United Stationers Inc. (NYSE:USTR) Q1 2015 Earnings Conference Call - Final Transcript
Apr 23, 2015 • 08:30 am ET
Thank you, Drew, and good morning, everyone. Thank you for joining us. With me today is Todd Shelton, SVP and CFO. I will start with a review of our first quarter results, which we issued yesterday. Then I'll discuss the progress we're making in executing our strategy to reposition our Company for long-term success.
Our first quarter performance was in line with our expectations and reflects ongoing progress as we execute our strategic plan. We delivered improved free cash flow and continued to deliver better-than-market growth in strategic channels and categories. The results from our recent acquisitions are meeting our expectations and we're executing our plan to exit non-strategic and low-margin (ph) business.
Finally, we are proactively managing the impact from our exposure to the oil and energy channels in our industrial business. Todd will provide more color on this in the call.
Overall results for the quarter were driven by net sales growth of 6.2%. Janitorial and breakroom grew just over 8%, ahead of market performance. Industrial grew approximately 57% as the benefit of our CPO and MEDCO acquisitions offset the 10% organic sales decline***Part01***
***Part01***Good morning, ladies and gentlemen, and welcome to the First Quarter 2015 Earnings Conference Call for United Stationers. My name is Drew, and I'll be your conference coordinator for today.
(Forward-Looking Cautionary Statements).
At this time, you can find the first quarter news release along with the financial slide presentation and other information relating to this call on the Investors section of the company's website at investors.unitedstationers.com. Shortly after the call ends, an archived version of it may also be found there. As a reminder, today's call is being recorded for replay purposes. (Operator Instructions).
I would now like to turn the call over to your host, Mr. Cody Phipps, President and CEO. Please go ahead, sir.
***Part02***decline in our core industrial business unit. This business has approximately 20% to 25% of its portfolio exposed to upstream oil production.
And as you know, this sector is facing significant challenges resulting in rapid consumption declines. Consistent with reports from others in this space, general industrial channel demand also softened outside of the oil field. We now expect this headwind to persist throughout this year.
Our sales to online resellers grew just over 12% over prior year and represent just over 10% of total sales. We continue to realize solid growth with our online partners.
Gross margin rate for the quarter was 15.3%, enhanced by our recent acquisitions and solid margin management. Adjusted EPS was $0.52 for the quarter compared to $0.55 in the first quarter of 2014. Free cash flow in the quarter was $57 million, representing solid progress as we work to improve our return on investments.
Now, let's review our progress in executing our strategy to position our company for sustained profitable growth. As I've noted in previous calls, the three elements of our strategy are to; one, strengthen our core business; two, win online; and three, expand and diversify into higher growth and