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 65 distribution centers to approximately 30,000 resellers, who in turn sell directly to end consumers.

As reported in the Company's press release dated October 30, 2009, month-to-date sales in October were tracking about even with the prior year. Sequentially, though, sales were benefitting from prior-year timing shifts and a decrease in last year's fourth quarter when economic activity dropped off. The Company has continued to see a positive impact from its internal initiatives and sales of flu-related products.

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.

† Macro-economic conditions have shown some signs of stabilization, despite weak unemployment trends and manufacturing activity, which are key economic indicators for the Company's business. Sales in the third quarter of 2009 declined by 6.8% to $1.25 billion, compared with last year's $1.34 billion. Revenue for the quarter was negatively affected by weak economic conditions across all product categories. However, the year-over-year rate of decline within the office products and furniture categories slowed marginally in the third quarter compared with the second quarter, while the janitorial/breakroom category experienced slightly greater growth from flu-related product demand and growth initiatives. The technology supplies category saw a slightly greater decline from the second quarter, reflecting timing shifts versus the prior year. Sales within the industrial supplies category continued to be negatively affected by distributor destocking and the current weakness in U.S. manufacturing, oil and gas pipeline, and commercial construction spending.

† Gross margin as a percent of sales for the third quarter of 2009 was 14.8%, flat versus last year. Gross margin benefited from reduced freight costs resulting from lower fuel costs and the Company's War on Waste (WOW) project and lower inventory obsolescence charges resulting from inventory management initiatives. Offsetting these positive factors were significantly lower product inflation, which depressed inventory-related margins, and continued margin pressure from the mix of products sold being skewed towards the lower-margin commodity and value-focused items.

† Operating expenses as a percent of sales for the third quarter of 2009 were 10.1 % compared to 10.2% for the same quarter of the prior year. Operating expenses in the 2008 quarter were 10.6% of sales after excluding a gain on the sale of two distribution centers. This decline in operating expenses reflected the full benefit of the cost reduction actions initiated earlier this year as well as ongoing WOW savings. Employee related costs and discretionary spending declined versus the prior year quarter and bad debt provisions were lower as the need to increase accounts receivable reserves slowed.

† Net cash provided by operating activities for the first nine months of 2009 was $294.5 million versus $65.4 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 $317.5 million versus $91.4 million in the same period in 2008. The increase in operating cash flows for the first nine months of 2009 was driven by reductions in working capital requirements including reduced inventories, improved payables leverage, and stabilizing receivables trends.

† Outstanding debt totaled $441.8 million at September 30, 2009 versus adjusted outstanding debt, including accounts receivable sold, of $713.8 million at September 30, 2008. The $272.0 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 40.3% at September 30, 2009 from 54.7% at September 30, 2008. The decline in adjusted debt led to a reduction in interest and other expense of $1.8 million from the prior year quarter.

† Net income was $33.5 million for the third quarter of 2009 versus $33.1 million in the prior-year quarter. In addition to the factors mentioned above, third quarter 2009 net income was positively impacted by lower charges related to the receivables securitization facility due to significantly lower funding needs and a lower effective tax rate from favorable income tax resolutions.

† Diluted earnings per share for the 2009 quarter were $1.38, down slightly from $1.39 in the prior-year quarter. Adjusted for the gain on sale of two buildings in the 2008 period, diluted earnings per share for the 2008 quarter were $1.26.

† 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 nine months of 2009. During the first nine 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 September 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 third 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          Nine Months Ended
                                 September 30,               September 30,
                               2009          2008          2009          2008

Net sales                       100.00 %      100.00 %      100.00 %      100.00 %
Cost of goods sold               85.17         85.21         85.47         85.31
Gross margin                     14.83         14.79         14.53         14.69

Operating expenses
Warehousing, marketing
and administrative
expenses                         10.13         10.17         10.88         10.80

Operating income                  4.70          4.62          3.65          3.89

Interest expense, net             0.53          0.48          0.59          0.52
Other expense, net                   -          0.15          0.01          0.17

Income before income
taxes                             4.17          3.99          3.05          3.20

Income tax expense                1.48          1.52          1.12          1.22

Net income                        2.69 %        2.47 %        1.93 %        1.98 %

Adjusted Operating Income, Net Income and Earnings Per Share

The following tables present Adjusted Operating Income, Net Income and Earnings Per Share for the three- and nine-month periods ended September 30, 2009 and 2008 (in millions, except per share data). The tables show Adjusted Operating Income, Net 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, the second quarter 2008 asset impairment charge related to capitalized software development costs, and the third quarter 2008 gain on the sale of two distribution centers. 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 September 30,
                                             2009                       2008
                                                    % to                       % to
                                     Amount       Net Sales      Amount      Net Sales

Net Sales                          $   1,246.7       100.00 %  $  1,337.9       100.00 %

Gross profit                       $     184.9        14.83 %  $    197.9        14.79 %

Operating expenses                 $     126.3        10.13 %  $    136.1        10.17 %
Gain on sale of distribution
centers                                      -            -           5.1         0.38 %
Adjusted operating expenses        $     126.3        10.13 %  $    141.2        10.55 %

Operating income                   $      58.6         4.70 %  $     61.8         4.62 %
Operating expense item noted
above                                        -            -          (5.1 )      (0.38 )%
Adjusted operating income          $      58.6         4.70 %  $     56.7         4.24 %

Net Income                         $      33.5         2.69 %  $     33.1         2.47 %
Operating expense item noted
above, net of tax                            -            -          (3.2 )      (0.24 )%
Adjusted net income                $      33.5         2.69 %  $     29.9         2.23 %

Net income per share - diluted     $      1.38                 $     1.39
Per share operating expense
item noted above                             -                      (0.13 )
Adjusted net income per share -
diluted                            $      1.38                 $     1.26

Weighted average number of
common shares - diluted                   24.2                       23.7

                                        For the Nine Months Ended September 30,
                                            2009                       2008
                                                   % to                       % to
                                     Amount      Net Sales      Amount      Net Sales

Net Sales                          $  3,527.2       100.00 %  $  3,841.7       100.00 %

Gross profit                       $    512.6        14.53 %  $    564.2        14.69 %

Operating expenses                 $    383.9        10.88 %  $    414.8        10.80 %
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                      (3.4 )      (0.09 )%          -            -
Adjusted operating expenses        $    380.5        10.79 %  $    417.9        10.88 %

Operating income                   $    128.7         3.65 %  $    149.4         3.89 %
Operating expense item noted
above                                     3.4         0.09 %        (3.1 )      (0.08 )%
Adjusted operating income          $    132.1         3.74 %  $    146.3         3.81 %

Net Income                         $     68.1         1.93 %  $     75.9         1.98 %
Operating expense item noted
above, net of tax                         2.1         0.06 %        (1.9 )      (0.05 )%
Adjusted net income                $     70.2         1.99 %  $     74.0         1.93 %

Net income per share - diluted     $     2.85                 $     3.18
Per share operating expense
item noted above                         0.09                      (0.08 )
Adjusted net income per share -
diluted                            $     2.94                 $     3.10

Weighted average number of
common shares - diluted                  23.9                       23.9

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

Net Sales. Net sales for the third quarter of 2009 were $1.25 billion, down 6.8% compared with sales of $1.34 billion for the same three-month period of 2008. The following table summarizes net sales by product category for the three-month periods ended September 30, 2009 and 2008 (in millions):

                                                     Three Months Ended September 30,
                                                         2009                2008 (1)
Technology products                               $              417     $            448
Traditional office products (including
cut-sheet paper)                                                 342                  359
Janitorial and breakroom supplies                                307                  281
Office furniture                                                  99                  141
Industrial supplies                                               59                   82
Freight revenue                                                   21                   25
Other                                                              2                    2
Total net sales                                   $            1,247     $          1,338

Sales in the technology products category declined in the third quarter of 2009 by approximately 7% versus the third quarter of 2008. 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 2009. The sales decline in the third quarter is slightly more than the 6% decline experienced in the second quarter of 2009. Contributing to this decline was a sales timing difference versus last year when there were significant price increases in the category that went into effect on October 1, 2008. This was particularly true for the printer consumables category which saw a sales shift from the fourth quarter of 2008 into the third quarter. Increased penetration and sales of the Company's Innovera private brand products, mainly in imaging and supplies, partially offset this negative timing impact on the third quarter of 2009 sales growth rate.

Sales of traditional office supplies declined in the third quarter of 2009 by approximately 5% versus the third quarter of 2008. Traditional office supplies represented approximately 27% of the Company's consolidated net sales for the third quarter of 2009. While this third quarter growth rate was slightly better than the 6% decline in the second quarter of 2009, the decline reflected weak demand in durable products, while cut-sheet paper sales, which typically earn lower margins, grew modestly. Consumers remain focused on consumable commodities such as cut-sheet paper while delaying new replacement purchases of discretionary items.

Sales in the janitorial and breakroom supplies product category increased 9% in the third quarter of 2009 compared to the third quarter of 2008. This category accounted for approximately 25% of the Company's third quarter of 2009 consolidated net sales. This represents a sequential improvement from a 6% increase in the second quarter and reflects the focus on sales growth initiatives and the ongoing lift from sales of flu-related products which were in high demand.

Office furniture sales in the third quarter of 2009 decreased by approximately 30% compared to the same three-month period of 2008. Office furniture accounted for 8% of the Company's third quarter of 2009 consolidated net sales. While this represents a sequential improvement from the 33% decline seen in the second quarter, furniture products are still being negatively affected by the recession. The Company's Alera private brand, however, did continue to outperform the overall category as end users continue to migrate towards more economical value-driven alternatives.

Industrial sales in the third quarter of 2009 declined 28% 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 third quarter of 2009. This decline is slightly higher than the second quarter decline of 27% and reflects the continuing effects of a sharp decline in manufacturing, pipeline, and commercial construction activity combined with de-stocking in the distributor channel.

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 third quarter of 2009 was $184.9 million, compared to $197.9 million in the third quarter of 2008, while the Company's gross margin rate of 14.8% was flat with the prior year quarter. Margins benefited from reduced freight costs (35 basis points or bps) which reflect the success with War on Waste (WOW) projects and lower fuel costs year-over-year. In addition, lower inventory obsolescence charges (15 bps) resulted from progress with stock-keeping units (SKU) rationalization and inventory management initiatives. Modestly favorable customer returns also contributed to margin (15 bps). These improvements in the margin rate were offset by significantly lower product inflation versus last year which depressed inventory-related margins (55 bps). Continued margin pressure from the mix of products being sold being skewed towards lower-margin commodity and value-focused items also had a negative impact on the margin rate (15 bps). The remaining changes in the gross margin rate were due to favorable supplier allowances ratios as a percent to sales versus the prior year quarter offset by unfavorable occupancy charges as a percent of net sales versus the prior year quarter.

Operating Expenses. Operating expenses for the third quarter of 2009 totaled $126.3 million, or 10.1% of net sales, compared with $136.1 million, or 10.2% of net sales in the third quarter of 2008. Included in the third quarter 2008 amount is a $5.1 million gain on the sale of two distribution centers. Adjusting for this item, operating expenses for the third quarter 2008 were $141.2 million or 10.6% of sales. The decline in operating expenses as a percentage of sales was due to the full benefit of the cost reduction actions initiated earlier this year as well as continued WOW savings. These cost reduction initiatives targeted employee related costs (31 bps favorable) including salaries, bonus, and travel and entertainment expenses. These favorable changes were partially offset by increasing healthcare costs (16 bps). Other favorable changes versus the prior year quarter include reductions in discretionary spending including professional services (10 bps favorable). The operating expense ratio was also aided by lower bad debt expense of $1.8 million in the quarter (10 bps) as the need to increase accounts receivables reserves slowed.

Interest and Other Expense, net. Interest and other expense for the third quarter of 2009 was $6.6 million, down from $8.4 million for the same period in 2008 as a result of strong cash flow performance that has led to reduced funding needs.

Income Taxes. Income tax expense was $18.5 million for the third quarter of 2009, compared with $20.3 million for the same period in 2008. The Company's effective tax rate was 35.6% for the third quarter of 2009 and 38.0% for the same period in 2008. The lower rate resulted from favorable resolution of certain tax positions in the quarter.

Net Income. Net income for the third quarter of 2009 totaled $33.5 million, or $1.38 per diluted share, compared with net income of $33.1 million, or $1.39 per diluted share for the same three-month period in 2008. Adjusted for the impact of the net $3.2 million gain on sale of the two distribution centers in the third quarter of 2008, net income was $29.9 million and diluted earnings per share were $1.26.

Results of Operations-Nine Months Ended September 30, 2009 Compared with the Nine Months Ended September 30, 2008

Net Sales. Net sales for the first nine months of 2009 were $3.53 billion, down 7.7% per selling day compared with sales of $3.84 billion for the same nine-month period of 2008. The following table summarizes net sales by product category for the nine-month periods ended September 30, 2009 and 2008 (in millions):

                                                    Nine Months Ended September 30,
                                                      2009                2008 (1)
Technology products                             $           1,212     $           1,303
Traditional office products (including
cut-sheet paper)                                              966                 1,035
Janitorial and breakroom supplies                             837                   799
Office furniture                                              272                   398
Industrial supplies                                           175                   233
Freight revenue                                                61                    69
Other                                                           4                     5
Total net sales                                 $           3,527     $           3,842

Sales in the technology products category declined in the first nine months of 2009 by 6.5% per selling day versus the first nine months of 2008. This category, which continues to represent the largest percentage of the Company's consolidated net sales, accounted for approximately 34% of net sales for the first nine months of 2009. Discretionary products in this category declined significantly while consumables outperformed the overall category. Contributing to this decline was a sales timing difference versus last year when there were significant price increases in the category that went into effect on October 1, 2008. This was particularly true for the printer consumables category which saw a sales shift from the fourth quarter of 2008 into the third quarter. Increased penetration and sales of the Company's Innovera private brand products, mainly in imaging and supplies, partially offset this negative timing impact.

Sales of traditional office supplies declined in the first nine months of 2009 by approximately 6% per selling day versus the first nine months of 2008. Traditional office supplies represented approximately 27% of the Company's consolidated net sales for the first nine months 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 over 5% per selling day in the first nine months of 2009 compared to the first nine months of 2008. This category accounted for approximately 24% of the Company's year-to-date 2009 consolidated net sales. Growth was driven by selling janitorial and breakroom products across other channels, including to office products dealers and industrial supplies distributors, along with the Company's ongoing success in converting manufacturers' 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 nine months of 2009 decreased by approximately 31% per selling day compared to the same nine-month period of . . .