EX-99.1 2 a18-18525_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Veritiv Announces Second Quarter 2018

Financial Results

 

Reports Second Quarter Net Sales of $2.2 Billion,

Net Loss of $(10.6) Million,

Basic and Diluted Loss per Share of $(0.67), and

Adjusted EBITDA of $45.4 Million

 

ATLANTA (August 9, 2018) — 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

%

 


 

Veritiv Contacts:

 

Investors: Tom Morabito, 770-391-8451 Media: Phil Taylor, 770-391-8415