Business News

United Stationers Reports First Quarter 2013 Results

Wednesday 24. April 2013 - United Stationers Inc. (NASDAQ: USTR) reported results for the first quarter 2013.

First Quarter Financial Summary
— Net sales of $1.25 billion were flat to the prior year’s first quarter
sales after adjusting for one less workday in the current year quarter.
— Diluted earnings per share were $0.34. Adjusted earnings per share grew
24% to $0.56((1)), compared with $0.45((1)) in the prior-year quarter.
— First quarter gross margin was $188.5 million or 15.1% of sales, up 85
basis points versus the prior-year quarter.
— Operating expenses were $163.3 million. Adjusted operating expenses
were $148.9 million((1)) or 11.9%((1)) of sales, up 66 basis points
compared to the adjusted prior-year quarter results.
— Operating income was $25.2 million. Adjusted operating income was $39.7
million((1)) or 3.2%((1)), up 19 basis points versus last year’s
adjusted first quarter operating income.
— Net cash used in operating activities for the quarter totaled $13.4
million versus net cash provided in operating activities of $27.9
million in the prior-year quarter.
— Share repurchases totaled 0.2 million shares at a cost of $7.1 million
during the current year quarter.
— Cash dividends of $5.6 million were paid during the current year
quarter.
“We made progress on strategic initiatives, and delivered solid results in a difficult demand environment,” said Cody Phipps, president and chief executive officer. “First quarter demand conditions were impacted by corporate and government spending reductions, low inflation and continued weakness in the economy as real jobs growth and small business confidence remain soft. O.K.I. Supply was fully integrated into our industrial business during the quarter and we drove additional cost reduction programs in several of our other core businesses. Our financial results showed solid EPS growth and gross margin expansion despite flat top-line sales. We continued to build the capabilities needed to help our customers win in an increasingly digital and rapidly evolving marketplace.”
First Quarter Performance
Sales for the first quarter of 2013 were $1.25 billion, flat with the prior-year quarter after adjusting for workdays. Strong growth was seen in the industrial supplies and janitorial/breakroom categories with sales up 35.7% and 3.0%, respectively. These gains were offset by decreased sales in the technology, office products and furniture categories of 5.9%, 6.5%, and 3.0%, respectively.
Gross margin for the quarter was $188.5 million or 15.1% of sales, compared with $180.9 million or 14.2% of sales in the prior-year quarter. Gross margin improved due to a more favorable product mix, margin improvement initiatives, and higher purchase-related supplier allowances. War on Waste (WOW) cost savings also contributed to the improvement in gross margin. Partially offsetting these improvements in gross margin were lower inflation trends, net of LIFO inventory impacts, and increased transportation costs.
First quarter 2013 operating expenses were $163.3 million. This included a charge of $14.4 million for a workforce reduction and facility closures. Excluding this item, first quarter 2013 adjusted operating expenses were $148.9 million((1)) or 11.9%((1) )of sales, compared with last year’s adjusted $143.1 million((1)) or 11.3%((1) )of sales. Adjusted operating expenses for 2012 exclude a $6.2 million charge for a workforce reduction and facility closures. Higher operating expenses were driven by incremental costs related to the O.K.I. Supply Co. acquisition, and increased healthcare and workers compensation costs.
Operating income for the first quarter of 2013 was $25.2 million. Excluding the charges noted above, first quarter 2013 adjusted operating income was $39.7 million((1)) or 3.2%((1)) of sales, compared with $37.8 million((1)) or 3.0%((1)) of sales in the prior-year quarter.
Diluted earnings per share for the latest quarter were $0.34. Excluding the charges noted above, first quarter 2013 adjusted earnings per share were $0.56((1)), compared with $0.45((1)) in the prior-year period. The improvement was the result of increased operating income, lower interest expense, and the impact of share repurchases.
Cash Flow, Debt Trends and Share Repurchases
Net cash used by operating activities for the first three months of 2013 was $13.4 million. Operating cash flow was negatively impacted by the timing of payments for year end 2012 inventory investment buys. Cash flow used in investing activities totaled $9.0 million in the latest quarter. Capital spending for 2013 is expected to be approximately $35 million.
The company has approximately $1.0 billion of total committed debt capacity at March 31, 2013 and has maintained debt-to-EBITDA leverage at the low end of targeted levels. Outstanding debt at March 31, 2013 and 2012 was $537.0 million and $512.2 million, respectively. Debt-to-total capitalization at March 31, 2013 was 41.6%, compared with 42.9% at March 31, 2012. During the first quarter of 2013, the company paid $7.1 million to repurchase 0.2 million shares and paid $5.6 million in cash dividends. The amount remaining under Board share repurchase authorizations at April 19, 2013 was approximately $43.8 million.
“Our balance sheet, liquidity and access to capital remains strong,” said Phipps. “We will maintain a balanced capital deployment approach of prudent investments in growth, productivity enhancements, targeted acquisitions, and returning capital to shareholders through cash dividends and share repurchases. We continue to have ample funds to pursue our diversification strategy.”
Outlook
“While we have responded to a difficult economy by taking cost reduction actions in the near-term, we have not lost sight of the importance of investing in the capabilities that will drive our business in the future,” Phipps stated. The first quarter cost actions are expected to result in annual savings in excess of the related charge. These actions will right size United’s business and fund growth initiatives. “Looking forward, we continue to be proactive in taking actions that will positively impact earnings, notwithstanding the uncertain economy that we face. Our efforts remain focused on enabling our supply chain partners to succeed in a rapidly changing environment,” concluded Phipps.