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, 2008.

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.

Overview and Recent Results

The Company is a leading wholesale distributor of business products, with 2008 net sales of approximately $5.0 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.

As reported in the Company's press release dated July 30, 2009, month-to-date sales in July showed continued modest improvement on a sequential quarter basis, and were down approximately 5% from the prior year. Nonetheless, as employment and manufacturing trends continue to deteriorate, the Company expects to encounter some pressure on the top line in the second half of 2009.

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.

† While the rate of sales decline in the second quarter of 2009 improved sequentially from the first quarter, weak macro-economic conditions, including weakness in employment trends and manufacturing, had a negative effect on the Company's sales. Sales for the second quarter of 2009 were $1.16 billion, a decline of 7.4% from the same period in the prior year. Sales rose in the janitorial/breakroom category, but were lower in all other categories versus the prior year quarter.

† Gross margin as a percent of sales for the second quarter of 2009 was 14.1%, down 44 basis points from the second quarter of 2008. Gross margin in the second quarter reflected downward pressure from a lower margin sales mix and a decline in supplier allowances and purchase discounts resulting from lower purchase volumes. Significantly lower fuel costs combined with cost reduction actions and modestly favorable inventory-related items partially offset these pressures.

† Operating expenses as a percent of sales for the second quarter of 2009 were 10.5 % compared to 11.1% for the same quarter of the prior year. Operating expenses in the 2008 quarter were 10.9% of sales after excluding a net charge of $2.0 million from an asset impairment of capitalized software development costs partially offset by a gain on the sale of the Company's former headquarters building. Operating expenses were down as a result of the cost reduction actions taken in payroll, bonus, travel, professional services, and distribution-related costs. These savings were partially offset by an increase in bad debt provisions related to continued weak economic conditions. However, the bad debt reserves increased at a lower rate than in the first quarter of 2009.

† Net cash provided by operating activities for the first six months of 2009 was $243.0 million versus $63.0 million in the same period last year. Excluding the impact of accounts receivable sold, net cash provided by operating activities for the latest quarter was $266.0 million versus $61.0 million in the 2008 quarter. The increase in operating cash flows for the first half of 2009 was driven by reductions in working capital requirements which are not expected to repeat in the second half of 2009.

† Outstanding debt totaled $471.8 million at June 30, 2009 versus adjusted outstanding debt, including accounts receivable sold, of $716.8 million at June 30, 2008. The $245.0 million reduction in adjusted debt was the result of the Company's strong operating cash flows and brought the Company's debt-to-total capitalization to 43.2% at June 30, 2009 from 56.2% at June 30, 2008. The decline in adjusted debt led to a reduction in interest and other expense of $1.5 million from the prior year quarter.

† No shares were repurchased in the first six months of 2009. As of July 30, 2009, the Company had $100.9 million remaining of existing share repurchase authorization from the Board of Directors.

† During the first quarter of 2009, the Company entered into a new accounts receivable securitization program (the "2009 Receivables Securitization Program" or the "2009 Program") that was structured to maintain the related accounts receivable and debt on its balance sheet with costs of this 2009 Program now included within "Interest Expense, net". In contrast, the previous securitization facility was structured for off-balance sheet treatment with costs included in "Other Expense, net".

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, 2008.

Stock Repurchase Program

No shares were repurchased in the first six months of 2009. During the first six months of 2008, the Company repurchased 1.2 million shares at an aggregate cost of $67.5 million with all such activity occurring in the first quarter of 2008. At June 30, 2009, the Company had $100.9 million remaining of existing share repurchase authorization from the Board of Directors.

Critical Accounting Policies, Judgments and Estimates

During the second quarter of 2009, 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, 2008.

Results of Operations



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



                                         Three Months Ended         Six Months Ended
                                              June 30,                  June 30,
                                         2009         2008         2009         2008

   Net sales                              100.00 %     100.00 %     100.00 %     100.00 %
   Cost of goods sold                      85.90        85.46        85.63        85.37
   Gross margin                            14.10        14.54        14.37        14.63

   Operating expenses
   Warehousing, marketing and
   administrative expenses                 10.54        11.09        11.15        11.13
   Restructuring charge                        -            -         0.15            -

   Total operating expenses                10.54        11.09        11.30        11.13

   Operating income                         3.56         3.45         3.07         3.50

   Interest expense, net                    0.60         0.51         0.62         0.55
   Other expense, net                          -         0.16         0.01         0.17

   Income before income taxes               2.96         2.78         2.44         2.78

   Income tax expense                       1.13         1.06         0.92         1.07

   Net income                               1.83 %       1.72 %       1.52 %       1.71 %

Adjusted Operating Income and Earnings Per Share

The following tables present Adjusted Operating Income and Earnings Per Share for the three- and six-month periods ended June 30, 2009 and 2008 (in millions, except per share data). The tables show Adjusted Operating Income and Earnings per Share excluding the effects of the first quarter 2009 severance charge, the second quarter 2008 gain on the sale of the Company's former headquarters building, and the second quarter 2008 asset impairment charge related to capitalized software development costs. Generally Accepted Accounting Principles (GAAP) require that the effect 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 June 30,
                                             2009                       2008
                                                    % to                       % to
                                      Amount      Net Sales      Amount      Net Sales

Sales                               $  1,159.2       100.00 %  $  1,251.3       100.00 %

Gross profit                        $    163.4        14.10 %  $    182.0        14.54 %

Operating expenses                  $    122.2        10.54 %  $    138.8        11.09 %
Asset impairment charge                      -            -          (6.7 )      (0.54 )%
Gain on the sale of the former
corporate headquarters                       -            -           4.7         0.38 %
Adjusted operating expenses         $    122.2        10.54 %  $    136.8        10.93 %

Operating income                    $     41.2         3.56 %  $     43.2         3.45 %
Operating expense item noted
above                                        -            -           2.0         0.16 %
Adjusted operating income           $     41.2         3.56 %  $     45.2         3.61 %

Net income per share - diluted      $     0.88                 $     0.91
Per share operating expense item
noted above                                  -                       0.05
Adjusted net income per share -
diluted                             $     0.88                 $     0.96

Weighted average number of
common shares - diluted                   24.0                       23.7




                                            For the Six Months Ended June 30,
                                             2009                       2008
                                                    % to                       % to
                                      Amount      Net Sales      Amount      Net Sales

Sales                               $  2,280.5       100.00 %  $  2,503.8       100.00 %

Gross profit                        $    327.7        14.37 %  $    366.3        14.63 %

Operating expenses                  $    257.6        11.30 %  $    278.7        11.13 %
Severance charge related to
workforce reduction                       (3.4 )      (0.15 )%          -            -
Asset impairment charge                      -            -          (6.7 )      (0.27 )%
Gain on the sale of the former
corporate headquarters                       -            -           4.7         0.19 %
Adjusted operating expenses         $    254.2        11.15 %  $    276.7        11.05 %

Operating income                    $     70.1         3.07 %  $     87.6         3.50 %
Operating expense item noted
above                                      3.4         0.15 %         2.0         0.08 %
Adjusted operating income           $     73.5         3.22 %  $     89.6         3.58 %

Net income per share - diluted      $     1.45                 $     1.79
Per share operating expense item
noted above                               0.09                       0.05
Adjusted net income per share -
diluted                             $     1.54                 $     1.84

Weighted average number of
common shares - diluted                   23.8                       24.0

Results of Operations-Three Months Ended June 30, 2009 Compared with the Three Months Ended June 30, 2008

Net Sales. Net sales for the second quarter of 2009 were $1.16 billion, down 7.4% compared with sales of $1.25 billion for the same three-month period of 2008. The following table summarizes net sales by product category for the three-month periods ended June 30, 2009 and 2008 (in millions):

                                                               Three Months Ended June 30,
                                                                2009              2008 (1)
Technology products                                        $           405     $           429
Traditional office products (including cut-sheet paper)                308                 327
Janitorial and breakroom supplies                                      281                 265
Office furniture                                                        85                 127
Industrial supplies                                                     58                  79
Freight revenue                                                         20                  22
Other                                                                    2                   2
Total net sales                                            $         1,159     $         1,251

Sales in the technology products category declined in the second quarter of 2009 by approximately 6% versus the second quarter of 2008. This category, which continues to represent the largest percentage of the Company's consolidated net sales, accounted for approximately 35% of net sales for the second quarter of 2009. The more discretionary products including printers, computer accessories and visual communication products saw significant declines while everyday consumables such as inkjet and laser printer cartridges outperformed the overall category. The Company's Innovera private brand products had positive growth during the quarter and also outperformed the category, underscoring the value these products bring to consumers.

Sales of traditional office supplies declined in the second quarter of 2009 by approximately 6% versus the second quarter of 2008. Traditional office supplies represented approximately 27% of the Company's consolidated net sales for the second quarter of 2009. The decline in this category reflected declines in durable products, while cut-sheet paper sales, which typically earn lower margins, grew modestly.

Sales in the janitorial and breakroom supplies product category increased 6% in the second quarter of 2009 compared to the second quarter of 2008. This category accounted for approximately 24% of the Company's second quarter of 2009 consolidated net sales. Growth initiatives, including "OfficeJan", "Jan-Dustrial" and the Company's ongoing success in converting direct sales to wholesale, helped drive the sales improvements. The Company also leveraged its value proposition in the marketplace to earn new business during the quarter from competitive market share conversions. Finally, during the second quarter of 2009, sales of sanitary products were positively affected by higher H1N1 flu-related product sales.

Office furniture sales in the second quarter of 2009 decreased by approximately 33% compared to the same three-month period of 2008. Office furniture accounted for 7% of the Company's second quarter of 2009 consolidated net sales. Since furniture products are often discretionary, this category continues to be negatively affected by the recession. The Company's Alera private brand outperformed the balance of the Company's overall furniture category - consistent with the broader consumer trend toward value.

Industrial sales in the second quarter of 2009 declined 27% compared to the same prior year period and have been adversely affected by current market conditions. Sales of industrial supplies accounted for 5% of the Company's net sales for the second quarter of 2009. This decline reflected the continued decline in United States manufacturing, pipeline, and commercial construction activity, combined with continued de-stocking in the distributor channel. The Company has won a number of new customers, primarily in the welding, industrial and safety verticals, as a result of its capacity to sell a more diversified product solution to resellers.

The remaining 2% of the Company's second quarter 2009 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the second quarter of 2009 was $163.4 million, compared to $182.0 million in the second quarter of 2008, while the Company's gross margin rate of 14.1% was down from the prior year quarter's 14.5%. A mix shift to value-oriented consumables resulted in lower pricing margin (invoice price less cost of sales) of 35 basis points while lower purchase volumes resulted in lower supplier allowances and purchase discounts of 70 basis points. These declines in the margin rate were partially offset by lower fuel costs and success with cost reduction projects related to freight (45 basis points), and modestly favorable credit memos and returns and inventory-related margin items. Inventory related margin items were negatively affected by reduced inflation versus the prior year quarter, with some products experiencing deflation, offset by a favorable last-in, first-out ("LIFO") adjustment due to the reduced inventory levels.

Operating Expenses. Operating expenses for the second quarter of 2009 totaled $122.2 million, or 10.5% of net sales, compared with $138.8 million, or 11.1% of net sales in the second quarter of 2008. Included in the second quarter 2008 amount is $6.7 million for an asset impairment charge related to capitalized software development costs and a $4.7 million gain on the sale of the Company's former headquarters. Adjusting for these items, operating expenses for the second quarter 2008 were $136.8 million or 10.9% of sales. The decline in operating expenses as a percentage of sales was due to the achievement of the full benefit of the cost reduction actions initiated earlier this year. These cost reduction initiatives targeted labor (20 basis points favorable), travel (20 basis points favorable), and professional services (20 basis points favorable). These cost savings were partially offset by higher bad debt provisions (10 basis points) and increased fringe benefits due to rising healthcare costs (10 basis points).

Interest and Other Expense, net. Interest and other expense for the second quarter of 2009 was $6.9 million, down from $8.4 million for the same period in 2008. The $1.5 million decrease included a $2.0 million decline associated with the sale of certain receivables as a part of the Company's Prior Receivables Securitization Program, which was terminated during the first quarter of 2009. This was offset by $0.5 million of expense related to higher borrowings under the Company's revolving credit facility and a higher average borrowing rate.

Income Taxes. Income tax expense was $13.1 million for the second quarter of 2009, compared with $13.3 million for the same period in 2008. The Company's effective tax rate was 38.3% for both the second quarters of 2009 and 2008.

Net Income. Net income for the second quarter of 2009 totaled $21.2 million, or $0.88 per diluted share, compared with net income of $21.5 million, or $0.91 per diluted share for the same three-month period in 2008. Adjusted for the impact of the net $2.0 million charge for the asset impairment and the gain on sale of the Company's former headquarters, second quarter 2008 diluted earnings per share were $0.96.

Results of Operations-Six Months Ended June 30, 2009 Compared with the Six Months Ended June 30, 2008

Net Sales. Net sales for the first six months of 2009 were $2.28 billion, down 8.2% per selling day compared with sales of $2.50 billion for the same six-month period of 2008. The following table summarizes net sales by product category for the six-month periods ended June 30, 2009 and 2008 (in millions):

                                                             Six Months Ended June 30,
                                                               2009           2008 (1)
Technology products                                        $         795    $         855
Traditional office products (including cut-sheet paper)              624              676
Janitorial and breakroom supplies                                    530              518
Office furniture                                                     173              257
Industrial supplies                                                  116              151
Freight revenue                                                       40               44
Other                                                                  3                3
Total net sales                                            $       2,281    $       2,504

Sales in the technology products category declined in the first half of 2009 by approximately 6% per selling day versus the first half of 2008. This category, which continues to represent the largest percentage of the Company's consolidated net sales, accounted for approximately 35% of net sales for the first half of 2009. Discretionary products in this category declined significantly while consumables outperformed the overall category.

Sales of traditional office supplies declined in the first half of 2009 by approximately 7% per selling day versus the first half of 2008. Traditional office supplies represented approximately 27% of the Company's consolidated net sales for the first half of 2009. The decline in this category reflected declines in durable products, while cut-sheet paper sales grew modestly.

Sales in the janitorial and breakroom supplies product category increased 3% per selling day in the first half of 2009 compared to the first half of 2008. This category accounted for approximately 23% of the Company's first half of 2009 consolidated net sales. Growth was driven by sales in the "OfficeJan" and "Jan-Dustrial" segments along with the Company's ongoing success in converting direct sales to wholesale. Finally, sales of sanitary products were positively affected by higher H1N1 flu-related product sales.

Office furniture sales in the first half of 2009 decreased by approximately 32% per selling day compared to the same six-month period of 2008. Office furniture accounted for 8% of the Company's first half of 2009 consolidated net sales. Furniture product sales were negatively affected by the recession.

Industrial supplies sales in the first half of 2009 declined 23% per selling day compared to the same prior year period. Sales of industrial supplies accounted for 5% of the Company's net sales for the first half of 2009. This decline reflected the decline in United States manufacturing, pipeline, and commercial construction activity, combined with continued de-stocking in the distributor channel.

The remaining 2% of the Company's first half 2009 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the first half of 2009 was $327.7 million, compared to $366.3 million in the first half of 2008, while the Company's gross margin rate of 14.4% was 25 basis points lower than the prior year. A mix shift to value-oriented consumables resulted in lower pricing margin (invoice price less cost of sales) of 15 basis points while lower purchase volumes resulted in lower supplier allowances and purchase discounts of 65 basis points. The de-leveraging impact of lower sales also negatively impacted the margin rate by 15 basis points related to occupancy costs which are primarily fixed. These declines in the margin rate were partially offset by lower fuel costs and success with cost reduction projects related to freight (35 basis points) and inventory related margin items (35 basis points). Inventory related margin items were favorably affected by increased year-to-date inflation versus the prior year and a favorable LIFO adjustment due to reduced inventory levels.

Operating Expenses. Operating expenses for the first half of 2009 totaled $257.6 million, or 11.3% of net sales, compared with $278.7 million, or 11.1% of net sales in the first half of 2008. Included in the first half 2008 amount is $6.7 million for an asset impairment charge related to capitalized software development costs and a $4.7 million gain on the sale of the Company's former headquarters. The first half 2009 includes $3.4 million of severance costs. Adjusting for these items, operating expenses for the first half of 2009 were $254.2 million or 11.2% of sales versus $276.7 million or 11.1% of sales in the first half of 2008. The increase in operating expenses as a percentage of sales was due to higher bad debt provisions (15 basis points) and increased fringe benefits due to rising healthcare costs (10 basis points). In addition, while compensation costs were down $9.8 million in the first six months of 2009, the de-leveraging effect of lower sales caused these expenses to increase by 15 . . .