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, 2007.

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

Company Overview

The Company is North America's largest broad line wholesale distributor of business products, with 2007 net sales of $4.6 billion. The Company sells its products through a national distribution network of 67 distribution centers to approximately 30,000 resellers, who in turn sell directly to end consumers.

Key Company and Industry Trends

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

† During the third quarter of 2008, worsening economic conditions had an adverse impact on business-related spending. The overall economic conditions including continued weakness in the labor, housing and credit markets, the challenges confronting the financial services industry, and the overall uncertainty of the economy have led to lower consumer spending. As a result, the Company's sales have been negatively impacted. It is unclear how these overall economic conditions will impact future sales. As reported in the Company's press release dated October 30, 2008, net sales growth for October trended lower, with overall growth including ORS Nasco at approximately 5% versus last year.

† On December 21, 2007, the Company completed the acquisition of ORS Nasco, a pure wholesale distributor of industrial supplies. ORS Nasco sales for the third quarter of 2008 were $84 million and earnings per share for the third quarter included a $0.09 per share contribution from ORS Nasco. ORS Nasco sales for the nine months ended September 30, 2008 were nearly $238 million with an approximate $0.21 per share contribution to EPS. The Company is on track for expected 8 - 10 percent sales growth and is realizing planned synergies as the $0.21 per share accretion is already above the targeted full year 15 - 20 cents of earnings per share accretion in 2008.

† On September 2, 2008, the Company closed the asset acquisition of Emco Distribution LLC's New Jersey business, including certain liabilities. This acquisition is expected to add $70 million in annual revenue. The $13 million purchase price was funded under the Company's credit agreement.

† Total Company sales for the third quarter of 2008 reached $1.34 billion which represents growth of 10.5% per selling day. Excluding ORS Nasco, sales per selling day were up 3.6% due primarily to 15% growth in the janitorial and breakroom category, 3% growth in office supplies and 2% growth in technology. These growth items were partially offset by an approximate 10% decline in office furniture.

† Gross margin as a percent of sales for the third quarter of 2008 was 14.8%, consistent with the third quarter of 2007. Gross margin in the third quarter was benefited by the effects of price increases, resulting inventory standard cost changes, and an approximate 20 basis point benefit from ORS Nasco. These items helped offset lower margin sales mix across and within categories.

† Total operating expenses as a percent of sales for the third quarter of 2008 were 10.2% compared to 10.4% for the same quarter of the prior year. The gain on the sale of two distribution centers, totaling $5.1 million, favorably impacted operating expenses for the quarter. Excluding this gain, non-GAAP operating expenses as a percent of sales for the quarter were 10.6%. ORS Nasco operating expenses for the third quarter 2008 were $9.5 million. Third quarter operating expenses also reflected increased expenses to fund various strategic initiatives and a higher level of bad debt costs in the quarter. The current economic environment could further impact the quality of the Company's receivables going forward.

† Operating cash flows for the year through September were $65.4 million versus $249.5 million in the same nine-month period in the prior year, reflecting the liquidation of a high year-end 2006 working capital investment and other timing related working capital changes at September 30, 2007. After excluding the impacts of accounts receivable sold under the Receivables Securitization Program, the Company's operating cash flows were $91.4 million for the nine months ended September 30, 2008, compared to $234.5 million for the same nine months ended in 2007.

† Many of the Company's product suppliers announced price increases which took effect during the third quarter and these increases resulted in a gross margin benefit in the quarter. Additional supplier price increases have been announced for the fourth quarter of 2008 as well. Gross margin benefits from product cost inflation are related to inventory standard cost changes as the Company passes these increases through the supply chain.

† During the first nine months of 2008, the Company acquired approximately 1.2 million shares of common stock under its publicly-announced share repurchase programs for $67.5 million. During the third quarter of 2008, the Company did not repurchase any shares of its common stock. As of October 30, 2008, the Company had approximately $100 million remaining of its existing share repurchase authorizations from the Board of Directors.

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 Company and Industry Trends" 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, 2007.

Acquisition of ORS Nasco Holding, Inc.

On December 21, 2007, the Company's subsidiary, USSC, completed the purchase of 100% of the outstanding shares of ORS Nasco Holding, Inc. (ORS Nasco) from an affiliate of Brazos Private Equity Partners, LLC of Dallas, Texas, and other shareholders. This acquisition was completed with the payment of the base purchase price of $175.0 million plus estimated working capital adjustments, a pre-closing tax benefit payment, and other adjusting items. The purchase price was also subject to certain post-closing adjustments of which approximately $0.4 million was adjusted downward based on the subsequently negotiated working capital calculations in the second quarter of 2008. In total, the purchase price, net of cash acquired, was $180.2 million, including $0.5 million in transaction costs. The acquisition allowed the Company to diversify its product offering and provided an entry into the wholesale industrial supplies market. The purchase price was financed through the addition of a $200 million term loan under the Company's credit agreement.

The acquisition was accounted for under the purchase method of accounting in accordance with Financial Accounting Standards No. 141, Business Combinations, with the excess purchase price over the fair market value of the assets acquired and liabilities assumed allocated to goodwill. Based on a preliminary purchase price allocation, the preliminary purchase price of $180.2 million, net of cash received, has resulted in goodwill and intangible assets of $88.8 million and $44.6 million, respectively. The intangible assets purchased include unamortizable intangibles of $12.3 million related to trademarks and trade names that have indefinite lives while the remaining $32.3 million in intangible assets acquired is amortizable and related to customer lists and certain non-compete agreements. Neither the goodwill nor the intangible assets are expected to generate a tax deduction. For financial accounting purposes, the amortizable intangible assets are treated as a temporary difference for which a deferred tax liability of $12.1 million was recorded through purchase accounting. The amortization expense related to the intangible assets is treated as the reversal of the temporary difference which has no impact on the effective tax rate. The weighted average useful life of amortizable intangibles is expected to be approximately 14 years. The Company recorded amortization expense of $0.5 million and $1.5 million in the three- and nine-month periods ending September 30, 2008. Amortization expense associated with the ORS Nasco intangible assets is expected to be approximately $2.1 million per year. Subsequent adjustments may be made to the purchase price allocation based on, among other things, post-closing purchase price adjustments and finalizing the valuation of tangible and intangible assets.

Acquisition of Emco Distribution LLC

On September 2, 2008, the Company closed the asset acquisition of Emco Distribution LLC's New Jersey business, including certain liabilities. The payment of the base purchase price of $13.1 million and transaction costs of $0.2 million were funded under the Company's credit agreement. The purchase resulted in goodwill and intangible assets of $2.6 million and $3.7 million, respectively. The intangible assets purchased include unamortizable intangibles of $0.7 million and amortizable intangibles of $3.0 million. Amortization expense associated with the intangible assets is expected to be approximately $0.3 million per year. Subsequent adjustments may be made to the purchase price allocation based on, among other things, post-closing purchase price adjustments and finalizing the valuation of tangible and intangible assets.

Stock Repurchase Program

During the first nine months of 2008, the Company repurchased 1,233,832 shares at an aggregate cost of $67.5 million with all such activity coming in the first quarter of 2008. For the three and nine months ended September 30, 2007, total share repurchases totaled 2,473,085 and 5,135,970 at an aggregate cost of $150.0 million and $301.7 million, respectively. At September 30, 2008, the Company had approximately $100 million remaining of its Board authorizations to repurchase USI common stock. The Company may purchase stock from time to time in the open market or in privately negotiated transactions. Depending on market and business conditions and other factors, including the Company's leverage target, credit agreement restrictions, cost of borrowing, and other potential investment opportunities, these repurchases may be commenced or suspended at any time without notice.

Critical Accounting Policies, Judgments and Estimates

During the third quarter of 2008, there were no significant changes to the Company's critical accounting policies, judgments or estimates from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

The Company adopted the required measurement date provisions of SFAS No. 158 as of January 1, 2008. SFAS No. 158 provides two transition alternatives related to the change in measurement date provisions. The Company elected the standard method. The transition from a previous measurement date of October 31, 2007 to December 31, 2007, beginning in fiscal 2008, required the Company to reduce its Retained Earnings as of January 1, 2008 by $0.6 million to recognize the one-time after-tax effect of an additional two months of net periodic benefit expense for the Company's pension and postretirement healthcare benefit plans. There was no impact on the Company's results of operations.

Results of Operations



The following table presents the Condensed Consolidated Statements of Income as
a percentage of net sales:



                                      Three Months Ended        Nine Months Ended
                                        September 30,             September 30,
                                      2008         2007         2008         2007

Net sales                              100.00 %     100.00 %     100.00 %     100.00 %
Cost of goods sold                      85.21        85.21        85.31        85.08
Gross margin                            14.79        14.79        14.69        14.92

Operating expenses
Warehousing, marketing and
administrative expenses                 10.17        10.39        10.80        10.61
Restructuring charge                        -            -            -         0.04

Total operating expenses                10.17        10.39        10.80        10.65

Operating income                         4.62         4.40         3.89         4.27

Interest expense, net                    0.48         0.23         0.52         0.22
Other expense, net                       0.15         0.31         0.17         0.31

Income before income taxes               3.99         3.86         3.20         3.74

Income tax expense                       1.52         1.55         1.23         1.50

Net income                               2.47 %       2.31 %       1.97 %       2.24 %

Adjusted Operating Income and Earnings Per Share

The following tables present Adjusted Operating Income and Earnings Per Share for the three- and nine-month periods ending September 30, 2008 and 2007 (in millions, except per share data). The tables show Adjusted Operating Income and Earnings per Share excluding the effects of gains on the sale of buildings, the second quarter asset impairment charge related to RTS and the first quarter 2007 restructuring charge related to a workforce reduction. Generally Accepted Accounting Principles (GAAP) require that the effects of these items be included in the Condensed Consolidated Statements of Income. The Company believes that excluding these items is an appropriate comparison of its ongoing operating results to last year and that 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 GAAP.

                                                For the Three Months Ended September 30,
                                                     2008                       2007
                                                            % to                      % to
                                             Amount       Net Sales     Amount      Net Sales

Net Sales                                  $   1,337.9       100.00 %  $ 1,192.0       100.00 %

Gross profit                               $     197.9        14.79 %  $   176.3        14.79 %

Operating expenses                         $     136.1        10.17 %  $   123.9        10.39 %
Gain on sale of distribution centers               5.1         0.38 %          -            -
Adjusted operating expenses                $     141.2        10.55 %  $   123.9        10.39 %

Operating income                           $      61.8         4.62 %  $    52.4         4.40 %
Operating expense item noted above                (5.1 )      -0.38 %          -            -
Adjusted operating income                  $      56.7         4.24 %  $    52.4         4.40 %

Net income per share - diluted             $      1.39                 $    1.00
Per share operating expense item noted
above                                            (0.13 )                       -
Adjusted net income per share - diluted    $      1.26                 $    1.00

Adjusted net income per diluted share
growth rate over the prior year period              26 %

Weighted average number of common
shares - diluted                                  23.7                      27.6

                                                 For the Nine Months Ended September 30,
                                                     2008                       2007
                                                            % to                       % to
                                             Amount       Net Sales      Amount      Net Sales

Net Sales                                  $   3,841.7       100.00 %  $  3,526.5       100.00 %

Gross profit                               $     564.2        14.69 %  $    526.0        14.92 %

Operating expenses                         $     414.8        10.80 %  $    375.6        10.65 %
Asset impairment charge                           (6.7 )      -0.17 %           -            -
Gain on sale of distribution centers               5.1         0.13 %           -            -
Gain on sale of former corporate
headquarters                                       4.7         0.12 %           -            -
Restructuring charge related to
workforce reduction                                  -            -          (1.4 )      -0.04 %
Adjusted operating expenses                $     417.9        10.88 %  $    374.2        10.61 %

Operating income                           $     149.4         3.89 %  $    150.4         4.27 %
Operating expense item noted above                (3.1 )      -0.08 %         1.4         0.04 %
Adjusted operating income                  $     146.3         3.81 %  $    151.8         4.31 %

Net income per share - diluted             $      3.18                 $     2.73
Per share operating expense item noted
above                                            (0.08 )                     0.03
Adjusted net income per share - diluted    $      3.10                 $     2.76

Adjusted net income per diluted share
growth rate over the prior year period              12 %

Weighted average number of common
shares - diluted                                  23.9                       28.9

Results of Operations-Three Months Ended September 30, 2008 Compared with the Three Months Ended September 30, 2007

Net Sales. Net sales for the third quarter of 2008 were $1.34 billion, up 12.2%, or 10.5% adjusting for one additional selling day in 2008, compared with sales of $1.19 billion for the same three-month period of 2007. Excluding ORS Nasco, sales were $1.25 billion, an increase of 5.2% or 3.6% adjusting for one additional selling day in 2008. In general, the Company was able to pass supplier price increases through the supply chain. These price increases accounted for approximately 3% of the sales growth.

The following table summarizes net sales by product category for the three months ended September 30, 2008 and 2007 (in millions):

                                                      Three Months Ended September 30,
                                                         2008                2007 (1)
Technology products                                $             448     $             434
Office supplies (including cut-sheet paper)                      359                   344
Janitorial and breakroom supplies                                281                   240
Office furniture                                                 141                   155
Freight revenue                                                   24                    18
Industrial supplies                                               84                     -
Other                                                              1                     1
Total net sales                                    $           1,338     $           1,192

Sales in the technology products category in the third quarter of 2008 were up approximately 3%, or 2% per selling day, versus the third quarter of 2007. This category, which continues to represent the largest percentage of the Company's consolidated net sales, accounted for approximately 33% of net sales for the third quarter of 2008. Sales in this category were favorably impacted by increases in sales of printer imaging supplies.

Sales of office supplies in the third quarter of 2008 improved by approximately 4%, or 3% per selling day, versus the third quarter of 2007. This category experienced significant growth in cut-sheet paper which typically earns lower margins. This growth more than offset declining traditional office product sales. Office supplies represented approximately 27% of the Company's consolidated net sales for the third quarter of 2008.

Sales growth in the janitorial and breakroom supplies product category continued to be solid, rising over 17%, or 15% per selling day, in the third quarter of 2008 compared to the third quarter of 2007. This category accounted for approximately 21% of the Company's third quarter of 2008 consolidated net sales. Growth in this category was primarily due to the addition of a significant account late in 2007 and continued growth in foodservice consumables and paper-based janitorial/sanitation supplies.

Office furniture sales in the third quarter of 2008 decreased by approximately 9%, or 10% per selling day, compared to the same three-month period of 2007. This decline was due primarily to the overall poor economy as consumers were putting off discretionary, high dollar purchases such as furniture. Office furniture accounted for 11% of the Company's third quarter of 2008 consolidated net sales.

Sales of industrial supplies accounted for 6% of the Company's net sales for the third quarter of 2008 as the Company continued to see the benefits of its investment in ORS Nasco.

Freight and other revenues represented 2% of net sales for the third quarter of 2008. Freight revenues increased due to higher sales, increased delivery charges driven by carrier rate increases, and increased fuel surcharges which partially offset the impact of rising fuel costs.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the third quarter of 2008 was $197.9 million, compared to $176.3 million in the third quarter of 2007. The increase in gross profit dollars was mainly due to the addition of ORS Nasco. The gross margin rate (gross profit as a percentage of net sales) for the third quarter of 2008 was 14.8%, flat with the prior-year quarter. The gross margin rate for the third quarter of 2008 was favorably impacted by approximately 20 basis points contribution from ORS Nasco and 40 basis points of inventory standard cost changes related to supplier price increases. Many of the Company's product suppliers announced price increases which took effect during the third quarter and these increases resulted in a gross margin benefit in the quarter. Additional supplier price increases have been announced for the fourth quarter of 2008 as well. Gross margin benefits from product cost inflation are related to inventory standard cost changes as the Company passes these increases through the supply chain. However, the effects of lower margin sales mix across and within product categories negatively impacted pricing margin by 20 basis points and supplier allowances/purchase discounts by 25 basis points. Also, a higher investment in advertising programs and publications lowered the gross margin rate by 15 basis points, while cost reduction efforts contributed to offsetting inflationary increases, such as fuel cost.

Operating Expenses. Operating expenses for the third quarter of 2008 totaled $136.1 million, or 10.2% of net sales, compared with $123.9 million, or 10.4% of net sales in the third quarter of 2007. Excluding the $5.1 million pre-tax gain on the sale of two distribution centers, operating expenses as a percent of sales for the quarter were 10.6%. ORS Nasco operating expenses for the third quarter 2008 were $9.5 million. Operating expense increases were also due to a 25 basis point increase in bad debt costs. Approximately one half of the increase in bad debt costs reflected a specific dealer issue that was not related to the economy, while the remainder brought bad debt reserves to a slightly higher level than the Company's historic norm. Another 14 basis point increase in operating expenses was due to investments in strategic initiatives, including roll-out of our new e-catalog and information technology projects. These expense increases as well as general inflation were partially offset by cost reduction efforts particularly in employee related travel and entertainment (9 basis points). Also, depreciation expense was lower in the quarter by approximately 10 basis points.

Interest Expense, net. Interest expense for the third quarter of 2008 was $6.4 million, compared with $2.7 million for the same period in 2007. The increase in interest expense for the third quarter of 2008 was attributable to higher borrowings as the Company's debt increased by $341.1 million from September 30, 2007 to September 30, 2008. This increase was partially offset by reduced interest rates.

Other Expense, net. Other expense for the third quarter of 2008 was $2.1 million, compared with $3.7 million in the third quarter of 2007, due to a decrease in the loss on the sale of accounts receivable through the Company's Receivables Securitization Program and reductions in the outstanding balance of receivables sold as of September 30, 2008 compared to September 30, 2007.

Income Taxes. Income tax expense was $20.3 million for the third quarter of 2008, compared with $18.6 million for the same period in 2007. The Company's effective tax rates for the third quarter of 2008 and 2007 were 38.0% and 40.3%, respectively. The decline reflected lower tax contingencies.

Net Income. Net income for the third quarter of 2008 totaled $33.1 million, or $1.39 per diluted share, compared with net income of $27.5 million, or $1.00 per diluted share for the same three-month period in 2007. Adjusted for the impact . . .