2000 Annual Report
We DELIVER Customer Satisfaction
United Stationers Inc. is
North America’s largest
distributor of business
products to resellers and
a provider of marketing
and logistics services.
By asking “If I were the
customer…,” United has
built an organization
devoted to satisfying its
20,000 reseller customers
and their end consumers.
Stockholders’ Letter 2
Strengthening Our Competitive Position 5
Expanding into Non-Office Products Fulfillment 9
Management’s Discussion and Analysis 12
Selected Consolidated Financial Data 20
Quarterly Financial and Stock Price Data 22
Report of Management/
Report of Independent Auditors 23
Consolidated Financial Statements 24
Notes to Consolidated Financial Statements 30
Directors and Officers/ Inside
Stockholder Information Back Cover
Capturing Growth Opportunities
Product Lines or
Services Offered Strengths Growth Strategies
• General office and computer supplies and accessories • North America’s leading just-in-time distributor Build share in this $85 billion market by:
Traditional of business products to resellers
• Filing and record storage products • Focusing on operational excellence
Office Products • Offers more than 25,000 products
• Business machines and audio-visual equipment • Expanding value-added services
• Network of 39 regional distribution centers across
• Office furniture • Improving its cost position
• Handling a greater share of manufacturers’
• Ability to reach nearly every reseller or consumer shipments
in the U.S. on the same day or overnight
• Increasing penetration among current resellers
• 98% order fill rate, 99.5% order accuracy rate, and
• Attracting new types of resellers
99% on-time delivery rate
• Continuing geographic expansion
• The largest and most popular General Line Catalog
in the industry: more than 6 million copies distributed • Making acquisitions
in 2000 • Expanding product categories
• Unmatched value-added services
• National presence in Canada, with three distribution
centers and a bilingual customer service facility
• Janitorial and sanitation supplies • One of North America’s leading wholesale sources Increase its share in this $18 billion market through:
Janitorial and of janitorial and sanitation maintenance products
• Paper products • Greater penetration among current resellers
Sanitation • Offers more than 7,000 items via product and service expansion
• Safety and health care products
• Network of 28 regional distribution centers • Handling larger share of manufacturers’ shipments
• Packaging supplies
across the U.S. • Developing new reseller relationships across
• Industrial maintenance products
• Annual growth exceeding 25% per year, every year both new and existing channels
• Food service disposables since acquired by United in 1996 • Continuing geographic expansion via new facilities
• Distributes industry-leading catalog and/or acquisitions
• Expanding e-commerce capabilities
• North America’s largest specialty distributor Expand share within this $30 billion market by:
• Computer consumables • Computer accessories
Computer Consumables of office technology consumables and peripherals
and supplies • Handling a greater share of manufacturers’
• Digital imaging
• Offers more than 10,000 products shipments
• Printers, scanners, fax • Professional graphics
machines, and all-in-ones • Network of six regional distribution centers • Increasing penetration of new
• Bar code and
in the U.S. and Mexico that provide next-day delivery customer markets
• Peripherals point-of-sale products
• Increasing penetration among
• Attracting new types of resellers
• Continuing geographic expansion
• Making strategic acquisitions
• Continuing to expand product offering
• Using the Internet to improve efficiencies
and become the partner of choice
Customer Relationship Management (CRM) • Offers full set of third-party services, including • Capitalizes on United’s distribution scale, logistics Penetrate the $18 billion market for third-party
expertise and technology service-fee revenue by:
distribution, fulfillment and customer relationship
and Fulfillment Services management (CRM) strategies—such as call center • Provides seamless, reliable service from a single source • Leveraging a solid infrastructure and refining
services, data mining and warehousing, and marketing its CRM tools
• Can handle a wide variety of product categories,
campaigns, which integrate with traditional and sizes and weights • Marketing its services to a broad audience
e-commerce business models including manufacturers, “clicks and mortar” retailers
• Measures customer satisfaction and is accountable
and direct marketers
• Utilizes robust, scaleable, flexible systems
• Call center complemented by CRM technology
• Provides a total back-end solution to traditional
and Web-based manufacturers and retailers, service
companies and resellers
Financial Highlights UNITED STATIONERS INC. AND SUBSIDIARIES
(dollars in thousands, except per share data)
Income Statement Data for the Years Ended Dec. 31, 2000 Dec. 31, 1999
Net sales . . . . . . . . . . . . . . . . . . . . $ 3,442,696
Income from operations . . . . . . . . . . . . . . 182,194
Income before income taxes and extraordinary item . . . . 143,567
Net income . . . . . . . . . . . . . . . . . . . . 83,409
Net income per common share — assuming dilution . . . . 2.37
Average number of common shares (in thousands) . . . . 35,208
Operating Results Before Extraordinary Charge 1
Income before extraordinary item .......... $ 83,409
Income before extraordinary item
per common share — assuming dilution . . . . . . . . 2.37
Balance Sheet Data at Year End
Working capital . . . . . . . . . . . . . . . . . . $ 415,548
Total assets . . . . . . . . . . . . . . . . . . . . 1,279,903
Long-term obligations (including current maturities) . . . . 355,552
Stockholders’ equity . . . . . . . . . . . . . . . . 406,009
1. Second quarter 2000 results included an extraordinary charge of $10.7 million ($6.5 million net of tax benefit of $4.2 million) related to
the early retirement of debt.
Net Income per Share
Operating income grew 11.2% despite a tight
The 14.6% increase in sales for 2000 gave Net income continued to outpace United’s
labor market and investments in developing the
United a 14.1% four-year compound annual goal of 15% annual growth, for a four-year
fulfillment business. This gave the company a
growth rate (CAGR). CAGR of 29.5%.
15.7% four-year CAGR.
DOLLARS IN BILLIONS DOLLARS IN MILLIONS DOLLARS PER SHARE
972 982 002
96 972 982
97 98 99 00 96 99 00
2.Excluding non-recurring charges
Stockholders Strong Balance Sheet
Our interest expense was favorably affected
by the interest rate spread between the revolving
line of credit and the 12.75% bonds we
redeemed in May (financed through our senior
United ended 2000 with its 19th consecutive
credit facility). However, this was partially
quarter of record sales and earnings. This was
offset by higher interest rates and funding
possible because our channel partners were
requirements for the July 2000 acquisitions of
drawn to United’s ability to deliver customer
Azerty/United Canada and CallCenter Services,
satisfaction. However, the real story is that
which increased total debt to $559.9 million,
we achieved these results in the face of strong
up 12.7%. Despite the acquisitions, our debt-to-
growth in 1999—while investing in other
total book capitalization of 53.9% improved
opportunities for even greater expansion.
when compared with 1999’s 55.0%, and is well
Fourth Straight Year
within our target range of 50-60%.
of Record Performance
Capital spending for the core business
Net sales rose 14.6% to $3.9 billion. Approx-
during the year was $26.0 million, compared
imately 12% came from organic growth,
with 1999’s $21.3 million. In addition, we
exceeding our 6-9% goal. The balance
spent about $13.0 million to develop The Order
resulted from our Azerty/United Canada
People, bringing our total capital expenditures
and CallCenter Services acquisitions.
for 2000 to $39.0 million.
We saw strong performance across all
product categories and
Our financial strength
geographies, led by office
furniture (up 16%)
comes from a company-wide
focus on serving customers
As expected, our 16.3% gross
margin was down slightly from 1999’s Expressing Our Confidence
in United’s Growth
16.4%. This reflects the higher amount of
business we are doing in two lower margin Our ongoing challenge with investors is to com-
areas—computer consumables and national municate 1) the role United plays in bringing
accounts business —although both have a efficiency to the business products supply chain,
lower cost-to-serve. Operating expenses as and 2) how we leverage our distribution
a percent of sales were 11.2% compared with competencies to grow and capitalize on new
Randall W. Larrimore,
11.1% in the prior year. Operating income market opportunities. We often are incorrectly
also increased 11.1% to $202.5 million. perceived only as a “traditional wholesaler,”
Chief Executive Officer
These numbers are even more impressive which ships full cases of merchandise to resellers
when you consider that nearly $9.0 million in so they can restock their inventory. This
operating expenses were used to build our third- misperception creates some concern United
party fulfillment business, The Order People. could be “bypassed” in the supply chain.
In reality, we are an integral part of our technology strategist to help guide United’s
customer’s supply chain. Our role is to be an e-commerce initiatives.
extension of our customers’ warehouses,
Our 20,000 reseller
providing same-day order turnaround
so they can deliver their customers’
customers have made us an
orders the next day. We pick indi-
vidual end-consumer orders for our
resellers, or drop ship them on behalf of the
reseller directly to the end consumer. We are a
just-in-time distributor of business products to Turning Growth
Opportunities into a Reality
resellers, as well as a provider of marketing and
Our strategic goal is to be a world-class logistics
logistics fulfillment services.
and fulfillment expert, providing a complete
We continue to take our story to investors—
suite of back-end services to office products
both in one-on-one meetings and at industry
resellers, manufacturers, and resellers of other
conferences—and believe in our bright, long-
products. To achieve this, we began looking at
term future. That’s why we are willing to invest
our company not as just a distributor of office
in our own stock. In the fourth quarter, the
products, but as fulfillment experts. This view
board authorized a $50 million stock repurchase
reveals opportunities to expand our traditional
program. During the year, we bought nearly
business and build a non-office products third-
1.0 million shares, at an average price of just
party services operation.
under $26.00 per share. At year-end, we had
We took a number of steps in 2000 to make
33.4 million shares outstanding. We see value 2000 Revenues
these growth opportunities a reality. (Details by Product Line
in our shares and will, from time-to-time,
on how the growth strategies are being imple-
continue our repurchase program. And our While office supplies
mented can be found in the Operations Review
commitment to investor education is ongoing. remain United’s largest
following this letter.) Here are the highlights. product category,
United’s Leadership Increase the Geographic Penetration and office furniture
of our Traditional Businesses
In addition to Ilene Gordon, President of were the fastest growing
categories in 2000.
We accomplished this in a number of ways:
Pechiney Plastic Packaging, who joined our
• Added distribution facilities at United
board in January 2000, United’s leadership
Stationers Supply Co. and Lagasse— Office Supplies
was strengthened with the addition of two other 35%
We moved from four less efficient
professionals during the year. Eileen Kamerick Consumables 33%
facilities into three new state-of-
became Executive Vice President and Chief
the-art distribution centers and
Financial Officer in October 2000. She came
opened two new centers.
to us from BP Amoco plc where she was
• Acquisition broadens Lagasse’s reach—
Vice President/Finance, the Americas, and
Just after the end of the year, we
Vice President and Chief Financial Officer
Business Machines Office Furniture
completed the acquisition of Peerless,
BPAmerica. Eileen has extensive experience & Audio-Visual 10% 13%
another wholesaler within the janitorial/
in acquisition evaluation, SEC reporting, Janitorial &
sanitation industry. This added a total of
international expansion, and banking
400,000 additional square feet of distribution
relationships. Alex Zoghlin, Chief Technology
capacity at six locations, and will help
Officer at Orbitz, joined our board in November
increase our penetration in the Northeast
2000. Alex will draw on his background as an
and Midwest facility supply markets.
innovator, a successful leader and an astute
We are continuously seeking
ways to improve our operational third-party fulfillment business needs.
and financial performance It also provides us with two cutting-edge
facilities —in Salisbury, Maryland and
• Increased geographic penetration in Canada—
Outlook for 2001
We purchased a computer consumables
All of our operations were performing well
operation in Canada during July 2000 and
as we entered the new year. We are making
renamed it Azerty/United Canada. This
investments in infrastructure and in our
business has $115 million (US) in annual
associates to keep operating at the high level we
sales and has served the Canadian
need to succeed in our business. We are building
marketplace for 10 years. We intend to
new growth platforms, such as non-office
leverage Azerty/United Canada’s customer
products fulfillment through The Order People,
base by offering these companies United
and expanding our product lines and customer
Stationers Supply Co.’s office products, giving
base through the Peerless acquisition. We have
us scale and growth opportunities.
the financial strength to fund this additional
Expand the Office Products growth. As a result, we have a positive outlook
E-Commerce Business for the year, even though we are realistic about
In 2000, we expanded two programs already the type of challenge 2001 is likely to bring—
in place. We offered our product lines to non- especially in the first half.
Eileen Kamerick joined
traditional office products resellers involved
United Stationers We can meet this challenge because
in e-commerce and helped our traditional
as Executive Vice President
United’s commitment to delighting customers
and CFO in October 2000.
resellers increase their presence on the Web. is enthusiastically embraced by associates at
Develop Non-Office Products all levels. Their outstanding efforts in 2000
Fulfillment Operation fueled our growth and built even stronger
In July 2000, we formed The Order People relationships between United and its manufac-
as a subsidiary to reach this market. We believe turers and resellers. We believe our focus on
third-party fulfillment and CRM (customer providing superior customer service will help
relationship management) represents one us continue to increase shareholder value for
of United’s best opportunities for growth. many years to come.
The Order People allows United to leverage
its core competencies of picking, packing and
shipping office products into providing the same
services for other types of products.
In addition, we made an acquisition to
support the new operation. CallCenter Services,
purchased in July 2000, has $20+ million in Randall W. Larrimore
annual service fee revenues. It gives The Order President and Chief Executive Officer
People the in-bound call center capabilities a March 15, 2001
United Stationers: A Leader in Customer Satisfaction
S AT I S F Y I N G O U R
2 0 , 0 0 0 R E S E L L E R C U S TO M E R S
AND THEIR END CONSUMERS
U N I T E D S TAT I O N E R S i s
N O RT H A M E R I C A’ S L A R G E S T P R O V I D E R O F :
• OFFICE SUPPLIES
• COMPUTER SUPPLIES
• OFFICE FURNITURE
• JANITORIAL AND
S A N I TAT I O N S U P P L I E S
• M O S T P O P U L A R P R I VAT E L A B E L
COMMODITY OFFICE PRODUCTS
DO YOU KNOW
R E A L LY
W H AT W E DO?
WE ARE A JUST - IN - TIME DISTRIBUTOR OF
BUSINESS PRODUCTS TO RESELLERS,
AS WELL AS A PROVIDER OF MARKETING
AND LOGISTICS SERVICES.
WE PROVIDE SAME - AND NEXT - DAY DELIVERY
OF PRODUCTS FOR RESELLERS ACROSS NORTH AMERICA.
WE COST - EFFECTIVELY BREAK DOWN BULK SHIPMENTS
FROM MANUFACTURERS INTO THE SMALL QUANTITIES
NEEDED BY END CONSUMERS.
WE ATTACH ADDRESS LABELS WITH RESELLERS‘ LOGOS
AND END - CONSUMERS’ NAMES TO 70% OF OUR SHIPMENTS —
MAKING OUR SERVICES TRANSPARENT.
WE SHARE OUR END - CONSUMER RESEARCH,
AND PROVIDE MARKETING ASSISTANCE
TO HELP RESELLERS BUILD THEIR BUSINESSES.
WE EXPAND THE RANGE OF PRODUCTS RESELLERS OFFER —
BENEFITING THEM, OUR SUPPLIERS AND END CONSUMERS.
Manufacturers also want to focus on their
Competitive Position core competencies —designing and making
How do we strengthen our competitive products. They, too, want to remove extraneous
position when we are already the largest operations and costs.
business products provider in North America? The functions these companies want to
Our philosophy is to add so much value— outsource are United’s core business. Our
from broad product lines to nationwide expertise, combined with a focus on delivering
distribution to marketing support— for our customer satisfaction, makes us a compelling
manufacturers and resellers that we become channel partner for manufacturers and
an integral part of how they go to market. resellers— and gives us great opportunities
In 2000, the office
Each year we find new ways to
increase our value as a business partner
niches we serve
for manufacturers and resellers
$130 billion in sales,
and had an average growth of 5-6%. United’s for growth. Here are the strategies we are using
organic growth was nearly twice as fast, about to capitalize on this.
12%. We accomplished this by executing the
Gaining a Greater Share of
following strategies, which stem from our Manufacturers’ Shipments
Efficient partners’ focus on their core competencies. There is a misconception that it is more
Distribution Resellers want to take costs out of their efficient for manufacturers to sell directly to
systems and focus on their core competencies—
Our fleet of 400 trucks—
resellers. This is not always the case, because
supplemented by UPS,
selling products and solutions. To do this, they we can provide our 500 manufacturers an
common carriers and Federal
increasingly shed part or all of their inventory
Express —allows us to achieve
edge with resellers that they typically couldn’t
99% on-time delivery of
and product distribution capabilities. match on their own.
resellers’ and end -consumers’
orders on the same day,
We create demand for their products—
overnight, or the next day.
We distribute nearly 14 million catalogs,
16 million promotional flyers, and provide
an electronic catalog for countless Websites.
These are used by more than 20,000 resellers:
office products dealers, mega-dealers, contract
stationers, office products superstores, computer
products resellers, mass merchandisers, mail
order companies, sanitary supply distributors,
and e-commerce merchants.
We broaden their geographic reach—
Our unmatched infrastructure allows us to
get products to every important U.S. and most
Canadian and Mexican metropolitan markets
within 24 hours. This fulfills the overnight
We provide exposure to a broader product
delivery requirements of many resellers.
Just a Click Away offering—We stock thousands of SKUs
(stockkeeping units) that most resellers do
We receive over 90% Increasing Penetration
of our orders electronically, not carry in their inventories. These products among Current Resellers
through a proprietary
typically have significantly higher margins for Our resellers find it’s easier to reap the benefits
order-entry system, the
all channel partners, since they are less price
Internet and computer-to- of United’s expertise and infrastructure than it is
sensitive. This gives most manufacturers to replicate it.
exposure to resellers and end consumers they
We offer the industry’s broadest product line—
would never be able to reach without United.
This allows resellers to expand their product
We manage the entire ordering process— offering without investing in inventory or
More than 90% of our orders are sent warehouses, which leverages their sales and
electronically to manufacturers and received distribution assets. With our more than 40,000
electronically from dealers. This automates items, we are:
order entry, reducing the chances for errors • the largest provider of office supplies.
while shortening the time between receiving
• the largest provider of computer supplies.
the order and shipping it. In addition, by
• the largest provider of office furniture.
working with many resellers and accumulating
their orders, United saves manufacturers • the largest provider of janitorial and
substantial handling and administrative costs— sanitation supplies.
particularly on small orders.
• the provider of the largest selection of
We efficiently handle small order quantities— popular private label commodity products:
Manufacturers need our skill in cost-effectively the Universal brand.
breaking down bulk shipments into the “one • a leading provider of business machines/
eaches” required by resellers and their end audio-visual equipment, and barcode
consumers. This means manufacturers can scanning products.
reduce warehousing and inventory costs, avoid
We offer unmatched value-added programs—
investments in elaborate picking systems, and
This helps resellers sell more product and better
sell products to resellers who otherwise would
satisfy their customers:
be too small for them to serve.
• Sales generating materials include United’s
General Line Catalog—the industry’s
favorite—and specialty catalogs. These are
The Largest Network
available in both a paper and electronic
in the Industry
format. Each catalog or site is customized
with the reseller’s (rather than United’s) name
and contact information.
• Wrap and Label Program allows us to
package the items ordered by an individual
consumer into a box, attach an address label—
featuring the reseller’s name—then send it
to the reseller for immediate delivery, or drop
ship it to the end consumer on the reseller’s
behalf. Resellers benefit because they don’t
have to break down large shipments and
repackage them for delivery.
United Stationers Supply Division
• Nationwide Express Delivery provides Lagasse, Inc.
same-day, next-day or second-day delivery via Azerty/United Canada
The Order People
UPS, reaching 99% of all business customers
in the U.S. This allows local, regional and Our 77 distribution centers
allow us to reach 90% of the
sponsor research on significant industry
virtual resellers to serve national accounts. U.S. population on a next-day
trends. Then we present the results —and our delivery basis. We also reach
• Dealer training included teaching 115
major metropolitan areas in
recommendations on how they can be used—
courses in 2000 that attracted nearly Canada and Mexico within
to resellers throughout the country. In 2000, 24 hours of order placement.
2,000 reseller “students” on subjects from
we helped 1,500 resellers in 33 cities better
finance and marketing to sales and sales
understand their markets and how to build
management. United provides professional
training that might not otherwise be available
to many resellers. We can handle their entire backroom operation—
Growing numbers of resellers are choosing to
• Premier Performance Shows allow resellers
outsource their warehousing and distribution,
and their end consumers to preview new and
stocking fewer items and relying on United’s
unique products, while the manufacturers
extensive inventory. We support this approach
who exhibit them provide detailed
through our broad product offering and these
information on their features. United
sponsored seven shows across the country
in 2000, showcasing products from about • A $600 million investment in inventory.
100 manufacturers. This helped strengthen
• State-of-the-art order processing, which
relationships with the thousands of resellers
allowed us to handle an average of 160,000
and consumers who attended.
customer orders each day in 2000. Our inte-
• End-consumer research gives United’s resellers grated systems enable us to locate products
an edge in their markets. Each year, we at multiple warehouses, consolidate them
Our Helton Center for Performance Improvement hosts
five-day training programs for associates. They learn to
work as teams to help us better serve our customers.
at one of our multiple locations and provide a • Lagasse also expanded into two larger
single, on-time delivery of the entire order. hub facilities, one in Chicago and one in
• 77 regional distribution centers in 36 metro-
politan areas in 25 states and provinces in the • United Stationers Supply Co. began building
U.S., Mexico and Canada. We also have 21 new centers that will replace several older
reshipment points. facilities in Denver (263,000 square feet),
expected to open in the summer of 2001, and
• Our fleet of more than 400 trucks, which
in Charlotte (300,000 square feet) expected to
delivers orders as soon as they are picked.
open by the end of the third quarter 2001.
• The highest service levels in the industry. In
We estimate our investment in each of
2000, we had a 98% order fill rate, a 99.5%
these facilities will have a relatively short
order accuracy rate, and a 99% on-time
delivery rate —generally within 24 hours of
• An operating system and culture focused We expanded our computer consumables and
on providing superior service and fulfillment janitorial/sanitation businesses through two
excellence. acquisitions: Azerty Canada in July 2000 and
Peerless Paper Mills in January 2001.
Geographic Expansion Azerty/United
Canada United has
A number of U.S. markets
offer opportunities for greater operated in Canada
sales or enhanced efficiency. for 10 years. As part
In 2000, we either built new of our strategic
distribution facilities or expanded current planning process two years ago, we identified
ones to capitalize on this situation: growth opportunities in Canada and decided to
intensify our efforts there. The acquisition of
• United Stationers Supply Co.’s 437,500
Azerty Canada significantly enhanced our
square foot distribution center in Dallas
replaced a two-building (383,000 square feet)
operation there. • It enables us to expand our computer
consumables, peripherals and accessories
• United Stationers Supply Co.’s 320,000
square foot distribution center in Baltimore
was retrofitted to provide leading-edge • It adds scale (an additional $115 million
picking capabilities. in annual sales) and infrastructure through
• Lagasse opened a 55,000 square foot its distribution facilities in Toronto, Vancouver,
distribution center in Phoenix, and a 47,000 and Montreal, and a bilingual customer
square foot facility near Kansas City. service facility, also in Montreal.
• It gives us a national presence and an • It provides additional logistics capabilities,
experienced staff that can help us build sales coverage and marketing expertise.
Expanding Into Non-Office
• It provides opportunities to cross-sell our
Through The Order People, United is
other product lines.
beginning to tap the fast-growing third-party
Peerless Paper Mills This wholesale
services market. Industry experts forecast
distributor of janitorial and sanitation products,
this market will reach $27 billion in U.S.
and paper and food service products, was a
revenue by 2004.
logical addition to Lagasse:
• It will expand Lagasse’s
Communicating with our customers
product line to nearly
helps us continuously find new ways to
improve our performance
• It will allow Lagasse and Peerless to
cross-sell complementary product lines to Pricing arrangements for The Order People
each other’s customers. will follow the tried-and-true formulas generally
used in outsourcing. Typically, this is a fee-based
• It enhances the scale and infrastructure of
business where the clients pay set-up fees,
Lagasse’s Northeast and Midwest operations.
transaction fees and fixed time or space fees.
This includes distribution centers in several We typically process orders
It is a low working capital business since the
new markets, including Minneapolis, until 6:00 p.m. We then move
clients own the inventory. swiftly to pick and pack orders
Pittsburgh, and a state-of-the-art facility
for products ranging from
The Order People targets a broad audience:
outside of Philadelphia. pens, binders and labels to
traditional catalog merchants, “clicks and office furniture. These are
• It generates $75 million in annual revenues, most often labeled for
mortar” retailers, manufacturers, service
with annual increases in the high-teens and individual end users and
providers and e-commerce businesses providing shipped on our own trucks
the potential to improve on this through or via UPS/Federal Express
business-to-business (B2B) and business-to-
synergies with Lagasse. during the night to resellers
consumer (B2C) services. Its mission is to and to end users on behalf
of our resellers. This allows
end-users’ orders to arrive at
Turning the Order -to -Delivery Cycle into Customer Satisfaction their desks the very next day.
While the content of each
order may vary, the customer
satisfaction we deliver each
day remains constant.
Customer Care—Through the CallCenter
Services acquisition, we added two state-of-the-
art call centers located in Salisbury, Maryland
and Wilkes-Barre, Pennsylvania. Combining
Web-enabled end-consumer contact with
traditional inbound and outbound teleservices,
we are able to meet our customers’ expanding
become the leader in the third-party service
needs while exceeding their end-consumer’s
market by providing outstanding fulfillment
expectations on a 24 x 7 x 365 basis.
and customer relationship management (CRM)
Our core offering includes order entry/status,
solutions. By combining leading edge
up-sell and cross-sell, credit/services applica-
technology with expertise in third-party
tions, refunds and exchanges, technical/help
fulfillment, The Order People’s goal is to
desk, and standard reports. Our special services
design and execute personalized and flexible
include self-service online, agent monitoring,
programs that exceed expectations for its
credit card authorizations, script development,
customers and their end consumers.
Steven R. Schwarz,
system integration, software development, mul-
Executive Vice President Integrated,
tilingual representatives, and agent training.
and President, United Supply
Data Mining & Warehousing—Our state-
Division, led another year
The Order People is taking United’s 80 years of
of record revenues.
of-the-art data approach includes a number
experience in seamless order taking, “picking,
packing, shipping and tracking,”and translating
• Customer data acquisition and
it into categories beyond office products. As
management—getting relevant information
with United, The Order People will remain
The Benefits of and organizing it so our customers can
transparent—end consumers will see only its
make the best use of it.
customers’ brand names.
• Analytic services —analyzing end-consumer
During 2000, we identified the infrastructure
Most of our products reach
information to provide customers with a
for The Order People’s future success. There
resellers and end consumers
better understanding of this audience—from
within 24 hours of their
are two aspects to our approach: customer
placing the order. This is
“customer lifetime analyses” to precision
relationship management (CRM) and fulfillment.
possible because our ware-
CRM creates a win/win relationship between
houses are linked with a
• Personalization services—generating
proprietary inventory locator
our customers and their end consumers—
system, and use technology
personalized end-consumer interactions.
The Order People breaks these strategies into
to increase their efficiency
• Customer access services—providing
three broad categories.
and accuracy. Our approach
allows us to provide very
or delivering services over multiple
high service levels.
communication channels, from the mail
to pagers to the Internet.
• Transaction services—improving all
contacts with end consumers, from
informing them of products and services
through post-sales support, such as returns
processing and billing.
Integrated Marketing Solutions—These are
the tools customers need to acquire, retain, and
expand their end-consumer base. The Order
People will support this by combining powerful
brand building tools and customer and market
data with innovative marketing campaigns.
• End-consumer acquisition campaigns.
• Lead generation.
• Incentive programs— for internal employees
and end consumers.
• End-consumer expansion campaigns— differentiates itself with its seamless integrated Management (CRM)
featuring cross-sell and up-sell marketing, approach. End consumers never know they are The Order People gives
coupon programs, and spiral marketing, its customers the benefits
not dealing directly with our customers. As a
of CRM – without the cost
in which end consumers are given a result, we provide a unique solution that helps and hassle of installing and
continuous loop of information to increase customers build and sustain end-consumer managing their own systems.
their awareness of all products and services. relationships and brand value.
• End-consumer retention campaigns— such Measuring Our Progress
as loyalty or rewards programs, satisfaction As we entered 2001, The Order People had a
surveys, renewal programs, memberships, number of customers using its call center
and frequent shopper programs. services and was well positioned to offer its
Fulfillment allows us to get the right products customers logistics and fulfillment services.
to end consumers on a timely basis—In Our goal is to continuously qualify leads each
November, The Order People opened its first quarter and sign contracts that will enable
warehouse dedicated to third-party fulfillment, The Order People to become profitable in
in Memphis, Tennessee. This 650,000 square 2002. We are excited about this new growth
foot facility incorporates the latest warehousing opportunity for United and are committed to
and distribution technology, including investing in its success.
computerized receiving and
picking systems. In addition,
The Order People is leveraging United’s
The Order People has
ability to PICK, PACK, SHIP and TRACK office supplies,
centers in Harrisburg,
by handling other product categories
Pennsylvania, and Reno, Nevada.
A number of companies provide one
or more of these services. The Order People
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
20,000 resellers, who in turn sell directly to end users.
The following discussion should be read in conjunction
with the Consolidated Financial Statements and related These products are distributed through a computer-based
notes. network of warehouse facilities and truck fleets radiating
Information contained or incorporated by reference in from 39 regional distribution centers, 28 Lagasse
this Annual Report may contain “forward-looking distribution centers, six Azerty distribution centers,
statements” within the meaning of Section 27A of the three distribution centers that serve the Canadian
Securities Act and Section 21E of the Exchange Act, which marketplace and a distribution center to serve clients
can be identified by the use of forward-looking of The Order People.
terminology such as “may,” “will,” “expect,” “intend,” On July 25, 2000, the Company announced that it
“anticipate,” “believe,” “estimate” or “continue” or the established The Order People (“TOP”) to operate as its
negative thereof or other variations thereon or comparable third-party fulfillment provider for product categories
terminology. All statements other than statements of beyond office products. TOP offers a full set of services
historical fact included in this Annual Report, including specifically designed to support a wide variety of third-
those regarding the Company’s financial position, business party service needs. By combining the Company’s state-
strategy, projected costs and plans and objectives of of-the-art distribution network with a multi-channel
management for future operations are forward-looking customer relationship management (CRM) capability,
statements. Certain risks and uncertainties could cause clients have the ability to custom design their order
actual results to differ materially from those in such fulfillment experience and then monitor and measure
forward-looking statements. These include, but are not consumer satisfaction. The Company has extensive
limited to, the highly competitive operating environment, experience and ability to pick, pack, ship and track
the market potential for third-party services, the products with a wide range of physical attributes.
Company’s ability to adjust The Order People’s cost structure TOP enables the Company to leverage these core
to the timing of revenue generation, the integration of
competencies in a broader context for third-party
acquisitions, changes in end-users’ traditional demands for
logistics and fulfillment.
business products, the Company’s reliance on certain key
In connection with TOP, the Company operates a new
suppliers, the effects of fluctuations in manufacturers’
650,000 square foot state-of-the-art distribution and
pricing, potential service interruptions, customer credit
service center in Memphis, Tennessee. In addition, the
risk, dependence on key personnel, and general economic
Company has leased distribution centers in Harrisburg,
conditions. A description of these factors, as well as other
Pennsylvania, and in Reno, Nevada.
factors, which could affect the Company’s business, is set
Acquisition of CallCenter Services, Inc. On July 1,
forth in certain filings by the Company with the Securities
2000, the Company acquired all of the capital stock of
and Exchange Commission. All forward-looking
CallCenter Services, Inc. from Corporate Express, a
statements contained in this Annual Report and/or any
Buhrmann Company. The purchase price was
subsequent written or oral forward-looking statements
approximately $10.7 million, financed through the
attributable to the Company or persons acting on behalf of
Company’s Senior Credit Facility. CallCenter Services is a
the Company, are expressly qualified in their entirety by
customer relationship management outsourcing service
such cautionary statements. The Company undertakes no
company. It has two inbound call centers, in Wilkes-
obligation to release the results of any revisions to these
Barre, Pennsylvania and Salisbury, Maryland, with a total
forward-looking statements that may be made to reflect
of up to 1,000 seats. This acquisition will complement
any future events or circumstances.
and significantly enhance the third-party fulfillment
Overview business of TOP. The acquisition was accounted for using
the purchase method of accounting and, accordingly, the
The Company is the largest general line business
purchase price was allocated to the assets purchased and
products wholesaler in the United States, with 2000 net
the liabilities assumed, based upon the estimated fair
sales of $3.9 billion. The Company sells its products
values at the date of acquisition. The excess of cost over
through national distribution networks to more than
U N I T E D S TAT I O N E R S I N C . A N D S U B S I D I A R I E S
fair value of approximately $3.1 million was allocated to of its common stock at a cost of approximately $49.6
goodwill. The pro forma effects of the acquisition were million. Acquired shares are included in the issued shares
not material. of the Company, but are not included in average shares
Acquisition of Azerty Canada. On July 5, 2000, the outstanding when calculating earnings per share data.
Company completed the acquisition of the net assets of During 2000 and 1999, the Company reissued 309,674
Azerty Canada from MCSi, Inc. The purchase price was and 29,519 shares of treasury stock, respectively, to fulfill
approximately $33.6 million (U.S. dollars) financed its obligations under its stock option plan.
through the Company’s Senior Credit Facility. Azerty June 1998 Equity Offering. In June 1998, United
Canada is a specialty wholesale distributor of computer completed an offering of 4.0 million shares of common
consumables, peripherals and accessories. The stock (the “June 1998 Equity Offering”), consisting of 3.0
acquisition was accounted for using the purchase method million primary shares sold by United, and 1.0 million
of accounting and, accordingly, the purchase price was secondary shares sold by certain selling stockholders. The
allocated to the assets purchased and the liabilities shares were priced at $27.00 per share, before underwriting
assumed, based upon the estimated fair values at the date discounts and commissions of $1.15 per share. The
of acquisition. The excess of cost over fair value of aggregate proceeds to United of approximately $77.6
approximately $11.8 million was allocated to goodwill. million (before deducting expenses) were delivered to USSC
The pro forma effects of the acquisition were not material. and used to repay a portion of indebtedness under the
Acquisition of Consumer Development Group. On Tranche A Term Loan Facility, which caused a permanent
November 1, 1999, the Company acquired all of the reduction of the amount borrowable under this facility.
capital stock of Consumer Development Group Inc. United did not receive any of the proceeds from the
(“CDG”) for approximately $4.8 million, including an sale of the 1.0 million shares of common stock offered
initial payment to the seller of approximately $2.4 by the selling stockholders. It did, however, receive an
million, financed through senior debt. The remaining aggregate of approximately $6.4 million paid by the
purchase price of approximately $2.4 million will be paid selling stockholders upon exercise of employee stock
ratably on each of the first three anniversaries of the options in connection with the June 1998 Equity
acquisition. The CDG acquisition was accounted for Offering, which were delivered to USSC and applied to
using the purchase method of accounting and, the repayment of indebtedness under the New Credit
accordingly, the purchase price was allocated to the assets Facilities.
purchased and the liabilities assumed, based upon the After closing the June 1998 Equity Offering, the
estimated fair values at the date of acquisition. The excess underwriters exercised an overallotment option to
of cost over fair value of approximately $4.8 million was purchase an additional 0.4 million shares from United.
allocated to goodwill. The financial information for the The net proceeds to United of approximately $10.3
year ended December 31, 1999, included the results of million from the sale were delivered to USSC and used to
CDG for November and December only. The pro forma repay an additional portion of the indebtedness
effects of this acquisition were not material. A Certificate outstanding under the Tranche A Term Loan Facility.
of Dissolution was filed with the State of Delaware to In the second quarter of 1998, the Company
dissolve CDG as of December 31, 1999. CDG is a recognized the following charges: a non-recurring charge
division of USSC. of $13.9 million ($8.3 million net of tax benefit of $5.6
million) to write off the remaining payments and related
Common Stock Repurchase. On October 23, 2000,
prepaid expense under a contract for computer services
the Company’s Board of Directors authorized the
from a vendor (see Note 1 to the Consolidated Financial
repurchase of up to $50.0 million of its common stock.
Statements), and an extraordinary loss of $9.9 million
Under this authorization, the Company purchased
($5.9 million net of tax benefit of $4.0 million) related to
857,100 shares at a cost of approximately $22.4 million,
the early retirement of debt (collectively “1998 Charges”),
during 2000. During 1999, under a previous
see Note 1 to the Consolidated Financial Statements.
authorization, the Company purchased 3,250,000 shares
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)
CallCenter Services Inc., increased 12.2%.
Net income attributable to common stockholders for
Gross Margin. Gross margin in 2000 reached $643.8
the year ended December 31, 1998, before the 1998
million, up 14.1% from last year and was 16.3% of net
Charges, was $72.2 million, up 59.0%, compared with
sales, compared with $564.2 million, or 16.4% of net
$45.4 million, before the 1997 Charges (as defined). In
sales, in 1999. The 0.1% rate decline is due to lower
1998, diluted earnings per share before the 1998 Charges
pricing margin partially offset by incremental vendor
were $2.00 on 36.2 million weighted average shares
allowances earned as a result of higher sales volume.
outstanding, up 36.1%, compared with $1.47, before
Operating Expenses. Operating expenses for 2000
charges, on 30.8 million weighted average shares
were up 15.5% to $441.3 million and were 11.2% of net
outstanding for the prior year.
sales, compared with $382.0 million, or 11.1% of net
Acquisition of the Azerty Business. On April 3,
sales, in the prior year. The increase in the operating
1998, the Company acquired all of the capital stock of
expense rate was attributable to investments in The Order
Azerty Incorporated, Azerty de Mexico, S.A. de C.V.,
People, the Company’s third-party fulfillment business.
Positive ID Wholesale Inc., and AP Support Services
Operating expenses for 2000 related to The Order People
Incorporated (collectively the “Azerty Business”). These
totaled $9.0 million resulting in a 0.2% increase in the
businesses comprised substantially all of the United States
operating expense ratio.
and Mexican operations of the Office Products Division of
Income from Operations. Income from operations
Abitibi-Consolidated Inc. The aggregate purchase price
increased 11.1% to $202.5 million, or 5.1% of net sales,
paid by the Company for the Azerty Business was
compared with $182.2 million, or 5.3% of net sales in
approximately $115.7 million (including fees and
1999. Excluding the investments in The Order People,
expenses). The acquisition was financed primarily
income from operations increased 15.5% to $210.5
through senior debt. The Azerty Business acquisition was
million or 5.4% of net sales.
accounted for using the purchase method of accounting
Interest Expense. Interest expense for 2000 was
and, accordingly, the purchase price was allocated to the
$27.2 million, or 0.7% of net sales, compared with $29.2
assets purchased and the liabilities assumed based upon
million, or 0.8% of net sales, in 1999. This reduction
the estimated fair values at the date of acquisition, with
reflects the Company’s continued leveraging of interest
the excess of cost over fair value of approximately $73.7
costs against higher sales, and the interest expense savings
million allocated to goodwill. The financial information
related to the redemption of the 12.75% Notes (as
for the year ended December 31, 1998, included nine
defined) partially offset by slightly higher interest rates
months of the Azerty Business. The pro forma effects of
on variable rate debt.
this acquisition were not material.
Other Expense. Other expense for 2000 reached
Comparison of Results for the Years $11.2 million, or 0.3% of net sales, compared with $9.4
Ended December 31, 2000 and 1999 million, or 0.3% of net sales in 1999. This expense
Net Sales. Net sales increased 14.6% to $3.9 billion primarily represents the costs associated with the sale of
for 2000, compared with $3.4 billion for 1999. This certain trade accounts receivable through the Receivables
increase reflected growth in the Company’s core business, Securitization Program (as defined). These costs vary on
incremental sales from acquisitions completed in 2000, a monthly basis and generally are related to certain short-
and increases in freight revenue. The Company’s sales term interest rates.
growth within its core business was broad based, with Income Before Income Taxes and Extraordinary
strength in all geographic regions, across all product Item. Income before income taxes and extraordinary
categories and customer channels. Specifically, the item was $164.1 million, or 4.1% of net sales, compared
janitorial and sanitation products, computer consumables with $143.6 million, or 4.2% of net sales in 1999.
and office furniture categories experienced strong sales Income Taxes. Income tax expense as a percent of net
growth. Sales growth for the year ended December 31, sales was 1.7% in 2000 and in 1999. The effective tax
2000, excluding the acquisitions of Azerty Canada and rate declined to 39.9% in 2000 from 41.9% in 1999.