DEERFIELD, Ill. — United Stationers Inc. (NASDAQ: USTR), a distributor of business essentials and industrial supplies in North America, announced on Wednesday its financial results for the third quarter ended Sept. 30.
Third Quarter Performance Net sales increased 6.2 percent to $1.42 billion when compared to the third quarter of last year. Sales of industrial supplies increased 24.4 percent to $163.5 million, including $21.9 million from the CPO acquisition of Liberty Bell Equipment, from $131.5 million. Janitorial and breakroom supplies sales increased 12.1 percent to $386.1 million from $344.5 million.
Traditional office products sales increased 1.4 percent to $360.4 million from $355.2 million in Q3 2013. Technology remained flat to the prior-year quarter at $381.2 million during the third quarter of 2014. Furniture was down slightly to $84.5 million compared to $85.1 million in the prior year quarter.
Gross profit in the third quarter of 2014 increased 3.6 percent to $211.0 million, compared to $203.7 million in 2013. Gross margin declined 35 basis points to 14.9 percent of sales. The decline in margin rate resulted from higher freight costs and higher inventory-related costs partially offset by favorable product margins.
Operating expenses for the third quarter increased to $146.6 million, or 10.3 percent of sales, due to the acquisition of CPO and higher bad debt expense. Comparatively, operating expenses were $136.3 million or 10.2 percent of sales in the third quarter of 2013.
Operating income declined to $64.5 million, compared to $67.4 million in the prior-year quarter. Operating margin declined 50 basis points to 4.5 percent of sales.
Net income was $38.2 million, or $0.98 per diluted share, compared with $40.5 million, or $1.01 per diluted share in the prior-year period.
Nine-Month Performance Net sales in the first nine months of 2014 increased 3.4 percent to $3.99 billion, from $3.86 billion in the prior-year period. This was led by a 12.2 percent increase in industrial supplies, including $30.1 million of incremental sales from CPO, and a 7.4 percent increase in janitorial and breakroom supplies.
Sales of total office products remained flat, as the declines in technology and furniture were offset by an increase in traditional office products sales.
Gross profit increased $3.5 million to $597.6 million in the first nine months of 2014, compared to $594.1 million the prior year. Gross margin declined 40 basis points to 15.0 percent of sales due to a combination of shifting customer and product mix in product margin, higher freight costs, and higher inventory-related adjustments.
Operating expenses in the first nine months of 2014 were $437.6 million, or 11.0 percent of sales, compared with $442.6 million the prior year. Operating expenses in the first nine months of 2013 included a charge for a workforce reduction and facility closure during the first quarter. Adjusted for the charge, operating expenses in the first nine months of 2013 were $428.1 million(1) or 11.1 percent(1) of sales. Year-to-date 2014, operating expenses were impacted by lower employee-related expenses offset by continued investments in the company's growth businesses.
Operating income for the first nine months of 2014 was $160.0 million or 4.0 percent of sales, compared with $151.6 million in the prior-year period. Excluding the charge mentioned above, adjusted operating income through the first nine months of 2013 was $166.0 million(1) or 4.3 percent(1) of sales.
Net income for the first nine months of 2014 was $93.4 million, or $2.38 per diluted share, compared to $89.0 million in the first nine months of 2013. Excluding the charge mentioned above, adjusted net income in the first nine months of 2013 was $98.0 million(1), or $2.43(1) per diluted share.
"Robust sales gains in our industrial, online, and janitorial and breakroom businesses drove our third quarter performance as we continue to successfully implement our diversification strategy," said Cody Phipps, president and chief executive officer.