Attached files
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| EX-99.2 - EXHIBIT 99.2 - Veritiv Corp | v452583_ex99-2.htm |
| 8-K - 8-K - Veritiv Corp | v452583_8k.htm |
Exhibit 99.1
Veritiv Announces Third Quarter 2016
Financial Results
Reports Third Quarter Net Income of $5.6 Million,
Diluted Earnings per Share of $0.34, and
Adjusted EBITDA of $57.1 Million;
Reaffirms Upper End of Full Year 2016 Adjusted EBITDA Guidance
ATLANTA (November 9, 2016) – 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 | % | ||||||||
Veritiv Contacts:
Investors: Tom Morabito, 770-391-8451 Media: Ed Patterson, 770-391-8244