UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 13, 2015 (August 13, 2015)
VERITIV CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-36479 | 42-3234977 | |
(Commission File Number) | (IRS Employer Identification No.) | |
1000 Abernathy Road NE Building 400, Suite 1700 Atlanta, Georgia (Address of principal executive offices) |
|
30328 (Zip Code) |
Registrant’s telephone number, including area code: (770) 391-8200
6600 Governors Lake Parkway, Norcross, Georgia 30071
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On August 13, 2015, Veritiv Corporation (the “Company”) issued a press release containing certain financial results of the Company and its direct and indirect wholly-owned subsidiaries for the three and six months ended June 30, 2015. A copy of this press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
The Company is furnishing herewith additional information in conjunction with the August 13, 2015 earnings release. This additional information includes general Company information and highlights of financial results of the Company and its direct and indirect wholly-owned subsidiaries for the three and six months ended June 30, 2015. The additional information, attached as Exhibit 99.2 to this Current Report on Form 8-K, is being furnished and will not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section.
The information in this Current Report on Form 8-K will not be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, or the Exchange Act, unless specifically identified therein as being incorporated by reference.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits. |
The following exhibits are filed with this report:
Exhibit No. | Exhibit Description | |
99.1 | Press Release of Veritiv Corporation issued August 13, 2015. | |
99.2 | Additional Information of Veritiv Corporation issued August 13, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
VERITIV CORPORATION | |
Date: August 13, 2015 | /s/ Mark W. Hianik |
Mark W. Hianik | |
Senior Vice President, General Counsel | |
& Corporate Secretary |
EXHIBIT INDEX
Exhibit No. | Exhibit Description | |
99.1 | Press Release of Veritiv Corporation issued August 13, 2015. | |
99.2 | Additional Information of Veritiv Corporation issued August 13, 2015. |
EXHIBIT 99.1
Veritiv Announces Second Quarter 2015
Financial Results
Reports Second Quarter Adjusted EBITDA of $41 Million, an Increase of 7.5% from Prior Year;
and Anticipates Reaching Mid to Higher End of 2015 Adjusted EBITDA Range
ATLANTA (August 13, 2015) − Veritiv Corporation (NYSE: VRTV), a North American leader in business-to-business distribution solutions, today announced financial results for the second fiscal quarter ended June 30, 2015.
“Veritiv’s second quarter results were driven by solid execution against our integration plan and continued synergy capture,” said Mary Laschinger, Chairman and CEO of Veritiv Corporation. “Having reached the company’s one-year mark, we are proud of our accomplishments to date and remain on track to deliver on our 2015 financial commitments.”
For the three months ended June 30, 2015, compared to the three months ended June 30, 2014 (on a pro forma basis):
· | Net sales were $2.2 billion, a decrease of 6.4% from the prior year. |
· | Adjusted EBITDA was $40.7 million, an increase of 7.5% from the prior year. |
· | Adjusted EBITDA as a percentage of net sales was 1.9%, an increase of 24 basis points from the prior year. |
For the six months ended June 30, 2015, compared to the six months ended June 30, 2014 (on a pro forma basis):
· | Net sales were $4.3 billion, a decrease of 5.4% from the prior year. |
· | Adjusted EBITDA was $69.1 million, an increase of 12.0% from the prior year. |
· | Adjusted EBITDA as a percentage of net sales was 1.6%, an increase of 25 basis points from the prior year. |
Net income, as reported for the three months ended June 30, 2015, was $4.3 million, which includes $12.5 million of integration expenses and restructuring charges. Net income, as reported for the six months ended June 30, 2015, was $2.1 million, which includes $25.9 million of integration expenses and restructuring charges.
In the second quarter of 2015, net sales per shipping day decreased 6.4% from the prior year. Year to date net sales per shipping day decreased 4.7% from the prior year. The six months ended June 30, 2015 had one less shipping day compared to the same period in the prior year.
“Our steady second quarter financial results were driven by the continued company-wide focus on process improvements and cost reductions. We are pleased with our margin improvement and healthy cash flow despite revenue headwinds,” said Stephen Smith, Senior Vice President and Chief Financial Officer of Veritiv Corporation. “Looking forward, we remain well-positioned for the second half of the year and expect to reach the middle to higher end of our range for Adjusted EBITDA of $165 to $175 million for the full year 2015.”
Veritiv Corporation will host a live conference call and webcast today, August 13, 2015, at 10 a.m. (ET) to discuss its second quarter 2015 financial results. All interested parties are invited to listen online at ir.veritivcorp.com. A replay of the call and webcast will be available online at ir.veritivcorp.com shortly after the live webcast is completed.
Important information regarding GAAP and pro forma operating results and related reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in the schedules and related footnotes to this press release, which should be thoroughly reviewed.
When reviewing the reconciliations included in the non-GAAP measures, please note that certain information is presented on a pro forma basis. The pro forma information includes historical Unisource Worldwide, Inc. ("Unisource") results, other purchase accounting adjustments and adjustments for one-time costs as if the merger of the legacy xpedx business and UWW Holdings, Inc., the parent company of Unisource, had occurred on January 1, 2013.
About Veritiv
Veritiv Corporation (NYSE: VRTV), with executive offices in Atlanta, and significant operations in the Greater Cincinnati, Ohio area, is a North American leader in business-to-business distribution solutions. Serving customers across virtually every industry, Veritiv provides print, publishing, packaging, facility and logistics solutions that help shape the success of its customers. Established in 2014, following the merger of International Paper Company’s xpedx division and Unisource Worldwide, the Company employs approximately 8,900 team members across about 180 distribution centers throughout the U.S., Mexico and Canada. 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 management, 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 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 our limited experience complying with the reporting and other requirements of a publicly traded company, including the Sarbanes-Oxley Act; 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, 2015 to be filed with the SEC may contain updates to the information included in this release.
Financial Statements
Because the merger of the legacy xpedx distribution solutions business with that of UWW Holdings, Inc., the parent company of Unisource, occurred on July 1, 2014, please note the following when reviewing the Veritiv Statements of Income, Balance Sheets, and Statements of Cash Flows included with this release:
· | The Veritiv Condensed Combined Statement of Income for the three and six months ended June 30, 2014 reflects the results of the legacy xpedx business only. The Veritiv Condensed Consolidated Statement of Income for the three and six months ended June 30, 2015 includes the combined legacy xpedx and Unisource businesses. |
· | The Veritiv Condensed Combined Statement of Cash Flows for the six months ended June 30, 2014 reflects the results of the legacy xpedx business only. The Veritiv Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2015 includes the combined legacy xpedx and Unisource businesses. |
VERITIV CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(in millions, except per share data, unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net sales | $ | 2,159.3 | $ | 1,329.0 | $ | 4,297.2 | $ | 2,636.4 | ||||||||
Cost of products sold (excluding depreciation and amortization) | 1,768.3 | 1,116.7 | 3,530.2 | 2,205.2 | ||||||||||||
Distribution expenses | 129.5 | 72.0 | 260.2 | 149.1 | ||||||||||||
Selling and administrative expenses | 218.0 | 129.9 | 428.6 | 258.5 | ||||||||||||
Depreciation and amortization | 15.3 | 4.3 | 28.8 | 8.9 | ||||||||||||
Merger and integration expenses | 10.3 | 2.1 | 20.3 | 2.1 | ||||||||||||
Restructuring charges (income) | 2.2 | (0.9 | ) | 5.6 | (1.1 | ) | ||||||||||
Operating income | 15.7 | 4.9 | 23.5 | 13.7 | ||||||||||||
Interest expense, net | 6.4 | - | 12.8 | - | ||||||||||||
Other expense (income), net | (1.5 | ) | (0.1 | ) | 2.0 | (0.6 | ) | |||||||||
Income from continuing operations before income taxes | 10.8 | 5.0 | 8.7 | 14.3 | ||||||||||||
Income tax expense | 6.5 | 2.1 | 6.6 | 5.8 | ||||||||||||
Income from continuing operations | 4.3 | 2.9 | 2.1 | 8.5 | ||||||||||||
Loss from discontinued operations, net of income taxes | - | - | - | (0.1 | ) | |||||||||||
Net income | $ | 4.3 | $ | 2.9 | $ | 2.1 | $ | 8.4 | ||||||||
Earnings per share: | ||||||||||||||||
Basic and diluted | ||||||||||||||||
Continuing operations | $ | 0.27 | $ | 0.36 | $ | 0.13 | $ | 1.04 | ||||||||
Discontinued operations | - | - | - | (0.01 | ) | |||||||||||
Basic and diluted earnings per share | $ | 0.27 | $ | 0.36 | $ | 0.13 | $ | 1.03 | ||||||||
Weighted average shares outstanding - basic and diluted | 16.00 | 8.16 | 16.00 | 8.16 |
VERITIV CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except par value, unaudited)
June 30, 2015 | December 31, 2014 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 79.4 | $ | 57.6 | ||||
Accounts receivable, less allowances of $42.1 and $39.0, respectively | 1,017.5 | 1,115.1 | ||||||
Related party receivable | 4.2 | 3.9 | ||||||
Inventories | 711.5 | 673.2 | ||||||
Other current assets | 115.9 | 109.3 | ||||||
Total current assets | 1,928.5 | 1,959.1 | ||||||
Property and equipment, net | 377.2 | 377.4 | ||||||
Goodwill | 52.1 | 52.4 | ||||||
Other intangibles, net | 32.1 | 36.1 | ||||||
Non-current deferred income tax assets | 100.8 | 105.6 | ||||||
Other non-current assets | 40.1 | 43.9 | ||||||
Total assets | $ | 2,530.8 | $ | 2,574.5 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 618.8 | $ | 589.8 | ||||
Related party payable | 13.6 | 11.0 | ||||||
Accrued payroll and benefits | 106.0 | 111.1 | ||||||
Deferred income tax liabilities | 20.8 | 21.1 | ||||||
Other accrued liabilities | 98.2 | 100.5 | ||||||
Current maturities of long-term debt | 3.5 | 3.8 | ||||||
Financing obligations to related party, current portion | 14.3 | 13.8 | ||||||
Total current liabilities | 875.2 | 851.1 | ||||||
Long-term debt, net of current maturities | 798.1 | 855.0 | ||||||
Financing obligations to related party, less current portion | 205.2 | 212.4 | ||||||
Defined benefit pension obligations | 32.3 | 36.3 | ||||||
Other non-current liabilities | 109.9 | 107.2 | ||||||
Total liabilities | 2,020.7 | 2,062.0 | ||||||
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 | 564.4 | 562.4 | ||||||
Accumulated deficit | (25.9 | ) | (28.0 | ) | ||||
Accumulated other comprehensive loss | (28.6 | ) | (22.1 | ) | ||||
Total shareholders' equity | 510.1 | 512.5 | ||||||
Total liabilities and shareholders' equity | $ | 2,530.8 | $ | 2,574.5 |
VERITIV CORPORATION
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
Six Months Ended June 30, | ||||||||
2015 | 2014 | |||||||
Operating Activities | ||||||||
Net income | $ | 2.1 | $ | 8.4 | ||||
Loss from discontinued operations, net of income taxes | - | (0.1 | ) | |||||
Income from continuing operations | 2.1 | 8.5 | ||||||
Depreciation and amortization | 28.8 | 8.9 | ||||||
Amortization of deferred financing fees | 2.2 | - | ||||||
Net losses (gains) on sales of property and equipment | 0.5 | (1.5 | ) | |||||
Provision for allowance for doubtful accounts | 5.8 | 4.0 | ||||||
Deferred income tax provision | 5.5 | 1.5 | ||||||
Stock-based compensation | 1.9 | 4.3 | ||||||
Other non-cash items, net | 2.1 | - | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable and related party receivable | 84.6 | 19.5 | ||||||
Inventories | (44.2 | ) | (4.4 | ) | ||||
Accounts payable and related party payable | 53.1 | (2.7 | ) | |||||
Accrued payroll and benefits | (6.3 | ) | 0.6 | |||||
Other | (11.7 | ) | (0.7 | ) | ||||
Net cash provided by operating activities – continuing operations | 124.4 | 38.0 | ||||||
Net cash used for operating activities – discontinued operations | - | (1.1 | ) | |||||
Net cash provided by operating activities | 124.4 | 36.9 | ||||||
Investing Activities | ||||||||
Property and equipment additions | (22.6 | ) | (1.3 | ) | ||||
Proceeds from asset sales | 0.2 | 4.8 | ||||||
Other | - | 0.1 | ||||||
Net cash (used for) provided by investing activities | (22.4 | ) | 3.6 | |||||
Financing Activities | ||||||||
Net cash transfers to Parent | - | (37.9 | ) | |||||
Change in book overdrafts | (18.5 | ) | (6.1 | ) | ||||
Borrowings of long-term debt | 2,292.8 | - | ||||||
Repayments of long-term debt | (2,346.3 | ) | - | |||||
Payments under equipment capital lease obligations | (2.0 | ) | - | |||||
Payments under financing obligations to related party | (6.8 | ) | - | |||||
Net cash used for financing activities – continuing operations | (80.8 | ) | (44.0 | ) | ||||
Net cash provided by financing activities – discontinued operations | - | 1.1 | ||||||
Net cash used for financing activities | (80.8 | ) | (42.9 | ) | ||||
Effect of exchange rate changes on cash | 0.6 | 0.6 | ||||||
Net change in cash | 21.8 | (1.8 | ) | |||||
Cash at beginning of period | 57.6 | 5.7 | ||||||
Cash at end of period | $ | 79.4 | $ | 3.9 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid for income taxes, net of refunds | $ | 1.1 | $ | 0.4 | ||||
Cash paid for interest | 10.5 | - | ||||||
Non-Cash Investing Activities | ||||||||
Non-cash additions to property and equipment | $ | 5.0 | $ | - |
Non-GAAP Measures
We supplement our financial information prepared in accordance with GAAP with Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges (income), non-restructuring stock-based compensation expense, LIFO (income) expense, non-restructuring severance charges, gain on sale of joint venture, merger and integration expenses, loss from discontinued operations, net of income taxes, 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 such as ours. In addition, the credit agreement governing our asset-based lending facility permits us to exclude these and other charges in calculating “Consolidated EBITDA”, as defined in the ABL Facility.
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 and related footnote for reconciliations of non-GAAP measures to the most comparable GAAP measures.
Table I
VERITIV CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(in millions, unaudited)
Three Months Ended June 30, 2014 | ||||||||||||||||
Three Months Ended June 30, 2015 | Veritiv As Reported | Pro Forma Adjustments* | Veritiv Pro Forma | |||||||||||||
Net income (loss) | $ | 4.3 | $ | 2.9 | $ | (12.2 | ) | $ | (9.3 | ) | ||||||
Interest expense, net | 6.4 | - | 6.1 | 6.1 | ||||||||||||
Income tax expense | 6.5 | 2.1 | 7.4 | 9.5 | ||||||||||||
Depreciation and amortization | 15.3 | 4.3 | 8.4 | 12.7 | ||||||||||||
EBITDA | 32.5 | 9.3 | 9.7 | 19.0 | ||||||||||||
Restructuring charges (income) | 2.2 | (0.9 | ) | - | (0.9 | ) | ||||||||||
Non-restructuring stock-based compensation | 0.9 | 3.0 | - | 3.0 | ||||||||||||
LIFO (income) expense | (4.8 | ) | 3.4 | 1.5 | 4.9 | |||||||||||
Non-restructuring severance charges | 1.0 | 0.7 | 0.3 | 1.0 | ||||||||||||
Merger and integration expenses | 10.3 | 2.1 | 6.2 | 8.3 | ||||||||||||
Fair value adjustment on TRA contingent liability | (1.7 | ) | - | - | - | |||||||||||
Other | 0.3 | - | 2.6 | 2.6 | ||||||||||||
Adjusted EBITDA / Pro Forma Adjusted EBITDA | $ | 40.7 | $ | 17.6 | $ | 20.3 | $ | 37.9 | ||||||||
Net sales | $ | 2,159.3 | $ | 1,329.0 | $ | 976.8 | $ | 2,305.8 | ||||||||
Adjusted EBITDA / Pro Forma Adjusted EBITDA as a % of net sales | 1.9 | % | 1.3 | % | 1.6 | % |
* Pro forma adjustments take into account the merger with UWW Holdings, Inc. and the related financing as if they occurred on January 1, 2013, as well as purchase accounting adjustments and adjustments for one-time costs related to the merger.
Table II
VERITIV CORPORATION
RECONCILIATION OF NON-GAAP MEASURES
(in millions, unaudited)
Six Months Ended June 30, 2014 | ||||||||||||||||
Six Months Ended June 30, 2015 | Veritiv As Reported | Pro Forma Adjustments* | Veritiv Pro Forma | |||||||||||||
Net income (loss) | $ | 2.1 | $ | 8.4 | $ | (16.2 | ) | $ | (7.8 | ) | ||||||
Interest expense, net | 12.8 | - | 12.4 | 12.4 | ||||||||||||
Income tax expense | 6.6 | 5.8 | 6.8 | 12.6 | ||||||||||||
Depreciation and amortization | 28.8 | 8.9 | 16.8 | 25.7 | ||||||||||||
EBITDA | 50.3 | 23.1 | 19.8 | 42.9 | ||||||||||||
Restructuring charges (income) | 5.6 | (1.1 | ) | 0.2 | (0.9 | ) | ||||||||||
Non-restructuring stock-based compensation | 1.9 | 4.0 | 0.1 | 4.1 | ||||||||||||
LIFO (income) expense | (10.0 | ) | (0.3 | ) | 1.3 | 1.0 | ||||||||||
Non-restructuring severance charges | 1.4 | 2.4 | 0.4 | 2.8 | ||||||||||||
Gain on sale of joint venture | - | - | (6.6 | ) | (6.6 | ) | ||||||||||
Merger and integration expenses | 20.3 | 2.1 | 14.1 | 16.2 | ||||||||||||
Fair value adjustment on TRA contingent liability | (0.4 | ) | - | - | - | |||||||||||
Other | - | (0.1 | ) | 2.2 | 2.1 | |||||||||||
Loss from discontinued operations, net of income taxes | - | 0.1 | - | 0.1 | ||||||||||||
Adjusted EBITDA / Pro Forma Adjusted EBITDA | $ | 69.1 | $ | 30.2 | $ | 31.5 | $ | 61.7 | ||||||||
Net sales | $ | 4,297.2 | $ | 2,636.4 | $ | 1,907.5 | $ | 4,543.9 | ||||||||
Adjusted EBITDA / Pro Forma Adjusted EBITDA as a % of net sales | 1.6 | % | 1.1 | % | 1.4 | % |
* Pro forma adjustments take into account the merger with UWW Holdings, Inc. and the related financing as if they occurred on January 1, 2013, as well as purchase accounting adjustments and adjustments for one-time costs related to the merger.
Veritiv Contacts:
Investors: Tom Morabito, 770-391-8451 | Media: Ed Patterson, 770-391-8244 |
EXHIBIT 99.2
Veritiv Corporation Second Quarter 2015 Financial Results August 13, 2015
Tom Morabito Director of Investor Relations 2
Safe Harbor Provision Certain statements contained in this presentation 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 management, 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 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 our limited experience complying with the reporting and other requirements of a publicly traded company, including the Sarbanes - Oxley Act ; 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 presentation beyond the published date, or for changes made to this document by wire services or Internet service providers . This presentation 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 , 2015 to be filed with the SEC may contain updates to the information included in this presentation . We reference non - GAAP financial measures in this presentation . Please see the appendix for reconciliations of non - GAAP measures to the most comparable GAAP measures . 3
Mary Laschinger Chairman & CEO 4
Financial Results 1 1) Please see the appendix for reconciliations of non - GAAP measures to the most comparable GAAP measures. 2) Amounts calculated on a pro forma basis, which assumes the Merger with UWW Holdings, Inc. and the related financing occur red on January 1, 2013, as well as purchase accounting adjustments and adjustments for one - time costs related to the Merger. $41 M Adjusted EBITDA 7.5% 2 Q15 Actual YOY% Change 2 $2.2 B Net Sales (6.4%) On track to reach long - term Adjusted EBITDA and net synergy goals 5
Second Quarter 2015 Veritiv Revenue 1 6 2 Q14 Revenue 2 Q15 Revenue 1) Amounts calculated on a pro forma basis, which assumes the Merger with UWW Holdings, Inc. and the related financing occur red on January 1, 2013, as well as purchase accounting adjustments and adjustments for one - time costs related to the Merger. $2,159 $2,306 Core Business FX Effect
Key Developments 7 2015 Milestones • On - schedule separation of information and majority of financial systems from International Paper • Implemented standardized route optimization and analysis tools for national fleet ▪ Common on - board monitoring and routing systems • Initiated several warehouse consolidations • Upcoming Developments for Long - Term Milestones: ▪ Decision on common suite of information technology applications and core operating system ▪ Network optimization roadmap
Stephen Smith CFO 8
2Q15 Three Months Ended June 30 YOY % Change 2 2Q15 Six Months Ended June 30 YOY % Change 2 Pro Forma : Net sales $2,159 (6.4%) $4,297 (5.4%) Net sales per shipping day - (6.4%) - (4.7%) Cost of products sold $1,768 (7.8%) $3,530 (6.4%) Net sales less cost of products sold $391 0.8% $767 (0.9%) Adjusted EBITDA $40.7 7.5% $69.1 12.0% Adjusted EBITDA as a % of net sales 1.9% 24 BPS 1.6% 25 BPS As Reported : Net income $4.3 N/A $2.1 N/A Second Quarter 2015 Veritiv Financial Results 1 1) Please see the appendix for reconciliations of non - GAAP measures to the most comparable GAAP measures. 2) Amounts calculated on a pro forma basis, which assumes the Merger with UWW Holdings, Inc. and the related financing occur red on January 1, 2013, as well as purchase accounting adjustments and adjustments for one - time costs related to the Merger. (Unaudited, Dollars In Millions) 9
Second Quarter 2015 Veritiv Segment Financial Results 1 1 ) Amounts calculated on a pro forma basis, which assumes the Merger with UWW Holdings, Inc. and the related financing occur red on January 1, 2013, as well as purchase accounting adjustments and adjustments for one - time costs related to the Merger. 10 Print Publishing Packaging Facility Solutions 2Q15 Three Months Ended June 30 YOY % Change 1 2Q15 Six Months Ended June 30 YOY % Change 1 Net Sales $294 (7.1%) $604 (4.6%) Net sales per shipping day - (7.1%) - (3.9%) Adjusted EBITDA $7.4 11.9% $13.8 0.0% Adj. EBITDA as a % of net sales 2.5% 42 BPS 2.3% 11 BPS 2Q15 Three Months Ended June 30 YOY % Change 1 2Q15 Six Months Ended June 30 YOY % Change 1 Net Sales $700 (0.4%) $1,375 0.6% Net sales per shipping day - (0.4%) - 1.4% Adjusted EBITDA $51.8 16.5% $97.5 15.3% Adj. EBITDA as a % of net sales 7.4% 108 BPS 7.1% 90 BPS 2Q15 Three Months Ended June 30 YOY % Change 1 2Q15 Six Months Ended June 30 YOY % Change 1 Net Sales $325 (7.4%) $634 (7.1%) Net sales per shipping day - (7.4%) - (6.3 %) Adjusted EBITDA $10.6 (19.7%) $17.5 (13.1%) Adj. EBITDA as a % of net sales 3.3% (50 BPS) 2.8% (19 BPS) 2Q15 Three Months Ended June 30 YOY % Change 1 2Q15 Six Months Ended June 30 YOY % Change 1 Net Sales $812 (11.3%) $1,633 (10.5%) Net sales per shipping day - (11.3%) - (9.8%) Adjusted EBITDA $18.4 14.6 % $33.9 13.6 % Adj. EBITDA as a % of net sales 2.3% 51 BPS 2.1% 44 BPS (Unaudited, Dollars In Millions )
Synergies & One - Time Integration Costs 0% 20% 40% 60% 80% 100% YE 2014 (Actual) YE 2015 YE 2016 YE 2017 Cumulative forecasted synergies ($150M - $225 M) Forecasted costs to achieve 1 ($225M): ~ 30 % 60 - 70% 80 - 90% 90 - 100% 1) Includes ~ $55 million of one - time integration capital expenditures; does not include approximately $27 million of merger re lated expenses. 2 5% - 35% 50% - 60% 80% - 90% ~ 10% T hrough the first half of 2015, Veritiv is pacing on or ahead of its synergy plan 11 Management intends to improve Adjusted EBITDA by an incremental $100 million over the first few years after the Merger » Key areas that synergies will be derived from include supply chain efficiencies and SG&A
ABL Facility & Capital Allocation Capital Structure / Cash Flow Capital Allocation ▪ Capital Allocation Priorities : – Invest in the company ▫ YTD: CapEx totaled ~ $23M, with ~ $16M related to integration ▫ Ordinary course C apEx now expected to be ~ $20M in 2015 ▫ Continue to expect incremental CapEx for integration projects of $30M - $40M – Pay down debt – Return value to shareholders ▪ At the end of June 2015: ▪ The borrowing base availability for the ABL facility was ~ $1.2 billion ▪ ~ $ 800M drawn against the ABL facility ▪ ~ $ 400M of available borrowing capacity 12
Appendix: Reconciliation of Non - GAAP Financial Measures We supplement our financial information prepared in accordance with GAAP with Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges (income), non - restructuring stock - based compensation expense, LIFO (income) expense, non - restructuring severance charges, gain on sale of joint venture, merger and integration expenses, loss from discontinued operations, net of income taxes, fair value adjustments on the contingent liability associated with the Tax Receivable Agreement ("TRA") and certain other adjustments) and Free Cash Flow because we believe investors commonly use Adjusted EBITDA and Free Cash Flow as key financial metrics for valuing companies such as ours . In addition, the credit agreement governing our asset - based lending facility permits us to exclude these and other charges in calculating “Consolidated EBITDA”, as defined in the ABL Facility . Adjusted EBITDA and Free Cash Flow are not alternative measures 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 and Free Cash Flow have limitations as analytical tools and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP . Please see the following tables and related footnotes for reconciliations of non - GAAP measures to the most comparable GAAP measures . 13
Appendix: Reconciliation of Non - GAAP Financial Measures 14 Table I VERITIV CORPORATION RECONCILIATION OF NON-GAAP MEASURES (in millions, unaudited) Veritiv As Reported Pro Forma Adjustments* Veritiv Pro Forma Net income (loss) 4.3$ 2.9$ (12.2)$ (9.3)$ Interest expense, net 6.4 - 6.1 6.1 Income tax expense 6.5 2.1 7.4 9.5 Depreciation and amortization 15.3 4.3 8.4 12.7 EBITDA 32.5 9.3 9.7 19.0 Restructuring charges (income) 2.2 (0.9) - (0.9) Non-restructuring stock-based compensation 0.9 3.0 - 3.0 LIFO (income) expense (4.8) 3.4 1.5 4.9 Non-restructuring severance charges 1.0 0.7 0.3 1.0 Merger and integration expenses 10.3 2.1 6.2 8.3 Fair value adjustment on TRA contingent liability (1.7) - - - Other 0.3 - 2.6 2.6 Adjusted EBITDA / Pro Forma Adjusted EBITDA 40.7$ 17.6$ 20.3$ 37.9$ Net sales 2,159.3$ 1,329.0$ 976.8$ 2,305.8$ Adjusted EBITDA / Pro Forma Adjusted EBITDA as a % of net sales 1.9% 1.3% 1.6% Three Months Ended June 30, 2014 * Pro forma adjustments take into account the merger with UWW Holdings, Inc. and the related financing as if they occurred on January 1, 2013, as well as purchase accounting adjustments and adjustments for one-time costs related to the merger. Three Months Ended June 30, 2015
15 Appendix: Reconciliation of Non - GAAP Financial Measures Table II VERITIV CORPORATION RECONCILIATION OF NON-GAAP MEASURES (in millions, unaudited) Veritiv As Reported Pro Forma Adjustments* Veritiv Pro Forma Net income (loss) 2.1$ 8.4$ (16.2)$ (7.8)$ Interest expense, net 12.8 - 12.4 12.4 Income tax expense 6.6 5.8 6.8 12.6 Depreciation and amortization 28.8 8.9 16.8 25.7 EBITDA 50.3 23.1 19.8 42.9 Restructuring charges (income) 5.6 (1.1) 0.2 (0.9) Non-restructuring stock-based compensation 1.9 4.0 0.1 4.1 LIFO (income) expense (10.0) (0.3) 1.3 1.0 Non-restructuring severance charges 1.4 2.4 0.4 2.8 Gain on sale of joint venture - - (6.6) (6.6) Merger and integration expenses 20.3 2.1 14.1 16.2 Fair value adjustment on TRA contingent liability (0.4) - - - Other - (0.1) 2.2 2.1 Loss from discontinued operations, net of income taxes - 0.1 - 0.1 Adjusted EBITDA / Pro Forma Adjusted EBITDA 69.1$ 30.2$ 31.5$ 61.7$ Net sales 4,297.2$ 2,636.4$ 1,907.5$ 4,543.9$ Adjusted EBITDA / Pro Forma Adjusted EBITDA as a % of net sales 1.6% 1.1% 1.4% Six Months Ended June 30, 2014 * Pro forma adjustments take into account the merger with UWW Holdings, Inc. and the related financing as if they occurred on January 1, 2013, as well as purchase accounting adjustments and adjustments for one-time costs related to the merger. Six Months Ended June 30, 2015
16 Appendix: Reconciliation of Non - GAAP Financial Measures Table III VERITIV CORPORATION RECONCILIATION OF NON-GAAP MEASURES (in millions, unaudited) Net cash flows provided by operating activities 124.4$ Less: Capital expenditures (22.6) Free cash flow 101.8 Add back: Cash payments for restructuring, integration-related capex and other items 43.3 Free cash flow excluding cash impact of restructuring, integration-related capex and other items 145.1$ Six Months Ended June 30, 2015
Questions 17
Mary Laschinger Chairman & CEO 18
Veritiv Corporation Second Quarter 2015 Financial Results August 13, 2015
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