-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CL8dt+3+a0sxMvs6gfEieWQ5G97hSEPL5FA6BKBLfRhglaQayxpd53RIHrf7HPXC mjc/Dyv71EgDJrQbfQlsDg== 0000945633-97-000002.txt : 19970501 0000945633-97-000002.hdr.sgml : 19970501 ACCESSION NUMBER: 0000945633-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATIONERS INC CENTRAL INDEX KEY: 0000355999 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 363141189 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10653 FILM NUMBER: 97590935 BUSINESS ADDRESS: STREET 1: 2200 E GOLF RD CITY: DES PLAINES STATE: IL ZIP: 60016-1267 BUSINESS PHONE: 7086995000 MAIL ADDRESS: STREET 1: 2200 E GOLF ROAD STREET 2: 2200 E GOLF ROAD CITY: DES PLAINES STATE: IL ZIP: 600161267 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED STATIONERS SUPPLY CO CENTRAL INDEX KEY: 0000945633 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 362431718 STATE OF INCORPORATION: DE FISCAL YEAR END: 0830 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-59811 FILM NUMBER: 97590936 BUSINESS ADDRESS: STREET 1: 2200 E GOLF RD CITY: DES PLAINES STATE: IL ZIP: 60016-1267 BUSINESS PHONE: 7086995000 MAIL ADDRESS: STREET 1: 2200 E GOLF ROAD STREET 2: 2200 E GOLF ROAD CITY: DES PLAINES STATE: IL ZIP: 600161267 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file numbers: United Stationers Inc.: 0-10653 United Stationers Supply Co.: 33-59811 UNITED STATIONERS INC. UNITED STATIONERS SUPPLY CO. (Exact name of registrant as specified in its charter) United Stationers Inc.: Delaware United Stationers Inc.: 36-3141189 United Stationers Supply Co.: Illinois United Stationers Supply Co.: 36-2431718 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2200 East Golf Road, Des Plaines, Illinois 60016-1267 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 699-5000 Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. United Stationers Inc.: Yes ( X ) No ( ) United Stationers Supply Co.: Yes ( X ) No ( ) On April 24, 1997, United Stationers Inc. had outstanding 11,446,306 shares of Common Stock, par value $0.10 per share, and 758,994 shares of Nonvoting Common Stock, $0.01 par value per share. On April 24, 1997, United Stationers Supply Co. had 880,000 shares of Common Stock, $1.00 par value per share, outstanding; United Stationers Inc. owns 100% of these shares. UNITED STATIONERS INC. AND SUBSIDIARIES Form 10-Q For The Quarter Ended March 31, 1997 INDEX PART I - FINANCIAL INFORMATION PAGE Important Explanatory Note 3 Independent Accountant's Review Report 4 Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 5 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996 6 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996 7 Notes to Condensed Consolidated Financial Statements 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II - OTHER INFORMATION 15 SIGNATURE 16 INDEX TO EXHIBITS 17 -2- UNITED STATIONERS INC. AND SUBSIDIARIES PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS IMPORTANT EXPLANATORY NOTE This integrated Form 10-Q is filed pursuant to the Securities Exchange Act of 1934, as amended, for each of United Stationers Inc., a Delaware corporation, and its wholly owned subsidiary, United Stationers Supply Co., an Illinois corporation (collectively, the "Company"). United Stationers Inc. is a holding company with no operations separate from its operating subsidiary, United Stationers Supply Co. and its subsidiaries. No separate financial information for United Stationers Supply Co. and its subsidiaries has been provided herein because management for the Company believes such information would not be meaningful because (i) United Stationers Supply Co. is the only direct subsidiary of United Stationers Inc., which has no operations other than those of United Stationers Supply Co. and (ii) all assets and liabilities of United Stationers Inc. are recorded on the books of United Stationers Supply Co. There is no material difference between United Stationers Inc. and United Stationers Supply Co. for the disclosure required by the instructions to Form 10-Q and therefore, unless otherwise indicated, the responses set forth herein apply to each of United Stationers Inc. and United Stationers Supply Co. -3- INDEPENDENT ACCOUNTANT'S REVIEW REPORT The Board of Directors United Stationers Inc. We have reviewed the accompanying condensed consolidated balance sheet of United Stationers Inc. and Subsidiaries as of March 31, 1997, and the related condensed consolidated statements of income and cash flows for the three month periods ended March 31, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of United Stationers Inc. as of December 31, 1996, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated January 28, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/Ernst & Young LLP Chicago, Illinois April 17, 1997 -4- UNITED STATIONERS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS (Unaudited) (Audited) March 31, December 31, 1997 1996 CURRENT ASSETS: Cash and cash equivalents $ 17,584 $ 10,619 Accounts receivable, net 255,854 291,401 Inventories 452,989 463,239 Other 25,164 25,221 Total Current Assets 751,591 790,480 PROPERTY, PLANT AND EQUIPMENT, at cost 226,650 225,041 Less-Accumulated depreciation and amortization (56,864) (51,266) Net Property, Plant and Equipment 169,786 173,775 GOODWILL 114,689 115,449 OTHER 29,106 30,163 TOTAL ASSETS $1,065.172 $1,109,867 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt and capital lease $ 23,306 $ 46,923 Accounts payable 223,552 238,124 Accrued liabilities 101,464 100,460 Total Current Liabilities 348,322 385,507 DEFERRED INCOME TAXES 36,347 36,828 LONG-TERM OBLIGATIONS: Senior revolver loan 196,000 207,000 Senior subordinated notes 150,000 150,000 Senior term loan - Tranche A 101,786 107,318 Senior term loan - Tranche B 56,204 56,425 Other long-term debt 31,823 31,870 Other long-term liabilities 15,274 15,502 Total Long-Term Obligations 551,087 568,115 REDEEMABLE PREFERRED STOCK 20,240 19,785 REDEEMABLE WARRANTS 24,807 23,812 STOCKHOLDERS' EQUITY 84,369 75,820 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,065,172 $1,109,867 See notes to condensed consolidated financial statements. -5- UNITED STATIONERS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (Unaudited) FOR THE THREE MONTHS ENDED March 31, March 31, 1997 1996 NET SALES $635,021 $586,881 COST OF GOODS SOLD 526,279 484,355 Gross profit 108,742 102,526 OPERATING EXPENSES: Warehousing, marketing and administrative expenses 76,704 73,104 Income from operations 32,038 29,422 INTEREST EXPENSE 14,661 15,171 Income before income taxes 17,377 14,251 INCOME TAXES 7,368 6,042 NET INCOME 10,009 8,209 PREFERRED STOCK DIVIDENDS ISSUED AND ACCRUED 455 428 Net income attributable to common stockholders $ 9,554 $ 7,781 Net income per common and common equivalent share - Primary and Fully Diluted $0.65 $0.51 Average number of common shares 14,607,695 15,135,257 See notes to condensed consolidated financial statements. -6- UNITED STATIONERS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) FOR THE THREE MONTHS ENDED March 31, March 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,009 $ 8,209 Depreciation and amortization 6,534 6,569 Transaction costs and other amortization 1,179 1,385 Changes in operating assets and liabilities 31,206 (8,040) Net cash provided by operating activities 48,928 8,123 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,642) (1,014) Proceeds from disposition of property, plant and equipment 30 58 Other - (861) Net cash used in investing activities (1,612) (1,817) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of debt (29,417) (12,906) Net (repayments) borrowings under revolver (11,000) 13,000 Other 66 49 Net cash (used in) provided by financing activities (40,351) 143 Net change in cash and cash equivalents 6,965 6,449 Cash and cash equivalents, beginning of period 10,619 11,660 Cash and cash equivalents, end of period $ 17,584 $ 18,109 Other Cash Flow Information: Cash payments during the three month period for: Income taxes paid $ 349 $ 1,286 Interest paid 8,340 8,162 See notes to condensed consolidated financial statements. -7- UNITED STATIONERS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, except for the Consolidated Balance Sheet as of December 31, 1996. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company's management, the condensed consolidated financial statements for the unaudited interim periods presented include all adjustments necessary to fairly present the results of such interim periods and the financial position as of the end of said periods. These adjustments were of a normal recurring nature and did not have a material impact on the financial statements presented. Certain interim expense and inventory estimates are recognized throughout the fiscal year relating to marginal income tax rates, shrinkage, price changes and product mix. Any refinements to these estimates based on actual experience are recorded when known. On October 31, 1996, the Company acquired all of the capital stock of Lagasse Bros., Inc. ("Lagasse") for approximately $51.9 million. The acquisition was financed primarily through senior debt. The Lagasse acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition with the excess of cost over fair value of approximately $39.0 million allocated to goodwill. The financial information for the quarter ended March 31, 1997 includes the results of Lagasse. The actual and pro forma effects of this acquisition are not material. 2. Operations The Company is a national wholesale distributor of business products. The Company offers approximately 30,000 items from more than 500 manufacturers. This includes a broad spectrum of office products, computer supplies, office furniture and facilities management supplies. The Company primarily serves commercial and contract office products dealers. Its customers include more than 15,000 resellers -- such as computer products resellers, office furniture dealers, mass merchandisers, sanitary supply distributors, warehouse clubs, mail order houses and office products superstores. The Company has a distribution network of 41 Regional Distribution Centers. Through its integrated computer system, the Company provides a high level of customer service and overnight delivery. In addition, the Company has 14 Lagasse Distribution Centers, specifically serving janitorial and sanitary supply distributors. 3. Reclassification Certain amounts from prior periods have been reclassified to conform to the 1997 basis of presentation. During the fourth quarter of 1996, the Company reclassified certain delivery and occupancy costs from operating expenses to cost of goods sold to conform the Company's presentation to the presentation used by others in the business products industry. The following table sets forth the impact of the reclassification: -8- UNITED STATIONERS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. Reclassification (Continued) For the Quarter Ended March 31, 1996 Gross Margin as a Percent of Net Sales: Gross margin prior to the reclassification 21.4% Gross margin as reported herein 17.5% Operating Expenses as a Percent of Net Sales: Operating expense ratio prior to reclassification 16.4% Operating expense ratio as reported herein 12.5% 4. Redeemable Warrants The Redeemable Warrants reflected on the Consolidated Balance Sheets are adjusted on an ongoing basis for any exercises to Common Stock, the revaluation to the current market price of the Company's common stock and any dilutive impact such as the issuance of stock options by the Company. 5. Stock Option Plan Employee stock options granted under the Company's employee stock option plan do not vest to the employee until the occurrence of an event (a "Vesting Event") that causes certain non-public equity investors to have received at least a full return of their investment (at cost) in cash, fully tradable marketable securities or the equivalent. A Vesting Event will cause the Company to recognize compensation expense based upon the difference between the fair market value of the Company's common stock and the exercise price of the employee stock options. Based upon a stock price of $19.94 and options outstanding as of March 31, 1997, the Company would recognize a nonrecurring noncash charge of $17.4 million in compensation expense ($10.0 million net of tax benefit of $7.4 million), if a Vesting Event were to occur. Each $1.00 change in the fair market value of common stock could result in a maximum adjustment to such compensation expense of approximately $2.4 million ($1.4 million net of tax effect of $1.0 million). 6. Net Income Per Common and Common Equivalent Share Net income per common and common equivalent share is based on net income after preferred stock dividend requirements. Net income per common and common equivalent share in the first quarter of 1997 and 1996 on a primary and fully diluted basis are computed using the weighted average number of shares outstanding adjusted for the effect of stock options and warrants considered to be dilutive common stock equivalents. -9- UNITED STATIONERS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. New Accounting Pronouncement In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods presented to conform to the new method. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share of $0.13 for the quarters ended March 31, 1997 and 1996. The impact of Statement No. 128 on the calculation of fully diluted earnings per share for these periods is not expected to be material. 8. Review Ernst & Young LLP, independent public accountants, have reviewed the condensed consolidated balance sheet of the Company as of March 31, 1997 and the related condensed consolidated statements of income and cash flows for the three month periods ended March 31, 1997 and 1996. Since they did not perform an audit, they express no opinion on these statements. They have previously audited the consolidated balance sheet of the Company as of December 31, 1996 from which the condensed consolidated balance sheet as of that date has been derived. The Independent Accountant's Review Report has been included in this filing. -10- UNITED STATIONERS INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comments on Forward Looking Information Certain information presented in this Form 10-Q includes forward-looking statements regarding the Company's future results of operations. The Company is confident that its expectations are based on reasonable assumptions given its knowledge of its operations and business. However, there can be no assurance that the Company's actual results will not differ materially from its expectations. The matters referred to in forward-looking statements may be affected by the risks and uncertainties involved in the Company's business (see Form 8-K filed with the Securities and Exchange Commission on October 21, 1996) including, among others, competition with business products manufacturers and other wholesalers, consolidation of the business products industry, the ability to maintain gross profit margins, the ability to achieve future cost savings, changing end-user demands, changes in manufacturer pricing, service interruptions and availability of liquidity and capital resources. First Quarter Ended March 31, 1997 compared with the First Quarter Ended March 31, 1996 Net Sales. Net sales were $635.0 million in the first quarter of 1997, an 8.2% increase over net sales of $586.9 million in the first quarter of 1996. On an equivalent workday basis, sales were up 9.9% from the comparable prior-year quarter. This included incremental growth resulting from the Lagasse acquisition. All of the Company's product segments showed year-over-year improvements. Gross Profit. Gross profit as a percent of net sales declined to 17.1% in the first quarter of 1997 from 17.5% in the comparable period of 1996. The lower margin rate reflects a decline in the rate of inflation across the Company's product mix, a shift in product mix and continuing customer base consolidation. Consolidation continues throughout all levels of the office products industry. Consolidation of commercial dealers and contract stationers has enabled these dealers to qualify for higher rebates and allowances. Continuing consolidation of the Company's customer base may result in additional adverse pressure on the Company's gross margins in the future. Operating Expenses. Operating expenses as a percent of net sales declined to 12.1% in the first quarter of 1997 from 12.5% in the first quarter of 1996. The reduction in operating expenses as a percent of net sales is primarily due to improved productivity and the leveraging of fixed expenses on a higher sales base. The Company believes there is further room for improvement, primarily through warehouse and system efficiencies and greater sales leverage. Income From Operations. Income from operations as a percent of net sales was 5.0% in the first quarter of 1997 and 1996. -11- UNITED STATIONERS INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Quarter Ended March 31, 1997 compared with the First Quarter Ended March 31, 1996 (Continued) Interest Expense. Interest expense as a percent of net sales was 2.3% in the first quarter of 1997, compared with 2.6% in the comparable period in 1996. This reduction reflects lower interest rates primarily due to the re-negotiation of our Credit Agreement (see Liquidity and Capital Resources included elsewhere herein) at October 31, 1996 and the leveraging of fixed interest costs against higher sales, partially offset by additional borrowings required to acquire Lagasse Bros., Inc. Income Before Income Taxes. Income before income taxes as a percent of net sales was 2.7% in the first quarter of 1997 compared with 2.4% in the first quarter of 1996. Net Income. Net income before preferred stock dividends was $10.0 million in the first quarter of 1997, compared with $8.2 million in the first quarter of 1996. Net Income Attributable to Common Stockholders. Net income attributable to common stockholders was $9.6 million in the first quarter of 1997, compared with $7.8 million in the first quarter of 1996. Liquidity and Capital Resources As of March 31, 1997, the credit facilities under the Amended and Restated Credit Agreement (the "Credit Agreement") consisted of $179.9 million of term loan borrowings (the "Term Loan Facilities"), and up to $325.0 million of revolving loan borrowings (the "Revolving Credit Facility"). This agreement was amended on October 31, 1996 to provide funding for the acquisition of Lagasse Bros., Inc., to extend the maturities, to adjust the pricing and to revise certain covenants. In addition, the Company has $150.0 million of 12 3/4% Senior Subordinated Notes due 2005, $29.8 million of internal revenue bonds and $2.2 million of mortgages. The Term Loan Facilities consist of a $122.8 million Tranche A term loan facility (the "Tranche A Facility") and a $57.1 million Tranche B term loan facility (the "Tranche B Facility"). Quarterly payments under the Tranche A Facility range from $5.63 million at March 31, 1997 to $8.30 million at September 30, 2001. Quarterly payments under the Tranche B Facility range from $0.25 million at March 31, 1997 to $6.64 million at September 30, 2003. On March 31, 1997, principal payments of $15.9 million and $7.4 million were paid from Excess Cash Flow (as defined in the Credit Agreement) at December 31, 1996 for the Tranche A and Tranche B Facilities, respectively. The Revolving Credit Facility is limited to the lesser of $325.0 million or a borrowing base equal to: 80% of Eligible Receivables (as defined in the Credit Agreement); plus 50% of Eligible Inventory (as defined in the Credit Agreement) (provided that no more than 60% or, during certain periods 65%, of the Borrowing Base may be attributable to Eligible Inventory); plus the aggregate amount of cover for Letter of Credit Liabilities (as defined in the Credit Agreement). In addition, for each fiscal year, the Company must repay revolving loans so that for a period of 30 consecutive days in each fiscal year the aggregate revolving loans do not exceed $250.0 million. The Revolving Credit Facility matures on October 31, 2001. As of March 31, 1997, $83.1 million remained available for borrowing under the Revolving Credit Facility. -12- UNITED STATIONERS INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) The Term Loan Facilities and the Revolving Credit Facility are secured by first priority pledges of the stock of USSC, all of the stock of the domestic direct and indirect subsidiaries of USSC, certain of the stock of all of the foreign direct and indirect subsidiaries of USSC and security interests in, and liens upon, all accounts receivable, inventory, contract rights and other certain personal and certain real property of USSC and its domestic subsidiaries. The loans outstanding under the Term Loan Facilities and the Revolving Credit Facility bear interest as determined within a set range with the rate based on the ratio of total debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Tranche A Facility and the Revolving Credit Facility bear interest at prime plus 0.25% to 1.25% or, at the Company's option, LIBOR plus 1.50% to 2.50%. The Tranche B Facility bears interest at prime plus 1.25% to 1.75% or, at the Company's option, LIBOR plus 2.50% to 3.00%. The Credit Agreement contains representations and warrants, affirmative and negative covenants and events of default customary for financings of this type. As of March 31, 1997, the Company was in compliance with all covenants contained in the Credit Agreement. The Credit Agreement permits capital expenditures for the Company of up to $15.0 million for its fiscal year ending December 31, 1997, plus $6.2 million of unused capital expenditures, approximately $7.8 million of unused Excess Cash Flow (as defined in the Credit Agreement), and $11.1 million of proceeds from the disposition of certain property, plant and equipment from the Company's fiscal year ended December 31, 1996. Capital expenditures will be financed from internally generated funds and available borrowings under the Credit Agreement. The Company expects gross capital expenditures to be approximately $14.0 million to $18.0 million in 1997. Management believes that the Company's cash on hand, anticipated funds generated from operations and available borrowings under the Credit Agreement, will be sufficient to meet the short-term (less than twelve months) and long-term operating and capital needs of the Company as well as to service its debt in accordance with its terms. There is, however, no assurance that this will be accomplished. United is a holding company and, as a result, its primary source of funds is cash generated from operating activities of its operating subsidiary, USSC, and bank borrowings by USSC. The Credit Agreement and the indenture governing the Notes contain restrictions on the ability of USSC to transfer cash to United. The statements of cash flows for the Company for the periods indicated are summarized below: Quarter Ended March 31, 1997 1996 (dollars in thousands) Net cash provided by operating activities $ 48,928 $ 8,123 Net cash used in investing activities (1,612) (1,817) Net cash (used in) provided by financing activities (40,351) 143 -13- UNITED STATIONERS INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources (Continued) Net cash provided by operating activities during the first quarter of 1997 increased to $48.9 million from $8.1 million in the comparable prior-year quarter. This increase was due to a higher net income, a decrease in accounts receivable, and a decrease in inventory offset by a decrease in accounts payable. Net cash used in investing activities during the first quarter of 1997 was $1.6 million compared with $1.8 million in the first quarter of 1996. The decrease was due to the acquisition of Total Product Management Inc. for approximately $0.9 million, a provider of complete office design services and office furniture, during the first quarter of 1996, offset by an increase in capital investments during the first quarter of 1997. Net cash used in financing activities during the first quarter of 1997 was $40.4 million compared with $0.1 million provided in the first quarter of 1996. The increase in cash used was due to the required payment of $23.3 million paid from Excess Cash Flow (as defined in the Credit Agreement) in 1997 compared with $9.0 million in 1996 and lower working capital requirements. -14- UNITED STATIONERS INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Number 2 Not applicable 10 Not applicable 11 Not applicable 15 Letter regarding unaudited interim financial information 18 Not applicable 19 Not applicable 22 Not applicable 23 Not applicable 24 Not applicable 27.1 Financial Data Schedule for United Stationers Inc. 27.2 Financial Data Schedule for United Stationers Supply Co. 99 Not applicable -15- UNITED STATIONERS INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED STATIONERS INC. UNITED STATIONERS SUPPLY CO. (Registrant) Date: April 28, 1997 /s/Daniel H. Bushell Daniel H. Bushell Executive Vice President and Chief Financial Officer -16- UNITED STATIONERS INC. AND SUBSIDIARIES INDEX TO EXHIBITS (a) Exhibit Number 2 Not applicable 10 Not applicable 11 Not applicable 15 Letter regarding unaudited interim financial information 18 Not applicable 19 Not applicable 22 Not applicable 23 Not applicable 24 Not applicable 27.1 Financial Data Schedule for United Stationers Inc. 27.2 Financial Data Schedule for United Stationers Supply Co. 99 Not applicable -17- EX-15 2 Exhibit 15 April 24, 1997 The Board of Directors United Stationers Inc. We are aware of the incorporation by reference in the Registration Statement (No. 333-02247) on Form S-3 of United Stationers Inc. for the registration of a total of 2,035,243 shares of its common stock of our report dated April 17, 1997 relating to the unaudited condensed consolidated interim financial statements of United Stationers Inc. which are included in its Form 10-Q for the period ended March 31, 1997. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. /s/Ernst & Young LLP EX-27.1 3
5 0000355999 UNITED STATIONERS INC. 1000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 17584 0 263227 7373 452989 751591 226650 56864 1065172 348322 0 20240 0 1153 83216 1065172 635021 635021 526279 526279 76704 1586 14661 17377 7368 10009 0 0 0 10009 0.65 0.65
EX-27.2 4
5 0000945633 UNITED STATIONERS SUPPLY CO. 1000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 17584 0 263227 7373 452989 751591 226650 56864 1065172 348322 0 20240 0 1153 83216 1065172 635021 635021 526279 526279 76704 1586 14661 17377 7368 10009 0 0 0 10009 0.65 0.65
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