ATLANTA,
Nov. 6, 2018
/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, 2018.
"We are pleased with our third quarter results," said
Mary Laschinger, Chairman and CEO of
Veritiv Corporation. "Our Packaging business continued to perform
well, growing both revenues and Adjusted EBITDA. For the quarter,
Adjusted EBITDA improved 20% year-over-year, and we are on track to
meet our full year Adjusted EBITDA guidance."
For the three months ended September 30, 2018,
compared to the three months ended September 30,
2017:
- Net sales were $2.2 billion, an increase of 3.6%
from the prior year. Net sales increased 2.3% from the prior year,
excluding the negative effect of foreign currency (0.4%) and
positive effect of one extra shipping day (1.6%) in the third
quarter of 2018.
- Net income was $1.4
million, compared to net loss of $(14.3) million in the prior year. Net
integration, acquisition and restructuring charges were
$13.3 million in the third quarter of
2018 and $16.9 million in the prior
year.
- Basic and diluted earnings (loss) per share were
$0.09 compared to $(0.91) in the prior year.
- Adjusted EBITDA was $52.7 million, an increase of
19.5% from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.4%, an
increase of 30 basis points from the prior year.
For the nine months ended September 30,
2018, compared to the nine months ended
September 30, 2017:
- Net sales were $6.5 billion, an increase of 5.3%
from the prior year. Net sales increased 4.6% from the prior year,
excluding the positive effect of foreign currency (0.2%) and one
extra shipping day (0.6%) in 2018.
- Net loss was $(25.0)
million, compared to net loss of $(25.6) million in the prior year. Net
integration, acquisition and restructuring charges were
$53.3 million in 2018 and
$58.1 million in the prior
year.
- Basic and diluted loss per share were $(1.58) compared to $(1.63) in the prior year.
- Adjusted EBITDA was $127.8 million, an increase of
9.8% from the prior year.
- Adjusted EBITDA as a percentage of net sales was 2.0%, an
increase of 10 basis points from the prior year.
"We expect to complete our final U.S. operating systems
conversion by year-end," said Stephen
Smith, Senior Vice President and Chief Financial Officer of
Veritiv Corporation. "With the system conversions, as well as the
multi-location warehouse consolidations largely behind us, we
anticipate shifting more of our effort to the optimization element
of our long-term strategy in 2019."
Veritiv Corporation will host a live conference call and
webcast today, November 6, 2018, at 10
a.m. (ET) to discuss its third 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 5976311. 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 nine months ended September 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net sales
|
$
|
2,192.5
|
|
|
$
|
2,116.8
|
|
|
$
|
6,465.4
|
|
|
$
|
6,140.3
|
|
Cost of products sold
(exclusive of depreciation and
amortization shown separately
below)
|
1,805.8
|
|
|
1,736.6
|
|
|
5,323.8
|
|
|
5,026.4
|
|
Distribution
expenses
|
135.0
|
|
|
132.0
|
|
|
400.1
|
|
|
380.9
|
|
Selling and
administrative expenses
|
209.8
|
|
|
229.4
|
|
|
656.1
|
|
|
652.7
|
|
Depreciation and
amortization
|
13.1
|
|
|
13.1
|
|
|
41.5
|
|
|
39.9
|
|
Integration and
acquisition expenses
|
7.9
|
|
|
14.2
|
|
|
24.6
|
|
|
28.1
|
|
Restructuring
charges, net
|
5.4
|
|
|
2.7
|
|
|
28.7
|
|
|
30.0
|
|
Operating income (loss)
|
15.5
|
|
|
(11.2)
|
|
|
(9.4)
|
|
|
(17.7)
|
|
Interest expense,
net
|
11.0
|
|
|
8.3
|
|
|
30.5
|
|
|
22.1
|
|
Other (income)
expense, net
|
(0.4)
|
|
|
(1.2)
|
|
|
(13.8)
|
|
|
(1.1)
|
|
Income (loss) before income
taxes
|
4.9
|
|
|
(18.3)
|
|
|
(26.1)
|
|
|
(38.7)
|
|
Income tax expense
(benefit)
|
3.5
|
|
|
(4.0)
|
|
|
(1.1)
|
|
|
(13.1)
|
|
Net income (loss)
|
$
|
1.4
|
|
|
$
|
(14.3)
|
|
|
$
|
(25.0)
|
|
|
$
|
(25.6)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share:
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share
|
$
|
0.09
|
|
|
$
|
(0.91)
|
|
|
$
|
(1.58)
|
|
|
$
|
(1.63)
|
|
Diluted earnings (loss) per
share
|
$
|
0.09
|
|
|
$
|
(0.91)
|
|
|
$
|
(1.58)
|
|
|
$
|
(1.63)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
15.85
|
|
|
15.70
|
|
|
15.82
|
|
|
15.70
|
|
Diluted
|
16.47
|
|
|
15.70
|
|
|
15.82
|
|
|
15.70
|
|
VERITIV CORPORATION
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
70.9
|
|
|
$
|
80.3
|
|
Accounts receivable,
less allowances of $56.2 and $44.0, respectively
|
1,212.5
|
|
|
1,174.3
|
|
Related party
receivable
|
3.2
|
|
|
3.3
|
|
Inventories
|
737.8
|
|
|
722.7
|
|
Other current
assets
|
152.5
|
|
|
133.5
|
|
Total current assets
|
2,176.9
|
|
|
2,114.1
|
|
Property and equipment
(net of depreciation and amortization of $315.3
and $314.6, respectively)
|
210.1
|
|
|
340.2
|
|
Goodwill
|
99.6
|
|
|
99.6
|
|
Other intangibles,
net
|
58.5
|
|
|
64.1
|
|
Deferred income tax
assets
|
62.4
|
|
|
59.6
|
|
Other non-current
assets
|
27.0
|
|
|
30.8
|
|
Total assets
|
$
|
2,634.5
|
|
|
$
|
2,708.4
|
|
Liabilities and shareholders'
equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
723.4
|
|
|
$
|
680.1
|
|
Related party
payable
|
11.8
|
|
|
8.5
|
|
Accrued payroll and
benefits
|
55.9
|
|
|
73.5
|
|
Other accrued
liabilities
|
139.6
|
|
|
134.6
|
|
Current maturities of
long-term debt
|
6.6
|
|
|
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
|
938.0
|
|
|
907.4
|
|
Long-term debt, net of
current maturities
|
997.6
|
|
|
908.3
|
|
Financing obligations,
less current portion (including obligations to related
party of $0.0 and $155.2,
respectively)
|
25.1
|
|
|
181.6
|
|
Defined benefit
pension obligations
|
20.6
|
|
|
24.4
|
|
Other non-current
liabilities
|
116.5
|
|
|
137.0
|
|
Total liabilities
|
2,097.8
|
|
|
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
|
603.3
|
|
|
590.2
|
|
Accumulated (deficit)
earnings
|
(17.8)
|
|
|
6.4
|
|
Accumulated other
comprehensive loss
|
(35.4)
|
|
|
(33.5)
|
|
Treasury
stock at cost - 0.3 million shares at September 30, 2018
and
December 31,
2017
|
(13.6)
|
|
|
(13.6)
|
|
Total shareholders' equity
|
536.7
|
|
|
549.7
|
|
Total liabilities and shareholders'
equity
|
$
|
2,634.5
|
|
|
$
|
2,708.4
|
|
VERITIV CORPORATION
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
Operating activities
|
|
|
|
Net loss
|
$
|
(25.0)
|
|
|
$
|
(25.6)
|
|
Depreciation and
amortization
|
41.5
|
|
|
39.9
|
|
Amortization of
deferred financing fees
|
2.0
|
|
|
1.9
|
|
Net (gains) on
dispositions of property and equipment
|
(2.2)
|
|
|
(4.0)
|
|
Long-lived asset
impairment charges
|
0.2
|
|
|
8.4
|
|
Provision for
allowance for doubtful accounts
|
18.5
|
|
|
11.6
|
|
Deferred income tax
(benefit)
|
(3.2)
|
|
|
(14.3)
|
|
Stock-based
compensation
|
15.2
|
|
|
11.6
|
|
Other non-cash items,
net
|
(6.8)
|
|
|
2.5
|
|
Changes in operating
assets and liabilities
|
|
|
|
Accounts receivable
and related party receivable
|
(60.6)
|
|
|
(87.5)
|
|
Inventories
|
(17.2)
|
|
|
(17.9)
|
|
Other current
assets
|
(26.1)
|
|
|
(6.7)
|
|
Accounts payable and
related party payable
|
78.1
|
|
|
69.6
|
|
Accrued payroll and
benefits
|
(17.5)
|
|
|
(23.4)
|
|
Other accrued
liabilities
|
15.4
|
|
|
8.9
|
|
Other
|
(4.8)
|
|
|
7.3
|
|
Net cash provided by
(used for) operating activities
|
7.5
|
|
|
(17.7)
|
|
Investing activities
|
|
|
|
Property and equipment
additions
|
(33.7)
|
|
|
(26.0)
|
|
Proceeds from asset
sales
|
4.1
|
|
|
23.1
|
|
Cash paid for purchase
of business, net of cash acquired
|
—
|
|
|
(144.8)
|
|
Net cash used for
investing activities
|
(29.6)
|
|
|
(147.7)
|
|
Financing activities
|
|
|
|
Change in book
overdrafts
|
(30.3)
|
|
|
(43.9)
|
|
Borrowings of
long-term debt
|
4,058.1
|
|
|
3,685.2
|
|
Repayments of
long-term debt
|
(3,988.4)
|
|
|
(3,446.5)
|
|
Payments under
equipment capital lease obligations
|
(5.3)
|
|
|
(2.2)
|
|
Payments under
financing obligations (including obligations
to related party of $8.6 and $11.5,
respectively)
|
(9.1)
|
|
|
(12.9)
|
|
Payments under Tax
Receivable Agreement
|
(9.9)
|
|
|
(8.5)
|
|
Other
|
(2.1)
|
|
|
—
|
|
Net cash provided by
financing activities
|
13.0
|
|
|
171.2
|
|
Effect of exchange
rate changes on cash
|
(0.3)
|
|
|
1.1
|
|
Net change in
cash
|
(9.4)
|
|
|
6.9
|
|
Cash at beginning of
period
|
80.3
|
|
|
69.6
|
|
Cash at end of
period
|
$
|
70.9
|
|
|
$
|
76.5
|
|
Supplemental cash flow
information
|
|
|
|
Cash paid for income
taxes, net of refunds
|
$
|
1.3
|
|
|
$
|
3.2
|
|
Cash paid for
interest
|
28.0
|
|
|
19.4
|
|
Non-cash investing and financing
activities
|
|
|
|
Non-cash additions to
property and equipment
|
$
|
29.8
|
|
|
$
|
8.6
|
|
Contingent
consideration for purchase of business: Earn-out
|
—
|
|
|
30.0
|
|
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 U.S. GAAP. Non-GAAP measures do not have
definitions under U.S. 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 U.S. GAAP. We caution investors not
to place undue reliance on such non-GAAP measures and to consider
them with the most directly comparable U.S. 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 U.S. GAAP. Please see the following
tables for reconciliations of non-GAAP measures to the most
comparable U.S. 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
(loss)
|
|
$
|
1.4
|
|
|
$
|
(14.3)
|
|
|
$
|
(25.0)
|
|
|
$
|
(25.6)
|
|
Interest expense,
net
|
|
11.0
|
|
|
8.3
|
|
|
30.5
|
|
|
22.1
|
|
Income tax expense
(benefit)
|
|
3.5
|
|
|
(4.0)
|
|
|
(1.1)
|
|
|
(13.1)
|
|
Depreciation and
amortization
|
|
13.1
|
|
|
13.1
|
|
|
41.5
|
|
|
39.9
|
|
EBITDA
|
|
29.0
|
|
|
3.1
|
|
|
45.9
|
|
|
23.3
|
|
Restructuring
charges, net
|
|
5.4
|
|
|
2.7
|
|
|
28.7
|
|
|
30.0
|
|
Stock-based
compensation
|
|
4.5
|
|
|
3.8
|
|
|
15.2
|
|
|
11.6
|
|
LIFO reserve
increase
|
|
4.0
|
|
|
3.7
|
|
|
18.4
|
|
|
3.4
|
|
Non-restructuring
asset impairment charges
|
|
0.2
|
|
|
7.7
|
|
|
0.2
|
|
|
8.4
|
|
Non-restructuring
severance charges
|
|
0.5
|
|
|
0.5
|
|
|
2.3
|
|
|
1.5
|
|
Non-restructuring
pension charges, net
|
|
(0.1)
|
|
|
3.2
|
|
|
(0.8)
|
|
|
2.1
|
|
Integration and
acquisition expenses
|
|
7.9
|
|
|
14.2
|
|
|
24.6
|
|
|
28.1
|
|
Fair value adjustment
on Tax Receivable Agreement
contingent liability
|
|
0.1
|
|
|
(0.4)
|
|
|
(0.3)
|
|
|
1.6
|
|
Fair value adjustment
on contingent consideration
liability
|
|
0.3
|
|
|
—
|
|
|
(11.0)
|
|
|
—
|
|
Escheat audit
contingent liability
|
|
0.8
|
|
|
4.5
|
|
|
0.8
|
|
|
4.5
|
|
Other
|
|
0.1
|
|
|
1.1
|
|
|
3.8
|
|
|
1.9
|
|
Adjusted
EBITDA
|
|
$
|
52.7
|
|
|
$
|
44.1
|
|
|
$
|
127.8
|
|
|
$
|
116.4
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,192.5
|
|
|
$
|
2,116.8
|
|
|
$
|
6,465.4
|
|
|
$
|
6,140.3
|
|
Adjusted EBITDA as a
% of net sales
|
|
2.4
|
%
|
|
2.1
|
%
|
|
2.0
|
%
|
|
1.9
|
%
|
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SOURCE Veritiv Corporation