UNITED STATIONERS INC (Form: 10-Q, Received: 04/28/2014 16:20:36)

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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, 2014

¨	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):

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 18, 2014, the registrant had outstanding 39,387,111 shares of common stock, par value $0.10 per share.

UNITED STATIONERS INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2014

TABLE OF CONTENTS


	Page No.
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013		3

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2014 and 2013		4

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013		5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013		6

Notes to Condensed Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		18

Item 4. Controls and Procedures		19

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		19

Item 1A. Risk Factors		19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		19

Item 6. Exhibits		20

SIGNATURES		21

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, 2014			As of December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	26,964		$	22,326
Accounts receivable, less allowance for doubtful accounts of $20,070 in 2014 and $20,608 in 2013		658,428			643,379
Inventories		748,499			830,295
Other current assets		28,766			29,255

Total current assets		1,462,657			1,525,255
Property, plant and equipment, net		138,907			143,050
Goodwill		356,651			356,811
Intangible assets, net		63,784			65,502
Other long-term assets		27,170			25,576

Total assets	$	2,049,169		$	2,116,194

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	397,198		$	476,113
Accrued liabilities		177,251			191,531
Current maturities of long-term debt		1,048			373

Total current liabilities		575,497			668,017
Deferred income taxes		26,271			29,552
Long-term debt		561,511			533,324
Other long-term liabilities		55,888			59,787

Total liabilities		1,219,167			1,290,680
Stockholders’ equity:
Common stock, $0.10 par value; authorized—100,000,000 shares, issued—74,435,628 shares in 2014 and 2013		7,444			7,444
Additional paid-in capital		412,109			411,954
Treasury stock, at cost – 34,971,702 shares in 2014 and 34,714,083 shares in 2013		(1,010,122	)		(998,234	)
Retained earnings		1,460,582			1,444,238
Accumulated other comprehensive loss		(40,011	)		(39,888	)

Total stockholders’ equity		830,002			825,514

Total liabilities and stockholders’ equity	$	2,049,169		$	2,116,194

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,
	2014		2013
Net sales	$	1,254,139	$	1,250,485
Cost of goods sold		1,067,056		1,061,960

Gross profit		187,083		188,525
Operating expenses:
Warehousing, marketing and administrative expenses		148,849		163,284

Operating income		38,234		25,241
Interest expense, net		3,374		3,113

Income before income taxes		34,860		22,128
Income tax expense		13,003		8,254

Net income	$	21,857	$	13,874

Net income per share—basic:
Net income per share—basic	$	0.56	$	0.35

Average number of common shares outstanding—basic		39,194		39,972
Net income per share—diluted:
Net income per share—diluted	$	0.55	$	0.34

Average number of common shares outstanding—diluted		39,655		40,628
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,
	2014			2013
Net income	$	21,857		$	13,874
Other comprehensive (loss) income, net of tax:
Unrealized translation adjustment		(545	)		745
Minimum pension liability adjustments		581			1,020
Unrealized interest rate swap adjustments		(159	)		144

Total other comprehensive (loss) income, net of tax		(123	)		1,909

Comprehensive income	$	21,734		$	15,783

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,
	2014			2013
Cash Flows From Operating Activities:
Net income	$	21,857		$	13,874
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		9,523			9,475
Share-based compensation		3,225			2,420
(Gain) loss on the disposition of property, plant and equipment		(4	)		14
Amortization of capitalized financing costs		287			224
Excess tax benefits related to share-based compensation		(494	)		(1,477	)
Deferred income taxes		(2,450	)		(2,079	)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net		(15,583	)		26,267
Decrease in inventory		81,714			40,828
Increase in other assets		(1,041	)		(3,999	)
Decrease in accounts payable		(47,191	)		(77,404	)
(Decrease) increase in checks in-transit		(31,751	)		14,201
Decrease in accrued liabilities		(13,654	)		(27,304	)
Decrease in other liabilities		(2,948	)		(8,407	)

Net cash provided by (used in) operating activities		1,490			(13,367	)
Cash Flows From Investing Activities:
Capital expenditures		(6,390	)		(9,096	)
Proceeds from the disposition of property, plant and equipment		458			86

Net cash used in investing activities		(5,932	)		(9,010	)
Cash Flows From Financing Activities:
Net borrowings (repayments) under Revolving Credit Facility		4,562			(37,028	)
Borrowings under Receivables Securitization Program		9,300			49,700
Repayment of debt		(135,000	)		—
Proceeds from the issuance of debt		150,000			—
Net (disbursements) proceeds from share-based compensation arrangements		(1,704	)		10,840
Acquisition of treasury stock, at cost		(12,491	)		(7,124	)
Payment of cash dividends		(5,509	)		(5,571	)
Excess tax benefits related to share-based compensation		494			1,477
Payment of debt issuance costs		(605	)		(345	)

Net cash provided by financing activities		9,047			11,949
Effect of exchange rate changes on cash and cash equivalents		33			31

Net change in cash and cash equivalents		4,638			(10,397	)
Cash and cash equivalents, beginning of period		22,326			30,919

Cash and cash equivalents, end of period	$	26,964		$	20,522

Other Cash Flow Information:
Income tax payments, net	$	2,236		$	9,843
Interest paid		2,424			4,443

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.

The accompanying Condensed Consolidated Financial Statements are unaudited, except for the Condensed Consolidated Balance Sheet as of December 31, 2013, which was derived from the December 31, 2013 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, 2013 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, 2014 and the results of operations and cash flows for the three months ended March 31, 2014 and 2013. The results of operations for the three months ended March 31, 2014 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

Inventory

Approximately 75% and 76% of total inventory as of March 31, 2014 and December 31, 2013, respectively has been valued under the last-in, first-out (“LIFO”) accounting method. The remaining inventory is valued under the first-in, first-out (“FIFO”) accounting method. 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 $111.9 million and $112.4 million higher than reported as of March 31, 2014 and December 31, 2013, respectively.

The quarterly change in the LIFO reserve as of March 31, 2014 and March 31, 2013 resulted in a $0.5 million decrease and a $1.4 million increase, respectively, in cost of sales. The change in the LIFO reserve as of March 31, 2014 resulted in a $0.5 million decrease in cost of goods sold which included LIFO liquidations relating to decrements in the Company’s office products and furniture pools. These decrements resulted in liquidation of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of current year purchases. This liquidation resulted in LIFO income of $4.0 million which was partially offset by LIFO expense of $3.5 million related to current inflation for an overall net decrease in cost of sales of $0.5 million as referenced above.

New Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11). This ASU requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as either a reduction to a deferred tax asset or separately as a liability depending on the existence, availability and/or use of an operating loss carry forward, a similar tax loss, or a tax credit carry forward. This ASU was effective for the Company beginning in the first quarter of 2014. There was no impact on the Company’s financial condition or results of operations due to the adoption of this standard.

2. Share-Based Compensation

As of March 31, 2014, 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, 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 56,451 shares of restricted stock, 145,355 restricted stock units (“RSUs”), and 5,538 stock options during the first three months of 2014. During the first three months of 2013, the Company granted 29,990 shares of restricted stock and 152,513 RSUs. There were no stock options granted during the first three months of 2013.

3. Severance and Restructuring Charges

During the first quarter of 2013, the Company recorded a $14.4 million pre-tax charge related to a workforce reduction and facility closures. The pre-tax charge is comprised of certain OKI facility closure expenses of $1.2 million and severance and workforce reduction-related expenses of $13.2 million which were included in operating expenses. Cash outflows for these actions occurred primarily during 2013 and have continued into 2014. Cash outlays associated with these charges in the three months ended March 31, 2014 were $1.8 million. During 2013, the Company reversed a portion of these charges totaling $1.4 million. Additionally, the Company reversed a portion of these charges totaling $0.3 million in the first quarter of 2014. As of March 31, 2014 and December 31, 2013, the Company had accrued liabilities for these actions of $2.3 million and $4.4 million, respectively.

During the first quarter 2012, the Company approved a distribution network optimization and cost reduction program. This program was substantially completed in the first quarter of 2012 and the Company recorded a $6.2 million pre-tax charge in that period in connection with these actions. The pre-tax charge is comprised of facility closure expenses of $2.6 million and severance and workforce reduction related expense of $3.6 million which were included in operating expenses. Cash outflows for this action occurred primarily in 2012 and continued in 2013 and 2014. Cash outlays associated with this charge in the three months ended March 31, 2014 were $0.1 million. As of March 31, 2014 and December 31, 2013, the Company had accrued liabilities for these actions of $0.1 million and $0.2 million, respectively.

4. 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, 2014 is as follows:


(amounts in thousands)	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2013	$	(6,661	)	$	871		$	(34,098	)	$	(39,888	)
Other comprehensive (loss) income before reclassifications		(545	)		(159	)		—			(704	)
Amounts reclassified from AOCI		—			—			581			581

Net other comprehensive (loss) income		(545	)		(159	)		581			(123	)

AOCI, balance as of March 31, 2014	$	(7,206	)	$	712		$	(33,517	)	$	(40,011	)

The following table details the amounts reclassified out of AOCI into the income statement during the three-month period ending March 31, 2014 respectively:


Details About AOCI Components	Amount Reclassified From AOCI
	For the Three Months Ended March 31, 2014			Affected Line Item In The Statement Where Net Income Is Presented
Amortization of defined benefit pension plan items:
Prior service cost and unrecognized loss	$	950		Warehousing, marketing and administrative expenses
		(369	)	Tax provision

Total reclassifications for the period		581		Net of tax

5. 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 period ending March 31, 2014, 0.5 million shares of such securities were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. For the three-month period ending March 31, 2013, all shares of common stock outstanding were included in the computation of diluted earnings per share because there were no antidilutive securities

outstanding. 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,
	2014		2013
Numerator:
Net income	$	21,857	$	13,874
Denominator:
Denominator for basic earnings per share:
weighted average shares		39,194		39,972
Effect of dilutive securities:
Employee stock options, restricted awards, restricted units, and deferred units		461		656

Denominator for diluted earnings per share:
Adjusted weighted average shares and the effect of dilutive securities		39,655		40,628

Net income per share:
Net income per share—basic	$	0.56	$	0.35
Net income per share—diluted	$	0.55	$	0.34

Common Stock Repurchases

As of December 31, 2013, the Company had Board authorization to repurchase $93.0 million of USI common stock. During the three-month periods ended March 31, 2014 and 2013, the Company repurchased 331,369 and 208,274 shares of USI’s common stock at an aggregate cost of $13.7 million and $7.8 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 2014 and 2013, the Company reissued 73,750 and 563,551 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.

6. 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, the 2007 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, 2013) contain restrictions on the use of cash transferred from USSC to USI.

Debt consisted of the following amounts (in millions):


	As of March 31, 2014		As of December 31, 2013
2013 Credit Agreement	$	211.5	$	206.8
2013 Note Purchase Agreement		150.0		—
2007 Note Purchase Agreement		—		135.0
Receivables Securitization Program		200.0		190.7
Mortgage & Capital Lease		1.0		1.2

Total	$	562.5	$	533.7

As of March 31, 2014, 73% 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”).

Pursuant to the 2013 Note Purchase Agreement, on January 15, 2014 USSC issued an aggregate of $150 million of senior secured notes due January 15, 2021 (the “2014 Notes”). USSC used the proceeds from the sale of the 2014 Notes to repay the Series 2007-A Notes issued under the 2007 Note Purchase Agreement and reduced the borrowings under the 2013 Credit Agreement.

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

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 0.00% to 1.00%. As of March 31, 2014, the applicable margin for LIBOR-based loans was 1.25% and for Alternate Base Rate loans was 0.25%. 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, 2014 and December 31, 2013, $382.4 million and $355.4 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, 2013). As of March 31, 2014, USR had $200.0 million outstanding under the Receivables Securitization Program. As of December 31, 2013, USR had $190.7 million outstanding under the Receivables Securitization Program.

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, 2013.

7. 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, 2013. A summary of net periodic pension cost related to the Company’s pension plans for the three months ended March 31, 2014 and 2013 is as follows (dollars in thousands):


	Pension Benefits
	For the Three Months Ended March 31,
	2014			2013
Service cost—benefit earned during the period	$	328		$	304
Interest cost on projected benefit obligation		2,243			2,097
Expected return on plan assets		(2,558	)		(2,842	)
Amortization of prior service cost		45			48
Amortization of actuarial loss		905			1,577

Net periodic pension cost	$	963		$	1,184

The Company made cash contributions of $2.0 million and $13.0 million to its pension plans during each of the first three months ended March 31, 2014 and 2013, respectively. Additional fundings, if any, for 2014 have not yet been determined. As of March 31, 2014 and December 31, 2013, respectively, the Company had accrued $18.8 million and $20.8 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, 2014. During the same period last year, the Company recorded $1.4 million to match employee contributions.

8. 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 November 6, 2007, USSC entered into an interest rate swap transaction (the “November 2007 Swap Transaction”) with U.S. Bank National Association as the counterparty. This swap transaction matured on January 15, 2013.

•

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 has an effective date of July 18, 2014 and a maturity date of July 18, 2017.

•

On June 11, 2013, USSC entered into a seven-month forward, seven-year interest rate swap transaction (the “June 2013 Swap Transaction”) with J.P. Morgan Chase Bank as the counterparty. The swap transaction had an effective date of January 15, 2014 and a maturity date of January 15, 2021. This swap was terminated in October 2013.

As of March 31, 2014, approximately 27% ($150 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, 2014 and December 31, 2013, at the following amounts (in thousands):


As of March 31, 2014	Notional Amount		Receive		Pay			Maturity Date		Fair Value Net Asset ⁽¹⁾
July 2012 Swap Transaction	$	150,000		Floating 1-month LIBOR		1.054	%		July 18, 2017	$	342


As of December 31, 2013	Notional Amount		Receive		Pay			Maturity Date		Fair Value Net Asset ⁽¹⁾
July 2012 Swap Transaction	$	150,000		Floating 1-month LIBOR		1.054	%		July 18, 2017	$	599

(1)

This interest rate derivative qualifies for hedge accounting, and is in a net asset position. Therefore, the fair value of the interest rate derivative is included in the Company’s Condensed Consolidated Balance Sheets as a component of “Other Assets,” 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 (for example, hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), 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 (for example, in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt).

In connection with the pricing of the 2013 Note Purchase Agreement, the Company terminated the June 2013 Swap Transaction. The gain of $0.9 million realized by the Company on the termination has been recorded as a component of Other Comprehensive Income on the Company’s consolidated balance sheet as of December 31, 2013 and will be reclassified into earnings over the term of the 2014 Notes. During 2014, $0.1 million will be recognized in earnings. This swap reduced the exposure to variability in interest rates between the date the Company entered into the hedge and the date the Company priced 2014 Notes.

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, 2014, the Company would have been entitled to receive the aggregate fair value net asset of $0.3 million plus accrued interest from the counterparty.

The swap transaction that was in effect as of March 31, 2014 and the swap transaction that was in effect as of March 31, 2013 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-month periods ended March 31, 2014 and March 31, 2013.


	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Three Months Ended March 31, 2014			For the Three Months Ended March 31, 2013				For the Three Months Ended March 31, 2014		For the Three Months Ended March 31, 2013
November 2007 Swap Transaction	$	—		$	(77	)	Interest expense, net	$	—	$	(228	)
July 2012 Swap Transaction		(159	)		(7	)	Interest expense, net		—		—

9. 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 8 “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, 2014 and December 31, 2013 (in thousands):


	Fair Value Measurements as of March 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
Assets
Interest rate swap asset	$	342	$	—	$	342	$	—


	Fair Value Measurements as of December 31, 2013
			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
Assets
Interest rate swap asset	$	599	$	—	$	599	$	—

The carrying amount of accounts receivable at March 31, 2014, including $382.4 million of receivables sold under the Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

Accounting guidance on fair value measurements requires separate disclosure of assets and liabilities measured at fair value on a recurring basis, as noted above, from those measured at fair value on a nonrecurring basis. As of March 31, 2014, no assets or liabilities are measured at fair value on a nonrecurring basis.

10. Other Assets and Liabilities

The Company had receivables related to supplier allowances totaling $77.0 million and $103.2 million included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013, respectively.

Accrued customer rebates of $37.3 million and $52.6 million as of March 31, 2014 and December 31, 2013, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

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, 2013.

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 Background

United is a leading wholesale distributor of business products with 2013 net sales of approximately $5.1 billion. United stocks over 140,000 items from over 1,600 manufacturers. These items include a broad spectrum of manufacturer-branded and private brand technology products, traditional office products, office furniture, janitorial and breakroom supplies, and industrial supplies. United sells its products through a network of 64 distribution centers to its approximately 25,000 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; and other independent distributors.

Overview of Strategy, Key Trends and Recent Results

•

Our strategy has two main components: 1) strengthen our core business, including driving efficiency and cost improvements, and 2) diversify our offering of higher margin and higher growth channels and categories, such as janitorial and breakroom and industrial products. We have seen long-term declining trends in certain office products categories as a result of workplace digitization. Online product procurement by end-consumers continues to gain a larger share of the markets our reseller customers serve. We continue to invest in digital and online capabilities and work with leading online resellers to help accelerate their growth in the categories we offer. Our business model allows these resellers to quickly enter new categories and scale their offerings.

•

We are repositioning United to become the premier supplier of digitally sourced business essentials. We are combining our office products and janitorial/breakroom operating platforms. We believe this effort will help us become the most effective source for our customers’ business essentials through our nationwide distribution network and logistics capabilities, order efficiency with enhanced ebusiness capabilities, broad product portfolio, and superior product category knowledge and commercial expertise. We will fund a majority of this initiative from cost savings and expect approximately $2.0 million to $3.0 million in incremental expense, with much of the expense occurring in the second quarter.

•

We recently completed the competitive bid process to support Office Depot’s office products and janitorial and breakroom business. We were named the second-call office products supplier, which will result in the loss of some business. Separately, we were selected as the primary supplier for Office Depot’s janitorial and breakroom business which will bring new business to United. There will be a transition period to implement these changes and we anticipate the impact on our business will be seen in the second half of 2014. We estimate that these changes will negatively impact net sales in a range of $20.0 million to $30.0 million and EPS in a range of $0.05 to $0.08 in the second half of this year, absent any offsetting actions. Additionally, absent any offsetting actions, we estimate the sales decrease in 2015 could be in a range of $75.0 million to $90.0 million and a decrease in EPS in a range of $0.14 to $0.22. We are well positioned to mitigate this impact with our robust pipeline and strong service proposition as we pursue sustainable new business to drive growth and profitability.

•

During the first quarter of 2014, we continued to make progress on our strategic initiatives and delivered solid results despite a difficult demand environment and the negative impact from severe winter weather early in the quarter. Diluted earnings per share for the first quarter of 2014 were $0.55, compared with $0.34 in the prior-year period. In the first quarter of 2013, we implemented cost reduction actions related to workforce reductions and facility closures. One-time charges associated with these actions totaled approximately $14.4 million of which $13.2 million related to the workforce reductions and $1.2 million related to facility closures. Adjusting for these charges, diluted earnings per share were $0.56 for the first quarter of 2013.

•

First quarter sales were $1.25 billion, up 0.3% over the prior-year quarter. The janitorial and breakroom category and industrial supplies sales grew 2.3% and 1.4%, respectively, quarter over quarter. Total office products sales declined approximately 1.2%.

•

The gross margin rate in the first quarter of 2014 of 14.9% was down from the prior-year quarter gross margin rate of 15.1%. This decline in the margin rate reflects unfavorable product/category mix partially offset by inventory-related items.

•

Operating expenses in the first quarter of 2014 were $148.8 million or 11.9% of sales, compared with $163.3 million or 13.1% of sales in the prior-year quarter. Adjusted for the workforce reduction and facility closure charges noted previously, operating expenses were $148.9 million or 11.9% of sales in the first quarter of 2013.

•

Operating income for the quarter ended March 31, 2014 was $38.2 million or 3.0% of sales, versus $25.2 million or 2.0% of sales in the first quarter of 2013. Adjusted operating income in the first quarter of 2013 was $39.7 million or 3.2% of sales.

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, 2013.

Critical Accounting Policies, Judgments and Estimates

During the first three months of 2014, there 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, 2013.

Adjusted Operating Income, Net Income and Earnings Per Share

The following table presents Adjusted Operating Expenses, Operating Income, Net Income, and Diluted Earnings Per Share for the three-month period ended March 31, 2014 and 2013 (in thousands, except per share data) excluding the effects of $14.4 million pre-tax charge related to workforce reductions and facility closures in the first quarter of 2013. 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 results to 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,
	2014						2013
				% to						% to
	Amount			Net Sales			Amount			Net Sales
Net Sales	$	1,254,139			100.00	%	$	1,250,485			100.00	%

Gross profit	$	187,083			14.92	%	$	188,525			15.08	%
Operating expenses	$	148,849			11.87	%	$	163,284			13.06	%
Workforce reduction and facility closure charge		—			—			(14,432	)		(1.15	)%

Adjusted operating expenses	$	148,849			11.87	%	$	148,852			11.91	%

Operating income	$	38,234			3.05	%	$	25,241			2.02	%
Operating expense item noted above		—			—			14,432			1.15	%

Adjusted operating income	$	38,234			3.05	%	$	39,673			3.17	%

Net income	$	21,857					$	13,874
Operating expense item noted above, net of tax		—						8,948

Adjusted net income	$	21,857					$	22,822

Diluted earnings per share	$	0.55					$	0.34
Per share operating expense item noted above		—						0.22

Adjusted diluted earnings per share	$	0.55					$	0.56

Adjusted diluted earnings per share—change over the prior year period		(1.8	)%
Weighted average number of common shares—diluted		39,655						40,628

Results of Operations—Three Months Ended March 31, 2014 Compared with the Three Months Ended March 31, 2013

Net Sales. Net sales for the first quarter of 2014 were $1.25 billion. The following table summarizes net sales by product category for the three-month periods ended March 31, 2014 and 2013 (in thousands):


	Three Months Ended March 31,
	2014		2013 ⁽¹⁾
Technology products	$	353,456	$	364,487
Janitorial and breakroom supplies		332,725		325,341
Traditional office products (including cut-sheet paper)		325,217		320,137
Industrial supplies		131,496		129,727
Office furniture		74,754		77,695
Freight revenue		29,180		25,309
Services, Advertising and Other		7,311		7,789

Total net sales	$	1,254,139	$	1,250,485

(1)

Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications include changes between several product categories due to several specific products being reclassified to different categories. These changes did not impact the Condensed Consolidated Statements of Income.

Overall, severe weather impacted demand early in the quarter but sales improved across all channels and products as we closed the quarter.

Sales in the technology products category (primarily ink and toner) decreased in the first quarter of 2014 by 3.0% versus the first quarter of 2013. This category, which continues to represent the largest percentage of the Company’s consolidated net sales, accounted for 28.2% of net sales for the first quarter of 2014. Sales declines in this category were partially due to a new distribution policy by our largest product line manufacturer that allows wholesalers to resell products only to certain authorized resellers. This negative impact was offset by adding new business to replace volume lost in the transition.

Sales in the janitorial and breakroom supplies product category increased 2.3% in the first quarter of 2014 compared to the first quarter of 2013. This category accounted for 26.5% of the Company’s first quarter 2014 consolidated net sales. Sales growth in this category was driven by gains in breakroom as we launched an enhanced product line.

Sales of traditional office products grew in the first quarter of 2014 by 1.6% versus the first quarter of 2013. Traditional office supplies represented 25.9% of the Company’s consolidated net sales for the first quarter of 2014. Within this category, higher sales of cut-sheet paper, continued double-digit growth in e-tailers, and a rebound in government spending were partially offset by the continued effects of workplace digitization which is lowering overall consumption.

Industrial supplies sales in the first quarter of 2014 increased by 1.4% compared to the same prior-year period. Sales of industrial supplies accounted for 10.5% of the Company’s net sales for the first quarter of 2014. Increases in the general industrial, oilfield-pipeline and safety channels were partially offset by the continued decline in welding.

Office furniture sales in the first quarter of 2014 declined 3.8% compared to the first quarter of 2013. Office furniture accounted for 6.0% of the Company’s first quarter of 2014 consolidated net sales. First quarter sales declines in this category were driven by reduced sales to independent channel dealers and national accounts partially offset by growth with e-tailer customers.

The remainder of the Company’s first quarter 2014 net sales was composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the first quarter of 2014 was $187.1 million, compared to $188.5 million in the first quarter of 2013. The gross margin rate of 14.9% was down 16 basis points (bps) from the prior-year quarter gross margin rate of 15.1%. This decline was due primarily from lower product margin (23 bps) which included investments in our industrial business and an unfavorable product and customer mix compared to the prior-year quarter, offset partially by a favorable reversal of previously capitalized supplier allowances and higher inflation. A lower LIFO charge of (15 bps) in the quarter somewhat offset the product margin decline.

Operating Expenses. Operating expenses for the latest quarter were $148.8 million or 11.9% of sales, compared with $163.3 million or 13.1% of sales in the same period last year. Excluding the workforce reduction and facility closure charges previously noted, first quarter 2013 adjusted operating expenses were $148.9 million or 11.9% of sales. Current quarter operating expenses were impacted by savings from decreased employee-related expenses (10 bps) and bad debt expense (5 bps) offset by a reversal of previously capitalized purchase, storage, and handling costs (15 bps).

Interest Expense, net. Interest expense, net for the first quarter of 2014 was $3.4 million compared to $3.1 million in the first quarter of 2013. This was driven primarily by the issuance of seven-year notes in January 2014 which replaced floating rate debt with fixed rate debt.

Income Taxes. Income tax expense was $13.0 million for the first quarter of 2014, compared with $8.3 million for the same period in 2013. The Company’s effective tax rate for both quarters was 37.3%.

Net Income. Net income for the first quarter of 2014 totaled $21.9 million or $0.55 per diluted share, compared with net income of $13.9 million or $0.34 per diluted share for the same three-month period in 2013. Adjusted for the impact of the $14.4 million facility closure and severance charge in the first quarter of 2013, net income was $22.8 million and diluted earnings per share were $0.56.

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, 2014 totaled $1.5 million, compared with cash used in operating activities of $13.4 million in the same three-month period of 2013. The increase in operating cash flows in the current year period was driven by a reduction in inventory levels from December 31, 2013 and a drop in accounts payable as we paid for year-end 2013 inventory investment buys. Additionally in the first quarter of 2013, the Company paid a cash contribution to its pension plans totaling $13.0 million. The cash contribution to the pension plan in the first quarter of 2014 was $2.0 million.

Investing Activities

Net cash used in investing activities for the first three months of 2014 was $5.9 million, compared to net cash used in investing activities of $9.0 million for the three months ended March 31, 2013. For the full year 2014, the Company expects capital spending to be approximately $30 million to $35 million.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2014 totaled $9.0 million, compared with $11.9 million in the prior-year period. Net cash provided by financing activities during the first three months of 2014 was impacted by $28.9 million in net borrowings under debt arrangements offset by $12.5 million in share repurchases and $5.5 million in payment 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. The Company believes that its cash from operations and collections of receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its 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, 2014, 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		211.5
2013 Note Purchase Agreement		150.0
Receivables Securitization Program ⁽¹⁾		200.0
Outstanding letters of credit		11.1

Total financing utilized				572.6

Available financing, before restrictions				477.4
Restrictive covenant limitation				72.5

Available financing as of March 31, 2014			$	404.9

(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, 2014			December 31, 2013
2013 Credit Agreement	$	211.5		$	206.8
2013 Note Purchase Agreement		150.0			—
2007 Note Purchase Agreement		—			135.0
Receivables Securitization Program		200.0			190.7
Mortgage & Capital Lease		1.0			1.2

Debt		562.5			533.7
Stockholders’ equity		830.0			825.5

Total capitalization	$	1,392.5		$	1,359.2

Debt-to-total capitalization ratio		40.4	%		39.3	%

The Company believes that its operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future. Refer to Note 6, “Debt”, for further descriptions of the provisions of the Company’s financing facilities as well as Note 9 “Debt” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2013.

Contractual Obligations

During the three-month period ended March 31, 2014, contractual obligations increased $8.8 million from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, primarily driven by a new software license and maintenance agreement.

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 2014 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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, 2014, 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, 2013. 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, 2014 and 2013, the Company repurchased 331,369 and 208,274 shares of USI’s common stock at an aggregate cost of $13.7 million and $7.8 million, respectively. The Company repurchased 0.4 million shares for $18.0 million year-to-date through April 18, 2014. As of that date, the Company had approximately $75.0 million remaining of existing share repurchase authorization from the Board of Directors.


2014 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, 2014 to January 31, 2014		45,758	$	43.24		45,758	$	91,058,189
February 1, 2014 to February 28, 2014		148,801		40.74		148,801		84,996,763
March 1, 2014 to March 31, 2014		136,810		41.72		136,810		79,289,258

Total First Quarter		331,369	$	41.49		331,369	$	79,289,258

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		Third 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, 2001, filed on April 1, 2002)

3.2		Amended and Restated Bylaws of the Company, dated as of July 16, 2009 (Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2009, filed on November 5, 2009)

4.1		Master Note Purchase Agreement, dated as of October 15, 2007, among United Stationers Inc. (“USI”), United Stationers Supply Co. (“USSC”), and the note Purchasers identified therein (Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended June 30, 2010, filed on August 6, 2010)

4.2		Parent Guaranty, dated as of October 15, 2007, by USI in favor of holders of the promissory notes identified therein (Exhibit 4.4 to the Company’s Form 10-Q for the quarter ended September 30, 2007, filed on November 7, 2007)

4.3		Subsidiary Guaranty, dated as of October 15, 2007, by Lagasse, Inc., United Stationers Technology Services LLC (“USTS”) and United Stationers Financial Services LLC (“USFS”) in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the Company’s Form 10-Q for the quarter ended September 30, 2007, filed on November 7, 2007)

10.1*		Second Amendment to Amended and Restated Transfer and Administration Agreement, dated as of January 23, 2014, by United Stationers Receivables, LLC, United Stationers Supply Co., United Stationers Financial Services LLC, PNC Bank, National Association, and the Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch

10.2*		United Stationers Inc. Executive Severance Plan**

10.3*		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 28, 2014, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, dated as of April 28, 2014, 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 28, 2014, 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, 2014, filed with the SEC on April 28, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statement of Income for the three-month period ended March 31, 2014 and 2013, (ii) the Condensed Consolidated Balance Sheet at March 31, 2014 and December 31, 2013, (iii) the Condensed Consolidated Statement of Cash Flows for the three-month period ended March 31, 2014 and 2013, 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 28, 2014						/s/ Todd A. Shelton
						Todd A. Shelton
						Senior Vice President and Chief Financial Officer

Exhibit 10.1

SECOND AMENDMENT

AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT, dated as of January 23, 2014 (this “ Amendment ”), is entered into by and among (i) United Stationers Receivables, LLC, an Illinois limited liability company (the “ SPV ”), (ii) United Stationers Supply Co., an Illinois corporation, as originator (the “ Originator ”), (iii) United Stationers Financial Services LLC, an Illinois limited liability company, as seller (the “ Seller ”) and as Servicer, PNC Bank, National Association (“ PNC Bank ”), a national banking association, as agent (the “ Agent ”), as a Class Agent and as an Alternate Investor, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (“ BTMU ”), a Japanese banking corporation acting through its New York Branch, as a Class Agent and an Alternate Investor.

Reference is herein made to that certain Amended and Restated Transfer and Administration Agreement, dated as of January 18, 2013 (as amended by that certain Assignment and Assumption and First Amendment to Amended and Restated Transfer and Administration Agreement, dated as of June 14, 2013, as amended hereby and as the same may be further amended, modified, supplemented, restated or replaced from time to time, the “ Transfer Agreement ”), by and among the SPV, the Originator, the Seller, PNC Bank, as Agent, as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties thereto as Conduit Investors and Alternate Investors. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Transfer Agreement.

WHEREAS, the parties hereto desire to amend the Transfer Agreement as set forth below.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Transfer Agreement . Effective as of the Effective Date, the Transfer Agreement is hereby amended as follows:

(a) The definition of “ Revolving Credit Agreement ” set forth in Section 1.1 of the Transfer Agreement is hereby replaced in its entirety with the following:

“ Revolving Credit Agreement ” The Fourth Amended and Restated Five-Year Revolving Credit Agreement, dated July 8, 2013, by and among the Originator, the Performance Guarantor, the Lenders from time to time parties thereto, U.S. Bank National Association, Bank of America, N.A., PNC Bank, National Association, Wells Fargo Bank, National Association, JPMorgan Securities LLC,

Wells Fargo Securities, LLC and JPMorgan Chase Bank, National Association as such agreement exists as of July 8, 2013 without giving effect to any amendment, modification, waiver, replacement or supplement thereto that is not consented to in writing by each Class Agent.

(b) The definition of “ S&P ” set forth in Section 1.1 of the Transfer Agreement is hereby replaced in its entirety with the following:

S&P : Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successor thereto.

(a) Leverage Ratio . During the term of this Agreement, unless the Agent shall otherwise consent in writing, the Performance Guarantor agrees with the Alternate Investor and the Agent to maintain a Leverage Ratio (as defined in the Revolving Credit Agreement) in accordance with the provisions of Section 6.20 of the Revolving Credit Agreement.

(d) Section 6.3(b) of the Transfer Agreement is hereby replaced in its entirety with the following:

(b) Consolidated Net Worth . During the term of this Agreement, unless the Agent shall otherwise consent in writing, the Performance Guarantor hereby agrees with the Alternate Investor and the Agent to maintain a positive Consolidated Net Worth (as defined in the Revolving Credit Agreement) in accordance with the provisions of Section 6.21 of the Revolving Credit Agreement.

(e) Exhibit J to the Transfer Agreement is hereby replaced in its entirety with Exhibit J attached hereto.

2. Representations and Warranties . Each of the Originator, the SPV, the Seller and the Servicer hereby certifies that, subject to the effectiveness of this Amendment, each of the representations and warranties set forth in the Transfer Agreement and the other Transaction Documents is true and correct on the date hereof, as if each such representation and warranty were made on the date hereof.

3. No Default . The SPV, the Originator, the Seller and the Servicer each hereby represent and warrant that, as of the date hereof, no Termination Event or Potential Termination Event has occurred or is continuing.

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4. Transaction Documents in Full Force and Effect as Amended . Except as specifically amended hereby, the Transfer Agreement and the other Transaction Documents shall remain in full force and effect. All references to the Transfer Agreement and each other Transaction Document shall be deemed to mean each such document, as modified hereby. The parties hereto agree to be bound by the terms and conditions of the Transaction Documents, as amended by this Amendment, as though such terms and conditions were set forth herein.

5. Consent of Performance Guarantor . The Performance Guarantor hereby consents to the amendments of the Transfer Agreement set forth in this Amendment.

6. Conditions to Effectiveness . This Amendment shall be effective as of the date (the “ Effective Date ”) on which the Agent receives counterparts of this Amendment duly executed by each of the parties hereto.

7. Miscellaneous .

(a) This agreement may be executed in any number of counterparts and by different parties hereto on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

(b) The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.’

(d) Any provision in this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

(e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAWS PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.


UNITED STATIONERS RECEIVABLES, LLC

By:		/s/ Robert J. Kelderhouse
		Name: Robert J. Kelderhouse
		Title: Vice President and Treasurer

UNITED STATIONERS SUPPLY CO. , as Originator

By:		/s/ Robert J. Kelderhouse
		Name: Robert J. Kelderhouse
		Title: Vice President and Treasurer

UNITED STATIONERS FINANCIAL SERVICES LLC , as Seller and as Servicer

By:		/s/ Robert J. Kelderhouse
		Name: Robert J. Kelderhouse
		Title: Vice President and Treasurer

[signatures continue on the following pages]

Second Amendment to A&R Transfer and Administration Agreement


Acknowledged and consented to by :

UNITED STATIONERS INC. , as the Performance Guarantor

By:		/s/ Robert J. Kelderhouse
		Name: Robert J. Kelderhouse
		Title: Vice President and Treasurer

[signatures continue on the following pages]

Second Amendment to A&R Transfer and Administration Agreement


PNC BANK, NATIONAL ASSOCIATION , as an Alternate Investor, a Class Agent and the Agent

By:		/s/ Mark Falcione
		Name: Mark Falcione
		Title: Senior Vice President

[signatures continue on the following page]

Second Amendment to A&R Transfer and Administration Agreement


THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH , as an Alternate Investor and a Class Agent

By:		/s/ Mark Maloney
		Name: Mark Maloney
		Title: Vice President

[end of signatures]

Second Amendment to A&R Transfer and Administration Agreement

Exhibit J

Form of Compliance Certificate

To: PNC Bank, National Association, as Agent

This Compliance Certificate (the “ Certificate ”) is furnished pursuant to Section 6.1(a)(iii) of that certain Amended and Restated Transfer and Administration Agreement dated as of January 18, 2013 as it may be amended or otherwise modified from time to time (as so amended or modified, the “ Agreement ”) by and among United Stationers Receivables, LLC, an Illinois limited liability company (the “ SPV ”), United Stationers Supply Co., an Illinois corporation, United Stationers Financial Services LLC, an Illinois limited liability company (the “ Servicer ”), PNC Bank, National Association, a national banking association, as Agent and as an Alternate Investor. Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the duly elected [Treasurer or CFO] of the Performance Guarantor and [Treasurer or President] of the SPV.

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the SPV, the Seller, the Servicer and the Performance Guarantor during the accounting period covered by the attached financial statements.

3. The examinations described in Paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Termination Event or Potential Termination Event during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in Paragraph 5 below.

4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, including the financial covenants in Section 6.3 of the Agreement, all of which data and computations are true, complete and correct and have been prepared in accordance with GAAP.

5. Described below are the exceptions, if any, to Paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the SPV or the Performance Guarantor has taken, is taking, or proposes to take with respect to each such condition or event:

6. As of the date hereof, the jurisdiction of organization of the SPV is the State of Illinois, the place where the SPV is “located” for the purposes of Section 9-307 of the UCC is the State of Illinois, and the SPV has not changed its jurisdiction of organization or its “location” for the purposes of Section 9-307 of the UCC since the date of the original Agreement.

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements as of [ ] delivered with the Certificate in support hereof, are made and delivered this [ ] day of [ ], 201[ ].


UNITED STATIONERS, INC.

By:
		Name:
		Title:

UNITED STATIONERS RECEIVABLES, LLC

By:
		Name:
		Title:

Exhibit J - 2

SCHEDULE I TO COMPLIANCE CERTIFICATE ²

Schedule of Compliance as of , with Section 6.3 of the Agreement.

A. LEVERAGE RATIO Section 6.3(a) (calculated as of [ last day of most recently ended fiscal quarter ]

(1)

Consolidated Funded Indebtedness

)

Consolidated Indebtedness for borrowed money

)

Undrawn amount of all standby Letters of Credit ³

)

Principal component of all Capitalized Lease Obligations

)

Off-Balance Sheet Liabilities

)

Disqualified Stock

)

Sum of (a) through (e), inclusive

(2)

Consolidated EBITDA

)

Consolidated Net Income

)

Consolidated Interest Expense

)

Taxes

)

Depreciation

)

Amortization

)

Losses attributable to equity in Affiliates

)

Non-cash charges related to employee compensation +

(h)

Extraordinary non-cash or nonrecurring non-cash charges or losses

(i)

Extraordinary non-cash or nonrecurring non-cash gains

–

(j)

Consolidated EBITDA

(3)

Leverage Ratio (Ratio of (1) to (2))

to 1.00

(4)

State whether the Leverage Ratio exceeded 3.50 ⁴ to 1.00

Yes/No

²	Capitalized terms used on this Schedule I to Compliance Certificate shall have the meanings given such terms in the Revolving Credit Agreement.

³	Exclude (i) up to $10,000,000 of Letters of Credit supporting worker’s compensation obligations and (ii) all Letters of Credit supporting indebtedness identified in clauses (a) through (e), inclusive, of this Section A.(1).

⁴	The Leverage Ratio may be increased in excess of 3.50 to 1.00 in certain circumstances per the proviso set forth in Section 6.20 of the Revolving Credit Agreement.

Exhibit J - 3

B.	CONSOLIDATED NET WORTH Section 6.3(b)

State whether, on any day during the most recently ended fiscal quarter, the Performance Guarantor’s Consolidated Net Worth was less than (i) $550,000,000, minus (ii) write-downs of goodwill and intangibles and non-cash pension adjustments and, to the extent permitted under the Agreement, dividends or repurchases or redemptions of its capital stock, all to the extent deducted from Consolidated Net Worth on or after January 1, 2013 plus (iii) fifty percent (50%) of the sum of Consolidated Net Income (if positive) calculated separately for each fiscal quarter commencing with the fiscal quarter ending on March 31, 2013 plus (iv) 50% of net cash proceeds resulting from issuances of USI’s or any Subsidiary’s capital stock at any time from and after the Restatement Effective Date. Yes/No

Exhibit J - 4

Exhibit 10.2

United Stationers Inc. Executive Severance Plan

1.	Severance Plan for Executives

The Severance Plan for Executives (the “Plan”) is intended to provide certain eligible employees of UNITED STATIONERS INC., a Delaware corporation (hereinafter, together with its successors, referred to as “ Holding ”), UNITED STATIONERS SUPPLY CO., an Illinois corporation (hereinafter, together with its successors, referred to as the “ Company ”), and UNITED STATIONERS MAMANAGEMENT SERVICES, L.L.C., an Illinois limited liability company (hereinafter, together with its successors, referred to as “ USMS ”) (with Holding, the Company, USMS, and their respective subsidiaries and affiliates including the entity employing the Executive, and any successors thereto, hereinafter referred to as the “ Companies ”) severance benefits in the event of such employee’s Eligible Termination or Eligible Change of Control Termination under the terms and conditions set forth in the Plan. The policy is intended to cover all Eligible Employees regardless of jurisdiction, but be subject to local laws and regulations and thereby tailored in its application, as required.

2.	Key Definitions

a. “ Board ” means the Board of Directors of Holding.

b. “ Cause ” shall mean the (i) conviction of, or plea of nolo contendere to, a felony (excluding motor vehicle violations); (ii) theft or embezzlement, or attempted theft or embezzlement, of money or property or assets of the Companies; (iii) illegal use of drugs; (iv) material breach of this Agreement or any employment-related undertakings provided in a writing signed by the Executive prior to or concurrently with this Agreement; (v) gross negligence or willful misconduct in the performance of Executive’s duties; (vi) breach of any fiduciary duty owed to the Companies, including, without limitation, engaging in competitive acts while employed by the Companies; or (vii) the Executive’s willful refusal to perform the assigned duties for which the Executive is qualified as directed by the Executive’s Supervising Officer (as hereinafter defined) or the Board; provided, that in the case of any event constituting Cause within clauses (viii) through (ix) which is curable by the Executive, the Executive has been given written notice by the Companies of such event said to constitute Cause, describing such event in reasonable detail, and has not cured such action within thirty (30) days of such written notice as reasonably determined by the Chief Executive Officer. For purposes of this definition of Cause, action or inaction by the Executive shall not be considered “willful” unless done or omitted by the Executive (i) intentionally or not in good faith and (ii) without reasonable belief that the Executive’s action or inaction was in the best interests of the Companies, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.

c. “ Change of Control ” shall mean and include any of the following: (i) Any “Person” (having the meaning ascribed to such term in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and used in Sections 13(d) and 14(d) thereof, including a “group” within the meaning of Section 13(d)(3)) has or acquires “Beneficial Ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of 30% or more of the combined voting power of Holding’s then outstanding voting securities entitled to vote generally in the election of directors (“ Voting Securities ”); provided, however, that the acquisition or holding of Voting Securities by (A) Holding of any of its Subsidiaries, (B) an employee benefit plan (or a trust forming a part thereof) maintained by Holding or any of its Subsidiaries, or (C) any Person in which the Executive has a substantial equity interest shall not constitute a Change of Control. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more

PAGE 1

than the permitted amount of Voting Securities as a result of (D) the issuance of Voting Securities by Holding in exchange for assets (including equity interests) or funds with a fair value equal to the fair value of the Voting Securities so issued or (E) the acquisition of Voting Securities by Holding which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Person; provided that if a Change of Control would occur (but for the operation of this sentence) as a result of the issuance of Voting Securities or the acquisition of Voting Securities by Holding, and after such issuance or acquisition, such Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the Voting Securities Beneficially Owned by such Person to more than 50% of the Voting Securities of Holding, then a Change of Control shall occur; (ii) At any time during a period of two consecutive years, the individuals who at the beginning of such period constituted the Board (the “ Incumbent Board ”) cease for any reason to constitute more than 50% of the Board; provided, however, that if the election, or nomination for election by Holding’s shareholders, of any new director was approved by a vote of more than 50% of the directors then comprising the Incumbent Board, such new director shall, for purposes of this subsection (ii), be considered as though such person were a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of (A) either an actual “Election Consent” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board (a “ Proxy Contest ”), or (B) by reason of an agreement intended to avoid or settle any actual or threatened Election Contest or Proxy Contest; (iii) Consummation of a merger, consolidation or reorganization or approval by Holding’s shareholders of a liquidation or dissolution of Holding or the occurrence of a liquidation or dissolution of Holding (“ Business Combination ”), unless, following such Business Combination: (A) the Persons with Beneficial Ownership of Holding, immediately before such Business Combination, have Beneficial Ownership of more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation (or in the election of a comparable governing body of any other type of entity) resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns Holding or all or substantially all of Holding’s assets either directly or through one or more subsidiaries) (the “ Surviving Company ”) in substantially the same proportions as their Beneficial Ownership of the Voting Securities immediately before such Business Combination, (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the initial agreement providing for such Business Combination constitute more than 50% of the members of the board of directors (or comparable governing body of a noncorporate entity) of the Surviving Company; and (C) no Person (other than Holding, any of its Subsidiaries or any employee benefit plan (or any trust forming a part thereof) maintained by Holding, the Surviving Company or any Person who immediately prior to such Business Combination had Beneficial Ownership of 30% or more of the then Voting Securities) has Beneficial Ownership of 30% or more of the then combined voting power of the Surviving Company’s then outstanding voting securities; provided, that notwithstanding this clause (C), a Change of Control shall not be deemed to occur solely because any Person acquired Beneficial Ownership of more than 30% of Voting Securities as a result of the issuance of Voting Securities by Holding in exchange for assets (including equity interests) or funds with a fair value equal to the fair value of the Voting Securities so issued; provided, however that a Business Combination with a Person in which the Executive has a substantial equity interest shall not constitute a Change of Control with respect to such Person. (iv) The closing of any assignment, sale, conveyance, transfer, lease or other disposition of all or substantially all of the assets of Holding to any Person (other than a Person in which the Executive has a substantial equity interest (in which case there shall not be a Change of Control with respect to such Person) and other than a Subsidiary of Holding or other entity, the Persons with Beneficial Ownership of which are the same Persons with Beneficial Ownership of Holding and such Beneficial Ownership is in substantially the same proportions), or the occurrence of the same.

PAGE 2

d. “ Eligible Employee ” shall mean a regular full-time salaried employee of the Companies, or any of its affiliates, who does not have an individual employment agreement with the Companies, who is a member of the Senior Leadership Team of Holding, and who shall have executed a Release Agreement.

e. “ Eligible Change of Control Termination ” shall mean during the Protection Period (i) an involuntary termination of employment without Cause; (ii) a voluntary termination by the employee for “Good Reason”.

f. “ Eligible Termination ” shall mean (i) an involuntary termination of employment by reason of a reduction in force program, job elimination, or unsatisfactory performance in the execution of an Eligible Employee’s duties; (ii) a resignation mutually agreed to in writing by the Companies and the Eligible Employee; or (iii) any other termination that is designated by the management of the Companies to be an Eligible Termination. An Eligible Termination shall not include (iv) a unilateral resignation; (v) a termination by the Company for Cause; or (vi) a termination as a result of a change of control of the Companies.

g. “Good Reason” shall mean (i) any material breach by the Companies of this Agreement without Executive’s written consent, or (ii) without Executive’s written consent: (A) a material reduction in the Executive’s Base Salary, or (B) the relocation of the Executive’s principal place of employment more than fifty (50) miles from its location on the Effective Date. For purposes of this Agreement, a Change of Control, alone, does not constitute Good Reason. Furthermore, notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless the Executive gives the Companies written notice within thirty (30) days after the initial occurrence of any of such events that the Executive believes that such event constitutes Good Reason, and the Companies thereafter fail to cure any such event within sixty (60) days after receipt of such notice.

h. “ Protection Period ” shall mean the two-year period following a Change of Control.

i. “ Release Agreement ” shall mean the Companies’ then-current standard form of release which, if executed by the Eligible Employee, will acknowledge his or her termination of employment with the Companies and release the Companies from liability for any claims.

3.	General Severance Benefits

In consideration of the Eligible Employee executing a Release Agreement, in the event of an Eligible Termination, an Eligible Employee shall be entitled to receive from the Companies benefits as set forth below. Unless otherwise noted, payments will be made in a lump sum on the 90 ^th day following the employee’s termination:

a. Cash Severance : cash severance in the amount of x-times the sum of the employee’s annual base salary (using the employee’s salary rate in effect at the time of termination) and target bonus opportunity.


Position	Severance Multiple
CEO		2.0×
EVP/SVP/President		1.5×
VP		1.0×

b. Pro Rata Bonus : a bonus in an amount equal to the actual bonus which would have been payable under the Companies’ Cash Award Incentive Plan (CIP), had such employee remained employed through the end of the year of such termination multiplied by a fraction the numerator of

PAGE 3

which is the number of full months of employment during the calendar year of termination and the denominator of which is 12. Such bonus shall be payable at the time otherwise payable under the CIP, had employment not terminated.

c. Welfare Benefits Continuation : an amount sufficient to cover the employer portion of medical benefits for a period of 6 months at the levels in effect for the employee immediately prior to termination of employment.

4.	Change-of-Control Severance Benefits

In consideration of the Eligible Employee executing a Release Agreement, in the event of an Eligible Change of Control Termination during the Protection Period, an Eligible Employee shall be entitled to receive from the Companies benefits as set forth below. Unless otherwise noted, payments will be made in a lump sum on the 90 ^th day following the employee’s termination:

a. Cash Severance : cash severance in the amount of x times the sum of the employee’s annual base salary and target bonus opportunity;


Position	Severance Multiple
CEO/EVP/SVP/President		2.0×
VP		1.5×

b. Pro Rata Bonus : a bonus in an amount equal to the Eligible Employee’s target bonus opportunity multiplied by a fraction the numerator of which is the number of full months of employment during the calendar year of termination and the denominator of which is 12;

c. Welfare Benefits Continuation : an amount sufficient to cover the employer portion of medical benefits for a period of 18 months at the levels in effect for the employee immediately prior to termination of employment.

d. Outplacement Services : an amount sufficient to cover outplacement benefits for a period of 9 months, subject to a maximum amount of $25,000.

e. Excise Taxes : In connection with the excise tax imposed by Section 4999 of the Internal Revenue Code (“Code”), as amended, the Plan will provide for the “Best Net” so that Eligible Employee’s aggregate severance payments and benefits would be reduced to $1.00 less than that amount which would trigger the Code Section 4999 excise tax if such reduction would result in such Eligible Employee receiving a greater after-tax benefit than Eligible Employee would receive if the full severance benefits were paid (i.e., the aggregate severance payments and benefits that Eligible Employee receives will be either the full amount of severance payments and benefits or an amount of severance payments and benefits reduced to the extent necessary so that the Eligible Employee incurs no excise tax, whichever results in the Eligible Employee receiving the greater amount, taking into account applicable federal, state and local income, employment and other applicable taxes, as well as the excise tax).

5.	Restrictive Covenants

Notwithstanding anything to the contrary in this Agreement, receipt of benefits under this Plan shall be contingent upon the Eligible Employee executing and delivering (i) a general release of claims following the date of the Eligible Termination that, within 60 days of such Eligible Termination, has become irrevocable by the Eligible Employee and (ii) a restrictive covenants and cooperation

PAGE 4

agreement (the “Restrictive Covenants”) that, within 60 days of the Eligible Termination, has become irrevocable. The date on which the Restrictive Covenants become irrevocable under this subparagraph shall be referred to as the Restrictive Covenants Effective Date. If the Eligible Employee fails to timely execute and deliver the Restrictive Covenants, then the Companies shall have no obligation to pay or provide the benefits provided under this Plan.

6.	Administration

a. Withholding Taxes . ABC may withhold from all payments or benefits due to the Eligible Employee hereunder or under any other plan or arrangement of the Companies all taxes which, by applicable federal, state, local or other law, ABC determines it is required to withhold therefrom.

b. Code Section 409A . To the extent applicable, it is intended that the Plan comply with the provisions of Code Section 409A. The Plan will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Plan to fail to satisfy Code Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Code Section 409A). Notwithstanding anything contained herein to the contrary, for all purposes of this Plan, an Eligible Employee shall not be deemed to have had a termination of employment until such Eligible Employee has incurred a separation from service as defined in Treasury Regulation §1.409A-1(h) and, to the extent required to avoid accelerated taxation and/or tax penalties under Code Section 409A, payment of the amounts payable under the Plan that would otherwise be payable during the six-month period after the date of termination shall instead be paid on the first business day after the expiration of such six-month period, plus interest thereon, at a rate equal to the applicable “Federal short-term rate” (as defined in Code Section 1274(d)) for the month in which such date of termination occurs, from the respective dates on which such amounts would otherwise have been paid until the actual date of payment. In addition, for purposes of the Plan, each amount to be paid and each installment payment shall be construed as a separate, identified payment for purposes of Code Section 409A. With respect to expenses eligible for reimbursement under the terms of this Plan, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Code Section 409A.

c. ERISA . This Plan shall be deemed to be an “employee welfare benefit plan” as defined by Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended. Accordingly, notwithstanding any contrary provision of the Plan, if the amount otherwise payable to an Eligible Employee under the Plan exceeds two times the Eligible Employee’s annual compensation during the year immediately preceding the year during which the Eligible Employee’s termination occurs (the “Permissible Amount”), the amount to be paid under the Plan shall be reduced so that it does not exceed the Permissible Amount. For this purpose, annual compensation includes all wages, salary, and any other benefits of monetary value, whether paid in cash or otherwise, which was paid as consideration for the Eligible Employee’s services during the year (or which would have been paid if the Eligible Employee had been employed a full year).

d. Waiver of Breach . No waiver by any party hereto of a breach of any provision of the Plan by any other party, or of compliance with any condition or provision of the Plan to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such parry of the right to take action at any time while such breach continues

PAGE 5

e. Amendment and Termination . The Board may amend or terminate the Plan at any time; provided, however that no amendment of the Plan which is adopted on or after a Change of Control or during the 180-day period immediately preceding a Change of Control shall directly or indirectly adversely affect any Eligible Employee’s rights and benefits under the Plan without the written consent of such Eligible Employee and further provided, that the upon and after a Change of Control, the Plan may not be terminated prior to the second anniversary of the occurrence of such Change of Control.

f. Administration . The Committee shall be responsible for administering this Plan. The Committee has the exclusive right, power and authority, in its sole and absolute discretion, to administer and interpret the Plan and other Plan documents. The Committee has all powers reasonably necessary to carry out its responsibilities under the Plan, including but not limited to the sole and absolute discretionary authority to (i) administer the Plan according to its terms and to interpret Plan policies and procedures; (ii) resolve and clarify inconsistencies, ambiguities and omissions in the Plan document and among and between the Plan document and other related documents; (iii) take all actions and make all decisions regarding questions of coverage, eligibility and entitlement to benefits, and benefit amounts; (iv) process and approve or deny all claims for benefits; and (v) employ attorneys, consultants, accounts, agents and other individuals, any of whom may be an employee of the Companies, and the Committee, the Companies, and their officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such individuals. All actions taken by the Committee, and all interpretations and determinations made by the Committee on any disputes arising under the Plan, including but not limited to questions of construction, interpretation and administration shall be final, conclusive and binding upon the Eligible Employees, the Companies, and all other persons having an interest in or under the Plan. Any determination made by the Committee shall be given deference in the event the determination is subject to judicial review and shall be overturned by a court of law only if it is arbitrary and capricious.

g. Binding Agreement; Successors . In the event of any Change of Control, the provisions of this Plan shall be binding upon the surviving corporation, and such surviving corporation shall be treated as ABC hereunder. This Plan shall inure to the benefit of and be enforceable by the Eligible Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If an Eligible Employee dies while any amounts would be payable to the Eligible Employee hereunder had the Eligible Employee continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such person or persons appointed in writing by the Eligible Employee to receive such amounts or, if no person is so appointed, to the Eligible Employee’s estate.

h. Gender and Number . Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

i. Unfunded Plan . Eligible Employees shall have no right, title or interest whatsoever in or to any investments that the Companies may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Companies and any Eligible Employee, beneficiary, legal representative or any other individual. To the extent that any individual acquires a right to receive payments under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Companies. All payments to be made hereunder shall be paid from the general funds of ABC, and no special or separate fund shall be established, and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.

j. Governing Law and Miscellaneous . The law of the State of Illinois shall govern this Plan without giving effect to its conflict of law principles. Should a court of competent jurisdiction find that any provision of this Plan is void, voidable, illegal, or unenforceable, no other provision shall be affected thereby and the balance shall be interpreted in a manner that gives effect to the intent of the parties. The normal rules of construction hold that all ambiguities are construed against the drafting party will not apply to the interpretation of this Plan.

PAGE 6

Exhibit 10.3

UNITED STATIONERS INC.

2004 LONG-TERM INCENTIVE PLAN

Performance Based Restricted Stock Unit Award Agreement

This Restricted Stock Unit Award Agreement (this “Agreement”), dated March 15, 2014 , (the “Award Date”), is by and between [[FIRSTNAME]] [[LASTNAME]] (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 2004 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 [[SHARESGRANTED]] 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’s Stock. 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, including the Scheduled Vesting Dates (as defined below), on which Units subject to this Award vest as provided in this Section 3.

(a)

(Subject to paragraphs 3(b) through 3(f), a portion of the Participant’s Units will be eligible to vest on each of March 1, 2015, March 1, 2016 and March 1, 2017 (the “Scheduled Vesting Dates”). Units will vest on a Scheduled Vesting Date (i) if the Participant’s Date of Termination has not occurred before that Scheduled Vesting Date, and (ii) only to the extent the Units have been earned as provided in Section 4 during the applicable performance period from January 1, 2013 to the most recent December 31 prior to that Scheduled Vesting Date. The following table summarizes the dates, time periods and corresponding terminology relevant to this Award:


Performance Period	Applicable Determination Date	Applicable Scheduled Vesting Date
1/1/2014 – 12/31/2014	December 31, 2014	March 1, 2015
1/1/2015 – 12/31/2015	December 31, 2015	March 1, 2016
1/1/2016 – 12/31/2016	December 31, 2016	March 1, 2017

The period from March 15, 2014 through March 1, 2017 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(g)), 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 lesser of (i) one-third of the Target Number of Units or (ii) the Target Number of Units not yet vested immediately prior to the Participant’s Date of Termination, by a fraction, the numerator of which shall be the number of whole months elapsed from the most recent March 1 prior to the Date of Termination, and the denominator of which shall be twelve. 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(j)), then the unvested Units at that time will continue to vest on the remaining Scheduled Vesting Dates to the extent that the Units have been earned as provided in Section 4 during the Performance Period corresponding to each such Scheduled Vesting Date, 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 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 greater of (i) 100% of the Target Number of Units not yet vested immediately prior to the Change of Control, or (ii) an amount determined by multiplying 100% of the Target Number of Units not yet vested immediately prior to the Change of Control by the Performance Factor (determined as provided in Appendix A ) for the Performance Period associated with the most recent Scheduled Vesting Date (if any) prior to the date of the Change in Control, 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 .

(f)

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.

(g)

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.

(h)

For purposes of this Agreement, “Good Reason” shall mean: (i) any material breach by the Company of this Agreement or of any employment agreement with the Participant without Participant’s written consent, (ii) any material reduction, without the Participant’s written consent, in the Participant’s duties, responsibilities or authority; provided, however, that for purposes of this clause (ii), neither (A) a change in the Participant’s supervisor or the number or identity of the Participant’s direct reports, nor (B) a change in the Participant’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Company’s executive organizational chart nor (C) a change in the Participant’s title, duties, responsibilities or authority as a result of a realignment or restructuring of the Company shall be deemed by itself to materially reduce Participant’s duties, responsibilities or authority, as long as, in the case of either (B) or (C), Participant continues to report to either the supervisor to whom he or she reported immediately prior to the Change of Control (if applicable) or a supervisor of equivalent responsibility and authority; or (iii) without Participant’s written consent: (A) a material reduction in the Participant’s base salary, or (B) the relocation of the Participant’s principal place of employment more than fifty (50) miles from its location on the date of a Change in Control (if applicable). For purposes of this Agreement, a Change of Control, alone, does not constitute Good Reason. Furthermore, notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless the Participant gives the Company written notice within thirty (30) days after the initial occurrence of any of such events that the Participant believes that such event constitutes Good Reason, and the Company thereafter fails to cure any such event within sixty (60) days after receipt of such notice.

(i)

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”).

(j)

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.

(k)

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 each Scheduled Vesting Date during the Vesting Period will be determined by the extent to which the Company has satisfied the performance-based objectives for the Performance Period ending on the applicable 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 each Scheduled 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 as of any Scheduled Vesting Date during the Vesting Period exceed the Maximum Number of Units. Any Units that are not earned and do not vest as of either of the first two Scheduled Vesting Dates during the Performance Period solely because of the failure to fully satisfy an applicable performance-based objective shall remain eligible to be earned and to vest as of a subsequent Scheduled Vesting Date during the Vesting Period. Any Units that are not earned and do not vest as of the last Scheduled Vesting Date will be forfeited.

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 (provided, however, to the extent shares described in this clause (ii) are used to satisfy more than the minimum statutory withholding obligation, as described below, then payments made with shares of Stock in accordance with this clause (ii) shall be limited to shares held by the Participant for not less than six months prior to the payment date), (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.

8.	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.

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. Any interpretations of the Plan by the Committee and any decisions made by it under the Plan are final and binding on the Participant and all other persons.

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

Performance-Based Restricted Stock Unit Award Agreement

Earned Units and Performance-Based Objectives

Vesting Period: March 15, 2014 through March 1, 2017

The determination of the number of Units that will be earned and vested as of each Scheduled Vesting Date during the Vesting Period specified above as provided in Section 4 of the Agreement will be determined as follows:

The Company’s Net Income (as defined below) for the Performance Period beginning on January 1, 2014 and ending on the applicable Determination Date will be calculated.

Based on that actual Net Income, the Performance Factor for the relevant Performance Period will be determined from the following table by determining where the Company’s actual Net Income 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 Net Income for any 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 Net Income for the Performance Period is less than or equal to the Minimum amount specified, the Performance Factor is zero, and if it greater than the Maximum amount specified, the Performance Factor will be equal to the percentage specified for the Maximum amount.

Company’s Cumulative Net Income Goals and Corresponding Performance Factors During the Performance Periods Ending on the Determination Dates Indicated


	December 31, 2014					December 31, 2015					December 31, 2016
	NI Goal		Perf. Factor			NI Goal		Perf. Factor			NI Goal		Perf. Factor
Min	$	125.6M		0	%	$	244.9M		0	%	$	358.0M		0	%
Target	$	135.0M		100	%	$	272.8M		100	%	$	413.3M		100	%
Max	$	141.8M		200	%	$	293.7M		200	%	$	456.3M		200	%

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

(Performance Factor x Cumulative Unit Percentage x Target Number of Units)—Number of Previously Earned Units where:

•

“Performance Factor” is the percentage determined as provided in item 2 above;

•

“Cumulative Unit Percentage” is the percentage in the following table that corresponds to the Determination Date marking the end of the relevant Performance Period:


Determination Dates	Cumulative Unit Percentage
December 31, 2014		33 1/3	%
December 31, 2015		66 2/3	%
December 31, 2016		100	%

•

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

•

“Number of Previously Earned Units” is the number of Units subject to the Award that had previously been determined to be Earned Units and had vested prior to the applicable Scheduled Vesting Date.

For purposes of this Appendix A, the Company’s “Net Income” for any Performance Period shall mean net income as reported on the Company’s 2014 through 2016 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, 2013, and will be adjusted to eliminate the effects of any and all of the following (net of any tax effects): (i) write-offs of previously capitalized costs from refinancing activities; (ii) the effects on financial results of any subsidiary charitable contributions to the United Stationers Charitable Foundation; (iii) the

impacts on financial results of any acquisition or disposition during the performance period if such acquisition or disposition had annual revenues for the most recently completed fiscal year in excess of $50 million, such impacts to be as projected in the final financial valuation of the transaction and its impacts presented to the Board prior to the Board’s approval of the transaction; (iv) the expense associated with impairment of goodwill and other intangible assets, if any; (vi) the interest expense and any accrued interest associated with the cost of repurchases of Company stock or issuance of dividends; (vi) the effects of any termination of any interest rate swap agreement; (vii) changes in the carrying value within the Company’s Other Comprehensive Income of the assets and liabilities associated with pension plans and interest rate swap agreements; and (viii) the effects of the termination, immunization, or change in accounting principles of the Company’s pension plans, if any.

As an example, to compute the number of Earned Units that will vest as of the first, second and third Scheduled Vesting Dates, assume the following facts: (i) the Target Number of Units was 15,000; (ii) the Company’s actual Net Income for the Performance Period ending on the first Determination Date was half-way between the Minimum Amount and the Target Amount, resulting in a Performance Factor of 50%; (iii) the Company’s actual Net Income for the Performance Period ending on the second Determination Date was half-way between the Target Amount and the Maximum Amount, resulting in a Performance Factor of 150%; and (iv) the Company’s actual Net Income for the Performance Period ending on the third Determination Date was 60% of the way between the Target Amount and the Maximum Amount, resulting in a Performance Factor of 160%. Under these facts, the number of additional Earned Units that would vest as of each Scheduled Vesting Date would be:


First Scheduled Vesting Date:		(50% x 33 1/3% x 15,000) – 0 = 2,500 Units

Second Scheduled Vesting Date:		(150% x 66 2/3% x 15,000) – 2,500 = 12,500 Units

Third Scheduled Vesting Date:		(160% x 100% x 15,000) – 15,000 = 9,000 Units

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):

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

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.

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)

(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):

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.

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, 2014, 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 28, 2014

/s/ Todd A. Shelton

Todd A. Shelton

Senior Vice President and Chief Financial Officer

April 28, 2014

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