DEERFIELD, Ill., Feb. 21, 2018 /PRNewswire/ -- Essendant Inc.
(Nasdaq: ESND), a leading national distributor of workplace items,
today announced financial results for the fourth quarter and year
ended December 31, 2017. The Company
also announced details of a restructuring program to support the
execution of its strategic drivers.
Fourth Quarter 2017 Summary
- Revenue decreased 4.5% compared to the fourth quarter last
year, to $1.2 billion
- GAAP loss per share was $(0.04),
compared to a loss of $(0.06) per
share in the fourth quarter 2016
- Adjusted diluted income per share(1) was
$0.11, compared to adjusted diluted
loss per share of $(0.02) in the
fourth quarter last year
"We are continuing to implement the strategic drivers that I
described last quarter: 1) improving efficiency across our
distribution network and reducing our cost base, 2) accelerating
sales performance in key channels where we are positioned to grow,
and 3) advancing supplier partnerships that leverage our network
and capabilities," said Ric
Phillips, President and Chief Executive Officer of
Essendant. "I am pleased with our early progress and we continue to
build momentum. We have seen growth in our key JanSan
reseller channel and the Industrial reseller channel, though
overall sales continued to be significantly pressured by changes in
the sourcing strategies of the national resellers, as reflected in
our product category sales results. We also have advanced our
inbound freight consolidation consistent with our plans.
Today we are providing details of our restructuring program to
consolidate our distribution network, reduce administrative costs,
and refine our product assortment. These actions enable our
strategic drivers and will create value over time."
Fourth Quarter Performance
- Net sales decreased 4.5% compared to the prior year quarter,
driven principally by reduced sales in the national reseller
channel. The product category results are as follows.
-
- JanSan Products: decreased $31.5
million, or 9.4%, to $304.0
million
- Technology Products: decreased $26.6 million, or 8.5%, to $285.0 million
- Traditional Office Products: decreased $8.8 million, or 4.8%, to $175.4 million
- Industrial Supplies: increased $15.3 million, or 11.0%, to $154.1 million
- Cut-sheet Paper Products: decreased $3.3 million, or 3.3%, to $98.2 million
- Automotive: increased $9.4
million, or 12.1%, to $87.4
million
- Office Furniture: decreased $11.0
million, or 16.4%, to $56.2
million
- Gross profit was $170.9 million,
an increase of $5.8 million from
$165.1 million in the prior year
quarter primarily resulting from a higher product margin reflecting
a $3.9 million increase in supplier
allowances and a $1.6 million
favorable inventory valuation as compared to the prior year
quarter.
- Operating expenses were $161.0
million, a decrease from $166.8
million in the prior year quarter. Adjusted operating
expenses in 2017 of $155.9 million
decreased from $162.4 million in 2016
which included an allowance on receivables from one customer
totaling $13.3 million in 2016.
Adjusted operating expenses in 2017 were also impacted by higher
inventory related expenses, an incentive compensation reset and
facility move costs.
- Income tax expense was $4.9
million in the fourth quarter 2017 as compared to income tax
benefit of $4.1 million in the prior
year. The fourth quarter 2017 tax expense increased primarily as a
result of the "Tax Cuts and Jobs Act" enacted in
December 2017, totaling $2.6 million, and increased state tax
expense.
- GAAP loss per share was $(0.04)
per share compared to a loss of $(0.06) per share in the fourth quarter last
year. Adjusted diluted earnings per share(1) was
$0.11 compared to adjusted loss per
share of $(0.02) in the fourth
quarter last year.
- Free cash flow totaled $(33.4)
million in the fourth quarter 2017, compared to free cash
flow of $15.5 million in the prior
year quarter. The decline in the fourth quarter 2017 was primarily
a result of higher inventory balances in the fourth quarter 2017 as
compared to the third quarter 2017, whereas the increase in the
2016 fourth quarter was primarily due to reductions in accounts
receivable.
Full Year 2017 Summary
- Revenue, workday adjusted, declined 5.8% year-over-year, to
$5.0 billion.
- GAAP (loss) per share was $(7.27), compared to diluted income per share of
$1.73 in 2016, impacted by goodwill
impairments and lower gross profit in 2017.
- Adjusted diluted earnings per share(1) was
$0.67, compared to $1.54 in 2016.
- Free cash flow(1) totaled $147.1 million in 2017, compared to $127.2 million in 2016, which drove over a
$100 million reduction in debt to
$504.4 million.
Restructuring Program
Essendant has launched a
restructuring program to advance the Company's strategic drivers by
reducing its cost base, aligning organizational infrastructure and
leadership with the Company's growth channels to drive sales, and
providing capacity to invest in products with preferred suppliers
and in growth categories. The Company expects the
restructuring program and other initiatives to reduce costs
beginning in 2018 and reach run-rate annual savings of more than
$50 million by 2020, with more than
half achieved in 2018.
The program includes facility consolidations and workforce
reductions with an estimated cash cost of $30 million to $40
million over the restructuring period, which began in the
first quarter of 2018.
Product assortment refinements are also planned to eliminate
items that have limited availability and lower sales. This is
expected to improve service levels while having a minimal impact on
sales. It will also increase capacity to support expansion into new
categories to support customer growth, and is also necessary to
execute the planned facility consolidations. A non-cash
charge related to these refinements is expected in the first
quarter of 2018 and estimated in the range of $42 million to $48
million.
Outlook for 2018
The following outlooks exclude the
impacts of any new acquisitions or unusual charges.
- Full year 2018 net sales are expected to be down 3% to 6% from
the prior year.
- Adjusted diluted earnings per share(1) in the first
quarter of 2018 is expected to be lower than the fourth quarter of
2017, reflecting impacts from the national reseller sales decline,
the annual first quarter reset of employee time off expense and
lower supplier allowances resulting from opportunistic inventory
purchases.
- Free cash flow(1) for 2018 is expected to be in
excess of $40 million for the full
year.
Conference Call
Essendant will hold a conference call
followed by a question and answer session on Thursday, February 22, 2018, at 7:30 a.m. CST, to discuss fourth quarter and full
year 2017 results. Investors may participate in the earnings call
by dialing (877) 358-2531 in the U.S. and Canada or (412) 902-6623 if international and
ask to be joined into the Essendant call. To listen to the
webcast, participants should visit the Investors section of the
company's website (investors.essendant.com), and click on the
"Essendant Q4 2017 Earnings Call" 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, within 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: market dynamics that
create sales risks, including Essendant's reliance on key
customers, the risks inherent in continuing or increased customer
concentration and consolidations, efforts by suppliers and
customers to bypass the Company and transact directly with each
other, and competition from e-commerce businesses and other
resellers increasing their presence at the wholesale level; the
impact of price transparency, customer consolidation and product
sales mix changes on the Company's sales and margins; Essendant's
reliance on supplier allowances and promotional incentives;
Essendant's exposure to the credit risk of its customers; potential
disruptions to the Company's relationships with customers and
suppliers due to the Company's significant cost reduction
initiatives; continuing or increasing competitive activity and
pricing pressures within existing or expanded product categories,
including competition from e-commerce businesses and the online
branches of brick-and-mortar businesses; the impact of supply chain
disruptions or changes in key suppliers' distribution strategies;
continued declines in end-user demand for products in the office,
technology and furniture product categories; financial cycles due
to secular consumer demand, recession or other events, most notably
in the Company's Industrial and Automotive businesses; the impact
of the Company's strategic drivers and possible disruption of
business operations and relationships with customers and suppliers;
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; Essendant's ability to
attract and retain key management personnel; the costs and risks
related to compliance with laws, regulations and industry standards
affecting Essendant's business; 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 on the Company's reputation and relationships of a
breach of the Company's information technology systems or a failure
to maintain the security of private information; the availability
of financing sources to meet Essendant's business needs; and
unexpected events that could disrupt business operations,
increasing costs and decreasing revenues.
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 any obligation 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 national
distributor of workplace items, with 2017 net sales of $5.0 billion. The company provides access to a
broad assortment of over 170,000 items, including janitorial and
breakroom supplies, technology products, traditional office
products, industrial supplies, cut sheet paper products, automotive
products and office furniture. Essendant serves a diverse group of
customers, including independent resellers, national resellers and
e-commerce businesses. The Company's network of 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.
(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, except losses or unless stated
otherwise.
|
Essendant Inc. and
Subsidiaries
|
Condensed
Consolidated Statements of Operations
|
(in thousands, except
per share data)
|
|
|
For the Three Months Ended
|
|
|
For the Years
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Net sales
|
$
|
1,198,309
|
|
|
$
|
1,254,699
|
|
|
$
|
5,037,327
|
|
|
$
|
5,369,022
|
|
|
Cost of goods
sold
|
|
1,027,441
|
|
|
|
1,089,597
|
|
|
|
4,331,273
|
|
|
|
4,609,161
|
|
|
Gross
profit
|
|
170,868
|
|
|
|
165,102
|
|
|
|
706,054
|
|
|
|
759,861
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehousing, marketing
and administrative expenses
|
|
161,037
|
|
|
|
166,415
|
|
|
|
664,280
|
|
|
|
629,825
|
|
|
Impairments of
goodwill and intangible assets
|
|
-
|
|
|
|
-
|
|
|
|
285,166
|
|
|
|
-
|
|
|
Defined benefit plan
settlement loss
|
|
-
|
|
|
|
347
|
|
|
|
-
|
|
|
|
12,510
|
|
|
Operating income
(loss)
|
|
9,831
|
|
|
|
(1,660)
|
|
|
|
(243,392)
|
|
|
|
117,526
|
|
|
Interest expense,
net
|
|
6,463
|
|
|
|
4,813
|
|
|
|
25,618
|
|
|
|
22,871
|
|
|
Income (loss) before
income taxes
|
|
3,368
|
|
|
|
(6,473)
|
|
|
|
(269,010)
|
|
|
|
94,655
|
|
|
Income tax (benefit)
expense
|
|
4,914
|
|
|
|
(4,120)
|
|
|
|
(2,029)
|
|
|
|
30,803
|
|
|
Net income
(loss)
|
$
|
(1,546)
|
|
|
$
|
(2,353)
|
|
|
$
|
(266,981)
|
|
|
$
|
63,852
|
|
|
Net income (loss) per share
- basic
|
$
|
(0.04)
|
|
|
$
|
(0.06)
|
|
|
$
|
(7.27)
|
|
|
$
|
1.75
|
|
|
Average number of common
shares outstanding - basic
|
|
36,846
|
|
|
|
36,638
|
|
|
|
36,729
|
|
|
|
36,580
|
|
|
Net income (loss) per share
- diluted
|
$
|
(0.04)
|
|
|
$
|
(0.06)
|
|
|
$
|
(7.27)
|
|
|
$
|
1.73
|
|
|
Average number of common
shares outstanding - diluted
|
|
36,846
|
|
|
|
36,638
|
|
|
|
36,729
|
|
|
|
36,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Essendant Inc. and
Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(dollars in
thousands, except share data)
|
|
|
|
|
|
As of
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
28,802
|
|
|
$
|
21,329
|
|
|
Accounts receivable,
less allowance for doubtful accounts of $17,102 in 2017 and $18,196
in 2016
|
|
619,200
|
|
|
|
678,184
|
|
|
Inventories
|
|
821,683
|
|
|
|
876,837
|
|
|
Other current
assets
|
|
43,044
|
|
|
|
32,100
|
|
|
Total current
assets
|
|
1,512,729
|
|
|
|
1,608,450
|
|
|
Property, plant and
equipment, at cost
|
|
132,793
|
|
|
|
128,251
|
|
|
Intangible assets,
net
|
|
73,441
|
|
|
|
83,690
|
|
|
Goodwill
|
|
13,153
|
|
|
|
297,906
|
|
|
Other long-term
assets
|
|
42,134
|
|
|
|
45,209
|
|
|
Total
assets
|
$
|
1,774,250
|
|
|
$
|
2,163,506
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
500,883
|
|
|
$
|
484,602
|
|
|
Accrued
liabilities
|
|
189,916
|
|
|
|
197,804
|
|
|
Current maturities of
long-term debt
|
|
6,079
|
|
|
|
28
|
|
|
Total current
liabilities
|
|
696,878
|
|
|
|
682,434
|
|
|
Deferred income
taxes
|
|
1,192
|
|
|
|
6,378
|
|
|
Long-term
debt
|
|
492,044
|
|
|
|
608,941
|
|
|
Other long-term
liabilities
|
|
89,222
|
|
|
|
84,647
|
|
|
Total
liabilities
|
|
1,279,336
|
|
|
|
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
|
|
412,987
|
|
|
|
409,805
|
|
|
Treasury stock, at
cost – 36,811,366 shares in 2017 and 36,951,522 shares in
2016
|
|
(1,093,813)
|
|
|
|
(1,096,744)
|
|
|
Retained
earnings
|
|
1,219,309
|
|
|
|
1,507,057
|
|
|
Accumulated other
comprehensive loss
|
|
(51,013)
|
|
|
|
(46,456)
|
|
|
Total stockholders'
equity
|
|
494,914
|
|
|
|
781,106
|
|
|
Total liabilities and
stockholders' equity
|
$
|
1,774,250
|
|
|
$
|
2,163,506
|
|
|
Essendant Inc. and
Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(in
thousands)
|
|
|
Years Ended
December 31,
|
|
|
2017
|
|
|
2016
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(266,981)
|
|
|
$
|
63,852
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
32,497
|
|
|
|
33,289
|
|
Amortization of
intangible assets
|
|
10,805
|
|
|
|
12,238
|
|
Share-based
compensation
|
|
7,295
|
|
|
|
10,202
|
|
Gain on the
disposition of property, plant and equipment
|
|
(1,197)
|
|
|
|
(20,965)
|
|
Amortization of
capitalized financing costs
|
|
1,433
|
|
|
|
681
|
|
Excess tax cost
related to share-based compensation
|
|
-
|
|
|
|
1,034
|
|
Impairment of
goodwill
|
|
285,166
|
|
|
|
-
|
|
Change in contingent
consideration
|
|
(4,457)
|
|
|
|
-
|
|
Deferred income
taxes
|
|
(8,900)
|
|
|
|
(10,624)
|
|
Pension settlement
charge
|
|
-
|
|
|
|
12,510
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Decrease in accounts
receivable, net
|
|
59,304
|
|
|
|
38,499
|
|
Decrease in
inventory
|
|
55,751
|
|
|
|
47,148
|
|
Increase in other
assets
|
|
(2,611)
|
|
|
|
(12,631)
|
|
Increase (decrease) in
accounts payable
|
|
16,478
|
|
|
|
(47,262)
|
|
Increase in accrued
liabilities
|
|
4,234
|
|
|
|
17,534
|
|
Decrease in other
liabilities
|
|
(3,274)
|
|
|
|
(14,563)
|
|
Net cash provided by
operating activities
|
|
185,543
|
|
|
|
130,942
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
(38,579)
|
|
|
|
(37,709)
|
|
Proceeds from the
disposition of property, plant and equipment
|
|
124
|
|
|
|
33,940
|
|
Net cash used in
investing activities
|
|
(38,455)
|
|
|
|
(3,769)
|
|
|
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
|
|
|
Net borrowings
(repayments) under revolving credit facility
|
|
20,872
|
|
|
|
(108,052)
|
|
Borrowings under Term
loan
|
|
77,600
|
|
|
|
-
|
|
Repayments under Term
loan
|
|
(4,554)
|
|
|
|
-
|
|
Net repayments under
Securitization program
|
|
(200,000)
|
|
|
|
-
|
|
Net (disbursements)
proceeds from share-based compensation arrangements
|
|
(1,320)
|
|
|
|
554
|
|
Acquisition of
treasury stock, at cost
|
|
-
|
|
|
|
(6,839)
|
|
Payment of cash
dividends
|
|
(20,726)
|
|
|
|
(20,487)
|
|
Excess tax cost
related to share-based compensation
|
|
-
|
|
|
|
(1,034)
|
|
Payment of debt
issuance costs
|
|
(6,330)
|
|
|
|
(106)
|
|
Contingent
consideration
|
|
(5,543)
|
|
|
|
-
|
|
Net cash used in
financing activities
|
|
(140,001)
|
|
|
|
(135,964)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
386
|
|
|
|
137
|
|
Net change in cash
and cash equivalents
|
|
7,473
|
|
|
|
(8,654)
|
|
Cash and cash
equivalents, beginning of period
|
|
21,329
|
|
|
|
29,983
|
|
Cash and cash
equivalents, end of period
|
$
|
28,802
|
|
|
$
|
21,329
|
|
|
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 twelve months ended December 31,
2017 and 2016. 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 the
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 the Company's results of
operations as determined in accordance with GAAP, and these
non-GAAP financial measures should only be used to evaluate 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 the Company's
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 and had an impact in
2016.
- 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 2016.
- 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.
In 2016, the Company recorded a charge related to the severance of
two operating leaders which were not part of a restructuring
program.
- Asset impairments. Changes in strategy or
macroeconomic events may cause asset impairments.
During 2017, the Company recorded goodwill impairment which
resulted from declines in sales, earnings and market
capitalization.
- 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.
In 2017, other actions include transformational expenses, a
litigation charge, the one-time impact due to the December 2017 passage of tax reform and a gain
reflecting recovery of notes receivable impaired in 2015. In 2016,
other actions included settlement charges related to a defined
benefit plan settlement, litigation charges and the tax impact of
dividends from a foreign subsidiary and reserves related to
discrete prior year uncertain tax provisions.
Adjusted operating expenses and adjusted operating
income. Adjusted operating expenses and adjusted operating
income provide management and investors with an understanding of
the results from the primary operations of the Company's business
by excluding the effects of items described above that do not
reflect the ordinary expenses and earnings of operations. Adjusted
operating expenses and adjusted operating income are used to
evaluate period-over-period operating performance as they are more
comparable measures of the continuing business. These measures may
be useful to an investor in evaluating the underlying operating
performance of the Company's 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 the 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 operations.
Adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Adjusted EBITDA is helpful in
evaluating 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 investors as it is a measure of the Company's liquidity. The
Company believes that 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 impact of acquisitions, net
of cash acquired and divestitures.
Outlook. Adjusted diluted earnings per share and free
cash flow are non-GAAP measures. A quantitative reconciliation of
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 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 December 31,
|
|
|
For the Years
Ended December 31,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operating
expenses
|
$
|
161,037
|
|
|
$
|
166,762
|
|
|
$
|
949,446
|
|
|
$
|
642,335
|
|
Impairment of
goodwill
|
|
-
|
|
|
|
-
|
|
|
|
(285,166)
|
|
|
|
-
|
|
Transformational
expenses
|
|
(5,252)
|
|
|
|
-
|
|
|
|
(19,745)
|
|
|
|
-
|
|
Litigation
reserve
|
|
-
|
|
|
|
(4,000)
|
|
|
|
(9,000)
|
|
|
|
(4,000)
|
|
Recovery of notes
receivable
|
|
150
|
|
|
|
-
|
|
|
|
300
|
|
|
|
-
|
|
Gain on sale of City
of Industry facility
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,541
|
|
Defined benefit plan
settlement charge
|
|
-
|
|
|
|
(347)
|
|
|
|
-
|
|
|
|
(12,510)
|
|
Severance costs for
operating leadership
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,245)
|
|
Restructuring
charges
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
956
|
|
Adjusted operating
expenses
|
$
|
155,935
|
|
|
$
|
162,415
|
|
|
$
|
635,835
|
|
|
$
|
646,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$
|
9,831
|
|
|
$
|
(1,660)
|
|
|
$
|
(243,392)
|
|
|
$
|
117,526
|
|
Gross profit and
operating expense adjustments noted above
|
|
5,102
|
|
|
|
4,347
|
|
|
|
313,611
|
|
|
|
(3,742)
|
|
Adjusted operating
income
|
$
|
14,933
|
|
|
$
|
2,687
|
|
|
$
|
70,219
|
|
|
$
|
113,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(1,546)
|
|
|
$
|
(2,353)
|
|
|
$
|
(266,981)
|
|
|
$
|
63,852
|
|
Gross profit and
operating expense adjustments noted above
|
|
5,102
|
|
|
|
4,347
|
|
|
|
313,611
|
|
|
|
(3,742)
|
|
Non-GAAP tax provision
on adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
goodwill
|
|
-
|
|
|
|
-
|
|
|
|
(13,356)
|
|
|
|
-
|
|
Transformational
expenses
|
|
(2,043)
|
|
|
|
-
|
|
|
|
(7,655)
|
|
|
|
-
|
|
Litigation
reserve
|
|
-
|
|
|
|
(1,508)
|
|
|
|
(3,488)
|
|
|
|
(1,508)
|
|
Tax reform
adjustment
|
|
2,545
|
|
|
|
-
|
|
|
|
2,545
|
|
|
|
-
|
|
Recovery of notes
receivable
|
|
58
|
|
|
|
-
|
|
|
|
118
|
|
|
|
-
|
|
Gain on sale of City
of Industry facility
|
|
-
|
|
|
|
(1,651)
|
|
|
|
-
|
|
|
|
1,138
|
|
Defined benefit plan
settlement charge
|
|
-
|
|
|
|
(131)
|
|
|
|
-
|
|
|
|
(4,705)
|
|
Dividend from foreign
entity
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,666
|
|
Severance costs for
operating leadership
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(469)
|
|
State income tax
reserve adjustment
|
|
-
|
|
|
|
417
|
|
|
|
-
|
|
|
|
417
|
|
Restructuring
charges
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
357
|
|
Income tax provision
on adjusted net income
|
|
560
|
|
|
|
(2,873)
|
|
|
|
(21,836)
|
|
|
|
(3,104)
|
|
Adjusted net income
(loss)
|
$
|
4,116
|
|
|
$
|
(879)
|
|
|
$
|
24,794
|
|
|
$
|
57,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per share (1)
|
$
|
(0.04)
|
|
|
$
|
(0.06)
|
|
|
$
|
(7.23)
|
|
|
$
|
1.73
|
|
Per share gross profit
and operating expense adjustments noted above
|
|
0.14
|
|
|
|
0.12
|
|
|
|
8.49
|
|
|
|
(0.10)
|
|
Non-GAAP tax benefit
(provision) on adjustments
|
|
0.01
|
|
|
|
(0.08)
|
|
|
|
(0.59)
|
|
|
|
(0.09)
|
|
Adjusted diluted net
income per share
|
$
|
0.11
|
|
|
$
|
(0.02)
|
|
|
$
|
0.67
|
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(1,546)
|
|
|
$
|
(2,353)
|
|
|
$
|
(266,981)
|
|
|
$
|
63,852
|
|
Income tax expense
(benefit)
|
|
4,914
|
|
|
|
(4,120)
|
|
|
|
(2,029)
|
|
|
|
30,803
|
|
Interest expense,
net
|
|
6,463
|
|
|
|
4,813
|
|
|
|
25,618
|
|
|
|
22,871
|
|
Depreciation and
amortization
|
|
10,735
|
|
|
|
11,328
|
|
|
|
43,302
|
|
|
|
45,527
|
|
Equity compensation
expense
|
|
1,180
|
|
|
|
3,158
|
|
|
|
7,295
|
|
|
|
10,202
|
|
Gross profit and
operating expense adjustments noted above
|
|
5,102
|
|
|
|
4,347
|
|
|
|
313,611
|
|
|
|
(3,742)
|
|
Adjusted earnings
before interest, taxes, depreciation and amortization
(EBITDA)
|
$
|
26,848
|
|
|
$
|
17,173
|
|
|
$
|
120,816
|
|
|
$
|
169,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)
provided by operating activities
|
$
|
(19,450)
|
|
|
$
|
24,974
|
|
|
$
|
185,543
|
|
|
$
|
130,942
|
|
Less: Net cash used in
investing activities
|
|
(13,992)
|
|
|
|
(9,492)
|
|
|
|
(38,455)
|
|
|
|
(3,769)
|
|
Free cash
flow
|
$
|
(33,442)
|
|
|
$
|
15,482
|
|
|
$
|
147,088
|
|
|
$
|
127,173
|
|
|
|
(1)
|
Diluted (loss)
earnings per share for the three months ended December 31, 2017 and
2016 and the for the year ended December 31, 2017, under GAAP
reflect an adjustment to the basic earnings per share due to the
net loss. The diluted earnings per share shown here do not reflect
this adjustment.
|
|
|
For Further Information
Contact:
investorrelations@essendant.com
(847) 627-2900
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SOURCE Essendant Inc.