Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS GENERAL United Stationers Inc. is the parent company for its direct wholly owned subsidiary, United Stationers Supply Co. Except where the context clearly indicates otherwise, the terms "Company" or "United Stationers" as hereinafter used include United Stationers Inc. together with its subsidiary. MicroUnited Inc., formerly a subsidiary of United Stationers Inc., was merged into United Stationers Supply Co. on Aug. 31, 1994.
United Stationers Supply Co. was incorporated in 1922 under the name Utility Supply Co. and has operated under its present name since 1960. United Stationers Supply Co. serves office products dealers, office products superstores, mail order houses, specialty retail stores, mass merchandisers, and sanitary supply distributors. Its MicroUnited division, which distributes computer products, primarily serves computer products resellers, computer superstores, national computer store chains, and mail order houses. Its furniture division distributes primarily to office furniture dealers.
On June 24, 1992, United Stationers Supply Co. acquired Stationers Distributing Company ("SDC"), a privately held wholesaler of office products based in Fort Worth, Texas with annual revenues of more than $400 million. SDC was immediately merged into United Stationers Supply Co.
The Company sells its products through a single national distribution network to more than 14,000 resellers, who in turn sell directly to end users. These products are distributed substantially within 24 hours through a computer- based network of warehouse facilities and truck fleets radiating from 58 distribution points. For Fiscal 1994, no single dealer accounted for more than 4% of the Company's consolidated net sales. The Company's annual net sales to individual dealers represent only a portion of each dealer's total purchases from all sources.
PRODUCTS The Company is engaged in the wholesale distribution of a broad line of business products to more than 14,000 resellers. The Company distributes approximately 25,000 items, including: traditional office supplies; office furniture and desk accessories; office machines, equipment and supplies; and computer hardware, peripherals and supplies; and facilities management supplies such as safety and sanitation items.
The Company's products are purchased from approximately 500 manufacturers. The Company has distribution contracts with certain suppliers, under which the Company's obligations are not material. For Fiscal 1994, no single supplier accounted for more than 9% of the total dollar amount of the Company's purchases. The Company historically has purchased on a purchase order basis.
CUSTOMERS United Stationers serves all segments of the office products, office furniture and computer reseller markets. In addition, the Company now serves sanitary supply distributors. The Company offers a menu of programs and services designed to meet the diverse needs of each of these customer categories.
The mainstay of the office products industry continues to be commercial dealers who typically serve large companies, institutions and government agencies. Through consolidation, these dealers are getting larger and becoming even more important to the Company. Commercial dealers remain one of United Stationers' fastest growing customer classes.
The independent dealer population has been declining for some time, especially as dealerships are acquired and brought under an umbrella of common ownership. However, many independent office products dealers continue to thrive, adapting to the highly competitive environment with the help of resources the Company offers.
Some independent dealers have joined forces in marketing and/or buying groups. United Stationers is the leading wholesale source for many of these groups, providing not only merchandise but also special programs that enable these dealers to utilize their combined strengths.
While United Stationers maintains and builds its business with these traditional dealers, the Company has also initiated programs with all major office products superstore chains. The Company sells superstores commodity items as "fill-ins" when they are out of stock. In addition, the Company has placed catalog order stations in some of these stores, providing consumers the opportunity to order items that superstores do not typically stock.
Through its furniture division, United Stationers offers middle-grade office furniture to both office products and office furniture dealers. The Company also provides computer-related products to all categories of computer resellers through its MicroUnited division. The Company provides marketing materials and professional expertise to meet the various needs of these resellers.
MARKETING AND SALES The Company concentrates its marketing efforts on providing value-added services to resellers within the business products industry. The Company distributes products that are generally available at similar prices from multiple sources, and most of its customers purchase their products from more than one source. As a result, the Company differentiates itself through broad product selection, a high degree of product availability, a variety of customer services and expeditious distribution capabilities. The Company's significant inventories and its advanced distribution system enable each of the Company's customers to provide a high level of service to end users while minimizing the reseller's own inventory requirements. The Company maintains sufficient inventory levels to ship from stock more than 90% of all items ordered.
In addition to emphasizing its broad product line, extensive inventory, computer integration and national distribution capabilities, the Company's marketing programs have relied upon two additional major components. First, the Company produces catalogs that are usually custom imprinted with each dealer's name. These catalogs are sold to dealers who, in turn, distribute the catalogs to their customers. Second, the Company provides its dealers with a variety of services, including business management systems, promotional programs and price updating services.
The Company produces numerous catalogs for placement with dealers' end-user customers, including: an annual General Line Catalog listing 22,000 items; an annual office furniture catalog featuring furniture and accessories; an Office Impressions catalog featuring the Company's private-brand furniture; a quarterly Concept 90 catalog offering approximately 1,000 high-volume commodity products; annual Universal and Universal Plus catalogs promoting the Company's private- brand merchandise; an annual Computer Products Catalog offering hardware, peripherals and supplies; an annual Computer Concepts catalog; an annual Facilities Management Supply catalog featuring janitorial and sanitation supplies and ergonomic products; a business presentation products catalog; and Access, a new promotional catalog.
An office products dealer typically distributes only one wholesaler's catalogs. The dealer will often purchase products to meet customers' orders from the wholesaler that provided the catalogs. Consequently, the Company attempts to maximize the distribution of its catalogs and, therefore, offers a rebate and allowance program that can offset the purchase price of most catalogs. In addition, the Company provides a variety of dealer support and marketing programs that are designed to create orders for dealers from their end-user customers throughout the year.
The Company began to focus on niche markets in Fiscal 1991 and has expanded steadily upon this concept since then. A furniture division was established to offer national delivery and set up capabilities to office products dealers as well as to attract new furniture dealers. Other niche markets include computer- related products, custom-imprinted items, facility management supplies and business presentation products.
The Company offers its dealers promotional programs at various times throughout the year. These programs offer retailers special prices on certain brand-name and private-brand merchandise along with packaged promotional materials, including newspaper and direct mail flyers. In addition, a support program is offered to help dealers develop their market through direct mail techniques.
To help inform dealers of price changes, the Company offers various price updating services in hard copy and computer media formats. The Company publishes a pricing guide listing manufacturers' suggested retail prices. For computer updating, the Company provides its price files on diskettes and tapes as well as through on-line access.
The Company offers its dealers a range of electronic order entry and business management systems. The Company benefits by gaining an increasing share of the dealers' business, while the dealers benefit through better control and administration of their business. The Company's most sophisticated electronic management system enables dealers to manage critical business functions including order entry, purchasing, pricing, accounts receivable, accounts payable and inventory control. In July 1993, United Stationers entered into a joint venture, creating a new corporation called United Business Computers, Inc. to enhance, market and support this system. Other systems are linked to the Company's computer network through dedicated or dial-up lines. These systems allow instant stock checks and order entry for the approximately 25,000 items offered by the Company.
DISTRIBUTION The Company has a national network of 58 distribution points that generally enables the Company to make its entire product line available to the customer within 24 hours of order placement. Each of the Company's 30 Regional Distribution Centers carries most of the Company's full line of inventory. The Company supplements its Regional Distribution Centers with Local Distribution Points throughout the United States that serve as will-call and reshipment points for orders filled at the Regional Distribution Centers. The Company's truck fleet allows direct delivery from the Regional Distribution Centers and Local Distribution Points to the dealers.
The Company's computerized systems enable orders to be taken at any Regional Distribution Center and filled from that or any other Regional Distribution Center. Dealers may elect to pick up their orders at the Regional Distribution Center or choose to have them shipped from the Regional Distribution Center to the dealer or directly to the dealer's customer. The merchandise may also be shipped to the Local Distribution Point that is closest to the dealer (or the dealer's customer) for will-call, local delivery or reshipment.
The Company's ability to readily deliver its products can be impaired by work stoppages by its employees. Although the Company has maintained service levels during past work stoppages by distributing to its customers from unaffected distribution centers, profitability has been reduced during such periods as a result of higher distribution costs. The Company's service levels would also be affected in the event of an interruption in operation of its computers and/or telecommunications network on a company-wide scale for an extended period of time. The Company has developed contingency plans to limit its exposure. As the number of the Company's distribution centers increases, the operation of any one distribution center becomes less significant in relation to the overall operation of the Company.
COMPETITION The Company competes with office products manufacturers as well as other wholesale distributors of business products. Most wholesale distributors conduct operations regionally and locally, sometimes with limited product lines such as writing instruments or computer products. Other wholesalers, including the Company, carry a full line of business products. Manufacturers typically sell their products through a variety of distribution channels, including business products wholesalers and resellers. Manufacturers have traditionally been viewed as both suppliers to and competitors of wholesalers.
Competition between the Company and manufacturers is based primarily upon net pricing, minimum order quantity and product availability. Although manufacturers may provide lower prices to dealers than the Company does, the Company's marketing and catalog programs, combined with speed of delivery and its ability to offer dealers a broad line of business products with lower minimum order quantities, are important factors in enabling the Company to compete effectively. Competition between the Company and other wholesalers is based primarily on net pricing to dealers, breadth of product lines, availability of products and other services, speed of delivery to dealers, and the quality of its services. The Company believes it is competitive in each of these areas.
EMPLOYEES At November 1, 1994, the Company employed approximately 3,600 persons. The Company considers its relationships with its employees to be satisfactory.
Approximately 863 shipping, warehouse and maintenance employees at the Chicago, Detroit, Philadelphia, Baltimore, Los Angeles, Minneapolis and New York City facilities are covered by various collective bargaining agreements. These agreements expire at various times during the next three years.
CANADIAN OPERATIONS In April 1991, United Stationers Canada Ltd. was formed as a subsidiary of United Stationers Supply Co., serving Canadian office products dealers on a limited basis. This subsidiary was liquidated on August 31, 1994. Canadian dealers are being served through the Company's Detroit, Seattle and Portland Regional Distribution Centers.
HONG KONG TRADING OFFICE In 1992, United Stationers Hong Kong Limited and United Worldwide Limited were formed as subsidiaries of United Stationers Supply Co. to facilitate global sourcing of products.
ITEM 2.



ITEM 2. PROPERTIES The Company considers its properties to be suitable and adequate for their intended uses. These properties consist of the following:
EXECUTIVE OFFICES The Corporate office facility in Des Plaines, Illinois has approximately 128,000 square feet of office and storage space. In September 1993, approximately 47,000 square feet of office space located in Mount Prospect, Illinois was leased by the Company. This lease expires in five years, with an option to renew for two five-year terms.
REGIONAL DISTRIBUTION CENTERS The Company operates 30 Regional Distribution Centers located in the metropolitan areas of Chicago (Forest Park, Illinois); Detroit (Livonia, Michigan); Philadelphia (Pennsauken, New Jersey); Dallas, Texas; Boston (Woburn, Massachusetts); Los Angeles (The City of Industry, California); Atlanta (Norcross, Georgia); Baltimore (Harmans, Maryland); Cleveland (Twinsburg, Ohio); Minneapolis (Eagan, Minnesota); New York City (Edison, New Jersey); St. Louis (Greenville, Illinois) Albany (Coxsackie, New York); Portland, Oregon; Phoenix (Tempe, Arizona); Sacramento, California; Salt Lake City, Utah; Seattle (Tukwila, Washington); Denver, Colorado; Houston, Texas; Lubbock, Texas; San Antonio, Texas; Tulsa, Oklahoma; Charlotte, North Carolina; Kansas City, Missouri; Memphis, Tennessee; Nashville, Tennessee; New Orleans (Harahan, Louisiana); Cincinnati (Springdale, Ohio); and Ft. Lauderdale, Florida.
These facilities represent total square footage of nearly six million square feet, of which 3.3 million is owned and the balance is leased.
LOCAL DISTRIBUTION POINTS The Company also operates 28 Local Distribution Points. Two are leased by the Company; the other Local Distribution Points are operated through cross- docking arrangements with third party distribution companies.
CANADIAN FACILITY The Company currently leases one facility in Woodbridge, Ontario (7,000 sq. ft.). This lease expires August 31, 1995 with an option to renew for one additional year.
HONG KONG TRADING OFFICE United Stationers Hong Kong Limited leases 1,500 square feet of office space in Hong Kong with the lease expiring on October 14, 1995.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
On October 26, 1993, a cross-complaint was filed against United Stationers Supply Co. in a collection action which had previously been brought in the Municipal Court of Los Angeles County under the name UNITED STATIONERS SUPPLY CO. V. OFFICE PALACE, INC. ET AL. The cross-complaint alleges restraint of trade and unfair business practices by United Stationers following the merger with Stationers Distributing Company in 1992. It seeks an unspecified amount of general and special damages, plus $10 million in punitive damages. The Company intends to pursue vigorously its complaint and defend the cross-complaint. In the opinion of management, the litigation will not have a material effect on the Company's results of operations or financial condition.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of Fiscal 1994 to a vote of security holders through the solicitation of proxies.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is included herein in accordance with General Instruction G(3) to Form 10-K. At November 1, 1994, the Company's executive officers were as follows:
All of the executive officers listed above, except Mr. Hewson, Mr. Kravis, Mr. Schwarz, Mr. Pribel and Mr. Uskup have been employed by the Company in similar capacities for more than the past five years.
Mr. Hewson, prior to his election as President and Chief Operating Officer in April 1991, had been Executive Vice President of the Company since March 1990. Prior to that, he had been President of ACCO International's U.S. Division since 1989 and President of its Canadian Division since 1987. ACCO International is a manufacturer of traditional office products and a subsidiary of American Brands. American Brands is a global consumer products holding company.
Mr. Kravis, prior to his election as Senior Vice President and Chief Financial Officer in September 1992, had been Senior Vice President, Chief Financial Officer and Treasurer since May 1991. He had been Vice President and Treasurer of the Company since 1981.
Mr. Schwarz, prior to his election as Senior Vice President, Marketing in June 1992, had been Senior Vice President, General Manager, MicroUnited since 1990 and Vice President, General Manager, MicroUnited since September 1989. He had held a staff position in the same capacity since February 1987.
Mr. Pribel, prior to his election as Treasurer in September 1992, had been Assistant Treasurer of the Company since 1984.
Mr. Uskup, prior to his election as Vice President, Management Information Systems and Chief Information Officer in February 1994, had been since 1987 Vice President, Corporate Information Services for Baxter International Inc., a global manufacturer and distributor of health care products.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference from pages 10 and 11 of the Registrant's Annual Report to Stockholders for the fiscal year ended August 31, 1994, section entitled "Quarterly Financial Data" and "Quarterly Stock Price Data."
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference from pages 10 and 11 of the Registrant's Annual Report to Stockholders for the fiscal year ended August 31, 1994, section entitled "Selected Financial Information."
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated herein by reference from pages 8 and 9 of the Registrant's Annual Report to Stockholders for the fiscal year ended August 31, 1994.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference from pages 13 through 24 of the Registrant's Annual Report to Stockholders for the fiscal year ended August 31, 1994.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant has had no disagreements on accounting and financial disclosure of the type referred to in Item 304 of Regulation S-K.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and information concerning any persons who failed to file, on a timely basis, reports required by section 16(a) of the Exchange Act, are incorporated herein by reference, pursuant to General Instruction G(3) to Form 10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on January 11, 1995 to be filed within 120 days after the end of the Registrant's fiscal year. Information concerning the executive officers is included in Part I of this report.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference, pursuant to General Instruction G(3) to Form 10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on January 11, 1995, to be filed within 120 days after the end of the Registrant's fiscal year.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference, pursuant to General Instruction G(3) to Form 10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on January 11, 1995, to be filed within 120 days after the end of the Registrant's fiscal year.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference, pursuant to General Instruction G(3) to Form 10-K, from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on January 11, 1995, to be filed within 120 days after the end of the Registrant's fiscal year.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(A) The following financial statements, schedules and exhibits are filed as part of this report:
(B) No reports on Form 8-K were filed by the Registrant during the last quarter.
For the purpose of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statement on Form S-8 No. 3332453 (filed December 6, 1989).
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNITED STATIONERS INC.
BY: /S/ ALLEN B. KRAVIS ----------------------------- Allen B. Kravis SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Dated: November 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our reports included in, or incorporated by reference in, this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (File Nos. 2-77628, 33-4729 and 33-32453) and Registration Statement on Form S-3 (File No. 33-28251). It should be noted that we have not audited any financial statements of the Company subsequent to August 31, 1994 or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Chicago, Illinois, November 22, 1994.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of United Stationers Inc.
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in United Stationers Inc.'s Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated October 6, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedules II, V, VI and VIII are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois, October 6, 1994.
UNITED STATIONERS INC. AND SUBSIDIARIES SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES (IN THOUSANDS OF DOLLARS)
UNITED STATIONERS INC. AND SUBSIDIARIES SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (IN THOUSANDS OF DOLLARS)
UNITED STATIONERS INC. AND SUBSIDIARIES SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY, PLANT AND EQUIPMENT (IN THOUSANDS OF DOLLARS)
UNITED STATIONERS INC. AND SUBSIDIARIES SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS OF DOLLARS)
UNITED STATIONERS INC.
2200 East Golf Road Des Plaines, Illinois 60016-1267 708/699-5000