Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2015

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

For the transition period from to

Commission File Number: 0-10653

UNITED STATIONERS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

36-3141189

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015-2559

(847) 627-7000

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

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

On April 20, 2015, the registrant had outstanding 38,317,621 shares of common stock, par value $0.10 per share.

UNITED STATIONERS INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2015

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014		3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014		4
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		25
Item 4. Controls and Procedures		25
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		26
Item 1A. Risk Factors		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 6. Exhibits		27
SIGNATURES		28

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	(Unaudited)			(Audited)
	As of March 31,			As of December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	23,631		$	20,812
Accounts receivable, less allowance for doubtful accounts of $18,043 in 2015 and $19,725 in 2014		665,426			702,527
Inventories		871,310			926,809
Assets held for sale		15,799			-
Other current assets		31,226			30,042
Total current assets		1,607,392			1,680,190
Property, plant and equipment, net		133,640			138,217
Goodwill		394,186			398,042
Intangible assets, net		96,797			111,958
Other long-term assets		49,440			41,810
Total assets	$	2,281,455		$	2,370,217
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	467,657		$	485,241
Accrued liabilities		175,770			192,792
Liabilities held for sale		6,956			-
Current maturities of long-term debt		41			851
Total current liabilities		650,424			678,884
Deferred income taxes		13,985			17,763
Long-term debt		684,238			713,058
Other long-term liabilities		104,413			104,394
Total liabilities		1,453,060			1,514,099
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2015 and 2014		7,444			7,444
Additional paid-in capital		413,546			412,291
Treasury stock, at cost – 36,089,975 shares in 2015 and 35,719,041 shares in 2014		(1,057,955	)		(1,042,501	)
Retained earnings		1,532,325			1,541,675
Accumulated other comprehensive loss		(66,965	)		(62,791	)
Total stockholders’ equity		828,395			856,118
Total liabilities and stockholders’ equity	$	2,281,455		$	2,370,217

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended
	March 31,
	2015			2014
Net sales	$	1,332,375		$	1,254,139
Cost of goods sold		1,127,925			1,067,056
Gross profit		204,450			187,083
Operating expenses:
Warehousing, marketing and administrative expenses		198,372			148,849
Operating income		6,078			38,234
Interest expense, net		4,839			3,374
Income before income taxes		1,239			34,860
Income tax expense		5,231			13,003
Net (loss) income	$	(3,992	)	$	21,857
Net (loss) income per share - basic:	$	(0.10	)	$	0.56
Average number of common shares outstanding - basic		38,115			39,194
Net (loss) income per share - diluted:	$	(0.10	)	$	0.55
Average number of common shares outstanding - diluted		38,534			39,655
Dividends declared per share	$	0.14		$	0.14

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	For the Three Months Ended
	March 31,
	2015			2014
Net (loss) income	$	(3,992	)	$	21,857
Other comprehensive (loss) income, net of tax
Unrealized translation adjustment		(4,630	)		(545	)
Minimum pension liability adjustments		932			581
Unrealized interest rate swap adjustments		(476	)		(159	)
Total other comprehensive loss, net of tax		(4,174	)		(123	)
Comprehensive (loss) income	$	(8,166	)	$	21,734

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	For the Three Months Ended
	March 31,
	2015			2014
Cash Flows From Operating Activities:
Net (loss) income	$	(3,992	)	$	21,857
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		12,223			9,523
Share-based compensation		2,640			3,225
Gain on the disposition of property, plant and equipment		(15	)		(4	)
Amortization of capitalized financing costs		272			287
Excess tax benefits related to share-based compensation		(262	)		(494	)
Asset impairment charges		23,610			-
Deferred income taxes		(1,858	)		(2,450	)
Changes in operating assets and liabilities (net of acquisitions):
Decrease (increase) in accounts receivable, net		26,217			(15,583	)
Decrease in inventory		42,759			81,714
Increase in other assets		(10,126	)		(1,041	)
Increase (decrease) in accounts payable		645			(47,191	)
Decrease in checks in-transit		(13,613	)		(31,751	)
Decrease in accrued liabilities		(16,521	)		(13,654	)
Increase (decrease) in other liabilities		743			(2,948	)
Net cash provided by operating activities		62,722			1,490
Cash Flows From Investing Activities:
Capital expenditures		(5,490	)		(6,390	)
Proceeds from the disposition of property, plant and equipment		18			458
Net cash used in investing activities		(5,472	)		(5,932	)

Cash Flows From Financing Activities:
Net (repayments) borrowings under revolving credit facility		(29,630	)		4,562
Borrowings under Receivables Securitization Program		-			9,300
Repayment of debt		-			(135,000	)
Proceeds from the issuance of debt		-			150,000
Net disbursements from share-based compensation arrangements		(875	)		(1,704	)
Acquisition of treasury stock, at cost		(16,028	)		(12,491	)
Payment of cash dividends		(5,396	)		(5,509	)
Excess tax benefits related to share-based compensation		262			494
Payment of debt issuance costs		(36	)		(605	)
Net cash (used in) provided by financing activities		(51,703	)		9,047
Effect of exchange rate changes on cash and cash equivalents		(1,758	)		33
Transfer of cash to held for sale		(970	)		-
Net change in cash and cash equivalents		2,819			4,638
Cash and cash equivalents, beginning of period		20,812			22,326
Cash and cash equivalents, end of period	$	23,631		$	26,964
Other Cash Flow Information:
Income tax payments, net	$	3,183		$	2,236
Interest paid		6,213			2,424

See notes to condensed consolidated financial statements.

UNITED STATIONERS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent United Stationers Inc. (“USI”) with its wholly owned subsidiary United Stationers Supply Co. (“USSC”), and USSC’s subsidiaries (collectively, “United” or the “Company”). The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of USI and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading distributor of business essentials.

During the first quarter of 2015, the Company approved a plan to change its corporate name to Essendant Inc., effective in June of 2015. See footnote 5, “Goodwill and Intangible Assets” for further disclosure.

The accompanying Condensed Consolidated Financial Statements are unaudited, except for the Condensed Consolidated Balance Sheet as of December 31, 2014, which was derived from the December 31, 2014 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for further information.

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of United at March 31, 2015 and the results of operations and cash flows for the three months ended March 31, 2015 and 2014. The results of operations for the three months ended March 31, 2015 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

Inventory

The Company uses the last-in, first-out (“LIFO”) method for valuing approximately 75% and 74% of its total inventory as of March 31, 2015 and December 31, 2014, respectively. The remaining inventory is valued under the first-in, first-out (“FIFO”) accounting method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the FIFO and LIFO accounting methods is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of FIFO cost or market, inventory would have been $120.9 million and $118.6 million higher than reported as of March 31, 2015 and December 31, 2014, respectively.

The quarterly change in the LIFO reserve as of March 31, 2015 resulted in a $2.3 million increase in cost of goods sold related to 2015 inflation. The change in the LIFO reserves as of March 31, 2014 resulted in a $0.5 million decrease in costs of goods sold which included LIFO liquidations relating to decrements in the Company’s office products and furniture pools which resulted in a $4.0 million liquidation of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of purchases in the year. This liquidation was partially offset by LIFO expense of $3.5 million related to 2014 inflation.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue From Contracts With Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

2. Acquisitions and Dispositions

Acquisition of CPO Commerce, Inc.

On May 30, 2014, USSC completed the acquisition of CPO, a leading online retailer of brand name power tools and equipment. The acquisition of CPO significantly expanded the Company’s digital resources and capabilities to support resellers as they transition to an increasingly online environment. CPO’s expertise will strengthen United’s ability to offer features like improved product content, real-time access to inventory and pricing, digital marketing and merchandising, and an enhanced digital platform to our resellers and manufacturing partners.

The purchase price was $37.8 million, including $5.5 million related to the estimated fair value of contingent consideration which is based upon the achievement of certain sales targets during a three-year period immediately following the acquisition date. The final payments related to the contingent consideration will be determined by actual achievement in the earn-out periods and will be between zero and $10 million. Any changes to the estimated fair value after the original purchase accounting is completed will be recorded in “warehousing, marketing and administrative expenses” in the period in which a change occurs. The Company financed the 100% stock acquisition with borrowings under the Company’s available committed bank facilities.

The Company has developed a preliminary estimate of the fair value of assets acquired and liabilities assumed for purposes of allocating the purchase price. This estimate is subject to change as the valuation activities are completed. The fair value of the assets and liabilities acquired were estimated using various valuation methods including estimated selling price, a market approach, and discounted cash flows using both an income and cost approach.

At March 31, 2015, the preliminary allocation of the purchase price is as follows (amounts in thousands):

Purchase price, net of cash acquired				$	32,225
Accounts receivable	$	(2,658	)
Inventories		(13,051	)
Other current assets		(307	)
Property, plant and equipment, net		(488	)
Intangible assets		(12,800	)
Total assets acquired					(29,304	)
Accounts payable		17,131
Accrued liabilities		2,139
Deferred income taxes		3,453
Other long-term liabilities		51
Total liabilities assumed					22,774
Goodwill				$	25,695

The purchased identifiable intangible assets are as follows (amounts in thousands):

	Total		Estimated Life
Customer relationships	$	5,200	3 years
Trademark		7,600	15 years
Total	$	12,800

Any changes to the preliminary estimates of the fair value of assets acquired and liabilities assumed, some of which may be material, will be allocated to residual goodwill.

Acquisition of MEDCO

On October 31, 2014, USSC completed the acquisition of all of the capital stock of Liberty Bell Equipment Corp., a United States wholesaler of automotive aftermarket tools and equipment, and its affiliates (collectively, MEDCO) including G2S Equipment de Fabrication et d’Entretien ULC, a Canadian wholesaler. MEDCO advances a key pillar of the Company’s strategy, which is to diversify into higher growth and margin channels and categories. It also brings expanded categories and services to customers.

The purchase price was $149.9 million, including $4.7 million related to the estimated fair value of contingent consideration which is based upon the achievements of certain sales and EBITDA targets over the next three years as well as $6.0 million reserved as a payable upon completion of an eighteen month indemnification period. The final payments related to the contingent consideration will be determined by actual achievement in the earn-out periods and will be between zero and $10 million. Any changes to the estimated fair value after the original purchase accounting is completed will be recorded in “warehousing, marketing and administrative expenses” in the period in which a change occurs. This acquisition was funded through a combination of cash on hand and cash available under the Company’s committed bank facilities.

The Company has developed a preliminary estimate of the fair value of assets acquired and liabilities assumed for purposes of allocating the purchase price. The estimate is subject to change as the valuation activities are completed. The fair value of the assets and liabilities acquired were estimated using various valuation methods including estimated selling price, a market approach, and discounted cash flows using both an income and cost approach.

At March 31, 2015, the preliminary allocation of the purchase price is as follows (amounts in thousands):

Purchase price, net of cash acquired				$	145,340
Accounts receivable	$	(44,815	)
Inventories		(54,656	)
Other current assets		(1,299	)
Property, plant and equipment, net		(4,408	)
Deferred income tax assets		(1,101	)
Other assets		(442	)
Intangible assets		(44,070	)
Total assets acquired					(150,791	)
Accounts payable		32,383
Accrued liabilities		3,976
Other long-term liabilities		52
Total liabilities assumed					36,411
Goodwill				$	30,960

The purchased identifiable intangible assets are as follows (amounts in thousands):

	Total		Estimated Life
Customer relationships	$	40,030	4-15 years
Trademarks		4,040	3-15 years
Total	$	44,070

Any changes to the preliminary allocation of the purchase price, some of which may be material, will be allocated to residual goodwill.

Assets Held for Sale

On February 10, 2015, the Company approved a plan to sell its operations in Mexico as the subsidiary is not strategic to the Company’s long-term business plan. The Company plans to dispose of the entity in 2015. As of the approval date, in accordance with Accounting Standards Codification (ASC) 360-10-45-9, the Mexican subsidiary met all of the criteria to be classified as a held-for-sale asset. In accordance with ASC 350-20-40, the Company allocated a proportionate share of the goodwill balance from the office product and janitorial and breakroom supply reporting unit based on the subsidiary’s relative fair value to the reporting unit and performed an impairment test for the allocated goodwill utilizing the cost approach to value the entity. Based upon the impairment test, the $3.3 million of goodwill was determined to be fully impaired. Additionally, in conjunction with classifying the subsidiary as a held-for-sale asset disposal group, the Company revalued the disposal group to fair value using the cost-approach method less the estimated cost to sell. The carrying value, including a $10.1 million cumulative foreign currency translation adjustment, of the disposal was then compared to the fair value less the estimated cost to sell resulting in a pre-tax impairment loss of $10.1 million. The goodwill impairment of $3.3 million, the held-for-sale impairment of $10.1 million and the $0.1 million estimated cost to sell are recorded in the first quarter of 2015 within “warehousing, marketing and administrative expenses.” The Company anticipates additional financial statement impacts during the remainder of 2015 related to transaction costs, foreign exchange volatility, and operating results.

As of March 31, 2015, the carrying amounts, excluding intercompany accounts, of the Mexican subsidiary by major classes of assets and liabilities included in the Consolidated Balance Sheet are as follows (in thousands):

	Amount
Assets held for sale:
Cash and cash equivalents	$	970
Accounts receivable, less allowance for doubtful accounts		10,980
Inventories		12,753
Other current assets		573
Net property, plant equipment		112
Other assets		658
Held-for-sale valuation allowance		(10,247	)
Total assets held for sale	$	15,799

Liabilities held for sale:
Accounts payable		4,618
Accrued liabilities		1,782
Other long-term liabilities		556
Total liabilities held for sale	$	6,956

3. Share-Based Compensation

As of March 31, 2015, the Company has two active equity compensation plans. Under the Amended and Restated 2004 Long-Term Incentive Plan, award vehicles include, but are not limited to, stock options, restricted stock awards, restricted stock units (“RSUs”), and performance-based awards. Associates and non-employee directors of the Company are eligible to become participants in the plan. The Nonemployee Directors’ Deferred Stock Compensation Plan allows non-employee directors to elect to defer receipt of all or a portion of their retainer and meeting fees.

The Company granted 46,229 shares of restricted stock and 145,552 RSUs during the first three months of 2015. No stock options were granted during the first quarter of 2015. During the first three months of 2014, the Company granted 56,451 shares of restricted stock, 145,355 RSUs, and 5,538 stock options.

4. Severance and Restructuring Charges

During the first quarter of 2015, the Company recorded a $6.0 million pre-tax charge relating to a workforce reduction and a $0.4 million pre-tax charge relating to facility consolidations that was included in “warehousing, marketing and administrative expenses.” Cash outflows for these actions will occur primarily in 2015 and were approximately $0.5 million in the three months ended March 31, 2015. As of March 31, 2015, the Company has accrued liabilities for these actions of $5.9 million. The Company is estimating an additional $2.6 million to be incurred in the remainder of 2015 due to facility closures related to this action for a total 2015 expense of approximately $9.0 million.

5. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are noted in the following table (in thousands):

Goodwill, balance as of December 31, 2014	$	398,042
Impairment		(3,319	)
Purchase accounting adjustments		1,034
Currency translation adjustment		(1,571	)
Goodwill, balance as of March 31, 2015	$	394,186

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	March 31, 2015								December 31, 2014
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	124,697	$	(43,813	)	$	80,884	16	$	125,761	$	(41,123	)	$	84,638	16
Non-compete agreements		4,658		(2,675	)		1,983	4		4,672		(2,364	)		2,308	4
Trademarks		13,728		(1,398	)		12,330	14		14,428		(1,716	)		12,712	13
Total	$	143,083	$	(47,886	)	$	95,197		$	144,861	$	(45,203	)	$	99,658
Intangible assets not subject to amortization
Trademarks		1,600		-			1,600	n/a		12,300		-			12,300	n/a
Total	$	144,683	$	(47,886	)	$	96,797		$	157,161	$	(45,203	)	$	111,958

During the first quarter of 2015, the Company approved a plan to change its corporate name in order to more accurately reflect its purpose and vision. The corporate names of the Company and several of its operating subsidiaries, including USSC and ORS Nasco, LLC, will change in the second quarter of the year. Accordingly, in the first quarter of 2015, the Company recorded a pre-tax non-cash impairment charge of $10.2 million to write-down the trademarks of ORS Nasco and certain OKI brands to their fair value. It was also determined that the useful lives did not extend past 2015. This impairment charge was recorded in “warehousing, marketing and administrative expenses.” The Company utilized the discounted cash flow method to determine the fair value of the intangibles based upon management’s current forecasted future revenues from the trademarks. The Company determined the useful lives of these intangibles based upon management’s timeline for rebranding. The trademarks had a total value of $1.5 million at March 31, 2015 and will be fully amortized by December 31, 2015. The Company is evaluating how it will utilize these assets in the future.

The following table summarizes the amortization expense to be incurred in 2015 and over the next four years on intangible assets (in thousands):

Year	Amount
2015	$	11,355
2016		12,785
2017		10,805
2018		7,452
2019		5,679

6. Accumulated Other Comprehensive Income (Loss)

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended March 31, 2015 is as follows (amounts in thousands):

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2014	$	(11,923	)	$	274		$	(51,142	)	$	(62,791	)
Other comprehensive (loss) income before reclassifications		(4,630	)		(702	)		-			(5,332	)
Amounts reclassified from AOCI		-			226			932			1,158
Net other comprehensive (loss) income		(4,630	)		(476	)		932			(4,174	)
AOCI, balance as of March 31, 2015	$	(16,553	)	$	(202	)	$	(50,210	)	$	(66,965	)

The following table details the amounts reclassified out of AOCI into the income statement during the three-month period ending March 31, 2015 respectively (in thousands):

	Amount Reclassified From AOCI
	For the Three
	Months Ended
	March 31,			Affected Line Item In The Statement
Details About AOCI Components	2015			Where Net Income is Presented
Gain on interest rate swap cash flow hedges, before tax	$	364		Interest expense, net
		(138	)	Tax provision
	$	226		Net of tax
Amortization of defined benefit pension plan items:
Prior service cost and unrecognized loss	$	1,525		Warehousing, marketing and administrative expenses
		(593	)	Tax provision
		932		Net of tax
Total reclassifications for the period	$	1,158		Net of tax

7. Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock, restricted stock units and deferred stock units are considered dilutive securities. For the three-month periods ending March 31, 2015 and 2014, 0.4 million and 0.5 million shares of such securities, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended
	March 31,
	2015			2014
Numerator:
Net (loss) income	$	(3,992	)	$	21,857
Denominator:
Denominator for basic earnings per share -
weighted average shares		38,115			39,194
Effect of dilutive securities:
Employee stock options and restricted units		419			461
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive
securities		38,534			39,655
Net income per share:
Net (loss) income per share - basic	$	(0.10	)	$	0.56
Net (loss) income per share - diluted	$	(0.10	)	$	0.55

Common Stock Repurchases

As of December 31, 2014, the Company had Board authorization to repurchase $42.4 million of USI common stock. In February 2015, the Board of Directors authorized the Company to purchase an additional $100.0 million of common stock. During the three-month periods ended March 31, 2015 and 2014, the Company repurchased 402,679 and 331,369 shares of USI’s common stock at an aggregate cost of $16.3 million and $13.7 million, respectively. Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data. During the first three months of 2015 and 2014, the Company reissued 31,745 and 73,750 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.

8. Debt

USI is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, USSC, and from borrowings by USSC. The 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program (each as defined in Note 9 of the Company’s Form 10-K for the year ended December 31, 2014) contain restrictions on the use of cash transferred from USSC to USI.

Debt consisted of the following amounts (in millions):

	As of		As of
	March 31, 2015		December 31, 2014

2013 Credit Agreement	$	334.2	$	363.0
2013 Note Purchase Agreement		150.0		150.0
Receivables Securitization Program		200.0		200.0
Mortgage & Capital Lease		0.1		0.9
Total	$	684.3	$	713.9

As of March 31, 2015, 78.1% of the Company’s outstanding debt, excluding capital leases, is priced at variable interest rates based primarily on the applicable bank prime rate or London InterBank Offered Rate (“LIBOR”).

The Company had outstanding letters of credit of $11.1 million under the 2013 Credit Agreement as of March 31, 2015 and December 31, 2014.

Borrowings under the 2013 Credit Agreement bear interest at LIBOR for specified interest periods or at the Alternate Base Rate (as defined in the 2013 Credit Agreement), plus, in each case, a margin determined based on the Company’s permitted debt to EBITDA ratio calculated as provided in Section 6.20 of the 2013 Credit Agreement (the “Leverage Ratio”). Depending on the Company’s Leverage Ratio, the margin on LIBOR-based loans ranges from 1.00% to 2.00% and on Alternate Base Rate loans ranges from 0% to 1.00%. As of March 31, 2015, the applicable margin for LIBOR-based loans was 1.375% and for Alternate Base Rate loans was 0.375%. USSC is required to pay the lenders a fee on the unutilized portion of the commitments under the 2013 Credit Agreement at a rate per annum between 0.15% and 0.35%, depending on the Company’s Leverage Ratio.

As of March 31, 2015 and December 31, 2014, $380.7 million and $360.3 million, respectively, of receivables had been sold to the Investors (as defined in Note 9 of the Company’s Form 10-K for the year ended December 31, 2014). United Stationers Receivables, LLC (“USR”) had $200.0 million outstanding under the Receivables Securitization Program as of March 31, 2015 and December 31, 2014.

For additional information about the 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program, see Note 9 of the Company’s Form 10-K for the year ended December 31, 2014.

9. Pension and Post-Retirement Benefit Plans

The Company maintains pension plans covering union and certain non-union employees. For more information on the Company’s retirement plans, see Note 11 to the Company’s Consolidated Financial Statements in the Form 10-K for the year ended December 31, 2014. A summary of net periodic pension cost related to the Company’s pension plans for the three months ended March 31, 2015 and 2014 is as follows (dollars in thousands):

	For the Three Months Ended March 31,
	2015			2014
Service cost - benefit earned during the period	$	400		$	328
Interest cost on projected benefit obligation		2,270			2,243
Expected return on plan assets		(2,805	)		(2,558	)
Amortization of prior service cost		75			45
Amortization of actuarial loss		1,450			905
Net periodic pension cost	$	1,390		$	963

The Company made cash contributions of $2.0 million to its pension plans during each of the quarters ended March 31, 2015 and 2014. Additional contributions, if any, for 2015 have not yet been determined. As of March 31, 2015 and December 31, 2014, respectively, the Company had accrued $48.2 million and $50.3 million of pension liability within “Other Long-Term Liabilities” on the Condensed Consolidated Balance Sheets.

Defined Contribution Plan

The Company has defined contribution plans covering certain salaried associates and non-union hourly paid associates (the “Plan”). The Plan permits associates to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for Company-funded discretionary contributions as well as matching associates’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $1.4 million for the Company match of employee contributions to the Plan for the three months ended March 31, 2015 and 2014.

10. Derivative Financial Instruments

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

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

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

As of March 31, 2015, approximately 21.9% ($150.0 million) of the Company’s current outstanding debt had its interest payments designated as hedged forecasted transactions.

The Company’s outstanding swap transaction is accounted for as a cash flow hedge and is recorded at fair value on the Condensed Consolidated Balance Sheet as of March 31, 2015 and December 31, 2014, at the following amounts (in thousands):

Notional

Fair Value Net

As of March 31, 2015

Amount

Receive

Pay

Maturity Date

Liability ⁽¹⁾

July 2012 Swap Transaction

150,000

Floating 1-month LIBOR

1.05%

July 18, 2017

982

Notional

Fair Value Net

As of December 31, 2014

Amount

Receive

Pay

Maturity Date

Liability ⁽¹⁾

July 2012 Swap Transaction

150,000

Floating 1-month LIBOR

1.05%

July 18, 2017

253

(1)

This interest rate derivative qualifies for hedge accounting, and is in a net liability position at March 31, 2015 and December 31, 2014. Therefore, the fair value of the interest rate derivative is included in the Company’s Condensed Consolidated Balance Sheets as a component of “Other long-term liabilities,” with an offsetting component in “Stockholders’ Equity” as part of “Accumulated Other Comprehensive Loss”.

Under the terms of the July 2012 Swap Transaction, USSC will be required to make monthly fixed rate payments to the counterparty calculated based on the notional amounts noted in the table above at a fixed rate also noted in the table above, while the counterparty will be obligated to make monthly floating rate payments to USSC based on the one-month LIBOR on the same referenced notional amount.

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

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings.

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

The Company’s agreement with its derivative counterparty provides that if an event of default occurs on any Company debt of $25 million or more, the counterparty can terminate the swap agreement. If an event of default had occurred and the counterparty had

exercised early termination right under the outstanding swap transaction as of March 31, 2015, the Company would have been required to pay the aggregate fair value net liability of $1.0 million plus accrued interest to the counterparty.

The swap transaction that was in effect as of March 31, 2015 and the swap transaction that was in effect as of March 31, 2014 contained no ineffectiveness; therefore, all gains or losses on those derivative instruments were reported as a component of other comprehensive income (“OCI”) and reclassified into earnings as “interest expense” in the same period or periods during which they affected earnings.

The following table depicts the effect of these derivative instruments on the statements of income and comprehensive income for the three periods ended March 31, 2015 and March 31, 2014 (in thousands).

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)							Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Three Months Ended March 31, 2015			For the Three Months Ended March 31, 2014			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	For the Three Months Ended March 31, 2015		For the Three Months Ended March 31, 2014
July 2012 Swap Transaction	$	(124	)	$	(159	)	Interest expense, net	$	331	$	-

11. Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including interest rate swap derivatives, based on the mark-to-market position of the Company’s positions and other observable interest rates (see Note 10 “Derivative Financial Instruments”, for more information on these interest rate swaps).

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

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

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

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

Determining which level to apply to an asset or liability requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 (in thousands):

	Fair Value Measurements as of March 31, 2015
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap liability		982		-		982		-
Total	$	982	$	-	$	982	$	-

	Fair Value Measurements as of December 31, 2014
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap liability		253		-		253		-
Total	$	253	$	-	$	253	$	-

The carrying amount of accounts receivable at March 31, 2015, including $380.7 million of receivables sold under the Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

As of March 31, 2015, the held for sale assets and liabilities detailed in Note 2 “Acquisitions and Dispositions” and the values of the impaired trademark assets detailed in Note 5 “Goodwill and Intangible Assets” were measured at fair value on a nonrecurring basis. No other assets or liabilities are measured at fair value on a nonrecurring basis.

12. Other Assets and Liabilities

The Company had receivables related to supplier allowances totaling $76.9 million and $124.4 million included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, respectively.

Accrued customer rebates of $45.7 million and $63.2 million as of March 31, 2015 and December 31, 2014, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

13. Income Taxes

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three months ended March 31, 2015, the Company recorded income tax expense of $5.2 million on pre-tax income of $1.2 million, for an effective tax rate of 422.2%. For the three months ended March 31, 2014, the Company recorded income tax expense of $13.0 million on pre-tax income of $34.9 million, for an effective tax rate of 37.3%.

The Company's U.S. statutory rate is 35.0%. The most significant factor impacting the effective tax rate for the three months ended March 31, 2015 were the discrete tax impacts of the impairment charges for financial reporting purposes related to placing a non-strategic business for sale in the quarter. There were no significant discrete items for the three months ended March 31, 2014.

ITEM 2.

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

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as “expects,” “anticipates,” “estimates,” “intends,” “plans,” “believes,” “seeks,” “will,” “is likely,” “scheduled,” “positioned to,” “continue,” “forecast,” “predicting,” “projection,” “potential” or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on management’s current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2014.

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

Company Overview

United is a leading supplier of workplace essentials, with 2014 net sales of approximately $5.3 billion. United stocks over 160,000 items from over 1,600 manufacturers. These items include a broad spectrum of manufacturer-branded and private branded technology products, traditional office products, office furniture, janitorial and breakroom supplies, and industrial supplies. United sells its products through a network of 77 distribution centers to its approximately 30,000 reseller customers, who in turn sell directly to end-consumers. The Company’s customers include independent office products dealers; contract stationers; office products superstores; computer products resellers; office furniture dealers; mass merchandisers; mail order companies; sanitary supply, paper and foodservice distributors; drug and grocery store chains; healthcare distributors; e-commerce merchants; oil field, welding supply and industrial/MRO distributors; automotive aftermarket dealers and wholesalers; and other independent distributors. Additionally, United’s subsidiary, CPO Commerce, LLC (“CPO”), is an e-retailer of brand name power tools and equipment that sells directly to end consumers.

Our strategy is comprised of three key elements:

1) Strengthen our core office, janitorial, and breakroom business with a common operating and IT platform, an aligned customer care and sales team, and advanced digital services;

2) Win online by growing our business-to-business (B2B) sales with major e-commerce players, and by enabling the online success of our resellers by providing digital capabilities and tools to support them; and

3) Expand and diversify our business into higher growth and higher margin channels and categories.

Execution on these priorities will help us achieve our goal of becoming the fastest and most convenient solution for workplace essentials.

Key Trends and Recent Results

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

Recent Results

·	First quarter sales were $1.33 billion, up 6.2% over the prior-year quarter driven by $90.2 million of incremental sales in the industrial supplies category from our 2014 acquisitions. Sales in the janitorial and breakroom category grew 8.3%.

·	The gross margin rate in the first quarter of 2015 was 15.3% compared to the prior-year quarter gross margin rate of 14.9%. This increase reflects the favorable impact from our acquisitions in 2014 and improved product margins offset by a higher LIFO charge.

Operating expenses in the first quarter of 2015 were $198.4 million or 14.9% of sales, compared with $148.8 million or 11.9% of sales in the prior-year quarter. These results included the effects of repositioning charges comprised of a $6.4 million pre-tax charge related to workforce reductions and facility consolidations, $10.5 million pre-tax intangible asset impairment charge and accelerated amortization related to rebranding efforts, and $13.6 million pre-tax impairment charge related to the held for sale classification of our Mexican subsidiary. Excluding the impact of these repositioning actions, adjusted operating expenses were higher due primarily to the addition of our 2014 acquisitions and operating investments.

Operating income for the quarter ended March 31, 2015 was $6.1 million or 0.5% of sales, versus $38.2 million or 3.0% of sales in the first quarter of 2014. Excluding the previously mentioned repositioning charges, adjusted operating income in the first quarter of 2015 was $36.5 million or 2.7% of sales.

Diluted loss per share for the first quarter of 2015 was $0.10, including $0.62 related to the previously mentioned repositioning charges, compared with diluted earnings per share of $0.55 in the prior-year period. We expect the percentage growth of adjusted earnings per share to be in the low single-digits in 2015, with the first half being below the prior year.

Repositioning for Sustained Success

As previously announced, we are taking decisive actions to reposition our business, provide enhanced customer service, and generate sustained long-term success. These actions are as follows:

Our initiative to combine the office products and janitorial operating platforms is intended to help us become the fastest most convenient solution for workplace essentials. We will deliver this through our nationwide distribution network and logistics capabilities, order efficiency with enhanced ecommerce capabilities, broad product portfolio, superior product category knowledge and commercial expertise. Physical implementation will begin in mid-2015 and will cascade into the first half of 2016. In the first quarter of 2015, expenses related to this initiative were $1.0 million and are expected to total approximately $15.0 million in 2015. Upon completion, we expect total cost savings through continued network consolidation and reduced expenses of $5.0 to $10.0 million in the back half of 2016, and $15.0 to $20.0 million on an annual basis thereafter.

Restructuring actions are being taken in 2015 to improve our operational utilization, labor spend and inventory performance. This includes workforce reductions and facility consolidations over five quarters beginning in the first quarter of 2015. In the first quarter of 2015, we recorded a pre-tax charge of $6.0 million relating to initial workforce reductions and $0.4 million relating to facility consolidations. We are currently estimating additional charges of approximately $2.6 million later in 2015 related to facility closures for a total of approximately $9.0 million for the full year of 2015. We expect these actions will produce cost savings of approximately $6.0 million, for a net cost of $3.0 million, in 2015 and approximately $10.0 million in savings in 2016.

We will exit certain non-strategic channels and categories during 2015 to further align our portfolio of product categories and channels with our strategies. In the first quarter of 2015, we began active sales efforts relating to a non-strategic subsidiary. As a result, we classified this subsidiary as held for sale and recorded a $13.6 million non-cash charge in the first quarter of 2015. The Company anticipates additional financial impacts during the remainder of 2015 related to transaction costs, foreign exchange volatility, and operating results.

In February 2015, we announced that we will change our Company name to Essendant Inc. in order to communicate more accurately our purpose and vision. As a result, the ORS Nasco trademark and certain OKI brands were tested for impairment. Upon completion of the impairment test of these intangible assets, management determined the trademarks were impaired and recorded a pre-tax, non-cash, impairment charge and accelerated amortization totaling $10.5 million in the first quarter of 2015. It was also determined that the useful lives do not extend past 2015. The remaining value of these intangibles after the impairment charge was $1.5 million at March 31, 2015 and will be fully amortized by December 31, 2015.

For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to “Key Trends and Recent Results” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2014.

Critical Accounting Policies, Judgments and Estimates

During the first three months of 2015, there were no significant changes to the Company’s critical accounting policies, judgments or estimates from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Adjusted Operating Income, Net Income and Earnings Per Share

The following table presents Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, and Adjusted Diluted Earnings Per Share for the three-month periods ended March 31, 2015 and 2014 (in thousands, except per share data) excluding the effects of the $6.4 million pre-tax charge related to workforce reductions and facility consolidations, $10.5 million pre-tax intangible asset impairment charge and accelerated amortization related to rebranding efforts, and $13.6 million pre-tax impairment charge related to the held-for-sale classification of our Mexican subsidiary in the first quarter of 2015. Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income. Management believes that excluding these items is an appropriate comparison of its ongoing operating and to the results of last year. It is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.

	For the Three Months Ended March 31,
	2015						2014
				% to					% to
	Amount			Net Sales			Amount		Net Sales
Net Sales	$	1,332,375			100.0	%	$	1,254,139		100.0	%
Gross profit	$	204,450			15.3	%	$	187,083		14.9	%
Operating expenses	$	198,372			14.9	%	$	148,849		11.9	%
Workforce reduction and facility consolidation charge		(6,433	)		(0.5	%)		-		-
Rebranding - intangible asset impairment and amortization		(10,462	)		(0.8	%)		-		-
Asset held for sale impairment		(13,566	)		(1.0	%)		-		-
Adjusted operating expenses	$	167,911			12.6	%	$	148,849		11.9	%
Operating income	$	6,078			0.5	%	$	38,234		3.0	%
Operating expense items noted above		30,461			2.3	%		-		-
Adjusted operating income	$	36,539			2.7	%	$	38,234		3.0	%
Net (loss) income	$	(3,992	)				$	21,857
Operating expense items noted above, net of tax		23,896						-
Adjusted net income	$	19,904					$	21,857
Diluted (loss) earnings per share	$	(0.10	)				$	0.55
Per share operating expense items noted above		0.62						-
Adjusted diluted earnings per share	$	0.52					$	0.55
Adjusted diluted earnings per share - change over the prior year period		(5.5	%)
Weighted average number of common shares - diluted		38,534						39,655

Results of Operations—Three Months Ended March 31, 2015 Compared with the Three Months Ended March 31, 2014

Net Sales. Net sales for the first quarter of 2015 were $1.33 billion. The following table summarizes net sales by product category for the three-month periods ended March 31, 2015 and 2014 (in thousands):

	Three Months Ended March 31,
	2015		2014⁽¹⁾
Janitorial and breakroom supplies	$	357,721	$	330,261
Technology products		353,016		354,716
Traditional office products (including cut-sheet paper)		296,221		323,943
Industrial supplies		210,258		133,779
Office furniture		78,053		74,948
Freight revenue		31,959		29,180
Services, Advertising and Other		5,147		7,312
Total net sales	$	1,332,375	$	1,254,139

(1)	Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications include changes to shift to a single operational item hierarchy. These changes did not impact the Condensed Consolidated Statements of Income.

Sales in the janitorial and breakroom supplies product category increased 8.3% in the first quarter of 2015 compared to the first quarter of 2014. This category accounted for 26.8% of the Company’s first quarter 2015 consolidated net sales. Sales growth in this category was driven by sales growth across all channels. Sales also increased approximately 3.0% from being named the primary supplier for Office Depot’s janitorial business.

Sales in the technology products category (primarily ink and toner) decreased 0.5% from the first quarter of 2014. This category accounted for 26.5% of net sales for the first quarter of 2015. This decline is attributable to reduced demand in our independent channel, the loss of business with a large national customer, and lower sales at our Mexican subsidiary. These were partially offset by growth in our e-tail dealers, purchases by certain large customers during the quarter, and the addition of new business.

Sales of traditional office products decreased in the first quarter of 2015 by 8.6% versus the first quarter of 2014. Traditional office supplies represented 22.2% of the Company’s consolidated net sales for the first quarter of 2015. This decline was driven by a $26.6 million decline in cut-sheet paper sales as we exit low margin business and losing the first-call supplier status with Office Depot. We continue to estimate this impact, net of incremental sales in janitorial products, to be a $0.14 to $0.22 reduction in earnings per share in 2015. This was partially offset by continued double-digit growth in e-tailers, a rebound in government spending, and growth with certain larger customers.

Industrial supplies sales in the first quarter of 2015 increased by 57.2% compared to the same prior-year period. Sales of industrial supplies accounted for 15.8% of the Company’s net sales for the first quarter of 2015 and reflected solid sales momentum from our acquisitions, which contributed $90.2 million in incremental sales and positively impacted earnings per share. Without the acquisitions, industrial sales declined 10.2% over the prior-year quarter. Approximately 25% of our core industrial business is exposed to oilfield and other energy sector resellers which have been impacted by the decline in oil prices resulting in sales declines in our general industrial and oilfield channels. We expect this impact to continue throughout the year.

Office furniture sales in the first quarter of 2015 increased 4.1% compared to the first quarter of 2014. Office furniture accounted for 5.9% of the Company’s first quarter of 2015 consolidated net sales. Within this category we saw continued increased sales to independent resellers, e-commerce customers, and certain larger customers which more than offset lost sales to a large national customer.

The remainder of the Company’s first quarter 2015 net sales was composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the first quarter of 2015 was $204.4 million, compared to $187.1 million in the first quarter of 2014. The gross margin rate of 15.3% was up 40 basis points (bps) from the prior-year quarter gross margin rate of 14.9%. Our acquisitions added 40 basis points to our gross margin rate in the quarter. Excluding the impact of our acquisitions, our gross margin rate was flat to the prior year as product margins improved (31 bps) from higher purchase-related allowances offset partially by a shift in the customer and product mix. Higher LIFO expense (20 bps) and higher inventory related reserves (11 bps) in the quarter offset the product margin increase.

Operating Expenses. Operating expenses for the first quarter were $198.4 million or 14.9% of sales, including $30.5 million related to repositioning actions. Adjusted operating expenses were $167.9 million or 12.6% of sales compared with $148.8 million or 11.9% of sales in the same period last year. The $19.1 million increase was driven by $17.5 million from acquisitions and $1.6 million from operating investments.

Interest Expense, net. Interest expense, net for the first quarter of 2015 was $4.8 million compared to $3.4 million in the first quarter of 2014. This was driven by higher debt outstanding related to the acquisition of MEDCO in the fourth quarter of 2014. Interest expense is expected to be higher in 2015 than in the prior year.

Income Taxes. Income tax expense was $5.2 million for the first quarter of 2015, compared with $13.0 million for the same period in 2014. The Company’s effective tax rate was 422.2% for the current-year quarter and 37.3% for the same period in 2014. The current quarter tax rate was impacted by unfavorable discrete tax impacts of placing a non-strategic business for sale in the quarter.

Net Income. The net loss for the first quarter of 2015 totaled $4.0 million or $0.10 per diluted share, including $23.9 million after-tax, or $0.62 per diluted share, of costs related to repositioning actions. Adjusted net income was $19.9 million, or $0.52 per diluted share, compared with net income of $21.9 million or $0.55 per diluted share for the same three-month period in 2014.

Cash Flows

The following discussion focuses on information included in the accompanying Condensed Consolidated Statements of Cash Flows.

Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2015 totaled $62.7 million, compared with $1.5 million in the same three-month period of 2014. The increase over the prior year was driven by declines in accounts receivable and a lower decline in accounts payable and accrued liabilities, as we proactively manage cash flow.

Investing Activities

Net cash used in investing activities for the first three months of 2015 was $5.5 million, compared with $5.9 million for the three months ended March 31, 2014. For the full year 2015, the Company expects capital spending to be approximately $30.0 million to $35.0 million.

Financing Activities

Net cash used in financing activities for the three months ended March 31, 2015 totaled $51.7 million, compared with $9.0 million provided by financing activities in the prior-year period. Net cash used in financing activities during the first three months of 2015 was impacted by $29.6 million in net repayments under debt arrangements, $16.0 million in share repurchases and $5.4 million in payments of cash dividends.

Liquidity and Capital Resources

United’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. We believe that our cash from operations and collections of receivables, coupled with our sources of borrowings and available cash on hand, are sufficient to fund currently anticipated requirements. These requirements include payments of interest and dividends, scheduled debt repayments, capital expenditures, working capital needs, restructuring activities, the funding of pension plans, and funding for additional share repurchases and acquisitions, if any. Due to our credit profile over the years, external funds have been available at an acceptable cost. We believe that current credit arrangements are sound and that the strength of our balance sheet affords us the financial flexibility to respond to both internal growth opportunities and those available through acquisitions.

Financing available from debt and the sale of accounts receivable as of March 31, 2015, is summarized below (in millions):

Availability

Maximum financing available under:
2013 Credit Agreement	$	700.0
2013 Note Purchase Agreement		150.0
Receivables Securitization Program ⁽¹⁾		200.0
Maximum financing available			$	1,050.0
Amounts utilized:
2013 Credit Agreement		334.2
2013 Note Purchase Agreement		150.0
Receivables Securitization Program ⁽¹⁾		200.0
Outstanding letters of credit		11.1
Total financing utilized				695.3
Available financing, before restrictions				354.7
Restrictive covenant limitation				-
Available financing as of March 31, 2015			$	354.7

(1)	The Receivables Securitization Program provides for maximum funding available of the lesser of $200.0 million or the total amount of eligible receivables less excess concentrations and applicable reserves.

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

	As of			As of
	March 31,			December 31,
	2015			2014
2013 Credit Agreement	$	334.2		$	363.0
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		200.0			200.0
Mortgage & Capital Lease		0.1			0.9
Debt		684.3			713.9
Stockholders’ equity		828.4			856.1
Total capitalization	$	1,512.7		$	1,570.0

Debt-to-total capitalization ratio		45.2	%		45.5	%

We believe that our operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future. Refer to Note 8, “Debt”, for further descriptions of the provisions of our financing facilities as well as Note 9 “Debt” in our Annual Report on Form 10-K for the year-ended December 31, 2014.

Contractual Obligations

During the three-month period ended March 31, 2015, contractual obligations have not materially changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Company’s exposures to market risk during the first three months of 2015 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission under the Securities Exchange Act is made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 31, 2015, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

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

ITEM 1A.

RISK FACTORS.

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the Company’s Form 10-K for the year ended December 31, 2014. There have been no material changes to the risk factors described in such Form 10-K.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a)	Not applicable.

(b)	Not applicable.

(c)	Common Stock Purchases.

During the three-month periods ended March 31, 2015 and 2014, the Company repurchased 402,679 and 331,369 shares of USI’s common stock at an aggregate cost of $16.3 million and $13.7 million, respectively. On February 11, 2015, the Board of Directors authorized the Company to purchase an additional $100.0 million of common stock. The Company repurchased 0.5 million shares for $18.7 million year-to-date through April 20, 2015. As of that date, the Company had approximately $123.7 million remaining of existing share repurchase authorization from the Board of Directors.

2015 Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
January 1, 2015 to January 31, 2015		104,115	$	40.44		104,115	$	38,235,430
February 1, 2015 to February 28, 2015		88,454		41.63		88,454		134,552,953
March 1, 2015 to March 31, 2015		210,110		39.79		210,110		126,192,695
Total First Quarter		402,679	$	40.62		402,679	$	126,192,695

ITEM 6.

EXHIBITS

(a)

Exhibits

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

Exhibit No.		Description
3.1		Second Restated Certificate of Incorporation of the Company, dated as of March 19, 2002 (Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 19, 2014)

3.2		Amended and Restated Bylaws of the Company, dated as of July 21, 2014 (Company’s current report on Form 8-K, filed on July 24, 2014)

4.1		Note Purchase Agreement, dated as of November 25, 2013, among USI, USSC, and the note purchasers identified therein (the “2013 Note Purchase Agreement”) (Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 19, 2014 (the “2013 Form 10-K”))

4.2		Parent Guaranty, dated as of November 25, 2013, by USI in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the 2013 Form 10-K)

4.3		Subsidiary Guaranty, dated as of November 25, 2013, by all of the domestic subsidiaries of USSC (Exhibit 4.6 to the 2013 Form 10-K)

10.1*		Form of Performance Based Restricted Stock Unit Award Agreement under the 2004 Long-Term Incentive Plan**

31.1*		Certification of Chief Executive Officer, dated as of April 23, 2015, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, dated as of April 23, 2015, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer and Chief Financial Officer, dated as of April 23, 2015, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following financial information from United Stationers Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, filed with the SEC on April 23, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statement of Income for the three-month periods ended March 31, 2015 and 2014, (ii) the Condensed Consolidated Balance Sheet at March 31, 2015 and December 31, 2014, (iii) the Condensed Consolidated Statement of Cash Flows for the three-month periods ended March 31, 2015 and 2014, and (iv) Notes to Condensed Consolidated Financial Statements.

*	- Filed herewith

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			UNITED STATIONERS INC.
			(Registrant)

Date: April 23, 2015			/s/ Todd A. Shelton
			Todd A. Shelton
			Senior Vice President and Chief Financial Officer

Exhibit 10.1

UNITED STATIONERS INC.

2015 LONG-TERM INCENTIVE PLAN

Performance Based Restricted Stock Unit Award Agreement

This Restricted Stock Unit Award Agreement (this “Agreement”), dated March 15, 2015 (the “Award Date”), is by and between [FIRST NAME] [LAST NAME] (the “Participant”), and United Stationers Inc., a Delaware corporation (the “Company”). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Company’s 2015 Long-Term Incentive Plan (the “Plan”).

In the exercise of its discretion to grant awards under the Plan, the Committee has determined that the Participant should receive an award of restricted stock units (“Units”) under the Plan, on the following terms and conditions:

Grant. The Company hereby grants to the Participant a Restricted Stock Unit Award (the “Award”) consisting of [SHARES GRANTED] Units (the “Target Number of Units”), subject to possible increase to as many as two times the Target Number of Units (the “Maximum Number of Units”) noted above depending on the degree to which the Company has satisfied the performance-based objectives specified in Appendix A to this Agreement. Each Unit that vests represents the right to receive one share of the Company’s common stock as provided in Section 5 of this Agreement. The Award will be subject to the terms and conditions of the Plan and this Agreement.

No Rights as a Stockholder. The Units granted pursuant to this Award do not entitle the Participant to any rights of a stockholder of the Company unless and until the Units vest as set forth in Section 3 and the Company has caused the Stock to be issued as set forth in Section 5. The Participant’s rights with respect to the Units shall remain forfeitable at all times until satisfaction of the vesting conditions set forth in Section 3 of this Agreement.

3.	Vesting; Effect of Date of Termination. For purposes of this Agreement, “Vesting Date” means any date on which Units subject to this Award vest as provided in this Section 3.

(a)

Subject to paragraphs 3(b) through 3(f), the Participant’s Units will be eligible to vest on March 1, 2018 (the “Vesting Date”). Units will vest on the Vesting Date (i) if the Participant’s Date of Termination has not occurred before the Vesting Date, and (ii) only to the extent the Units have been earned as provided in Section 4 during the period (the “Performance Period”) from January 1, 2015 to December 31, 2017 (the “Determination Date”). The period from the Award Date through the Vesting Date is referred to as the “Vesting Period.” If the Participant’s Date of Termination occurs for any reason during the Vesting Period, the Participant’s Units that have not yet vested will be forfeited on and after the Participant’s Date of Termination, except as provided in paragraphs 3(b) through 3(f).

(b)

If the Participant’s Date of Termination occurs during the Vesting Period by reason of the Participant’s death or Permanent and Total Disability (as defined in paragraph 3(f)), a portion of the then unvested Units subject to this Award will become vested as of the Participant’s Date of Termination. That portion shall be equal to a number of Units determined by multiplying the Target Number of Units by a fraction, the numerator of which shall be the number of whole months elapsed from the Award Date, and the denominator of which shall be 36. Any remaining Units subject to this Award that do not vest as provided in this paragraph shall be forfeited.

(c)

If the Participant’s Date of Termination occurs during the Vesting Period by reason of the Participant’s Retirement (as defined in paragraph 3(h)), then the unvested Units will vest on the Vesting Date to the extent that the Units have been earned as provided in Section 4 during the Performance Period, but only if the following conditions have been satisfied: (i) the Participant has provided the Company with written notice of his or her intent to retire at least 3 months prior to the Participant’s Date of Termination (but such advance notice shall not be required if Retirement occurs as a result of Participant’s involuntary separation from service without Cause,

Participant’s death or Permanent and Total Disability, or Participant’s separation from service for Good Reason); and (ii) the Participant executes prior to such Date of Termination a release of claims and an agreement not to compete in such forms as the Company may prescribe. If these conditions are not satisfied prior to Participant’s Date of Termination, any unvested Units as of the Date of Termination shall be forfeited.

(d)

If a Change of Control occurs during the Vesting Period and prior to the Participant’s Date of Termination, then the Target Number of Units will become fully vested as of the date of such Change of Control. All Units that have vested as a result of the Change of Control shall be deemed Earned Units for purposes of applying the formula specified in Appendix A.

(e)

If the Participant’s Date of Termination occurs during the Vesting Period by reason of the involuntary termination of the Participant’s employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason, and a Change of Control then occurs within two years following the Participant’s Date of Termination, a number of shares of Stock equal to the portion of the Target Number of Units forfeited on the Participant’s Date of Termination (subject to paragraph 5.2(f) of the Plan) shall be issued to the Participant on a fully vested basis promptly, but in no event later than two and one-half months after the end of the calendar year in which the Change of Control occurred.

(f)

For purposes of this Agreement, the term “Permanent and Total Disability” means the Participant’s inability, due to illness, accident, injury, physical or mental incapacity or other disability, effectively to carry out his duties and obligations as an employee of the Company or its Subsidiaries or to participate effectively and actively as an employee of the Company or its Subsidiaries for 90 consecutive days or shorter periods aggregating at least 180 days (whether or not consecutive) during any twelve-month period.

(g)	For purposes of this Agreement, a Date of Termination shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Section 409A of the Internal Revenue Code, as amended (the “Code”).

(h)	For purposes of this Agreement, “Retirement” means the Participant’s separation from service (as defined in the regulations promulgated under Code Section 409A) occurring after the Participant has reached age 60 and has completed at least 10 years of Service with the Company and its Subsidiaries.

(i)	For purposes of this Agreement, a Change of Control shall be deemed to have occurred only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.

Except as otherwise specifically provided, the Company will not have any further obligations to the Participant under this Agreement if the Participant’s Units are forfeited as provided herein.

Earned Units. The number of Units subject to this Award that the Participant will be deemed to have earned (“Earned Units”) and that are eligible for vesting as of the Vesting Date will be determined by the extent to which the Company has satisfied the performance-based objectives for the Performance Period ending on the Determination Date as set forth in Appendix A to this Agreement. The portion of the Units subject to this Award that will be deemed Earned Units as of the Vesting Date during the Vesting Period will be determined according to the formula specified in Appendix A, but in no event will the cumulative number of Units that are deemed Earned Units exceed the Maximum Number of Units. Any Units that are not earned and do not vest as of the Vesting Date will be forfeited. Notwithstanding any contrary provision of this Agreement, the Committee, in its sole discretion, may reduce the number of Earned Units that would otherwise be deemed vested as of the Vesting Date in recognition of such performance or other factors that the Committee deems relevant.

Settlement of Units. After any Units vest pursuant to Section 3, the Company will promptly, but in no event later than two and one-half months after the Vesting Date, cause to be issued to the Participant, or to the Participant’s beneficiary or legal representative in the event of Participant’s death, one share of Stock in payment and settlement of each vested Unit. Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of the Company or a duly authorized transfer agent of the Company, shall be subject to the tax withholding provisions of Section 6, and shall be in complete satisfaction of such vested Units. If the Units that vest include a fractional Unit, the Company will round the number of vested Units down to the nearest whole Unit prior to issuance of the shares as provided herein. Notwithstanding the foregoing, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter.

Tax Matters. The Committee may require the Participant, or the alternate recipient identified in Section 5, to satisfy any potential federal, state, local or other tax withholding liability. Such liability must be satisfied at the time such Units are settled in shares of Stock. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied: (i) through a cash payment by the Participant, (ii) through the surrender of shares of Stock that the Participant already owns, (iii) through the surrender of shares of Stock to which the Participant is otherwise entitled in respect of the Award under this Agreement; provided, however, that such shares under this clause (iii) may be used to satisfy not more than the minimum statutory withholding obligation of the Company or applicable Subsidiary (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), or (iv) any combination of clauses (i), (ii) and (iii); provided, however, that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (ii)-(iv) and that the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 of the Exchange Act (if the Participant is subject thereto) and any other applicable laws and the respective rules and regulations thereunder. Any fraction of a share of Stock which would be required to satisfy such an obligation will be disregarded and the remaining amount due will be paid in cash by the Participant.

Compliance with Laws. Despite the provisions of Section 5 hereof, the Company is not required to issue or deliver any certificates for shares of Stock if at any time the Company determines that the listing, registration or qualification of such shares upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of the shares hereunder in compliance with all applicable laws and regulations, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.

Restrictive Covenants; Recovery of Payments. Notwithstanding any contrary provision of this Agreement, the Company may recover the Award granted or paid under this Agreement to the extent required by the terms of any clawback or compensation recovery policy adopted by the Company. Furthermore, and in consideration of the grant of the Award under the terms of this Agreement and in recognition of the fact that Participant has received and will receive Confidential Information (as defined in paragraph 8(e)(iv)) during Participant’s Service with the Company (as defined in paragraph 8(e)(v)), Participant agrees to be bound by the restrictive covenants set forth in paragraphs 8(a), 8(b), 8(c), and 8(d), below (the “Restrictive Covenants”). In addition, but subject to the last sentence of this paragraph, Participant agrees that if Participant violates any provision of such Restrictive Covenants, then (i) all unvested Units shall immediately become null and void, and (ii) any shares of Stock issued upon vesting of any Units at any time prior to or at any time after the date on which such violation occurred shall immediately become null and void (collectively, the “Forfeited Shares”). Subject to the

last sentence of this paragraph, Participant hereby agrees that upon demand from the Company at any time after discovery of the violation of a Restrictive Covenant, (A) Participant shall pay to the Company an amount equal to the proceeds Participant has received from any sales or distributions of Forfeited Shares, and (B) if Participant still holds all or any part of the Forfeited Shares at the time the Company makes such demand, Participant shall either (1) deliver to the Company all such unsold Forfeited Shares or (2) pay to the Company the aggregate Fair Market Value of such Forfeited Shares as of the date of the Participant’s receipt of the Company’s demand. Subject to the last sentence of this paragraph, by accepting this Agreement, Participant consents to a deduction from any amounts the Company owes Participant from time to time (including amounts owed to Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to Participant by the Company), to the extent of the amounts Participant owes the Company under this Section 8. Whether or not the Company elects to make any set-off in whole or in part, if the Company does not recover by means of set-off the full amount Participant owes pursuant to this Section 8, Participant hereby agrees to pay immediately the unpaid balance to the Company. Notwithstanding the foregoing, if and to the extent that a violation of a Restrictive Covenant is curable at the time of discovery by the Company, Participant will not be deemed to have violated such Restrictive Covenant unless and until the Company gives Participant written notice of such violation and Participant fails to cure such violation within 30 calendar days after receipt of such written notice.

(a)

Confidential Information. Participant acknowledges that during the course of his or her Service with the Company, he or she has received and will receive Confidential Information. Participant further acknowledges that he or she has received a copy of the Company’s Confidentiality and Nondisclosure Policy. Participant acknowledges and agrees that it is his or her responsibility to protect the integrity and confidential nature of the Confidential Information, both during and after his or her Service with the Company, and Participant shall not directly or indirectly use, disclose, disseminate, or otherwise make available any such Confidential Information, either during or after the term of his or her Service with the Company, except as necessary for the performance of his or her duties to the Company or as expressly permitted in writing by the Company.

(b)

Competitive Activities. During Participant’s Service with the Company and for two years after the termination of Participant’s Service for any reason whatsoever (including Retirement), Participant shall not engage in any Competitive Activity (as defined in paragraph 8(e)iii)). Participant’s obligations under this paragraph 8(b) shall apply in any geographic territory in which the Company conducts its business during the term of the Participant’s Service with the Company. In the event that any portion of this paragraph 8(b) shall be determined by any court of competent jurisdiction to be unenforceable because it is unreasonably restrictive in any respect, it shall be interpreted to extend over the maximum period of time for which it reasonably may be enforced and to the maximum extent for which it reasonably may be enforced in all other respects, and enforced as so interpreted, all as determined by such court in such action. Participant acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

(c)	Non-Solicitation. During Participant’s Service with the Company and for two years after the termination of Participant’s Service for any reason whatsoever, Participant shall not:

(i)

solicit, induce or attempt to solicit or induce any employee, consultant, or independent contractor of the Company (each, a “Service Provider”) to leave or otherwise terminate such Service Provider’s relationship with the Company, or in any way interfere adversely with the relationship between any such Service Provider and the Company;

(ii)	solicit, induce or attempt to solicit or induce any Service Provider to work for, render services to, provide advice to, or supply Confidential Information or trade secrets of the Company to any third person, firm, or entity;

(iii)

employ, or otherwise pay for services rendered by, any Service Provider in any business enterprise with which Participant may be associated, connected or affiliated;

(iv)

call upon, induce or attempt to induce any current or potential customer, vendor, supplier, licensee, licensor or other business relation of the Company for the purpose of soliciting or selling products or services in direct competition with the Company or to induce any such person to cease or refrain from doing business with the Company, or in any way interfere with the then-existing or potential business relationship between any such current or potential customer, vendor, supplier, licensee, licensor or other business relation and the Company;

(v)	call upon any entity that is a prospective acquisition candidate that Participant knows or has reason to know was called upon by the Company or for which the Company made an acquisition analysis for the purpose of acquiring such entity; or

(vi)

assist, solicit, or encourage any other person, directly or indirectly, in carrying out any activity set forth above that would be prohibited by any of the provisions of this Agreement if such activity were carried out by Participant. In particular, Participant will not, directly or indirectly, induce any Service Provider of the Company to carry out any such activity.

(d)

Other Restricted Activities. During Participant’s Service with the Company and for two years after the later of (i) termination of Participant’s Service for any reason whatsoever or (ii) the Vesting Date, Participant shall not engage in any other activity that is inimical, contrary or harmful to the interests of the Company including, but not limited to, (i) conduct related to Participant’s Service with the Company for which either criminal or civil penalties against Participant may be sought, (ii) violation of Company policies, including, without limitation, the Company's insider trading policy, or (iii) participating in a hostile takeover attempt.

(e)	Definitions. For purposes of this Section 8, the following terms shall have the following definitions:

(i)	The term “Company” shall include any Subsidiary of the Company that may exist at a given time.

(ii)

The term “Competing Business” shall mean any business activities that are directly or indirectly competitive with the business conducted by the Company or its Subsidiaries at or prior to the date of the termination of Participant’s Service, all as described in the Company’s periodic reports filed pursuant to the Exchange Act (e.g., the Company’s Annual Report on Form 10-K) or other comparable publicly disseminated information.

(iii)

The term “Competitive Activity” shall mean directly or indirectly investing in, owning, operating, financing, controlling, or providing services that are the same as or similar to a Competing Business (as defined in paragraph 8(e)ii)) if the nature of such services are similar in position scope and geographic scope to any position held by Participant during the last two years of his or her employment with the Company, such that Participant’s engaging in such services on behalf of a Competing Business does or may pose competitive harm to the Company, provided that passive investments of less than 2% ownership interest in any entity that is a Competing Business will not be considered to be a “Competitive Activity.”

(iv)

The term “Confidential Information” has the meaning set forth in the Company’s Confidentiality and Nondisclosure Policy. Confidential Information includes not only information contained in written or digitized Company documents but also all such information that Participant may commit to memory during the course of his or her Service with the Company. “Confidential Information” does not include information that is available in reasonably similar form to the general public through no fault of Participant, or that was received by Participant outside of the Company, without an obligation of confidentiality.

(v)

Participant will be deemed to be in “Service” to the Company so long as he or she renders continuous services on a periodic basis to the Company in the capacity of an employee, director, consultant, independent contractor, or other advisor (but, in the case of Participant’s continued Service as a consultant, independent contractor, or other advisor, only as determined by the Committee or the Board, in its sole and absolute discretion, following Participant’s initial Service as an employee or director).

(f)

Equitable Relief; Enforceability. By accepting this Agreement and the Units granted hereby, Participant agrees that the Restrictive Covenants set forth in this Section 8 are reasonable and necessary to protect the legitimate interests of the Company. In the event a violation of any of the restrictions contained in this Section 8 is established, the Company shall be entitled to seek enforcement of the provisions of this Section 8 through proceedings at law or in equity in any court of competent jurisdiction, including preliminary and permanent injunctive relief. In the event of a violation of any provision of subsection (b), (c), or (d) of this Section 8, the period for which those provisions would remain in effect shall be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation have been finally terminated in good faith. Participant is aware that there may be defenses to the enforceability of the Restrictive Covenants set forth in this Section 8, based on time or territory considerations, and Participant knowingly, consciously, intentionally, entirely voluntarily, and irrevocably waives any and all such defenses and agrees that he or she will not assert the same in any action or other proceeding brought by the Company for the purpose of enforcing the Restrictive Covenants.

9.	No Right to Employment. Nothing herein confers upon the Participant any right to continue in the employ of the Company or any Subsidiary.

10.

Nontransferability. Except as otherwise provided by the Committee or as provided in Section 5, and except with respect to shares of Stock issued in settlement of vested Units, the Participant’s interests and rights in and under this Agreement may not be assigned, transferred, exchanged, pledged or otherwise encumbered other than as designated by the Participant by will or by the laws of descent and distribution. Issuance of shares of Stock in settlement of Units will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participant’s personal representative; or, if the Participant is deceased, to the designated beneficiary or other appropriate recipient in accordance with Section 5 hereof. The Committee may require personal receipts or endorsements of a Participant’s personal representative, designated beneficiary or alternate recipient provided for herein, and the Committee shall extend to those individuals the rights otherwise exercisable by the Participant with regard to any withholding tax election in accordance with Section 6 hereof. Any effort to otherwise assign or transfer any Units or any rights or interests therein or thereto under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights and interests of the Participant and his or her beneficiary in and under this Agreement.

11.

Administration and Interpretation. The Committee has the authority to control and manage the operation and administration of the Plan and to make all interpretations and determinations necessary or appropriate for the administration of the Plan and this Agreement, including the enforcement of any recovery of payments pursuant to Section 8 or otherwise. Any interpretations of the Plan or this Agreement by the Committee and any decisions made by it under the Plan or this Agreement are final and binding on the Participant and all other persons. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan.

12.	Governing Law. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the state of Delaware, without regard to principles of conflicts of law of Delaware or any other jurisdiction.

13.	Sole Agreement. Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to all of the terms and conditions of the Plan (as the same may be

amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company. In addition, this Agreement and the Participant’s rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the Plan. This Agreement is the entire agreement between the parties to it with respect to the subject matter hereof, and supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements between the parties).

14.	Binding Effect. This Agreement will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the Plan, their respective heirs, executors, administrators, legal representatives, successors and assigns.

15.

Amendment and Waiver. This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement between the Company and the Participant without the consent of any other person. No course of conduct or failure or delay in enforcing the provisions of this Agreement will affect the validity, binding effect or enforceability of this Agreement.

IN WITNESS WHEREOF, the Company has duly executed this Agreement as of the Award Date.

Very truly yours,

UNITED STATIONERS INC.

By:

Charles Crovitz

Chairman of the Board

APPENDIX A

Performance-Based Restricted Stock Unit Award Agreement

Earned Units and Performance-Based Objectives

Vesting Period: March 15, 2015 through March 1, 2018

The determination of the number of Units that will be earned and vested as of the Vesting Date as provided in Section 4 of the Agreement will be determined as follows:

1.	The Company’s Cumulative Net Income (as defined below) and Working Capital Efficiency (as defined below) for the Performance Period beginning on January 1, 2015 and ending on the Determination Date will be calculated.

Based on that actual Cumulative Net Income and Working Capital Efficiency, the Performance Factors for the Performance Period will be determined from the following table by determining where each of the Company’s actual Cumulative Net Income and Working Capital Efficiency falls relative to the goals specified in the applicable column of the table below, and then selecting the corresponding Performance Factor. If the Company’s actual Cumulative Net Income and/or Working Capital Efficiency for the Performance Period is between two amounts shown in the applicable column of the table, the corresponding Performance Factor will be determined by linear interpolation between the two relevant Performance Factors shown in the table. If actual Cumulative Net Income and/or Working Capital Efficiency for the Performance Period is less than or equal to the Minimum amount specified, the corresponding Performance Factor is zero, and if actual Cumulative Net Income and/or Working Capital Efficiency for the Performance Period is greater than the Maximum amount specified, the corresponding Performance Factor will be equal to the percentage specified for the Maximum amount.

Company’s Cumulative Net Income and Working Capital Efficiency Goals and Corresponding Performance Factors during the Performance Period


Performance Period ending December 31, 2017 December 31, 2015
	Cumulative Net Income Goal	Perf. Factor	Working Capital Efficiency Goal	Perf. Factor
Minimum	$364.8M	0%	16.48%	0%
Target	$396.9M	100%	15.73%	100%
Maximum	$413.6M	200%	14.98%	200%

3.	The number of Earned Units during the Performance Period that will vest as of the Vesting Date will be calculated using the following formula:

(Performance Factor for Cumulative Net Income x Target Number of Units x 0.75) +

(Performance Factor for Working Capital Efficiency x Target Number of Units x 0.25) where:

·	“Performance Factor for Cumulative Net Income” and “Performance Factor for Working Capital Efficiency” are the percentages determined as provided in item 2 above; and

·	“Target Number of Units” is the number associated with that term in Section 1 of the Agreement.

For purposes of this Appendix A, the Company’s “Working Capital Efficiency” for the Performance Period shall mean the monthly average of total current assets (excluding cash and cash equivalents) less total current liabilities (excluding short term debt), divided by net sales, and the Company’s “Cumulative Net Income” for the Performance Period shall mean the sum of the net income for each of the three years in such period, all as reported on the Company’s 2015 through

A-1

2017 audited financial statements and re-calculated based on accounting standards promulgated by the Financial Accounting Standards Board or similar accounting standards body in place as of December 31, 2014, and adjusted to eliminate the effects of any and all of the following (net of any tax effects): (i) write-offs of previously capitalized financing costs; (ii) subsidiary charitable contributions to the United Stationers Charitable Foundation; (iii) projected impacts on financial results of any acquisition or disposition (including liquidation of at least 90% of the assets) of any business during the Performance Period as reflected in the final financial valuation of the transaction presented to the Board prior to the Board’s approval of the transaction; (iv) impairment of goodwill and other intangible assets (as defined by ASC 350); (v) curtailment, settlement or termination of any of the Company’s pension plans (as defined in ASC 715); (vi) litigation or claim judgments and settlements; and (vii) restructuring costs (as defined by ASC 420) and extraordinary items (as defined by ASC 225) identified in the Company’s audited financial statements, including footnotes.

Examples:

Assume the following facts: (i) the Target Number of Units is 15,000; (ii) the Company’s actual Cumulative Net Income for the Performance Period was half-way between the Minimum Amount and the Target Amount, resulting in a Performance Factor for Cumulative Net Income of 50%; and (iii) the Company’s actual Working Capital Efficiency for the Performance Period was half-way between the Minimum Amount and the Target Amount, resulting in a Performance Factor for Working Capital Efficiency of 50%. Under these facts, the number of Earned Units that would vest as of the Vesting Date would be:

(0.50 x 15,000 x 0.75) + (0.50 x 15,000 x 0.25) = 5,625 + 1,875 = 7,500

Assume the following facts: (i) the Target Number of Units is 10,000; (ii) the Company’s actual Cumulative Net Income for the Performance Period was half-way between the Target Amount and the Maximum Amount, resulting in a Performance Factor for Cumulative Net Income of 150%; and (iii) the Company’s actual Working Capital Efficiency for the Performance Period was half-way between the Target Amount and the Maximum Amount, resulting in a Performance Factor for Working Capital Efficiency of 150%. Under these facts, the number of Earned Units that would vest as of the Vesting Date would be:

(1.50 x 10,000 x 0.75) + (1.50 x 10,000 x 0.25) = 11,250 + 3,750 =15,000

Assume the following facts: (i) the Target Number of Units is 20,000; (ii) the Company’s actual Cumulative Net Income for the Performance Period was 60% of the way between the Minimum Amount and the Target Amount, resulting in a Performance Factor for Cumulative Net Income of 60%; and (iii) the Company’s actual Working Capital Efficiency for the Performance Period was 70% of the way between the Target Amount and the Maximum Amount, resulting in a Performance Factor for Working Capital Efficiency of 170%. Under these facts, the number of Earned Units that would vest as of the Vesting Date would be:

(0.60 x 20,000 x 0.75) + (1.70 x 20,000 x 0.25) = 9,000 + 8,500 =17,500

A-2

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, P. Cody Phipps, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 23, 2015		/s/ P. Cody Phipps
		P. Cody Phipps
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Todd A. Shelton, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 23, 2015		/s/ Todd A. Shelton
		Todd A. Shelton
		Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of United Stationers Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), P. Cody Phipps, President and Chief Executive Officer of the Company, and Todd A. Shelton, Senior Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ P. Cody Phipps

P. Cody Phipps

President and Chief Executive Officer

April 23, 2015

/s/ Todd A. Shelton

Todd A. Shelton

Senior Vice President and Chief Financial Officer

April 23, 2015

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