ATLANTA, Aug. 9, 2018
/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, 2018.
"We are pleased with our second quarter results," said
Mary Laschinger, Chairman and CEO of
Veritiv Corporation. "Our Packaging and Facility Solutions revenues
continue to grow, and Print and Publishing also showed top-line
trend improvement despite the challenging sector. We experienced a
sequential increase in consolidated margins from the first quarter
to the second quarter, and believe there is room for
improvement. Overall, we are reiterating our 2018 guidance
for Adjusted EBITDA and free cash flow."
For the three months ended June 30, 2018, compared to
the three months ended June 30, 2017:
- Net sales were $2.2 billion, an increase of 7.0% from the
prior year. Net sales increased 6.6% from the prior year, excluding
the positive effect of foreign currency (0.4%) in the second
quarter of 2018.
- Net loss was $(10.6) million,
compared to net loss of $(9.1)
million in the prior year. Net integration, acquisition and
restructuring charges were $19.8
million in the second quarter of 2018 and $30.7 million in the prior year.
- Basic and diluted loss per share were $(0.67) compared to $(0.58) in the prior year.
- Adjusted EBITDA was $45.4 million, an increase of 6.8%
from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.1%,
unchanged from the prior year.
For the six months ended June 30, 2018, compared to the six
months ended June 30, 2017:
- Net sales were $4.3 billion, an increase of 6.2% from the
prior year. Net sales increased 5.8% from the prior year, excluding
the positive effect of foreign currency (0.4%) in 2018.
- Net loss was $(26.4) million,
compared to net loss of $(11.3)
million in the prior year. Net integration, acquisition and
restructuring charges were $40.0
million in 2018 and $41.2
million in the prior year.
- Basic and diluted loss per share were $(1.67) compared to $(0.72) in the prior year.
- Adjusted EBITDA was $75.1 million, an increase of 3.9%
from the prior year.
- Adjusted EBITDA as a percentage of net sales was 1.8%,
unchanged from the prior year.
"To date, our operating system conversions and warehouse
consolidations have gone relatively well," said Stephen Smith, Senior Vice President and Chief
Financial Officer of Veritiv Corporation. "We expect to complete
our final two (and largest) U.S. operating systems conversions in
the second half. We also plan to continue our multi-location
warehouse consolidations during the balance of the year. Even with
the complexity of these operational activities, we are committed to
achieving our financial objectives."
Veritiv Corporation will host a live conference call and webcast
today, August 9, 2018, at 10 a.m.
(ET) to discuss its second quarter financial results. To
participate, callers within the U.S. and Canada can dial (833) 241-7249, and
international callers can dial (647) 689-4213, both using
conference ID number 8481938. 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 8,900 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 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
full benefit of the anticipated synergies, cost savings and growth
opportunities from the merger transaction and 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, 2018 to be filed with the
SEC may contain updates to the information included in this
release.
Financial Statements
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in millions, except
per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net sales
|
$
|
2,171.9
|
|
|
$
|
2,028.9
|
|
|
$
|
4,272.9
|
|
|
$
|
4,023.5
|
|
Cost of products sold
(exclusive of depreciation and
amortization shown separately
below)
|
1,788.5
|
|
|
1,660.5
|
|
|
3,518.0
|
|
|
3,289.8
|
|
Distribution
expenses
|
132.0
|
|
|
122.7
|
|
|
265.1
|
|
|
248.9
|
|
Selling and
administrative expenses
|
223.6
|
|
|
211.0
|
|
|
446.3
|
|
|
423.3
|
|
Depreciation and
amortization
|
14.0
|
|
|
13.7
|
|
|
28.4
|
|
|
26.8
|
|
Integration and
acquisition expenses
|
8.4
|
|
|
7.5
|
|
|
16.7
|
|
|
13.9
|
|
Restructuring
charges, net
|
11.4
|
|
|
23.2
|
|
|
23.3
|
|
|
27.3
|
|
Operating
loss
|
(6.0)
|
|
|
(9.7)
|
|
|
(24.9)
|
|
|
(6.5)
|
|
Interest expense,
net
|
10.2
|
|
|
7.4
|
|
|
19.5
|
|
|
13.8
|
|
Other (income)
expense, net
|
(2.9)
|
|
|
(0.3)
|
|
|
(13.4)
|
|
|
0.1
|
|
Loss before income
taxes
|
(13.3)
|
|
|
(16.8)
|
|
|
(31.0)
|
|
|
(20.4)
|
|
Income tax
benefit
|
(2.7)
|
|
|
(7.7)
|
|
|
(4.6)
|
|
|
(9.1)
|
|
Net
loss
|
$
|
(10.6)
|
|
|
$
|
(9.1)
|
|
|
$
|
(26.4)
|
|
|
$
|
(11.3)
|
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.67)
|
|
|
$
|
(0.58)
|
|
|
$
|
(1.67)
|
|
|
$
|
(0.72)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic and
diluted
|
15.84
|
|
|
15.70
|
|
|
15.80
|
|
|
15.70
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
69.5
|
|
|
$
|
80.3
|
|
Accounts receivable,
less allowances of $52.5 and $44.0, respectively
|
1,175.4
|
|
|
1,174.3
|
|
Related party
receivable
|
3.4
|
|
|
3.3
|
|
Inventories
|
719.8
|
|
|
722.7
|
|
Other current
assets
|
137.3
|
|
|
133.5
|
|
Total current
assets
|
2,105.4
|
|
|
2,114.1
|
|
Property and equipment
(net of depreciation and amortization of $309.6
and $314.6, respectively)
|
207.1
|
|
|
340.2
|
|
Goodwill
|
99.6
|
|
|
99.6
|
|
Other intangibles,
net
|
60.2
|
|
|
64.1
|
|
Deferred income tax
assets
|
64.8
|
|
|
59.6
|
|
Other non-current
assets
|
29.6
|
|
|
30.8
|
|
Total
assets
|
$
|
2,566.7
|
|
|
$
|
2,708.4
|
|
Liabilities and
shareholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
709.2
|
|
|
$
|
680.1
|
|
Related party
payable
|
7.8
|
|
|
8.5
|
|
Accrued payroll and
benefits
|
54.8
|
|
|
73.5
|
|
Other accrued
liabilities
|
128.8
|
|
|
134.6
|
|
Current maturities of
long-term debt
|
6.0
|
|
|
2.9
|
|
Financing obligations,
current portion (including obligations to related
party of $0.0 and $7.1,
respectively)
|
0.7
|
|
|
7.8
|
|
Total current
liabilities
|
907.3
|
|
|
907.4
|
|
Long-term debt, net of
current maturities
|
957.1
|
|
|
908.3
|
|
Financing obligations,
less current portion (including obligations to related
party of $0.0 and $155.2,
respectively)
|
24.8
|
|
|
181.6
|
|
Defined benefit
pension obligations
|
21.3
|
|
|
24.4
|
|
Other non-current
liabilities
|
128.0
|
|
|
137.0
|
|
Total
liabilities
|
2,038.5
|
|
|
2,158.7
|
|
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; shares
issued - 16.2 million and 16.0
million, respectively; shares
outstanding - 15.9 million and 15.7
million, respectively
|
0.2
|
|
|
0.2
|
|
Additional paid-in
capital
|
598.9
|
|
|
590.2
|
|
Accumulated (deficit)
earnings
|
(19.2)
|
|
|
6.4
|
|
Accumulated other
comprehensive loss
|
(38.1)
|
|
|
(33.5)
|
|
Treasury
stock at cost - 0.3 million shares at June 30, 2018 and
December 31,
2017
|
(13.6)
|
|
|
(13.6)
|
|
Total shareholders'
equity
|
528.2
|
|
|
549.7
|
|
Total liabilities
and shareholders' equity
|
$
|
2,566.7
|
|
|
$
|
2,708.4
|
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
Operating
activities
|
|
|
|
Net loss
|
$
|
(26.4)
|
|
|
$
|
(11.3)
|
|
Depreciation and
amortization
|
28.4
|
|
|
26.8
|
|
Amortization of
deferred financing fees
|
1.3
|
|
|
1.3
|
|
Net gains on
dispositions of property and equipment
|
(2.5)
|
|
|
(1.1)
|
|
Long-lived asset
impairment charges
|
0.0
|
|
|
0.7
|
|
Provision for
allowance for doubtful accounts
|
10.4
|
|
|
3.7
|
|
Deferred income tax
(benefit)
|
(5.9)
|
|
|
(10.5)
|
|
Stock-based
compensation
|
10.7
|
|
|
7.8
|
|
Other non-cash items,
net
|
(10.0)
|
|
|
2.0
|
|
Changes in operating
assets and liabilities
|
|
|
|
Accounts receivable
and related party receivable
|
(15.9)
|
|
|
(4.4)
|
|
Inventories
|
(1.2)
|
|
|
(2.7)
|
|
Other current
assets
|
(13.6)
|
|
|
(2.9)
|
|
Accounts payable and
related party payable
|
39.2
|
|
|
10.2
|
|
Accrued payroll and
benefits
|
(18.5)
|
|
|
(26.9)
|
|
Other accrued
liabilities
|
15.3
|
|
|
(3.5)
|
|
Other
|
(3.3)
|
|
|
6.9
|
|
Net cash provided by
(used for) operating activities
|
8.0
|
|
|
(3.9)
|
|
Investing
activities
|
|
|
|
Property and equipment
additions
|
(21.5)
|
|
|
(21.3)
|
|
Proceeds from asset
sales
|
4.0
|
|
|
11.1
|
|
Net cash used for
investing activities
|
(17.5)
|
|
|
(10.2)
|
|
Financing
activities
|
|
|
|
Change in book
overdrafts
|
(8.1)
|
|
|
(44.3)
|
|
Borrowings of
long-term debt
|
2,603.8
|
|
|
2,353.0
|
|
Repayments of
long-term debt
|
(2,572.5)
|
|
|
(2,291.8)
|
|
Payments under
equipment capital lease obligations
|
(3.2)
|
|
|
(2.0)
|
|
Payments under
financing obligations (including obligations
to related party of $8.6 and $7.2,
respectively)
|
(8.9)
|
|
|
(7.4)
|
|
Payments under Tax
Receivable Agreement
|
(9.9)
|
|
|
(8.5)
|
|
Other
|
(2.1)
|
|
|
—
|
|
Net cash used for
financing activities
|
(0.9)
|
|
|
(1.0)
|
|
Effect of exchange
rate changes on cash
|
(0.4)
|
|
|
0.8
|
|
Net change in
cash
|
(10.8)
|
|
|
(14.3)
|
|
Cash at beginning of
period
|
80.3
|
|
|
69.6
|
|
Cash at end of
period
|
$
|
69.5
|
|
|
$
|
55.3
|
|
Supplemental cash
flow information
|
|
|
|
Cash paid for income
taxes, net of refunds
|
$
|
0.1
|
|
|
$
|
0.4
|
|
Cash paid for
interest
|
17.9
|
|
|
12.2
|
|
Non-cash investing
and financing activities
|
|
|
|
Non-cash additions to
property and equipment
|
$
|
26.2
|
|
|
$
|
8.2
|
|
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, net, integration and
acquisition 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, net, fair value adjustments related to contingent
liabilities assumed in mergers and acquisitions 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 LOSS TO
ADJUSTED EBITDA; ADJUSTED EBITDA MARGIN
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net loss
|
|
$
|
(10.6)
|
|
|
$
|
(9.1)
|
|
|
$
|
(26.4)
|
|
|
$
|
(11.3)
|
|
Interest expense,
net
|
|
10.2
|
|
|
7.4
|
|
|
19.5
|
|
|
13.8
|
|
Income tax
benefit
|
|
(2.7)
|
|
|
(7.7)
|
|
|
(4.6)
|
|
|
(9.1)
|
|
Depreciation and
amortization
|
|
14.0
|
|
|
13.7
|
|
|
28.4
|
|
|
26.8
|
|
EBITDA
|
|
10.9
|
|
|
4.3
|
|
|
16.9
|
|
|
20.2
|
|
Restructuring
charges, net
|
|
11.4
|
|
|
23.2
|
|
|
23.3
|
|
|
27.3
|
|
Stock-based
compensation
|
|
5.1
|
|
|
4.1
|
|
|
10.7
|
|
|
7.8
|
|
LIFO reserve increase
(decrease)
|
|
8.7
|
|
|
2.2
|
|
|
14.4
|
|
|
(0.3)
|
|
Non-restructuring
asset impairment charges
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.7
|
|
Non-restructuring
severance charges
|
|
0.5
|
|
|
0.5
|
|
|
1.8
|
|
|
1.0
|
|
Non-restructuring
pension charges, net
|
|
0.0
|
|
|
(1.1)
|
|
|
(0.7)
|
|
|
(1.1)
|
|
Integration and
acquisition expenses
|
|
8.4
|
|
|
7.5
|
|
|
16.7
|
|
|
13.9
|
|
Fair value adjustment
on Tax Receivable Agreement
contingent liability
|
|
(0.2)
|
|
|
1.1
|
|
|
(0.4)
|
|
|
2.0
|
|
Fair value adjustment
on contingent consideration
liability
|
|
(3.0)
|
|
|
—
|
|
|
(11.3)
|
|
|
—
|
|
Other
|
|
3.6
|
|
|
0.7
|
|
|
3.7
|
|
|
0.8
|
|
Adjusted
EBITDA
|
|
$
|
45.4
|
|
|
$
|
42.5
|
|
|
$
|
75.1
|
|
|
$
|
72.3
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,171.9
|
|
|
$
|
2,028.9
|
|
|
$
|
4,272.9
|
|
|
$
|
4,023.5
|
|
Adjusted EBITDA as a
% of net sales
|
|
2.1
|
%
|
|
2.1
|
%
|
|
1.8
|
%
|
|
1.8
|
%
|
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SOURCE Veritiv Corporation