Use these links to rapidly review the document
TABLE OF CONTENTS
United States Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
| (Mark One) | |
ý |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2004 |
|
or |
|
o |
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 (State or Other Jurisdiction of Incorporation or Organization) |
36-3141189 (I.R.S. Employer Identification No.) |
|
2200 East Golf Road Des Plaines, Illinois 60016-1267 (847) 699-5000 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) |
||
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.10 par value per share
(Title of Class)
Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ý No o
The aggregate market value of the common stock of United Stationers Inc. held by non-affiliates as of June 30, 2004 was approximately $1,293,056,995.
On March 14, 2005, United Stationers Inc. had 33,195,666 shares of common stock outstanding.
Documents Incorporated by Reference:
Certain portions of United Stationers Inc.'s definitive Proxy Statement relating to its 2005 Annual Meeting of Stockholders, to be filed within 120 days after the end of United Stationers Inc.'s fiscal year, are incorporated by reference into Part III.
UNITED STATIONERS INC.
FORM 10-K
For The Year Ended December 31, 2004
General
United Stationers Inc. is the largest broad line wholesale distributor of business products in North America with 2004 consolidated net sales of approximately $4.0 billion. United has over 15,000 customers, which resell products purchased from United to end consumers. The Company provides its customers with a number of competitive advantages, including access to more than 40,000 items, high order accuracy and fill rates, same- or next-day delivery to more than 90% of the U.S. and major cities in Canada and Mexico, and comprehensive training and marketing programs to help resellers reach end consumers.
Except where the context otherwise requires, the terms "United" and the "Company" refer to United Stationers Inc. and its consolidated subsidiaries. The parent holding company, United Stationers Inc. ("USI"), was incorporated in 1981 in the State of Delaware. USI's only direct wholly owned subsidiary and the Company's principal operating company is United Stationers Supply Co. ("USSC"), incorporated in 1922 in the State of Illinois. USSC sells traditional business products, as well as technology products through its Azerty marketing division and janitorial and sanitation products through its subsidiary, Lagasse, Inc.
Products
United distributes more than 40,000 stockkeeping units ("SKUs") within the following principal categories:
Technology Products. The Company is a leading wholesale distributor of computer supplies and peripherals in North America. It offers approximately 12,000 items—such as printer cartridges, data storage, and digital cameras—to value-added computer resellers, office products dealers, drug stores and grocery chains. Technology products accounted for approximately 45% of the Company's 2004 consolidated net sales.
Traditional Office Products. United is one of the largest national wholesale distributors of a broad range of office supplies. The Company offers approximately 20,000 brand-name and private label products—such as writing instruments, paper products, organizers, calendars and general office accessories. These products accounted for approximately 30% of the Company's 2004 consolidated net sales.
Office Furniture. United is one of the largest office furniture wholesalers in North America. It offers more than 4,500 items—such as vertical and lateral file cabinets, leather chairs, wooden and steel desks and computer furniture—from approximately 60 manufacturers. This product category accounted for approximately 12% of the Company's 2004 consolidated net sales.
Janitorial/Sanitation Products. The Company is a leading wholesaler of janitorial and sanitation supplies. It offers over 5,000 items in the following primary subcategories: janitorial and sanitation supplies, food service disposables, safety and security items, and paper and packaging supplies. The janitorial/sanitation product category accounted for approximately 12% of the Company's 2004 consolidated net sales.
The remaining 1% of the Company's consolidated net sales came from freight and advertising revenue.
As part of its efforts to improve product category management, in 2003 United introduced another category—New and Emerging Products. The Company established this category to focus on specific niche markets, such as supplies for education and physicians' offices, and to develop product lines and promotional materials to help its resellers increase their sales in these markets. Since most of the products offered in this category fall into the other four primary categories, revenues from New and Emerging Products are not reported separately. During 2004, the Company reclassified certain products between categories and, as a result, previously disclosed percentages for both product category growth
1
and total sales mix are not comparable to the current year presentation. The reclassifications did not impact total net sales. See Note 5 to the Consolidated Financial Statements showing 2003 and 2002 net sales by product category that conform to the current year presentation.
For more information on sales by product category, as well as sales and assets attributable to domestic and foreign locations in which the Company conducts business, see Note 5 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Customers
The Company serves a diverse group of over 15,000 customers, including independent office products dealers and contract stationers, national mega-dealers, office products superstores, computer products resellers, office furniture dealers, mass merchandisers, mail order companies, sanitary supply distributors, drug and grocery store chains, and e-commerce merchants. No single customer accounted for more than 7.5% of United's 2004 consolidated net sales.
Independent resellers accounted for nearly 80% of United's 2004 consolidated net sales. The Company provides these customers with specialized services designed to help them market their products and services while improving operating efficiencies and eliminating costs.
Marketing and Customer Support
United's customers can purchase most of the products the Company distributes at similar prices from many other sources. Most of the Company's reseller customers purchase their products from more than one source, frequently using "first call" and "second call" distributors. A "first call" distributor typically is a reseller's primary wholesaler, which is given the first opportunity to fill an order. In the event the "first call" distributor is unable to fill an order or to do so timely, the reseller will transmit the order to its "second call" distributor.
To differentiate itself from its competition, United focuses its marketing efforts on providing value-added services to resellers, including:
United's marketing programs have emphasized two other major components. First, the Company produces an extensive array of catalogs for commercial dealers, contract stationers and retail dealers. These catalogs usually are custom printed with each reseller's name, then sold to the resellers who, in turn, distribute them to their customers. Second, United provides its resellers with a variety of dealer support and marketing services. These services are designed to help resellers differentiate themselves from their competitors by addressing the needs of the end user's procurement process.
Nearly all of the Company's 40,000 SKUs are sold through its comprehensive annual general line catalog (available in both print and electronic versions) and semi-annual specialty catalogs. Promotional catalogs are typically produced each quarter.
United also develops separate quarterly flyers covering most of its product categories, including its Universal® private brand line, offering a large selection of popular commodity products. Since catalogs
2
provide product exposure to end consumers and generate demand, United tries to maximize their distribution by offering incentives to resellers, which they can use to offset the cost of the catalogs.
Resellers can place orders with the Company through the Internet, by phone, fax and e-mail and through a variety of electronic order entry systems. Electronic order entry systems allow resellers to forward their customers' orders directly to United, resulting in the delivery of pre-sold products to the reseller. In 2004, United received almost 90% of its orders electronically.
At year-end, the Company employed approximately 260 field salespeople, 140 tele-salespeople and 460 customer care representatives in support of its sales, marketing and customer service activities. United's sales force tailors its service offerings to serve each customer's needs and reduce costs.
Distribution
USSC has a network of 35 business products regional distribution centers located in 24 states. Most of these centers carry the Company's complete offering of business products, including technology products, traditional office products and office furniture. United also has 24 Lagasse distribution centers that carry a comprehensive line of janitorial and sanitation supplies. In addition, the Company operates two distribution centers in Mexico that serve computer supply resellers, and two Azerty distribution centers that serve the Canadian marketplace. United's domestic operations generated $3.8 billion of its $4.0 billion in 2004 consolidated net sales, and its international operations contributed another $0.2 billion to 2004 net sales.
The Company supplements its regional distribution centers with 20 local distribution points across the U.S., which serve as re-distribution points for orders filled at the regional centers. United uses a dedicated fleet of more than 400 trucks, most of which are under contract to the Company, to enable direct delivery to resellers from regional distribution centers and local distribution points.
United enhances its distribution capabilities through a proprietary computerized inventory locator system. If a reseller places an order for an item that is out of stock at the nearest distribution center, the system will search for the product at alternative facilities within the shuttle network. When the item is found, the alternate location coordinates shipping with the primary facility. For the majority of resellers, the result is a single on-time delivery of all items. This system gives United added inventory support while minimizing working capital requirements. As a result, the Company can provide higher service levels to its reseller customers, reduce back orders, and minimize time spent searching for substitute merchandise. These factors contribute to a high order fill rate and efficient levels of inventory. To meet the Company's delivery commitments and to maintain high order fill rates, United carries a significant amount of inventory, which contributes to its overall working capital requirements.
The "Wrap and Label" program is another service the Company offers to resellers. This program gives resellers the option to receive individually packaged orders ready to be delivered to its end-consumers. For example, when a reseller places orders for several individual consumers, United can group and wrap the items separately, identifying each specific consumer, so that the reseller need only deliver the already individualized packages. Resellers find the "Wrap and Label" program advantageous because it eliminates the need to break down bulk shipments and repackage orders before delivering them to consumers.
In addition to these value-adding programs for resellers, United is committed to reducing its operating costs. The Company's "war on waste" program has a goal of removing $20 million in costs per year through a combination of new and continuing activities such as streamlining the Company's receiving operations, improving its returns policies and procedures, and maximizing the efficiency of its fleet and transportation system.
Purchasing and Merchandising
As the largest broad line wholesale business products distributor in North America, United is able to leverage its broad product selection as a key merchandising strategy. The Company orders products
3
from more than 450 manufacturers. As a result of its purchasing volume, United receives substantial supplier allowances and can realize significant economies of scale in its logistics and distribution activities. In 2004, United's largest supplier was Hewlett-Packard Company, representing approximately 24% of its aggregate purchases.
The Company's centralized Merchandising Department is responsible for selecting, purchasing and pricing merchandise, as well as managing the entire supplier relationship. Product selection is based upon end user acceptance, anticipated demand for the product, and the manufacturer's total service, price and product quality. As part of its effort to create an integrated supplier approach, United introduced the Preferred Supplier Program. This program is designed to strengthen relationships with suppliers, by offering their products as preferred brands in the Company's marketing efforts, while working closely with them to reduce overall supply chain costs.
Competition
United competes with office products manufacturers and with other national, regional and specialty wholesalers of office products, office furniture, technology products, and janitorial and sanitation supplies. In most cases, competition is based primarily upon net pricing, minimum order quantity, speed of delivery, and value-added marketing and logistics services.
The Company competes with manufacturers who often sell their products directly to resellers and may offer lower prices. United believes that it provides an attractive alternative to manufacturer direct purchases by offering a combination of value-added services, including: 1) marketing and catalog programs; 2) same-day and next-day delivery; 3) a broad line of business products from multiple manufacturers on a "one-stop shop" basis; and 4) lower minimum order quantities.
Competition with other broad line wholesalers is based on breadth of product lines, availability of products, speed of delivery to resellers, order fill rates, net pricing to resellers, and quality of marketing and other value-added services. The Company competes with one national broad line office products competitor, as well as local and regional office products wholesalers and furniture and janitorial/sanitation distributors, each of which typically offer more limited product lines. In addition, United competes with various national distributors of computer consumables primarily on net pricing to resellers.
General competition in the office products industry has led to greater price awareness among end consumers. As a result, purchasers of commodity office products appear increasingly more price sensitive. The Company has addressed this by emphasizing to resellers the continuing advantages of its value-added services and competitive strengths as compared to those of manufacturers and other wholesalers.
Seasonality
The Company's sales generally are relatively steady throughout the year. However, sales vary to the extent of seasonal buying patterns of consumers of office products. In particular, the Company's sales usually are higher than average during January, when many businesses begin operating under new annual budgets and release previously deferred purchase orders.
Employees
As of March 1, 2005, United employed approximately 5,550 people.
Management believes it has good relations with its employees. Approximately 740 of the shipping, warehouse and maintenance employees at certain of the Company's Philadelphia, Baltimore, Los Angeles and New York City facilities are covered by collective bargaining agreements. United successfully renegotiated agreements with employees in Philadelphia and Los Angeles in 2004. The agreement with employees in New York is set to expire on April 30, 2005. The other agreements expire at
4
various times during the next three years. The Company has not experienced any work stoppages during the past five years.
Availability of the Company's Reports
The Company's principal Internet Web site address is www.unitedstationers.com. The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as amendments and exhibits to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") are available free of charge through the Company's Web site as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC"). In addition, copies of these filings (excluding exhibits) may be requested at no cost by contacting the Investor Relations Department at:
| United Stationers Inc. Attn: Investor Relations Department 2200 East Golf Road Des Plaines, IL 60016-1267 Telephone: (847) 699-5000 Fax: (847) 699-4716 E-mail: IR@ussco.com |
The Company considers its properties to be suitable with adequate capacity for their intended uses. The Company evaluates its properties on an ongoing basis to improve efficiency and customer service and leverage potential economies of scale. Substantially all owned facilities are subject to liens under USSC's debt agreements (see the information under the caption "Liquidity and Capital Resources" included below under Item 7). As of December 31, 2004, these properties consisted of the following:
Offices. The Company owns its approximately 136,000 square foot headquarters office in Des Plaines, Illinois. It also owns approximately 49,000 square feet of office space in Orchard Park, New York. The Company leases approximately 49,000 square feet of additional office space in Des Plaines, Illinois and Mt. Prospect, Illinois. Its Canadian Division leases approximately 17,000 square feet of office space in Montreal, Quebec. In addition, the Company leases approximately 22,000 square feet of office space in Harahan, Louisiana and approximately 6,000 square feet of office space in Metarie, Louisiana.
Distribution Centers. The Company utilizes approximately 10.5 million square feet of warehouse space. USSC has 35 business products distribution centers located throughout the United States. The Company maintains 24 Lagasse janitorial and sanitation supply distribution centers in the United States, two distribution centers in Mexico that serve computer supply resellers and two Azerty distribution centers that serve the Canadian marketplace. Of the 10.5 million square feet of distribution center space, 3.0 million square feet are owned and 7.5 million square feet are leased.
For information with respect to legal proceedings, see Note 3 to the Company's Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The Company has been advised by the staff of the SEC that the staff is conducting an informal inquiry regarding the Company in connection with its Azerty United Canada division and related financial reporting matters. For additional information with respect to such matters, see Item 7 of this Annual Report under the caption, "Review of Canadian Division," and Item 9A under the caption, "Changes in Internal Control over Financial Reporting." The Company intends to continue to cooperate with the SEC in this inquiry. Due to the early stage of this inquiry, the Company is unable to predict its ultimate scope or outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth quarter of 2004.
5
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
| Name, Age and Position with the Company |
Business Experience |
|
|---|---|---|
| Richard W. Gochnauer 55, President and Chief Executive Officer |
Richard W. Gochnauer became the Company's President and Chief Executive Officer in December 2002, after joining the Company as its Chief Operating Officer and as a Director in July 2002. From 1994 until he joined the Company, Mr. Gochnauer held the positions of Vice Chairman and President, International, and President and Chief Operating Officer of Golden State Foods, a privately held food company that manufactures and distributes food and paper products. Prior to that, he served as Executive Vice President of the Dial Corporation, with responsibility for its Household and Laundry Consumer Products businesses. Mr. Gochnauer also served as President of the Stella Cheese Company, then a division of Universal Foods, and as President of the International Division of Schreiber Foods, Inc. | |
S. David Bent 44, Senior Vice President and Chief Information Officer |
S. David Bent joined the Company as its Senior Vice President and Chief Information Officer in May 2003. From August 2000 until such time, Mr. Bent served as the Corporate Vice President and Chief Information Officer of Acterna Corporation, a multi-national telecommunications test equipment and services company, and also served as General Manager of its Software Division from October 2002. Previously, he spent 18 years with the Ford Motor Company. During his Ford tenure, Mr. Bent most recently served during 1999 and 2000 as the Chief Information Officer of Visteon Automotive Systems, a tier one automotive supplier, and from 1998 through 1999 as its Director, Enterprise Processes and Systems. |
|
Ronald C. Berg 45, Senior Vice President, Inventory Management and Facility Support |
Ronald C. Berg has been the Senior Vice President, Inventory Management and Facility Support, of the Company since October 2001. He had served previously as the Company's Vice President, Inventory Management, since 1997, and as a Director, Inventory Management, since 1994. He began his career with the Company in 1987 as an Inventory Rebuyer, and spent several years thereafter in various product and furniture or general inventory management positions. Prior to joining the Company, Mr. Berg managed Solar Cine Products, Inc., a family-owned, photographic equipment business. |
|
6
Patrick T. Collins 44, Senior Vice President, Sales |
Patrick T. Collins joined the Company in October 2004 as Senior Vice President, Sales. Prior to joining the Company, Mr. Collins was employed by Ingram Micro, a global technology distribution company, in various senior sales and marketing roles, serving most recently as its Senior Group Vice President of Sales and Marketing from January 2000 through August 2004. In that capacity, Mr. Collins had operating responsibility for sales, marketing, purchasing and supplier relations for Ingram Micro's North American division. Prior to joining Ingram Micro in early 2000, Mr. Collins was with the Frito-Lay division of PepsiCo, Inc., a global food and beverage consumer products company, for nearly 15 years, where he held various accounting, planning, sales and general management positions. |
|
Brian S. Cooper 48, Senior Vice President and Treasurer |
Brian S. Cooper has served as the Company's Senior Vice President and Treasurer since February 2001. From 1997 until he joined the Company, he was the Treasurer of Burns International Services Corporation, a provider of physical security systems and services. Prior to that time, Mr. Cooper spent twelve years in U.S. and international finance assignments with Amoco Corporation, a global petroleum and chemicals company. He also held the position of Chief Financial Officer for Amoco's operations in Norway. |
|
Kathleen S. Dvorak 48, Senior Vice President and Chief Financial Officer |
Kathleen S. Dvorak has been the Company's Senior Vice President and Chief Financial Officer since October 2001. In that role, she oversees the Company's financial planning, accounting, treasury and investor relations activities and serves as its primary liaison to the financial/investor community. Ms. Dvorak previously served as the Senior Vice President of Investor Relations and Financial Administration from October 2000, and as Vice President, Investor Relations, from July 1997. Ms. Dvorak has been with the Company since 1982, and has been involved in various aspects of the financial function at the Company. |
|
James K. Fahey 54, Senior Vice President, Merchandising |
James K. Fahey is the Company's Senior Vice President, Merchandising, with responsibility for product management and merchandising, vendor logistics and advertising services. From September 1992 until he assumed that position in October 1998, Mr. Fahey served as Vice President, Merchandising of the Company. Prior to that time, he served as the Company's Director of Merchandising. Before he joined the Company in 1991, Mr. Fahey had an extensive career in both retail and consumer direct-response marketing. |
|
7
Deidra D. Gold 50, Senior Vice President, General Counsel and Secretary |
Deidra D. Gold has served as the Company's Senior Vice President, General Counsel and Secretary since November 2001. She was Vice President and General Counsel of eLoyalty Corporation, an IT consulting services and systems integration company, from 2000 until such time, and Counsel and Corporate Secretary of Ameritech Corporation, a communications company, from early 1998 through the end of 1999, following its acquisition. Prior to such time, she was a partner in the law firms of Goldberg, Kohn and Jones, Day, Reavis & Pogue and served as Vice President and General Counsel of Premier Industrial (renamed Premier Farnell) Corporation, a wholesale distributor of electronic and industrial products. |
|
Mark J. Hampton 51, Senior Vice President, Marketing |
Mark J. Hampton is the Company's Senior Vice President, Marketing, with responsibility for marketing and category management activities. He previously served as Senior Vice President, Marketing and Field Support Services, from late 2001 until early 2003, Senior Vice President, Marketing, and President and Chief Operating Officer of The Order People Company, during 2001 and Senior Vice President, Marketing, from October 2000. Mr. Hampton began his career with the Company in 1980 and left the Company to work in the office products dealer community in 1991. Upon his return to the Company in 1992, he served as Midwest Regional Vice President, Vice President and General Manager of the Company's MicroUnited division and, from 1994, Vice President, Marketing. |
|
Jeffrey G. Howard 50, Senior Vice President, National Accounts and Channel Management |
Jeffrey G. Howard has served as the Company's Senior Vice President, National Accounts and Channel Management, since October 2004. From early 2003 until such time, he was Senior Vice President, National Accounts and New Business Development. Mr. Howard previously held the positions of Senior Vice President, Sales and Customer Support Services from October 2001, Senior Vice President, National Accounts, from late 2000 and Vice President, National Accounts, from 1994. He joined the Company in 1990 as General Manager of its Los Angeles distribution center, and was promoted to Western Region Vice President in 1992. Mr. Howard began his career in the office products industry in 1973 with Boorum & Pease Company, which was acquired by Esselte Pendaflex in 1985. |
|
Kenneth M. Nickel 37, Vice President and Controller |
Kenneth M. Nickel has been the Company's Vice President and Controller since November 2002. Prior to that, Mr. Nickel served as the Company's Vice President and Field Support Center Controller from November 2001 to October 2002 and as its Vice President and Assistant Controller from April 2001 to October 2001. Mr. Nickel has been with the Company since November 1989 and has held progressively more responsible accounting positions within the Company's Finance department. |
|
8
P. Cody Phipps 43, Senior Vice President, Operations |
P. Cody Phipps joined the Company in August 2003 as its Senior Vice President, Operations. Prior to joining the Company, Mr. Phipps was a partner at McKinsey & Company, Inc., a global management consulting firm. During his tenure at McKinsey from and after 1990, he became a leader in the firm's North American Operations Effectiveness Practice and co-founded and led its Service Strategy and Operations Initiative, which focused on driving significant operational improvements in complex service and logistics environments. Prior to joining McKinsey, Mr. Phipps worked as a consultant with The Information Consulting Group, a systems consulting firm, and as an IBM account marketing representative. |
|
Stephen A. Schultz 38, President, Lagasse, Inc. and Vice President, Category Management, Janitorial/Sanitation |
Stephen A. Schultz is the President of Lagasse, Inc., a wholly owned subsidiary of USSC, a position he has held since August 2001. In October 2003, he assumed the additional position of Vice President, Category Management—Janitorial/Sanitation, of the Company. Mr. Schultz joined Lagasse in early 1999 as Vice President, Marketing and Business Development, and became a Senior Vice President of Lagasse in late 2000. Before joining Lagasse, he served for nearly 10 years in various executive sales and marketing roles for Hospital Specialty Company, a manufacturer and distributor of hygiene products for the institutional janitorial and sanitation industry. |
|
John T. Sloan 53, Senior Vice President, Human Resources |
John T. Sloan has been the Company's Senior Vice President, Human Resources since January 2002. Before he joined the Company, Mr. Sloan held various human resources management positions with Sears, Roebuck and Co., a retailer of apparel, home and automotive products and services, serving most recently as its Executive Vice President, Human Resources, from early 1998 through the end of 2000. Previously, he served in various senior human resources and administrative management positions with The Tribune Company, a media company, and various divisions within Philip Morris Incorporated, including The Seven-Up Company. |
|
Joseph R. Templet 58, Senior Vice President, Trade Development |
Joseph R. Templet has served as Senior Vice President, Trade Development since October 2004. From October 2001 until such time, Mr. Templet was the Company's Senior Vice President, Field Sales. He previously served as the Company's Senior Vice President, Field Sales and Operations from October 2001, Senior Vice President, South Region, from October 2000, and Vice President, South Region, from 1992. Mr. Templet joined the Company in 1985 and thereafter held various managerial positions, including Vice President, Central Region, and Vice President, Marketing and Corporate Sales. Prior to joining the Company, Mr. Templet held sales and sales management positions with the Parker Pen Company, Polaroid Corporation and Procter & Gamble. |
Executive officers are elected by the Board of Directors. Except as required by individual employment agreements between executive officers and the Company, there exists no arrangement or understanding between any executive officer and any other person pursuant to which such executive officer was elected. Each executive officer serves until his or her successor is appointed and qualified or until his or her earlier removal or resignation.
9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Common Stock Information
USI's common stock is quoted through The NASDAQ Stock Market® ("NASDAQ") under the symbol USTR. The following table shows the high and low closing sale prices per share for USI's common stock as reported by NASDAQ:
| |
High |
Low |
||||
|---|---|---|---|---|---|---|
| 2004 | ||||||
| First Quarter | $ | 44.15 | $ | 37.17 | ||
| Second Quarter | 43.29 | 36.30 | ||||
| Third Quarter | 43.40 | 38.27 | ||||
| Fourth Quarter | 49.25 | 42.50 | ||||
2003 |
||||||
| First Quarter | $ | 27.36 | $ | 18.00 | ||
| Second Quarter | 35.83 | 21.45 | ||||
| Third Quarter | 41.30 | 35.67 | ||||
| Fourth Quarter | 42.37 | 37.21 | ||||
On March 2, 2005, there were approximately 737 holders of record of common stock. A greater number of holders of USI common stock are "street name" or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
Common Stock Repurchases
The Company did not repurchase any shares of USI common stock during the fourth quarter of 2004. During full year 2004, the Company repurchased 1,072,654 shares of such common stock at an aggregate cost of $40.9 million. The Company did not repurchase any stock during 2003. As of December 31, 2004, the Company had authority from its Board of Directors and is permitted under its debt agreements to additionally repurchase up to $86 million of USI common stock.
Dividends
The Company's policy has been to reinvest earnings to enhance its financial flexibility and to fund future growth. Accordingly, USI has not paid cash dividends and has no plans to declare cash dividends on its common stock at this time. Furthermore, as a holding company, USI's ability to pay cash dividends in the future depends upon the receipt of dividends or other payments from its operating subsidiary, USSC. The Company's debt agreements impose limited restrictions on the payment of dividends. For further information on the Company's debt agreements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in Item 7, and Note 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K (Securities Authorized for Issuance under Equity Compensation Plans) is included in Item 12 of this Annual Report.
10
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data of the Company for the years ended December 31, 2000 through 2004 have been derived from the Consolidated Financial Statements of the Company, which have been audited by Ernst & Young LLP, an independent registered public accounting firm. The selected consolidated financial data below should be read in conjunction with, and is qualified in its entirety by, Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements of the Company included in Items 7 and 8, respectively, of this Annual Report. Except for per share data, all amounts presented are in thousands:
| |
Years Ended December 31, |
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
2002 |
2001 |
2000 |
||||||||||||
| Income Statement Data:(1) | |||||||||||||||||
| Net sales | $ | 3,991,190 | $ | 3,847,722 | $ | 3,701,564 | $ | 3,925,936 | $ | 3,944,862 | |||||||
| Cost of goods sold | 3,408,974 | 3,287,189 | 3,163,589 | 3,306,143 | 3,301,018 | ||||||||||||
| Gross profit | 582,216 | 560,533 | 537,975 | 619,793 | 643,844 | ||||||||||||
| Operating expenses: | |||||||||||||||||
| Warehousing, marketing and administrative expenses | 433,027 | 414,917 | 415,980 | 444,434 | 435,809 | ||||||||||||
| Goodwill amortization(2) | — | — | — | 5,701 | 5,489 | ||||||||||||
| Restructuring and other charges, net(3)(4) | — | — | 6,510 | 47,603 | — | ||||||||||||
| Total operating expenses | 433,027 | 414,917 | 422,490 | 497,738 | 441,298 | ||||||||||||
| Income from operations | 149,189 | 145,616 | 115,485 | 122,055 | 202,546 | ||||||||||||
| Interest expense | (3,324 | ) | (6,816 | ) | (16,860 | ) | (25,872 | ) | (30,171 | ) | |||||||
| Interest income | 423 | 324 | 165 | 2,079 | 2,942 | ||||||||||||
| Loss on early retirement of debt(5)(6) | — | (6,693 | ) | — | — | (10,724 | ) | ||||||||||
| Other expense, net(7) | (3,488 | ) | (4,826 | ) | (2,421 | ) | (4,621 | ) | (11,201 | ) | |||||||
| Income before income taxes and cumulative effect of a change in accounting principle | 142,800 | 127,605 | 96,369 | 93,641 | 153,392 | ||||||||||||
| Income tax expense | 52,829 | 48,495 | 36,141 | 36,663 | 61,225 | ||||||||||||
| Income before cumulative effect of a change in accounting principle | 89,971 | 79,110 | 60,228 | 56,978 | 92,167 | ||||||||||||
| Cumulative effect of a change in accounting principle(8) | — | (6,108 | ) | — | — | — | |||||||||||
| Net income | $ | 89,971 | $ | 73,002 | $ | 60,228 | $ | 56,978 | $ | 92,167 | |||||||
| Net income per share—basic: | |||||||||||||||||
| Income before cumulative effect of a change in accounting principle | $ | 2.69 | $ | 2.39 | $ | 1.81 | $ | 1.70 | $ | 2.70 | |||||||
| Cumulative effect of a change in accounting principle | — | (0.19 | ) | — | — | — | |||||||||||
| Net income per common share—basic | $ | 2.69 | $ | 2.20 | $ | 1.81 | $ | 1.70 | $ | 2.70 | |||||||
| Net income per share—diluted: | |||||||||||||||||
| Income before cumulative effect of a change in accounting principle | $ | 2.65 | $ | 2.37 | $ | 1.78 | $ | 1.68 | $ | 2.65 | |||||||
| Cumulative effect of a change in accounting principle | — | (0.19 | ) | — | — | — | |||||||||||
| Net income per common share—diluted | $ | 2.65 | $ | 2.18 | $ | 1.78 | $ | 1.68 | $ | 2.65 | |||||||
| Cash dividends declared per share | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Balance Sheet Data: |
|||||||||||||||||
| Working capital(9) | $ | 458,472 | $ | 386,868 | $ | 400,587 | $ | 412,766 | $ | 495,456 | |||||||
| Total assets(9) | 1,407,240 | 1,295,010 | 1,349,229 | 1,380,587 | 1,481,417 | ||||||||||||
| Total debt(10) | 18,000 | 17,324 | 211,249 | 271,705 | 409,867 | ||||||||||||
| Total stockholders' equity | 731,203 | 672,978 | 558,884 | 538,681 | 478,439 | ||||||||||||
Statement of Cash Flows Data: |
|||||||||||||||||
| Net cash provided by operating activities | $ | 47,042 | $ | 167,667 | $ | 105,730 | $ | 191,156 | $ | 38,718 | |||||||
| Net cash used in investing activities | (9,719 | ) | (10,931 | ) | (23,039 | ) | (46,327 | ) | (83,534 | ) | |||||||
| Net cash (used in) provided by financing activities | (32,032 | ) | (164,416 | ) | (93,917 | ) | (135,783 | ) | 45,655 | ||||||||
Other Data: |
|||||||||||||||||
| Pro forma amounts assuming the accounting change for EITF Issue No. 02-16:(8) | |||||||||||||||||
| Net income | $ | 89,971 | $ | 79,110 | $ | 58,862 | $ | 58,353 | $ | 91,784 | |||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 2.69 | $ | 2.39 | $ | 1.77 | $ | 1.74 | $ | 2.69 | |||||||
| Diluted | $ | 2.65 | $ | 2.37 | $ | 1.74 | $ | 1.72 | $ | 2.64 | |||||||
11
FORWARD LOOKING INFORMATION
This Annual Report on Form 10-K 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, but are not limited to:
12
Readers should not place undue reliance on forward-looking statements contained in this Annual Report. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with both the information at the end of Item 6 of this Annual Report appearing under the caption, "Forward Looking Information," and the Company's Consolidated Financial Statements and related notes contained in Item 8 of this Annual Report.
Overview; Recent Results
The Company is North America's largest broad line wholesale distributor of business products, with 2004 net sales of approximately $4.0 billion. Through its national distribution network, the Company distributes its products to over 15,000 resellers, who in turn sell directly to end-consumers. Products are distributed through computer-linked networks of 35 USSC distribution centers, 24 Lagasse distribution centers that serve the janitorial and sanitation industry, two distribution centers in Mexico that serve computer supply resellers, and two Azerty distribution centers that serve the Canadian marketplace.
Sales for 2005 through the filing date of this Annual Report were up approximately 9% compared with the same period last year. Of this 9% year-over-year sales growth, the Company estimates that approximately 2% is attributable to manufacturers' price increases. While there are recent favorable economic indicators that generally correlate with increasing demand for business products, there can be no assurance that such economic trends will be sustainable, that they will in fact lead to increased demand for the Company's products on an ongoing basis or that any increased demand will not be negatively impacted by increasing competition or other developments affecting the Company's business or industry.
Key Company and Industry Trends
The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.