First Quarter Highlights
- Net Income of $68.7 million, a
decrease of 12.5% from prior year
- Diluted EPS of $5.00, a
decrease of 2.3% from prior year
- Adjusted EBITDA and Adjusted EBITDA margin1 of
$103.8 million and 6.9%,
respectively
- Returned $8.5 million to
shareholders through dividends
- Named a 2023 World's Most Admired Company by Fortune
Magazine
ATLANTA, May 9, 2023
/PRNewswire/ -- Veritiv Corporation (NYSE: VRTV), a full-service
provider of business-to-business products, services and solutions,
today announced financial results for the first quarter ended
March 31, 2023.
"The ongoing execution of our commercial strategy drove record
first quarter Adjusted EBITDA margin, despite industry-wide
destocking and softening demand," said Sal
Abbate, Chief Executive Officer. "The combination of working
capital management and the benefits of our recession-resistant
business model also drove strong free cash flow for the
quarter."
Abbate concluded, "We believe the benefits from our diversified
and complementary portfolio of products, industry verticals and
customers will continue to generate strong free cash flow and
provide stability and investment optionality during this uncertain
macroeconomic environment."
For the three months ended March 31, 2023, compared to
the three months ended March 31, 2022:
- Net sales were $1.5 billion, a
decrease of 18.7% from the prior year; organic sales decreased
7.8%.
- Net income was $68.7 million,
compared to $78.5 million in the
prior year. Net restructuring charges were none, compared to
$2.7 million in the prior year.
- Basic and diluted earnings per share were $5.08 and $5.00,
respectively, compared to $5.31 and
$5.12, respectively, in the prior
year.
- Adjusted EBITDA was $103.8
million, a decrease of 13.1% from the prior year.
- Adjusted EBITDA margin was 6.9%, an increase of 50 basis points
from the prior year.
For the three months ended March 31, 2023, net cash
provided by operating activities was $70.9 million and free
cash flow was $68.0 million.
"Disciplined management of our working capital and earnings
stability resulted in strong free cash flow of $68 million for the first quarter," said
Eric Guerin, Chief Financial
Officer. "Our record low leverage ratio of 0.3x, along with an
active pipeline of inorganic opportunities, provides strategic
optionality for the Company to act on our capital allocation
priorities. Based on our results and current market trends, we are
reaffirming our guidance for 2023 as our strategic initiatives
provide confidence in achieving our financial goals for the
year."
2023 Guidance
The Company reaffirms its full year 2023 guidance. Net income is
expected to be in the range of $265
to $305 million. Diluted
earnings per share is estimated to be in the range of $19.00 to $22.00,
based on approximately 13.9 million fully diluted shares
outstanding. Adjusted EBITDA is expected to be in the range
of $430 to $490 million. Net cash provided by operating
activities and free cash flow are expected to be approximately
$305 million and $275 million, respectively. Capital investments
are estimated to be approximately $45
million, consisting of approximately $30 million of traditional capital expenditures
and approximately $15 million of
cloud computing arrangements2, consistent with our
investments in technology.
Quarterly Dividend
Veritiv Corporation's Board of Directors approved a dividend of
$0.63 per share payable on
June 5, 2023 to shareholders of
record as of the close of business on May
18, 2023.
1Adjusted EBITDA margin, a non-GAAP metric, is
defined as Adjusted EBITDA as a percentage of net sales.
2Capital expenditures are reported in cash flow
from investing activities and cloud computing arrangements are
reported in cash flow from operating activities.
Veritiv Corporation will host a conference call and webcast
today, May 9, 2023, at 9 a.m.
(ET) to discuss its first quarter results. To participate,
callers within the United States
(U.S.) and Canada can dial (888)
330-2469, and international callers can use the following link for
international access numbers,
https://events.evolveirportal.com/custom/access/2324, both using
conference ID number 3047006. Interested parties can also listen
online at ir.veritivcorp.com. A replay of the call and
webcast will be available online for a limited period of time at
ir.veritivcorp.com shortly after the webcast is completed.
Important information regarding measures not presented in
accordance with U.S. generally accepted accounting principles
("U.S. GAAP") and related reconciliations of non-GAAP financial
measures to the most comparable U.S. GAAP measures can be found in
the schedules to this press release, which should be thoroughly
reviewed.
About Veritiv
Veritiv Corporation (NYSE: VRTV), headquartered in Atlanta and a Fortune 500® company,
is a full-service provider of packaging, JanSan and hygiene
products, services and solutions. Additionally, Veritiv provides
print and publishing products. Serving customers in a wide
range of industries both in North
America and globally, Veritiv has distribution centers
throughout the U.S. and Mexico,
and team members around the world helping shape the success of its
customers. For more information about Veritiv and its business
segments visit www.veritivcorp.com.
Safe Harbor Provision
Certain statements contained in this press release regarding
Veritiv Corporation's (the "Company") future operating results,
performance, strategy, business plans, prospects and guidance,
statements related to customer demand, supply and demand
imbalances, the expected competitive landscape, the expected impact
of COVID-19 and any other statements not constituting historical
fact are "forward-looking statements" subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995.
Where possible, the words "believe," "expect," "anticipate,"
"continue," "intend," "will," "may," "should," "could," "would,"
"plan," "estimate," "predict," "potential," "goal," "outlook," or
the negative of such terms, or other comparable expressions, have
been used to identify such forward-looking statements. All
forward-looking statements reflect only the Company's current
beliefs and assumptions with respect to future results and other
matters, and are based on information currently available to the
Company. Accordingly, the statements are subject to significant
risks, uncertainties and contingencies, which could cause the
Company's actual operating results, performance, strategy, business
plans, prospects or guidance to differ materially from those
expressed in, or implied by, these statements.
Factors that could cause actual results to differ materially
from current expectations include the risks and other factors
described under "Risk Factors" and elsewhere in our Annual Report
on Form 10-K and in the Company's other publicly available reports
filed with the Securities and Exchange Commission ("SEC"). Such
risks and other factors, which in some instances are beyond the
Company's control, include: the industry-wide decline in demand for
paper and related products; increased competition from existing and
non-traditional sources; procurement and other risks in obtaining
packaging, facility products and paper from our suppliers for
resale to our customers; changes in prices for raw materials;
changes in trade policies and regulations; increases in the cost of
fuel and third-party freight and the availability of third-party
freight providers; the loss of multiple significant customers;
adverse developments in general business and economic conditions
that could impair our ability to use net operating loss
carryforwards and other deferred tax assets; our ability to
adequately protect our material intellectual property and other
proprietary rights, or to defend successfully against intellectual
property infringement claims by third parties; our ability to
attract, train and retain appropriately qualified employees; our
pension and health care costs and participation in multi-employer
pension, health and welfare plans; the effects of work stoppages,
union negotiations and labor disputes; our ability to generate
sufficient cash to service our debt; our ability to comply with the
covenants contained in our debt agreements; costs to comply with
laws, rules and regulations, including environmental, health and
safety laws, and to satisfy any liability or obligation imposed
under such laws; our ability to adequately address environmental,
social and governance matters; changes in tax laws; adverse results
from litigation, governmental investigations or audits, or
tax-related proceedings or audits; regulatory changes and judicial
rulings impacting our business; adverse impacts from the COVID-19
pandemic; the impact of adverse developments in general business
and economic conditions as well as conditions in the global capital
and credit markets on demand for our products and services, our
business including our international operations, and our customers;
foreign currency fluctuations; inclement weather, widespread
outbreak of an illness, anti-terrorism measures and other
disruptions to our supply chain, distribution system and
operations; our dependence on a variety of information technology
and telecommunications systems and the Internet; our reliance on
third-party vendors for various services; cybersecurity risks; and
other events of which we are presently unaware or that we currently
deem immaterial that may result in unexpected adverse operating
results.
The Company is not responsible for updating the information
contained in this press release beyond the published date, or for
changes made to this document by wire services or Internet service
providers. This press release is being furnished to the SEC through
a Form 8-K. The Company's Quarterly Report on Form 10-Q for
the three months ended March 31, 2023 to be filed with the SEC
may contain updates to the information included in this
release.
Financial Statements
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in millions, except
per share data, unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Net sales
|
|
$ 1,510.2
|
|
$ 1,858.1
|
Cost of products sold
(exclusive of depreciation and amortization shown separately
below)
|
|
1,144.1
|
|
1,455.4
|
Distribution
expenses
|
|
89.7
|
|
112.2
|
Selling and
administrative expenses
|
|
171.4
|
|
187.9
|
Depreciation and
amortization
|
|
10.1
|
|
12.7
|
Restructuring charges,
net
|
|
—
|
|
2.7
|
Operating
income
|
|
94.9
|
|
87.2
|
Interest expense,
net
|
|
4.7
|
|
3.5
|
Other (income) expense,
net
|
|
1.0
|
|
(0.6)
|
Income before income
taxes
|
|
89.2
|
|
84.3
|
Income tax
expense
|
|
20.5
|
|
5.8
|
Net
income
|
|
$
68.7
|
|
$
78.5
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
|
$
5.08
|
|
$
5.31
|
Diluted
|
|
$
5.00
|
|
$
5.12
|
|
|
|
|
|
Weighted-average shares
outstanding:
|
|
|
|
|
Basic
|
|
13.53
|
|
14.77
|
Diluted
|
|
13.74
|
|
15.32
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
33.0
|
|
$
40.6
|
Accounts receivable,
less allowances of $24.3 and $26.7, respectively
|
|
789.8
|
|
889.6
|
Inventories
|
|
470.9
|
|
423.9
|
Other current
assets
|
|
101.2
|
|
103.7
|
Total current
assets
|
|
1,394.9
|
|
1,457.8
|
Property and equipment
(net of accumulated depreciation and amortization
of $329.1 and $325.5,
respectively)
|
|
124.2
|
|
127.5
|
Goodwill
|
|
96.3
|
|
96.3
|
Other intangibles,
net
|
|
34.5
|
|
35.6
|
Deferred income tax
assets
|
|
29.4
|
|
29.0
|
Other non-current
assets
|
|
347.6
|
|
343.4
|
Total
assets
|
|
$
2,026.9
|
|
$
2,089.6
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
444.6
|
|
$
452.9
|
Accrued payroll and
benefits
|
|
44.1
|
|
106.2
|
Other accrued
liabilities
|
|
144.2
|
|
154.1
|
Current portion of
debt
|
|
13.6
|
|
13.4
|
Total current
liabilities
|
|
646.5
|
|
726.6
|
Long-term debt, net of
current portion
|
|
231.9
|
|
264.8
|
Defined benefit pension
obligations
|
|
0.8
|
|
0.4
|
Other non-current
liabilities
|
|
330.4
|
|
341.7
|
Total
liabilities
|
|
1,209.6
|
|
1,333.5
|
Commitments and
contingencies
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Preferred stock, $0.01
par value, 10.0 million shares authorized, none issued
|
|
—
|
|
—
|
Common stock, $0.01 par
value, 100.0 million shares authorized; shares
issued - 17.5 million
and 17.5 million, respectively; shares outstanding -
13.5
million and 13.5
million, respectively
|
|
0.2
|
|
0.2
|
Additional paid-in
capital
|
|
611.3
|
|
613.1
|
Accumulated
earnings
|
|
532.8
|
|
472.6
|
Accumulated other
comprehensive loss
|
|
(9.9)
|
|
(12.7)
|
Treasury stock at cost
- 4.0 million and 4.0 million shares, respectively
|
|
(317.1)
|
|
(317.1)
|
Total shareholders'
equity
|
|
817.3
|
|
756.1
|
Total liabilities
and shareholders' equity
|
|
$
2,026.9
|
|
$
2,089.6
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2023
|
|
2022
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
68.7
|
|
$
78.5
|
Depreciation and
amortization
|
|
10.1
|
|
12.7
|
Amortization and
write-off of deferred financing fees
|
|
0.4
|
|
0.4
|
Net (gains) losses on
disposition of assets and sale of businesses
|
|
0.0
|
|
(2.3)
|
Provision for expected
credit losses
|
|
(1.7)
|
|
(0.6)
|
Deferred income tax
provision
|
|
(0.2)
|
|
(12.7)
|
Stock-based
compensation
|
|
1.8
|
|
2.8
|
Other non-cash items,
net
|
|
(0.2)
|
|
0.5
|
Changes in operating
assets and liabilities
|
|
|
|
|
Accounts
receivable
|
|
102.2
|
|
(25.8)
|
Inventories
|
|
(45.7)
|
|
(8.8)
|
Other current
assets
|
|
3.5
|
|
(1.1)
|
Accounts
payable
|
|
19.1
|
|
4.5
|
Accrued payroll and
benefits
|
|
(69.3)
|
|
(50.6)
|
Other accrued
liabilities
|
|
(11.5)
|
|
1.0
|
Other
|
|
(6.3)
|
|
(4.4)
|
Net cash provided by
(used for) operating activities
|
|
70.9
|
|
(5.9)
|
Investing
activities
|
|
|
|
|
Property and equipment
additions
|
|
(2.9)
|
|
(9.4)
|
Proceeds from asset
sales and sale of businesses, net of cash transferred
|
|
0.2
|
|
0.2
|
Proceeds from insurance
related to property and equipment
|
|
—
|
|
2.1
|
Net cash provided by
(used for) investing activities
|
|
(2.7)
|
|
(7.1)
|
Financing
activities
|
|
|
|
|
Change in book
overdrafts
|
|
(29.0)
|
|
20.3
|
Borrowings of long-term
debt
|
|
1,459.5
|
|
1,515.2
|
Repayments of long-term
debt
|
|
(1,488.8)
|
|
(1,481.8)
|
Payments under
right-of-use finance leases
|
|
(2.5)
|
|
(3.4)
|
Payments under
vendor-based financing arrangements
|
|
(3.4)
|
|
(3.2)
|
Purchase of treasury
stock
|
|
—
|
|
(10.4)
|
Impact of tax
withholding on share-based compensation
|
|
(3.6)
|
|
(29.5)
|
Dividends paid to
shareholders
|
|
(8.5)
|
|
—
|
Other
|
|
(0.2)
|
|
0.2
|
Net cash provided by
(used for) financing activities
|
|
(76.5)
|
|
7.4
|
Effect of exchange
rate changes on cash
|
|
0.7
|
|
0.0
|
Net change in cash and
cash equivalents, including cash classified within
assets-held-for-sale
|
|
(7.6)
|
|
(5.6)
|
Less: cash included in
assets-held-for-sale, end of period
|
|
—
|
|
(9.9)
|
Net change in cash
and cash equivalents
|
|
(7.6)
|
|
(15.5)
|
Cash and cash
equivalents at beginning of period
|
|
40.6
|
|
49.3
|
Cash and cash
equivalents at end of period
|
|
$
33.0
|
|
$
33.8
|
Supplemental cash
flow information
|
|
|
|
|
Cash paid for income
taxes, net of refunds
|
|
$
21.6
|
|
$
15.1
|
Cash paid for
interest
|
|
4.2
|
|
2.9
|
Non-cash investing
and financing activities
|
|
|
|
|
Non-cash additions to
property and equipment for right-of-use finance
leases and vendor-based
financing arrangements
|
|
$
2.7
|
|
$
15.6
|
Non-cash additions to
other non-current assets for right-of-use operating
leases
|
|
14.3
|
|
31.2
|
Non-GAAP Measures
We supplement our financial information prepared in accordance
with U.S. GAAP with certain non-GAAP measures including organic
sales (net sales on an average daily sales basis, excluding revenue
from sold businesses and revenue from acquired businesses for a
period of 12 months after we complete the acquisition), Adjusted
EBITDA (earnings before interest, income taxes, depreciation and
amortization, restructuring charges, net, integration and
acquisition expenses and other similar charges including any
severance costs, costs associated with warehouse and office
openings or closings, consolidation, and relocation and other
business optimization expenses, stock-based compensation expense,
changes in the LIFO reserve, non-restructuring asset impairment
charges, non-restructuring severance charges, non-restructuring
pension charges (benefits), fair value adjustments related to
contingent liabilities assumed in mergers and acquisitions and
certain other adjustments), free cash flow and other non-GAAP
measures such as the Net Leverage Ratio (calculated as net debt
divided by trailing twelve months of Adjusted EBITDA) and Return on
Invested Capital "ROIC" (calculated as Net Operating Profit After
Tax divided by the sum of net working capital and property and
equipment. Net Operating Profit After Tax is defined as Adjusted
EBITDA less depreciation and amortization times 1 minus the
standard tax rate1). We believe investors commonly use
Adjusted EBITDA, free cash flow and these other non-GAAP measures
as key financial metrics for valuing companies; we also present
organic sales to help investors better compare period-over-period
results. In addition, the credit agreement governing our
Asset-Based Lending Facility (the "ABL Facility") permits us to
exclude the foregoing and other charges in calculating
"Consolidated EBITDA", as defined in the ABL Facility. Consolidated
EBITDA and ROIC are also used as a basis for certain compensation
programs sponsored by the Company.
Organic sales, Adjusted EBITDA, free cash flow and these other
non-GAAP measures are not alternative measures of financial
performance or liquidity under U.S. GAAP. Non-GAAP measures do not
have definitions under U.S. GAAP and may be defined differently by,
and not be comparable to, similarly titled measures used by other
companies. As a result, we consider and evaluate non-GAAP measures
in connection with a review of the most directly comparable measure
calculated in accordance with U.S. GAAP. We caution investors not
to place undue reliance on such non-GAAP measures and to consider
them with the most directly comparable U.S. GAAP measures. Organic
sales, Adjusted EBITDA, free cash flow and these other non-GAAP
measures have limitations as analytical tools and should not be
considered in isolation or as a substitute for analyzing our
results as reported under U.S. GAAP. Please see the following
tables for reconciliations of non-GAAP measures to the most
comparable U.S. GAAP measures.
1 The Company uses a standard tax rate of 26%.
Table
I
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
NET INCOME TO
ADJUSTED EBITDA; ADJUSTED EBITDA MARGIN
|
(in millions,
unaudited)
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Net income
|
|
$
68.7
|
|
$
78.5
|
Interest expense,
net
|
|
4.7
|
|
3.5
|
Income tax
expense
|
|
20.5
|
|
5.8
|
Depreciation and
amortization
|
|
10.1
|
|
12.7
|
EBITDA
|
|
104.0
|
|
100.5
|
Restructuring charges,
net
|
|
—
|
|
2.7
|
Facility closure
charges, including (gain) loss from asset disposition
|
|
(0.1)
|
|
(0.6)
|
Stock-based
compensation
|
|
1.8
|
|
2.8
|
LIFO reserve (decrease)
increase
|
|
(2.5)
|
|
11.0
|
Non-restructuring
severance charges
|
|
0.3
|
|
1.7
|
Non-restructuring
pension charges (benefits)
|
|
0.2
|
|
—
|
Other
|
|
0.1
|
|
1.4
|
Adjusted
EBITDA
|
|
$ 103.8
|
|
$ 119.5
|
|
|
|
|
|
Net sales
|
|
$
1,510.2
|
|
$
1,858.1
|
Adjusted EBITDA as a %
of net sales
|
|
6.9 %
|
|
6.4 %
|
Table
I.a.
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
ADJUSTED EBITDA
GUIDANCE
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Forecast for Year
Ending December 31, 2023
|
|
|
Low
|
|
High
|
Net
income
|
|
$
265
|
|
$
305
|
Interest expense,
net
|
|
15
|
|
15
|
Income tax
expense
|
|
95
|
|
110
|
Depreciation and
amortization
|
|
40
|
|
40
|
Other reconciling
items
|
|
15
|
|
20
|
Adjusted
EBITDA
|
|
$
430
|
|
$
490
|
Table
II
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
FREE CASH
FLOW
|
(in millions,
unaudited)
|
|
|
|
|
|
Three Months
Ended
March 31, 2023
|
Net cash provided by
(used for) operating activities
|
|
$
70.9
|
Less: Capital
expenditures
|
|
(2.9)
|
Free cash
flow
|
|
$
68.0
|
Table
II.a
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
FREE CASH FLOW
GUIDANCE
|
(in millions,
unaudited)
|
|
|
|
|
|
Forecast for Year
Ending December 31, 2023
|
Net cash provided by
(used for) operating activities
|
|
approximately
$305
|
Less: Capital
expenditures
|
|
approximately
($30)
|
Free cash
flow
|
|
approximately
$275
|
Table
III
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
NET DEBT TO ADJUSTED
EBITDA
|
(in millions,
unaudited)
|
|
|
|
March 31,
2023
|
Amount drawn on ABL
Facility
|
$
199.9
|
Less: Cash and cash
equivalents
|
(33.0)
|
Net debt
|
$
166.9
|
|
|
Last Twelve Months
Adjusted EBITDA
|
$
502.2
|
|
|
Net debt to Adjusted
EBITDA
|
0.3x
|
|
|
|
Last Twelve
Months
|
|
March 31,
2023
|
Net income
|
$
328.1
|
Interest expense,
net
|
18.9
|
Income tax
expense
|
108.7
|
Depreciation and
amortization
|
43.0
|
EBITDA
|
498.7
|
Restructuring charges,
net
|
(0.7)
|
Gain on sale of
businesses
|
(29.7)
|
Facility closure
charges, including (gain) loss from asset disposition
|
0.5
|
Stock-based
compensation
|
8.5
|
LIFO reserve (decrease)
increase
|
18.6
|
Non-restructuring
severance charges
|
2.9
|
Non-restructuring
pension charges (benefits)
|
(1.9)
|
Other
|
5.3
|
Adjusted
EBITDA
|
$
502.2
|
Table
IV
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
REPORTED NET SALES
TO ORGANIC SALES
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
|
2023
|
|
2022
|
Reported net
sales
|
|
$ 1,510.2
|
|
$ 1,858.1
|
Impact of change in
selling days (1)
|
|
—
|
|
—
|
Net sales (on an
average daily sales basis)
|
|
1,510.2
|
|
1,858.1
|
Business divestitures
(2)
|
|
—
|
|
(220.6)
|
Organic
sales
|
|
$
1,510.2
|
|
$
1,637.5
|
|
|
|
|
|
Business
Days
|
|
63
|
|
63
|
(1)
Adjustment for differences in the number of selling days, if
any.
|
(2)
Represents the net sales of each of the following divested
businesses prior to its respective divestiture: Veritiv Canada,
Inc. (May 2, 2022) and the
logistics
solutions business (September 1, 2022).
|
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SOURCE Veritiv Corporation