ATLANTA, Nov. 9, 2016
/PRNewswire/ -- Veritiv Corporation (NYSE: VRTV), a North
American leader in business-to-business distribution solutions,
today announced financial results for the third quarter ended
September 30, 2016.
"Our third quarter results met our expectations, and we continue
to be on track with our 2016 commitments," said Mary Laschinger, Chairman and CEO of Veritiv
Corporation. "Given the results and our outlook for the balance of
the year, we are reaffirming the upper end of our full year 2016
Adjusted EBITDA guidance."
For the three months ended September 30, 2016:
- Net sales were $2.1 billion, a
decrease of 4.2% from the prior year. Excluding the negative effect
of foreign currency (0.2%) in the third quarter of 2016, net sales
declined 4.0% from the prior year.
- Net income was $5.6 million,
compared to $14.5 million in the
prior year. Integration and restructuring charges were $13.1 million in the quarter and $11.3 million in the prior year.
- Basic and diluted earnings per share were $0.35 and $0.34,
respectively, compared to $0.91 for
both in the prior year.
- Adjusted EBITDA was $57.1
million, a decrease of 5.8% from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.7%,
unchanged from the prior year.
For the nine months ended September 30, 2016:
- Net sales were $6.2 billion, a
decrease of 4.8% from the prior year. Excluding the negative effect
of foreign currency (0.6%) and positive effect of two more shipping
days (1.0%) in the first nine months of 2016, net sales declined
5.2% from the prior year.
- Net income was $16.8 million,
compared to $16.6 million in the
prior year. Integration and restructuring charges were $26.8 million in the first nine months of 2016
and $37.2 million in the prior
year.
- Basic and diluted earnings per share were $1.05 and $1.04,
respectively, compared to $1.04 for
both in the prior year.
- Adjusted EBITDA was $142.1
million, an increase of 9.6% from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.3%, an
increase of 30 basis points from the prior year.
"Our third quarter Adjusted EBITDA was impacted by continued
headwinds in our Print and Publishing segments, as well as the
planned slowing of our synergy capture," said Stephen Smith, Senior Vice President and Chief
Financial Officer of Veritiv Corporation. "While our third quarter
margins remained flat, we anticipate improved margins and Adjusted
EBITDA in the fourth quarter of 2016 compared to the prior year's
fourth quarter."
Veritiv Corporation will host a live conference call and webcast
today, November 9, 2016, at 10 a.m.
(ET) to discuss its third quarter 2016 financial results and
full year 2016 guidance. All interested parties are invited to
listen online at ir.veritivcorp.com. A replay of the call and
webcast will be available online for a limited period of time at
ir.veritivcorp.com shortly after the live webcast is completed.
Important information regarding GAAP and related reconciliations
of non-GAAP financial measures to the most comparable GAAP measures
can be found in the schedules to this press release, which should
be thoroughly reviewed.
About Veritiv
Veritiv Corporation (NYSE: VRTV),
headquartered in Atlanta and a
Fortune 500® company, is a leading North American
business-to-business distributor of print, publishing, packaging,
and facility solutions; and also a provider of logistics and supply
chain management services. Serving customers in a wide range of
industries, the Company has approximately 180 distribution centers
throughout the U.S., Mexico and
Canada, and employs approximately
8,800 team members worldwide that help shape the success of its
customers. For more information about Veritiv and its business
segments visit www.veritivcorp.com.
Safe Harbor Provision
Certain statements contained in
this press release regarding Veritiv Corporation's (the "Company")
future operating results, performance, business plans, prospects,
guidance and any other statements not constituting historical fact
are "forward-looking statements" subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. Where
possible, the words "believe," "expect," "anticipate," "intend,"
"should," "will," "would," "planned," "estimated," "potential,"
"goal," "outlook," "may," "predicts," "could," or the negative of
such terms, or other comparable expressions, as they relate to the
Company or its business, have been used to identify such
forward-looking statements. All forward-looking statements reflect
only the Company's current beliefs and assumptions with respect to
future operating results, performance, business plans, prospects,
guidance and other matters, and are based on information currently
available to the Company. Accordingly, the statements are subject
to significant risks, uncertainties and contingencies, which could
cause the Company's actual operating results, performance, business
plans, prospects or guidance to differ materially from those
expressed in, or implied by, these statements.
Factors that could cause actual results to differ materially
from current expectations include risks and other factors described
under "Risk Factors" in our Annual Report on Form 10-K and
elsewhere in the Company's publicly available reports filed with
the Securities and Exchange Commission ("SEC"), which contain a
discussion of various factors that may affect the Company's
business or financial results. Such risks and other factors, which
in some instances are beyond the Company's control, include: the
industry-wide decline in demand for paper and related products;
increased competition from existing and non-traditional sources;
adverse developments in general business and economic conditions as
well as conditions in the global capital and credit markets;
foreign currency fluctuations; our ability to collect trade
receivables from customers to whom we extend credit; our ability to
attract, train and retain highly qualified employees; the effects
of work stoppages, union negotiations and union disputes; loss of
significant customers; changes in business conditions in our
international operations; procurement and other risks in obtaining
packaging, paper and facility products from our suppliers for
resale to our customers; changes in prices for raw materials; fuel
cost increases; inclement weather, anti-terrorism measures and
other disruptions to the transportation network; our dependence on
a variety of IT and telecommunications systems and the Internet;
our reliance on third-party vendors for various services;
cyber-security risks; costs to comply with laws, rules and
regulations, including environmental, health and safety laws, and
to satisfy any liability or obligation imposed under such laws;
regulatory changes and judicial rulings impacting our business;
adverse results from litigation, governmental investigations or
audits, or tax-related proceedings or audits; our inability to
renew existing leases on acceptable terms, negotiate rent decreases
or concessions and identify affordable real estate; our ability to
adequately protect our material intellectual property and other
proprietary rights, or to defend successfully against intellectual
property infringement claims by third parties; our pension and
health care costs and participation in multi-employer plans;
increasing interest rates; our ability to generate sufficient cash
to service our debt; our ability to comply with the covenants
contained in our debt agreements; our ability to refinance or
restructure our debt on reasonable terms and conditions as might be
necessary from time to time; changes in accounting standards and
methodologies; our ability to realize the anticipated synergies,
cost savings and growth opportunities from the Merger, our ability
to integrate the xpedx business with the Unisource business, the
possibility of incurring expenditures in excess of those currently
budgeted in connection with the integration, and other events of
which we are presently unaware or that we currently deem immaterial
that may result in unexpected adverse operating results. The
Company is not responsible for updating the information contained
in this press release beyond the published date, or for changes
made to this document by wire services or Internet service
providers. This press release is being furnished to the SEC through
a Form 8-K. The Company's Quarterly Report on Form 10-Q for the
three and nine months ended September 30, 2016 to be filed
with the SEC may contain updates to the information included in
this release.
Financial Statements
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(in millions, except
per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net sales
|
$
|
2,126.6
|
|
|
$
|
2,219.8
|
|
|
$
|
6,207.2
|
|
|
$
|
6,517.0
|
|
Cost of products sold
(exclusive of depreciation and amortization shown separately
below)
|
1,743.8
|
|
|
1,825.8
|
|
|
5,086.2
|
|
|
5,356.0
|
|
Distribution
expenses
|
126.0
|
|
|
129.8
|
|
|
375.2
|
|
|
390.0
|
|
Selling and
administrative expenses
|
207.3
|
|
|
207.1
|
|
|
615.9
|
|
|
635.7
|
|
Depreciation and
amortization
|
13.4
|
|
|
13.7
|
|
|
40.5
|
|
|
42.5
|
|
Integration
expenses
|
7.3
|
|
|
8.3
|
|
|
19.6
|
|
|
28.6
|
|
Restructuring
charges
|
5.8
|
|
|
3.0
|
|
|
7.2
|
|
|
8.6
|
|
Operating
income
|
23.0
|
|
|
32.1
|
|
|
62.6
|
|
|
55.6
|
|
Interest expense,
net
|
8.2
|
|
|
7.0
|
|
|
21.1
|
|
|
19.8
|
|
Other expense
(income), net
|
1.2
|
|
|
1.7
|
|
|
6.3
|
|
|
3.7
|
|
Income before
income taxes
|
13.6
|
|
|
23.4
|
|
|
35.2
|
|
|
32.1
|
|
Income tax
expense
|
8.0
|
|
|
8.9
|
|
|
18.4
|
|
|
15.5
|
|
Net
income
|
$
|
5.6
|
|
|
$
|
14.5
|
|
|
$
|
16.8
|
|
|
$
|
16.6
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.35
|
|
|
$
|
0.91
|
|
|
$
|
1.05
|
|
|
$
|
1.04
|
|
Diluted earnings per
share
|
$
|
0.34
|
|
|
$
|
0.91
|
|
|
$
|
1.04
|
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
16.00
|
|
|
16.00
|
|
|
16.00
|
|
|
16.00
|
|
Diluted
|
16.27
|
|
|
16.00
|
|
|
16.05
|
|
|
16.00
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
59.2
|
|
|
$
|
54.4
|
|
Accounts receivable,
less allowances of $33.9 and $33.3, respectively
|
1,088.1
|
|
|
1,037.5
|
|
Related party
receivable
|
3.5
|
|
|
3.9
|
|
Inventories
|
703.7
|
|
|
720.6
|
|
Other current
assets
|
116.0
|
|
|
108.8
|
|
Total current
assets
|
1,970.5
|
|
|
1,925.2
|
|
Property and equipment
(net of depreciation and amortization of
$289.8 and $263.0,
respectively)
|
365.9
|
|
|
363.7
|
|
Goodwill
|
50.2
|
|
|
50.2
|
|
Other intangibles,
net
|
24.5
|
|
|
30.2
|
|
Deferred income tax
assets
|
65.4
|
|
|
73.3
|
|
Other non-current
assets
|
30.9
|
|
|
34.3
|
|
Total
assets
|
$
|
2,507.4
|
|
|
$
|
2,476.9
|
|
Liabilities and
shareholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
641.8
|
|
|
$
|
565.1
|
|
Related party
payable
|
6.4
|
|
|
10.7
|
|
Accrued payroll and
benefits
|
85.5
|
|
|
120.5
|
|
Other accrued
liabilities
|
106.7
|
|
|
100.4
|
|
Current maturities of
long-term debt
|
3.0
|
|
|
2.8
|
|
Financing obligations
to related party, current portion
|
15.1
|
|
|
14.7
|
|
Total current
liabilities
|
858.5
|
|
|
814.2
|
|
Long-term debt, net of
current maturities
|
768.2
|
|
|
800.5
|
|
Financing obligations
to related party, less current portion
|
183.4
|
|
|
197.8
|
|
Defined benefit
pension obligations
|
26.7
|
|
|
28.7
|
|
Other non-current
liabilities
|
116.0
|
|
|
105.6
|
|
Total
liabilities
|
1,952.8
|
|
|
1,946.8
|
|
Commitments and
contingencies
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred stock, $0.01
par value, 10.0 million shares authorized, none
issued
|
—
|
|
|
—
|
|
Common stock, $0.01
par value, 100.0 million shares authorized, 16.0
million shares issued and
outstanding
|
0.2
|
|
|
0.2
|
|
Additional paid-in
capital
|
573.4
|
|
|
566.2
|
|
Accumulated earnings
(deficit)
|
15.5
|
|
|
(1.3)
|
|
Accumulated other
comprehensive loss
|
(34.5)
|
|
|
(35.0)
|
|
Total shareholders'
equity
|
554.6
|
|
|
530.1
|
|
Total liabilities
and shareholders' equity
|
$
|
2,507.4
|
|
|
$
|
2,476.9
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
Operating
Activities
|
|
|
|
Net income
|
$
|
16.8
|
|
|
$
|
16.6
|
Depreciation and
amortization
|
40.5
|
|
|
42.5
|
Amortization of
deferred financing fees
|
4.9
|
|
|
3.3
|
Long-lived asset
impairment charges
|
4.0
|
|
|
2.6
|
Provision for
allowance for doubtful accounts
|
0.4
|
|
|
6.8
|
Deferred income tax
provision
|
8.1
|
|
|
13.7
|
Stock-based
compensation
|
7.2
|
|
|
3.0
|
Other non-cash items,
net
|
2.0
|
|
|
0.5
|
Changes in operating
assets and liabilities
|
|
|
|
Accounts receivable
and related party receivable
|
(48.6)
|
|
|
20.0
|
Inventories
|
19.9
|
|
|
(43.6)
|
Accounts payable and
related party payable
|
38.5
|
|
|
81.5
|
Accrued payroll and
benefits
|
(39.9)
|
|
|
0.1
|
Other
|
6.1
|
|
|
(16.5)
|
Net cash provided by
operating activities
|
59.9
|
|
|
130.5
|
Investing
Activities
|
|
|
|
Property and equipment
additions
|
(29.8)
|
|
|
(34.2)
|
Proceeds from asset
sales
|
5.1
|
|
|
0.2
|
Net cash used for
investing activities
|
(24.7)
|
|
|
(34.0)
|
Financing
Activities
|
|
|
|
Change in book
overdrafts
|
32.9
|
|
|
(15.1)
|
Borrowings of
long-term debt
|
3,394.4
|
|
|
3,458.9
|
Repayments of
long-term debt
|
(3,439.0)
|
|
|
(3,529.9)
|
Payments under
equipment capital lease obligations
|
(2.3)
|
|
|
(2.8)
|
Payments under
financing obligations to related party
|
(14.4)
|
|
|
(10.3)
|
Deferred financing
fees
|
(2.0)
|
|
|
—
|
Net cash used for
financing activities
|
(30.4)
|
|
|
(99.2)
|
Effect of exchange
rate changes on cash
|
—
|
|
|
(1.4)
|
Net change in
cash
|
4.8
|
|
|
(4.1)
|
Cash at beginning of
period
|
54.4
|
|
|
57.6
|
Cash at end of
period
|
$
|
59.2
|
|
|
$
|
53.5
|
Supplemental Cash
Flow Information
|
|
|
|
Cash paid for income
taxes, net of refunds
|
$
|
3.1
|
|
$
|
1.4
|
Cash paid for
interest
|
15.5
|
|
16.0
|
Non-Cash Investing
and Financing Activities
|
|
|
|
Non-cash additions to
property and equipment
|
$
|
12.3
|
|
$
|
3.1
|
Non-GAAP Measures
We supplement our financial
information prepared in accordance with GAAP with certain non-GAAP
measures including Adjusted EBITDA (earnings before interest,
income taxes, depreciation and amortization, restructuring charges,
stock-based compensation expense, LIFO (income) expense,
non-restructuring asset impairment charges, non-restructuring
severance charges, non-restructuring pension charges, integration
expenses, fair value adjustments on the contingent liability
associated with the Tax Receivable Agreement ("TRA") and certain
other adjustments) because we believe investors commonly use
Adjusted EBITDA as a key financial metric for valuing
companies. In addition, the credit agreement governing our
asset-based lending facility permits us to exclude the foregoing
and other charges in calculating "Consolidated EBITDA", as defined
in the facility. We approximate foreign currency effects by
applying the foreign currency exchange rate for the prior period to
the local currency results for the current period.
Adjusted EBITDA is not an alternative measure of financial
performance under GAAP. Non-GAAP measures do not have definitions
under GAAP and may be defined differently by, and not be comparable
to, similarly titled measures used by other companies. As a result,
we consider and evaluate non-GAAP measures in connection with a
review of the most directly comparable measure calculated in
accordance with GAAP. We caution investors not to place undue
reliance on such non-GAAP measures and to consider them with the
most directly comparable GAAP measures. Adjusted EBITDA has
limitations as an analytical tool and should not be considered in
isolation or as a substitute for analyzing our results as reported
under GAAP. Please see the following tables for reconciliations of
non-GAAP measures to the most comparable GAAP measures.
Table
I
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
NET INCOME TO
ADJUSTED EBITDA; ADJUSTED EBITDA MARGIN
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income
|
|
$
|
5.6
|
|
|
$
|
14.5
|
|
|
$
|
16.8
|
|
|
$
|
16.6
|
Interest expense,
net
|
|
8.2
|
|
|
7.0
|
|
|
21.1
|
|
|
19.8
|
Income tax
expense
|
|
8.0
|
|
|
8.9
|
|
|
18.4
|
|
|
15.5
|
Depreciation and
amortization
|
|
13.4
|
|
|
13.7
|
|
|
40.5
|
|
|
42.5
|
EBITDA
|
|
35.2
|
|
|
44.1
|
|
|
96.8
|
|
|
94.4
|
Restructuring
charges
|
|
5.8
|
|
|
3.0
|
|
|
7.2
|
|
|
8.6
|
Stock-based
compensation
|
|
2.1
|
|
|
1.0
|
|
|
7.2
|
|
|
3.0
|
LIFO (income)
expense
|
|
0.4
|
|
|
2.2
|
|
|
(2.7)
|
|
|
(7.8)
|
Non-restructuring
asset impairment charges
|
|
3.1
|
|
|
—
|
|
|
4.0
|
|
|
—
|
Non-restructuring
severance charges
|
|
0.2
|
|
|
0.5
|
|
|
2.4
|
|
|
1.9
|
Non-restructuring
pension charges
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
—
|
Integration
expenses
|
|
7.3
|
|
|
8.3
|
|
|
19.6
|
|
|
28.6
|
Fair value
adjustments on TRA contingent liability
|
|
1.0
|
|
|
0.3
|
|
|
4.8
|
|
|
(0.1)
|
Other
|
|
(0.3)
|
|
|
1.2
|
|
|
0.5
|
|
|
1.1
|
Adjusted
EBITDA
|
|
$
|
57.1
|
|
|
$
|
60.6
|
|
|
$
|
142.1
|
|
|
$
|
129.7
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,126.6
|
|
|
$
|
2,219.8
|
|
|
$
|
6,207.2
|
|
|
$
|
6,517.0
|
Adjusted EBITDA as a
% of net sales
|
|
2.7%
|
|
|
2.7%
|
|
|
2.3%
|
|
|
2.0%
|
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SOURCE Veritiv Corporation