(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 October ~~19, 2015,~~24, 2016, the registrant had outstanding ~~37,391,273~~36,968,408 shares of common stock, par value $0.10 per share.

	(Unaudited)			(Unaudited)			(Unaudited)			(Audited)
	As of September 30,			As of December 31,			As of September 30,			As of December 31,
	2015			2014 (Revised)			2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	28,047		$	20,812		$	22,647		$	29,983
Accounts receivable, less allowance for doubtful accounts of $18,079 in 2015 and $19,725 in 2014		737,979			702,527
Accounts receivable, less allowance for doubtful accounts of $16,696 in 2016 and $17,810 in 2015								752,260			716,537
Inventories		860,355			906,430			850,463			922,162
Other current assets		31,946			30,713			44,771			27,310
Total current assets		1,658,327			1,660,482			1,670,141			1,695,992
Property, plant and equipment, net		129,744			138,217			126,334			133,751
Goodwill		413,178			398,042			298,242			299,355
Intangible assets, net		102,760			111,958			86,886			96,413
Other long-term assets		36,282			38,669			55,059			37,348
Total assets	$	2,340,291		$	2,347,368		$	2,236,662		$	2,262,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	540,949		$	485,241		$	540,743		$	531,949
Accrued liabilities		186,826			185,535			192,189			177,472
Current maturities of long-term debt		43			851			35			51
Total current liabilities		727,818			671,627			732,967			709,472
Deferred income taxes		15,119			17,763			8,372			11,901
Long-term debt		666,142			709,917			620,155			716,264
Other long-term liabilities		98,621			104,394			92,535			101,488
Total liabilities		1,507,700		��	1,503,701			1,454,029			1,539,125
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2015 and 2014		7,444			7,444
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2016 and 2015								7,444			7,444
Additional paid-in capital		408,475			412,291			406,964			410,927
Treasury stock, at cost – 36,874,672 shares in 2015 and 35,719,041 shares in 2014		(1,090,624	)		(1,042,501	)
Treasury stock, at cost – 36,967,378 shares in 2016 and 37,178,394 shares in 2015								(1,097,094	)		(1,100,867	)
Retained earnings		1,564,816			1,529,224			1,514,573			1,463,821
Accumulated other comprehensive loss		(57,520	)		(62,791	)		(49,254	)		(57,591	)
Total stockholders’ equity		832,591			843,667			782,633			723,734
Total liabilities and stockholders’ equity	$	2,340,291		$	2,347,368		$	2,236,662		$	2,262,859

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2015		2014 (Revised)		2015		2014 (Revised)		2016		2015		2016		2015
Net sales	$	1,391,545	$	1,419,947	$	4,065,719	$	3,994,123	$	1,407,504	$	1,391,545	$	4,114,323	$	4,065,719
Cost of goods sold		1,166,402		1,203,246		3,430,062		3,400,992		1,208,650		1,166,402		3,519,564		3,430,062
Gross profit		225,143		216,701		635,657		593,131		198,854		225,143		594,759		635,657
Operating expenses:
Warehousing, marketing and administrative expenses		172,159		148,831		526,653		438,538		138,107		172,159		463,410		526,653
Defined benefit plan settlement loss (Note 10)										419		-		12,163		-
Operating income		52,984		67,870		109,004		154,593		60,328		52,984		119,186		109,004
Interest expense, net		5,300		3,992		14,918		11,199		6,484		5,300		18,058		14,918
Income before income taxes		47,684		63,878		94,086		143,394		53,844		47,684		101,128		94,086
Income tax expense		20,017		23,647		42,594		53,349		17,102		20,017		34,923		42,594
Net income	$	27,667	$	40,231	$	51,492	$	90,045	$	36,742	$	27,667	$	66,205	$	51,492
Net income per share - basic:	$	0.74	$	1.05	$	1.36	$	2.32	$	1.00	$	0.74	$	1.81	$	1.36
Average number of common shares outstanding - basic		37,300		38,450		37,724		38,817		36,578		37,300		36,560		37,724
Net income per share - diluted:	$	0.74	$	1.03	$	1.35	$	2.29	$	0.99	$	0.74	$	1.79	$	1.35
Average number of common shares outstanding - diluted		37,608		38,884		38,109		39,244		36,938		37,608		36,896		38,109
Dividends declared per share	$	0.14	$	0.14	$	0.42	$	0.42	$	0.14	$	0.14	$	0.42	$	0.42

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2015			2014 (Revised)			2015			2014 (Revised)			2016			2015			2016			2015
Net income	$	27,667		$	40,231		$	51,492		$	90,045		$	36,742		$	27,667		$	66,205		$	51,492
Other comprehensive income, net of tax
Other comprehensive income (loss), net of tax
Translation adjustments		7,497			(1,395	)		3,076			(1,378	)		(692	)		7,497			2,441			3,076
Minimum pension liability adjustments		967			606			2,831			1,767			(2,298	)		967			6,035			2,831
Cash flow hedge adjustments		(208	)		446			(636	)		(339	)		288			(208	)		(139	)		(636	)
Total other comprehensive gain (loss), net of tax		8,256			(343	)		5,271			50
Total other comprehensive income (loss), net of tax														(2,702	)		8,256			8,337			5,271
Comprehensive income	$	35,923		$	39,888		$	56,763		$	90,095		$	34,040		$	35,923		$	74,542		$	56,763

	For the Nine Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015			2014 (Revised)			2016			2015
Cash Flows From Operating Activities:
Net income	$	51,492		$	90,045		$	66,205		$	51,492
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		36,344			29,699			34,199			36,344
Share-based compensation		6,447			5,935			6,903			6,447
Loss on the disposition of property, plant and equipment		1,562			97
(Gain) loss on the disposition of property, plant and equipment								(21,027	)		1,562
Amortization of capitalized financing costs		659			657			502			659
Excess tax benefits related to share-based compensation		(402	)		(1,166	)
Excess tax cost (benefit) related to share-based compensation								960			(402	)
Asset impairment charges		34,893			-			-			34,893
Loss on sale of equity investment		33			-			-			33
Deferred income taxes		(15,285	)		(9,134	)		(6,970	)		(15,285	)
Changes in operating assets and liabilities (net of acquisitions):
Pension settlement charge								12,163			-
Changes in operating assets and liabilities:
Increase in accounts receivable, net		(31,288	)		(104,540	)		(35,457	)		(31,288	)
Decrease in inventory		54,354			51,974			73,735			54,354
(Increase) decrease in other assets		(8,720	)		10,000
Increase in other assets								(35,221	)		(8,720	)
Increase in accounts payable		8,972			24,663			8,902			50,412
Increase (decrease) in checks in-transit		41,440			(2,679	)
Increase in accrued liabilities		6,500			2,883			13,659			6,500
Decrease in other liabilities		(3,342	)		(4,768	)		(12,585	)		(3,342	)
Net cash provided by operating activities		183,659			93,666			105,968			183,659
Cash Flows From Investing Activities:
Capital expenditures		(18,133	)		(15,431	)		(28,167	)		(18,133	)
Proceeds from the disposition of property, plant and equipment		184			872			33,890			184
Acquisitions, net of cash acquired		(40,471	)		(26,725	)
Acquisition, net of cash acquired								-			(40,471	)
Proceeds from sale of equity investment		612			-			-			612
Net cash used in investing activities		(57,808	)		(41,284	)

Net cash provided by (used in) investing activities								5,723			(57,808	)
Cash Flows From Financing Activities:
Net repayments under revolving credit facility		(45,309	)		(12,094	)		(96,640	)		(45,309	)
Borrowings under Receivables Securitization Program		-			9,300
Repayment of debt		-			(135,000	)
Proceeds from the issuance of debt		-			150,000
Net disbursements from share-based compensation arrangements		(1,507	)		(3,142	)
Net proceeds (disbursements) from share-based compensation arrangements								621			(1,507	)
Acquisition of treasury stock, at cost		(55,677	)		(43,037	)		(6,839	)		(55,677	)
Payment of cash dividends		(15,976	)		(16,407	)		(15,355	)		(15,976	)
Excess tax benefits related to share-based compensation		402			1,166
Excess tax (cost) benefit related to share-based compensation								(960	)		402
Payment of debt issuance costs		(36	)		(623	)		(86	)		(36	)
Net cash used in financing activities		(118,103	)		(49,837	)		(119,259	)		(118,103	)
Effect of exchange rate changes on cash and cash equivalents		(513	)		(33	)		232			(513	)
Net change in cash and cash equivalents		7,235			2,512			(7,336	)		7,235
Cash and cash equivalents, beginning of period		20,812			22,326			29,983			20,812
Cash and cash equivalents, end of period	$	28,047		$	24,838		$	22,647		$	28,047
Other Cash Flow Information:
Income tax payments, net	$	53,704		$	55,867		$	27,821		$	53,704
Interest paid		16,032			9,838			19,607			16,032

The accompanying Condensed Consolidated Financial Statements represent Essendant Inc. (“ESND”) ~~(formerly known as United Stationers Inc.)~~ with its wholly owned subsidiary Essendant Co. ~~(formerly known as United Stationers Supply Co.~~(“ECO”), and ~~Essendant Co.’s~~ECO’s subsidiaries (collectively, “Essendant” 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 ESND and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading distributor of workplace essentials.

The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet as of December 31, ~~2014,~~2015, was derived from the December 31, ~~2014~~2015 audited financial ~~statements with certain line items being restated for changes in accounting principles. See Note 2, “Change in Accounting Principles,” for additional details.~~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, ~~2014~~2015 (the “2015 Form 10-K”) 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 Essendant at September 30, ~~2015~~2016 and the results of operations and cash flows for the nine months ended September 30, ~~2015~~2016 and ~~2014.~~2015. The results of operations for the three and nine months ended September 30, ~~2015~~2016 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

In ~~September 2015,~~May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2015-16, “Simplifying the Accounting for Measurement-Period Adjustments (Topic 805): Business Combinations,~~” which replaces the requirement that an acquirer in a business combination account for measurement period adjustments retrospectively with a requirement that an acquirer recognize adjustments to the provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. For public business entities, ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The guidance is to be applied prospectively to adjustments to provisional amounts that occur after the effective date of the guidance, and earlier application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

~~In April 2015, the FASB issued ASU No. 2015-05, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”~~, that provides guidance to customers about whether a cloud computing arrangement includes a software license. If such an arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for it as a service contract. This standard will be effective for annual periods beginning after December 15, 2015, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

~~In April 2015, the FASB issued ASU No. 2015-03,~~ ~~Interest- Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~, that simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU does not affect the recognition and measurement guidance for debt issuance costs. This standard is effective for fiscal years beginning after December 15, 2015. Early application is permitted. The Company elected to early adopt this new guidance as of September 30, 2015. See Note 2 for the impact on the Company’s consolidated financial statements.

~~In May 2014, the FASB issued ASU No.~~ 2014-09, Revenue from Contracts with Customers,, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU No. 2014-09. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting ~~period,~~period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that requires lessees to recognize right-of-use assets and ~~early application is permitted~~lease liabilities for ~~fiscal years~~all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. This standard will be effective for annual periods beginning after December 15, ~~2016,~~2018, including interim periods within that reporting ~~period.~~period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Under the new guidance, when awards vest or are settled, companies are required to record excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement instead of in additional paid-in capital (APIC). This guidance will be applied prospectively. Furthermore, companies will present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity, which companies can elect to apply retrospectively or prospectively. Under the new guidance, companies will elect whether to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimate the number of awards expected to be forfeited, as is currently required. This guidance will be applied using a modified retrospective transition method, with a cumulative adjustment to retained earnings. The standard will be effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

Approximately ~~99% and 98%~~98.4% of total inventory as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, has been valued under the ~~last-in, first-out (“LIFO”)~~LIFO method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the LIFO accounting method is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of ~~first-in, first-out (“FIFO”)~~FIFO cost or market, inventory values would have been ~~$147.5~~$147.2 million and ~~$139.6~~$147.8 million higher than reported as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. ~~During~~

The change in the LIFO reserve in the third quarter of ~~2015,~~2016 included a LIFO liquidation relating to decrements in five of the ~~Company elected a change~~Company’s thirteen LIFO pools. These decrements resulted in ~~accounting principle to change~~liquidation of LIFO inventory quantities carried at lower costs in prior years as compared with the ~~valuation method for certain inventories. See Note 2, “Change~~cost of current year purchases. This liquidation resulted in ~~Accounting Principles,” for further details.~~

~~In the third quarter~~$2.3 million which was partially offset by LIFO expense of 2015, the Company changed its method of inventory costing for certain inventory in its Business and Facility Essentials (formerly separately known as Supply and Lagasse) operating segment to the LIFO method from the FIFO accounting method. Prior to the change, the Business and Facility Essentials operating segment was comprised of two separate legal entities which each utilized different methods of inventory costing: LIFO for inventories$2.1 million related to ~~Business Essentials which is comprised mainly of office product and breakroom categories and FIFO~~current inflation for ~~inventories related to Facility Essentials which consists of the janitorial product category. The Company believes that the LIFO method is preferable because i) the Company is executing~~ an ~~initiative to combine the office products and janitorial categories onto a single information technology and operating platform, ii) it allows for consistency~~overall net decrease in financial reporting (all domestic inventories will now be on LIFO), and iii) it allows for better matching of costs and revenues as historical inflationary inventory acquisition prices are expected to continue in the future and the LIFO method uses the current acquisition cost to value cost of ~~goods sold as inventory is sold. The change has been reported through retrospective application~~sales of $0.2 million for the ~~new accounting policy to all periods presented. The impact of~~three months ended September 30, 2016. For the three months ended September 30, 2015, the change in the method of inventory costing resulted in LIFO income of $3.5 million which was partially offset by LIFO expense of $0.8 million related to inflation for ~~certain inventory to the third quarter 2015 was a $4.2 million~~an overall net decrease toin cost of ~~goods sold, $2.3 million increase to net income, and $0.06 increase in basic and diluted EPS.~~

~~In April 2015,~~$2.7 million. For the ~~FASB issued ASU 2015-03~~ ~~Simplifying the Presentation of Debt Issuance Costs~~ ~~which amends the FASB Accounting Standards Codification (ASC) subtopic 835-30~~ ~~Interest-Imputation of Interest~~. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. The Company has elected to early adopt the guidance as ofnine months ended September 30, ~~2015 and has retrospectively applied~~2016, the ~~changes to all periods presented for the third quarter 2015.~~

~~The impact~~LIFO income of ~~all adjustments made to the consolidated financial statements presented is summarized in the following tables (in thousands, except per share data):~~

Years Ended December 31,

2014

2013

2012

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Consolidated Statement of Income

Cost of goods sold^(A)

$
4,516,704

$
4,524,676

$
7,972

$
4,295,715

$
4,297,952

$
2,237

$
4,305,502

$
4,303,778

$
(1,724
)
Gross profit^(A)

810,501

802,529

(7,972
)

789,578

787,341

(2,237
)

774,604

776,328

1,724

Warehousing, marketing, and administrative expenses^(A)

592,050

595,673

3,623

580,428

580,141

(287
)

573,693

573,645

(48
)
Income before income taxes^(A)

194,483

182,888

(11,595
)

197,510

195,560

(1,950
)

177,635

179,407

1,772

Income tax expense^(A)

75,285

70,773

(4,512
)

74,340

73,507

(833
)

65,805

66,526

721

Net income^(A)

119,198

112,115

(7,083
)

123,170

122,053

(1,117
)

111,830

112,881

1,051

Net income per share^(A)

Basic^(A)

$
3.08

$
2.90

$
(0.18
)

$
3.11

$
3.08

$
(0.03
)

$
2.77

$
2.80

$
0.03

Diluted^(A)

$
3.05

$
2.87

$
(0.18
)

$
3.06

$
3.03

$
(0.03
)

$
2.73

$
2.75

$
0.02

Consolidated Statement of Comprehensive Income

Net income^(A)

$
119,198

$
112,115

$
(7,083
)

$
123,170

$
122,053

$
(1,117
)

$
111,830

$
112,881

$
1,051

Comprehensive income^(A)

96,295

89,212

(7,083
)

137,047

135,930

(1,117
)

114,471

115,522

1,051

Consolidated Statement of Financial Position

Inventories^(A)

$
926,809

$
906,430

$
(20,379
)

$
830,295

$
821,511

$
(8,784
)

$
767,206

$
760,372

$
(6,834
)
Other current assets^(A)

30,042

30,713

671

29,255

29,255

-

30,118

30,118

-

Other long-term assets^(B)

41,810

38,669

(3,141
)

25,576

22,185

(3,391
)

20,260

17,737

(2,523
)
Accrued liabilities^(A)

192,792

185,535

(7,257
)

191,531

188,115

(3,416
)

205,228

202,645

(2,583
)
Long-term debt^(B)

713,058

709,917

(3,141
)

533,324

529,933

(3,391
)

524,376

521,853

(2,523
)
Retained earnings^(A)

1,541,675

1,529,224

(12,451
)

1,444,238

1,438,870

(5,368
)

1,343,437

1,339,186

(4,251
)

Consolidated Statement of Cash Flows

Net income^(A)

$
119,198

$
112,115

$
(7,083
)

$
123,170

$
122,053

$
(1,117
)

$
111,830

$
112,881

$
1,051

Deferred income taxes^(A)

(6,367
)

(10,879
)

(4,512
)

(3,921
)

(4,754
)

(833
)

(6,713
)

(5,992
)

721

Inventories^(A)

(30,319
)

(18,724
)

11,595

(66,627
)

(64,677
)

1,950

10,374

8,602

(1,772
)
Cash provided by operating activities^(A)

77,133

77,133

-

74,737

74,737

-

189,814

189,814

-

Consolidated Statement of Shareholders’ Equity

Retained earnings at beginning of year^(A)

$
1,444,238

$
1,438,870

$
(5,368
)

$
1,343,437

$
1,339,186

$
(4,251
)

$
1,253,118

$
1,247,816

$
(5,302
)
Retained earnings at end of year^(A)

1,541,675

1,529,224

(12,451
)

1,444,238

1,438,870

(5,368
)

1,343,437

1,339,186

(4,251
)

(A) Change related to Inventory Valuation

(B) Change related to Debt Issuance Costs

As of and for the Three Months Ended
June 30, 2015

As of and for the Three Months Ended
March 31, 2015

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Consolidated Statement of Income

Cost of goods sold^(A)

$
1,129,737

$
1,131,680

$
1,943

$
1,127,925

$
1,131,980

$
4,055

Gross profit^(A)

212,062

210,119

(1,943
)

204,450

200,395

(4,055
)

Warehousing, marketing, and administrative expenses^(A)

158,159

156,912

(1,247
)

198,372

197,581

(791
)

Income before income taxes^(A)

49,125

48,429

(696
)

1,239

(2,025
)

(3,264
)

Income tax expense^(A)

18,864

18,595

(269
)

5,231

3,982

(1,249
)

Net income (loss)^(A)

30,261

29,834

(427
)

(3,992
)

(6,007
)

(2,015
)

Net income (loss) per share^(A)

Basic^(A)

$
0.80

$
0.79

$
(0.01
)

$
(0.10
)
$
(0.16
)
$
(0.06
)

Diluted^(A)

$
0.79

$
0.78

$
(0.01
)

$
(0.10
)
$
(0.16
)
$
(0.06
)

Consolidated Statement of Comprehensive Income

Net income (loss)^(A)

$
30,261

$
29,834

$
(427
)

$
(3,992
)
$
(6,007
)
$
(2,015
)

Comprehensive income (loss) ^(A)

31,450

31,023

(427
)

(8,166
)

(10,181
)

(2,015
)

Consolidated Statement of Financial Position

Inventories^(A)

$
875,465

$
851,126

$
(24,339
)

$
871,310

$
847,667

$
(23,643
)

Other current assets^(A)

29,595

30,344

749

31,226

31,977

751

Other long-term assets^(B)

48,439

45,779

(2,660
)

49,440

46,535

(2,905
)

Accrued liabilities^(A)

190,257

181,560

(8,697
)

175,770

167,344

(8,426
)

Long-term debt^(B)

661,143

658,483

(2,660
)

684,238

681,333

(2,905
)

Retained earnings^(A)

1,557,281

1,542,388

(14,893
)

1,532,325

1,517,859

(14,466
)

For the Six Months Ended
June 30, 2015

For the Three Months Ended
March 31, 2015

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Consolidated Statement of Cash Flows

Net income (loss)^(A)

$
26,269

$
23,827

$
(2,442
)

$
(3,992
)
$
(6,007
)
$
(2,015
)

Deferred income taxes^(A)

(8,365
)

(8,294
)

71

(1,858
)

(1,469
)

389

Inventories^(A)

44,984

48,944

3,960

42,759

46,023

3,264

Other assets^(A)

(10,173
)

(10,250
)

(77
)

(10,126
)

(10,751
)

(625
)

Accrued liabilities^(A)

4,794

3,282

(1,512
)

(16,521
)

(17,534
)

(1,013
)

Cash provided by operating activities^(A)

120,848

120,848

-

62,722

62,722

-

(A) Change related to Inventory Valuation

(B) Change related to Debt Issuance Costs

As of and for the Three Months Ended
September 30, 2014

As of and for the Three Months Ended
June 30, 2014

As of and for the Three Months Ended
March 31, 2014

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Consolidated Statement of Income

Cost of goods sold^(A)

$
1,208,919

$
1,203,246

$
(5,673
)

$
1,120,577

$
1,124,485

$
3,908

$
1,067,056

$
1,073,261

$
6,205

Gross profit^(A)

211,028

216,701

5,673

199,460

195,552

(3,908
)

187,083

180,878

(6,205
)
Warehousing, marketing, and administrative expenses^(A)

146,560

148,831

2,271

142,186

142,870

684

148,849

146,837

(2,012
)
Income before income taxes^(A)

60,476

63,878

3,402

53,441

48,849

(4,592
)

34,860

30,667

(4,193
)
Income tax expense^(A)

22,307

23,647

1,340

20,110

18,327

(1,783
)

13,003

11,375

(1,628
)
Net income^(A)

38,169

40,231

2,062

33,331

30,522

(2,809
)

21,857

19,292

(2,565
)
Net income per share^(A)

Basic^(A)

$
0.99

$
1.05

$
0.06

$
0.86

$
0.79

$
(0.07
)

$
0.56

$
0.49

$
(0.07
)
Diluted^(A)

$
0.98

$
1.03

$
0.05

$
0.85

$
0.78

$
(0.07
)

$
0.55

$
0.49

$
(0.06
)

Consolidated Statement of Comprehensive Income

Net income^(A)

$
38,169

$
40,231

$
2,062

$
33,331

$
30,522

$
(2,809
)

$
21,857

$
19,292

$
(2,565
)
Comprehensive income^(A)

37,826

39,888

2,062

33,847

31,038

(2,809
)

21,734

19,169

(2,565
)

Consolidated Statement of Financial Position

Inventories^(A)

$
796,325

$
782,158

$
(14,167
)

$
804,395

$
786,826

$
(17,569
)

$
748,499

$
735,522

$
(12,977
)
Other long-term assets^(B)

24,372

21,197

(3,175
)

26,059

22,662

(3,397
)

27,170

23,459

(3,711
)
Accrued liabilities^(A)

189,224

183,737

(5,487
)

187,414

180,587

(6,827
)

177,251

172,207

(5,044
)
Long-term debt^(B)

545,009

541,834

(3,175
)

542,410

539,013

(3,397
)

561,511

557,800

(3,711
)
Retained earnings^(A)

1,521,230

1,512,550

(8,680
)

1,488,469

1,477,727

(10,742
)

1,460,582

1,452,649

(7,933
)

For the Nine Months Ended
September 30, 2014

For the Six Months Ended
June 30, 2014

For the Three Months Ended
March 31, 2014

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Previous Method

As Reported

Effect of Change

Consolidated Statement of Cash Flows

Net income^(A)

$
93,357

$
90,045

$
(3,312
)

$
55,188

$
49,814

$
(5,374
)

$
21,857

$
19,292

$
(2,565
)
Deferred income taxes^(A)

(7,618
)

(9,134
)

(1,516
)

(5,317
)

(6,381
)

(1,064
)

(2,450
)

(2,437
)

13

Inventories^(A)

46,591

51,974

5,383

39,290

48,075

8,785

81,714

85,907

4,193

Accrued liabilities^(A)

3,438

2,883

(555
)

(1,106
)

(3,453
)

(2,347
)

(13,654
)

(15,295
)

(1,641
)
Cash provided by operating activities^(A)

93,666

93,666

-

78,889

78,889

-

1,490

1,490

-

(A) Change related to Inventory Valuation

(B) Change related to Debt Issuance Costs

On May 30, 2014, Essendant Co. completed the acquisition of CPO Commerce, Inc. (“CPO”), a leading online retailer of brand name power tools and equipment. The acquisition of CPO significantly expanded the Company’s digital resources and capabilities to support resellers as they transition to an increasingly online environment. CPO’s expertise will strengthen Essendant’s ability to offer features like improved product content, real-time access to inventory and pricing, digital marketing and merchandising, and an enhanced digital platform to our resellers and manufacturing partners.

~~The purchase price was $37.8 million, including $5.5~~$2.3 million related to the ~~estimated fair value~~liquidation was more than offset by LIFO expense of contingent consideration. The contingent consideration ultimately paid will be determined based on CPO’s sales during a three-year period immediately following the acquisition date. The final payments related to the contingent consideration will be determined by actual achievement in the earn-out periods and will be between zero and $10 million. The Company financed the 100% stock acquisition with borrowings under the Company’s available committed bank facilities. Purchase accounting for this transaction was completed as of May 30, 2015.

On October 31, 2014, Essendant Co. completed the acquisition of 100% of the capital stock of Liberty Bell Equipment Corp., a United States wholesaler of automotive aftermarket tools and equipment, and its affiliates (collectively, MEDCO) including G2S Equipement de Fabrication et d’Entretien, a Canadian wholesaler. MEDCO advances a key pillar of the Company’s strategy, which is to diversify into channels and categories that leverage our common platform. It also brings expanded categories and services to customers.

~~The purchase price was $150.4 million, including $4.7~~$3.2 million related to ~~the estimated fair value~~current inflation for an overall net increase in cost of ~~contingent consideration. The contingent consideration ultimately paid will be determined based on MEDCO’s~~ sales ~~and EBITDA during a three-year period immediately following the acquisition date. Additionally, $6.0 million was reserved as a payable upon completion~~ of ~~an eighteen month indemnification period. The final payments related to the contingent consideration will be determined by actual achievement in the earn-out periods and will be between zero and $10~~$0.9 million. Any changes to the estimated fair value of contingent consideration after the original purchase accounting is completed will be recorded in “warehousing, marketing and administrative expenses” in the period in which a change occurs. This acquisition was funded through a combination of cash on hand and cash available under the Company’s committed bank facilities.

On July 31, 2015, Essendant Co. completed the acquisition of 100% of the capital stock of Nestor Sales LLC (“Nestor”), a leading wholesaler and distributor of tools, equipment and supplies to the transportation industry. This acquisition accelerates the Company’s growth in the automotive aftermarket, complements the Company’s existing industrial offerings while providing access to new customer ~~segments, and advances a key strategic pillar to diversify into channels and categories that leverage our common platform.~~segments.

The purchase price was $41.8 million. This acquisition was funded through a combination of cash on hand and cash available under the Company’s revolving credit facility. Purchase accounting for this transaction was completed as of June 30, 2016.

~~The Company has developed preliminary estimates of~~At September 30, 2016, the fair values of assets acquired and liabilities assumed from the MEDCO and Nestor acquisitions for purposes of allocating the purchase prices. The estimates are subject to change as the valuation activities are completed. The fair values of the assets and liabilities acquired in the MEDCO and Nestor acquisitions were estimated using various valuation methods including estimated selling prices, market approach, and discounted cash flows using both an income and cost approach. The same methods were used for determining the fair values of the assets and liabilities acquired for the CPO acquisition.

~~Any changes to the preliminary allocations~~allocation of the purchase ~~prices, some of which may be material, will be allocated to residual goodwill.~~

~~At September 30, 2015, the allocations of the purchase prices were~~price was as follows (amounts in thousands):

The purchased identifiable intangible assets were as follows (amounts in thousands):

3. Sale-Leaseback On September ~~18, 2015,~~23, 2016, the Company ~~completed~~entered into an agreement for the ~~100% stock-sale~~sale and leaseback of its ~~subsidiary, Azerty de Mexico, to~~facility in City of Industry, CA. The agreement provided for the ~~local general manager. The~~ sale price was a combination of cash and a seller’s note, totaling $8.7 million. The seller’s note matures in 180 days and requires periodic repayments. When the decision to sell the subsidiary was approved, in accordance with Accounting Standards Codification (ASC) 360-10-45-9 ~~Property, Plant, and Equipment, Azerty de Mexico met all~~ of the ~~criteria to be classified as~~facility for a ~~held-for-sale asset disposal group. In accordance with ASC 350-20-40,~~ ~~Intangibles – Goodwill and Other, the Company allocated a proportionate share~~purchase price of the goodwill balance from the office product and janitorial and breakroom supply reporting unit based on the subsidiary’s relative fair value to the reporting unit and performed an impairment test for the allocated goodwill utilizing the cost approach to value the subsidiary. Based upon the impairment test, the $3.3 million of goodwill allocated to the subsidiary was determined to be fully impaired. Additionally, in conjunction with classifying the subsidiary as a held-for-sale asset disposal group, the Company revalued the subsidiary to fair value using the cost-approach method less the estimated cost to sell. The carrying value of the disposal group, including a $10.1 million cumulative foreign currency translation adjustment, was then compared to the fair value less the estimated cost to sell, resulting in a pre-tax impairment loss of $10.1 million. The goodwill impairment of $3.3 million, the held-for-sale impairment of $10.1$31.7 million and the ~~$0.1~~subsequent leaseback for a two year period. The lease is classified as an operating lease. As a result, the Company recorded a gain of $20.5 million ~~estimated cost to sell were recorded~~ in ~~the first quarter of 2015 within~~ “warehousing, marketing and administrative expenses.” ~~During~~A deferred gain of approximately $2.8 million that will be amortized into income over the ~~second and third quarters,~~term of the ~~Company recorded an additional~~lease was also recorded. As of September 30, 2016, $1.4 million ~~and $2.1 million, respectively, within “warehousing, marketing and administrative expenses.” This includes~~of the deferred gain is reflected in the accompanying Consolidated Balance Sheet under “other long-term liabilities”, with the remainder included as a ~~$1.5 million loss on sale.~~component of “other current liabilities”. The ~~pre-tax loss, excluding~~cash proceeds from the ~~foreign currency translation adjustment noted above, attributable~~sale were used primarily to Azerty de Mexico for the three months ended September 30, 2015 and 2014 was $0.9 million and $0.2 million, respectively. The pre-tax loss attributable to this subsidiary for the nine months ended September 30, 2015 was $5.2 million and none for the nine months ended September 30, 2014.pay down long-term debt.

As of September 30, ~~2015,~~2016, the Company has two active equity compensation plans. ~~On May 20,~~Under the 2015 ~~the Company’s stockholders approved certain amendments to the Amended and Restated 2004~~ Long-Term Incentive Plan ~~(“LTIP) which included the renaming of the LTIP to the “2015 Long-Term Incentive Plan”~~ (as amended and ~~restated, the “2015 Plan”). Under the 2015 Plan,~~restated), award ~~vehicles~~instruments include, but are not limited to, stock options, restricted stock awards, restricted stock units (“RSUs”), 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 annual retainer ~~and meeting fees.~~in deferred stock units.

The Company granted 526,697 shares of restricted stock and 290,725 RSUs during the first nine months of 2016, compared to 440,948 shares of restricted stock and 162,092 RSUs during the first nine months of 2015. ~~No stock options were granted during the first nine months of 2015. During the first nine months of 2014, the Company granted 229,477 shares of restricted stock, 176,717 RSUs, and 5,538 stock options.~~

Commencing in 2015 which included workforce reductions and facility consolidations. For the three months and nine months ended September 30, 2015, the Company recorded $0.2 million and $1.5 million pre-tax expense relating to facility consolidations, respectively. During the first quarter of 2015, the Company ~~recorded a $6.0 million pre-tax charge relating~~began certain restructuring actions which included workforce reductions and facility closures. Commencing in the fourth quarter of 2015, the Company executed actions to ~~a workforce reduction. These~~reduce costs through management delayering in order to achieve broader functional alignment of the organization. The charges associated with these actions were included in “warehousing, marketing and administrative expenses.” ~~Cash outflows for these~~

The expenses, cash flows, and accrued liabilities associated with the restructuring actions ~~will occur primarily in 2015 and were approximately $3.0 million~~described above are noted in the nine months ended September 30, 2015. As of September 30, 2015, the Company has accrued liabilities for these actions of $3.1 million. The Company estimated an additional $1.5 million will be incurred in the remainder of 2015 due to facility closures related to this action, for a total 2015 expense of approximately $9.0 million.following table (in thousands):

	Expenses										Cash flow				Accrued Liabilities
	For the three months ended September 30,					For the nine months ended September 30,					For the nine months ended September 30,				As of September 30,
	2016			2015		2016			2015		2016		2015		2016
First quarter 2015 Actions
Workforce reduction	$	(0.5	)	$	-	$	(0.5	)	$	6.0
Facility closure	$	-			0.2	$	0.3			0.5
Total	$	(0.5	)		0.2	$	(0.2	)	$	6.5	$	1.2	$	3.0	$	0.8

Fourth Quarter 2015 Action
Workforce reduction	$	(0.7	)	N/A		$	(0.7	)	N/A		$	8.0	N/A		$	2.1

The changes in the carrying amount of goodwill are noted in the following table (in thousands):

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	September 30, 2015								December 31, 2014								September 30, 2016								December 31, 2015
								Weighted								Weighted								Weighted								Weighted
								Average								Average								Average								Average
	Gross					Net		Useful	Gross					Net		Useful	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	138,864	$	(48,659	)	$	90,205	16	$	125,761	$	(41,123	)	$	84,638	16	$	137,678	$	(59,545	)	$	78,133	16	$	137,938	$	(51,357	)	$	86,581	16
Non-compete agreements		4,650		(3,260	)		1,390	4		4,672		(2,364	)		2,308	4		4,651		(4,260	)		391	4		4,644		(4,260	)		384	4
Trademarks		12,833		(3,268	)		9,565	14		14,428		(1,716	)		12,712	13		13,725		(5,363	)		8,362	14		13,688		(4,240	)		9,448	14
Total	$	156,347	$	(55,187	)	$	101,160		$	144,861	$	(45,203	)	$	99,658		$	156,054	$	(69,168	)	$	86,886		$	156,270	$	(59,857	)	$	96,413
Intangible assets not subject to amortization
Trademarks		1,600		-			1,600	n/a		12,300		-			12,300	n/a
Total	$	157,947	$	(55,187	)	$	102,760		$	157,161	$	(45,203	)	$	111,958

In the first quarter of 2015, the Company recorded a pre-tax non-cash impairment charge of $10.2 million to write-down the trademarks of ORS Nasco and certain OKI brands to their fair value related to the corporate name change that was effective June 1, 2015. This impairment charge was recorded in “warehousing, marketing and administrative expenses.” The Company utilized the discounted cash flow method to determine the fair value of these trademarks based upon management’s current forecasted future revenues from the trademarks. The trademarks had a total value of $0.5 million at September 30, 2015.

The following table summarizes the amortization expense to be incurred in ~~2015 and over the next four years~~2016 through 2020 on intangible assets (in thousands):

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended September 30, ~~2015~~2016 was as follows (amounts in thousands):

The following table details the amounts reclassified out of AOCI into the income statement during the ~~three-month~~three and ~~nine-month periods ending~~nine months ended September 30, ~~2015, respectively (in~~2016(in thousands):

	Amount Reclassified From AOCI							Amount Reclassified From AOCI
	For the Three			For the Nine				For the Three			For the Nine
	Months Ended			Months Ended				Months Ended			Months Ended
	September 30,			September 30,			Affected Line Item In The Statement	September 30,			September 30,			Affected Line Item In The Statement
Details About AOCI Components	2015			2015			Where Net Income is Presented	2016			2016			Where Net Income is Presented
Realized and unrealized gains (losses) on cash flow hedges
Gain (loss) on interest rate swap, before tax	$	349		$	1,052		Interest expense, net
Gain on foreign exchange hedge, before tax		4			4		Cost of goods sold
Gain on interest rate swap, before tax								$	249		$	789		Interest expense, net
Loss on foreign exchange hedges, before tax									-			(70	)	Cost of goods sold
		(134	)		(401	)	Tax provision		(96	)		(279	)	Tax provision
	$	219		$	655		Net of tax	$	153		$	440		Net of tax

Foreign currency translation adjustments
Disposition of Azerty de Mexico	$	11,132		$	11,132		Warehousing, marketing and administrative expenses

Defined benefit pension plan items
Amortization of prior service cost and unrecognized loss	$	1,573		$	4,623		Warehousing, marketing and administrative expenses	$	1,237		$	4,125		Warehousing, marketing and administrative expenses
Settlement loss									419			12,163		Defined benefit plan settlement loss
		(610	)		(1,792	)	Tax provision		(641	)		(6,307	)	Tax provision
		963			2,831		Net of tax		1,015			9,981		Net of tax
Total reclassifications for the period, net of tax	$	12,314		$	14,618			$	1,168		$	10,421

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 September 30, 2016 and 2015, 0.3 and 0.4 million shares of such securities, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. For the nine-month period ending September 30, ~~2015, no~~2016, 0.3 million shares of securities were excluded from the computation. For the ~~three-month and~~ nine-month ~~periods ending~~period September 30, ~~2014, 0.5 million~~2015, no shares of ~~such~~ securities were ~~not included because~~excluded from the ~~effect would be antidilutive.~~computation. 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				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Numerator:
Net income	$	27,667	$	40,231	$	51,492	$	90,045	$	36,742	$	27,667	$	66,205	$	51,492
Denominator:
Denominator for basic earnings per share -
weighted average shares		37,300		38,450		37,724		38,817		36,578		37,300		36,560		37,724
Effect of dilutive securities:
Employee stock options and restricted stock		308		434		385		427		360		308		336		385
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities		37,608		38,884		38,109		39,244		36,938		37,608		36,896		38,109
Net income per share:
Net income per share - basic	$	0.74	$	1.05	$	1.36	$	2.32	$	1.00	$	0.74	$	1.81	$	1.36
Net income per share - diluted	$	0.74	$	1.03	$	1.35	$	2.29	$	0.99	$	0.74	$	1.79	$	1.35

As of ~~December 31, 2014,~~September 30, 2016 , the Company had Board authorization to repurchase ~~$42.4 million of common stock. In February 2015, the Board of Directors authorized the Company to purchase an additional $100.0~~$68.2 million of common stock. During the ~~three-month periods~~three months ended September 30, ~~2015 and 2014,~~2016, the Company did not repurchase any shares of its common stock. For the same period in the prior year, the Company repurchased 744,081 shares at an aggregate cost of $25.9 million. During the nine months ended September 30, 2016 and ~~283,283~~2015, the Company repurchased 241,270 and 1,525,222 shares of the Company’s common stock at an aggregate cost of ~~$25.9~~$6.8 million and $11.4 million, respectively. During the nine-month periods ended September 30, 2015 and 2014, the Company repurchased 1,525,222 and 1,074,574 shares of the Company’s common stock at an aggregate cost of $57.4 ~~million and $43.0~~ 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 nine months of ~~2015~~2016 and ~~2014,~~2015, the Company reissued ~~369,591~~452,286 and ~~225,783~~369,591 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.

ESND is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, ~~Essendant Co.,~~ECO, and from borrowings by ~~Essendant Co.~~ECO. The 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program (each as defined in Note 911 of the ~~Company’s~~2015 Form ~~10-K~~10-K) (each a “Lending Agreement”) contain restrictions on the use of cash transferred from ECO to ESND. Each of the Lending Agreements also prohibits the Company from exceeding a Leverage Ratio (as defined in the 2013 Credit Agreement and the 2013 Note Purchase Agreement). The maximum Leverage Ratio is 3.50 to 1.00 but increases to up to 4.00 to 1.00 for the ~~year~~first four fiscal quarters (the “Adjusted Leverage Period”) following certain acquisitions. Following the 2015 acquisition of Nestor Sales, an Adjusted Leverage period was applicable through the quarter ended ~~December~~June 30, 2016. On August 30, 2016, the Lending Agreements were amended to extend the Adjusted Leverage Period for two additional quarters. As a result, the maximum permitted Leverage Ratio remains at 4.00 to 1.00 but will revert to 3.50 to 1.00 for the quarter ending March 31, ~~2014) restrict Essendant Co.’s ability to transfer cash to ESND.~~2017.

As of September 30, ~~2015, 77.6%~~2016, 75.9% of the Company’s outstanding debt, excluding capital leases and transaction costs, was priced at variable interest rates based primarily on the applicable bank prime rate or London InterBank Offered Rate (“LIBOR”).

The Company had outstanding letters of credit of ~~$11.1~~$11.2 million and $11.6 million under the 2013 Credit Agreement as of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015, respectively.

~~Borrowings~~As of September 30, 2016, the applicable margin 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% towas 2.00% ~~and on Alternate Base Rate loans ranges from 0% to 1.00%. As of September 30, 2015, the applicable margin~~ for LIBOR-based loans and was ~~1.375% and~~1.00% for Alternate Base Rate ~~loans was 0.375%. Essendant Co. is required to pay the lenders a fee on the unutilized portion of the commitments~~loans. Interest under the 2013 ~~Credit~~Note Purchase Agreement is payable semi-annually at a rate per annum ~~between 0.15% and 0.35%~~equal to 3.75% (3.66% after the effect of terminating an interest rate swap), ~~depending on~~except the annual rate increases by 0.625% if the Company’s Leverage ~~Ratio.~~Ratio is between 3.50 to 1.00 and 3.75 to 1.00, and increases by 0.75% if the Leverage Ratio is between 3.75 to 1.00 and 4.00 to 1.00. The Company’s Leverage Ratio was 3.51 to 1.00 as of June 30, 2016 and was 2.77 to 1.00 as of September 30, 2016.

On June 26, 2015, the Company and its subsidiaries Essendant Co., Essendant Financial Services LLC (“EFS") and Essendant Receivables LLC ("ESR") entered into a Third Omnibus Amendment to Transaction Documents (the “Omnibus Amendment”) with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch ("BTMU") and PNC Bank, National Association (“PNC Bank”). The Omnibus Agreement amended the transaction documents of the Receivable Securitization Program to reflect rebranded legal entity names. On June 29, 2015, Lagasse, LLC, a subsidiary of Essendant Co. merged into Essendant Co. All accounts receivable originated by Lagasse prior to the merger are excluded from the Program. The Omnibus Agreement amended the Transaction Documents to also exclude “Excluded Receivables” from the Receivables Securitization Program, which are defined as “any receivable which, at the time of such Receivable’s origination, was processed on the [enterprise resource planning system previously used by Lagasse, LLC].”

As of September 30, ~~2015~~2016 and December 31, ~~2014, $414.2~~2015, $552.9 million and ~~$360.3~~$448.6 million, respectively, of receivables had been sold to the Investors (as defined in Note ~~9 of~~11 to the Company’s Consolidated Financial Statements in the 2015 Form ~~10-K for the year ended December 31, 2014)~~10-K). ~~ESR~~Essendant Receivables LLC had $200.0 million outstanding under the Receivables Securitization Program as of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015.

For additional information about the 2013 Credit Agreement, the 2013 Note Purchase Agreement, and the Receivables Securitization Program, see Note 911 of the ~~Company’s~~2015 Form ~~10-K for the year ended December 31, 2014.~~10-K.

The Company maintains pension plans covering union and certain non-union employees. For more information on the Company’s retirement plans, see Note 1113 to the Company’s Consolidated Financial ~~Statements~~Statement in the 2015 Form ~~10-K for the year ended December 31, 2014.~~10-K. A summary of net periodic pension cost related to the Company’s pension plans for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 was as follows (dollars in thousands):

The Company made cash contributions of $10.0 million and $2.0 million to its pension plans during ~~each of~~ the nine ~~month periods~~months ended September 30, 2016 and 2015, ~~and 2014.~~respectively. Additional contributions, if any, for ~~2015~~2016 have not yet been determined. As of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, the Company had accrued ~~$47.8~~$44.7 million and ~~$50.3~~$48.4 million of pension liability within “Other long-term liabilities” on the Condensed Consolidated Balance Sheets.

During 2016, the Company has taken several actions to mitigate the interest rate, mortality and investment risks of the Essendant Pension Plan. These actions include a limited-time voluntary lump-sum pension offering to eligible, terminated, vested plan participants that was completed during the second quarter.

As a result of the lump sum offer, a settlement and remeasurement of the Essendant Pension Plan was performed. The remeasurement and activity in the first nine months of 2016 had no cash impact to the Company since the payments were made by the Essendant Pension Trust, and resulted in a $1.5 million improvement to the net funded status of the plan, therefore reducing other long-term liabilities. However, the settlement caused a loss of $12.2 million, which was partially offset by the $8.4 million reduction in Accumulated Other Comprehensive Income related to the unrecognized actuarial loss, for a net impact on shareholders’ equity of $3.8 million as of September 30, 2016 when compared to December 31, 2015. This offer also reduces future pension expense recognized by the Company and volatility related to future obligations of the 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 ~~$1.5~~$1.8 million and ~~$4.4~~$5.5 million, respectively, for the Company match of employee contributions to the Plan for the three and nine months ended September 30, ~~2015.~~2016. During the same periods last year, the Company recorded expense of ~~$1.4~~$1.5 million and ~~$4.2~~$4.4 million to match employee contributions.

The Company selectively uses derivative financial instruments to reduce its exposure to changes in interest rates and foreign currency exchange rates. Under Company policy, the Company does not enter into derivative financial instruments for trading or speculative purposes. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs.

~~The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its debt arrangements. In July 2012, the Company entered into an~~ interest rate swap to convert a portion of the Company’s floating-rate debt to a fixed-rate basis. The fair value is determined by using quoted market forward rates (level 2 inputs) and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. The changes in fair value of this instrument is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same periods during which the related interest payments on the hedged debt affect earnings. This swap matures in July 2017.As of September 30, 2015 and December 31, 2014, the fair value of the Company's interest rate swap included in the Company’s Condensed Consolidated Balance Sheet as a component of “Other long-term liabilities” was $1.3 million and $0.3 million respectively.

During the third quarter of 2015, the Company implemented a foreign currency cash flow hedge program in order to manage the volatility in exchange rates and the related impacts on the operations of its Canadian functional currency subsidiaries. The Company uses foreign currency exchange contracts to hedge certain of its foreign exchange rate exposures related to inventory purchases. The Company has currently hedged approximately 50%, or $5.6 million, of its Canadian subsidiaries’ US dollar denominated inventory purchases for the next two quarters. The fair value is determined by using quoted market spot rates (level 2 inputs). The changes in fair value of ASC 815 designated hedges are reported in AOCI and reclassified into earnings in the same financial statement line item and in the same periods during which the related inventory is sold and affects earnings. As of September 30, 2015, the fair value of these cash flow hedges were included in the Company’s Condensed Consolidated Balance Sheet as a component of “Other current assets” totaling $0.1 million.

The following table depicts the effect of these derivative instruments on the statements of income and comprehensive income for the three and nine months ended September 30, 2015 and September 30, 2014 (in thousands).

The Company measures certain financial assets and liabilities, including interest rate swap and foreign currency derivatives, at fair value on a recurring basis, based on market rates of the Company’s positions and other observable interest ~~rates (see Note 11 “Derivative Financial Instruments”, for more information on these~~rates. The fair value of the interest rate swaps is determined by using quoted market forward rates (level 2 inputs) and reflects the present value of the amount the Company would pay for contracts involving the same notional amount and maturity date. The fair value of the foreign currency ~~derivatives)~~cash flow hedge is determined by using quoted market spot rates (level 2 inputs).

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:

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 September 30, ~~2015~~2016 and December 31, ~~2014~~2015 (in thousands):

	Fair Value Measurements as of September 30, 2015								Fair Value Measurements as of September 30, 2016
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs				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		Total		Level 1		Level 2		Level 3
Assets
Foreign exchange hedge	$	50	$	-	$	50	$	-
Foreign exchange hedges									$	95	$	-	$	95	$	-

Liabilities
Interest rate swap liability	$	1,260	$	-	$	1,260	$	-
Interest rate swap									$	501	$	-	$	501	$	-
Foreign exchange hedges										30		-		30		-
									$	531	$	-	$	531	$	-
	Fair Value Measurements as of December 31, 2014
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value Measurements as of December 31, 2015
	Total		Level 1		Level 2		Level 3				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
Foreign exchange hedges									$	91	$	-	$	91	$	-

Liabilities
Interest rate swap liability	$	253	$	-	$	253	$	-
Interest rate swap									$	469	$	-	$	469	$	-

The carrying amount of accounts receivable at September 30, ~~2015,~~2016, including ~~$414.2~~$552.9 million of receivables sold under the Receivables Securitization Program, approximates fair value because of the short-term nature of this item.

Receivables related to supplier allowances totaling ~~$102.4~~$93.4 million and ~~$124.4~~$111.0 million were included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively.

Accrued customer rebates of ~~$60.9~~$64.3 million and ~~$63.2~~$63.6 million as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

In December 2014, the Company sold its software solutions subsidiary in exchange for a combination of cash and convertible and non-convertible notes (the “Notes”). Based upon a financial analysis that included information available through the end of the third quarter, the Company determined it was probable, within the scope of ~~ASC 450-20-25-2(a) Contingencies~~, that the Company will not be able to collect any of the amounts due according to the contractual terms of the Notes or the other receivables from the acquirer. The loss was estimable at the book value of the Notes and other receivables as of September 30, 2015. As such, the Company fully impaired the assets and recorded a loss of $10.7 million in the third quarter of 2015 within “Warehousing, marketing and administrative expenses” in the Condensed Consolidated Statements of Income. As of December 31, 2014, the value of the Notes and other receivables totaled $10.6 million.

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three and nine months ended September 30, 2016, the Company recorded income tax expense of $17.1 million and $34.9 million on pre-tax income of $53.8 million and $101.1 million, for an effective tax rate of 31.8% and 34.5%, respectively. For the three and nine months ended September 30, 2015, the Company recorded income tax expense of $20.0 million and $42.6 million on pre-tax income of $47.7 million and $94.1 million, for an effective tax rate of 42.0% and 45.3%, respectively. ~~For~~

The Company’s U.S. statutory rate is 35.0%. The most significant factor impacting the effective tax rate for the three ~~months~~ and nine months ended September 30, ~~2014,~~2016 was the ~~Company recorded income~~discrete tax ~~expense~~impact of ~~$23.6 million and $53.3 million on pre-tax income~~the payment of ~~$63.9 million and $143.4 million, respectively, for an effective tax rate of 37.0% and 37.2%, respectively.~~

~~The Company's U.S. statutory rate is 35.0%.~~a dividend from a foreign subsidiary. The most significant factors impacting the effective tax rate for the three and nine months ended September 30, 2015 were the discrete tax impacts of the impairment charges and the establishment of a valuation allowance on a capital loss asset for financial reporting purposes related to selling a non-strategic business in the third quarter. ~~There were no significant discrete items for the three and nine months ended September 30, 2014.~~

The Company has been named as a defendant in ~~an action filed before the United States District Court for the Central District of California on May 1, 2015. The complaint alleges~~two lawsuits alleging that the Company sent unsolicited fax advertisements to ~~two~~the named plaintiffs, as well as ~~thousands of~~ other persons and entities, in violation of the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 ("TCPA"). ~~After filing~~One lawsuit was initially filed in the ~~complaint,~~United States District Court for the ~~plaintiff~~Central District of California on May 1, 2015 and has been dismissed without prejudice and refiled in the United States District Court for the Northern District of Illinois. The other lawsuit was filed in the United States District Court for the Northern District of Illinois on January 14, 2016. In both lawsuits the plaintiffs filed a motion asking the Court to certify a class of plaintiffs comprised of persons and entities who allegedly received fax advertisements from the Company. Under the TCPA, recipients of unsolicited fax advertisements can seek damages of $500 per fax for inadvertent violations and up to $1,500 per fax for knowing and willful violations. Other reported TCPA lawsuits have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. ~~The~~In each lawsuit, the Company is vigorously contesting class certification and ~~liability.~~denies that any violations occurred. Litigation of this kind, however, is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. Regardless of whether the ~~litigation is~~lawsuits are resolved at trial or through settlement, the Company believes that a loss associated with resolution of pending claims is probable. However, the amount of any such loss, which could be material, cannot be reasonably estimated because the Company is continuing to evaluate its defenses based on its internal review and investigation of prior events, new information and future circumstances.

The Company is also involved in other 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 such ordinary course legal proceedings will be resolved with no material adverse effect upon its financial condition or 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~~Item 1A. ~~Risk~~“Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, ~~2014.~~2015 (the “2015 Form 10-K”) and in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.

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.

Essendant Inc. ~~(formerly known as United Stationers Inc.)~~ is a leading supplier of workplace essentials, with ~~2014~~2015 net sales of approximately ~~$5.3~~$5.4 billion. Essendant Inc. stocks over ~~160,000~~180,000 items ~~from over 1,600 manufacturers.~~and is a leading national wholesale distributor of workplace items including traditional office products and office furniture, janitorial, sanitation and breakroom supplies, technology products, industrial supplies, and automotive aftermarket tools and equipment. These items include a broad spectrum of manufacturer-branded and private branded ~~technology products, traditional office products, office furniture, janitorial and breakroom supplies, and industrial supplies.~~products. Essendant sells through a network of 7971 distribution centers to approximately 30,000 reseller customers, who in turn sell directly to end consumers. The Company also operates CPO Commerce which sells power tools and outdoor equipment online to the consumer market and construction professionals.

~~Our strategy is comprised~~We have begun implementing the first phase of ~~three key elements:~~

~~2) Win online by growing our business-to-business (B2B) sales with major e-commerce players and by enabling~~a comprehensive multi-year transformation program to improve the ~~online success~~value of our ~~resellers by providing digital capabilities~~business, which includes:

3) Expand and diversify our business into channels and categories that leverage our common platform which includes the IT systems, distribution network, data infrastructure, digital expertise and functional capabilities in merchandising, sales and operations.16

~~Execution on these priorities will help us achieve our goal of becoming the fastest and most convenient solution for workplace essentials.~~

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

~~As previously announced, we are taking decisive actions to reposition our business, provide enhanced customer service, and generate sustained long-term success. These actions are as follows:~~

~~Fourth Quarter Cost Initiative~~Actions impacting comparability of results (the “Actions”)

The Company revised its guidance regarding 2016, and currently expects the following:

Adjusted diluted earnings per share and free cash flow are non-GAAP measures. A quantitative reconciliation of our non-GAAP guidance to the corresponding GAAP information is not available because the non-GAAP guidance excludes certain GAAP information that is uncertain and difficult to predict.

The adjusted diluted earnings per share guidance excludes income in the first nine months of 2016 of $0.22 per share related to a ~~channel-based organization more closely aligned with our customers,~~settlement charge for the defined benefit plan, gain on sale of City of Industry facility, severance costs for operating leadership, restructuring charges, and ~~re-invest a portion~~non-GAAP tax provision. Actual amounts for these measures for the three and nine months ended September 30, 2016 appear in the Non-GAAP table included later in this section. For the remainder of the ~~expected savings~~year, the factors that will be excluded are currently unknown due to ~~fund bringing additional~~the level of unpredictability and uncertainty associated with these items, but may include actions such as gain or loss on future sales of assets or businesses, ~~onto the common platform. These actions are critical to driving our goal~~future restructuring charges, non-GAAP tax adjustments, cash flow impacts of ~~achieving high-single digit EPS growth beginning in 2016.~~acquisitions, and other actions.

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~~2015 Form ~~10-K for the year-ended December 31, 2014.~~10-K.

In the third quarter of ~~2015, the Company changed its method of inventory costing for certain inventory in its Business and Facility Essentials (formerly separately known as Supply and Lagasse) operating segment~~2016, there were no significant changes to the ~~last-in-first-out (“LIFO”) method~~Company’s critical accounting policies, judgments or estimates from ~~the first-in-first-out (“FIFO”) accounting method. For further discussion of the Company’s change~~those disclosed in the ~~method of inventory costing, refer to Note 2, “Change in Accounting Principles.”~~2015 Form 10-K.

Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, ~~and~~Adjusted Diluted Earnings Per Share, Adjusted EBITDA and Free Cash Flow (the “Non-GAAP table”)

The ~~following tables~~Non-GAAP table below presents Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, ~~and~~ Adjusted Diluted Earnings ~~Per~~per Share, Adjusted EBITDA and Free Cash Flow for the three and ~~nine-month periods~~nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands, except per share data). These non-GAAP measures exclude certain non-recurring items and exclude other items that do not reflect the Company’s ongoing operations and are included to provide investors with useful information about the financial performance of our business. The presented non-GAAP financial measures should not be considered in isolation or as substitutes for the comparable GAAP financial measures. The non-GAAP financial measures do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures.

In order to calculate the non-GAAP measures, management excludes the following items to facilitate the comparison of current and prior year results and ongoing operations, as management believes these items do not reflect the underlying cost structure of our business. These items can vary significantly in amount and frequency.

The Company commenced two such restructuring programs during 2015 (refer to Note 5).

The Company recognized a gain on the sale of its City of Industry facility in the third quarter of 2016 (refer to Note 3), a loss on the sale and related impairment of intangible assets of the operations in Mexico in 2015, and a loss on the sale and related impairment of intangible assets of its software subsidiary in 2014, recording an impairment of the seller notes in the third quarter of 2015.

Due to the sale of the City of Industry facility, the Company was able to utilize its capital loss carryforwards. This utilization resulted in the release of the valuation allowance previously established against the deferred tax asset. The $5.0 million tax benefit from the release of the valuation allowance reduced the effective tax rate for the three and nine months ended September 30, 2016, by 9.2% and 4.9%, respectively.

Two operating leaders were severed from the Company in the third quarter of 2016, which were not part of a restructuring program.

The Company recorded impairment and accelerated amortization of its trademarks upon the announcement of its rebranding effort in 2015.

Adjusted operating expenses and adjusted operating income. Adjusted operating expenses and adjusted operating income provide management and our investors with an understanding of the results from the primary operations of our business by excluding the effects of items described above that do not reflect the ~~pre-tax charges related to workforce reductions~~ordinary expenses and facility consolidations, intangible asset impairment charge and accelerated amortization related to rebranding efforts, an impairment of seller notes receivable related to the company’s prior year sale of its software service provider, and a loss on sale and related costsearnings of our ~~Mexican subsidiary. Generally Accepted Accounting Principles require~~operations. Adjusted operating expenses and adjusted operating income are used to evaluate our period-over-period operating performance as they are more comparable measures of our continuing business. These measures may be useful to an investor in evaluating the underlying operating performance of our business.

Adjusted net income and adjusted diluted earnings per share. Adjusted net income and adjusted diluted earnings per share provide a more comparable view of our Company’s underlying performance and trends than the comparable GAAP measures. Net income and diluted earnings per share are adjusted for the effect of items described above that do not reflect the ~~effects~~ordinary earnings of ~~these items be included~~our operations.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Adjusted EBITDA is helpful in evaluating our operating performance and is used by management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting. Net income is adjusted for the ~~Condensed Consolidated Statements~~effect of ~~Income.~~interest, taxes, depreciation and amortization and stock-based compensation expense. Management believes that ~~excluding these items~~adjusted EBITDA is ~~an appropriate comparison~~also commonly used by investors to evaluate operating performance between competitors because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation accounting policies, and depreciation and amortization policies.

Free cash flow. Free cash flow is useful to management and our investors as it is a measure of ~~its ongoing~~the Company’s liquidity. It provides a more complete understanding of factors and trends affecting our cash flows than the comparable GAAP measure. Net cash provided by (used in) operating activities and net cash provided by (used in) investing activities are aggregated and adjusted to exclude the ~~results~~non-cash impact of 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.acquisitions and divestitures.

For the Three Months Ended September 30,

2015

2014 (Revised)

% to

% to

Amount

Net Sales

Amount

Net Sales

Net Sales
$
1,391,545

100.0
%

$
1,419,947

100.0
%
Gross profit
$
225,143

16.2
%

$
216,701

15.3
%
Operating expenses
$
172,159

12.4
%

$
148,831

10.5
%
Workforce reduction and facility consolidation charge

(200
)

-

-

-

Rebranding - intangible asset amortization

(511
)

-

-

-

Notes receivable impairment

(10,738
)

(0.8
%)

Loss on sale of business and related costs

(2,072
)

(0.1
%)

-

-

Adjusted operating expenses
$
158,638

11.4
%

$
148,831

10.5
%
Operating income
$
52,984

3.8
%

$
67,870

4.8
%
Operating expense items noted above

13,521

1.0
%

-

-

Adjusted operating income
$
66,505

4.8
%

$
67,870

4.8
%
Net income
$
27,667

$
40,231

Operating expense items noted above, net of tax

10,017

-

Adjusted net income
$
37,684

$
40,231

Diluted earnings per share
$
0.74

$
1.03

Per share operating expense items noted above

0.26

-

Adjusted diluted earnings per share
$
1.00

$
1.03

Adjusted diluted earnings per share - change over the prior year period

(2.9
%)

Weighted average number of common shares - diluted

37,608

38,884

For the Nine Months Ended September 30,

2015

2014 (Revised)

% to

% to

Amount

Net Sales

Amount

Net Sales

Net Sales
$
4,065,719

100.0
%

$
3,994,123

100.0
%
Gross profit
$
635,657

15.6
%

$
593,131

14.9
%
Operating expenses
$
526,653

13.0
%

$
438,538

11.0
%
Workforce reduction and facility consolidation charge

(6,495
)

(0.2
%)

-

-

Rebranding - intangible asset impairment and amortization

(11,485
)

(0.3
%)

-

-

Notes receivable impairment

(10,738
)

(0.3
%)

Loss on sale of business and related costs

(16,999
)

(0.4
%)

-

-

Adjusted operating expenses
$
480,936

11.8
%

$
438,538

11.0
%
Operating income
$
109,004

2.7
%

$
154,593

3.9
%
Operating expense items noted above

45,717

1.1
%

-

-

Adjusted operating income
$
154,721

3.8
%

$
154,593

3.9
%
Net income
$
51,492

$
90,045

Operating expense items noted above, net of tax

34,854

-

Adjusted net income
$
86,346

$
90,045

Diluted earnings per share
$
1.35

$
2.29

Per share operating expense items noted above

0.91

-

Adjusted diluted earnings per share
$
2.26

$
2.29

Adjusted diluted earnings per share - change over the prior year period

(1.3
%)

Weighted average number of common shares - diluted

38,109

39,244

	For the Three Months Ended September 30,
	2016			2015

Operating expenses	$	138,526		$	172,159
Settlement charge related to the defined benefit plan (Note 10)		(419	)		-
Gain on sale of City of Industry facility (Note 3)		20,541			-
Severance costs for operating leadership		(1,245	)		-
Restructuring charges (Note 5)		1,210			(200	)
Impairment of assets and accelerated amortization related to rebranding		-			(511	)
Impairment of seller notes		-			(10,738	)
Loss on sale of Mexico business and related costs		-			(2,072	)
Adjusted operating expenses	$	158,613		$	158,638

Operating income	$	60,328		$	52,984
Operating expense adjustments noted above		(20,087	)		13,521
Adjusted operating income	$	40,241		$	66,505

Net income	$	36,742		$	27,667
Operating expense adjustments noted above		(20,087	)		13,521
Non-GAAP tax provision on adjustments
Settlement charge related to the defined benefit plan (Note 10)		(158	)		-
Gain on sale of City of Industry facility (Note 3)		2,789			-
Severance costs for operating leadership		(469	)		-
Restructuring charges (Note 5)		456			(76	)
Dividend from a foreign subsidiary (Note 13)		1,666			-
Impairment of assets and accelerated amortization related to rebranding		-			(194	)
Impairment of seller notes		-			(4,080	)
Loss on sale of Mexico business and related costs		-			846
Adjusted net income	$	20,939		$	37,684

Diluted earnings per share	$	0.99		$	0.74
Operating expense adjustments noted above		(0.54	)		0.36
Non-GAAP tax provision on adjustments		0.12			(0.10	)
Adjusted diluted earnings per share	$	0.57		$	1.00

Net income	$	36,742		$	27,667
Provision for income taxes		17,102			20,017
Interest expense, net		6,484			5,300
Depreciation and amortization		10,046			10,424
Equity compensation expense		1,355			3,179
Operating expense adjustments noted above		(20,087	)		13,521
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)	$	51,642		$	80,108

Net cash provided by operating activities	$	121,952		$	62,811
Net cash provided by (used in) investing activities		22,280			(45,363	)
Less: Acquisition, net of cash acquired		-			39,939
Add: Sale of equity investment		-			(612	)
Free cash flow	$	144,232		$	56,775

	For the Nine Months Ended September 30,
	2016			2015

Operating expenses	$	475,573		$	526,653
Settlement charge related to the defined benefit plan (Note 10)		(12,163	)		-
Gain on sale of City of Industry facility (Note 3)		20,541			-
Severance costs for operating leadership		(1,245	)		-
Restructuring charges (Note 5)		956			(6,495	)
Impairment of assets and accelerated amortization related to rebranding		-			(11,485	)
Impairment of seller notes		-			(10,738	)
Loss on sale of Mexico business and related costs		-			(16,999	)
Adjusted operating expenses	$	483,662		$	480,936

Operating income	$	119,186		$	109,004
Operating expense adjustments noted above		(8,089	)		45,717
Adjusted operating income	$	111,097		$	154,721

Net income	$	66,205		$	51,492
Operating expense adjustments noted above		(8,089	)		45,717
Non-GAAP tax provision on adjustments
Settlement charge related to the defined benefit plan (Note 10)		(4,574	)		-
Gain on sale of City of Industry facility (Note 3)		2,789			-
Severance costs for operating leadership		(469	)		-
Restructuring charges (Note 5)		357			(2,468	)
Dividend from a foreign subsidiary (Note 13)		1,666			-
Impairment of assets and accelerated amortization related to rebranding		-			(4,364	)
Impairment of seller notes		-			(4,080	)
Loss on sale of Mexico business and related costs		-			49
Adjusted net income	$	57,885		$	86,346

Diluted earnings per share	$	1.79		$	1.35
Operating expense adjustments noted above		(0.22	)		1.20
Non-GAAP tax provision on adjustments		-			(0.29	)
Adjusted diluted net income per share	$	1.57		$	2.26

Net income	$	66,205		$	51,492
Provision for income taxes		34,923			42,594
Interest expense, net		18,058			14,918
Depreciation and amortization		30,500			31,356
Equity compensation expense		7,044			6,447
Operating expense adjustments noted above		(8,089	)		45,717
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)	$	148,641		$	192,524

Net cash provided by operating activities	$	105,968		$	183,659
Net cash provided by (used in) investing activities		5,723			(57,808	)
Less: Acquisitions, net of cash acquired		-			(40,471	)
Add: Sale of equity investment		-			612
Free cash flow	$	111,691		$	85,992

Results of Operations—Three Months Ended September 30, ~~2015~~2016 Compared with the Three Months Ended September 30, ~~2014~~2015

Net Sales. Net sales for the third quarter of ~~2015~~2016 were ~~$1.39~~$1.4 billion. The following table summarizes net sales by product category for the three-month periods ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands):

~~Sales~~Net sales in the janitorial and breakroom supplies (JanSan) product category decreased ~~1.8%~~1.3% in the third quarter of ~~2015~~2016 compared to the third quarter of ~~2014.~~2015. This category accounted for ~~27.0%~~26.5% of the Company’s ~~third~~second quarter ~~2015~~2016 consolidated net sales. Sales ~~increased from being named the primary supplier for Office Depot’s janitorial business and e-tail growth but was more than offset by a decline~~ in ~~sales~~this category declined due to ~~the~~lower volumes in independent ~~dealer channel.~~distributor channels.

~~Sales~~Net sales in the technology products category (primarily ink and toner) ~~decreased 10.6%~~increased 0.7% from the third quarter of ~~2014.~~2015. This category accounted for ~~24.7%~~24.6% of net sales for the third quarter of ~~2015. This decline is primarily attributable to the loss of business with large national customers, lower sales to the independent dealer channel, and lower sales at~~2016. Excluding our Mexican subsidiary, which was sold in the third ~~quarter. These were partially offset~~quarter of 2015, net sales in this category increased 3.2% compared to the prior year quarter, which was driven by ~~growth in e-tail~~sales to new customers.

~~Sales~~Net sales of traditional office products ~~decreased~~increased in the third quarter of ~~2015~~2016 by ~~11.1%~~1.6% versus the third quarter of ~~2014.~~2015. Traditional office supplies represented ~~23.0%~~17.0% of the Company’s consolidated net sales for the third quarter of ~~2015. This~~2016. The sales increase was driven by ~~a decline~~an increase in ~~cut-sheet paper~~ sales ~~loss of business~~in independent dealer channels as we have increased our share in this channel with ~~Office Depot and reduced demand in our independent channel. These declines were partially offset by continued growth in e-tailers and a higher government spending.~~new key customer acquisitions.

Industrial supplies net sales in the third quarter of ~~2015 increased~~2016 decreased by ~~37.3%~~4.7% compared to the same prior-year period. ~~Sales~~Net sales of industrial supplies accounted for ~~16.1%~~9.9% of the Company’s net sales for the third quarter of ~~2015 and reflected solid~~2016. Growth in retail channel sales momentum from our acquisitions in the last 12 months, which contributed $81.2 million in incremental sales. Without the acquisitions, industrial sales declined 12.6% over the prior-year quarter. Approximately 25% of our organic industrial business is exposed to energy sector resellers which have been impacted bypartially offset the decline in ~~oil prices resulting~~industrial supplies net sales driven by challenges in the oilfield and welding sector and macro-economic environment.

Net sales ~~declines~~ in ~~our general industrial and energy~~the cut sheet paper category increased in the third quarter of 2016 by 27.6% compared to the third quarter of 2015. Cut sheet paper net sales accounted for 7.6% of the Company’s net sales for the third quarter of 2016. The increase in this category was driven by increased sales in the independent dealer channels. ~~We expect this impact to continue throughout the year.~~

~~Office furniture~~Automotive net sales in the third quarter of ~~2015~~2016 increased ~~2.7%~~3.9% compared to the third quarter of ~~2014. Office furniture accounted for 6.3%~~2015. Automotive net sales represented 5.6% of the Company’s third quarter of ~~2015~~2016 net sales. This increase was due to the acquisition of Nestor which contributed an additional $3.8 million in net sales in the third quarter of 2016.

Office furniture net sales in the third quarter of 2016 decreased 6.3% compared to the third quarter of 2015. Office furniture accounted for 5.8% of the Company’s third quarter of 2016 consolidated net sales. ~~Within this category, the loss of~~This decline was due to declines in sales ~~at Office Depot was mostly offset by growth~~ in ~~other large customers~~national accounts and ~~e-tailers.~~independent dealer channels.

The remainder of the Company’s third quarter ~~2015~~2016 net sales ~~was~~were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the third quarter of ~~2015~~2016 was ~~$225.1~~$198.9 million, compared to ~~$216.7~~$225.1 million in the third quarter of ~~2014.~~2015. The gross margin rate of ~~16.2%~~14.1% was ~~up 92~~down 210 basis points (bps) from the prior-year quarter gross margin rate of ~~15.3%~~16.2%. Our ~~acquisitions in~~gross margin declined primarily due to reduced supplier allowances related to inventory reductions and customer and product mix. We also experienced higher freight cost due to new sales and growth of larger customers, and inventory expense increase due to the ~~last 12 months added an incremental 17 basis points~~2015 favorability related to a LIFO conversion. Our sales to larger resellers are generally at lower margins than sales to our ~~gross~~smaller resellers. Sales to new customers tend to be lower margin ~~rate in the quarter. Excluding the impact~~but mature over time. Lower margin categories of ~~our acquisitions, our gross~~sales include cut-sheet paper and technology, while JanSan office products, furniture and industrial are higher margin ~~rate benefited from a favorable product margin driven by a favorable product mix (20 bps), a decline in freight expenses (31 bps) and favorable inflation related inventory adjustments (48 bps).~~categories.

Operating Expenses. Operating expenses for the third quarter of 2016 were $138.5 million or 9.8% of net sales, compared to $172.2 million or 12.4% of net sales ~~including $13.5~~in the prior year. The $33.7 million ~~related~~decline was driven by the gain on sale of the City of Industry facility (refer to Note 3) as well as the ~~third quarter charges.~~impairment of seller notes in 2015. Adjusted operating expenses were $158.6 million or ~~11.4%~~11.3% of net sales compared with ~~$148.8~~$158.6 million or ~~10.5%~~11.4% of net sales in the same period last ~~year. The $9.8 million increase was driven by $11.5 million~~year, reflecting the recognition of previously capitalized costs related to inventory reduction and incremental ~~expenses from acquisitions, partially~~variable labor costs, offset by ~~benefits from~~actions to reduce salary expense, discretionary spend and lower incentive compensation. We expect to realize future savings through continued rationalization of our ~~first quarter restructuring actions~~distribution center network, realization of process improvements in our distribution centers and ~~expense control.~~our infrastructure, and optimization of our fleet and delivery structure to match the changing business that we are supporting.

Interest Expense, net. Interest expense, net for the third quarter of ~~2015~~2016 was ~~$5.3~~$6.5 million compared to ~~$4.0~~$5.3 million in the third quarter of ~~2014.~~2015. This was driven by higher debt outstanding related to our acquisitions in the past year. Interest expense is expected to be higher in ~~2015~~2016 than in the prior year.

Income Taxes. Income tax expense was ~~$20.0~~$17.1 million for the third quarter of ~~2015,~~2016, compared with ~~$23.6~~$20.0 million for the same period in ~~2014.~~2015. The Company’s effective tax rate was ~~42.0%~~31.8% for the current-year quarter and ~~37.0%~~42.0% for the same period in ~~2014 driven by the capital loss on the sale of Azerty de Mexico which cannot be recognized at this time and carries a full valuation allowance.~~2015.

Net Income. Net income for the third quarter of ~~2015 totaled~~2016 increased to $36.7 million or $0.99 per diluted share, compared to $27.7 million or $0.74 per diluted share ~~including $10.0 million after-tax, or $0.26 per diluted share, of costs related to~~in the ~~third quarter charges.~~prior year. Adjusted net income was ~~$37.7~~$20.9 million, or ~~$1.00~~$0.57 per diluted share, compared with adjusted net income of ~~$40.2~~$37.7 million or ~~$1.03~~$1.00 per diluted share for the same three-month period in ~~2014.~~2015.

Results of Operations—Nine Months Ended September 30, ~~2015~~2016 Compared with the Nine Months Ended September 30, ~~2014~~2015

Net Sales. Net sales for the ~~first nine months of 2015~~nine-month period ended September 30, 2016 were ~~$4.07~~$4.1 billion. The following table summarizes net sales by product category for the ~~nine-month periods~~nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (in thousands):

Sales in the janitorial and breakroom supplies product category ~~increased 3.0%~~ in the first nine months of ~~2015 compared~~2016 were comparable to the first nine months of ~~2014.~~2015. This category accounted for ~~27.1%~~26.8% of the Company’s first nine months of ~~2015~~2016 consolidated net sales. Sales ~~growth~~ in this category ~~was driven by being named the primary supplier for Office Depot’s janitorial business and growth~~declined due to lower volumes in ~~e-tail, partially offset by reduced demand in our~~ independent ~~dealer customers.~~distributor channels.

Sales in the technology products category (primarily ink and toner) decreased in the first nine months of ~~2015~~2016 by ~~5.6%~~0.7% versus the first nine months of ~~2014.~~2015. This category accounted for ~~25.8%~~25.2% of net sales for the first nine months of ~~2015. Sales declined due to the loss of business with Office Depot, lower sales at~~2016. Excluding our Mexican subsidiary, which was sold in the third quarter of 2015, net sales in this category increased 4.3% compared to the prior year quarter, driven by sales to new e-tailers and ~~reduced demand in our independent dealer channel. The sales decline was partially offset by growth in e-tailers.~~technology customers.

Sales of traditional office products ~~decreased~~increased in the first nine months of ~~2015~~2016 by ~~10.3%~~2.2% versus the first nine months of ~~2014.~~2015. Traditional office supplies represented ~~22.4%~~16.3% of the Company’s consolidated net sales for the first nine months of ~~2015.~~2016. The ~~decline~~improvement in this category was primarily driven by ~~the decline of cut-sheet paper and the loss of first call supplier status~~increased sales in independent dealer channels as we have increased our share in this channel with ~~Office Depot.~~new key customer acquisitions.

Industrial supplies sales in the first nine months of ~~2015 increased~~2016 decreased by ~~47.0%~~5.0% compared to the same prior-year period and accounted for ~~15.9%~~10.3% of the Company’s net sales for the first nine months of ~~2015. Our acquisitions contributed $258.1 million in incremental sales. Excluding sales from acquisitions, industrial~~2016. Industrial supplies sales declined ~~11.6% over the same period last year,~~ due to ~~declines in~~impacts of our general industrial and energy channels. We expect this impact to continue throughout the year.

Net sales in the cut sheet paper category increased in the first nine months of 2016 by 15.9% compared to the first nine months of 2015. Cut sheet paper net sales accounted for 7.2% of the Company’s net sales for the first nine months of 2016. The increase in this category was driven by increased sales in the independent dealer channels.

Automotive net sales in the first nine months of 2016 increased 19.4% compared to the same prior-year period. Automotive net sales represented 5.8% of the Company’s net sales for the first nine months of 2016. This increase was primarily due to the acquisition of Nestor which contributed an additional $38.9 million in net sales.

Office furniture sales in the first nine months of ~~2015 increased 2.2%~~2016 decreased 5.6% compared to the first nine months of ~~2014.~~2015. Office furniture accounted for ~~6.0%~~5.6% of the Company’s first nine months of ~~2015~~2016 consolidated net sales. ~~Improved sales with a large~~The decline in this category was primarily driven by national ~~customer and growth in e-tail~~account and independent ~~resellers more than offset lost~~dealer channels sales ~~to Office Depot.~~decreases.

The remainder of the Company’s first nine months of ~~2015~~2016 net sales was composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the first nine months of ~~2015~~2016 was ~~$635.7~~$594.8 million, compared to ~~$593.1~~$635.7 million in the first nine months of ~~2014.~~2015. The gross margin rate of ~~15.6%~~14.5% was ~~up 78 basis points (bps)~~down 110 bps from the prior-year period gross margin rate of ~~14.9%~~15.6%. This ~~increase~~decrease was primarily due to ~~acquisitions (30 bps) and a favorable~~ product margin, driven by ~~favorable~~customer and product mix, and ~~purchase driven inventory allowances.~~higher freight expenses.

Operating Expenses. Operating expenses for the first nine months of ~~2015~~2016 were $475.6 million or 11.6% of sales, compared with $526.7 million or 13.0% ~~of sales, compared with $438.5 million or 11.0%~~ of sales in the same period last year. ~~This included~~The improvement was due to the ~~impacts~~gain on sale of ~~a $10.7 million~~City of Industry facility (see Note 3) as well as the impairment of seller notes ~~$6.5 million related to workforce reduction and facility consolidations, $11.5 million charge for accelerated amortization related to intangible assets impaired~~ in ~~the first quarter of 2015, and $17.0 million charge related to exiting our non-strategic business in Mexico (together the “2015 charges”).~~2015. Adjusted operating expenses were $483.7 million or 11.8% of net sales and $480.9 million or 11.8% of ~~sales. Current period operating expenses were affected by acquisitions which added an incremental $40.9 million in operating expenses. The Company incurred approximately $4.2 million~~net sales in the first nine months of 2016 and 2015, ~~of operating expense related to the initiative to combine the Company’s office product and janitorial platforms.~~ respectively.

Interest Expense, net. Interest expense, net for the first nine months of ~~2015~~2016 was ~~$14.9~~$18.1 million compared to ~~$11.2~~$14.9 million in the first nine months of ~~2014.~~2015. This was driven by higher debt outstanding related to our acquisitions in the past year. Interest expense is expected to be higher in 2016 than in the prior year.

Income Taxes. Income tax expense was ~~$42.6~~$34.9 million for the first nine months of ~~2015,~~2016, compared with ~~$53.3~~$42.6 million for the same period in ~~2014.~~2015. The Company’s effective tax rate was ~~45.3%~~34.5% for the current-year period and ~~37.2%~~45.3% for the same period in ~~2014 driven by discrete tax impacts of the impairment charges and a capital loss on the sale of Azerty de Mexico which cannot be recognized at this time and carries a full valuation allowance.~~2015.

Net Income. Net income for the first nine months of ~~2015~~2016 totaled $66.2 million or $1.79 per diluted share, including $8.3 million after-tax, or $0.22 per diluted share, of income related to the Actions. For the same period in the prior year, net income was $51.5 million or $1.35 per diluted ~~share, including $34.9 million after-tax, or $0.91 per diluted share, of costs related to 2015 charges.~~share. Adjusted net income for the first nine months of 2016 was ~~$86.3~~$57.9 million, or ~~$2.26~~$1.57 per diluted share, compared with adjusted net income of ~~$90.0~~$86.3 million or ~~$2.29~~$2.26 per diluted share for the same nine-month period in ~~2014.~~2015.

Defined benefit plan settlement loss of $0.4 million and $12.2 million for the three and nine months ended September 30, 2016, respectively, resulted from the voluntary lump sum program announced in February 2016. Refer to Note 10 “Pension and Post-Retirement Benefit Plans”, for further information on the remeasurement and voluntary lump sum program.

The following discussion focuses on information included in the accompanying Condensed Consolidated Statements of Cash Flows.

Net cash provided by operating activities for the ~~nine months~~nine-month period ended September 30, ~~2015~~2016 totaled ~~$183.7~~$106.0 million, compared with ~~$93.7~~$183.7 million in the ~~same~~ nine-month period ended September 30, 2015. A decrease in inventory of ~~2014. The 96.1% improvement over~~$73.7 million compared to a decrease of $54.4 million in the prior year, ~~demonstrates market factors~~an increase in accounts payable of $8.9 million compared to an increase of $50.4 million in the prior year, and ~~our commitment~~an increase in dealer prepayments of $34.5 million compared to ~~effectively manage working capital.~~ an increase of $10.8 million in the prior year were the primary drivers of the $77.7 million decrease.

Net cash ~~used in~~provided by investing activities for the first nine months of ~~2015~~2016 was ~~$57.8~~$5.7 million, compared with ~~$41.3~~$57.8 million used in investing activities for the ~~nine months~~nine-month period ended September 30, ~~2014. For~~2015. The $63.5 million change was primarily driven by $31.0 million proceeds from the ~~full year 2015, the Company expects capital spending, excluding acquisitions, to be approximately $30.0~~sale of our City of Industry facility in 2016 compared with $40.5 million ~~to $35.0 million.~~cash used in our acquisition activity in 2015.

Net cash used in financing activities for the ~~nine months~~nine-month period ended September 30, ~~2015~~2016 totaled ~~$118.1~~$119.3 million, compared with ~~$49.8~~$118.1 million in the same prior-year period. Net cash used in financing activities during the first nine months of ~~2015~~2016 was impacted by ~~$45.3~~$96.6 million in net repayments under ~~debt arrangements, $55.7~~our revolving credit facility compared to $45.3 million in the prior year, and $6.8 million in share repurchases, ~~and $16.0~~compared to $55.7 million in ~~payments of cash dividends.~~the prior year.

On July 14, 2016, the Board of Directors approved a dividend of $0.14 which was paid on October ~~6, 2015,~~14, 2016 to shareholders of record as of September 15, 2016. On September 28, 2016, the Company’s Board of Directors approved ~~the~~ payment of a $0.14 per share dividend ~~payable~~ to ~~stockholders~~shareholders of record as of December 15, ~~2015~~2016 to be paid on January ~~15, 2016.~~13, 2017.

The 2013 Credit Agreement and the 2013 Note Purchase Agreement (each as defined in Note 11 “Debt” in the Notes to the Consolidated Financial Statements in the 2015 Form 10-K) limit the Company’s ability to repurchase its stock when the Company’s Leverage Ratio, as defined in the 2013 Credit Agreement and the 2013 Note Purchase Agreement and as reported to its lenders, exceeds 3.00 to 1.00. As of September 30, 2016, the Company’s Leverage Ratio was 2.77 to 1.00.

Essendant’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. We believe that our cash from operations and collections of receivables, coupled with our sources of borrowings and available cash on hand, are sufficient to fund 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 September 30, ~~2015,~~2016, is summarized below (in millions):

The Company’s ~~outstanding debt~~total capitalization consisted of the following amounts (in millions):

~~We believe that our operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future.~~ Refer to Note 9, “Debt”, for further descriptions of the provisions of our financing facilities as well as Note 911 “Debt” in our ~~Annual Report on~~2015 Form ~~10-K for the year-ended December 31, 2014.~~10-K.

During the nine-month period ended September 30, ~~2015,~~2016, contractual obligations ~~have~~ increased ~~$90.0~~by $73.8 million from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2014,~~2015, driven by ~~the renewed corporate office building lease and other~~new facility leases, facility lease ~~renewals.~~renewals and new multi-year technology contracts.

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 nine months of ~~2015~~2016 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

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.

During the fiscal quarter ended September 30, ~~2015,~~2016, 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.

The Company has been named as a defendant in an action filed before the United States District Court for the Central District of California on May 1, 2015. The complaint alleges that the Company sent unsolicited fax advertisements to two named plaintiffs, as well as thousands of other persons and entities, in violation of the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 ("TCPA"). After filing the complaint, the plaintiff filed a motion asking the Court to certify a class of plaintiffs comprised of persons and entities who allegedly received fax advertisements from the Company. Under the TCPA, recipients of unsolicited fax advertisements can seek damages of $500 per fax for inadvertent violations and up to $1,500 per fax for knowing and willful violations. Other reported TCPA lawsuits have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. The Company is vigorously contesting class certification and liability. Litigation of this kind, however, is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. Regardless of whether the litigation is resolved at trial or through settlement, the Company believes that a loss associated with resolution of pending claims is probable. However, the amount of any such loss, which could be material, cannot be reasonably estimated because the Company is continuing to evaluate its defenses based on its internal review and investigation of prior events, newFor information ~~and future circumstances.~~

~~The Company is also involved in other~~regarding 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 such ordinary course legal proceedings will be resolved with no material adverse effect upon its financial condition or results of operations.see Note 14 “Legal Matters.”

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the ~~Company’s~~2015 Form ~~10-K for the year ended December 31, 2014.~~10-K. There have been no material changes to the risk factors described in such Form ~~10-K.~~10-K, except for the following two revised risk factors.

Price transparency, customer consolidation, and changes in product sales mix may result in lower margins.

The Company faces price and margin pressure due to a number of factors, including:

If Essendant is unable to reduce expenses, grow sales to existing and new customers, and increase sales of higher margin products as a percentage of total sales, the Company’s results of operations and financial condition may be adversely affected.

For example, during the second and third quarters of 2016, despite the Company’s success at converting customers, profitability was adversely affected by margin pressure resulting from a shift in customer mix to lower margin customers and in product category mix to lower margin products. The transparency of pricing online also caused margin pressure.

Essendant’s reliance on supplier allowances and promotional incentives could impact profitability.

Supplier allowances and promotional incentives that are often based on the volume of Company product purchases contribute significantly to Essendant’s profitability. If Essendant does not comply with suppliers’ terms and conditions, or does not make requisite purchases to achieve certain volume hurdles, Essendant may not earn certain allowances and promotional incentives. Additionally, suppliers may reduce the allowances they pay Essendant if they conclude the value Essendant creates does not justify the allowances. If Essendant’s suppliers reduce or otherwise alter their allowances or promotional incentives, Essendant’s profit margin for the sale of the products it purchases from those suppliers may decline. The loss or diminution of supplier allowances and promotional support could have an adverse effect on the Company’s results of operations.

For example, in the second quarter of 2016, lower supplier allowances and promotional incentives contributed to the unfavorable margin impact of the product category mix shift, and as the Company executed its strategy to improve cash flow in part through lower inventory balances in the third quarter of 2016, a reduction in purchases from suppliers resulted in lower supplier allowances, which contributed to the unfavorable gross margin changes.

During the ~~nine-month periods~~nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, the Company repurchased ~~1,525,222~~241,270 and ~~1,074,574~~1,525,222 shares of common stock at an aggregate cost of $6.8 million and $57.4 million, ~~and $43.0 million,~~ respectively. ~~On February 11, 2015, the Board of Directors authorized the Company to purchase an additional $100.0 million of common stock.~~ The Company ~~repurchased 1,737,850~~did not repurchase any additional shares ~~for $64.5 million year-to-date~~ through October ~~19, 2015.~~24, 2016. As of that date, the Company had approximately ~~$77.9~~$68.2 million remaining of existing share repurchase authorization from the Board of Directors.

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.

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.

Large accelerated filer	x☒	Accelerated filer	¨☐

Non-accelerated filer	¨☐ (Do not check if a smaller reporting company)	Smaller reporting company	¨☐

		Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015		3
Condensed Consolidated Statements of Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015		4
Condensed Consolidated Statements of Comprehensive Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015		5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2116
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2928
Item 4. Controls and Procedures		2928
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 6. Exhibits		31
SIGNATURES		32

	CPO			MEDCO			Nestor
	(Final)			(Preliminary)			(Preliminary)
Purchase price, net of cash acquired	$	32,225		$	145,873		$	39,939		$	39,983

Accounts receivable		(2,956	)		(44,815	)		(9,230	)		9,230
Inventories		(13,051	)		(55,491	)		(10,442	)		12,067
Other current assets		(269	)		(1,299	)		(339	)		339
Property, plant and equipment, net		(488	)		(4,408	)		(1,251	)		1,251
Other assets		-			(650	)		(752	)		752
Intangible assets		(12,800	)		(40,000	)		(17,670	)		16,930
Total assets acquired		(29,564	)		(146,663	)		(39,684	)		40,569

Accounts payable		16,911			32,383			4,992			4,992
Accrued liabilities		2,580			5,542			1,912			1,943
Deferred income taxes		3,453			2,716			3,875			3,287
Other long-term liabilities		90			52			76			76
Total liabilities assumed		23,034			40,693			10,855			10,298
Goodwill	$	25,695		$	39,903		$	11,110		$	9,712

	Total		Estimated Life
Customer relationships	$	15,570	13 years
Trademark		1,360	2-15 years
Total	$	16,930

	CPO (Final)			MEDCO (Preliminary)			Nestor (Preliminary)
	Total		Estimated Life	Total		Estimated Life	Total		Estimated Life
Customer relationships	$	5,200	3 years	$	37,590	3-15 years	$	16,890	13 years
Trademark		7,600	15 years		2,410	1.5-15 years		780	2.5-15 years
Total	$	12,800		$	40,000		$	17,670

	Years Ended December 31,
	2014									2013									2012
	Previous Method			As Reported			Effect of Change			Previous Method			As Reported			Effect of Change			Previous Method			As Reported			Effect of Change
Consolidated Statement of Income
Cost of goods sold^(A)	$	4,516,704		$	4,524,676		$	7,972		$	4,295,715		$	4,297,952		$	2,237		$	4,305,502		$	4,303,778		$	(1,724	)
Gross profit^(A)		810,501			802,529			(7,972	)		789,578			787,341			(2,237	)		774,604			776,328			1,724
Warehousing, marketing, and administrative expenses^(A)		592,050			595,673			3,623			580,428			580,141			(287	)		573,693			573,645			(48	)
Income before income taxes^(A)		194,483			182,888			(11,595	)		197,510			195,560			(1,950	)		177,635			179,407			1,772
Income tax expense^(A)		75,285			70,773			(4,512	)		74,340			73,507			(833	)		65,805			66,526			721
Net income^(A)		119,198			112,115			(7,083	)		123,170			122,053			(1,117	)		111,830			112,881			1,051
Net income per share^(A)
Basic^(A)	$	3.08		$	2.90		$	(0.18	)	$	3.11		$	3.08		$	(0.03	)	$	2.77		$	2.80		$	0.03
Diluted^(A)	$	3.05		$	2.87		$	(0.18	)	$	3.06		$	3.03		$	(0.03	)	$	2.73		$	2.75		$	0.02

Consolidated Statement of Comprehensive Income
Net income^(A)	$	119,198		$	112,115		$	(7,083	)	$	123,170		$	122,053		$	(1,117	)	$	111,830		$	112,881		$	1,051
Comprehensive income^(A)		96,295			89,212			(7,083	)		137,047			135,930			(1,117	)		114,471			115,522			1,051

Consolidated Statement of Financial Position
Inventories^(A)	$	926,809		$	906,430		$	(20,379	)	$	830,295		$	821,511		$	(8,784	)	$	767,206		$	760,372		$	(6,834	)
Other current assets^(A)		30,042			30,713			671			29,255			29,255			-			30,118			30,118			-
Other long-term assets^(B)		41,810			38,669			(3,141	)		25,576			22,185			(3,391	)		20,260			17,737			(2,523	)
Accrued liabilities^(A)		192,792			185,535			(7,257	)		191,531			188,115			(3,416	)		205,228			202,645			(2,583	)
Long-term debt^(B)		713,058			709,917			(3,141	)		533,324			529,933			(3,391	)		524,376			521,853			(2,523	)
Retained earnings^(A)		1,541,675			1,529,224			(12,451	)		1,444,238			1,438,870			(5,368	)		1,343,437			1,339,186			(4,251	)

Consolidated Statement of Cash Flows
Net income^(A)	$	119,198		$	112,115		$	(7,083	)	$	123,170		$	122,053		$	(1,117	)	$	111,830		$	112,881		$	1,051
Deferred income taxes^(A)		(6,367	)		(10,879	)		(4,512	)		(3,921	)		(4,754	)		(833	)		(6,713	)		(5,992	)		721
Inventories^(A)		(30,319	)		(18,724	)		11,595			(66,627	)		(64,677	)		1,950			10,374			8,602			(1,772	)
Cash provided by operating activities^(A)		77,133			77,133			-			74,737			74,737			-			189,814			189,814			-

Consolidated Statement of Shareholders’ Equity
Retained earnings at beginning of year^(A)	$	1,444,238		$	1,438,870		$	(5,368	)	$	1,343,437		$	1,339,186		$	(4,251	)	$	1,253,118		$	1,247,816		$	(5,302	)
Retained earnings at end of year^(A)		1,541,675			1,529,224			(12,451	)		1,444,238			1,438,870			(5,368	)		1,343,437			1,339,186			(4,251	)

(A) Change related to Inventory Valuation
(B) Change related to Debt Issuance Costs

	As of and for the Three Months Ended June 30, 2015									As of and for the Three Months Ended March 31, 2015
	Previous Method			As Reported			Effect of Change			Previous Method			As Reported			Effect of Change
Consolidated Statement of Income
Cost of goods sold^(A)	$	1,129,737		$	1,131,680		$	1,943		$	1,127,925		$	1,131,980		$	4,055
Gross profit^(A)		212,062			210,119			(1,943	)		204,450			200,395			(4,055	)
Warehousing, marketing, and administrative expenses^(A)		158,159			156,912			(1,247	)		198,372			197,581			(791	)
Income before income taxes^(A)		49,125			48,429			(696	)		1,239			(2,025	)		(3,264	)
Income tax expense^(A)		18,864			18,595			(269	)		5,231			3,982			(1,249	)
Net income (loss)^(A)		30,261			29,834			(427	)		(3,992	)		(6,007	)		(2,015	)
Net income (loss) per share^(A)
Basic^(A)	$	0.80		$	0.79		$	(0.01	)	$	(0.10	)	$	(0.16	)	$	(0.06	)
Diluted^(A)	$	0.79		$	0.78		$	(0.01	)	$	(0.10	)	$	(0.16	)	$	(0.06	)

Consolidated Statement of Comprehensive Income
Net income (loss)^(A)	$	30,261		$	29,834		$	(427	)	$	(3,992	)	$	(6,007	)	$	(2,015	)
Comprehensive income (loss) ^(A)		31,450			31,023			(427	)		(8,166	)		(10,181	)		(2,015	)

Consolidated Statement of Financial Position
Inventories^(A)	$	875,465		$	851,126		$	(24,339	)	$	871,310		$	847,667		$	(23,643	)
Other current assets^(A)		29,595			30,344			749			31,226			31,977			751
Other long-term assets^(B)		48,439			45,779			(2,660	)		49,440			46,535			(2,905	)
Accrued liabilities^(A)		190,257			181,560			(8,697	)		175,770			167,344			(8,426	)
Long-term debt^(B)		661,143			658,483			(2,660	)		684,238			681,333			(2,905	)
Retained earnings^(A)		1,557,281			1,542,388			(14,893	)		1,532,325			1,517,859			(14,466	)



	For the Six Months Ended June 30, 2015									For the Three Months Ended March 31, 2015
	Previous Method			As Reported			Effect of Change			Previous Method			As Reported			Effect of Change
Consolidated Statement of Cash Flows
Net income (loss)^(A)	$	26,269		$	23,827		$	(2,442	)	$	(3,992	)	$	(6,007	)	$	(2,015	)
Deferred income taxes^(A)		(8,365	)		(8,294	)		71			(1,858	)		(1,469	)		389
Inventories^(A)		44,984			48,944			3,960			42,759			46,023			3,264
Other assets^(A)		(10,173	)		(10,250	)		(77	)		(10,126	)		(10,751	)		(625	)
Accrued liabilities^(A)		4,794			3,282			(1,512	)		(16,521	)		(17,534	)		(1,013	)
Cash provided by operating activities^(A)		120,848			120,848			-			62,722			62,722			-

(A) Change related to Inventory Valuation
(B) Change related to Debt Issuance Costs

Goodwill, balance as of December 31, 2014	$	398,042
Impairment		(3,319	)
Purchase accounting adjustments		9,977
Acquisition		11,110
Currency translation adjustments		(2,632	)
Goodwill, balance as of September 30, 2015	$	413,178

Year	Amount		Amount
2015	$	15,156
2016		13,113	$	12,242
2017		10,956		10,797
2018		8,088		8,054
2019		6,953		6,937
2020				6,934

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total			Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2014	$	(11,923	)	$	274		$	(51,142	)	$	(62,791	)
AOCI, balance as of December 31, 2015													$	(9,866	)	$	146		$	(47,871	)	$	(57,591	)
Other comprehensive (loss) income before reclassifications		(8,056	)		(1,291	)		-			(9,347	)		2,441			(579	)		(3,946	)		(2,084	)
Settlement loss reclassified from AOCI														-			-			7,453			7,453
Amounts reclassified from AOCI		11,132			655			2,831			14,618			-			440			2,528			2,968
Net other comprehensive (loss) income		3,076			(636	)		2,831			5,271			2,441			(139	)		6,035			8,337
AOCI, balance as of September 30, 2015	$	(8,847	)	$	(362	)	$	(48,311	)	$	(57,520	)
AOCI, balance as of September 30, 2016													$	(7,425	)	$	7		$	(41,836	)	$	(49,254	)

	As of			As of			As of			As of
	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015

2013 Credit Agreement	$	318.5		$	363.0		$	271.8		$	368.4
2013 Note Purchase Agreement		150.0			150.0			150.0			150.0
Receivables Securitization Program		200.0			200.0			200.0			200.0
Mortgage & Capital Lease		0.1			0.9			0.1			0.1
Transaction Costs		(2.4	)		(3.1	)		(1.7	)		(2.2	)
Total	$	666.2		$	710.8		$	620.2		$	716.3

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Derivatives in ASC 815 Cash Flow Hedging Relationships	For the Three Months Ended September 30, 2015		For the Nine Months Ended September 30, 2015			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	For the Three Months Ended September 30, 2015		For the Nine Months Ended September 30, 2015
Interest Rate Swap	$	86	$	361		Interest expense, net	$	329	$	991
Foreign Exchange Hedges		55		55		Cost of goods sold		4		4

Derivatives in ASC 815 Cash Flow Hedging Relationships	For the Three Months Ended September 30, 2014		For the Nine Months Ended September 30, 2014			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	For the Three Months Ended September 30, 2014		For the Nine Months Ended September 30, 2014
Interest Rate Swap	$	748	$	(1	)	Interest expense, net	$	281	$	281

	Three Months Ended September 30,				For the Three Months Ended September 30,
	2015		2014⁽¹⁾		2016		2015⁽¹⁾
Janitorial and breakroom supplies	$	375,454	$	382,308
Janitorial and breakroom supplies (JanSan)					$	372,880	$	377,763
Technology products		343,891		384,591		345,649		343,303
Traditional office products (including cut-sheet paper)		320,736		360,848
Traditional office products						239,964		236,258
Industrial supplies		223,510		162,813		139,822		146,769
Cut sheet paper						106,589		83,543
Automotive						78,618		75,633
Office furniture		87,409		85,090		82,216		87,731
Freight revenue		33,264		33,302		34,731		33,264
Services, Advertising and Other		7,281		10,995		7,035		7,281
Total net sales	$	1,391,545	$	1,419,947	$	1,407,504	$	1,391,545

	Nine Months Ended September 30,				For the Nine Months Ended September 30,
	2015⁽¹⁾		2014⁽¹⁾		2016		2015⁽¹⁾
Janitorial and breakroom supplies	$	1,100,646	$	1,068,766	$	1,102,909	$	1,107,574
Technology products		1,047,558		1,109,974		1,038,194		1,045,577
Traditional office products (including cut-sheet paper)		911,532		1,015,838
Traditional office products						669,290		654,669
Industrial supplies		647,689		440,751		422,142		444,413
Cut sheet paper						294,804		254,395
Automotive						238,576		199,870
Office furniture		244,177		238,867		231,370		245,104
Freight revenue		95,522		92,120		100,293		95,522
Services, Advertising and Other		18,595		27,807		16,745		18,595
Total net sales	$	4,065,719	$	3,994,123	$	4,114,323	$	4,065,719

Maximum financing available under:
2013 Credit Agreement	$	700.0			$	700.0
2013 Note Purchase Agreement		150.0				150.0
Receivables Securitization Program ⁽¹⁾		200.0				200.0
Maximum financing available			$	1,050.0			$	1,050.0
Amounts utilized:
2013 Credit Agreement		318.5				271.8
2013 Note Purchase Agreement		150.0				150.0
Receivables Securitization Program ⁽¹⁾		200.0				200.0
Outstanding letters of credit		11.1				11.2
Total financing utilized				679.6				633.0
Available financing, before restrictions				370.4				417.0
Restrictive covenant limitation(2)				-				140.4
Available financing as of September 30, 2015			$	370.4
Available financing as of September 30, 2016							$	276.6

2015 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
July 1, 2015 to July 31, 2015		179,757	$	37.88		179,757	$	104,169,515
August 1, 2015 to August 31, 2015		215,011		35.35		215,011		96,569,656
September 1, 2015 to September 30, 2015		349,313		32.89		349,313		85,082,091
Total Third Quarter		744,081	$	35.37		744,081	$	85,082,091

2016 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
July 1, 2016 to July 31, 2016		-		-		-		68,160,702
August 1, 2016 to August 31, 2016		-		-		-		68,160,702
September 1, 2016 to September 30, 2016		-		-		-		68,160,702
Total Third Quarter		-	$	-		-	$	68,160,702

Exhibit No.		Description
3.1		Third Restated Certificate of Incorporation of Essendant Inc. (“ESND” or the ~~Company,~~“Company”), dated as of June 1, 2015 (Exhibit 3.1 to the ~~Company’s~~ Form 10-Q, ~~for the quarter ended June 30, 2015,~~ filed on July ~~23, 2015)~~
	23,2015)
3.2		Amended and Restated Bylaws of ~~the Company,~~Essendant Inc., dated as of June 1, 2015 (Exhibit 3.2 to the ~~Company’s~~ Form 10-Q, ~~for the quarter ended June 30, 2015,~~ filed on July 23, 2015)

4.1		Note Purchase Agreement, dated as of November 25, 2013, among ~~USI, USSC,~~ESND, Essendant Co. (“ECO”), and the note purchasers identified therein (the “2013 Note Purchase Agreement”) (Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 19, 2014 (the “2013 Form 10-K”))
4.2		Amendment No. 1 to Note Purchase Agreement, dated as of January 27, 2016, among ECO, ESND and the holders of Notes issued by the Company that are parties thereto (Exhibit 4.2 to the Form 10-Q, filed on April 20, 2016)
~~4.2~~4.3		Parent Guaranty, dated as of November 25, 2013, by ~~USI~~ESND in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the 2013 Form 10-K)

~~4.3~~4.4		Subsidiary Guaranty, dated as of November 25, 2013, by all of the domestic subsidiaries of ~~USSC~~ECO (Exhibit 4.6 to the 2013 Form 10-K)

10.1*10.1		~~Executive Employment Agreement, effective as of July 22, 2015, by and among~~ Essendant, Inc.~~, Essendant Co.,~~ Amended and Essendant Management Services LLC and Robert B. Aiken, Jr. **

~~10.2~~		~~Letter Agreement dated June 4, 2015 among Essendant Inc., Essendant Co. and Robert B. Aiken, Jr.~~Restated Executive Severance Plan (Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on ~~June 9, 2015)~~July 18, 2016)**
18.110.2†		~~Preferability Letter on Change in Accounting Principle~~2016 Cash Incentive Award Agreement with EPS Minimum dated as of July 18, 2016, by and between ESND and Richard D. Phillips**
10.3*		Amended and Restated Executive Employment Agreement, dated as of July 22, 2016, by and among ESND, ECO, Essendant Management Services (“EMS”) and Robert B. Aiken, Jr.**
10.4*		Form of Amended and Restated Executive Employment Agreement, effective as of January 1, 2017**
10.5*		Form of 2016 Restricted Stock Award Agreement with EPS Minimum under the 2015 Long-Term Incentive Plan**
10.6*		Form of Performance Based Restricted Stock Unit Award Agreement under the 2015 Long-Term Incentive Plan**
10.7*		Amendment No. 2 to Note Purchase Agreement, dated as of August 30, 2016, between ESND, ECO, and the noteholders identified therein
10.8*		Amendment No. 2 to the Fourth Amended and Restated Five Year Revolving Credit Agreement, dated as of August 29, 2016, between ESND, ECO, JPMorgan Chase Bank, N.A., as agent, and the other financial institutions identified therein
10.9*		August 30, 2016 Consent of Class Agents under the Amended and Restated Transfer and Administration Agreement dated as of January 18, 2013 to amendment to the amendment of the Fourth Amended and Restated Five Year Revolving Credit Agreement, dated as of July 8, 2013
31.1*		Certification of Chief Executive Officer, dated as of October ~~21, 2015,~~26, 2016, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer, dated as of October ~~21, 2015,~~26, 2016, 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 October ~~21, 2015,~~26, 2016, 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 Essendant Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, ~~2015,~~2016, filed with the SEC on October ~~21, 2015,~~26, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statement of Income for the three-month and nine-month periods ended September 30, 2016 and 2015 ~~and 2014,~~, (ii) the Condensed Consolidated Balance Sheet at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, (iii) the Condensed Consolidated Statement of Cash Flows for the nine-month periods ended September 30, ~~2015~~2016 and ~~2014,~~2015, and (iv) Notes to Condensed Consolidated Financial Statements.

**		- Represents a management contract or compensatory plan or arrangement
†		- Confidential treatment has been requested for a portion of this document. Confidential portions have been omitted and filed separately with the Securities and Exchange Commission.

			ESSENDANT INC.
			(Registrant)

Date: October ~~21, 2015~~26, 2016			/s/ ~~Todd A. Shelton~~Earl C. Shanks
			~~Todd A. Shelton~~Earl C. Shanks
			Senior Vice President and Chief Financial Officer