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10-Q 1 d405563d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 quarterly period ended September 30, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-10653

UNITED STATIONERS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

36-3141189

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015-2559

(847) 627-7000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether 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 for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On October 26, 2012, the registrant had outstanding 40,225,647 shares of common stock, par value $0.10 per share.

UNITED STATIONERS INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2012

TABLE OF CONTENTS


	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011		3

Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2012 and 2011		4

Condensed Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2012 and 2011		5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011		6

Notes to Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3. Quantitative and Qualitative Disclosures About Market Risk		31

Item 4. Controls and Procedures		31
PART II — OTHER INFORMATION

Item 1. Legal Proceedings		32

Item 1A. Risk Factors		32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 6. Exhibits		33

SIGNATURES		34

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	(Unaudited)			(Audited)
	As of September 30, 2012			As of December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	21,147		$	11,783
Accounts receivable, less allowance for doubtful accounts of $25,389 in 2012 and $28,323 in 2011		669,014			659,215
Inventories		643,597			741,507
Other current assets		29,679			48,093

Total current assets		1,363,437			1,460,598

Property, plant and equipment, at cost		464,668			456,354
Less—accumulated depreciation and amortization		337,441			326,916

Net property, plant and equipment		127,227			129,438

Goodwill		328,061			328,061
Intangible assets, net		52,492			56,285
Other long-term assets		20,549			20,500

Total assets	$	1,891,766		$	1,994,882

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	443,022		$	499,265
Accrued liabilities		192,287			193,572
Short-term debt		110,000			—

Total current liabilities		745,309			692,837

Deferred income taxes		15,696			14,750
Long-term debt		345,036			496,757
Other long-term liabilities		74,946			85,859

Total liabilities		1,180,987			1,290,203
Stockholders’ equity:
Common stock, $0.10 par value; authorized—100,000,000 shares, issued—74,435,628 shares in 2012 and 2011		7,444			7,444
Additional paid-in capital		400,678			409,190
Treasury stock, at cost—34,137,367 shares in 2012 and 32,281,847 shares in 2011		(963,471	)		(908,667	)
Retained earnings		1,316,112			1,253,118
Accumulated other comprehensive loss		(49,984	)		(56,406	)

Total stockholders’ equity		710,779			704,679

Total liabilities and stockholders’ equity	$	1,891,766		$	1,994,882

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Net sales	$	1,288,675	$	1,310,029	$	3,836,032	$	3,804,110
Cost of goods sold		1,084,917		1,110,278		3,263,086		3,237,748

Gross profit		203,758		199,751		572,946		566,362

Operating expenses:
Warehousing, marketing and administrative expenses		140,117		135,117		427,389		413,917

Operating income		63,641		64,634		145,557		152,445

Interest expense, net		4,708		6,972		18,944		20,094

Other expense		—		100		—		410

Income before income taxes		58,933		57,562		126,613		131,941

Income tax expense		22,169		21,783		47,708		50,879

Net income	$	36,764	$	35,779	$	78,905	$	81,062

Net income per share—basic:
Net income per share—basic	$	0.92	$	0.83	$	1.95	$	1.82

Average number of common shares outstanding—basic		39,896		43,025		40,562		44,479

Net income per share—diluted:
Net income per share—diluted	$	0.91	$	0.81	$	1.91	$	1.77

Average number of common shares outstanding—diluted		40,530		44,202		41,229		45,718

Dividends declared per share	$	0.13	$	0.13	$	0.39	$	0.39

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(Unaudited)


	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2012		2011			2012		2011
Net income	$	36,764	$	35,779		$	78,905	$	81,062

Other comprehensive income (loss), net of tax
Unrealized translation adjustment		799		(3,066	)		1,565		(2,024	)

Unrealized interest rate swap adjustments		420		2,721			4,857		6,621

Total other comprehensive income (loss), net of tax		1,219		(345	)		6,422		4,597

Comprehensive income	$	37,983	$	35,434		$	85,327	$	85,659

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


	For the Nine Months Ended
	September 30,
	2012			2011
Cash Flows From Operating Activities:
Net income	$	78,905		$	81,062
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,216			25,822
Share-based compensation		5,243			13,072
Loss on the disposition of property, plant and equipment		60			28
Impairment of equity investment		—			1,635
Amortization of capitalized financing costs		749			728
Excess tax benefits related to share-based compensation		(411	)		(3,397	)
Deferred income taxes		(4,135	)		4,387
Changes in operating assets and liabilities:
Increase in accounts receivable, net		(9,342	)		(71,662	)
Decrease in inventory		98,605			67,747
Decrease in other assets		17,822			2,879
(Decrease) increase in accounts payable		(46,880	)		12,135
Decrease in checks in-transit		(9,093	)		(23,232	)
Increase (decrease) in accrued liabilities		3,973			(5,346	)
Decrease in other liabilities		(6,008	)		(6,369	)

Net cash provided by operating activities		155,704			99,489

Cash Flows From Investing Activities:
Capital expenditures		(20,322	)		(20,786	)
Proceeds from the disposition of property, plant and equipment		195			62

Net cash used in investing activities		(20,127	)		(20,724	)

Cash Flows From Financing Activities:
Net (repayments) borrowings under debt arrangements		(41,721	)		77,923
Repayment of debt		—			(370,000	)
Proceeds from the issuance of debt		—			340,000
Net (disbursements) proceeds from share-based compensation arrangements		(1,162	)		11,486
Acquisition of treasury stock, at cost		(67,507	)		(137,669	)
Payment of cash dividends		(16,101	)		(11,955	)
Excess tax benefits related to share-based compensation		411			3,397
Payment of debt fees and other		(138	)		(2,727	)

Net cash used in financing activities		(126,218	)		(89,545	)

Effect of exchange rate changes on cash and cash equivalents		5			(32	)

Net change in cash and cash equivalents		9,364			(10,812	)
Cash and cash equivalents, beginning of period		11,783			21,301

Cash and cash equivalents, end of period	$	21,147		$	10,489

Other Cash Flow Information:
Income tax payments, net	$	29,570		$	34,292
Interest paid		18,162			19,593

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent United Stationers Inc. (“USI”) with its wholly owned subsidiary United Stationers Supply Co. (“USSC”), and USSC’s subsidiaries (collectively, “United” or the “Company”). The Company is a leading national wholesale distributor of business products, with net sales of approximately $5.0 billion for the year ended December 31, 2011. The Company stocks about 100,000 items from over 1,000 manufacturers. These items include a broad spectrum of technology products, traditional office products, office furniture, janitorial and breakroom supplies, and industrial supplies. In addition, the Company also offers private brand products. The Company primarily serves commercial and contract office products dealers, janitorial/breakroom product distributors, computer product resellers, furniture dealers, and industrial product distributors. The Company sells its products through a national distribution network of 60 distribution centers to its over 25,000 reseller customers, who in turn sell directly to end-consumers.

The accompanying Condensed Consolidated Financial Statements are unaudited, except for the Condensed Consolidated Balance Sheet as of December 31, 2011, which was derived from the December 31, 2011 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for further information.

In the opinion of the management of the Company, the Condensed Consolidated Financial Statements for the periods presented include all adjustments necessary to fairly present the Company’s results for such periods. Certain interim estimates of a normal, recurring nature are recognized throughout the year, relating to accounts receivable, supplier allowances, inventory, customer rebates, price changes and product mix. The Company evaluates these estimates periodically and makes adjustments where facts and circumstances dictate.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates.

Various assumptions and other factors underlie the determination of significant accounting estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. The Company periodically reevaluates these significant factors and makes adjustments where facts and circumstances dictate.

Supplier Allowances

Supplier allowances (fixed or variable) are common practice in the business products industry and have a significant impact on the Company’s overall gross margin. Gross margin is determined by, among other items, file margin (determined by reference to invoiced price), as reduced by customer discounts and rebates as discussed below, and increased by supplier allowances and promotional incentives. Receivables related to supplier allowances totaled $79.7 million and $81.3 million as of September 30, 2012 and December 31, 2011, respectively. These receivables are included in “Accounts receivable” in the Condensed Consolidated Balance Sheets.

The majority of the Company’s annual supplier allowances and incentives are variable, based solely on the volume and mix of the Company’s product purchases from suppliers. These variable allowances are recorded based on the Company’s annual inventory purchase volumes and product mix and are included in the Company’s Condensed Consolidated Financial Statements as a reduction to cost of goods sold, thereby reflecting the net inventory purchase cost. The remaining portion of the Company’s annual supplier allowances and incentives are fixed and are earned based primarily on supplier participation in specific Company advertising and marketing publications. Fixed allowances and incentives are taken to income through lower cost of goods sold as inventory is sold.

Supplier allowances and incentives attributable to unsold inventory are carried as a component of net inventory cost. The potential amount of variable supplier allowances often differs based on purchase volumes by supplier and product category. As a result, changes in the Company’s sales volume (which can increase or reduce inventory purchase requirements) and changes in product sales mix (especially because higher-margin products often benefit from higher supplier allowance rates) can create fluctuations in variable supplier allowances.

Customer Rebates

Customer rebates and discounts are common practice in the business products industry and have a significant impact on the Company’s overall sales and gross margin. Such rebates are reported in the Condensed Consolidated Financial Statements as a reduction of sales. Accrued customer rebates of $53.4 million and $55.7 million as of September 30, 2012 and December 31, 2011, respectively, are included as a component of “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

Customer rebates include volume rebates, sales growth incentives, advertising allowances, participation in promotions and other miscellaneous discount programs. These rebates are paid to customers monthly, quarterly and/or annually. Estimates for volume rebates and growth incentives are based on estimated annual sales volume to the Company’s customers. The aggregate amount of customer rebates depends on product sales mix and customer mix changes. Reported results reflect management’s current estimate of such rebates. Changes in estimates of sales volumes, product mix, customer mix or sales patterns, or actual results that vary from such estimates may impact future results.

Revenue Recognition

Revenue is recognized when a service is rendered or when title to the product has transferred to the customer. Management records an estimate for future product returns related to revenue recognized in the current period. This estimate is based on historical product return trends and the gross margin associated with those returns. Management also records customer rebates that are based on annual sales volume to the Company’s customers. Annual rebates earned by customers include growth components, volume hurdle components, and advertising allowances.

Shipping and handling costs billed to customers are treated as revenues and recognized at the time title to the product has transferred to the customer. Freight costs are included in the Company’s Condensed Consolidated Financial Statements as a component of cost of goods sold and not netted against shipping and handling revenues. Net sales do not include sales tax charged to customers.

Additional revenue is generated from the sale of software licenses, delivery of subscription services (including the right to use software and software maintenance services), and professional services. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fees are fixed and determinable, and collection is considered probable. If collection is not considered probable, the Company recognizes revenue when the fees are collected. If fees are not fixed and determinable, the Company recognizes revenues when the fees become due from the customer.

Accounts Receivable

In the normal course of business, the Company extends credit to customers that satisfy pre-defined credit criteria. Accounts receivable, as shown in the Condensed Consolidated Balance Sheets, include such trade accounts receivable and are net of allowances for doubtful accounts and anticipated discounts. The Company makes judgments as to the collectability of trade accounts receivable based on historical trends and future expectations. Management estimates an allowance for doubtful accounts, which addresses the collectability of trade accounts receivable. This allowance adjusts gross trade accounts receivable downward to its estimated collectible or net realizable value. To determine the allowance for doubtful accounts, management reviews specific customer risks and the Company’s trade accounts receivable aging. Uncollectible trade receivable balances are written off against the allowance for doubtful accounts when it is determined that the trade receivable balance is uncollectible.

Insured Loss Liability Estimates

The Company is primarily responsible for retained liabilities related to workers’ compensation, vehicle, and certain employee health benefits. The Company records expense for paid and open claims and an expense for claims incurred but not reported based upon historical trends and certain assumptions about future events. The Company has an annual per-person maximum cap, provided by a third-party insurance company, on certain employee medical benefits. In addition, the Company has a per-occurrence maximum loss and an annual aggregate maximum cap on workers’ compensation and auto claims.

Leases

The Company leases real estate and personal property under operating leases. Certain operating leases include incentives from landlords including, landlord “build-out” allowances, rent escalation clauses and rent holidays or periods in which rent is not payable for a certain amount of time. The Company accounts for landlord “build-out” allowances as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease.

The Company also recognizes leasehold improvements associated with the “build-out” allowances and amortizes these improvements over the shorter of (1) the term of the lease or (2) the expected life of the respective improvements. The Company accounts for rent escalation and rent holidays as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease. As of September 30, 2012, any capital leases to which the Company is a party are negligible.

Inventories

Approximately 74% and 78% of total inventory as of September 30, 2012 and December 31, 2011, has been valued under the last-in, first-out (“LIFO”) accounting method. LIFO results in a better matching of costs and revenues. The remaining inventory is valued under the first-in, first-out (“FIFO”) accounting method. Inventory valued under the FIFO and LIFO accounting methods is recorded at the lower of cost or market. LIFO inventory costs can only be determined annually when inflation rates and inventory levels are finalized; therefore, LIFO inventory costs for interim financial statements are estimated. If the Company had valued its entire inventory under the lower of FIFO cost or market, inventory would have been $108.6 million and $96.1 million higher than reported as of September 30, 2012 and December 31, 2011, respectively. The change in the LIFO reserve since December 31, 2011 resulted in a $12.5 million increase in cost of goods sold which included a LIFO liquidation relating to a projected decrement in the Company’s office products LIFO pool. This projected decrement resulted in liquidation of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of current year purchases. This liquidation resulted in LIFO income of $2.4 million which was more than offset by LIFO expense of $14.9 million related to current inflation for an overall net increase in cost of sales of $12.5 million referenced above.

The Company also records adjustments to inventory for shrinkage. Inventory that is obsolete, damaged, defective or slow moving is recorded at the lower of cost or market. These adjustments are determined using historical trends and are adjusted, if necessary, as new information becomes available. The Company charges certain warehousing and administrative expenses to inventory each period with $33.5 million and $33.8 million remaining in inventory as of September 30, 2012 and December 31, 2011, respectively.

Cash Equivalents

An unfunded check balance (payments in-transit) exists for the Company’s primary disbursement accounts. Under the Company’s cash management system, the Company utilizes available borrowings, on an as-needed basis, to fund the clearing of checks as they are presented for payment. As of September 30, 2012 and December 31, 2011, outstanding checks totaling $62.4 million and $71.4 million, respectively, were included in “Accounts payable” in the Condensed Consolidated Balance Sheets.

All highly liquid debt instruments with an original maturity of three months or less are considered to be short-term investments. Short-term investments consist primarily of money market funds rated AAA and are stated at cost, which approximates fair value. There were no short term investments as of September 30, 2012 and December 31, 2011.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Depreciation and amortization are determined by using the straight-line method over the estimated useful lives of the assets. The estimated useful life assigned to fixtures and equipment is from two to ten years; the estimated useful life assigned to buildings does not exceed forty years; leasehold improvements are amortized over the lesser of their useful lives or the term of the applicable lease. Repair and maintenance costs are charged to expense as incurred.

Software Capitalization

The Company capitalizes internal use software development costs in accordance with accounting guidance on accounting for costs of computer software developed or obtained for internal use. Amortization is recorded on a straight-line basis over the estimated useful life of the software, generally not to exceed ten years. Capitalized software is included in “Property, plant and equipment, at cost” on the Condensed Consolidated Balance Sheet. The total costs are as follows (in thousands):


	As of September 30, 2012			As of December 31, 2011
Capitalized software development costs	$	72,985		$	69,879
Accumulated amortization		(52,504	)		(52,061	)

Net capitalized software development costs	$	20,481		$	17,818

Derivative Financial Instruments

The Company’s risk management policies allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure. The policies do not allow such derivative financial instruments to be used for speculative purposes. At this time, the Company uses interest rate swaps which are subject to the management, direction and control of its financial officers. Risk management practices, including the use of all derivative financial instruments, are presented to the Board of Directors for approval.

All derivatives are recognized on the balance sheet date at their fair value. All derivatives are currently in a net liability position and are included in “Accrued liabilities” and “Other Long-Term Liabilities” on the Condensed Consolidated Balance Sheets. The interest rate swaps that the Company has entered into are classified as cash flow hedges in accordance with accounting guidance on derivative instruments and hedging activities as they are hedging a forecasted transaction or the variability of cash flow to be paid by the Company. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in other comprehensive income, net of tax, until earnings are affected by the forecasted transaction or the variability of cash flow, and then are reported in current earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific forecasted transactions or variability of cash flow.

The Company formally assesses, at both the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items. When it is determined that a derivative is not highly effective as a hedge then hedge accounting is discontinued prospectively in accordance with accounting guidance on derivative instruments and hedging activities. This has not occurred as all cash flow hedges contain no ineffectiveness. See Note 11, “Derivative Financial Instruments,” for further detail.

Income Taxes

The Company accounts for income taxes using the liability method in accordance with the accounting guidance for income taxes. The Company estimates actual current tax expense and assesses temporary differences that exist due to differing treatments of items for tax and financial statement purposes. These temporary differences result in the recognition of deferred tax assets and liabilities. A provision has not been made for deferred U.S. income taxes on the undistributed earnings of the Company’s foreign subsidiaries as these earnings have historically been permanently invested. It is not practicable to determine the amount of unrecognized deferred tax liability for such unremitted foreign earnings. The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax expense.

Foreign Currency Translation

The functional currency for the Company’s foreign operations is the local currency. Assets and liabilities of these operations are translated into U.S. currency at the rates of exchange at the balance sheet date. The resulting translation adjustments are included in accumulated other comprehensive loss, a separate component of comprehensive income and stockholders’ equity. Income and expense items are translated at average monthly rates of exchange. Realized gains and losses from foreign currency transactions were not material.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04. The amendments in this ASU generally represent clarifications of fair value measurement, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements. On January 1, 2012, the Company adopted these amendments on a prospective basis and there was no impact on its financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, which requires entities to present items of net income and other comprehensive income either in a single continuous statement of comprehensive income or in two separate, but consecutive, statements of net income and other comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 was subsequently amended by ASU No. 2011-12, which deferred the requirement for companies to present reclassification adjustments for each component of accumulated other comprehensive income in both other comprehensive income and net income on the face of the financial statements. On January 1, 2012, the Company adopted the effective portions of ASU No. 2011-05, which are reflected in its financial position and results of operations.

In July 2012, the FASB issued ASU No. 2012-02, on testing indefinite-lived intangible assets for impairment. Under the guidance, testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill has been simplified. The guidance allows an organization the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. An organization electing to perform a qualitative assessment is no longer required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is “more likely than not” that the asset is impaired. The guidance is effective for impairment tests for fiscal years beginning after September 15, 2012. We will adopt this guidance on January 1, 2013 but do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

3. Share-Based Compensation

Overview

As of September 30, 2012, the Company has two active equity compensation plans. A description of these plans is as follows:

Amended and Restated 2004 Long-Term Incentive Plan (“LTIP”)

In March 2004, the Company’s Board of Directors adopted the LTIP to, among other things, attract and retain managerial talent, further align the interests of key associates to those of the Company’s shareholders and provide competitive compensation to key associates. Award vehicles include stock options, stock appreciation rights, full value awards, cash incentive awards and performance-based awards. Key associates and non-employee directors of the Company are eligible to become participants in the LTIP, except that non-employee directors may not be granted incentive stock options.

Nonemployee Directors’ Deferred Stock Compensation Plan

Pursuant to the United Stationers Inc. Nonemployee Directors’ Deferred Stock Compensation Plan, non-employee directors may defer receipt of all or a portion of their retainer and meeting fees. Fees deferred are credited quarterly to each participating director in the form of stock units, based on the fair market value of the Company’s common stock on the quarterly deferral date. Each stock unit account generally is distributed and settled in whole shares of the Company’s common stock on a one-for-one basis, with a cash-out of any fractional stock unit interests, after the participant ceases to serve as a Company director.

Accounting For Share-Based Compensation

The following table summarizes the share-based compensation expense (in thousands):


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Numerator:
Pre-tax expense	$	2,078		$	2,658		$	5,243		$	13,072
Tax effect		(789	)		(1,031	)		(1,992	)		(4,967	)

After tax expense		1,289			1,627			3,251			8,105

Denominator:
Denominator for basic shares—weighted average shares		39,896			43,025			40,562			44,479
Denominator for diluted shares— Adjusted weighted average shares and the effect of dilutive securities		40,530			44,202			41,229			45,718
Net expense per share:
Net expense per share—basic	$	0.03		$	0.04		$	0.08		$	0.18
Net expense per share—diluted	$	0.03		$	0.04		$	0.08		$	0.18

The following tables summarize the intrinsic value of options outstanding, exercisable, and exercised for the applicable periods listed below:

Intrinsic Value of Options

(in thousands of dollars)


	Outstanding		Exercisable
As of September 30, 2012	$	3,838	$	3,838
As of September 30, 2011		6,494		6,494

Intrinsic Value of Options Exercised

(in thousands of dollars)


	For the Three Months Ended		For the Nine Months Ended
September 30, 2012	$	395	$	1,392
September 30, 2011		310		8,233

The following tables summarize the intrinsic value of restricted shares outstanding and vested for the applicable periods listed below:

Intrinsic Value of Restricted Shares Outstanding

(in thousands of dollars)


As of September 30, 2012	$	34,086
As of September 30, 2011		37,772

Intrinsic Value of Restricted Shares Vested

(in thousands of dollars)


	For the Three Months Ended		For the Nine Months Ended
September 30, 2012	$	3,704	$	8,767
September 30, 2011		7,845		14,880

The aggregate intrinsic values summarized in the tables above are based on the closing sale price per share for the Company’s Common Stock on the last day of trading in each respective fiscal period which was $26.07 per share for the 2012 period end and $27.22 per share for the 2011 period end. Additionally, the aggregate intrinsic value of options exercisable does not include the value of options for which the exercise price exceeds the stock price as of the last day of trading in each respective fiscal period.

Stock Options

There were no stock options granted during the first nine months of 2012 or 2011. As of September 30, 2012, there was no unrecognized compensation cost related to stock option awards granted.

The fair value of option awards and modifications to option awards is estimated on the date of grant or modification using a Black-Scholes option valuation model that uses various assumptions including the expected stock price volatility, risk-free interest rate, and expected life of the option. Historically, stock options vested in annual increments over three years and have a term of 10 years. Compensation costs for all stock options are recognized, net of estimated forfeitures, on a straight-line basis as a single award typically over the vesting period. The Company estimates expected volatility based on historical volatility of the price of its common stock. The Company estimates the expected term of share-based awards by using historical data relating to option exercises and employee terminations to estimate the period of time that options granted are expected to be outstanding. The interest rate for periods during the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The following table summarizes the transactions, excluding restricted stock, under the Company’s equity compensation plans for the nine months ended September 30, 2012:


Stock Options Only	Shares			Weighted Average Exercise Price		Weighted Average Exercise Contractual Life		Aggregate Intrinsic Value ($000)
Options outstanding—December 31, 2011		1,715,380		$	24.62
Granted		—			—
Exercised		(116,096	)		16.62
Canceled		(125,896	)		32.35

Options outstanding—September 30, 2012		1,473,388		$	24.59		3.4	$	3,838

Number of options exercisable		1,473,388		$	24.59		3.4	$	3,838

*	Aggregate intrinsic value of options exercisable does not include the value of options for which the exercise price exceeds the stock price as of September 30, 2012.

Restricted Stock and Restricted Stock Units

The Company granted 461,478 shares of restricted stock and 245,737 restricted stock units (“RSUs”) during the first nine months of 2012. During the first nine months of 2011, the Company granted 26,373 shares of restricted stock and 330,280 RSUs. The restricted stock granted in each period generally vests in three equal annual installments on the anniversaries of the date of the grant. The RSUs granted in 2012 and 2011 generally vest in three annual installments based on the terms of the agreements, to the extent earned based on the Company’s cumulative economic profit performance against target economic profit goals. A summary of the status of the Company’s restricted stock and RSU grants and changes during the nine months ended September 30, 2012, is as follows:


Restricted Shares Only	Shares			Weighted Average Grant Date Fair Value		Weighted Average Contractual Life		Aggregate Intrinsic Value ($000)
Shares outstanding—December 31, 2011		1,002,125		$	26.42
Granted		706,760			27.84
Vested		(323,248	)		21.98
Canceled		(78,157	)		27.92

Outstanding—September 30, 2012		1,307,480		$	29.18		2.0	$	34,086

4. Goodwill and Intangible Assets

Accounting guidance on goodwill and intangible assets requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company performs an annual impairment test on goodwill and intangible assets with indefinite lives at October 1st of each year. Based on this latest test, the Company concluded that the fair value of each of the reporting units was in excess of the carrying value as of October 1, 2011. At October 1, 2011 the Company adopted Accounting Standards update (“ASU”) 2011-8 which allows for the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether the Company should calculate the fair value of a reporting unit. The Company does not believe any triggering event occurred since the last annual impairment test on October 1, 2011 that would require an interim impairment assessment.

As of September 30, 2012 and December 31, 2011, the Company’s Condensed Consolidated Balance Sheets reflected $328.1 million of goodwill at each period-end and $52.5 million and $56.3 million in net intangible assets, respectively.

Net intangible assets consist primarily of customer lists, trademarks, and non-compete agreements purchased as part of past acquisitions. The Company has no intention to renew or extend the terms of acquired intangible assets and accordingly, did not incur any related costs during the first nine months of 2012. Amortization of intangible assets totaled $3.8 million for the first nine months of 2012 and 2011, respectively. Accumulated amortization of intangible assets as of September 30, 2012 and December 31, 2011 totaled $30.5 million and $26.7 million, respectively.

5. Severance and Restructuring Charges

On February 13, 2012, the Company approved a distribution network optimization and cost reduction program. This program was substantially completed in the first quarter of 2012 and the Company recorded a $6.2 million pre-tax charge in that period in connection with these actions. The pre-tax charge is comprised of facility closure expenses of $2.6 million and severance and related expense of $3.6 million which were included in operating expenses. Cash outflows for this action will occur primarily during 2012 and 2013. Cash outlays associated with facility closures in the nine-month period ended September 30, 2012 were $1.4 million. Cash outlays associated with this severance charge in the nine months ended September 30, 2012 were $1.7 million. As of September 30, 2012, the Company had accrued liabilities for these actions of $3.1 million.

On December 31, 2010, the Company approved an early retirement program for eligible employees and a focused workforce realignment to support strategic initiatives. The Company recorded a pre-tax charge of $9.1 million in the fourth quarter of 2010 for estimated severance pay, benefits and outplacement costs related to these actions. This charge was included in the operating expenses on the Consolidated Statements of Income for the quarter ending December 31, 2010. Cash outlays associated with this severance charge in the nine months ended September 30, 2012 were $2.4 million. Cash outlays associated with this severance charge in 2011 totaled $5.6 million. During 2011, the Company reversed a portion of these severance charges totaling $0.9 million. As of September 30, 2012 and December 31, 2011, the Company had accrued liabilities for these actions of $0.2 million and $2.6 million, respectively.

6. Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock and deferred stock units are considered dilutive securities. For the three- and nine-month periods ending September 30, 2012 and September 30, 2011, certain stock options were excluded from the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares, and therefore, the effect would be antidilutive. For both the three- and nine-month periods ending September 30, 2012, 0.5 million shares of common stock were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Numerator:
Net income	$	36,764	$	35,779	$	78,905	$	81,062

Denominator:
Denominator for basic earnings per share—weighted average shares		39,896		43,025		40,562		44,479
Effect of dilutive securities:
Employee stock options and restricted units		634		1,177		667		1,239

Denominator for diluted earnings per share—Adjusted weighted average shares and the effect of dilutive securities		40,530		44,202		41,229		45,718

Net income per share:
Net income per share—basic	$	0.92	$	0.83	$	1.95	$	1.82
Net income per share—diluted	$	0.91	$	0.81	$	1.91	$	1.77

Common Stock Repurchases

On February 24, 2012, the Board of Directors approved an expanded stock repurchase program authorizing the purchase of an additional $100.0 million of the Company’s common stock. During the three-month periods ended September 30, 2012 and 2011, the Company repurchased 519,970 and 2,260,065 shares of USI’s common stock at an aggregate cost of $13.2 million and $67.8 million, respectively. During the nine-month periods ended September 30, 2012 and 2011, the Company repurchased 2,363,686 and 4,310,820 shares of USI’s common stock at an aggregate cost of $67.5 million and $137.7 million, respectively. Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data. During the first nine months of 2012 and 2011, the Company reissued 522,566 and 628,436 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.

7. Debt

USI is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, USSC, and from borrowings by USSC. The 2011 Credit Agreement (as defined below), the 2007 Credit Agreement (as defined below), the 2007 Note Purchase Agreement (as defined below) and the current Receivables Securitization Program (as defined below) contain restrictions on the use of cash transferred from USSC to USI.

Debt consisted of the following amounts (in millions):


	As of September 30, 2012		As of December 31, 2011
2011 Credit Agreement	$	210.0	$	361.8
2007 Master Note Purchase Agreement (Private Placement)		135.0		135.0
2009 Receivables Securitization Program		110.0		—

Total	$	455.0	$	496.8

As of September 30, 2012, 100% of the Company’s outstanding debt is priced at variable interest rates based primarily on the applicable bank prime rate or London InterBank Offered Rate (“LIBOR”). While the Company had primarily all of its outstanding debt based on LIBOR at September 30, 2012, the Company had hedged $135 million of this debt with an interest rate swap further discussed in Note 2, “Summary of Significant Accounting Policies”, and Note 11, “Derivative Financial Instruments”, to the Condensed Consolidated Financial Statements. As of September 30, 2012, the overall weighted average effective borrowing rate of the Company’s debt was 2.8%. At September 30, 2012 funding levels based on the Company’s unhedged debt of $320.0 million, a 50 basis point movement in interest rates would result in a $1.6 million increase or decrease in annualized interest expense, on a pre-tax basis, and upon cash flows from operations.

Receivables Securitization Program

On March 3, 2009, USI entered into an accounts receivables securitization program (as amended to date, the “Receivables Securitization Program” or the “Program”). The parties to the Program are USI, USSC, United Stationers Financial Services (“USFS”), United Stationers Receivables, LLC (“USR”), and Bank of America, National Association (the “Investor”). The Program is governed by the following agreements:

•

The Transfer and Administration Agreement among USSC, USFS, USR, and the Investors;

•

The Receivables Sale Agreement between USSC and USFS;

•

The Receivables Purchase Agreement between USFS and USR; and

•

The Performance Guaranty executed by USI in favor of USR.

Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC. Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC. Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to the Investor. The Program provides for maximum funding available of the lesser of $150 million or the total amount of eligible receivables less excess concentrations and applicable reserves. USFS retains servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the Program are repaid and the Program has been terminated.

As of September 30, 2012, the Transfer and Administration Agreement prohibited the Company from exceeding a Leverage Ratio of 3.50 to 1.00 and imposed other restrictions on the Company’s ability to incur additional debt. It also contained additional covenants, requirements and events of default that are customary for this type of agreement, including the failure to make any required payments when due.

On January 20, 2012, USSC, USFS, and USR entered into a First Omnibus Amendment to Receivables Sale Agreement, Receivables Purchase Agreement and Transfer and Administration Agreement with Bank of America, N.A. (the “First Omnibus Amendment”). The First Omnibus Agreement amended (i) the Transfer and Administration Agreement, dated as of March 3, 2009 (as amended through the date hereof, the “Transfer Agreement”), between USSC, USR, USFS and Bank of America, (ii) the Receivables Purchase Agreement, dated as of March 3, 2009 (as amended through the date hereof, the “Purchase Agreement”), between USFS and USR, and (iii) the Receivables Sale Agreement, dated as of March 3, 2009 (as amended through the date hereof, the “Sale Agreement”), between USSC and USFS. The First Omnibus Amendment extended the commitment termination date of the Transfer Agreement to January 18, 2013. The Omnibus Amendment also amended the Transfer Agreement to conform the leverage ratio covenant and consolidated net worth covenant in the Transfer Agreement to the corresponding covenants in the Third Amended and Restated Five-Year Revolving Credit Agreement dated September 21, 2011 among USSC, USI, the lenders from time to time parties thereto and JPMorgan Chase Bank, National Association.

On July 18, 2012, USSC, USR, and USFS entered into a Seventh Amendment to the Transfer and Administration Agreement (the “Seventh Amendment”). The Seventh Amendment increased the maximum investment to USR to the lesser of $150 million or the total amount of eligible receivables less excess concentrations and applicable reserves. The receivables sold to the Investor remain on USI’s Condensed Consolidated Balance Sheet, and amounts advanced to USR by the Investor or any successor Investor are recorded as debt on USI’s Condensed Consolidated Balance Sheet. The cost of such debt is recorded as interest expense on USI’s income statement. As of September 30, 2012 and December 31, 2011, $420.2 million and $421.0 million, respectively, of receivables had been sold to the agent, Bank of America. As of September 30, 2012, USR had $110.0 million outstanding under this debt agreement. As of December 31, 2011, no amounts had been borrowed by USR.

Credit Agreement and Other Debt

On September 21, 2011, USI and USSC entered into a Third Amended and Restated Five-Year Revolving Credit Agreement (the “2011 Credit Agreement”) with U.S. Bank National Association and Wells Fargo Bank, National Association as Syndication Agents; Bank of America, N.A. and PNC Bank, National Association, as Documentation Agents; JPMorgan Chase Bank, National Association, as Administrative Agent, and the lenders identified therein. The 2011 Credit Agreement amends and restates the Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the “2007 Credit Agreement”).

The 2011 Credit Agreement provides for a revolving credit facility with an aggregate committed principal amount of $700 million. The 2011 Credit Agreement also provides a sublimit for the issuance of letters of credit in an aggregate amount not to exceed $100 million at any one time and provides a sublimit for swing line loans in an aggregate outstanding principal amount not to exceed $50 million at any one time. These amounts, as sublimits, do not increase the maximum aggregate principal amount, and any undrawn issued letters of credit and all outstanding swing line loans under the facility reduce the remaining availability under the 2011 Credit Agreement. Subject to the terms and conditions of the 2011 Credit Agreement, USSC may seek additional commitments to increase the aggregate committed principal amount to a total amount of $1 billion.

Amounts borrowed under the 2011 Credit Agreement are secured by a majority of the Company’s assets, other than real property and certain accounts receivable already collateralized as part of the Receivables Securitization Program. Borrowings under the 2011 Credit Agreement will bear interest at LIBOR for specified interest periods or at the Alternate Base Rate (as defined in the 2011 Credit Agreement), plus, in each case, a margin determined based on the Company’s permitted debt to EBITDA ratio (calculated as provided in Section 6.20 of the 2011 Credit Agreement) (the “Leverage Ratio”). In addition, the Company is required to pay the lenders a fee on the unutilized portion of the commitments under the 2011 Credit Agreement at a rate per annum determined based on the Company’s Leverage Ratio.

USSC has entered into several interest rate swap transactions to mitigate its floating rate risk on a portion of its total long-term debt. See Note 11, “Derivative Financial Instruments”, for further details on these swap transactions and their accounting treatment.

The Company had outstanding letters of credit of $10.2 million under the 2011 Credit Agreement as of September 30, 2012 and $10.3 million under the 2011 Credit Agreement as of December 31, 2011.

Obligations of USSC under the 2011 Credit Agreement and the 2007 Note Purchase Agreement are guaranteed by USI and certain of USSC’s domestic subsidiaries. USSC’s obligations under these agreements and the guarantors’ obligations under the guaranties are secured by liens on substantially all Company assets other than real property and certain accounts receivable already collateralized as part of the Receivables Securitization Program.

The 2011 Credit Agreement, 2007 Note Purchase Agreement, and the Transfer and Administration Agreement all contain cross-default provisions. As a result, if a termination event occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.

8. Pension and Post-Retirement Health Care Benefit Plans

The Company maintains pension plans covering a majority of its employees. In addition, the Company had a post-retirement health care benefit plan (the “Retiree Medical Plan”) covering substantially all retired employees and their dependents, which terminated effective December 31, 2010. For more information on the Company’s retirement plans, see Notes 12 and 13 to the Company’s Consolidated Financial Statements in the Form 10-K for the year ended December 31, 2011. A summary of net periodic benefit cost related to the Company’s pension plans and Retiree Medical Plan for the three and nine months ended September 30, 2012 and 2011 is as follows (dollars in thousands):


	Pension Benefits
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Service cost—benefit earned during the period	$	240		$	192		$	721		$	577
Interest cost on projected benefit obligation		2,104			2,121			6,312			6,361
Expected return on plan assets		(2,501	)		(2,430	)		(7,503	)		(7,290	)
Amortization of prior service cost		44			33			132			101
Amortization of actuarial loss		1,549			485			4,646			1,455

Net periodic pension cost	$	1,436		$	401		$	4,308		$	1,204

The Company made cash contributions of $13.0 million and $8.5 million to its pension plans during the first nine months ended September 30, 2012 and 2011, respectively. The Company does not expect to make any additional contributions to its pension plans during the remaining three months of 2012.

Defined Contribution Plan

The Company has defined contribution plans covering certain salaried associates and non-union hourly paid associates (the “Plan”). The Plan permits associates to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for discretionary Company contributions and Company contributions matching associates’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $1.4 million and $4.1 million for the Company match of employee contributions to the Plan for the three and nine months ended September 30, 2012. During the same periods last year, the Company recorded $1.3 million and $4.0 million for the same match.

9. Other Assets and Liabilities

Other assets and liabilities as of September 30, 2012 and December 31, 2011 were as follows (in thousands):


	As of September 30, 2012		As of December 31, 2011
Other Long-Term Assets, net:
Investment—deferred compensation	$	5,282	$	4,536
Long-term notes receivable		10,554		10,184
Equity investment		1,556		2,051
Capitalized financing costs		2,762		3,373
Other		395		356

Total other long-term assets	$	20,549	$	20,500

Other Long-Term Liabilities:
Accrued pension obligation	$	42,029	$	50,727
Deferred rent		18,586		18,724
Deferred directors compensation		5,292		4,549
Long-term swap liability		792		5,697
Long-term income tax liability		3,668		3,802
Other		4,579		2,360

Total other long-term liabilities	$	74,946	$	85,859

10. Accounting for Uncertainty in Income Taxes

For each of the periods ended September 30, 2012 and December 31, 2011, the Company had $3.1 million and $3.4 million, respectively, in gross unrecognized tax benefits. The entire amount of these gross unrecognized tax benefits would, if recognized, decrease the Company’s effective tax rate.

The Company recognizes net interest and penalties related to unrecognized tax benefits in income tax expense. The gross amount of interest and penalties reflected in the Condensed Consolidated Statement of Income for the quarter ended September 30, 2012 was not material. The Condensed Consolidated Balance Sheets for each of the periods ended September 30, 2012 and December 31, 2011, include $0.6 million and $0.7 million, respectively, accrued for the potential payment of interest and penalties.

As of September 30, 2012, the Company’s U.S. Federal income tax returns for 2009 and subsequent years remain subject to examination by tax authorities. In addition, the Company’s state income tax returns for the 2004 and subsequent tax years remain subject to examinations by state and local income tax authorities. Although the Company is not currently under examination by the IRS, a number of state and local examinations are currently ongoing. Due to the potential for resolution of ongoing examinations and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $1.5 million.

11. Derivative Financial Instruments

Interest rate movements create a degree of risk to the Company’s operations by affecting the amount of interest payments. Interest rate swap agreements are used to manage the Company’s exposure to interest rate changes. The Company designates its floating-to-fixed interest rate swaps as cash flow hedges of the variability of future cash flows at the inception of the swap contract to support hedge accounting.

USSC entered into four separate swap transactions to mitigate USSC’s floating rate risk on the noted aggregate notional amount of LIBOR based interest rate risk noted in the table below. These swap transactions occurred as follows:

•

On November 6, 2007, USSC entered into an interest rate swap transaction (the “November 2007 Swap Transaction”) with U.S. Bank National Association as the counterparty.

•

On December 20, 2007, USSC entered into another interest rate swap transaction (the “December 2007 Swap Transaction”) with Key Bank National Association as the counterparty. This swap transaction matured on June 21, 2012.

•

On March 13, 2008, USSC entered into an interest rate swap transaction (the “March 2008 Swap Transaction”) with U.S. Bank National Association as the counterparty. This swap transaction matured on June 29, 2012.

•

On July 18, 2012, USSC entered into a two-year forward, three-year interest rate swap transaction (the “July 2012 Swap Transaction”) with U.S. Bank National Association as the counterparty. The swap transaction has an effective date of July 18, 2014 and a maturity date of July 18, 2017.

Approximately 30% ($135 million) of the Company’s current outstanding debt had its interest payments designated as the hedged forecasted transactions to the November 2007 Swap Transaction at September 30, 2012.

The Company’s outstanding swap transactions are accounted for as cash flow hedges and are recorded at fair value on the statement of financial position as of September 30, 2012. These hedges were as follows (in thousands):


As of September 30, 2012	Notional Amount		Receive		Pay			Maturity Date		Fair Value Net Liability ⁽¹⁾
November 2007 Swap Transaction	$	135,000		Floating 3-month LIBOR		4.674	%		January 15, 2013	$	(1,703	)
July 2012 Swap Transaction	$	150,000		Floating 1-month LIBOR		1.054	%		July 18, 2017	$	(792	)

(1)

These interest rate derivatives qualify for hedge accounting, and are in a net liability position. Therefore, the fair value of the interest rate derivatives are included in the Company’s Condensed Consolidated Balance Sheets as a component of “Accrued liabilities” or “Other Long-Term Liabilities” depending on the maturity date of the instrument, with an offsetting component in “Stockholders’ Equity” as part of “Accumulated Other Comprehensive Loss”.

Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on the notional amounts noted in the table above at a fixed rate also noted in the table above, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount.

The hedged transactions described above qualify as cash flow hedges in accordance with accounting guidance on derivative instruments. This guidance requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value. The Company does not offset fair value amounts recognized for interest rate swaps executed with the same counterparty.

For derivative instruments that are designated and qualify as a cash flow hedge (for example, hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt).

The November 2007 Swap Transaction effectively converts a portion of the Company’s current floating-rate debt to a fixed-rate basis, and the July 2012 Swap Transaction effectively converts a portion of the Company’s future floating-rate debt to a fixed-rate basis. Both reduce the impact of interest rate changes on future interest expense. By using such derivative financial instruments, the Company exposes itself to credit risk and market risk. Credit risk is the risk that the counterparty to the interest rate swap (as noted above) will fail to perform under the terms of the agreement. The Company attempts to minimize the credit risk in this agreement by only entering into transactions with creditworthy counterparties. The market risk is the adverse effect on the value of a derivative financial instrument that results from a change in interest rates.

The Company’s agreement with its derivative counterparty provides that if an event of default occurs on any Company debt of $25 million or more, the counterparty can terminate the swap agreement. If an event of default had occurred and the counterparty had exercised its early termination rights under the outstanding swap transactions as of September 30, 2012, the Company would have been required to pay the aggregate fair value net liability of $2.5 million plus accrued interest to the counterparties.

The swap transactions contain no ineffectiveness; therefore, all gains or losses on these derivative instruments are reported as a component of other comprehensive income (“OCI”) and reclassified into earnings as “interest expense” in the same period or periods during which the hedged transaction affects earnings. The following tables depict the effect of these derivative instruments on the statement of income for the three- and nine-month periods ended September 30, 2012 and September 30, 2011.


	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Three Months Ended September 30, 2012			For the Nine Months Ended September 30, 2012				For the Three Months Ended September 30, 2012			For the Nine Months Ended September 30, 2012
November 2007 Swap Transaction	$	(535	)	$	(1,811	)	Interest expense, net; income tax expense	$	(1,455	)	$	(4,294	)
December 2007 Swap Transaction		—			(1,335	)	Interest expense, net; income tax expense		—			(3,400	)
March 2008 Swap Transaction		—			(535	)	Interest expense, net; income tax expense		—			(1,344	)
July 2012 Swap Transaction		(500	)		(500	)	Interest expense, net; income tax expense		—			—

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Three Months Ended September 30, 2011			For the Nine Months Ended September 30, 2011				For the Three Months Ended September 30, 2011			For the Nine Months Ended September 30, 2011
November 2007 Swap Transaction	$	(597	)	$	(2,325	)	Interest expense, net; income tax expense	$	(1,525	)	$	(4,500	)
December 2007 Swap Transaction		(669	)		(2,507	)	Interest expense, net; income tax expense		(1,951	)		(5,744	)
March 2008 Swap Transaction		(247	)		(1,010	)	Interest expense, net; income tax expense		(758	)		(2,219	)
July 2012 Swap Transaction		—			—		Interest expense, net; income tax expense		—			—

12. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including interest rate swap liabilities related to interest rate swap derivatives based on the mark-to-market position of the Company’s interest rate swap positions and other observable interest rates (see Note 11, “Derivative Financial Instruments”, for more information on these interest rate swaps).

Accounting guidance on fair value establishes a hierarchy for those instruments measured at fair value which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

•

Level 1—Quoted market prices in active markets for identical assets or liabilities;

•

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable; and

•

Level 3—Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2012 (in thousands):


	Fair Value Measurements as of September 30, 2012
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap liability	$	2,495	$	—	$	2,495	$	—

The carrying amount of accounts receivable at September 30, 2012, including $420.2 million of receivables sold under the Current Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

Accounting guidance on fair value measurements requires separate disclosure of assets and liabilities measured at fair value on a recurring basis, as noted above, from those measured at fair value on a nonrecurring basis. As of September 30, 2012, no assets or liabilities are measured at fair value on a nonrecurring basis.

13. Subsequent Events

On October 22, 2012, the Registrant announced that its wholly-owned subsidiary, United Stationers Supply Co. signed a stock purchase agreement to acquire 100% of the outstanding shares of O.K.I. Supply Co. (O.K.I.) for an all-cash purchase price of $90 million. The transaction is expected to be completed in November 2012, subject to customary closing conditions. United Stationers plans to fund this acquisition through a combination of cash on hand and cash available under its revolving credit facility.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as “expects,” “anticipates,” “estimates,” “intends,” “plans,” “believes,” “seeks,” “will,” “is likely,” “scheduled,” “positioned to,” “continue,” “forecast,” “predicting,” “projection,” “potential” or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on management’s current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2011.

Readers should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.

Company Overview

The Company is a leading wholesale distributor of business products, with 2011 net sales of approximately $5.0 billion. The Company sells its products through a national distribution network of 60 distribution centers to approximately 25,000 resellers, who in turn sell directly to end consumers.

Key Trends and Recent Results

The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.

•

The Company’s “Winning-from-the-Middle” strategy has two primary components: 1) to strengthen and extend the Company’s core office products business, and 2) to diversify the Company’s portfolio into higher growth categories and channels.

In office products, the Company serves a diverse set of customers across many channels. The Company provides wholesale distribution services that allow its reseller customers to operate more efficiently and become more adaptable in today’s rapidly changing marketplace. This is enabled through a highly efficient supply chain and advanced logistics capabilities, coupled with marketing, merchandising, and e-businesses solutions. These offerings allow the Company’s customers to grow faster, better manage their working capital, and extend the depth and breadth of their product assortment. The Company is beginning to see long-term declining demand trends in certain office products categories as a result of the digitization of the workspace. In addition, online sales of these products continue to gain a larger share of the market. The Company’s core independent and national account customers value the scale and services that United provides in helping them succeed in this changing marketplace.

The Company’s acquisitions have extended its reach into the industrial and janitorial/breakroom categories. The recent agreement to acquire O.K.I. Supply Co. (O.K.I.), described in more detail below, demonstrates the Company’s strategic focus to expand the role of wholesale distribution services into areas where they are currently underpenetrated. The services and capabilities offered to customers in these categories are similar to those in office products. A common distribution and supply chain infrastructure is used across all categories to drive efficiencies in the supply chain. These efforts are continuing to prove the value of wholesale and continue to drive organic growth.

•

On October 22, 2012, the Company announced that USSC signed a stock purchase agreement to acquire 100% of the outstanding shares of O.K.I. for an all cash purchase price of $90 million. O.K.I. has annual revenues of approximately $150 million, offering 80,000 premium manufacturer-branded and private label products. The potential for accelerated growth and value creation from this acquisition is attractive given the Company’s unique nationwide pure wholesale distribution network, broad product offering, and marketing capabilities. O.K.I. sells to more than 9,000 independent distributors across multiple channels through nine distribution centers strategically located across the United States. It also has operations in Canada and Dubai, UAE that are positioned for strong growth. The acquisition is expected to be completed in November 2012.

•

In the short-term, the Company continues to: 1) increase investment in growth categories and channels, 2) optimize its distribution and transportation network, 3) align the organization’s structure around future priorities, 4) accelerate cost savings through its “War on Waste” or WOW program, and 5) strengthen its value proposition and improve margins.

•

As mentioned, the industry and marketplace continue to change quickly. Business and retail consumers are rapidly shifting their purchases of the product categories the Company offers from traditional “brick and mortar” channels to the internet. Many of the Company’s customers are growing rapidly online and new customers are emerging. The Company offers industry-leading fulfillment services along with content and marketing services to provide its customers with the scale and capabilities to succeed online.

•

Sales for the third quarter remained flat to the prior year quarter, after adjusting for one less selling day this quarter, at $1.29 billion. These sales reflected softening market conditions with industrial, janitorial/breakroom, and office product categories increasing 7.0%, 2.3%, and 1.3%, respectively. Technology category sales declined 4.5% and furniture category sales were down 2.9%.

•

The gross margin for the quarter was $203.8 million or 15.8% of sales, compared with $199.8 million or 15.3% of sales in the prior-year quarter. This 56 basis point improvement was positively impacted by higher inventory purchase-related supplier allowances.

•

Third quarter operating expenses were $140.1 million or 10.9% of sales, compared with $135.1 million or 10.3% of sales in the third quarter of 2011. Higher pension, healthcare and variable labor costs were partially offset by savings from WOW initiatives. The prior-year quarter also included a favorable resolution of a non-income based tax liability.

•

Operating income for the quarter ended September 30, 2012 was $63.6 million or 4.9% of sales, versus $64.6 million or 4.9% of sales in the third quarter of 2011.

•

Diluted earnings per share for the latest quarter were $0.91, compared with $0.81 in the prior-year period. Lower interest expense and lower average shares outstanding during the quarter benefited earnings per share.

•

Net cash provided by operating activities for the nine months ended September 30, 2012 was $155.7 million, compared with $99.5 million in the same period last year. Cash flow used in investing activities totaled $20.1 million in 2012, compared with $20.7 million in the same period last year. Capital spending is expected to be in the range of $30 million to $35 million for all of 2012.

•

On July 12, 2012, the Board approved a $0.13 per share dividend to shareholders of record at the close of business on September 14, 2012. The Company paid the dividend on October 15, 2012. On October 17, 2012, the Board approved a $0.14 per share cash dividend, an increase of 8%, to shareholders of record on December 14, 2012 and payable on January 15, 2013.

•

The Company currently has approximately $985 million of total committed debt capacity and $455 million of debt outstanding at September 30, 2012. Debt-to-total capitalization declined to 39.0% at September 30, 2012 from 40.4% at September 30, 2011. During the latest nine months, the Company paid $67.5 million to acquire approximately 2.4 million shares and paid cash dividends of $16.1 million to common shareholders.

•

On July 18, 2012, the Company entered into an amendment to an existing agreement with Bank of America, National Association. As a result, the maximum financing available under its accounts receivable securitization program increased to the lesser of $150 million or the total amount of eligible receivables less excess concentrations and applicable reserves.

On the same day, the Company entered into a two-year forward, three-year interest rate swap transaction with U.S. Bank National Association as the counterparty. The Company entered into the swap transaction to mitigate its interest rate risk on $150 million of future one-month LIBOR-based debt. The swap transaction has an effective date of July 18, 2014 and a maturity date of July 18, 2017. The swap transaction effectively fixes the interest rate on $150 million of future borrowings at 1.0535% plus the applicable interest margin on the underlying borrowings.

•

In February 2012, the Company announced a distribution network optimization and targeted cost reduction program. Three distribution centers were closed during the first quarter and certain positions were eliminated. In addition, an organizational realignment eliminated certain management positions. The first quarter 2012 charge related to these actions totaled $6.2 million. The steps taken are expected to meet the strategic objectives set for them, as well as generate $5 million to $6 million in savings during 2012, with ongoing annual cost savings of $7 million to $8 million. The Company intends to continue investing the savings from these actions into growth and other initiatives. A fourth distribution center was closed during the second quarter of 2012 and the Company closed a fifth facility during the third quarter of 2012, with additional expenses and savings from these actions.

For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to “Key Company and Industry Trends” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2011.

Stock Repurchase Program

During the nine-month period ended September 30, 2012 and 2011, the Company repurchased 2,363,686 and 4,310,820 shares of USI’s common stock at an aggregate cost of $67.5 million and $137.7 million, respectively. Through October 26, 2012, the Company repurchased 2.5 million shares year-to-date for $69.9 million. As of that date, the Company had approximately $55.1 million remaining of existing share repurchase authorization from the Board of Directors.

Stock purchases may be made from time to time in the open market or in privately negotiated transactions. Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data.

Critical Accounting Policies, Judgments and Estimates

During the first nine months of 2012, there were no significant changes to the Company’s critical accounting policies, judgments or estimates from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Results of Operations

The following table presents operating income as a percentage of net sales:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Net sales		100.00	%		100.00	%		100.00	%		100.00	%
Cost of goods sold		84.19			84.75			85.06			85.11

Gross margin		15.81			15.25			14.94			14.89

Operating expenses
Warehousing, marketing and administrative expenses		10.87			10.32			11.14			10.88

Operating income		4.94			4.93			3.80			4.01

Adjusted Operating Income, Net Income and Earnings Per Share

The following table presents Adjusted Operating Income, Net Income and Earnings Per Share for the nine-month period ended September 30, 2012 and 2011 (in thousands, except per share data). The tables show Adjusted Operating Income, Net Income and Earnings per Share excluding the effects of a non-cash pre-tax equity compensation charge taken with respect to a transition agreement with the Company’s former chief executive officer in the second quarter of 2011, a non-cash, non-tax deductible asset impairment charge in the first quarter of 2011, and a pre-tax charge related to facility closures and severance costs in the first quarter of 2012. Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income. Management believes that excluding these items is an appropriate comparison of its ongoing operating results to last year. It is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.


	For the Nine Months Ended September 30,
	2012						2011
				% to						% to
	Amount			Net Sales			Amount			Net Sales
Net Sales	$	3,836,032			100.00	%	$	3,804,110			100.00	%

Gross profit	$	572,946			14.94	%	$	566,362			14.89	%

Operating expenses	$	427,389			11.14	%	$	413,917			10.88	%
Facility closures and severance charge		(6,247	)		(0.16	)%		—			—
Equity compensation—CEO transition		—			—			(4,409	)		(0.12	)%
Asset impairment charge		—			—			(1,635	)		(0.04	)%

Adjusted operating expenses	$	421,142			10.98	%	$	407,873			10.72	%

Operating income	$	145,557			3.80	%	$	152,445			4.01	%
Operating expense item noted above		6,247			0.16	%		6,044			0.16	%

Adjusted operating income	$	151,804			3.96	%	$	158,489			4.17	%

Net income	$	78,905					$	81,062
Operating expense item noted above		3,873						4,367

Adjusted net income	$	82,778					$	85,429

Diluted earnings per share	$	1.91					$	1.77
Per share operating expense item noted above		0.10						0.10

Adjusted diluted earnings per share	$	2.01					$	1.87

Adjusted diluted earnings per share—growth rate over the prior year period		7.5	%

Weighted average number of common shares—diluted		41,229						45,718

Results of Operations—Three Months Ended September 30, 2012 Compared with the Three Months Ended September 30, 2011

Net Sales. Net sales for the third quarter of 2012 were $1.29 billion, flat compared with the prior-year quarter, after adjusting for one less selling day in the third quarter 2012. The following table summarizes net sales by product category for the three-month periods ended September 30, 2012 and 2011 (in thousands):


	Three Months Ended September 30,
	2012		2011⁽¹⁾
Technology products	$	381,512	$	406,029
Traditional office products (including cut-sheet paper)		361,911		363,085
Janitorial and breakroom supplies		326,521		324,254
Industrial supplies		99,261		94,248
Office furniture		86,165		90,169
Freight revenue		25,310		23,969
Services, Advertising and Other		7,995		8,275

Total net sales	$	1,288,675	$	1,310,029

(1)

Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications include changes between several product categories due to several specific products being reclassified to different categories. These changes did not impact the Consolidated Statements of Income.

Sales in the technology products category decreased in the third quarter of 2012 by 4.5% versus the third quarter of 2011, after adjusting for one less selling day in the current year quarter. This category, which continues to represent the largest percentage of the Company’s consolidated net sales, accounted for 29.6% of net sales for the third quarter of 2012. The decline versus the prior-year quarter was due to reduced sales of printer imaging supplies and the loss of some business at a key national account customer in the second half of 2011.

Sales of traditional office products increased in the third quarter of 2012 by 1.3% versus the third quarter of 2011, after adjusting for one less selling day. Traditional office supplies represented 28.1% of the Company’s consolidated net sales for the third quarter of 2012. Within this category, growth was driven by cut-sheet paper, private brands, new channels, and public sector penetration partially offset by the loss of some business with a key national account customer.

Sales in the janitorial and breakroom supplies product category increased 2.3% in the third quarter of 2012, adjusted for selling days, compared to the third quarter of 2011. This category accounted for 25.3% of the Company’s third quarter of 2012 consolidated net sales. The category faced challenging comparisons with last year’s third quarter, which was aided by strong inflation and the addition of a key national account customer. In this year’s quarter, inflation was negligible and some other national account business shifted to direct purchases from manufacturers. Despite these factors, the Company’s janitorial and breakroom growth continued to outperform the underlying market.

Industrial supplies sales in the third quarter of 2012 increased 7.0%, adjusted for selling days, compared to the same prior-year period. Sales of industrial supplies accounted for 7.7% of the Company’s net sales for the third quarter of 2012. Sales growth in industrial supplies reflected a moderation in market growth rates that began in the second quarter 2012. The Company nevertheless continued to outperform the market in this category and growth began to accelerate towards the end of the quarter.

Office furniture sales in the third quarter of 2012 declined 2.9% compared to the third quarter of 2011, after adjusting for one less selling day. Office furniture accounted for 6.7% of the Company’s third quarter of 2012 consolidated net sales. This decline was due to the shift of some national account business to direct purchases from manufacturers and decreased end user demand.

The remaining 2.6% of the Company’s third quarter 2012 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the third quarter of 2012 was $203.8 million, compared to $199.8 million in the third quarter of 2011. The gross margin rate of 15.8% was up 56 basis points (bps) from the prior-year quarter gross margin rate of 15.3%. Gross margin was positively affected by lower cost of goods sold primarily driven by inventory purchase-related supplier allowances (70 bps) and lower advertising costs (10 bps) as well as ongoing War on Waste (WOW) initiatives. These improvements were partially offset by increased obsolescence costs (10 bps), increased LIFO expense (10 bps), and ongoing competitive pricing pressures.

Operating Expenses. Operating expenses for the latest quarter were $140.1 million or 10.9% of sales, compared with $135.1 million or 10.3% of sales in the same period last year. Operating expenses in the third quarter 2012 were affected by higher pension expense (10 bps), health care costs (5 bps), labor expense (10 bps), variable management compensation costs (10 bps), and workers compensation costs (10 bps). In addition, the prior-year quarter included a favorable resolution of a non-income based tax liability (15 bps). These items were partially offset by a decrease in bad debt expense (10 bps) and by continued success with WOW efforts.

Interest Expense, net. Interest expense, net for the third quarter of 2012 was $4.7 million, down by $2.3 million from the same period in 2011, mainly due to the maturity of two interest rate swaps since the prior year quarter.

Income Taxes. Income tax expense was $22.2 million for the third quarter of 2012, compared with $21.8 million for the same period in 2011. The Company’s effective tax rate was 37.6% for the current-year quarter and 37.8% for the same period in 2011.

Net Income. Net income for the third quarter of 2012 totaled $36.8 million, or $0.91 per diluted share, compared with net income of $35.8 million, or $0.81 per diluted share for the same three-month period in 2011. Lower average shares outstanding due to ongoing stock repurchases contributed approximately 6 cents per share to the current quarter results.

Results of Operations—Nine Months Ended September 30, 2012 Compared with the Nine Months Ended September 30, 2011

Net Sales. Net sales for the first nine months of 2012 were $3.84 billion, up 1.4%, after adjusting for one less selling day in 2012, compared with sales of $3.80 billion for the same nine-month period of 2011. The following table summarizes net sales by product category for the nine-month periods ended September 30, 2012 and 2011 (in millions):


	Nine Months Ended September 30,
	2012⁽¹⁾		2011⁽¹⁾
Technology products	$	1,174,124	$	1,236,068
Traditional office products (including cut-sheet paper)		1,047,249		1,045,248
Janitorial and breakroom supplies		971,704		917,211
Industrial supplies		297,010		263,184
Office furniture		248,344		251,493
Freight revenue		73,585		67,807
Services, Advertising and Other		24,016		23,099

Total net sales	$	3,836,032	$	3,804,110

(1)

Sales in the technology products category decreased in the first nine months of 2012 by 4.5% versus the first nine months of 2011, after adjusting for one less selling day in the current year. This category accounted for 30.6% of net sales for the first nine months of 2012. The loss of some business from a key national account customer negatively impacted this category as well as reduced sales of printer imaging supplies.

Sales of traditional office products were up 0.7% in the first nine months of 2012 compared to the first nine months of 2011, after adjusting for one less selling day. Traditional office supplies represented 27.3% of the Company’s consolidated net sales for the first nine months of 2012. Within this category, cut-sheet paper sales drove growth. Additionally, increased sales of private brands and growth in new channels and public sector sales were offset by the loss of some national account business.

Sales in the janitorial and breakroom supplies product category increased 6.5% in the first nine months of 2012, adjusted for selling days, compared to the first nine months of 2011. This category accounted for 25.3% of the Company’s first nine months of 2012 consolidated net sales. While the Company’s growth rate in this category has moderated, it has continued to outperform the underlying market growth. This has been the result of continued execution of growth initiatives, new channel sales growth, and new national account business that more than offset the shift of other national account business to direct purchases from manufacturers.

Industrial supplies sales in the first nine months of 2012 increased 13.4% compared to the same prior-year period, after adjusting for one less selling day. Sales of industrial supplies accounted for 7.7% of the Company’s net sales for the first nine months of 2012. Industrial sales growth continued to reflect a positive economic environment in this category, growth from strategic investments, and execution of sales initiatives.

Office furniture sales in the first nine months of 2012 were down 0.7% compared to the first nine months of 2011, after adjusting for selling days. Office furniture accounted for 6.5% of the Company’s consolidated net sales for the first nine months of 2012. This slight decrease demonstrates a decrease in end-user demand for value products and growth with furniture-focused dealers and the loss of some national account business.

The remaining 2.6% of the Company’s first nine months of 2012 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the first nine months of 2012 was $572.9 million, compared to $566.4 million in 2011. The gross margin rate of 14.9% was flat to the rate for the first nine months of the prior year. Gross margin was impacted by increased obsolescence charges (10 bps), increased LIFO expense (15 bps), as well as continued competitive pricing pressures. These items were offset by higher inventory purchase-related supplier allowances (10 bps), increased advertising margins (10 bps), and continued success from WOW initiatives.

Operating Expenses. Operating expenses for the first nine months of 2012 totaled $427.4 million, or 11.1% of net sales, compared with $413.9 million, or 10.9% of net sales in the first nine months of 2011. Excluding the $6.2 million network optimization and cost reduction charge in the first nine months of 2012, and the $4.4 million equity compensation charge and $1.6 million asset impairment charge related to an equity investment in the first nine months of 2011, adjusted operating expenses were $421.1 million, or 11.0% of sales in 2012, compared with $407.9 million, or 10.7% of sales in 2011. Operating expenses reflected increased employee-related costs including higher pension costs (10 bps), healthcare costs (10 bps), labor cost (5 bps), and workers compensation insurance (5 bps) offset by lower bad debt expense (5 bps).

Interest Expense, net. Interest expense, net for the first nine months of 2012 was $18.9 million, down by $1.2 million from the same period in 2011, primarily due to the maturity of two interest rate swap agreements during the first nine months of 2012.

Income Taxes. Income tax expense was $47.7 million for the first nine months of 2012, compared with $50.9 million for the same period in 2011. The Company’s effective tax rate was 37.7% for the first nine months of 2012 and 38.6% for the same period in 2011. The primary difference relates to lower non-deductible expenses combined with favorable discrete items in 2012.

Net Income. Net income for the first nine months of 2012 totaled $78.9 million, or $1.91 per diluted share, compared with net income of $81.1 million, or $1.77 per diluted share for the same nine-month period in 2011. Adjusted for the impact of the network optimization and cost reduction charge in the first nine months of 2012, and the equity compensation charge and the non-tax deductible asset impairment charge related to an equity investment in the first nine months of 2011, net income was $82.8 million, or $2.01 per diluted share, compared with net income of $85.4 million, or $1.87 per diluted share for the same nine-month period in 2011. Diluted earnings per share were benefited by continued share repurchases over the trailing twelve months which have lowered the Company’s diluted average shares outstanding.

Liquidity and Capital Resources

Debt

The Company’s outstanding debt consisted of the following amounts (in millions):


	As of			As of
	September 30, 2012			December 31, 2011
2011 Credit Agreement	$	210.0		$	361.8
2007 Master Note Purchase Agreement (Private Placement)		135.0			135.0
2009 Receivables Securitization Program, maturing in 2013		110.0			—

Debt		455.0			496.8
Stockholders’ equity		710.8			704.7

Total capitalization	$	1,165.8		$	1,201.5

Adjusted debt-to-total capitalization ratio		39.0	%		41.3	%

Operating cash requirements and capital expenditures are funded from operating cash flow and available financing. Financing available from debt and the sale of accounts receivable as of September 30, 2012, is summarized below (in millions):

Availability


Maximum financing available under:
2011 Credit Agreement	$	700.0
2007 Master Note Purchase Agreement		135.0
Receivables Securitization Program ⁽¹⁾		150.0

Maximum financing available			$	985.0

Amounts utilized:
2011 Credit Agreement		210.0
2007 Master Note Purchase Agreement		135.0
Receivables Securitization Program ⁽¹⁾		110.0
Outstanding letters of credit		10.2

Total financing utilized				465.2

Available financing, before restrictions				519.8
Restrictive covenant limitation				95.9

Available financing as of September 30, 2012			$	423.9

(1)	The Receivables Securitization Program provides for maximum funding available of the lesser of $150 million or the total amount of eligible receivables less excess concentrations and applicable reserves.

The 2011 Credit Agreement prohibits the Company from exceeding a Leverage Ratio of 3.50 to 1.00 and imposes limits on the Company’s ability to repurchase stock and issue dividends when the Leverage Ratio is greater than 3.00 to 1.00. The 2011 Credit Agreement contains additional representations and warranties, covenants and events of default that are customary for facilities of this type.

The Company believes that its operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future.

Contractual Obligations

At the end of the nine-month period ending September 30, 2012, the Company had new outstanding borrowings of $110 million under the Receivables Securitization Program. Additionally during the nine-month period ending September 30, 2012, the Company entered into several operating lease extensions committing the Company to an additional $36.3 million in contractual obligations from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Credit Agreement and Other Debt

On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the “2007 Note Purchase Agreement”) with several purchasers. The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to the debt restrictions contained in the Credit Agreement. Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the “Series 2007-A Notes”). Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008. USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time. Obligations of USSC under the 2011 Credit Agreement and the 2007 Note Purchase Agreement are guaranteed by USI and certain of USSC’s domestic subsidiaries. USSC’s obligations under these agreements and the guarantors’ obligations under the guaranties are secured by liens on substantially all of the Company’s assets, other than real property and certain accounts receivable already collateralized as part of the Receivables Securitization Program.

On September 21, 2011, USI and USSC entered into a Third Amended and Restated Five-Year Revolving Credit Agreement (the “2011 Credit Agreement”) with U.S. Bank National Association and Wells Fargo Bank, National Association as Syndication Agents; Bank of America, N.A. and PNC Bank, National Association, as Documentation Agents; JPMorgan Chase Bank, National Association, as Administrative Agent, and the lenders identified therein. The 2011 Credit Agreement is a revolving credit facility with an aggregate committed principal amount of $700 million. The 2011 Credit Agreement also provides a sublimit for the issuance of letters of credit in an aggregate amount not to exceed $100 million at any one time and provides a sublimit for swing line loans in an

aggregate outstanding principal amount not to exceed $50 million at any one time. These amounts, as sublimits, do not increase the maximum aggregate principal amount, and any undrawn issued letters of credit and all outstanding swing line loans under the facility reduce the remaining availability under the 2011 Credit Agreement. The Company had outstanding letters of credit under the 2011 Credit Agreement of $10.2 million and $10.3 million as of September 30, 2012 and December 31, 2011, respectively. Subject to the terms and conditions of the 2011 Credit Agreement, USSC may seek additional commitments to increase the aggregate committed principal amount to a total amount of $1 billion.

Borrowings under the 2011 Credit Agreement bear interest at LIBOR for specified interest periods or at the Alternate Base Rate (as defined in the 2011 Credit Agreement), plus, in each case, a margin determined based on the Company’s permitted debt to EBITDA ratio (calculated as provided in Section 6.20 of the 2011 Credit Agreement) (the “Leverage Ratio”). In addition, the Company is required to pay the lenders a fee on the unutilized portion of the commitments under the 2011 Credit Agreement at a rate per annum determined based on the Company’s Leverage Ratio.

•

The Transfer and Administration Agreement among USSC, USFS, USR, and the Investor;

•

The Receivables Sale Agreement between USSC and USFS;

•

The Receivables Purchase Agreement between USFS and USR; and

•

The Performance Guaranty executed by USI in favor of USR.

Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC. Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC. Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to Bank of America. The Program provides for maximum funding available of the lesser of $150 million or the total amount of eligible receivables less excess concentrations and applicable reserves. USFS retains servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the Program are repaid and the Program has been terminated. The maturity date of the Program is November 23, 2013, subject to the extension of the commitments of the investors under the Program, which expire on January 18, 2013.

The receivables sold to the Investor remain on USI’s Condensed Consolidated Balance Sheets, and amounts advanced to USR by the Investor or any successor Investor are recorded as debt on USI’s Condensed Consolidated Balance Sheets. The cost of such debt is recorded as interest expense on USI’s Condensed Consolidated Statements of Income. As of September 30, 2012 and December 31, 2011, $420.2 million and $421.0 million, respectively, of receivables had been sold to Bank of America. At September 30, 2012, $110 million had been borrowed by USR related to these receivables sold. No amounts had been borrowed as of December 31, 2011.

Subject to the terms and conditions of the 2011 Credit Agreement, USSC is permitted to incur up to $300 million of indebtedness in addition to borrowings under the 2011 Credit Agreement, plus up to $200 million under the Receivables Securitization Program and up to $135 million in replacement or refinancing of the 2007 Note Purchase Agreement. The 2011 Credit Agreement, the 2007 Note Purchase Agreement and the Transfer and Administration Agreement each prohibit the Company from exceeding a Leverage Ratio of 3.50 to 1.00. The 2011 Credit Agreement and the 2007 Note Purchase Agreement also impose limits on the Company’s ability to repurchase stock and issue dividends when the Leverage Ratio is greater than 3.00 to 1.00. The 2011 Credit Agreement, the 2007 Note Purchase Agreement and the Transfer and Administration Agreement contain additional representations and warranties, covenants and events of default that are customary for such facilities. The 2011 Credit Agreement, 2007 Note Purchase Agreement, and the Transfer and Administration Agreement all contain cross-default provisions. As a result, if a termination event occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.

On November 6, 2007, USSC entered into an interest rate swap transaction (the “November 2007 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the November 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $135 million of LIBOR based interest rate risk. Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $135 million at a fixed rate of 4.674%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The November 2007 Swap Transaction has an effective date of January 15, 2008 and a maturity date of January 15, 2013.

On December 20, 2007, USSC entered into an interest rate swap transaction (the “December 2007 Swap Transaction”) with Key Bank National Association as the counterparty. USSC entered into the December 2007 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $200 million of LIBOR based interest rate risk. Under the terms of the December 2007 Swap Transaction, USSC was required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $200 million at a fixed rate of 4.075%, while the counterparty was obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The December 2007 Swap Transaction was effective as of December 21, 2007 and matured on June 21, 2012.

On March 13, 2008, USSC entered into an interest rate swap transaction (the “March 2008 Swap Transaction”) with U.S. Bank National Association as the counterparty. USSC entered into the March 2008 Swap Transaction to mitigate USSC’s floating rate risk on an aggregate of $100 million of LIBOR based interest rate risk. Under the terms of the March 2008 Swap Transaction, USSC was required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $100 million at a fixed rate of 3.212%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The March 2008 Swap Transaction was effective as of March 31, 2008 and matured on June 29, 2012.

On July 18, 2012, the Company entered into a two-year forward, three-year interest rate swap transaction (the “July 2012 Swap Transaction”) with U.S. Bank National Association as the counterparty. The Company entered into the July 2012 Swap Transaction to mitigate its interest rate risk on $150 million of future one-month LIBOR-based debt. The swap transaction has an effective date of July 18, 2014 and a maturity date of July 18, 2017. The swap transaction effectively fixes the interest rate on $150 million of future borrowings at 1.0535% plus the applicable interest margin on the underlying borrowings.

At September 30, 2012 funding levels (including amounts sold under the Receivables Securitization Program), a 50 basis point movement in interest rates would result in a $1.6 million increase or decrease in annualized interest expense on a pre-tax basis, and upon cash flows from operations.

Refer to Note 7, “Debt”, for further descriptions of the provisions of 2007 Credit Agreement and the 2007 Note Purchase Agreement.

Cash Flows

Cash flows for the Company for the nine-month periods ended September 30, 2012 and 2011 are summarized below (in thousands):


	For the Nine Months Ended
	September 30,
	2012			2011
Net cash provided by operating activities	$	155,704		$	99,489
Net cash used in investing activities		(20,127	)		(20,724	)
Net cash used in financing activities		(126,218	)		(89,545	)

Cash Flow From Operations

Net cash provided by operating activities for the nine months ended September 30, 2012 totaled $155.7 million, compared with $99.5 million in the same nine-month period of 2011. This increase in cash flows was positively affected by lower working capital requirements, primarily from improved receivables collections with an increase in receivables and successful inventory management. Cash flow for the nine-month period ending September 30, 2012 was also impacted by an outflow of $13.0 million related to pension plan contributions in the first quarter which was partially offset by an approximate $10.0 million inflow related to an income tax refund.

Cash Flow From Investing Activities

Net cash used in investing activities for the first nine months of 2012 was $20.1 million, compared to net cash used in investing activities of $20.7 million for the nine months ended September 30, 2011. For the full year 2012, the Company expects capital spending to be in the range of $30 million to $35 million.

Cash Flow From Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2012 totaled $126.2 million, compared with $89.5 million net cash used in the prior-year period. Cash used during the first nine months of 2012 in financing activities was impacted by $67.5 million in share repurchases, payment of cash dividends of $16.1 million, and by $41.7 million in net repayments under debt arrangements.

ITEM

3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Company’s exposures to market risk during the first nine months of 2012 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM

4. CONTROLS AND PROCEDURES.

Attached as exhibits to this Quarterly Report are certifications of the Company’s President and Chief Executive Officer (“CEO”) and Senior Vice President and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 under the Exchange Act. This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in such certifications.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that the Company’s Disclosure Controls or its internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the existence of resource constraints. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the fact that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by managerial override. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and no design is likely to succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks, including that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report the Company’s management performed an evaluation, under the supervision and with the participation of the Company’s CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Such disclosure controls and procedures (“Disclosure Controls”) are controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management’s quarterly evaluation of Disclosure Controls includes an evaluation of some components of the Company’s internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis.

Based on this evaluation, the Company’s management (including its CEO and CFO) concluded that as of September 30, 2012, the Company’s Disclosure Controls were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting during the quarter ended September 30, 2012, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

The Company is involved in legal proceedings arising in the ordinary course of or incidental to its business. The Company has established reserves, which are not material, for potential losses that are probable and reasonably estimable that may result from those proceedings. In many cases, however, it is difficult to determine whether a loss is probable or even possible or to estimate the amount or range of potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. The Company believes that pending legal proceedings will be resolved with no material adverse effect upon its financial condition or results of operations.

ITEM 1A.

RISK FACTORS.

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K for the year ended December 31, 2011. There have been no material changes to the risk factors described in such Form 10-K.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a)

Not applicable.

(b)

Not applicable.

(c)

Common Stock Purchases.

During the nine-month periods ended September 30, 2012 and 2011, the Company repurchased 2,363,686 and 4,310,820 shares of USI’s common stock at an aggregate cost of $67.5 million and $137.7 million, respectively. On February 24, 2012, the Company announced that its Board of Directors authorized the purchase of an additional $100.0 million of the Company’s common stock. The Company repurchased 2.5 million shares for $69.9 million year-to-date through October 26, 2012. As of that date, the Company had approximately $55.1 million remaining of existing share repurchase authorization from the Board of Directors.


2012 Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1, 2012 to July 31, 2012		98,537	$	26.78		98,537	$	68,052,042
August 1, 2012 to August 31, 2012		286,238		24.92		286,238		60,920,010
September 1, 2012 to September 30, 2012		135,195		25.34		135,195		57,494,051

Total Third Quarter		519,970	$	25.38		519,970	$	57,494,051

ITEM 6.

EXHIBITS

(a)

Exhibits

This Quarterly Report on Form 10-Q includes as exhibits certain documents that the Company has previously filed with the SEC. Such previously filed documents are incorporated herein by reference from the respective filings indicated in parentheses at the end of the exhibit descriptions (all made under the Company’s file number of 0-10653). Each of the management contracts and compensatory plans or arrangements included below as an exhibit is identified as such by a double asterisk at the end of the related exhibit description.


Exhibit No.		Description

3.1		Second Restated Certificate of Incorporation of the Company, dated as of March 19, 2002 (Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on April 1, 2002)

3.2		Amended and Restated Bylaws of the Company, dated as of July 16, 2009 (Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2009, filed on November 5, 2009)

4.1		Master Note Purchase Agreement, dated as of October 15, 2007, among United Stationers Inc. (“USI”), United Stationers Supply Co. (“USSC”), and the note Purchasers identified therein (Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended June 30, 2010, filed on August 6, 2010)

4.2		Parent Guaranty, dated as of October 15, 2007, by USI in favor of holders of the promissory notes identified therein (Exhibit 4.4 to the Company’s Form 10-Q for the quarter ended September 30, 2007, filed on November 7, 2007)

4.3		Subsidiary Guaranty, dated as of October 15, 2007, by Lagasse, Inc., United Stationers Technology Services LLC (“USTS”) and United Stationers Financial Services LLC (“USFS”) in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the Company’s Form 10-Q for the quarter ended September 30, 2007, filed on November 7, 2007)

10.1		Seventh Amendment to Transfer and Administration Agreement, dated July 18, 2012, among United Stationers Supply Co., United Stationers Receivables, LLC, United Stationers Financial Services LLC, and Bank of America, National Association (Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 23, 2012)

10.2*		Form of Restricted Stock Award Agreement under the Amended and Restated 2004 Long-Term Incentive Plan**

31.1*		Certification of Chief Executive Officer, dated as of October 30, 2012, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, dated as of October 30, 2012, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer and Chief Financial Officer, dated as of October 30, 2012, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following financial information from United Stationers Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed with the SEC on October 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statement of Income for the three- and nine-month periods ended September 30, 2012 and 2011, (ii) the Consolidated Balance Sheet at September 30, 2012 and December 31, 2011, (iii) the Consolidated Statement of Cash Flows for the nine-month periods ended September 30, 2012 and 2011, and (iv) Notes to Consolidated Financial Statements.

*	- Filed herewith

**	Represents a management contract or compensatory plan or arrangement.

SIGNATURES

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.

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