ATLANTA, Aug. 2, 2017
/PRNewswire/ -- Veritiv Corporation (NYSE: VRTV), a North
American leader in business-to-business distribution solutions,
today announced financial results for the second quarter ended
June 30, 2017.
"In the second quarter, we were pleased with our revenue growth
in Packaging and Facility Solutions, which was offset by the
ongoing secular declines in Print and Publishing," said
Mary Laschinger, Chairman and CEO of
Veritiv Corporation.
"Investments in our selling activities to drive future growth,
along with the incremental supply chain costs from consolidating
and integrating multiple warehouses, adversely affected our
Consolidated Adjusted EBITDA. Although these planned investments in
our growth segments and the strengthening of our foundation have a
near-term impact on earnings, we believe they are necessary for the
long-term success of Veritiv," said Laschinger.
For the three months ended June 30, 2017, compared to
the three months ended June 30, 2016:
- Net sales were $2.0 billion, a decrease of 1.5% from the
prior year. Net sales declined 1.2% from the prior year, excluding
the negative effect of foreign currency (0.3%) in the second
quarter of 2017.
- Net loss was $(9.1) million,
compared to net income of $7.9
million in the prior year. Integration and restructuring
charges were $30.7 million in the
second quarter of 2017 and $5.8
million in the prior year.
- Basic and diluted earnings (loss) per share was $(0.58), compared to $0.49 for both measures in the prior year.
- Adjusted EBITDA was $42.5 million, a decrease of 15.2%
from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.1%, a
decrease of 30 basis points from the prior year.
For the six months ended June 30, 2017, compared to the six
months ended June 30, 2016:
- Net sales were $4.0 billion, a decrease of 1.4% from the
prior year. Net sales declined 1.2% from the prior year, excluding
the negative effect of foreign currency (0.2%) in 2017.
- Net loss was $(11.3) million,
compared to net income of $11.2
million in the prior year. Integration and restructuring
charges were $41.2 million in 2017
and $13.7 million in the prior
year.
- Basic and diluted earnings (loss) per share was $(0.72), compared to $0.70 for both measures in the prior year.
- Adjusted EBITDA was $72.3 million, a decrease of 14.9%
from the prior year.
- Adjusted EBITDA as a percentage of net sales was 1.8%, a
decrease of 30 basis points from the prior year.
"Our integration remains on track, with significant progress
being made on information systems and the consolidation of our
warehouse footprint," said Stephen
Smith, Senior Vice President and Chief Financial Officer of
Veritiv Corporation. "These activities are critical to
support our future optimization efforts."
Veritiv Corporation will host a live conference call and webcast
today, August 2, 2017, at 10 a.m.
(ET) to discuss its second quarter financial results. To
participate, callers within the U.S. and Canada can dial (877) 201-0168, and
international callers can dial (647) 788-4901, both using
conference ID number 41499327. Interested parties can
also 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 U.S. generally accepted
accounting principles ("U.S. GAAP") and related reconciliations of
non-GAAP financial measures to the most comparable U.S. 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
packaging, facility solutions, print and publishing products and
services; and also a provider of logistics and supply chain
management solutions. Serving customers in a wide range of
industries, the Company has approximately 160 operating
distribution centers throughout the U.S., Canada and Mexico, and employs approximately 8,700 team
members 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," "continue," "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 labor disputes; the loss
of any of our 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 pension,
health and welfare 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 transaction, 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 six
months ended June 30, 2017 to be filed with the SEC may
contain updates to the information included in this release.
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in millions, except
per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$
|
2,028.9
|
|
|
$
|
2,060.8
|
|
|
$
|
4,023.5
|
|
|
$
|
4,080.6
|
|
Cost of products sold
(exclusive of depreciation and amortization shown separately
below)
|
1,660.5
|
|
|
1,687.9
|
|
|
3,289.8
|
|
|
3,342.4
|
|
Distribution
expenses
|
122.7
|
|
|
121.7
|
|
|
248.9
|
|
|
249.2
|
|
Selling and
administrative expenses
|
210.1
|
|
|
207.7
|
|
|
421.7
|
|
|
408.6
|
|
Depreciation and
amortization
|
13.7
|
|
|
13.6
|
|
|
26.8
|
|
|
27.1
|
|
Integration
expenses
|
7.5
|
|
|
6.1
|
|
|
13.9
|
|
|
12.3
|
|
Restructuring charges
(income)
|
23.2
|
|
|
(0.3)
|
|
|
27.3
|
|
|
1.4
|
|
Operating income
(loss)
|
(8.8)
|
|
|
24.1
|
|
|
(4.9)
|
|
|
39.6
|
|
Interest expense,
net
|
7.4
|
|
|
6.4
|
|
|
13.8
|
|
|
12.9
|
|
Other expense,
net
|
0.6
|
|
|
3.6
|
|
|
1.7
|
|
|
5.1
|
|
Income (loss)
before income taxes
|
(16.8)
|
|
|
14.1
|
|
|
(20.4)
|
|
|
21.6
|
|
Income tax expense
(benefit)
|
(7.7)
|
|
|
6.2
|
|
|
(9.1)
|
|
|
10.4
|
|
Net income
(loss)
|
$
|
(9.1)
|
|
|
$
|
7.9
|
|
|
$
|
(11.3)
|
|
|
$
|
11.2
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share:
|
|
|
|
|
|
|
|
Basic and diluted earnings
(loss) per share
|
$
|
(0.58)
|
|
|
$
|
0.49
|
|
|
$
|
(0.72)
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic and
diluted
|
15.70
|
|
|
16.00
|
|
|
15.70
|
|
|
16.00
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
55.3
|
|
|
$
|
69.6
|
|
Accounts receivable,
less allowances of $36.1 and $34.5, respectively
|
1,055.8
|
|
|
1,048.3
|
|
Related party
receivable
|
3.4
|
|
|
3.9
|
|
Inventories
|
715.1
|
|
|
707.9
|
|
Other current
assets
|
131.2
|
|
|
118.9
|
|
Total current
assets
|
1,960.8
|
|
|
1,948.6
|
|
Property and equipment
(net of depreciation and amortization of $304.9
and $292.8, respectively)
|
350.2
|
|
|
371.8
|
|
Goodwill
|
50.2
|
|
|
50.2
|
|
Other intangibles,
net
|
19.9
|
|
|
21.0
|
|
Deferred income tax
assets
|
72.5
|
|
|
61.8
|
|
Other non-current
assets
|
29.5
|
|
|
30.3
|
|
Total
assets
|
$
|
2,483.1
|
|
|
$
|
2,483.7
|
|
Liabilities and
shareholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
620.7
|
|
|
$
|
654.1
|
|
Related party
payable
|
11.9
|
|
|
9.0
|
|
Accrued payroll and
benefits
|
57.8
|
|
|
84.4
|
|
Other accrued
liabilities
|
98.0
|
|
|
102.5
|
|
Current maturities of
long-term debt
|
2.4
|
|
|
2.9
|
|
Financing obligations,
current portion (including obligations to related
party of $14.5 and $14.9,
respectively)
|
15.1
|
|
|
14.9
|
|
Total current
liabilities
|
805.9
|
|
|
867.8
|
|
Long-term debt, net of
current maturities
|
792.6
|
|
|
749.2
|
|
Financing obligations,
less current portion (including obligations to related
party of $160.0 and $176.1,
respectively)
|
185.8
|
|
|
176.1
|
|
Defined benefit
pension obligations
|
25.8
|
|
|
27.6
|
|
Other non-current
liabilities
|
129.3
|
|
|
121.2
|
|
Total
liabilities
|
1,939.4
|
|
|
1,941.9
|
|
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; shares
outstanding - 15.7 million at June 30,
2017 and December 31, 2016
respectively
|
0.2
|
|
|
0.2
|
|
Additional paid-in
capital
|
582.3
|
|
|
574.5
|
|
Accumulated
earnings
|
8.4
|
|
|
19.7
|
|
Accumulated other
comprehensive loss
|
(33.6)
|
|
|
(39.0)
|
|
Treasury
stock at cost - 0.3 million shares at June 30, 2017 and
December
31, 2016
|
(13.6)
|
|
|
(13.6)
|
|
Total shareholders'
equity
|
543.7
|
|
|
541.8
|
|
Total liabilities
and shareholders' equity
|
$
|
2,483.1
|
|
|
$
|
2,483.7
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2016
|
Operating
activities
|
|
|
|
Net income
(loss)
|
$
|
(11.3)
|
|
|
$
|
11.2
|
|
Depreciation and
amortization
|
26.8
|
|
|
27.1
|
|
Amortization of
deferred financing fees
|
1.3
|
|
|
2.2
|
|
Net losses (gains) on
dispositions of property and equipment
|
(1.1)
|
|
|
(2.5)
|
|
Long-lived asset
impairment charges
|
0.7
|
|
|
1.0
|
|
Provision for
allowance for doubtful accounts
|
3.7
|
|
|
(2.6)
|
|
Deferred income tax
provision (benefit)
|
(10.5)
|
|
|
6.5
|
|
Stock-based
compensation
|
7.8
|
|
|
5.1
|
|
Other non-cash items,
net
|
2.0
|
|
|
5.6
|
|
Changes in operating
assets and liabilities
|
|
|
|
Accounts receivable
and related party receivable
|
(4.4)
|
|
|
43.8
|
|
Inventories
|
(2.7)
|
|
|
31.9
|
|
Other current
assets
|
(2.9)
|
|
|
(1.3)
|
|
Accounts payable and
related party payable
|
10.2
|
|
|
36.9
|
|
Accrued payroll and
benefits
|
(26.9)
|
|
|
(28.8)
|
|
Other accrued
liabilities
|
(3.5)
|
|
|
(13.9)
|
|
Other
|
6.9
|
|
|
0.6
|
|
Net cash provided by
(used for) operating activities
|
(3.9)
|
|
|
122.8
|
|
Investing
activities
|
|
|
|
Property and equipment
additions
|
(21.3)
|
|
|
(17.8)
|
|
Proceeds from asset
sales
|
11.1
|
|
|
4.9
|
|
Net cash used for
investing activities
|
(10.2)
|
|
|
(12.9)
|
|
Financing
activities
|
|
|
|
Change in book
overdrafts
|
(44.3)
|
|
|
0.9
|
|
Borrowings of
long-term debt
|
2,353.0
|
|
|
2,202.5
|
|
Repayments of
long-term debt
|
(2,291.8)
|
|
|
(2,308.8)
|
|
Payments under
equipment capital lease obligations
|
(2.0)
|
|
|
(1.8)
|
|
Payments under
financing obligations (including obligations
to related party of $7.2 and $11.2,
respectively)
|
(7.4)
|
|
|
(11.2)
|
|
Payments under Tax
Receivable Agreement
|
(8.5)
|
|
|
—
|
|
Net cash used for
financing activities
|
(1.0)
|
|
|
(118.4)
|
|
Effect of exchange
rate changes on cash
|
0.8
|
|
|
0.2
|
|
Net change in
cash
|
(14.3)
|
|
|
(8.3)
|
|
Cash at beginning of
period
|
69.6
|
|
|
54.4
|
|
Cash at end of
period
|
$
|
55.3
|
|
|
$
|
46.1
|
|
Supplemental cash
flow information
|
|
|
|
Cash paid for income
taxes, net of refunds
|
$
|
0.4
|
|
|
$
|
2.0
|
|
Cash paid for
interest
|
12.2
|
|
|
10.3
|
|
Non-cash investing
and financing activities
|
|
|
|
Non-cash additions to
property and equipment
|
$
|
8.2
|
|
|
$
|
1.9
|
|
Non-GAAP Measures
We supplement our financial information prepared in accordance
with U.S. GAAP with certain non-GAAP measures including Adjusted
EBITDA (earnings before interest, income taxes, depreciation and
amortization, restructuring charges (income), integration
expenses and other similar charges including any severance
costs, costs associated with warehouse and office openings or
closings, consolidation, and relocation and other business
optimization expenses, stock-based compensation expense, changes in
the LIFO reserve, non-restructuring asset impairment charges,
non-restructuring severance charges, non-restructuring pension
charges, 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 (LOSS)
TO ADJUSTED EBITDA; ADJUSTED EBITDA MARGIN
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(loss)
|
|
$
|
(9.1)
|
|
|
$
|
7.9
|
|
|
$
|
(11.3)
|
|
|
$
|
11.2
|
|
Interest expense,
net
|
|
7.4
|
|
|
6.4
|
|
|
13.8
|
|
|
12.9
|
|
Income tax expense
(benefit)
|
|
(7.7)
|
|
|
6.2
|
|
|
(9.1)
|
|
|
10.4
|
|
Depreciation and
amortization
|
|
13.7
|
|
|
13.6
|
|
|
26.8
|
|
|
27.1
|
|
EBITDA
|
|
4.3
|
|
|
34.1
|
|
|
20.2
|
|
|
61.6
|
|
Restructuring charges
(income)
|
|
23.2
|
|
|
(0.3)
|
|
|
27.3
|
|
|
1.4
|
|
Stock-based
compensation
|
|
4.1
|
|
|
3.1
|
|
|
7.8
|
|
|
5.1
|
|
LIFO reserve decrease
(increase)
|
|
2.2
|
|
|
2.2
|
|
|
(0.3)
|
|
|
(3.1)
|
|
Non-restructuring
asset impairment charges
|
|
—
|
|
|
0.6
|
|
|
0.7
|
|
|
1.0
|
|
Non-restructuring
severance charges
|
|
0.5
|
|
|
1.4
|
|
|
1.0
|
|
|
2.2
|
|
Non-restructuring
pension charges
|
|
(1.1)
|
|
|
—
|
|
|
(1.1)
|
|
|
—
|
|
Integration
expenses
|
|
7.5
|
|
|
6.1
|
|
|
13.9
|
|
|
12.3
|
|
Fair value adjustment
on TRA contingent liability
|
|
1.1
|
|
|
2.0
|
|
|
2.0
|
|
|
3.8
|
|
Other
|
|
0.7
|
|
|
0.9
|
|
|
0.8
|
|
|
0.7
|
|
Adjusted
EBITDA
|
|
$
|
42.5
|
|
|
$
|
50.1
|
|
|
$
|
72.3
|
|
|
$
|
85.0
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,028.9
|
|
|
$
|
2,060.8
|
|
|
$
|
4,023.5
|
|
|
$
|
4,080.6
|
|
Adjusted EBITDA as a
% of net sales
|
|
2.1
|
%
|
|
2.4
|
%
|
|
1.8
|
%
|
|
2.1
|
%
|
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SOURCE Veritiv Corporation