DEERFIELD, Ill., Oct. 26, 2016 /PRNewswire/ -- Essendant Inc.
(NASDAQ: ESND), a leading supplier of workplace essentials, today
announced financial results for the third quarter ended
September 30, 2016. Key results
for third quarter 2016 were as follows:
- Continued revenue growth with net sales increase of 1.1%
year-over-year, to $1.4 billion
- GAAP net income of $36.7 million
compared to $27.7 million last
year
- GAAP operating income of $60.3
million compared to $53.0
million last year
- GAAP diluted earnings per share of $0.99 compared to $0.74 per share last year
- Free cash flow totaled $144.2(1) million compared to
$56.8 million last year
- Adjusted EBITDA of $51.6(1) million compared to
$80.1 million last year
- Adjusted diluted earnings per share of $0.57(1) compared to $1.00 last year
- Full year adjusted diluted EPS guidance is reduced to
$1.75 to $1.90(1) per
share
"Our actions in the third quarter to advance our strategy,
increase market share, reduce inventory and improve our leverage
position showed positive impact, but we continued to face
challenging industry dynamics which negatively impacted our margin
and earnings performance," said Robert B.
Aiken, Jr., president and chief executive officer of
Essendant. "Our recent results are below our expectations for the
business. However, we are moving forward aggressively to
implement the first phase of a comprehensive multi-year
transformation program. This action builds on the organizational
changes we made earlier in the year to improve our focus on key
customer channels and is designed to deliver improved profitability
by winning back lost revenue in our JanSan distributor channel,
aligning pricing with cost to serve, enhancing our merchandising
efforts through better sourcing and assortment, driving
productivity and reducing costs, and diversifying our industrial
channel."
Mr. Aiken continued, "In light of the continued headwinds facing
our business and recognizing the fact that our transformation
efforts will take time to impact our results, we are reducing our
guidance for the balance of the year. We do not take this
decision lightly and remain committed to moving forward with focus
and urgency to implement changes to drive improved results and
value."
Third Quarter Sales
- Net sales increased 1.1%, driven principally by sales in our
office products category, partly offset by continued declines in
our Industrial category
- Janitorial/Sanitation: decreased $4.9 million, or 1.3%, to $372.9 million
- Technology Products: increased $2.3 million, or 0.7%, to $345.6 million
- Traditional Office Products: increased $3.7 million, or 1.6% to $240.0 million
- Industrial: decreased $6.9
million, or 4.7%, to $139.8
million
- Cut-sheet Paper: increased $23.0
million, or 27.6% to $106.6
million
- Automotive: increased $3.0
million, or 3.9%, to $78.6
million
- Office Furniture: decreased $5.5
million, or 6.3%, to $82.2
million
Third Quarter Performance
- Gross profit was $198.9 million,
a decline from $225.1 million in the
prior year resulting from:
- Shifts in customer channel and product category mix
- Lower supplier allowances related to reductions of inventory
during the quarter
- Higher freight cost due to new customers, growth by large
customers and inflation
- Inventory expense favorability in 2015 following a last-in
first-out method (LIFO) conversion that did not recur
- Operating expenses were $138.5
million, a decline from $172.2
million in the prior year resulting from:
- Gains on the sale of the City of
Industry, CA facility in the third quarter of 2016 totaling
$20.5 million, pre-tax
- Third quarter 2015 impact of the impairment of seller notes
totaling $10.7 million, pre-tax
- Income tax expense was $17.1
million compared to $20.0
million in the prior year resulting from:
- Utilization of a capital loss carry forward totaling
$5.0 million
- Additional tax expense of $1.7
million related to dividends from a foreign subsidiary
- Diluted earnings per share increased to $0.99 per share compared to $0.74 per share last year. Adjusted earnings per
share were $0.57(1)
compared to $1.00 last year
- Free cash flow increased to $144.2(1) million from $56.8 million in the prior year resulting from:
- Reduction in inventory of $117.8
million
- Proceeds of $31.0 million from a
sale of the City of Industry
facility
- Cash outflows of $39.9 million
for a 2015 acquisition
- Reduced debt leverage from 3.5x at June
30, 2016 to 2.8x at September 30,
2016
Guidance
The company provided updated guidance and currently expects the
following in 2016, excluding any acquisitions or unusual
charges:
Full-Year
2016
|
|
|
|
Net sales
|
$5.325 billion to
$5.375 billion
|
Adjusted diluted
earnings per share(1)
|
$1.75 to $1.90 per
share
|
Free cash
flow(1)
|
Greater than $150
million in the second half of 2016
|
|
|
|
|
|
|
|
Conference Call
Essendant will hold a conference call followed by a question and
answer session on Thursday, October 27,
2016, at 7:30 a.m. CDT, to
discuss third quarter 2016 results. To participate, callers within
the U.S. and Canada should dial
(877) 358-2531 and international callers should dial (412) 902-6623
approximately 10 minutes before the presentation. The
conference ID is "10091551." To listen to the webcast,
participants should visit the Investors section of the company's
website (investors.essendant.com), and click on the "Q3-16 Earnings
Release" button on the right side of the page, several minutes
before the event is broadcast. Interested parties can
access an archived version of the call, this news release, a
financial slide presentation and other information related to the
call, also located on the quarterly results section of Essendant's
investor website, about two hours after the call ends.
Forward-Looking Statements
This news release contains forward-looking statements, including
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 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, but are not limited to the
following: Essendant's reliance on key customers, and the risks
inherent in continuing or increased customer concentration and
consolidations; end-user demand for products in the office,
technology, and furniture product categories may continue to
decline; the impact of Essendant's repositioning activities on
Essendant's customers, suppliers, and operations; Essendant's
reliance on independent resellers for a significant percentage of
its net sales and, therefore, the importance of the continued
independence, viability and success of these resellers; prevailing
economic conditions and changes affecting the business products
industry and the general economy; Essendant's ability to maintain
its existing information technology systems and to successfully
procure, develop and implement new systems and services without
business disruption or other unanticipated difficulties or costs;
the impact of price transparency, customer consolidation, and
changes in product sales mix on Essendant's margins; the impact on
the company's reputation and relationships of a breach of the
company's information technology systems; the risks and expense
associated with Essendant's obligations to maintain the security of
private information provided by Essendant's customers; Essendant's
reliance on supplier allowances and promotional incentives; the
creditworthiness of Essendant's customers; continuing or increasing
competitive activity and pricing pressures within existing or
expanded product manufacturers who sell directly to Essendant's
customers; the impact of supply chain disruptions or changes in key
suppliers' distribution strategies; Essendant's ability to manage
inventory in order to maximize sales and supplier allowances while
minimizing excess and obsolete inventory; Essendant's success in
effectively identifying, consummating and integrating acquisitions;
the costs and risks related to compliance with laws, regulations
and industry standards affecting Essendant's business; the
availability of financing sources to meet Essendant's business
needs; Essendant's reliance on key management personnel, both in
day-to-day operations and in execution of new business initiatives;
and the effects of hurricanes, acts of terrorism and other natural
or man-made disruptions.
Shareholders, potential investors and other readers are urged to
consider these risks and uncertainties in evaluating
forward-looking statements and are cautioned not to place undue
reliance on the forward-looking statements. For additional
information about risks and uncertainties that could materially
affect Essendant's results, please see the company's Securities and
Exchange Commission filings. The forward-looking information
in this news release is made as of this date only, and the company
does not undertake to update any forward-looking statement.
Investors are advised to consult any further disclosure by
Essendant regarding the matters discussed in this news release in
its filings with the Securities and Exchange Commission and in
other written statements it makes from time to time. It is
not possible to anticipate or foresee all risks and uncertainties,
and investors should not consider any list of risks and
uncertainties to be exhaustive or complete.
Company Overview
Essendant Inc. is a leading supplier of workplace essentials,
with 2015 net sales of $5.4 billion.
The company stocks a broad assortment of over 180,000 items,
including technology products, traditional office products,
janitorial and breakroom supplies, office furniture, industrial
supplies, and automotive aftermarket tools. The Company's network
of 71 distribution centers enables the Company to ship most
products overnight to more than ninety percent of the U.S. For more
information, visit www.essendant.com.
Essendant common stock trades on the NASDAQ Global Select Market
under the symbol ESND.
For Further Information
Contact:
investorrelations@essendant.com
(847) 627-2900
(1)
|
This is non-GAAP
information. See the Reconciliation of Non-GAAP Financial Measures
section of this document for more information.
|
|
Note: All EPS numbers
in this document are diluted unless stated otherwise.
|
Essendant Inc. and
Subsidiaries
|
Condensed
Consolidated Statements of Income
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
For the Three
Months Ended
|
|
|
For the Nine
Months Ended
|
|
September 30,
|
|
|
September 30,
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Net sales
|
$
|
1,407,504
|
|
|
$
|
1,391,545
|
|
|
$
|
4,114,323
|
|
|
$
|
4,065,719
|
Cost of goods
sold
|
|
1,208,650
|
|
|
|
1,166,402
|
|
|
|
3,519,564
|
|
|
|
3,430,062
|
Gross
profit
|
|
198,854
|
|
|
|
225,143
|
|
|
|
594,759
|
|
|
|
635,657
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehousing, marketing and
administrative expenses
|
|
138,107
|
|
|
|
172,159
|
|
|
|
463,410
|
|
|
|
526,653
|
Defined benefit plan
settlement loss (Note 10)
|
|
419
|
|
|
|
-
|
|
|
|
12,163
|
|
|
|
-
|
Operating
income
|
|
60,328
|
|
|
|
52,984
|
|
|
|
119,186
|
|
|
|
109,004
|
Interest expense,
net
|
|
6,484
|
|
|
|
5,300
|
|
|
|
18,058
|
|
|
|
14,918
|
Income before income
taxes
|
|
53,844
|
|
|
|
47,684
|
|
|
|
101,128
|
|
|
|
94,086
|
Income tax
expense
|
|
17,102
|
|
|
|
20,017
|
|
|
|
34,923
|
|
|
|
42,594
|
Net income
|
$
|
36,742
|
|
|
$
|
27,667
|
|
|
$
|
66,205
|
|
|
$
|
51,492
|
Net income per share
- basic:
|
$
|
1.00
|
|
|
$
|
0.74
|
|
|
$
|
1.81
|
|
|
$
|
1.36
|
Average number of common
shares outstanding - basic
|
|
36,578
|
|
|
|
37,300
|
|
|
|
36,560
|
|
|
|
37,724
|
Net income per share
- diluted:
|
$
|
0.99
|
|
|
$
|
0.74
|
|
|
$
|
1.79
|
|
|
$
|
1.35
|
Average number of common
shares outstanding - diluted
|
|
36,938
|
|
|
|
37,608
|
|
|
|
36,896
|
|
|
|
38,109
|
Dividends declared
per share
|
$
|
0.14
|
|
|
$
|
0.14
|
|
|
$
|
0.42
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Essendant Inc. and
Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands, except share data)
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
As of
September 30,
|
|
|
As of
December 31,
|
|
2016
|
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
22,647
|
|
|
$
|
29,983
|
Accounts receivable,
less allowance for doubtful accounts of $16,696 in 2016 and $17,810
in 2015
|
|
752,260
|
|
|
|
716,537
|
Inventories
|
|
850,463
|
|
|
|
922,162
|
Other current
assets
|
|
44,771
|
|
|
|
27,310
|
Total current
assets
|
|
1,670,141
|
|
|
|
1,695,992
|
Property, plant and
equipment, net
|
|
126,334
|
|
|
|
133,751
|
Goodwill
|
|
298,242
|
|
|
|
299,355
|
Intangible assets,
net
|
|
86,886
|
|
|
|
96,413
|
Other long-term
assets
|
|
55,059
|
|
|
|
37,348
|
Total
assets
|
$
|
2,236,662
|
|
|
$
|
2,262,859
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
540,743
|
|
|
$
|
531,949
|
Accrued
liabilities
|
|
192,189
|
|
|
|
177,472
|
Current maturities of
long-term debt
|
|
35
|
|
|
|
51
|
Total current
liabilities
|
|
732,967
|
|
|
|
709,472
|
Deferred income
taxes
|
|
8,372
|
|
|
|
11,901
|
Long-term
debt
|
|
620,155
|
|
|
|
716,264
|
Other long-term
liabilities
|
|
92,535
|
|
|
|
101,488
|
Total
liabilities
|
|
1,454,029
|
|
|
|
1,539,125
|
Stockholders'
equity:
|
|
|
|
|
|
|
Common stock, $0.10
par value; authorized - 100,000,000 shares, issued - 74,435,628
shares in 2016 and 2015
|
|
7,444
|
|
|
|
7,444
|
Additional paid-in
capital
|
|
406,964
|
|
|
|
410,927
|
Treasury stock, at
cost – 36,967,378 shares in 2016 and 37,178,394 shares in
2015
|
|
(1,097,094)
|
|
|
|
(1,100,867)
|
Retained
earnings
|
|
1,514,573
|
|
|
|
1,463,821
|
Accumulated other
comprehensive loss
|
|
(49,254)
|
|
|
|
(57,591)
|
Total stockholders'
equity
|
|
782,633
|
|
|
|
723,734
|
Total liabilities and
stockholders' equity
|
$
|
2,236,662
|
|
|
$
|
2,262,859
|
Essendant Inc. and
Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
|
For the Nine
Months Ended
|
|
September 30,
|
|
2016
|
|
|
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
Net income
|
$
|
66,205
|
|
|
$
|
51,492
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
34,199
|
|
|
|
36,344
|
Share-based
compensation
|
|
6,903
|
|
|
|
6,447
|
(Gain) loss on the
disposition of property, plant and equipment
|
|
(21,027)
|
|
|
|
1,562
|
Amortization of
capitalized financing costs
|
|
502
|
|
|
|
659
|
Excess tax cost
(benefit) related to share-based compensation
|
|
960
|
|
|
|
(402)
|
Asset impairment
charges
|
|
-
|
|
|
|
34,893
|
Loss on sale of equity
investment
|
|
-
|
|
|
|
33
|
Deferred income
taxes
|
|
(6,970)
|
|
|
|
(15,285)
|
Pension settlement
charge
|
|
12,163
|
|
|
|
-
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Increase in accounts
receivable, net
|
|
(35,457)
|
|
|
|
(31,288)
|
Decrease in
inventory
|
|
73,735
|
|
|
|
54,354
|
Increase in other
assets
|
|
(35,221)
|
|
|
|
(8,720)
|
Increase in accounts
payable
|
|
8,902
|
|
|
|
50,412
|
Increase in accrued
liabilities
|
|
13,659
|
|
|
|
6,500
|
Decrease in other
liabilities
|
|
(12,585)
|
|
|
|
(3,342)
|
Net cash provided by
operating activities
|
|
105,968
|
|
|
|
183,659
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
Capital
expenditures
|
|
(28,167)
|
|
|
|
(18,133)
|
Proceeds from the
disposition of property, plant and equipment
|
|
33,890
|
|
|
|
184
|
Acquisition, net of
cash acquired
|
|
-
|
|
|
|
(40,471)
|
Proceeds from sale of
equity investment
|
|
-
|
|
|
|
612
|
Net cash provided by
(used in) investing activities
|
|
5,723
|
|
|
|
(57,808)
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
Net repayments under
revolving credit facility
|
|
(96,640)
|
|
|
|
(45,309)
|
Net proceeds
(disbursements) from share-based compensation
arrangements
|
|
621
|
|
|
|
(1,507)
|
Acquisition of
treasury stock, at cost
|
|
(6,839)
|
|
|
|
(55,677)
|
Payment of cash
dividends
|
|
(15,355)
|
|
|
|
(15,976)
|
Excess tax (cost)
benefit related to share-based compensation
|
|
(960)
|
|
|
|
402
|
Payment of debt
issuance costs
|
|
(86)
|
|
|
|
(36)
|
Net cash used in
financing activities
|
|
(119,259)
|
|
|
|
(118,103)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
232
|
|
|
|
(513)
|
Net change in cash
and cash equivalents
|
|
(7,336)
|
|
|
|
7,235
|
Cash and cash
equivalents, beginning of period
|
|
29,983
|
|
|
|
20,812
|
Cash and cash
equivalents, end of period
|
$
|
22,647
|
|
|
$
|
28,047
|
Other Cash Flow
Information:
|
|
|
|
|
|
|
Income tax payments,
net
|
$
|
27,821
|
|
|
$
|
53,704
|
Interest
paid
|
|
19,607
|
|
|
|
16,032
|
Essendant Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Expenses, Adjusted Operating Income, Adjusted
Net Income,
Adjusted Diluted Earnings Per Share,
Adjusted EBITDA, and Free Cash Flow
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 nine months ended September 30, 2016 and 2015 (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 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.
The Company commenced two such restructuring programs during
2015.
- 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.
The Company recognized a gain on the sale of its City of Industry facility in the third quarter
of 2016, a loss on the sale and related impairment of intangible
assets of the operations in Mexico
in 2015, and a loss on the sale and related impairment of
intangible assets of its software subsidiary in 2014, recording an
impairment of the seller notes in the third quarter of 2015.
Due to the sale of the City of
Industry facility, the Company was able to utilize its
capital loss carryforwards. This utilization resulted in the
release of the valuation allowance previously established against
the deferred tax asset. The $5.0
million tax benefit from the release of the valuation
allowance reduced the effective tax rate for the three and nine
months ended September 30, 2016, by
9.2% and 4.9%, respectively.
- 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.
Two operating leaders were severed from the Company in the third
quarter of 2016, which were not part of a restructuring
program.
- Asset impairments. Changes in strategy or
macroeconomic events may cause asset impairments.
The Company recorded impairment and accelerated amortization of its
trademarks upon the announcement of its rebranding effort in
2015.
- 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 charges include items such as settlement charges
related to the defined benefit plan settlement in 2016 and the tax
impact of the dividend from a foreign subsidiary.
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.
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 the non-cash impact of acquisitions and divestitures.
Guidance. Adjusted diluted earnings per share and free
cash flow are non-GAAP measures. A quantitative reconciliation of
our non-GAAP guidance to the corresponding GAAP information is not
available because the non-GAAP guidance excludes certain GAAP
information that is uncertain and difficult to predict. The
adjusted diluted earnings per share guidance excludes income in the
first nine months of 2016 of $0.22
per share related to a settlement charge for the defined benefit
plan, gain on sale of City of
Industry facility, severance costs for operating leadership,
restructuring charges, and non-GAAP tax provision. Actual amounts
for these measures for the three and nine months ended September 30, 2016 appear in the Non-GAAP table
included later in this section. For the remainder of the year, the
factors that will be excluded are currently unknown due to the
level of unpredictability and uncertainty associated with these
items, but may include actions such as gain or loss on future sales
of assets or businesses, future restructuring charges, non-GAAP tax
adjustments, cash flow impacts of acquisitions, and other
actions.
Essendant Inc. and
Subsidiaries
|
Reconciliation of
Non-GAAP Financial Measures
|
Adjusted Operating
Expenses, Adjusted Operating Income, Adjusted Net
Income,
|
Adjusted Diluted
Earnings Per Share, Adjusted EBITDA, and Free Cash
Flow
|
(unaudited)
|
(in thousands, except
per share data)
|
|
|
For the Three
Months Ended September 30,
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
138,526
|
|
|
$
|
172,159
|
Settlement charge
related to the defined benefit plan
|
|
(419)
|
|
|
|
-
|
Gain on sale of City
of Industry facility
|
|
20,541
|
|
|
|
-
|
Severance costs for
operating leadership
|
|
(1,245)
|
|
|
|
-
|
Restructuring
charges
|
|
1,210
|
|
|
|
(200)
|
Impairment of assets
and accelerated amortization related to rebranding
|
|
-
|
|
|
|
(511)
|
Impairment of seller
notes
|
|
-
|
|
|
|
(10,738)
|
Loss on sale of Mexico
business and related costs
|
|
-
|
|
|
|
(2,072)
|
Adjusted operating
expenses
|
$
|
158,613
|
|
|
$
|
158,638
|
|
|
|
|
|
|
|
Operating
income
|
$
|
60,328
|
|
|
$
|
52,984
|
Operating expense
adjustments noted above
|
|
(20,087)
|
|
|
|
13,521
|
Adjusted operating
income
|
$
|
40,241
|
|
|
$
|
66,505
|
|
|
|
|
|
|
|
Net income
|
$
|
36,742
|
|
|
$
|
27,667
|
Operating
expense adjustments noted above
|
|
(20,087)
|
|
|
|
13,521
|
Non-GAAP tax provision
on adjustments
|
|
|
|
|
|
|
Settlement charge
related to the defined benefit plan
|
|
(158)
|
|
|
|
-
|
Gain on sale of City
of Industry facility
|
|
2,789
|
|
|
|
-
|
Severance costs for
operating leadership
|
|
(469)
|
|
|
|
-
|
Restructuring
charges
|
|
456
|
|
|
|
(76)
|
Dividend from a
foreign subsidiary
|
|
1,666
|
|
|
|
-
|
Impairment of assets
and accelerated amortization related to rebranding
|
|
-
|
|
|
|
(194)
|
Impairment of seller
notes
|
|
-
|
|
|
|
(4,080)
|
Loss on sale of Mexico
business and related costs
|
|
-
|
|
|
|
846
|
Adjusted net
income
|
$
|
20,939
|
|
|
$
|
37,684
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.99
|
|
|
$
|
0.74
|
Operating expense
adjustments noted above
|
|
(0.54)
|
|
|
|
0.36
|
Non-GAAP tax provision
on adjustments
|
|
0.12
|
|
|
|
(0.10)
|
Adjusted diluted
earnings per share
|
$
|
0.57
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
Net income
|
$
|
36,742
|
|
|
$
|
27,667
|
Provision for income
taxes
|
|
17,102
|
|
|
|
20,017
|
Interest expense,
net
|
|
6,484
|
|
|
|
5,300
|
Depreciation and
amortization
|
|
10,046
|
|
|
|
10,424
|
Equity compensation
expense
|
|
1,355
|
|
|
|
3,179
|
Operating expense
adjustments noted above
|
|
(20,087)
|
|
|
|
13,521
|
Adjusted earnings
before interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
51,642
|
|
|
$
|
80,108
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
121,952
|
|
|
$
|
62,811
|
Net cash provided by
(used in) investing activities
|
|
22,280
|
|
|
|
(45,363)
|
Less: Acquisition, net
of cash acquired
|
|
-
|
|
|
|
39,939
|
Add: Sale of equity
investment
|
|
-
|
|
|
|
(612)
|
Free cash
flow
|
$
|
144,232
|
|
|
$
|
56,775
|
Essendant Inc. and
Subsidiaries
|
Reconciliation of
Non-GAAP Financial Measures
|
Adjusted Operating
Expenses, Adjusted Operating Income, Adjusted Net
Income,
|
Adjusted Diluted
Earnings Per Share, Adjusted EBITDA, and Free Cash
Flow
|
(unaudited)
|
(in thousands, except
per share data)
|
|
|
For the Nine
Months Ended September 30,
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
475,573
|
|
|
$
|
526,653
|
Settlement charge
related to the defined benefit plan
|
|
(12,163)
|
|
|
|
-
|
Gain on sale of City
of Industry facility
|
|
20,541
|
|
|
|
-
|
Severance costs for
operating leadership
|
|
(1,245)
|
|
|
|
-
|
Restructuring
charges
|
|
956
|
|
|
|
(6,495)
|
Impairment of assets
and accelerated amortization related to rebranding
|
|
-
|
|
|
|
(11,485)
|
Impairment of seller
notes
|
|
-
|
|
|
|
(10,738)
|
Loss on sale of Mexico
business and related costs
|
|
-
|
|
|
|
(16,999)
|
Adjusted operating
expenses
|
$
|
483,662
|
|
|
$
|
480,936
|
|
|
|
|
|
|
|
Operating
income
|
$
|
119,186
|
|
|
$
|
109,004
|
Operating expense
adjustments noted above
|
|
(8,089)
|
|
|
|
45,717
|
Adjusted operating
income
|
$
|
111,097
|
|
|
$
|
154,721
|
|
|
|
|
|
|
|
Net income
|
$
|
66,205
|
|
|
$
|
51,492
|
Operating expense
adjustments noted above
|
|
(8,089)
|
|
|
|
45,717
|
Non-GAAP tax provision
on adjustments
|
|
|
|
|
|
|
Settlement charge
related to the defined benefit plan
|
|
(4,574)
|
|
|
|
-
|
Gain on sale of City
of Industry facility
|
|
2,789
|
|
|
|
-
|
Severance costs for
operating leadership
|
|
(469)
|
|
|
|
-
|
Restructuring
charges
|
|
357
|
|
|
|
(2,468)
|
Dividend from a
foreign subsidiary
|
|
1,666
|
|
|
|
-
|
Impairment of assets
and accelerated amortization related to rebranding
|
|
-
|
|
|
|
(4,364)
|
Impairment of seller
notes
|
|
-
|
|
|
|
(4,080)
|
Loss on sale of Mexico
business and related costs
|
|
-
|
|
|
|
49
|
Adjusted net
income
|
$
|
57,885
|
|
|
$
|
86,346
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
1.79
|
|
|
$
|
1.35
|
Operating expense
adjustments noted above
|
|
(0.22)
|
|
|
|
1.20
|
Non-GAAP tax provision
on adjustments
|
|
-
|
|
|
|
(0.29)
|
Adjusted diluted net
income per share
|
$
|
1.57
|
|
|
$
|
2.26
|
|
|
|
|
|
|
|
Net income
|
$
|
66,205
|
|
|
$
|
51,492
|
Provision for income
taxes
|
|
34,923
|
|
|
|
42,594
|
Interest expense,
net
|
|
18,058
|
|
|
|
14,918
|
Depreciation and
amortization
|
|
30,500
|
|
|
|
31,356
|
Equity compensation
expense
|
|
7,044
|
|
|
|
6,447
|
Operating expense
adjustments noted above
|
|
(8,089)
|
|
|
|
45,717
|
Adjusted earnings
before interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
148,641
|
|
|
$
|
192,524
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
105,968
|
|
|
$
|
183,659
|
Net cash provided by
(used in) investing activities
|
|
5,723
|
|
|
|
(57,808)
|
Less: Acquisitions,
net of cash acquired
|
|
-
|
|
|
|
(40,471)
|
Add: Sale of equity
investment
|
|
-
|
|
|
|
612
|
Free cash
flow
|
$
|
111,691
|
|
|
$
|
85,992
|
|
|
|
|
|
|
|
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SOURCE Essendant Inc.