10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-10653

ESSENDANT INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	36-3141189
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015-2559

(847) 627-7000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

On July 21, 2017, the registrant had outstanding 37,529,402 shares of common stock, par value $0.10 per share.

ESSENDANT INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2017

TABLE OF CONTENTS

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	3
Condensed Consolidated Statements of (Loss) Income for the Three and Six Months Ended June 30, 2017 and 2016	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2017 and 2016	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6. Exhibits	33
SIGNATURES	34

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	(Unaudited)			(Audited)
	As of  June 30,			As of  December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	23,889		$	21,329
Accounts receivable, less allowance for doubtful accounts of $16,751 in 2017 and $18,196 in 2016		663,926			678,184
Inventories		800,323			876,837
Other current assets		36,984			32,100
Total current assets		1,525,122			1,608,450
Property, plant and equipment, net		127,104			128,251
Intangible assets, net		78,149			83,690
Goodwill		99,479			297,906
Other long-term assets		45,971			45,209
Total assets	$	1,875,825		$	2,163,506
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	508,639		$	484,602
Accrued liabilities		188,940			197,804
Current maturities of long-term debt		6,089			28
Total current liabilities		703,668			682,434
Deferred income taxes		1,307			6,378
Long-term debt		504,932			608,941
Other long-term liabilities		72,239			84,647
Total liabilities		1,282,146			1,382,400
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2017 and 2016		7,444			7,444
Additional paid-in capital		413,865			409,805
Treasury stock, at cost – 36,967,119 shares in 2017 and 36,951,522 shares in 2016		(1,097,300	)		(1,096,744	)
Retained earnings		1,313,209			1,507,057
Accumulated other comprehensive loss		(43,539	)		(46,456	)
Total stockholders’ equity		593,679			781,106
Total liabilities and stockholders’ equity	$	1,875,825		$	2,163,506

See notes to condensed consolidated financial statements.

3

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share data)

(Unaudited)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2017		2016		2017			2016
Net sales	$	1,260,656	$	1,354,523	$	2,530,038		$	2,706,819
Cost of goods sold		1,083,092		1,158,700		2,166,807			2,310,914
Gross profit		177,564		195,823		363,231			395,905
Operating expenses:
Warehousing, marketing and administrative expenses		161,695		157,625		334,717			325,303
Impairment of goodwill		-		-		198,828			-
Defined benefit plan settlement loss		-		11,744		-			11,744
Operating income (loss)		15,869		26,454		(170,314	)		58,858
Interest expense, net		6,299		5,677		13,038			11,574
Income (loss) before income taxes		9,570		20,777		(183,352	)		47,284
Income tax expense		4,474		7,844		146			17,821
Net income (loss)	$	5,096	$	12,933	$	(183,498	)	$	29,463
Net income (loss) per share - basic:	$	0.14	$	0.35	$	(5.01	)	$	0.81
Average number of common shares outstanding - basic		36,673		36,512		36,659			36,552
Net income (loss) per share - diluted:	$	0.14	$	0.35	$	(5.01	)	$	0.80
Average number of common shares outstanding - diluted		36,873		36,910		36,659			36,897
Dividends declared per share	$	0.14	$	0.14	$	0.28		$	0.28

See notes to condensed consolidated financial statements.

4

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(Unaudited)

	For the Three Months Ended					For the Six Months Ended
	June 30,					June 30,
	2017			2016		2017			2016
Net income (loss)	$	5,096		$	12,933	$	(183,498	)	$	29,463
Other comprehensive income (loss), net of tax
Translation adjustments		1,092			442		1,477			3,133
Minimum pension liability adjustments		704			7,418		1,408			8,333
Cash flow hedge adjustments		(36	)		100		32			(427	)
Total other comprehensive income (loss), net of tax		1,760			7,960		2,917			11,039
Comprehensive income (loss)	$	6,856		$	20,893	$	(180,581	)	$	40,502

See notes to condensed consolidated financial statements.

5

ESSENDANT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	For the Six Months Ended
	June 30,
	2017			2016
Cash Flows From Operating Activities:
Net (loss) income	$	(183,498	)	$	29,463
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		21,534			22,936
Share-based compensation		4,038			5,689
Gain on the disposition of property, plant and equipment		(656	)		(739	)
Amortization of capitalized financing costs		804			332
Excess tax cost related to share-based compensation		-			193
Deferred income taxes		(270	)		(2,765	)
Impairment of goodwill		198,828			-
Pension settlement charge		-			11,744
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net		14,434			(28,439	)
Decrease (increase) in inventory		76,757			(44,017	)
Increase in other assets		(1,178	)		(36,529	)
Increase in accounts payable		24,133			43,429
Decrease in accrued liabilities		(19,603	)		(12,219	)
Decrease in other liabilities		(9,512	)		(5,062	)
Net cash provided by (used in) operating activities		125,811			(15,984	)
Cash Flows From Investing Activities:
Capital expenditures		(13,677	)		(19,327	)
Proceeds from the disposition of property, plant and equipment		-			2,770
Net cash used in investing activities		(13,677	)		(16,557	)
Cash Flows From Financing Activities:
Net borrowings under revolving credit facility		31,375			43,876
Borrowings under Term Loan		77,600			-
Repayments under Term Loan		(1,518	)		-
Net repayments under Securitization Program		(200,000	)		-
Net (disbursements) proceeds from share-based compensation arrangements		(600	)		1,285
Acquisition of treasury stock, at cost		-			(6,839	)
Payment of cash dividends		(10,339	)		(10,237	)
Excess tax cost related to share-based compensation		-			(193	)
Payment of debt issuance costs		(6,277	)		-
Net cash (used in) provided by financing activities		(109,759	)		27,892
Effect of exchange rate changes on cash and cash equivalents		185			366
Net change in cash and cash equivalents		2,560			(4,283	)
Cash and cash equivalents, beginning of period		21,329			29,983
Cash and cash equivalents, end of period	$	23,889		$	25,700
Other Cash Flow Information:
Income tax payments, net	$	19,058		$	27,358
Interest paid		11,809			11,750

See notes to condensed consolidated financial statements.

6

ESSENDANT INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent Essendant Inc. (“ESND”) with its wholly owned subsidiary Essendant Co. (“ECO”), and ECO’s subsidiaries (collectively, “Essendant” or the “Company”). The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of ESND and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading national wholesale distributor of workplace items.

The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2016, was derived from the December 31, 2016 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) for further information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Essendant at June 30, 2017 and the results of operations for the three and six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016. The results of operations for the three and six months ended June 30, 2017 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

New Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Under the new guidance, when awards vest or are settled, companies are required to record excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement instead of in additional paid-in capital. Furthermore, excess tax benefits are presented as an operating activity on the statement of cash flows rather than as a financing activity. In the six months ended June 30, 2017, the Company adopted the standard which resulted in $0.8 million of incremental tax expense that was recognized due to excess tax deficiencies of vested or settled awards in the first six months of 2017. Furthermore, the Company notes certain other changes resulting from adoption including changes in the calculation of the effect of dilutive securities for purposes of calculating diluted net income per share which was immaterial in the period and Condensed Consolidated Statement of Cash Flows presentation changes. The Company has elected to apply guidance concerning cash flow presentation on a prospective basis and to continue to estimate the number of awards expected to be forfeited.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the second step of the two-step goodwill impairment test. Specifically, the standard requires an entity to perform its interim or annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized could not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. The Company early adopted the standard in the quarter ended March 31, 2017 when an interim impairment test was conducted as further discussed in Note 4 – “Goodwill and Intangible Assets”.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU No. 2014-09. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period.

7

Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company plans to adopt the standard using the modified retrospective approach, which will require the Company to recognize the cumulative effect of initial adoption of the standard for all contracts as of, and new contracts after, the date of initial application.

Based on the Company’s current assessment and detailed review of the revenue transactions of the organization with its customers, the impact of the application of the new standard is expected to be immaterial. The Company expects that revenue recognition related to the processing, fulfillment and shipment of various warehoused goods to remain substantially unchanged. The Company also expects disclosure changes resulting from certain policy elections and practical expedient uses of, or allowable divergences from, authoritative guidance. The Company will continue to monitor for modifications to the standards throughout the year ended December 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that requires lessees to recognize right-of-use assets and lease liabilities for all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. This standard will be effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. This standard replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This standard amends and adjusts how cash receipts and cash payments are presented and classified in the statement of cash flows and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and will require adoption on a retrospective basis unless impracticable. If impracticable the Company would be required to apply the amendments prospectively as of the earliest date possible. The Company is currently evaluating the impact the new guidance will have on its statement of cash flows or financial statement disclosures.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires registrants that include a measure of operating income to include the service cost component in the same financial statement line item as other compensation costs and to report other pension-related costs, including amortization of prior service cost/credit, and settlement and curtailment effects, etc. separately, excluding them from operating expenses and income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. Application of the standard is required to be made on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement while the change in capitalized benefit cost is to be applied prospectively. This standard will be effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is permitted as of the beginning of an annual period. The Company is currently evaluating the new guidance to determine the impact it will have on the presentation of its consolidated financial statements, but does not expect any impact on the Company’s net income.

8

Inventory

Approximately 98.3% of total inventory as of June 30, 2017 and December 31, 2016, respectively, has been valued under the Last-In-First-Out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the LIFO accounting method is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of First-In-First-Out (“FIFO”) cost or market, inventory values would have been $158.1 million and $147.9 million higher than reported as of June 30, 2017 and December 31, 2016, respectively.

For the three months ended June 30, 2017, there was a $0.3 million reduction in LIFO liquidations as compared to the $1.6 million reported in the first quarter. For the six months ended June 30, 2017, LIFO liquidations resulted in LIFO income of $1.3 million, which was more than offset by LIFO expense of $11.5 million related to current inflation, for an overall net increase in cost of sales of $10.2 million. LIFO liquidations occur when there are decrements of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of current year purchases.

2. Share-Based Compensation

As of June 30, 2017, the Company has two active equity compensation plans. Under the 2015 Long-Term Incentive Plan (as amended and restated), award instruments include, but are not limited to, stock options, restricted stock awards, restricted stock units (“RSUs”), and performance-based awards. Associates and non-employee directors of the Company are eligible to become participants in the plan. The Nonemployee Directors’ Deferred Stock Compensation Plan allows non-employee directors to elect to defer receipt of all or a portion of their annual retainer in deferred stock units.

The Company granted 58,962 shares of restricted stock and 221,365 RSUs during the first six months of 2017, compared to 129,059 shares of restricted stock and 247,656 RSUs during the first six months of 2016.

3. Severance and Restructuring Charges

Commencing in 2015, the Company began certain restructuring actions which included workforce reductions, facility closures, and actions to reduce costs through management delayering in order to achieve broader functional alignment of the organization. The charges associated with these actions were included in “warehousing, marketing and administrative expenses.” These actions were substantially completed in 2016. No expenses have been recorded in the three and six months ended June 30, 2017 and the three months ended June 30, 2016.

The expenses, cash flows, and accrued liabilities associated with the restructuring actions described above are noted in the following table (in thousands):

	Expenses		Cash flow				Accrued Liabilities
	For the six months ended June 30,		For the six months ended June 30,				As of June 30,		As of December 31,
	2016		2017		2016		2017		2016
Fourth quarter 2015 Action
Workforce reduction	$	-	$	410	$	6,462	$	1,014	$	1,424
First quarter 2015 Actions
Workforce reduction	$	-	$	107	$	487	$	651	$	758
Facility closure		254		-		500		-		-
Total		254	$	107	$	987	$	651	$	758

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4. Goodwill and Intangible Assets

The Company tests goodwill for impairment annually as of October 1 and whenever triggering events or circumstances indicate that an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit, among others. Determining whether an impairment has occurred requires a comparison of the carrying value of the net assets of the reporting unit to the fair value of the respective reporting unit.

In the quarter ended March 31, 2017, given a sustained decrease in the Company’s share price and related market capitalization, the Company determined that a triggering event had occurred for all of its reporting units, requiring an interim impairment test of goodwill. During this assessment, the Company determined that the carrying value of net assets for three of the four reporting units of the Company exceeded fair value. In consideration of the Company’s adoption of ASU 2017-04 (refer to Note 1 – “Basis of Presentation”) the Company recognized a goodwill impairment of $198.8 million in aggregate based on the difference between the carrying value of net assets and fair value as determined based on the combination of market prices and merger and acquisitions (“M&A”) transactions of comparable businesses and forecasted future discounted cash flows.

The carrying amount of goodwill by reporting unit and impairment recognized is noted in the table below (in thousands):

	Goodwill balance		For the six months ended June 30, 2017					Goodwill balance
	as of December 31, 2016		Impairment			Currency translation adjustments		as of June 30, 2017
Office & Facilities	$	224,683	$	(185,704	)	$	-	$	38,979
Industrial		13,067		-		46			13,113
Automotive		45,234		(12,220	)	355			33,369
CPO		14,922		(904	)		-		14,018
	$	297,906	$	(198,828	)	$	401	$	99,479

Acquired intangible assets are initially recorded at their fair market values determined based on quoted market prices in active markets, if available, or recognized valuation models. The Company’s intangible assets have finite useful lives and are amortized on a straight-line basis over their useful lives.  

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	June 30, 2017								December 31, 2016
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	137,802	$	(67,594	)	$	70,208	16	$	137,452	$	(62,235	)	$	75,217	16
Non-compete agreements		4,654		(4,260	)		394	4		4,649		(4,260	)		389	4
Trademarks		13,737		(6,190	)		7,547	14		13,704		(5,620	)		8,084	14
Total	$	156,193	$	(78,044	)	$	78,149		$	155,805	$	(72,115	)	$	83,690

The following table summarizes the amortization expense to be incurred in 2017 through 2021 on intangible assets (in thousands):

Year	Amount
2017	$	10,795
2018		8,063
2019		6,945
2020		6,942
2021		6,942

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5. Accumulated Other Comprehensive Income (Loss)

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended June 30, 2017 was as follows (amounts in thousands):

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2016	$	(8,439	)	$	172		$	(38,189	)	$	(46,456	)
Other comprehensive income (loss) before reclassifications		1,477			(75	)		-			1,402
Amounts reclassified from AOCI		-			107			1,408			1,515
Net other comprehensive income		1,477			32			1,408			2,917
AOCI, balance as of June 30, 2017	$	(6,962	)	$	204		$	(36,781	)	$	(43,539	)

The following table details the amounts reclassified out of AOCI into the income statement during the three and six months ended June 30, 2017 (in thousands):

	Amount Reclassified From AOCI
	For the Three			For the Six
	Months Ended			Months Ended
	June 30,			June 30,			Affected Line Item In The Statement
Details About AOCI Components	2017			2017			Where Net Income is Presented
Realized and unrealized gains (losses) on cash flow hedges
Gain on interest rate swap, before tax	$	45		$	175		Interest expense, net
		(17	)		(68	)	Tax provision
	$	28		$	107		Net of tax
Defined benefit pension plan items
Amortization of prior service cost and unrecognized loss	$	1,134		$	2,268		Warehousing, marketing and administrative expenses
		(430	)		(860	)	Tax provision
		704			1,408		Net of tax
Total reclassifications for the period, net of tax	$	732		$	1,515

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6. Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock, restricted stock units and deferred stock units are considered dilutive securities. For the three- and six- month periods ended June 30, 2017 and 2016, 0.2 million shares of such securities, respectively, were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. An additional 0.2 million shares of common stock outstanding for the six months ended June 30, 2017 were excluded from the computation of diluted earnings per share due to the net loss. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2017		2016		2017			2016
Numerator:
Net income (loss)	$	5,096	$	12,933	$	(183,498	)	$	29,463
Denominator:
Denominator for basic earnings per share -
weighted average shares		36,673		36,512		36,659			36,552
Effect of dilutive securities:
Employee stock options and restricted stock (1)		200		398		-			345
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities		36,873		36,910		36,659			36,897
Net income (loss) per share:
Net income (loss) per share - basic	$	0.14	$	0.35	$	(5.01	)	$	0.81
Net income (loss) per share - diluted (2)	$	0.14	$	0.35	$	(5.01	)	$	0.80

(1) The effect of dilutive securities for employee stock options and restricted stock in the three and six months ended June 30, 2017 was affected by the adoption of ASU 2016-09 at the beginning of the year. In accordance with the standard, the effect of dilutive securities in the calculation of diluted net income per share was applied prospectively and results for the three and six months ended June 30, 2016 have not been revised.

(2) As a result of the net loss in the six months ended June 30, 2017, the effect of potentially dilutive securities would have been anti-dilutive and has been omitted from the calculation of diluted earnings per share.

Common Stock Repurchases

As of June 30, 2017 , the Company had Board authorization to repurchase $68.2 million of common stock. During the three and six months ended June 30, 2017, the Company did not repurchase any shares of its common stock. During the three months ended June 30, 2016, the Company did not repurchase any shares of its common stock. For the six months ended June 30, 2016, the Company repurchased 241,270 shares at an aggregate cost of $6.8 million. Depending on the market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data.

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7. Debt

ESND is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, ECO, and from borrowings by ECO. The 2017 Credit Agreement and the 2013 Note Purchase Agreement (each as defined below and each a “Lending Agreement”) contain restrictions on the use of cash transferred from ECO to ESND.

On February 22, 2017, ESND, ECO, ECO’s United States subsidiaries (ESND, ECO and the subsidiaries collectively referred to as the “Loan Parties”), JPMorgan Chase Bank, National Association, as Administrative Agent, and certain lenders entered into a Fifth Amended and Restated Revolving Credit Agreement (the “2017 Credit Agreement”). The 2017 Credit Agreement amended and restated the Fourth Amended and Restated Five-Year Revolving Credit Agreement dated as of July 9, 2013 (as amended prior to February 22, 2017, the “2013 Credit Agreement”). Also on February 22, 2017, ESND, ECO and the holders of ECO’s 3.75% senior secured notes due January 15, 2021, (the “Notes”) entered into Amendment No. 4 (“Amendment No. 4”) to the Note Purchase Agreement dated as of November 25, 2013, (as amended prior to February 22, 2017, the “2013 Note Purchase Agreement”).

The 2017 Credit Agreement and Amendment No. 4 eliminated certain covenants in the 2013 Credit Agreement and the 2013 Note Purchase Agreement that prohibited the Company from exceeding a debt-to-EBITDA ratio of 3.5 to 1.0 (or 4.0 to 1.0 following certain permitted acquisitions) and restricted the Company’s ability to pay dividends and repurchase stock when the ratio was 3.0 to 1.0 or more. As a result, the Company is no longer subject to a debt-to-EBITDA ratio covenant.

Proceeds from the 2017 Credit Facility were used to repay the balances of the 2013 Credit Agreement and the Receivables Securitization Program (as defined below).

The 2017 Credit Agreement provides for a revolving credit facility (with an aggregated committed principal amount of $1.0 billion), a first-in-last-out (“FILO”) revolving credit facility (with an aggregated committed principal amount of $100 million) and a term loan (with an initial aggregated committed principal amount of $77.6 million). The term loan was funded in a single funding on March 24, 2017. Loans under the 2017 Credit Agreement must be extended to the Company first through the FILO facility.

Borrowings under the 2017 Credit Agreement bear interest at LIBOR for specified interest periods, at the REVLIBOR30 Rate (as defined in the 2017 Credit Agreement) or at the Alternate Base Rate (as defined in the 2017 Credit Agreement), plus, in each case, a margin determined based on the Company’s average quarterly revolving availability. Depending on the Company’s average quarterly revolving availability, the margin on LIBOR-based loans and REVLIBOR30 Rate-based loans ranges from 1.25% to 1.75% for revolving and term loans and 2.00% to 2.50% for FILO loans, and on Alternate Base Rate loans ranges from 0.25% to 0.75% for revolving and term loans and 1.00% to 1.50% for FILO loans. From February 22, 2017 (the date of the 2017 Credit Agreement) to June 30, 2017, the applicable margin for LIBOR-based loans and REVLIBOR30 Rate-based loans is 1.50% for revolving and term loans and 2.25% for FILO loans, and for Alternate Base Rate loans is 0.50% for revolving and term loans and 1.25% for FILO loans. In addition, ECO is required to pay the lenders a commitment fee on the unutilized portion of the revolving and FILO commitments under the 2017 Credit Agreement at a rate per annum equal to 0.25%. Letters of credit issued pursuant to the 2017 Credit Agreement incur interest based on the applicable margin rate for LIBOR-based Loans, plus 0.125%. Unamortized deferred financing fees of $7.0 million are included within “Current maturities of long-term debt” and “Long-term debt” on the Condensed Consolidated Balance Sheets and will be amortized over the life of the agreements.

Obligations of ECO under the 2017 Credit Agreement are guaranteed by ESND and ECO’s domestic subsidiaries. ECO’s obligations under these agreements and the guarantors’ obligations under the guaranty are secured by liens on substantially all Company assets. Availability of credit under the revolving facility will be subject to a revolving borrowing base calculation comprised of a certain percentage of the eligible accounts receivable, plus a certain percentage of the inventory, less reserves. Similarly, availability under the FILO revolving credit facility is subject to a FILO borrowing base comprised primarily of 10% of the eligible accounts receivable, plus 10% multiplied by the net orderly liquidation value percentages of the eligible inventory, less reserves. The amount of the remaining term loan of $76.1 million, is based on the value of the Company’s owned real estate and certain equipment. Beginning in April 2017, the Company began repayment of nominal principal amounts pursuant to the terms and conditions of the term loan, and these payments may be subject to acceleration under certain dispositions of the underlying collateral.

The 2017 Credit Agreement contains representations and warranties, covenants and events of default that are customary for facilities of this type, including covenants to deliver periodic certifications setting forth the revolving borrowing base and FILO borrowing base. As long as the Payment Conditions (as defined in the 2017 Credit Agreement) are satisfied, the Loan Parties may pay dividends, repurchase stock and engage in certain permitted acquisitions, investments and dispositions, in each case subject to the other terms and conditions of the Credit Agreement and the other loan documents.

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If ECO elects to prepay some or all of the Notes prior to January 15, 2021, and in some circumstances if ECO is required to prepay the Notes, ECO will be obligated to pay a make-whole amount as set forth in the Agreement and Amendment No. 4. The Company’s obligations under the 2013 Note Purchase Agreement and Amendment No. 4 are secured by a $165.0 million letter of credit issued under the 2017 Credit Agreement.

The Company’s accounts receivable securitization program (“Receivables Securitization Program” or the “Program”) was terminated when the Company entered into the 2017 Credit Agreement. The Program provided maximum financing of up to $200 million secured by all the customer accounts receivable and related rights originated by ECO.

Debt consisted of the following amounts (in millions):

	As of			As of
	June 30, 2017			December 31, 2016
2017 Credit Agreement
Term Loan	$	76.1		$	-
Revolving Credit Facility		191.9			-
FILO Facility		100.0			-
2013 Credit Agreement		-			260.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		-			200.0
Mortgage & Capital Lease		-			0.1
Transaction Costs		(7.0	)		(1.5	)
Total	$	511.0		$	609.0

The 2017 Credit Agreement provides for the issuance of letters of credit up to $25.0 million, plus up to $165.0 million to be used as collateral for obligations under the 2013 Note Purchase Agreement. Letters of credit totaling approximately $177.5 million were utilized as of June 30, 2017.

Interest under the 2013 Note Purchase Agreement is payable semi-annually at a rate per annum equal to 3.75% (3.66% after the effect of terminating an interest rate swap).

For additional information about the 2017 Credit Agreement and the 2013 Note Purchase Agreement, see Note 11 – “Debt” to the Company’s Consolidated Financial Statements in the 2016 Form 10-K.

8. Pension and Post-Retirement Benefit Plans

The Company maintains pension plans covering union and certain non-union employees. For more information on the Company’s retirement plans, see Note 13 – “Pension Plans and Defined Contribution Plan” to the Company’s Consolidated Financial Statements in the 2016 Form 10-K. A summary of net periodic pension cost related to the Company’s pension plans for the three and six months ended June 30, 2017 and 2016 was as follows (dollars in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
Service cost - benefit earned during the period	$	321		$	317		$	642		$	634
Interest cost on projected benefit obligation		1,862			2,173			3,724			4,516
Expected return on plan assets		(2,272	)		(2,547	)		(4,544	)		(5,265	)
Amortization of prior service cost		72			74			144			148
Amortization of actuarial loss		1,062			1,321			2,124			2,740
Settlement loss		-			11,744			-			11,744
Net periodic pension cost	$	1,045		$	13,082		$	2,090		$	14,517

The Company made cash contributions to its pension plans of $10.0 million in the three and six months ended June 30, 2017 and $10.0 million during the six months ended June 30, 2016. Additional contributions, if any, for 2017 have not yet been determined. As of June 30, 2017 and December 31, 2016, the Company had accrued $30.0 million and $40.2 million, respectively, of pension liability within “Other long-term liabilities” on the Condensed Consolidated Balance Sheets.

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Defined Contribution Plan

The Company has defined contribution plans covering certain salaried associates and non-union hourly paid associates (the “Plan”). The Plan permits associates to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for Company-funded discretionary contributions as well as matching associates’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $1.9 million and $3.7 million for the Company match of employee contributions to the Plan for the three and six months ended June 30, 2017, respectively and the three and six months ended June 30, 2016, respectively.

9. Fair Value Measurements

The Company measures certain financial assets and liabilities, including an interest rate swap and foreign currency derivatives, at fair value on a recurring basis, based on market rates of the Company’s positions and other observable interest rates. The fair value of the interest rate swaps is determined by using quoted market forward rates (level 2 inputs) and reflects the present value of the amount the Company would pay for contracts involving the same notional amount and maturity date. The fair value of the foreign exchange hedge is determined by using quoted market spot rates (level 2 inputs).

Accounting guidance on fair value establishes a hierarchy for those instruments measured at fair value which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

• Level 1—Quoted market prices in active markets for identical assets or liabilities;

• Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable; and

• Level 3—Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Determining which level to apply to an asset or liability requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (in thousands):

	Fair Value Measurements
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap & foreign exchange hedges
- as of June 30, 2017	$	52	$	-	$	52	$	-
- as of December 31, 2016	$	205	$	-	$	205	$	-

The carrying amount of accounts receivable at June 30, 2017, approximates fair value because of the short-term nature of this item. As of June 30, 2017, no assets or liabilities were measured at fair value on a nonrecurring basis.

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10. Other Assets and Liabilities

Receivables related to supplier allowances totaling $87.8 million and $86.9 million were included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016, respectively.

Current and non-current prepaid customer rebates, net of allowances, were $50.6 million and $47.9 million as of June 30, 2017 and December 31, 2016, respectively, and are included as a component of “Other current assets” and “Other assets”. Accrued customer rebates of $47.2 million and $65.3 million as of June 30, 2017 and December 31, 2016, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

11. Income Taxes

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three and six months ended June 30, 2017, the Company recorded income tax expense of $4.5 million and $0.1 million on pre-tax income of $9.6 million and pre-tax loss of $183.4 million, for an effective tax rate of 46.8% and (0.1%), respectively. For the three and six months ended June 30, 2016, the Company recorded income tax expense of $7.8 million and $17.8 million on pre-tax income of $20.8 million and $47.3 million, for an effective tax rate of 37.8% and 37.7%, respectively. In the three and six months ended June 30, 2017, the Company adopted ASU 2016-09 which resulted in $0.5 million and $0.8 million, respectively, of incremental tax expense recognized due to excess tax deficiencies of vested or settled awards in the period. The adoption of the standard was applied prospectively in accordance with guidance.

The Company’s U.S. statutory rate is 35.0%. The most significant factor impacting the effective tax rate for the six months ended June 30, 2017 was the discrete impact of the goodwill impairment charges. There were no significant discrete items impacting the effective tax rate for the six months ended June 30, 2016.

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12. Legal Matters

The Company has been named as a defendant in two lawsuits alleging that the Company sent unsolicited fax advertisements to the named plaintiffs, as well as other persons and entities, in violation of the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 ("TCPA"). One lawsuit was initially filed in the United States District Court for the Central District of California on May 1, 2015, and subsequently refiled in the United States District Court for the Northern District of Illinois. The other lawsuit was filed in the United States District Court for the Northern District of Illinois on January 14, 2016. The two lawsuits have been consolidated for pre-trial proceedings, and assigned to the same judge. Plaintiffs in both lawsuits seek certification of a class of plaintiffs comprised of persons and entities who allegedly received fax advertisements from the Company. Under the TCPA, recipients of unsolicited fax advertisements can seek damages of $500 per fax for inadvertent violations and up to $1,500 per fax for knowing and willful violations. Other reported TCPA lawsuits have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. In each lawsuit, the Company is vigorously contesting class certification and denies that any violations occurred.  

Litigation of this kind is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. Regardless of whether the lawsuits are resolved at trial or through settlement, the Company believes that a loss associated with resolution of the pending claims is probable. As of the year ended December 31, 2016, the Company recorded a $4.0 million, pre-tax reserve within “warehousing, marketing and administrative expenses” in the consolidated statement of operations. During the six months ended June 30, 2017, the Company recorded an additional $6.0 million, pre-tax reserve to reflect events concerning mediation activities and settlement negotiations between the Company and the plaintiffs for a total reserve at June 30, 2017 of $10.0 million. The Company continues to evaluate its defenses based on its internal review and investigation of prior events, new information and future circumstances. Final disposition of the lawsuits, whether through settlement or through trial, may result in a loss materially in excess of the aggregate recorded amount. However, a range of reasonably possible excess losses is not estimable at this time. 

As disclosed in the first quarter of 2017, the Company was named in a lawsuit filed by a former employee in the Los Angeles Superior Court. During the second quarter of 2017, the Company reached an agreement on the general terms of a settlement to resolve this litigation. The parties are in the process of finalizing a settlement agreement, which will be subject to court approval. In consideration of the settlement, the Company recorded a $3.0 million pre-tax reserve within the warehousing, marketing and administrative expenses line item in the consolidated statement of operations for the three and six months ended June 30, 2017. 

The Company is also involved in other legal proceedings arising in the ordinary course of, or incidental to its business. The Company has established reserves, which are not material, for potential losses that are probable and reasonably estimable that may result from those proceedings. In many cases, however, it is difficult to determine whether a loss is probable or even possible or to estimate the amount or range of potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. The Company believes that such ordinary course legal proceedings will be resolved with no material adverse effect upon its financial condition, results of operations or cash flows.

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ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as “expects,” “anticipates,” “estimates,” “intends,” “plans,” “believes,” “seeks,” “will,” “is likely,” “scheduled,” “positioned to,” “continue,” “forecast,” “predicting,” “projection,” “potential” or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on management’s current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2016 (the “2016 Form 10-K”).

Readers should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.

Company Overview

Essendant Inc. is a leading national wholesale distributor of workplace items, with 2016 net sales of approximately $5.4 billion. Essendant Inc. sells over 190,000 items including janitorial, foodservice and breakroom supplies (“JanSan”), technology products, traditional office products, industrial supplies, cut sheet paper products, automotive products and office furniture. These items include a broad spectrum of brand-name and Essendant private label brand products. Essendant sells through a network of 70 distribution centers to approximately 29,000 reseller customers. Customers include office and workplace dealers; facilities and maintenance distributors, technology, military, automotive aftermarket customers, national retailers and healthcare and vertical suppliers; industrial distributors and internet retailers. The Company also operates CPO Commerce which sells tools, do-it-yourself equipment and other items online to the consumer market.

The Company has begun implementing six actions to improve the performance of our business, which include:

• Merchandising excellence through supplier negotiation to reduce cost of goods sold, driving Essendant private label brand and preferred national brand strategies and assortment optimization to increase profitability.

• Alignment of pricing with cost to serve.

• Stabilization of the JanSan sales channel by improving the customer experience and implementing comprehensive sales, marketing and care programs.

• Industrial growth through improving sales effectiveness and leveraging the product set to a broader customer base.

• Additional cost reductions through network optimization, productivity improvements and in-bound logistics activities.

• Reduce working capital through inventory management measures and reduce debt through free cash flow generation.

Key Trends and Recent Results

Net sales in the second quarter of 2017 declined by 6.9% compared to the second quarter of 2016. The decline was primarily due to lower sales to large customers in the national retail and independent dealer channels. Profitability in the quarter was adversely impacted by lower sales volume and lower supplier allowances. We are implementing strategies to address these market trends, but we expect them to continue and to continue to impact our business. As a result, our outlook is for 2017 net sales to be down 6% to 9% compared to 2016, which will result in additional margin pressure.

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Actions impacting comparability of results (the “Actions”)

• In the six months ended June 30, 2017, the Company recognized a charge of $198.8 million related to the impairment of the Company’s goodwill as a result of sustained share price declines. Refer to Note 4 – “Goodwill and Intangible Assets” for further details.

• In the three and six months ended June 30, 2017, the Company recognized accruals of $3.0 million and $9.0 million, respectively related to litigation matters. Refer to Note 12 – “Legal Matters” for further details.

• In the three and six months ended June 30, 2017, the Company incurred $5.4 million and $8.4 million, respectively related to transformational expenses associated with the implementation of strategic objectives to improve the value of the business. These expenses, which result from the changing strategies of the Company, included consulting fees and other activities for which the Company has had significant investment.

• A voluntary lump-sum pension offering was completed in the second quarter of 2016 and resulted in a significant reduction of interest rate, mortality and investment risk of the pension plan. Due to this offer, a settlement and remeasurement of the Essendant Pension Plan was required as of May 31, 2016, resulting in a defined benefit plan settlement loss of $11.7 million for the three and six months ended June 30, 2016.

• During the six months ended June 30, 2016, the Company incurred restructuring charges of $0.3 million related to the 2015 actions to improve operational utilization, labor spend, inventory performance and functional alignment of the organization. Refer to Note 3 – “Severance and Restructuring Charges.”

Second Quarter Results

• Diluted earnings per share for the second quarter of 2017 of $0.14 decreased from diluted earnings per share of $0.35 in the prior year quarter, including the impacts of the Actions discussed above. Adjusted diluted earnings per share were $0.28 in the quarter, and improved sequentially from the first quarter of 2017, but decreased compared to $0.55 in the prior-year quarter. Similar to our experience in the first half of 2017, we expect the range of 2017 sales decline to affect our second half adjusted diluted earnings per share. Refer to the Adjusted Operating Expenses, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share and Free Cash Flow table (the “Non-GAAP table”) included later in this section for more detail.

• Second quarter net sales decreased 6.9% or $93.9 million, from the prior-year quarter to $1.3 billion.

• Gross margin as a percentage of net sales in the second quarter of 2017 was 14.1% versus 14.5% in the prior-year quarter. Gross margin for the second quarter of 2017 was $177.6 million, compared to $195.8 million in the second quarter of 2016.

• Operating expenses in the second quarter of 2017 were $161.7 million or 12.8% of net sales, compared with $169.4 million or 12.4% of net sales in the prior-year quarter, including impacts of the Actions. Adjusted operating expenses in the second quarter of 2017 were $153.3 million or 12.2% of net sales compared to $157.6 million or 11.6% of net sales in the prior-year quarter.     

• Operating income for the quarter ended June 30, 2017 was $15.9 million or 1.3% of net sales, compared with $26.5 million or 2.0% of net sales in the prior year quarter, including impacts of the Actions discussed above. Excluding the Actions, adjusted operating income in the second quarter of 2017 was $24.3 million or 1.9% of net sales, as compared to $38.2 million or 2.8% of net sales in the second quarter of 2016.

• Free cash flow generated in the six months ended June 30, 2017 was $112.1 million as compared to free cash flow usage of $32.5 million in the prior year due to improved operating cash flows. Based on strong cash flow generation in the first half of 2017, free cash flow generation is expected to be in excess of $90 million for the full year 2017.

For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to “Key Trends and Recent Results” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2016 Form 10-K.

Critical Accounting Policies, Judgments and Estimates

In the second quarter of 2017, there were no significant changes to the Company’s critical accounting policies, judgments or estimates from those disclosed in the 2016 Form 10-K.

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Results of Operations—Three Months Ended June 30, 2017 Compared with the Three Months Ended June 30, 2016

The following table presents the Condensed Consolidated Statements of Income results (in thousands):

	For the Three Months Ended June 30,
	2017					2016 (1)
	Amount		% of Revenue			Amount		% of Revenue
Net sales: (1)
Janitorial, foodservice and breakroom supplies (JanSan products)	$	339,386		26.9	%	$	371,428		27.4	%
Technology products		300,170		23.8	%		342,804		25.3	%
Traditional office products		181,327		14.4	%		202,569		15.0	%
Industrial products		145,591		11.5	%		143,171		10.6	%
Cut sheet paper products		106,294		8.4	%		101,534		7.5	%
Automotive products		82,143		6.5	%		80,550		5.9	%
Office furniture		67,895		5.4	%		74,606		5.5	%
Freight and other		37,850		3.1	%		37,861		2.8	%
Total net sales		1,260,656		100.0	%		1,354,523		100.0	%
Cost of goods sold		1,083,092		85.9	%		1,158,700		85.5	%
Total gross profit	$	177,564		14.1	%	$	195,823		14.5	%
Operating expenses:
Warehousing, marketing and administrative expenses		161,695		12.8	%		157,625		11.6	%
Defined benefit plan settlement loss		-		0.0	%		11,744		0.9	%
Total operating expenses	$	161,695		12.8	%	$	169,369		12.5	%
Total operating income		15,869		1.3	%		26,454		2.0	%
Interest expense, net		6,299		0.5	%		5,677		0.5	%
Income before income taxes		9,570		0.8	%		20,777		1.5	%
Income tax expense		4,474		0.4	%		7,844		0.5	%
Net income	$	5,096		0.4	%	$	12,933		1.0	%

(1) Certain prior period amounts have been reclassified to conform to the current presentation. Such changes include reclassification of specific products to different product categories and did not impact the Condensed Consolidated Statements of Income. All percentage presentations described below are based on the reclassified amounts.

Net Sales. Net sales for the quarter ended June 30, 2017 were $1.3 billion, a 6.9% decrease from $1.4 billion in sales during the quarter ended June 30, 2016. In light of the first half sales results, full year 2017 net sales are expected to be down 6% to 9% as compared to 2016. Net sales by key product category for the quarters included the following:

JanSan product sales decreased $32.0 million or 8.6% in the second quarter of 2017 compared to the second quarter of 2016. Sales decreased due to declines in the national retail channel of $27.2 million and the independent distributor channel of $3.5 million. As a percentage of total sales, JanSan represented 26.9% in the second quarter of 2017, a decrease from the prior year quarter percentage of total sales of 27.4%.

Technology product (primarily ink and toner) sales decreased $42.6 million or 12.4% from the second quarter of 2016. Sales in this category decreased primarily as a result of reduced supplier promotions and declines in the independent dealer channel of $31.0 million as well as declines in the national retail channel of $12.0 million, partially offset by internet retailers sales growth of $2.1 million. As a percentage of total sales, technology products represented 23.8% in the second quarter of 2017, a decrease from the prior year quarter percentage of total sales of 25.3%.

Traditional office product sales decreased $21.2 million or 10.5% in the second quarter of 2017 compared to the second quarter of 2016. Sales in this category decreased due to reductions in the independent dealers channel of $10.4 million and sales to the national retail channel of $10.2 million, partially offset by internet retailers sales growth of $0.5 million. As a percentage of total sales, traditional office products represented 14.4% in the second quarter of 2017, a decrease from the prior year quarter percentage of total sales of 15.0%.

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Industrial product sales increased $2.4 million or 1.7% in the second quarter of 2017 compared to the second quarter of 2016. This increase was driven by growth in the general industrial channel of $3.2 million and the energy channel of $2.0 million, partially offset by a decline in the retail channel of $4.0 million. As a percentage of total sales, industrial supplies represented 11.5% in the second quarter of 2017, an increase from the prior year quarter percentage of total sales of 10.6%.

Cut sheet paper product sales increased $4.8 million or 4.7% in the second quarter of 2017 compared to the second quarter of 2016. The increase in this category was primarily driven by increased sales to independent dealers of $5.3 million and internet retailers sales growth of $0.8 million, partially offset by declines in the national retail channel of $0.6 million. As a percentage of total sales, cut sheet paper represented 8.4% in the second quarter of 2017, which increased from the prior year quarter percentage of total sales of 7.5%.

Automotive product sales increased $1.6 million or 2.0% in the second quarter of 2017 compared to the second quarter of 2016. The increase in this category was primarily driven by growth initiatives. As a percentage of total sales, automotive products represented 6.5% in the second quarter of 2017, which increased from the prior year quarter percentage of total sales of 5.9%.

Office furniture sales decreased $6.7 million or 9.0% in the second quarter of 2017 compared to the second quarter of 2016. This decrease was primarily the result of declines in sales to independent dealer channels of $5.7 million and internet retailers of $0.8 million. As a percentage of total sales, office furniture represented 5.4% in the second quarter of 2017, which decreased from prior year quarter percentage of total sales of 5.5%.

The remainder of the Company’s second quarter 2017 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the second quarter of 2017 was $177.6 million, compared to $195.8 million in the second quarter of 2016. Gross profit as a percentage of net sales (the gross margin rate) of 14.1% decreased from the prior-year quarter gross margin rate of 14.5%. The gross margin decline of $18.3 million was principally the result of lower sales volume impacting margin by $12.3 million, with the remainder of the decline primarily driven by lower supplier allowances. Sales volume and supplier allowance declines more than offset the benefits of merchandising and pricing actions related to our transformative initiatives. The gross margin rate was negatively impacted as revenue declines outpaced cost reductions. Our sales to larger resellers are generally at lower margins than sales to our smaller resellers. Sales to new customers tend to be lower margin but improve over time. Lower margin category sales include cut-sheet paper products and technology products, while JanSan, traditional office products, furniture and industrial supplies are higher margin categories.

Operating Expenses. Operating expenses for the second quarter of 2017 were $161.7 million or 12.8% of net sales, compared to $169.4 million or 12.5% of net sales in the prior year. The $7.7 million decrease was primarily driven by the decrease from the prior year pension settlement charge of $11.7 million, partially offset by increased transformational expenses of $5.4 million and litigation expenses of $3.0 million. Adjusted operating expenses were $153.3 million or 12.2% of net sales compared with $157.6 million or 11.6% of net sales in the same period last year, which was primarily driven by overall cost containment actions including decreased variable labor expenses of $2.3 million, partially offset by a reset of management incentives of $4.2 million.

Interest Expense, net. Interest expense, net for the second quarter of 2017 was $6.3 million compared to $5.7 million in the second quarter of 2016. This increase was primarily driven by higher interest rates on outstanding debt.

Income Taxes. Income tax expense was $4.5 million for the second quarter of 2017, compared to $7.8 million for the same period in 2016. The Company’s effective tax rate was 46.8% for the current-year quarter as compared to 37.8% for the same period in 2016. The most significant factor impacting the effective tax rate for the three months ended June 30, 2017 was the impact of the adoption of new accounting guidance related to share based compensation.

Net Income. Net income for the second quarter of 2017 decreased to $5.1 million or $0.14 per diluted share, compared to $12.9 million or $0.35 per diluted share in the prior year quarter. Adjusted net income was $10.3 million, or $0.28 per diluted share, compared with adjusted net income of $20.3 million or $0.55 per diluted share for the prior year quarter.

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Results of Operations—Six Months Ended June 30, 2017 Compared with the Six Months Ended June 30, 2016

The following table presents the Condensed Consolidated Statements of Income results (in thousands):

	For the Six Months Ended June 30,
	2017						2016 (1)
	Amount			% of Revenue			Amount		% of Revenue
Net sales: (1)
Janitorial, foodservice and breakroom supplies (JanSan products)	$	674,234			26.6	%	$	736,941		27.2	%
Technology products		607,425			24.0	%		694,812		25.7	%
Traditional office products		373,468			14.8	%		414,907		15.3	%
Industrial products		292,230			11.6	%		282,663		10.4	%
Cut sheet paper products		209,137			8.3	%		192,960		7.1	%
Automotive products		160,949			6.4	%		159,958		5.9	%
Office furniture		137,777			5.4	%		149,308		5.5	%
Freight and other		74,818			2.9	%		75,270		2.9	%
Total net sales		2,530,038			100.0	%		2,706,819		100.0	%
Cost of goods sold		2,166,807			85.6	%		2,310,914		85.4	%
Total gross profit	$	363,231			14.4	%	$	395,905		14.6	%
Operating expenses:
Warehousing, marketing and administrative expenses		334,717			13.2	%		325,303		12.0	%
Impairment of goodwill		198,828			7.9	%		-		0.0	%
Defined benefit plan settlement loss		-			0.0	%		11,744		0.4	%
Total operating expenses	$	533,545			21.1	%	$	337,047		12.4	%
Total operating (loss) income		(170,314	)		(6.7	%)		58,858		2.2	%
Interest expense, net		13,038			0.5	%		11,574		0.5	%
(Loss) income before income taxes		(183,352	)		(7.2	%)		47,284		1.7	%
Income tax expense		146			0.1	%		17,821		0.6	%
Net (loss) income	$	(183,498	)		(7.3	%)	$	29,463		1.1	%

(1) Certain prior period amounts have been reclassified to conform to the current presentation. Such changes include reclassification of specific products to different product categories and did not impact the Condensed Consolidated Statements of Income. All percentage presentations described below are based on the reclassified amounts.

Net Sales. Net sales for the six-month period ended June 30, 2017 were $2.5 billion, a 6.5% decrease from $2.7 billion in sales during the six-month period ended June 30, 2016. Net sales by key product category for the periods included the following:

JanSan product sales decreased $62.7 million or 8.5% in the first six months of 2017 compared to the first six months of 2016. Sales decreased due to declines in the national retail channel of $47.5 million, independent distributor channel of $13.4 million and internet retailers sales of $1.3 million. As a percentage of total sales, JanSan represented 26.6% in the first six months of 2017, a decrease from the prior year quarter percentage of total sales of 27.2%.

Technology products (primarily ink and toner) sales decreased $87.4 million or 12.6% from the first six months of 2016. Sales in this category decreased primarily as a result of reduced supplier promotions and declines in the independent dealer channel of $74.8 million as well as declines in the national retail channel of $16.1 million, partially offset by internet retailers sales growth of $4.7 million. As a percentage of total sales, technology products represented 24.0% in the first six months of 2017, a decrease from the same prior year period of 25.7%.

Traditional office product sales decreased $41.4 million or 10.0% in the first six months of 2017 compared to the first six months of 2016. Sales in this category decreased due to reductions in the independent dealers channel of $26.0 million and declines in sales to the national retail channel of $17.7 million, partially offset by internet retailers sales growth of $3.2 million. As a percentage of total sales, traditional office products represented 14.8% in the first six months of 2017, a decrease from the same prior year period percentage of total sales of 15.3%.

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Industrial product sales increased $9.6 million or 3.4% in the first six months of 2017 compared to the first six months of 2016. This increase was driven by growth in the general industrial channel of $5.9 million and the energy channel of $4.1 million, partially offset by a decline in the retail channel of $2.9 million. As a percentage of total sales, industrial supplies represented 11.6% in the first six months of 2017, an increase from the same prior year period percentage of total sales of 10.4%.

Cut sheet paper product sales increased $16.2 million or 8.4% in the first six months of 2017 compared to the first six months of 2016. The increase in this category was primarily driven by increased sales to independent dealers of $14.9 million and internet retailers sales growth of $2.5 million. As a percentage of total sales, cut sheet paper represented 8.3% in the first six months of 2017, which increased from the same prior year period percentage of total sales of 7.1% due to continued product category market-share growth.

Automotive product sales increased $1.0 million or 0.6% in the first six months of 2017 compared to the first six months of 2016. The increase in this category was primarily driven by growth initiatives. As a percentage of total sales, automotive products represented 6.4% in the first six months of 2017, which increased from the same prior year period percentage of total sales of 5.9%.

Office furniture sales decreased $11.5 million or 7.7% in the first six months of 2017 compared to the first six months of 2016. This decrease was primarily the result of declines in sales to independent dealer channels of $9.0 million, national retail channel of $1.4 million and internet retailers of $0.8 million. As a percentage of total sales, office furniture represented 5.4% in the first six months of 2017, which decreased from the same prior year period percentage of total sales of 5.5%.

The remainder of the Company’s second quarter 2017 net sales were composed of freight and other revenues.

Gross Profit and Gross Margin Rate. Gross profit for the first six months of 2017 was $363.2 million, compared to $395.9 million in the first six months of 2016. Gross profit as a percentage of net sales (the gross margin rate) of 14.4% decreased from the prior-year six month period gross margin rate of 14.6%. The gross margin decline of $32.7 million was principally the result of lower sales volume, impacting margin by $22.8 million, lower supplier allowances of $10.1 million and higher freight costs of $3.3 million. Sales volume and supplier allowance declines and higher freight costs more than offset the benefits of merchandising and pricing actions related to our transformative initiatives. The gross margin rate was negatively impacted as revenue declines outpaced cost reductions.

Operating Expenses. Operating expenses for the first six months of 2017 were $533.5 million or 21.1% of net sales, compared to $337.0 million or 12.4% of net sales in the prior year. The $196.5 million increase was primarily driven by goodwill impairment of $198.8 million, increased litigation expenses of $9.0 million and transformational expenses of $8.4 million, partially offset by reductions from the prior year pension settlement charge of $11.7 million and reductions in occupancy expenses of $2.2 million. Adjusted operating expenses were $317.3 million or 12.5% of net sales compared with $325.0 million or 12.0% of net sales in the same period last year, primarily as a result of overall cost containment actions including decreased variable labor expenses of $3.0 million, partially offset by a reset of management incentives of $5.6 million.

Interest Expense, net. Interest expense, net for the first six months of 2017 was $13.0 million compared to $11.6 million in the first six months of 2016. This increase was primarily driven by higher interest rates on outstanding debt.

Income Taxes. Income tax expense was $0.1 million for the first six months of 2017, compared to $17.8 million for the same period in 2016. The Company’s effective tax rate was (0.1%) for the first six months of 2017, compared to 37.7% for the same period in 2016. The most significant factor impacting the effective tax rate for the six months ended June 30, 2017 was the discrete impact of the goodwill impairment charges in the period.

Net (Loss) Income. Net loss for the first six months of 2017 decreased to $183.5 million or $(5.01) per diluted share, compared to net income of $29.5 million or $0.80 per diluted share in the prior year. Adjusted net income was $19.5 million, or $0.53 per diluted share, compared with adjusted net income of $36.9 million or $1.00 per diluted share for the same prior year period.

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Cash Flows

Cash flows for the Company for the six-month periods ended June 30, 2017 and 2016 are summarized below (in thousands):

	Six months ended June 30,
	2017			2016
Net cash provided by (used in) operating activities	$	125,811		$	(15,984	)
Net cash used in investing activities		(13,677	)		(16,557	)
Net cash (used in) provided by financing activities		(109,759	)		27,892

Operating Activities

For the six-month period ended June 30, 2017, the increase in net cash provided by operating activities was principally the result of decreased inventories and accounts receivable, partially offset by decreased accrued liabilities.

Investing Activities

Gross capital spending for the six-month period ended June 30, 2017 and 2016 was $13.7 million and $19.3 million, respectively, which was used for various investments in fleet equipment, information technology systems, technology hardware, and distribution center equipment including facility projects.

Financing Activities

The Company’s cash flow from financing activities is largely dependent on levels of borrowing under the Company’s credit agreement, the acquisition or issuance of treasury stock, and quarterly dividend payments.

Cash outflows from financing activities in the six-months ended June 30, 2017 included the repayment of the asset securitization program and payment of debt issuance costs incurred in connection with the 2017 Credit Agreement, partially offset by incremental borrowings under the 2017 Credit Agreement and term loan as compared to net borrowings and repurchases of shares in the six months ended June 30, 2016.

In May 2017, the Board of Directors approved a dividend of $0.14 that was paid on July 14, 2017 to shareholders of record as of June 15, 2017. In July 2017, the Board of Directors approved a dividend of $0.14 payable on October 13, 2017 to shareholders of record as of September 15, 2017.

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Liquidity and Capital Resources

Essendant’s growth has historically been funded by a combination of cash provided by operating activities and debt financing. The Company believes that its cash from operations and collections of receivables, coupled with its sources of borrowings and available cash on hand, are sufficient to fund its currently anticipated requirements. These requirements include payments of interest and dividends, scheduled debt repayments, capital expenditures, working capital needs, the funding of pension plans, and funding for additional share repurchases and acquisitions, if any. The Company believes that its sources of borrowings are sound and that the strength of its balance sheet affords the financial flexibility to respond to both internal growth opportunities and those available through acquisitions.

Availability of financing as of June 30, 2017, is summarized below (in millions):

	Aggregated Committed Principal		Borrowing Base Limitation		Total Utilization		Net Availability
2017 Credit Agreement
Term Loan (1)	$	76.1	$	76.1	$	76.1	$	-
Revolving Credit Facility (2)		1,000.0		865.4	369.4			496.0
First-in-Last-Out ("FILO")		100.0		100.0		100.0		-
Total all Funding Sources	$	1,176.1	$	1,041.5	$	545.5	$	496.0

1) The term loan was funded in a single funding on March 24, 2017. The proceeds from the funding were used to pay down borrowings and increase availability under the revolving credit facility.

2) The 2017 Credit Agreement provides for the issuance of letters of credit up to $25.0 million, plus up to $165.0 million to be used as collateral for obligations under the 2013 Note Purchase Agreement. Letters of credit totaling approximately $177.5 million were utilized as of June 30, 2017.

The Company’s total debt and debt-to-total capitalization ratio consisted of the following amounts (in millions):

	As of			As of
	June 30,			December 31,
	2017			2016
2017 Credit Agreement
Term Loan	$	76.1		$	-
Revolving Credit Facility (1)		191.9			-
FILO Facility		100.0			-
2013 Credit Agreement		-			260.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		-			200.0
Debt		518.0			610.4
Stockholders’ equity		593.7			781.1
Total capitalization	$	1,111.7		$	1,391.5
Debt-to-total capitalization ratio		46.6	%		43.9	%

Refer to Note 7 - “Debt”, for further descriptions of the provisions of our financing facilities as well as Note 11 - “Debt”, in our 2016 Form 10-K.

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Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted EBITDA and Free Cash Flow (the “Non-GAAP table”)

The Non-GAAP table below presents Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted EBITDA and Free Cash Flow for the three and six months ended June 30, 2017 and 2016 (in thousands, except per share data). These non-GAAP measures exclude certain non-recurring items and exclude other items that do not reflect the Company’s ongoing operations and are included to provide investors with useful information about the financial performance of our business. The presented non-GAAP financial measures should not be considered in isolation or as substitutes for the comparable GAAP financial measures. The non-GAAP financial measures do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, and these non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures.

In order to calculate the non-GAAP measures, management excludes the following items to the extent they occur in the reporting period, to facilitate the comparison of current and prior year results and ongoing operations, as management believes these items do not reflect the underlying cost structure of our business. These items can vary significantly in amount and frequency.

• Restructuring charges. Workforce reduction and facility closure charges such as employee termination costs, facility closure and consolidation costs, and other costs directly associated with shifting business strategies or business conditions that are part of a restructuring program.

Restructuring actions were taken in 2015 to improve our operational utilization, labor spend, inventory performance and functional alignment of the organization. This included workforce reductions and facility consolidations with an expense impact of $0.3 million in the six months ended June 30, 2016 (refer to Note 3 – “Severance & Restructuring Charges”).

• Gain or loss on sale of assets or businesses. Sales of assets, such as buildings or equipment, and businesses can cause gains or losses. These transactions occur as the Company is repositioning its business and reviewing its cost structure.

• Severance costs for operating leadership.  Employee termination costs related to members of the Company’s operating leadership team are excluded as they are based upon individual agreements.

• Asset impairments.  Changes in strategy or macroeconomic events may cause asset impairments.

In the six months ended June 30, 2017, the Company recorded an impairment of goodwill of $198.8 million, based on a decline in market capitalization (refer to Note 4 – “Goodwill and Intangible Assets”).

• Other actions.  Actions, which may be non-recurring events, that result from the changing strategies and needs of the Company and do not reflect the underlying expense of the on-going business. These include charges related to litigation matters totaling $3.0 million and $9.0 million, respectively, for the three and six months ended June 30, 2017 (refer to Note 12 – “Legal Matters”) and transformational expenses totaling $5.4 million and $8.4 million, respectively, for the three and six months ended June 30, 2017. In the three and six months ended June 30, 2016, other actions included a settlement charge of $11.7 million related to a defined benefit plan settlement.

Adjusted operating expenses and adjusted operating income. Adjusted operating expenses and adjusted operating income provide management and our investors with an understanding of the results from the primary operations of our business by excluding the effects of items described above that do not reflect the ordinary expenses and earnings of our operations. Adjusted operating expenses and adjusted operating income are used to evaluate our period-over-period operating performance as they are more comparable measures of our continuing business. These measures may be useful to an investor in evaluating the underlying operating performance of our business.

Adjusted net income and adjusted diluted earnings per share. Adjusted net income and adjusted diluted earnings per share provide a more comparable view of our Company’s underlying performance and trends than the comparable GAAP measures. Net income and diluted earnings per share are adjusted for the effect of items described above that do not reflect the ordinary earnings of our operations.

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Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Adjusted EBITDA is helpful in evaluating our operating performance and is used by management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting. Net income is adjusted for the effect of interest, taxes, depreciation and amortization and stock-based compensation expense. Management believes that adjusted EBITDA is also commonly used by investors to evaluate operating performance between competitors because it helps reduce variability caused by differences in capital structures, income taxes, stock-based compensation accounting policies, and depreciation and amortization policies.  

Free cash flow. Free cash flow is useful to management and our investors as it is a measure of the Company’s liquidity. It provides a more complete understanding of factors and trends affecting our cash flows than the comparable GAAP measure. Net cash provided by (used in) operating activities and net cash provided by (used in) investing activities are aggregated and adjusted to exclude acquisitions, net of cash acquired and divestitures.

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	For the Three Months Ended June 30,
	2017			2016
Operating expenses	$	161,695		$	169,369
Litigation reserve (Note 12)		(3,000	)		-
Transformational expenses		(5,444	)		-
Defined benefit plan settlement charge		-			(11,744	)
Adjusted operating expenses	$	153,251		$	157,625
Operating income	$	15,869		$	26,454
Operating expense adjustments noted above		8,444			11,744
Adjusted operating income	$	24,313		$	38,198
Net income	$	5,096		$	12,933
Operating expense adjustments noted above		8,444			11,744
Non-GAAP tax provision on adjustments
Litigation reserve		(1,164	)		-
Transformational expenses		(2,085	)		-
Defined benefit plan settlement charge		-			(4,416	)
Adjusted net income	$	10,291		$	20,261
Diluted earnings per share	$	0.14		$	0.35
Operating expense adjustments noted above		0.23			0.32
Non-GAAP tax provision on adjustments		(0.09	)		(0.12	)
Adjusted diluted earnings per share	$	0.28		$	0.55
Net income	$	5,096		$	12,933
Provision for income taxes		4,474			7,844
Interest expense, net		6,299			5,677
Depreciation and amortization		10,569			11,205
Equity compensation expense		1,570			2,778
Operating expense adjustments noted above		8,444			11,744
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)	$	36,452		$	52,181
Net cash provided by (used in) operating activities	$	72,786		$	(5,163	)
Net cash used in investing activities		(5,365	)		(6,961	)
Free cash flow	$	67,421		$	(12,124	)

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	For the Six Months Ended June 30,
	2017			2016
Operating expenses	$	533,545		$	337,047
Impairment of goodwill (Note 4)		(198,828	)		-
Litigation reserve (Note 12)		(9,000	)		-
Transformational expenses		(8,395	)		-
Defined benefit plan settlement charge		-			(11,744	)
Restructuring charges		-			(254	)
Adjusted operating expenses	$	317,322		$	325,049
Operating (loss) income	$	(170,314	)	$	58,858
Operating expense adjustments noted above		216,223			11,998
Adjusted operating income	$	45,909		$	70,856
Net (loss) income	$	(183,498	)	$	29,463
Operating expense adjustments noted above		216,223			11,998
Non-GAAP tax provision on adjustments
Impairment of goodwill		(6,559	)		-
Litigation reserve		(3,488	)		-
Transformational expenses		(3,203	)		-
Defined benefit plan settlement charge		-			(4,416	)
Restructuring charges		-			(91	)
Adjusted net income	$	19,475		$	36,954
Diluted (loss) earnings per share (1)	$	(4.97	)	$	0.80
Operating expense adjustments noted above		5.86			0.33
Non-GAAP tax provision on adjustments		(0.36	)		(0.12	)
Adjusted diluted earnings per share	$	0.53		$	1.00
Net (loss) income	$	(183,498	)	$	29,463
Provision for income taxes		146			17,821
Interest expense, net		13,038			11,574
Depreciation and amortization		21,534			22,936
Equity compensation expense		4,038			5,689
Operating expense adjustments noted above		216,223			11,998
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)	$	71,481		$	99,481
Net cash provided by (used in) operating activities	$	125,811		$	(15,984	)
Net cash used in investing activities		(13,677	)		(16,557	)
Free cash flow	$	112,134		$	(32,541	)

(1) Diluted earnings per share for the six months ended June 30, 2017 under GAAP reflect an adjustment to the basic earnings per share due to the net loss. The diluted earnings per share here does not reflect this adjustment.

29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Company’s exposures to market risk during the quarter ended June 30, 2017, from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission under the Securities Exchange Act is made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2017, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

For information regarding legal proceedings, see Note 12 - “Legal Matters.”

ITEM 1A. RISK FACTORS.

For information regarding risk factors, see “Risk Factors” in Item 1A of Part I of the 2016 Form 10-K. There have been no material changes to the risk factors described in such Form 10-K, except for the following three revised risk factors.

The loss of one or more significant customers could significantly reduce Essendant’s revenues and profitability.

In 2016, Essendant’s largest customer accounted for approximately 11% of net sales and Essendant’s five largest customers accounted for approximately 25% of net sales. Several of Essendant’s current and potential customers were involved in business combinations in 2016 and 2015 and the Company expects increased customer consolidation in the future. Following business combinations, the surviving companies often review their supply chain and sourcing options, which can result in the companies altering their sourcing relationships. The Company generally does not have long-term contracts with its customers, which are typically free to reduce or terminate their purchases from the Company on little or no notice. Increasing direct purchases by major customers from manufacturers, as well as the loss of one or more key customers, changes in the sales mix or sales volume to key customers, or a significant downturn in the business or financial condition of any of them could significantly reduce Essendant’s sales and profitability.

For example, Essendant’s revenue and profitability declined as sales, including sales to several large customers, declined in the first half of 2017.

Essendant relies on independent resellers for a significant percentage of its net sales.

Sales to independent resellers account for a significant portion of Essendant’s net sales. Independent resellers compete with national distributors and retailers that have substantially greater financial resources and technical and marketing capabilities. Financial, technical, and commercial constraints are challenging as business increasingly shifts online. Over the years, several of the Company’s independent reseller customers have been acquired by competitors or have ceased operation, and the Company expects independent reseller customers to continue to consolidate. If Essendant’s customer base of independent resellers declines and the Company is not able to replace resulting sales declines, the Company’s business and results of operations will be adversely affected.

In the first half of 2017, sales to independent dealers declined, which the Company believes is due in part to independent dealers losing market share to larger competitors with greater resources. Sales in the first half of 2017 were also adversely affected by the previously disclosed acquisition of a large regional independent dealer customer by Staples.

Essendant’s reliance on supplier allowances and promotional incentives could impact profitability.

Supplier allowances and promotional incentives that are often based on the volume of Company product purchases contribute significantly to Essendant’s profitability. If Essendant does not comply with suppliers’ terms and conditions, or does not make requisite purchases to achieve certain volume hurdles, Essendant may not earn certain allowances and promotional incentives. For example, in 2016, as the Company executed its strategy to improve cash flow in part through lower inventory balances, a reduction in purchases from suppliers resulted in lower supplier allowances and promotional incentives, which contributed to unfavorable gross margin changes. Additionally, suppliers may reduce the allowances they pay Essendant if they conclude the value Essendant creates does not justify the allowances. If Essendant’s suppliers reduce or otherwise alter their allowances or promotional incentives, Essendant’s profit margin for the sale of the products it purchases from those suppliers may decline. The loss or diminution of supplier allowances and promotional support could have an adverse effect on the Company’s results of operations. As part of the Company’s multi-year transformation program, the Company has undertaken merchandising and sourcing initiatives to more effectively leverage supply relationships and enhance profitability. Failure to complete the process, incomplete attainment or ineffective management of the initiatives could cause declines in profitability and results of operations.

For example, we earned lower supplier allowances in the first half of 2017, which resulted primarily from lower sales and ongoing inventory rationalization efforts.

31

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a) Not applicable.

(b) Not applicable.

(c) Common Stock Purchases.

The Company did not repurchase any shares of common stock in the six months ended June 30, 2017 while during the six months ended June 30, 2016, the Company repurchased 241,270 of common stock at an aggregate cost of $6.8 million. The Company did not repurchase any additional shares through July 21, 2017. As of that date, the Company had approximately $68.2 million remaining of existing share repurchase authorization from the Board of Directors.

2017 Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2017 to April 30, 2017		-		-		-		68,160,702
May 1, 2017 to May 31, 2017		-		-		-		68,160,702
June 1, 2017 to June 30, 2017		-		-		-		68,160,702
Total Second Quarter		-	$	-		-	$	68,160,702

32

ITEM 6. EXHIBITS

(a) Exhibits

This Quarterly Report on Form 10-Q includes as exhibits certain documents that the Company has previously filed with the SEC. Such previously filed documents are incorporated herein by reference from the respective filings indicated in parentheses at the end of the exhibit descriptions (all made under the Company’s file number of 0-10653). Each of the management contracts and compensatory plans or arrangements included below as an exhibit is identified as such by a double asterisk at the end of the related exhibit description.

Exhibit No.	Description
3.1	Third Restated Certificate of Incorporation of Essendant Inc. (“ESND” or the “Company”), dated as of June 1, 2015 (Exhibit 3.1 to the Form 10-Q, filed on July 23,2015)
3.2	Amended and Restated Bylaws of Essendant Inc., dated as of December 13, 2016 (Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on December 16, 2016)
4.1	Note Purchase Agreement, dated as of November 25, 2013, among ESND, Essendant Co. (“ECO”), and the note purchasers identified therein (the “2013 Note Purchase Agreement”) (Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 19, 2014 (the “2013 Form 10-K”))
4.2	Amendment No. 1 to Note Purchase Agreement, dated as of January 27, 2016, among ECO, ESND and the holders of Notes issued by the Company that are parties thereto (Exhibit 4.2 to the Form 10-Q, filed on April 20, 2016)
4.3	Amendment No. 2 to Note Purchase Agreement, dated as of August 30, 2016, among ESND, ECO, and the note purchasers identified therein (Exhibit 10.7 to the Company’s Form 10-Q filed on October 26, 2016)
4.4	Parent Guaranty, dated as of November 25, 2013, by ESND in favor of the holders of the promissory notes identified therein (Exhibit 4.5 to the 2013 Form 10-K)
4.5	Subsidiary Guaranty, dated as of November 25, 2013, by all of the domestic subsidiaries of ECO (Exhibit 4.6 to the 2013 Form 10-K)
31.1*	Certification of Chief Executive Officer, dated as of July 26, 2017, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer, dated as of July 26, 2017, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer, dated as of July 26, 2017, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	The following financial information from Essendant Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, filed with the SEC on July 26, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheet at June 30, 2017 and December 31, 2016; (ii) the Condensed Consolidated Statement of Income (Loss) for the three-month and six-month periods ended June 30, 2017 and 2016; (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three-month and six-month periods ended June 30, 2017 and 2016; (iv) the Condensed Consolidated Statement of Cash Flows for the six-month periods ended June 30, 2017 and 2016; and (v) Notes to Condensed Consolidated Financial Statements.
*	- Filed herewith
**	- Represents a management contract or compensatory plan or arrangement

33

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 thereunto duly authorized.

	ESSENDANT INC.
	(Registrant)
Date: July 26, 2017	/s/ Janet Zelenka
	Janet Zelenka
	Senior Vice President and Chief Financial Officer

34

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Richard D. Phillips, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Essendant Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2017	/s/ RICHARD D. PHILLIPS
	Richard D. Phillips Interim President and Chief Executive Officer

1

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Janet Zelenka, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Essendant Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2017	/s/ JANET ZELENKA
	Janet Zelenka Senior Vice President and Chief Financial Officer

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Essendant Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard D. Phillips, Interim Chief Executive Officer of the Company, and Janet Zelenka, Senior Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ RICHARD D. PHILLIPS

Richard D. Phillips
Interim President and Chief Executive Officer
July 26, 2017

/s/ JANET ZELENKA

Janet Zelenka
Senior Vice President and Chief Financial Officer
July 26, 2017

1

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 21, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	ESND
Entity Registrant Name	ESSENDANT INC
Entity Central Index Key	0000355999
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		37,529,402

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 23,889	$ 21,329
Accounts receivable, less allowance for doubtful accounts of $16,751 in 2017 and $18,196 in 2016	663,926	678,184
Inventories	800,323	876,837
Other current assets	36,984	32,100
Total current assets	1,525,122	1,608,450
Property, plant and equipment, net	127,104	128,251
Intangible assets, net	78,149	83,690
Goodwill	99,479	297,906
Other long-term assets	45,971	45,209
Total assets	1,875,825	2,163,506
Current liabilities:
Accounts payable	508,639	484,602
Accrued liabilities	188,940	197,804
Current maturities of long-term debt	6,089	28
Total current liabilities	703,668	682,434
Deferred income taxes	1,307	6,378
Long-term debt	504,932	608,941
Other long-term liabilities	72,239	84,647
Total liabilities	1,282,146	1,382,400
Stockholders’ equity:
Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 74,435,628 shares in 2017 and 2016	7,444	7,444
Additional paid-in capital	413,865	409,805
Treasury stock, at cost – 36,967,119 shares in 2017 and 36,951,522 shares in 2016	(1,097,300)	(1,096,744)
Retained earnings	1,313,209	1,507,057
Accumulated other comprehensive loss	(43,539)	(46,456)
Total stockholders’ equity	593,679	781,106
Total liabilities and stockholders’ equity	$ 1,875,825	$ 2,163,506

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 16,751	$ 18,196
Common stock, par value	$ 0.10	$ 0.10
Common stock, authorized	100,000,000	100,000,000
Common stock, issued	74,435,628	74,435,628
Treasury stock, shares	36,967,119	36,951,522

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Net sales		$ 1,260,656	$ 1,354,523	$ 2,530,038	$ 2,706,819
Cost of goods sold		1,083,092	1,158,700	2,166,807	2,310,914
Gross profit		177,564	195,823	363,231	395,905
Operating expenses:
Warehousing, marketing and administrative expenses		161,695	157,625	334,717	325,303
Impairment of goodwill				198,828
Defined benefit plan settlement loss			11,744		11,744
Operating income (loss)		15,869	26,454	(170,314)	58,858
Interest expense, net		6,299	5,677	13,038	11,574
Income (loss) before income taxes		9,570	20,777	(183,352)	47,284
Income tax expense		4,474	7,844	146	17,821
Net income (loss)		$ 5,096	$ 12,933	$ (183,498)	$ 29,463
Net income (loss) per share - basic:		$ 0.14	$ 0.35	$ (5.01)	$ 0.81
Average number of common shares outstanding - basic		36,673	36,512	36,659	36,552
Net income (loss) per share - diluted:	[1]	$ 0.14	$ 0.35	$ (5.01)	$ 0.80
Average number of common shares outstanding - diluted		36,873	36,910	36,659	36,897
Dividends declared per share		$ 0.14	$ 0.14	$ 0.28	$ 0.28

[1] As a result of the net loss in the six months ended June 30, 2017, the effect of potentially dilutive securities would have been anti-dilutive and has been omitted from the calculation of diluted earnings per share.

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ 5,096	$ 12,933	$ (183,498)	$ 29,463
Other comprehensive income (loss), net of tax
Translation adjustments	1,092	442	1,477	3,133
Minimum pension liability adjustments	704	7,418	1,408	8,333
Cash flow hedge adjustments	(36)	100	32	(427)
Total other comprehensive income (loss), net of tax	1,760	7,960	2,917	11,039
Comprehensive income (loss)	$ 6,856	$ 20,893	$ (180,581)	$ 40,502

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows From Operating Activities:
Net (loss) income	$ (183,498)	$ 29,463
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	21,534	22,936
Share-based compensation	4,038	5,689
Gain on the disposition of property, plant and equipment	(656)	(739)
Amortization of capitalized financing costs	804	332
Excess tax cost related to share-based compensation		193
Deferred income taxes	(270)	(2,765)
Impairment of goodwill	198,828
Pension settlement charge		11,744
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net	14,434	(28,439)
Decrease (increase) in inventory	76,757	(44,017)
Increase in other assets	(1,178)	(36,529)
Increase in accounts payable	24,133	43,429
Decrease in accrued liabilities	(19,603)	(12,219)
Decrease in other liabilities	(9,512)	(5,062)
Net cash provided by (used in) operating activities	125,811	(15,984)
Cash Flows From Investing Activities:
Capital expenditures	(13,677)	(19,327)
Proceeds from the disposition of property, plant and equipment		2,770
Net cash used in investing activities	(13,677)	(16,557)
Cash Flows From Financing Activities:
Net borrowings under revolving credit facility	31,375	43,876
Borrowings under Term Loan	77,600
Repayments under Term Loan	(1,518)
Net repayments under Securitization Program	(200,000)
Net (disbursements) proceeds from share-based compensation arrangements	(600)	1,285
Acquisition of treasury stock, at cost		(6,839)
Payment of cash dividends	(10,339)	(10,237)
Excess tax cost related to share-based compensation		(193)
Payment of debt issuance costs	(6,277)
Net cash (used in) provided by financing activities	(109,759)	27,892
Effect of exchange rate changes on cash and cash equivalents	185	366
Net change in cash and cash equivalents	2,560	(4,283)
Cash and cash equivalents, beginning of period	21,329	29,983
Cash and cash equivalents, end of period	23,889	25,700
Other Cash Flow Information:
Income tax payments, net	19,058	27,358
Interest paid	$ 11,809	$ 11,750

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements represent Essendant Inc. (“ESND”) with its wholly owned subsidiary Essendant Co. (“ECO”), and ECO’s subsidiaries (collectively, “Essendant” or the “Company”). The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of ESND and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading national wholesale distributor of workplace items.

The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2016, was derived from the December 31, 2016 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) for further information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Essendant at June 30, 2017 and the results of operations for the three and six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016. The results of operations for the three and six months ended June 30, 2017 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

New Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Under the new guidance, when awards vest or are settled, companies are required to record excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement instead of in additional paid-in capital. Furthermore, excess tax benefits are presented as an operating activity on the statement of cash flows rather than as a financing activity. In the six months ended June 30, 2017, the Company adopted the standard which resulted in $0.8 million of incremental tax expense that was recognized due to excess tax deficiencies of vested or settled awards in the first six months of 2017. Furthermore, the Company notes certain other changes resulting from adoption including changes in the calculation of the effect of dilutive securities for purposes of calculating diluted net income per share which was immaterial in the period and Condensed Consolidated Statement of Cash Flows presentation changes. The Company has elected to apply guidance concerning cash flow presentation on a prospective basis and to continue to estimate the number of awards expected to be forfeited.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the second step of the two-step goodwill impairment test. Specifically, the standard requires an entity to perform its interim or annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized could not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. The Company early adopted the standard in the quarter ended March 31, 2017 when an interim impairment test was conducted as further discussed in Note 4 – “Goodwill and Intangible Assets”.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU No. 2014-09. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period.

Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company plans to adopt the standard using the modified retrospective approach, which will require the Company to recognize the cumulative effect of initial adoption of the standard for all contracts as of, and new contracts after, the date of initial application.

Based on the Company’s current assessment and detailed review of the revenue transactions of the organization with its customers, the impact of the application of the new standard is expected to be immaterial. The Company expects that revenue recognition related to the processing, fulfillment and shipment of various warehoused goods to remain substantially unchanged. The Company also expects disclosure changes resulting from certain policy elections and practical expedient uses of, or allowable divergences from, authoritative guidance. The Company will continue to monitor for modifications to the standards throughout the year ended December 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that requires lessees to recognize right-of-use assets and lease liabilities for all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. This standard will be effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. This standard replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This standard amends and adjusts how cash receipts and cash payments are presented and classified in the statement of cash flows and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and will require adoption on a retrospective basis unless impracticable. If impracticable the Company would be required to apply the amendments prospectively as of the earliest date possible. The Company is currently evaluating the impact the new guidance will have on its statement of cash flows or financial statement disclosures.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires registrants that include a measure of operating income to include the service cost component in the same financial statement line item as other compensation costs and to report other pension-related costs, including amortization of prior service cost/credit, and settlement and curtailment effects, etc. separately, excluding them from operating expenses and income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. Application of the standard is required to be made on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement while the change in capitalized benefit cost is to be applied prospectively. This standard will be effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is permitted as of the beginning of an annual period. The Company is currently evaluating the new guidance to determine the impact it will have on the presentation of its consolidated financial statements, but does not expect any impact on the Company’s net income.

Inventory

Approximately 98.3% of total inventory as of June 30, 2017 and December 31, 2016, respectively, has been valued under the Last-In-First-Out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the LIFO accounting method is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of First-In-First-Out (“FIFO”) cost or market, inventory values would have been $158.1 million and $147.9 million higher than reported as of June 30, 2017 and December 31, 2016, respectively.

For the three months ended June 30, 2017, there was a $0.3 million reduction in LIFO liquidations as compared to the $1.6 million reported in the first quarter. For the six months ended June 30, 2017, LIFO liquidations resulted in LIFO income of $1.3 million, which was more than offset by LIFO expense of $11.5 million related to current inflation, for an overall net increase in cost of sales of $10.2 million. LIFO liquidations occur when there are decrements of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of current year purchases.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Compensation

2. Share-Based Compensation

As of June 30, 2017, the Company has two active equity compensation plans. Under the 2015 Long-Term Incentive Plan (as amended and restated), award instruments include, but are not limited to, stock options, restricted stock awards, restricted stock units (“RSUs”), and performance-based awards. Associates and non-employee directors of the Company are eligible to become participants in the plan. The Nonemployee Directors’ Deferred Stock Compensation Plan allows non-employee directors to elect to defer receipt of all or a portion of their annual retainer in deferred stock units.

The Company granted 58,962 shares of restricted stock and 221,365 RSUs during the first six months of 2017, compared to 129,059 shares of restricted stock and 247,656 RSUs during the first six months of 2016.

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Severance and Restructuring Charges

6 Months Ended

Jun. 30, 2017

Restructuring And Related Activities [Abstract]

Severance and Restructuring Charges

3. Severance and Restructuring Charges

Commencing in 2015, the Company began certain restructuring actions which included workforce reductions, facility closures, and actions to reduce costs through management delayering in order to achieve broader functional alignment of the organization. The charges associated with these actions were included in “warehousing, marketing and administrative expenses.” These actions were substantially completed in 2016. No expenses have been recorded in the three and six months ended June 30, 2017 and the three months ended June 30, 2016.

The expenses, cash flows, and accrued liabilities associated with the restructuring actions described above are noted in the following table (in thousands):

	Expenses		Cash flow				Accrued Liabilities
	For the six months ended June 30,		For the six months ended June 30,				As of June 30,		As of December 31,
	2016		2017		2016		2017		2016
Fourth quarter 2015 Action
Workforce reduction	$	-	$	410	$	6,462	$	1,014	$	1,424
First quarter 2015 Actions
Workforce reduction	$	-	$	107	$	487	$	651	$	758
Facility closure		254		-		500		-		-
Total		254	$	107	$	987	$	651	$	758

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

4. Goodwill and Intangible Assets

The Company tests goodwill for impairment annually as of October 1 and whenever triggering events or circumstances indicate that an impairment may have occurred, such as a significant adverse change in the business climate, loss of key personnel or a decision to sell or dispose of a reporting unit, among others. Determining whether an impairment has occurred requires a comparison of the carrying value of the net assets of the reporting unit to the fair value of the respective reporting unit.

In the quarter ended March 31, 2017, given a sustained decrease in the Company’s share price and related market capitalization, the Company determined that a triggering event had occurred for all of its reporting units, requiring an interim impairment test of goodwill. During this assessment, the Company determined that the carrying value of net assets for three of the four reporting units of the Company exceeded fair value. In consideration of the Company’s adoption of ASU 2017-04 (refer to Note 1 – “Basis of Presentation”) the Company recognized a goodwill impairment of $198.8 million in aggregate based on the difference between the carrying value of net assets and fair value as determined based on the combination of market prices and merger and acquisitions (“M&A”) transactions of comparable businesses and forecasted future discounted cash flows.

The carrying amount of goodwill by reporting unit and impairment recognized is noted in the table below (in thousands):

	Goodwill balance		For the six months ended June 30, 2017					Goodwill balance
	as of December 31, 2016		Impairment			Currency translation adjustments		as of June 30, 2017
Office & Facilities	$	224,683	$	(185,704	)	$	-	$	38,979
Industrial		13,067		-		46			13,113
Automotive		45,234		(12,220	)	355			33,369
CPO		14,922		(904	)		-		14,018
	$	297,906	$	(198,828	)	$	401	$	99,479

Acquired intangible assets are initially recorded at their fair market values determined based on quoted market prices in active markets, if available, or recognized valuation models. The Company’s intangible assets have finite useful lives and are amortized on a straight-line basis over their useful lives.  

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	June 30, 2017								December 31, 2016
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	137,802	$	(67,594	)	$	70,208	16	$	137,452	$	(62,235	)	$	75,217	16
Non-compete agreements		4,654		(4,260	)		394	4		4,649		(4,260	)		389	4
Trademarks		13,737		(6,190	)		7,547	14		13,704		(5,620	)		8,084	14
Total	$	156,193	$	(78,044	)	$	78,149		$	155,805	$	(72,115	)	$	83,690

The following table summarizes the amortization expense to be incurred in 2017 through 2021 on intangible assets (in thousands):

Year	Amount
2017	$	10,795
2018		8,063
2019		6,945
2020		6,942
2021		6,942

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

5. Accumulated Other Comprehensive Income (Loss)

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended June 30, 2017 was as follows (amounts in thousands):

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2016	$	(8,439	)	$	172		$	(38,189	)	$	(46,456	)
Other comprehensive income (loss) before reclassifications		1,477			(75	)		-			1,402
Amounts reclassified from AOCI		-			107			1,408			1,515
Net other comprehensive income		1,477			32			1,408			2,917
AOCI, balance as of June 30, 2017	$	(6,962	)	$	204		$	(36,781	)	$	(43,539	)

The following table details the amounts reclassified out of AOCI into the income statement during the three and six months ended June 30, 2017 (in thousands):

	Amount Reclassified From AOCI
	For the Three			For the Six
	Months Ended			Months Ended
	June 30,			June 30,			Affected Line Item In The Statement
Details About AOCI Components	2017			2017			Where Net Income is Presented
Realized and unrealized gains (losses) on cash flow hedges
Gain on interest rate swap, before tax	$	45		$	175		Interest expense, net
		(17	)		(68	)	Tax provision
	$	28		$	107		Net of tax
Defined benefit pension plan items
Amortization of prior service cost and unrecognized loss	$	1,134		$	2,268		Warehousing, marketing and administrative expenses
		(430	)		(860	)	Tax provision
		704			1,408		Net of tax
Total reclassifications for the period, net of tax	$	732		$	1,515

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Earnings Per Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

6. Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock, restricted stock units and deferred stock units are considered dilutive securities. For the three- and six- month periods ended June 30, 2017 and 2016, 0.2 million shares of such securities, respectively, were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. An additional 0.2 million shares of common stock outstanding for the six months ended June 30, 2017 were excluded from the computation of diluted earnings per share due to the net loss. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2017		2016		2017			2016
Numerator:
Net income (loss)	$	5,096	$	12,933	$	(183,498	)	$	29,463
Denominator:
Denominator for basic earnings per share -
weighted average shares		36,673		36,512		36,659			36,552
Effect of dilutive securities:
Employee stock options and restricted stock (1)		200		398		-			345
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities		36,873		36,910		36,659			36,897
Net income (loss) per share:
Net income (loss) per share - basic	$	0.14	$	0.35	$	(5.01	)	$	0.81
Net income (loss) per share - diluted (2)	$	0.14	$	0.35	$	(5.01	)	$	0.80

(1) The effect of dilutive securities for employee stock options and restricted stock in the three and six months ended June 30, 2017 was affected by the adoption of ASU 2016-09 at the beginning of the year. In accordance with the standard, the effect of dilutive securities in the calculation of diluted net income per share was applied prospectively and results for the three and six months ended June 30, 2016 have not been revised.

(2) As a result of the net loss in the six months ended June 30, 2017, the effect of potentially dilutive securities would have been anti-dilutive and has been omitted from the calculation of diluted earnings per share.

Common Stock Repurchases

As of June 30, 2017 , the Company had Board authorization to repurchase $68.2 million of common stock. During the three and six months ended June 30, 2017, the Company did not repurchase any shares of its common stock. During the three months ended June 30, 2016, the Company did not repurchase any shares of its common stock. For the six months ended June 30, 2016, the Company repurchased 241,270 shares at an aggregate cost of $6.8 million. Depending on the market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice. Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data.

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Debt

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Debt

7. Debt

ESND is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, ECO, and from borrowings by ECO. The 2017 Credit Agreement and the 2013 Note Purchase Agreement (each as defined below and each a “Lending Agreement”) contain restrictions on the use of cash transferred from ECO to ESND.

On February 22, 2017, ESND, ECO, ECO’s United States subsidiaries (ESND, ECO and the subsidiaries collectively referred to as the “Loan Parties”), JPMorgan Chase Bank, National Association, as Administrative Agent, and certain lenders entered into a Fifth Amended and Restated Revolving Credit Agreement (the “2017 Credit Agreement”). The 2017 Credit Agreement amended and restated the Fourth Amended and Restated Five-Year Revolving Credit Agreement dated as of July 9, 2013 (as amended prior to February 22, 2017, the “2013 Credit Agreement”). Also on February 22, 2017, ESND, ECO and the holders of ECO’s 3.75% senior secured notes due January 15, 2021, (the “Notes”) entered into Amendment No. 4 (“Amendment No. 4”) to the Note Purchase Agreement dated as of November 25, 2013, (as amended prior to February 22, 2017, the “2013 Note Purchase Agreement”).

The 2017 Credit Agreement and Amendment No. 4 eliminated certain covenants in the 2013 Credit Agreement and the 2013 Note Purchase Agreement that prohibited the Company from exceeding a debt-to-EBITDA ratio of 3.5 to 1.0 (or 4.0 to 1.0 following certain permitted acquisitions) and restricted the Company’s ability to pay dividends and repurchase stock when the ratio was 3.0 to 1.0 or more. As a result, the Company is no longer subject to a debt-to-EBITDA ratio covenant.

Proceeds from the 2017 Credit Facility were used to repay the balances of the 2013 Credit Agreement and the Receivables Securitization Program (as defined below).

The 2017 Credit Agreement provides for a revolving credit facility (with an aggregated committed principal amount of $1.0 billion), a first-in-last-out (“FILO”) revolving credit facility (with an aggregated committed principal amount of $100 million) and a term loan (with an initial aggregated committed principal amount of $77.6 million). The term loan was funded in a single funding on March 24, 2017. Loans under the 2017 Credit Agreement must be extended to the Company first through the FILO facility.

Borrowings under the 2017 Credit Agreement bear interest at LIBOR for specified interest periods, at the REVLIBOR30 Rate (as defined in the 2017 Credit Agreement) or at the Alternate Base Rate (as defined in the 2017 Credit Agreement), plus, in each case, a margin determined based on the Company’s average quarterly revolving availability. Depending on the Company’s average quarterly revolving availability, the margin on LIBOR-based loans and REVLIBOR30 Rate-based loans ranges from 1.25% to 1.75% for revolving and term loans and 2.00% to 2.50% for FILO loans, and on Alternate Base Rate loans ranges from 0.25% to 0.75% for revolving and term loans and 1.00% to 1.50% for FILO loans. From February 22, 2017 (the date of the 2017 Credit Agreement) to June 30, 2017, the applicable margin for LIBOR-based loans and REVLIBOR30 Rate-based loans is 1.50% for revolving and term loans and 2.25% for FILO loans, and for Alternate Base Rate loans is 0.50% for revolving and term loans and 1.25% for FILO loans. In addition, ECO is required to pay the lenders a commitment fee on the unutilized portion of the revolving and FILO commitments under the 2017 Credit Agreement at a rate per annum equal to 0.25%. Letters of credit issued pursuant to the 2017 Credit Agreement incur interest based on the applicable margin rate for LIBOR-based Loans, plus 0.125%. Unamortized deferred financing fees of $7.0 million are included within “Current maturities of long-term debt” and “Long-term debt” on the Condensed Consolidated Balance Sheets and will be amortized over the life of the agreements.

Obligations of ECO under the 2017 Credit Agreement are guaranteed by ESND and ECO’s domestic subsidiaries. ECO’s obligations under these agreements and the guarantors’ obligations under the guaranty are secured by liens on substantially all Company assets. Availability of credit under the revolving facility will be subject to a revolving borrowing base calculation comprised of a certain percentage of the eligible accounts receivable, plus a certain percentage of the inventory, less reserves. Similarly, availability under the FILO revolving credit facility is subject to a FILO borrowing base comprised primarily of 10% of the eligible accounts receivable, plus 10% multiplied by the net orderly liquidation value percentages of the eligible inventory, less reserves. The amount of the remaining term loan of $76.1 million, is based on the value of the Company’s owned real estate and certain equipment. Beginning in April 2017, the Company began repayment of nominal principal amounts pursuant to the terms and conditions of the term loan, and these payments may be subject to acceleration under certain dispositions of the underlying collateral.

The 2017 Credit Agreement contains representations and warranties, covenants and events of default that are customary for facilities of this type, including covenants to deliver periodic certifications setting forth the revolving borrowing base and FILO borrowing base. As long as the Payment Conditions (as defined in the 2017 Credit Agreement) are satisfied, the Loan Parties may pay dividends, repurchase stock and engage in certain permitted acquisitions, investments and dispositions, in each case subject to the other terms and conditions of the Credit Agreement and the other loan documents.

If ECO elects to prepay some or all of the Notes prior to January 15, 2021, and in some circumstances if ECO is required to prepay the Notes, ECO will be obligated to pay a make-whole amount as set forth in the Agreement and Amendment No. 4. The Company’s obligations under the 2013 Note Purchase Agreement and Amendment No. 4 are secured by a $165.0 million letter of credit issued under the 2017 Credit Agreement.

The Company’s accounts receivable securitization program (“Receivables Securitization Program” or the “Program”) was terminated when the Company entered into the 2017 Credit Agreement. The Program provided maximum financing of up to $200 million secured by all the customer accounts receivable and related rights originated by ECO.

Debt consisted of the following amounts (in millions):

	As of			As of
	June 30, 2017			December 31, 2016
2017 Credit Agreement
Term Loan	$	76.1		$	-
Revolving Credit Facility		191.9			-
FILO Facility		100.0			-
2013 Credit Agreement		-			260.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		-			200.0
Mortgage & Capital Lease		-			0.1
Transaction Costs		(7.0	)		(1.5	)
Total	$	511.0		$	609.0

The 2017 Credit Agreement provides for the issuance of letters of credit up to $25.0 million, plus up to $165.0 million to be used as collateral for obligations under the 2013 Note Purchase Agreement. Letters of credit totaling approximately $177.5 million were utilized as of June 30, 2017.

Interest under the 2013 Note Purchase Agreement is payable semi-annually at a rate per annum equal to 3.75% (3.66% after the effect of terminating an interest rate swap).

For additional information about the 2017 Credit Agreement and the 2013 Note Purchase Agreement, see Note 11 – “Debt” to the Company’s Consolidated Financial Statements in the 2016 Form 10-K.

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Pension and Post-Retirement Benefit Plans

6 Months Ended

Jun. 30, 2017

Compensation And Retirement Disclosure [Abstract]

Pension and Post-Retirement Benefit Plans

8. Pension and Post-Retirement Benefit Plans

The Company maintains pension plans covering union and certain non-union employees. For more information on the Company’s retirement plans, see Note 13 – “Pension Plans and Defined Contribution Plan” to the Company’s Consolidated Financial Statements in the 2016 Form 10-K. A summary of net periodic pension cost related to the Company’s pension plans for the three and six months ended June 30, 2017 and 2016 was as follows (dollars in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
Service cost - benefit earned during the period	$	321		$	317		$	642		$	634
Interest cost on projected benefit obligation		1,862			2,173			3,724			4,516
Expected return on plan assets		(2,272	)		(2,547	)		(4,544	)		(5,265	)
Amortization of prior service cost		72			74			144			148
Amortization of actuarial loss		1,062			1,321			2,124			2,740
Settlement loss		-			11,744			-			11,744
Net periodic pension cost	$	1,045		$	13,082		$	2,090		$	14,517

The Company made cash contributions to its pension plans of $10.0 million in the three and six months ended June 30, 2017 and $10.0 million during the six months ended June 30, 2016. Additional contributions, if any, for 2017 have not yet been determined. As of June 30, 2017 and December 31, 2016, the Company had accrued $30.0 million and $40.2 million, respectively, of pension liability within “Other long-term liabilities” on the Condensed Consolidated Balance Sheets.

Defined Contribution Plan

The Company has defined contribution plans covering certain salaried associates and non-union hourly paid associates (the “Plan”). The Plan permits associates to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for Company-funded discretionary contributions as well as matching associates’ salary deferral contributions, at the discretion of the Board of Directors. The Company recorded expense of $1.9 million and $3.7 million for the Company match of employee contributions to the Plan for the three and six months ended June 30, 2017, respectively and the three and six months ended June 30, 2016, respectively.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

9. Fair Value Measurements

The Company measures certain financial assets and liabilities, including an interest rate swap and foreign currency derivatives, at fair value on a recurring basis, based on market rates of the Company’s positions and other observable interest rates. The fair value of the interest rate swaps is determined by using quoted market forward rates (level 2 inputs) and reflects the present value of the amount the Company would pay for contracts involving the same notional amount and maturity date. The fair value of the foreign exchange hedge is determined by using quoted market spot rates (level 2 inputs).

Accounting guidance on fair value establishes a hierarchy for those instruments measured at fair value which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

• Level 1—Quoted market prices in active markets for identical assets or liabilities;

• Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable; and

• Level 3—Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.

Determining which level to apply to an asset or liability requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (in thousands):

	Fair Value Measurements
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap & foreign exchange hedges
- as of June 30, 2017	$	52	$	-	$	52	$	-
- as of December 31, 2016	$	205	$	-	$	205	$	-

The carrying amount of accounts receivable at June 30, 2017, approximates fair value because of the short-term nature of this item. As of June 30, 2017, no assets or liabilities were measured at fair value on a nonrecurring basis.

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Other Assets and Liabilities

6 Months Ended

Jun. 30, 2017

Other Assets And Liabilities [Abstract]

Other Assets and Liabilities

10. Other Assets and Liabilities

Receivables related to supplier allowances totaling $87.8 million and $86.9 million were included in “Accounts receivable” in the Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016, respectively.

Current and non-current prepaid customer rebates, net of allowances, were $50.6 million and $47.9 million as of June 30, 2017 and December 31, 2016, respectively, and are included as a component of “Other current assets” and “Other assets”. Accrued customer rebates of $47.2 million and $65.3 million as of June 30, 2017 and December 31, 2016, respectively, were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three and six months ended June 30, 2017, the Company recorded income tax expense of $4.5 million and $0.1 million on pre-tax income of $9.6 million and pre-tax loss of $183.4 million, for an effective tax rate of 46.8% and (0.1%), respectively. For the three and six months ended June 30, 2016, the Company recorded income tax expense of $7.8 million and $17.8 million on pre-tax income of $20.8 million and $47.3 million, for an effective tax rate of 37.8% and 37.7%, respectively. In the three and six months ended June 30, 2017, the Company adopted ASU 2016-09 which resulted in $0.5 million and $0.8 million, respectively, of incremental tax expense recognized due to excess tax deficiencies of vested or settled awards in the period. The adoption of the standard was applied prospectively in accordance with guidance.

The Company’s U.S. statutory rate is 35.0%. The most significant factor impacting the effective tax rate for the six months ended June 30, 2017 was the discrete impact of the goodwill impairment charges. There were no significant discrete items impacting the effective tax rate for the six months ended June 30, 2016.

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Legal Matters

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Legal Matters

12. Legal Matters

The Company has been named as a defendant in two lawsuits alleging that the Company sent unsolicited fax advertisements to the named plaintiffs, as well as other persons and entities, in violation of the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005 ("TCPA"). One lawsuit was initially filed in the United States District Court for the Central District of California on May 1, 2015, and subsequently refiled in the United States District Court for the Northern District of Illinois. The other lawsuit was filed in the United States District Court for the Northern District of Illinois on January 14, 2016. The two lawsuits have been consolidated for pre-trial proceedings, and assigned to the same judge. Plaintiffs in both lawsuits seek certification of a class of plaintiffs comprised of persons and entities who allegedly received fax advertisements from the Company. Under the TCPA, recipients of unsolicited fax advertisements can seek damages of $500 per fax for inadvertent violations and up to $1,500 per fax for knowing and willful violations. Other reported TCPA lawsuits have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. In each lawsuit, the Company is vigorously contesting class certification and denies that any violations occurred.  

Litigation of this kind is likely to lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. Regardless of whether the lawsuits are resolved at trial or through settlement, the Company believes that a loss associated with resolution of the pending claims is probable. As of the year ended December 31, 2016, the Company recorded a $4.0 million, pre-tax reserve within “warehousing, marketing and administrative expenses” in the consolidated statement of operations. During the six months ended June 30, 2017, the Company recorded an additional $6.0 million, pre-tax reserve to reflect events concerning mediation activities and settlement negotiations between the Company and the plaintiffs for a total reserve at June 30, 2017 of $10.0 million. The Company continues to evaluate its defenses based on its internal review and investigation of prior events, new information and future circumstances. Final disposition of the lawsuits, whether through settlement or through trial, may result in a loss materially in excess of the aggregate recorded amount. However, a range of reasonably possible excess losses is not estimable at this time. 

As disclosed in the first quarter of 2017, the Company was named in a lawsuit filed by a former employee in the Los Angeles Superior Court. During the second quarter of 2017, the Company reached an agreement on the general terms of a settlement to resolve this litigation. The parties are in the process of finalizing a settlement agreement, which will be subject to court approval. In consideration of the settlement, the Company recorded a $3.0 million pre-tax reserve within the warehousing, marketing and administrative expenses line item in the consolidated statement of operations for the three and six months ended June 30, 2017. 

The Company is also involved in other legal proceedings arising in the ordinary course of, or incidental to its business. The Company has established reserves, which are not material, for potential losses that are probable and reasonably estimable that may result from those proceedings. In many cases, however, it is difficult to determine whether a loss is probable or even possible or to estimate the amount or range of potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial or indeterminate damages. Matters frequently need to be more developed before a loss or range of loss can reasonably be estimated. The Company believes that such ordinary course legal proceedings will be resolved with no material adverse effect upon its financial condition, results of operations or cash flows.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Consolidation, Policy

The accompanying Condensed Consolidated Financial Statements represent Essendant Inc. (“ESND”) with its wholly owned subsidiary Essendant Co. (“ECO”), and ECO’s subsidiaries (collectively, “Essendant” or the “Company”). The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of ESND and its subsidiaries. All intercompany transactions and balances have been eliminated. The Company operates in a single reportable segment as a leading national wholesale distributor of workplace items.

The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2016, was derived from the December 31, 2016 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”) for further information.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Essendant at June 30, 2017 and the results of operations for the three and six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016. The results of operations for the three and six months ended June 30, 2017 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.

New Accounting Pronouncements

New Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. Under the new guidance, when awards vest or are settled, companies are required to record excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement instead of in additional paid-in capital. Furthermore, excess tax benefits are presented as an operating activity on the statement of cash flows rather than as a financing activity. In the six months ended June 30, 2017, the Company adopted the standard which resulted in $0.8 million of incremental tax expense that was recognized due to excess tax deficiencies of vested or settled awards in the first six months of 2017. Furthermore, the Company notes certain other changes resulting from adoption including changes in the calculation of the effect of dilutive securities for purposes of calculating diluted net income per share which was immaterial in the period and Condensed Consolidated Statement of Cash Flows presentation changes. The Company has elected to apply guidance concerning cash flow presentation on a prospective basis and to continue to estimate the number of awards expected to be forfeited.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the second step of the two-step goodwill impairment test. Specifically, the standard requires an entity to perform its interim or annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized could not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. The Company early adopted the standard in the quarter ended March 31, 2017 when an interim impairment test was conducted as further discussed in Note 4 – “Goodwill and Intangible Assets”.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, which deferred the effective date of ASU No. 2014-09. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period.

Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company plans to adopt the standard using the modified retrospective approach, which will require the Company to recognize the cumulative effect of initial adoption of the standard for all contracts as of, and new contracts after, the date of initial application.

Based on the Company’s current assessment and detailed review of the revenue transactions of the organization with its customers, the impact of the application of the new standard is expected to be immaterial. The Company expects that revenue recognition related to the processing, fulfillment and shipment of various warehoused goods to remain substantially unchanged. The Company also expects disclosure changes resulting from certain policy elections and practical expedient uses of, or allowable divergences from, authoritative guidance. The Company will continue to monitor for modifications to the standards throughout the year ended December 31, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that requires lessees to recognize right-of-use assets and lease liabilities for all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. This standard will be effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. This standard replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period, and early application is permitted. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This standard amends and adjusts how cash receipts and cash payments are presented and classified in the statement of cash flows and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and will require adoption on a retrospective basis unless impracticable. If impracticable the Company would be required to apply the amendments prospectively as of the earliest date possible. The Company is currently evaluating the impact the new guidance will have on its statement of cash flows or financial statement disclosures.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires registrants that include a measure of operating income to include the service cost component in the same financial statement line item as other compensation costs and to report other pension-related costs, including amortization of prior service cost/credit, and settlement and curtailment effects, etc. separately, excluding them from operating expenses and income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. Application of the standard is required to be made on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement while the change in capitalized benefit cost is to be applied prospectively. This standard will be effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is permitted as of the beginning of an annual period. The Company is currently evaluating the new guidance to determine the impact it will have on the presentation of its consolidated financial statements, but does not expect any impact on the Company’s net income.

Inventory

Inventory

Approximately 98.3% of total inventory as of June 30, 2017 and December 31, 2016, respectively, has been valued under the Last-In-First-Out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Inventory valued under the LIFO accounting method is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of First-In-First-Out (“FIFO”) cost or market, inventory values would have been $158.1 million and $147.9 million higher than reported as of June 30, 2017 and December 31, 2016, respectively.

For the three months ended June 30, 2017, there was a $0.3 million reduction in LIFO liquidations as compared to the $1.6 million reported in the first quarter. For the six months ended June 30, 2017, LIFO liquidations resulted in LIFO income of $1.3 million, which was more than offset by LIFO expense of $11.5 million related to current inflation, for an overall net increase in cost of sales of $10.2 million. LIFO liquidations occur when there are decrements of LIFO inventory quantities carried at lower costs in prior years as compared with the cost of current year purchases.

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Severance and Restructuring Charges (Tables)

6 Months Ended

Jun. 30, 2017

Restructuring And Related Activities [Abstract]

Schedule of Expenses, Cash Flows, and Accrued Liabilities Associated with Restructuring Actions

The expenses, cash flows, and accrued liabilities associated with the restructuring actions described above are noted in the following table (in thousands):

	Expenses		Cash flow				Accrued Liabilities
	For the six months ended June 30,		For the six months ended June 30,				As of June 30,		As of December 31,
	2016		2017		2016		2017		2016
Fourth quarter 2015 Action
Workforce reduction	$	-	$	410	$	6,462	$	1,014	$	1,424
First quarter 2015 Actions
Workforce reduction	$	-	$	107	$	487	$	651	$	758
Facility closure		254		-		500		-		-
Total		254	$	107	$	987	$	651	$	758

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Carrying Amount of Goodwill by Reporting Unit and Impairment Recognized

The carrying amount of goodwill by reporting unit and impairment recognized is noted in the table below (in thousands):

	Goodwill balance		For the six months ended June 30, 2017					Goodwill balance
	as of December 31, 2016		Impairment			Currency translation adjustments		as of June 30, 2017
Office & Facilities	$	224,683	$	(185,704	)	$	-	$	38,979
Industrial		13,067		-		46			13,113
Automotive		45,234		(12,220	)	355			33,369
CPO		14,922		(904	)		-		14,018
	$	297,906	$	(198,828	)	$	401	$	99,479

Summary of Intangible Assets of Company by Major Class

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	June 30, 2017								December 31, 2016
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	137,802	$	(67,594	)	$	70,208	16	$	137,452	$	(62,235	)	$	75,217	16
Non-compete agreements		4,654		(4,260	)		394	4		4,649		(4,260	)		389	4
Trademarks		13,737		(6,190	)		7,547	14		13,704		(5,620	)		8,084	14
Total	$	156,193	$	(78,044	)	$	78,149		$	155,805	$	(72,115	)	$	83,690

Summary of Amortization Expense to be Incurred in 2017 Through 2021 on Intangible Assets

The following table summarizes the amortization expense to be incurred in 2017 through 2021 on intangible assets (in thousands):

Year	Amount
2017	$	10,795
2018		8,063
2019		6,945
2020		6,942
2021		6,942

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Change in Accumulated Other Comprehensive Income (Loss) (AOCI) by Component, Net of Tax

The change in Accumulated Other Comprehensive Income (Loss) (“AOCI”) by component, net of tax, for the period ended June 30, 2017 was as follows (amounts in thousands):

	Foreign Currency Translation			Cash Flow Hedges			Defined Benefit Pension Plans			Total
AOCI, balance as of December 31, 2016	$	(8,439	)	$	172		$	(38,189	)	$	(46,456	)
Other comprehensive income (loss) before reclassifications		1,477			(75	)		-			1,402
Amounts reclassified from AOCI		-			107			1,408			1,515
Net other comprehensive income		1,477			32			1,408			2,917
AOCI, balance as of June 30, 2017	$	(6,962	)	$	204		$	(36,781	)	$	(43,539	)

Amounts Reclassified Out of AOCI into Income Statement

The following table details the amounts reclassified out of AOCI into the income statement during the three and six months ended June 30, 2017 (in thousands):

	Amount Reclassified From AOCI
	For the Three			For the Six
	Months Ended			Months Ended
	June 30,			June 30,			Affected Line Item In The Statement
Details About AOCI Components	2017			2017			Where Net Income is Presented
Realized and unrealized gains (losses) on cash flow hedges
Gain on interest rate swap, before tax	$	45		$	175		Interest expense, net
		(17	)		(68	)	Tax provision
	$	28		$	107		Net of tax
Defined benefit pension plan items
Amortization of prior service cost and unrecognized loss	$	1,134		$	2,268		Warehousing, marketing and administrative expenses
		(430	)		(860	)	Tax provision
		704			1,408		Net of tax
Total reclassifications for the period, net of tax	$	732		$	1,515

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2017		2016		2017			2016
Numerator:
Net income (loss)	$	5,096	$	12,933	$	(183,498	)	$	29,463
Denominator:
Denominator for basic earnings per share -
weighted average shares		36,673		36,512		36,659			36,552
Effect of dilutive securities:
Employee stock options and restricted stock (1)		200		398		-			345
Denominator for diluted earnings per share -
Adjusted weighted average shares and the effect of dilutive securities		36,873		36,910		36,659			36,897
Net income (loss) per share:
Net income (loss) per share - basic	$	0.14	$	0.35	$	(5.01	)	$	0.81
Net income (loss) per share - diluted (2)	$	0.14	$	0.35	$	(5.01	)	$	0.80

(1) The effect of dilutive securities for employee stock options and restricted stock in the three and six months ended June 30, 2017 was affected by the adoption of ASU 2016-09 at the beginning of the year. In accordance with the standard, the effect of dilutive securities in the calculation of diluted net income per share was applied prospectively and results for the three and six months ended June 30, 2016 have not been revised.

(2) As a result of the net loss in the six months ended June 30, 2017, the effect of potentially dilutive securities would have been anti-dilutive and has been omitted from the calculation of diluted earnings per share.

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Debt (Tables)

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-Term Debt Components

Debt consisted of the following amounts (in millions):

	As of			As of
	June 30, 2017			December 31, 2016
2017 Credit Agreement
Term Loan	$	76.1		$	-
Revolving Credit Facility		191.9			-
FILO Facility		100.0			-
2013 Credit Agreement		-			260.4
2013 Note Purchase Agreement		150.0			150.0
Receivables Securitization Program		-			200.0
Mortgage & Capital Lease		-			0.1
Transaction Costs		(7.0	)		(1.5	)
Total	$	511.0		$	609.0

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Pension and Post-Retirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2017

Compensation And Retirement Disclosure [Abstract]

Schedule of Components of Net Periodic Pension Cost

A summary of net periodic pension cost related to the Company’s pension plans for the three and six months ended June 30, 2017 and 2016 was as follows (dollars in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016
Service cost - benefit earned during the period	$	321		$	317		$	642		$	634
Interest cost on projected benefit obligation		1,862			2,173			3,724			4,516
Expected return on plan assets		(2,272	)		(2,547	)		(4,544	)		(5,265	)
Amortization of prior service cost		72			74			144			148
Amortization of actuarial loss		1,062			1,321			2,124			2,740
Settlement loss		-			11,744			-			11,744
Net periodic pension cost	$	1,045		$	13,082		$	2,090		$	14,517

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value

The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (in thousands):

	Fair Value Measurements
			Quoted Market Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Liabilities
Interest rate swap & foreign exchange hedges
- as of June 30, 2017	$	52	$	-	$	52	$	-
- as of December 31, 2016	$	205	$	-	$	205	$	-

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Basis of Presentation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Incremental tax expense	$ 0.5		$ 0.8
Percentage inventory valued under LIFO	98.30%		98.30%	98.30%
Higher inventory if FIFO applied entirely	$ 158.1		$ 158.1	$ 147.9
Effect of LIFO inventory liquidation on income	$ (0.3)	$ 1.6	1.3
LIFO expense related to inflation increase in cost of sales			11.5
Increase in cost of sales due to LIFO accounting method			$ 10.2

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Share-Based Compensation - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2017 Plans shares	Jun. 30, 2016 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of share-based compensation plans | Plans	2
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and restricted stock units granted	58,962	129,059
Restricted Stock Units (RSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock and restricted stock units granted	221,365	247,656

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Severance and Restructuring Charges - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Warehousing, Marketing and Administrative Expenses [Member]
Restructuring Cost And Reserve [Line Items]
Expenses associated with restructuring actions	$ 0	$ 0	$ 0	$ 254,000

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Severance and Restructuring Charges - Schedule of Expenses, Cash Flows, and Accrued Liabilities Associated with Restructuring Actions (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Restructuring Cost And Reserve [Line Items]
Cash flow associated with restructuring actions			$ 107,000	$ 987,000
Accrued Liabilities associated with restructuring actions	$ 651,000		651,000		$ 758,000
Warehousing, Marketing and Administrative Expenses [Member]
Restructuring Cost And Reserve [Line Items]
Expenses associated with restructuring actions	0	$ 0	0	254,000
First Quarter 2015 Actions Workforce Reduction [Member]
Restructuring Cost And Reserve [Line Items]
Cash flow associated with restructuring actions			107,000	487,000
Accrued Liabilities associated with restructuring actions	651,000		651,000		758,000
First Quarter 2015 Actions Facility Closure [Member]
Restructuring Cost And Reserve [Line Items]
Cash flow associated with restructuring actions				500,000
First Quarter 2015 Actions Facility Closure [Member] | Warehousing, Marketing and Administrative Expenses [Member]
Restructuring Cost And Reserve [Line Items]
Expenses associated with restructuring actions				254,000
Fourth Quarter 2015 Action Workforce Reduction [Member]
Restructuring Cost And Reserve [Line Items]
Cash flow associated with restructuring actions			410,000	$ 6,462,000
Accrued Liabilities associated with restructuring actions	$ 1,014,000		$ 1,014,000		$ 1,424,000

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Goodwill and Intangible Assets - Additional Information (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Impairment of goodwill	$ 198,828

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Goodwill and Intangible Assets - Schedule of Carrying Amount of Goodwill by Reporting Unit and Impairment Recognized (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Goodwill [Line Items]
Goodwill, balance as of December 31, 2016	$ 297,906
Impairment	(198,828)
Currency translation adjustments	401
Goodwill, balance as of June 30, 2017	99,479
Office & Facilities [Member]
Goodwill [Line Items]
Goodwill, balance as of December 31, 2016	224,683
Impairment	(185,704)
Goodwill, balance as of June 30, 2017	38,979
Industrial [Member]
Goodwill [Line Items]
Goodwill, balance as of December 31, 2016	13,067
Currency translation adjustments	46
Goodwill, balance as of June 30, 2017	13,113
Automotive [Member]
Goodwill [Line Items]
Goodwill, balance as of December 31, 2016	45,234
Impairment	(12,220)
Currency translation adjustments	355
Goodwill, balance as of June 30, 2017	33,369
CPO [Member]
Goodwill [Line Items]
Goodwill, balance as of December 31, 2016	14,922
Impairment	(904)
Goodwill, balance as of June 30, 2017	$ 14,018

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Goodwill and Intangible Assets - Summary of Intangible Assets of Company by Major Class (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Schedule Of Intangible Assets [Line Items]
Intangible assets subject to amortization, Gross Carrying Amount	$ 156,193	$ 155,805
Intangible assets subject to amortization, Accumulated Amortization	(78,044)	(72,115)
Intangible assets subject to amortization, Net Carrying Amount	78,149	83,690
Customer relationships and other intangibles [Member]
Schedule Of Intangible Assets [Line Items]
Intangible assets subject to amortization, Gross Carrying Amount	137,802	137,452
Intangible assets subject to amortization, Accumulated Amortization	(67,594)	(62,235)
Intangible assets subject to amortization, Net Carrying Amount	$ 70,208	$ 75,217
Intangible assets subject to amortization, Weighted Average Useful Life (years)	16 years	16 years
Non-compete Agreements [Member]
Schedule Of Intangible Assets [Line Items]
Intangible assets subject to amortization, Gross Carrying Amount	$ 4,654	$ 4,649
Intangible assets subject to amortization, Accumulated Amortization	(4,260)	(4,260)
Intangible assets subject to amortization, Net Carrying Amount	$ 394	$ 389
Intangible assets subject to amortization, Weighted Average Useful Life (years)	4 years	4 years
Trademarks [Member]
Schedule Of Intangible Assets [Line Items]
Intangible assets subject to amortization, Gross Carrying Amount	$ 13,737	$ 13,704
Intangible assets subject to amortization, Accumulated Amortization	(6,190)	(5,620)
Intangible assets subject to amortization, Net Carrying Amount	$ 7,547	$ 8,084
Intangible assets subject to amortization, Weighted Average Useful Life (years)	14 years	14 years

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Goodwill and Intangible Assets - Summary of Amortization Expense to be Incurred in 2017 Through 2021 on Intangible Assets (Detail) $ in Thousands	Jun. 30, 2017 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
2017	$ 10,795
2018	8,063
2019	6,945
2020	6,942
2021	$ 6,942

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Accumulated Other Comprehensive Income (Loss) - Change in Accumulated Other Comprehensive Income (Loss) (AOCI) by Component, Net of Tax (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income Loss [Line Items]
AOCI, balance as of December 31, 2016			$ 781,106
Other comprehensive income (loss) before reclassifications			1,402
Amounts reclassified from AOCI			1,515
Total other comprehensive income (loss), net of tax	$ 1,760	$ 7,960	2,917	$ 11,039
AOCI, balance as of June 30, 2017	593,679		593,679
Foreign Currency Translation [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
AOCI, balance as of December 31, 2016			(8,439)
Other comprehensive income (loss) before reclassifications			1,477
Total other comprehensive income (loss), net of tax			1,477
AOCI, balance as of June 30, 2017	(6,962)		(6,962)
Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
AOCI, balance as of December 31, 2016			172
Other comprehensive income (loss) before reclassifications			(75)
Amounts reclassified from AOCI			107
Total other comprehensive income (loss), net of tax			32
AOCI, balance as of June 30, 2017	204		204
Defined Benefit Pension Plans [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
AOCI, balance as of December 31, 2016			(38,189)
Amounts reclassified from AOCI			1,408
Total other comprehensive income (loss), net of tax			1,408
AOCI, balance as of June 30, 2017	(36,781)		(36,781)
AOCI, Total [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
AOCI, balance as of December 31, 2016			(46,456)
AOCI, balance as of June 30, 2017	$ (43,539)		$ (43,539)

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Accumulated Other Comprehensive Income (Loss) - Amounts Reclassified Out of AOCI into Income Statement (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense, net	$ 6,299	$ 5,677	$ 13,038	$ 11,574
Warehousing, marketing and administrative expenses	161,695	157,625	334,717	325,303
Tax provision	(4,474)	(7,844)	(146)	(17,821)
Net income (loss)	5,096	$ 12,933	(183,498)	$ 29,463
Amount Reclassified From AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net income (loss)	732		1,515
Amount Reclassified From AOCI [Member] | Cash Flow Hedges [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax provision	(17)		(68)
Net income (loss)	28		107
Amount Reclassified From AOCI [Member] | Defined Benefit Pension Plans [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Warehousing, marketing and administrative expenses	1,134		2,268
Tax provision	(430)		(860)
Net income (loss)	704		1,408
Amount Reclassified From AOCI [Member] | Interest Rate Swap [Member] | Cash Flow Hedges [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense, net	$ 45		$ 175

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Earnings Per Share - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount	200,000	200,000	200,000	200,000
Additional authorized repurchase amount	$ 68.2		$ 68.2
Number of shares repurchased	0	0	0	241,270
Repurchase of common stock, value				$ 6.8
Common Stock [Member]
Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount			200,000

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Earnings Per Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Earnings Per Share [Abstract]
Net income (loss)		$ 5,096	$ 12,933	$ (183,498)	$ 29,463
Denominator for basic earnings per share - weighted average shares		36,673	36,512	36,659	36,552
Effect of dilutive securities: Employee stock options and restricted stock	[1]	200	398		345
Denominator for diluted earnings per share - Adjusted weighted average shares and the effect of dilutive securities		36,873	36,910	36,659	36,897
Net income (loss) per share - basic		$ 0.14	$ 0.35	$ (5.01)	$ 0.81
Net income (loss) per share - diluted	[2]	$ 0.14	$ 0.35	$ (5.01)	$ 0.80

[1] The effect of dilutive securities for employee stock options and restricted stock in the three and six months ended June 30, 2017 was affected by the adoption of ASU 2016-09 at the beginning of the year. In accordance with the standard, the effect of dilutive securities in the calculation of diluted net income per share was applied prospectively and results for the three and six months ended June 30, 2016 have not been revised.

[2] As a result of the net loss in the six months ended June 30, 2017, the effect of potentially dilutive securities would have been anti-dilutive and has been omitted from the calculation of diluted earnings per share.

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Debt - Additional Information (Detail) - USD ($)		4 Months Ended	6 Months Ended
	Feb. 22, 2017	Jun. 30, 2017	Jun. 30, 2017
Debt Instrument [Line Items]
FILO borrowing base percentage of accounts receivable		10.00%	10.00%
FILO borrowing base percentage of liquidation value of inventory		10.00%	10.00%
Maximum amount of financing upon amendment of program		$ 200,000,000	$ 200,000,000
Letters of credit issued amount		177,500,000	$ 177,500,000
2017 Credit Agreement [Member]
Debt Instrument [Line Items]
Credit agreement commencement date			Feb. 22, 2017
Credit agreement period	5 years
Line of credit facility, interest rate description			Borrowings under the 2017 Credit Agreement bear interest at LIBOR for specified interest periods, at the REVLIBOR30 Rate (as defined in the 2017 Credit Agreement) or at the Alternate Base Rate (as defined in the 2017 Credit Agreement), plus, in each case, a margin determined based on the Company’s average quarterly revolving availability. Depending on the Company’s average quarterly revolving availability, the margin on LIBOR-based loans and REVLIBOR30 Rate-based loans ranges from 1.25% to 1.75% for revolving and term loans and 2.00% to 2.50% for FILO loans, and on Alternate Base Rate loans ranges from 0.25% to 0.75% for revolving and term loans and 1.00% to 1.50% for FILO loans. From February 22, 2017 (the date of the 2017 Credit Agreement) to June 30, 2017, the applicable margin for LIBOR-based loans and REVLIBOR30 Rate-based loans is 1.50% for revolving and term loans and 2.25% for FILO loans, and for Alternate Base Rate loans is 0.50% for revolving and term loans and 1.25% for FILO loans. In addition, ECO is required to pay the lenders a commitment fee on the unutilized portion of the revolving and FILO commitments under the 2017 Credit Agreement at a rate per annum equal to 0.25%.
Unamortized deferred financing fees		7,000,000	$ 7,000,000
Borrowing base calculation, description			Availability of credit under the revolving facility will be subject to a revolving borrowing base calculation comprised of a certain percentage of the eligible accounts receivable, plus a certain percentage of the inventory, less reserves. Similarly, availability under the FILO revolving credit facility is subject to a FILO borrowing base comprised primarily of 10% of the eligible accounts receivable, plus 10% multiplied by the net orderly liquidation value percentages of the eligible inventory, less reserves.
2017 Credit Agreement [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Basis spread on variable rate			0.125%
2017 Credit Agreement [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 1,000,000,000	$ 1,000,000,000
Alternate base rate loans rates		0.50%
Fee on unutilized portion of commitments			0.25%
2017 Credit Agreement [Member] | Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates		1.50%	1.50%
2017 Credit Agreement [Member] | First In Last Out Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 100,000,000	$ 100,000,000
Alternate base rate loans rates		1.25%
Fee on unutilized portion of commitments			0.25%
2017 Credit Agreement [Member] | First In Last Out Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates		2.25%	2.25%
2017 Credit Agreement [Member] | Term Loan Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 77,600,000	$ 77,600,000
Line of credit facility, funding date			Mar. 24, 2017
Alternate base rate loans rates		0.50%
Remaining term loan		$ 76,100,000	$ 76,100,000
2017 Credit Agreement [Member] | Term Loan Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates		1.50%	1.50%
2017 Credit Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt-to-EBITDA ratio			3.50%
Letters of credit issued amount		$ 25,000,000	$ 25,000,000
Letters of credit facility, collateral amount		165,000,000	$ 165,000,000
2017 Credit Agreement [Member] | Maximum [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			0.75%
2017 Credit Agreement [Member] | Maximum [Member] | Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			1.75%
2017 Credit Agreement [Member] | Maximum [Member] | First In Last Out Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			1.50%
2017 Credit Agreement [Member] | Maximum [Member] | First In Last Out Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			2.50%
2017 Credit Agreement [Member] | Maximum [Member] | Term Loan Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			0.75%
2017 Credit Agreement [Member] | Maximum [Member] | Term Loan Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			1.75%
2017 Credit Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt-to-EBITDA ratio			3.00%
2017 Credit Agreement [Member] | Minimum [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			0.25%
2017 Credit Agreement [Member] | Minimum [Member] | Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			1.25%
2017 Credit Agreement [Member] | Minimum [Member] | First In Last Out Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			1.00%
2017 Credit Agreement [Member] | Minimum [Member] | First In Last Out Revolving Credit Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			2.00%
2017 Credit Agreement [Member] | Minimum [Member] | Term Loan Facility [Member]
Debt Instrument [Line Items]
Alternate base rate loans rates			0.25%
2017 Credit Agreement [Member] | Minimum [Member] | Term Loan Facility [Member] | REVLIBOR30 And LIBOR Based Loan [Member]
Debt Instrument [Line Items]
Line of credit facility loan rates			1.25%
3.75% Senior Secured Notes [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	3.75%
Debt instrument, maturity date			Jan. 15, 2021
2013 Note Purchase Agreement and Amendment No. 4 [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Letter of credit issued		$ 165,000,000	$ 165,000,000
2013 Note Purchase Agreement [Member]
Debt Instrument [Line Items]
Basis spread on variable rate			3.75%
Credit facility, frequency of payment and payment terms			Interest under the 2013 Note Purchase Agreement is payable semi-annually at a rate per annum equal to 3.75% (3.66% after the effect of terminating an interest rate swap).
Effective interest rate		3.66%	3.66%

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Debt - Schedule of Long-Term Debt Components (Detail) - USD ($) $ in Millions	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Mortgage & Capital Lease		$ 0.1
Transaction Costs	$ (7.0)	(1.5)
Total	511.0	609.0
2017 Credit Agreement [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Credit Agreement	76.1
2017 Credit Agreement [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit Agreement	191.9
2017 Credit Agreement [Member] | First In Last Out Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit Agreement	100.0
2013 Note Purchase Agreement [Member]
Debt Instrument [Line Items]
Note Purchase Agreement	$ 150.0	150.0
Receivables Securitization Program [Member]
Debt Instrument [Line Items]
Credit Agreement		200.0
2013 Credit Agreement [Member]
Debt Instrument [Line Items]
Credit Agreement		$ 260.4

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Pension and Post-Retirement Benefit Plans - Schedule of Components of Net Periodic Pension Cost (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan settlement loss		$ 11,744		$ 11,744
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost - benefit earned during the period	$ 321	317	$ 642	634
Interest cost on projected benefit obligation	1,862	2,173	3,724	4,516
Expected return on plan assets	(2,272)	(2,547)	(4,544)	(5,265)
Amortization of prior service cost	72	74	144	148
Amortization of actuarial loss	1,062	1,321	2,124	2,740
Defined benefit plan settlement loss		11,744		11,744
Net periodic pension cost	$ 1,045	$ 13,082	$ 2,090	$ 14,517

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Pension and Post-Retirement Benefit Plans - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Compensation And Retirement Disclosure [Abstract]
Cash contribution to pension plan during the period	$ 10.0		$ 10.0	$ 10.0
Pension plan liabilities	30.0		30.0		$ 40.2
Company contributions	$ 1.9	$ 1.9	$ 3.7	$ 3.7

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Fair Value Measurements - Schedule of Financial Instruments Measured at Fair Value (Detail) - Interest Rate Swap & Foreign Exchange Hedges [Member] - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	$ 52	$ 205
Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities	$ 52	$ 205

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Fair Value Measurements - Additional Information (Detail)	Jun. 30, 2017 USD ($)
Fair Value Disclosures [Abstract]
Assets measured at fair value on a nonrecurring basis	$ 0
Liabilities measured at fair value on a nonrecurring basis	$ 0

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Other Assets and Liabilities - Additional Information (Detail) - USD ($) $ in Millions	Jun. 30, 2017	Dec. 31, 2016
Other Assets And Liabilities [Abstract]
Receivables related to supplier allowances included Accounts receivable	$ 87.8	$ 86.9
Current and non-current prepaid customer rebates, net of allowances included in Other current assets and Other assets	50.6	47.9
Accrued customer rebates included in Accrued liabilities	$ 47.2	$ 65.3

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Income tax expense	$ 4,474	$ 7,844	$ 146	$ 17,821
(Loss) income before income taxes	$ 9,570	$ 20,777	$ (183,352)	$ 47,284
Effective income tax percent	46.80%	37.80%	(0.10%)	37.70%
Incremental tax expense	$ 500		$ 800
United States statutory income tax rate, percent			35.00%

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Legal Matters - Additional Information (Detail)			3 Months Ended	6 Months Ended	12 Months Ended
	Jan. 14, 2016 Lawsuit	May 01, 2015 Lawsuit	Jun. 30, 2017 USD ($)	Jun. 30, 2017 USD ($) Lawsuit	Dec. 31, 2016 USD ($)
Commitments And Contingencies [Line Items]
Number of lawsuits filed | Lawsuit				2
Total reserve			$ 10,000,000	$ 10,000,000
Mediation Activities and Settlement Negotiations [Member]
Commitments And Contingencies [Line Items]
Pre-tax reserve recorded				6,000,000
Warehousing, Marketing and Administrative Expenses [Member]
Commitments And Contingencies [Line Items]
Pre-tax reserve recorded			$ 3,000,000	3,000,000	$ 4,000,000
Inadvertent Violation under TCPA for Unsolicited Fax Advertisement [Member]
Commitments And Contingencies [Line Items]
Damages sought by plaintiff per violation				500
Willful Violation under TCPA for Unsolicited Fax Advertisement [Member]
Commitments And Contingencies [Line Items]
Damages sought by plaintiff per violation				$ 1,500
United States District Court California [Member]
Commitments And Contingencies [Line Items]
Number of lawsuits filed | Lawsuit		1
United States District Court Illinois [Member]
Commitments And Contingencies [Line Items]
Number of lawsuits filed | Lawsuit	1