Second Quarter Highlights
- Net Income of $70.7 million, a
decrease of 22.4% from prior year
- Diluted EPS of $5.15, a
decrease of 15.8% from prior year
- Record second quarter Adjusted EBITDA margin1 of
7.7%
- 14 consecutive quarters of year-over-year Adjusted EBITDA
margin expansion
ATLANTA, Aug. 8, 2023
/PRNewswire/ -- Veritiv Corporation (NYSE: VRTV), a leading
full-service provider of business-to-business products, services
and solutions, today announced financial results for the second
quarter ended June 30, 2023.
"The second quarter highlighted the value of our diversified and
complementary portfolio of products and industry verticals. Despite
challenging macroeconomic conditions, Adjusted EBITDA for both
Packaging and Facility Solutions improved sequentially and on a
year-over-year basis, achieving record Adjusted EBITDA margins for
these segments," said Sal Abbate,
Chief Executive Officer. "This strong performance partially offset
continued intense industry-wide destocking and slowing demand
headwinds in Print Solutions, resulting in record second quarter
consolidated Adjusted EBITDA margin."
Abbate concluded, "I am excited to have reached an agreement
with an affiliate of Clayton,
Dubilier & Rice, LLC (CD&R) to acquire Veritiv, which
we believe delivers substantial value to our shareholders. This is
a testament to our team's hard work and dedication over the past
several years as the successful execution of our commercial and
operational excellence strategies fundamentally improved our
business. The transaction will further enhance our resources and
offer greater financial and operational flexibility as we deliver
innovative and sustainable solutions to our customers."
For the three months ended June 30, 2023, compared to
the three months ended June 30, 2022:
- Net sales were $1.5 billion, a
decrease of 20.0% from the prior year; organic sales decreased
15.4%.
- Net income was $70.7 million,
compared to $91.1 million in the
prior year. Net restructuring charges were none, compared to
$1.4 million in the prior year.
- Basic and diluted earnings per share were $5.22 and $5.15,
respectively, compared to $6.24 and
$6.12, respectively, in the prior
year.
- Adjusted EBITDA was $112.2
million, a decrease of 17.7% from the prior year.
- Adjusted EBITDA margin was 7.7%, an increase of 20 basis points
from the prior year.
For the six months ended June 30, 2023, compared to
the six months ended June 30, 2022:
- Net sales were $3.0 billion, a
decrease of 19.3% from the prior year; organic sales decreased
11.7%.
- Net income was $139.4 million,
compared to $169.6 million in the
prior year. Net restructuring charges were none, compared to
$4.1 million in the prior year.
- Basic and diluted earnings per share were $10.30 and $10.15,
respectively, compared to $11.55 and
$11.23, respectively, in the prior
year.
- Adjusted EBITDA was $216.0
million, a decrease of 15.6% from the prior year.
- Adjusted EBITDA margin was 7.3%, an increase of 30 basis points
from the prior year.
For the three months ended June 30,
2023, net cash provided by operating activities was
$94.4 million and free cash flow was
$91.3 million. For the six
months ended June 30, 2023, net cash
provided by operating activities was $165.3
million and free cash flow was $159.3
million.
"We are pleased with strong free cash flow of nearly
$160 million generated during the
first half of 2023." said Eric
Guerin, Chief Financial Officer.
In light of the previously announced transaction with
CD&R, Veritiv will not provide guidance or host a conference
call or webcast to review the second quarter 2023 financial
results.
1Adjusted EBITDA margin, a non-GAAP metric, is
defined as Adjusted EBITDA as a percentage of net sales.
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, is a leading 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.veritiv.com.
Safe Harbor Provision
This release contains certain forward-looking statements that
reflect Veritiv's current views with respect to certain current and
future events. Specific forward-looking statements include, among
others, statements regarding the consummation of the proposed
transaction. These forward-looking statements are and will be,
subject to many risks, uncertainties and factors which may cause
future events to be materially different from these forward-looking
statements or anything implied therein. These risks and
uncertainties include, but are not limited to: the timing, receipt
and terms and conditions of any required governmental or regulatory
approvals of the proposed transaction that could reduce the
anticipated benefits of or cause the parties to abandon the
proposed transaction; risks related to the satisfaction of the
conditions to closing the proposed transaction (including the
failure to obtain necessary regulatory approvals or the necessary
approvals of the Veritiv's stockholders) in the anticipated
timeframe or at all; the risk that any announcements relating to
the proposed transaction could have adverse effects on the market
price of Veritiv's common stock; disruption from the proposed
transaction making it more difficult to maintain business and
operational relationships, including retaining and hiring key
personnel; the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement entered into in connection with the proposed transaction;
risks related to disruption of management's attention from
Veritiv's ongoing business operations due to the proposed
transaction; significant transaction costs; the risk of litigation
and/or regulatory actions related to the proposed transaction;
global economic conditions; adverse industry and market conditions;
the ability to retain management and other personnel; and other
economic, business, or competitive factors. Any forward-looking
statements in this release are based upon information available to
Veritiv on the date of this release. Veritiv does not undertake to
publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any statements
expressed or implied therein will not be realized. Additional
information on risk factors that could affect Veritiv may be found
in Veritiv's filings with the Securities and Exchange Commission
(the "SEC").
Additional Information and Where to Find it
This filing may be deemed solicitation material in respect of
the proposed merger of an affiliate of Clayton, Dubilier & Rice, LLC with and
into Veritiv. In connection with the proposed merger transaction,
Veritiv will file with the SEC and furnish to Veritiv's
stockholders a proxy statement and other relevant documents. This
filing does not constitute a solicitation of any vote or approval.
Stockholders are urged to read the proxy statement when it becomes
available and any other documents to be filed with the SEC in
connection with the proposed merger or incorporated by reference in
the proxy statement because they will contain important information
about the proposed merger.
Investors will be able to obtain free of charge the proxy
statement and other documents filed with the SEC at the SEC's
website at https://www.sec.gov. In addition, the proxy statement
and Veritiv's annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 are available free of charge
through Veritiv's website at https://ir.veritiv.com/ as soon as
reasonably practicable after they are electronically filed with, or
furnished to, the SEC.
The directors, executive officers and certain other members of
management and employees of Veritiv may be deemed "participants" in
the solicitation of proxies from stockholders of Veritiv in favor
of the proposed merger. Information regarding the persons who may,
under the rules of the SEC, be considered participants in the
solicitation of the stockholders of Veritiv in connection with the
proposed merger will be set forth in the proxy statement and the
other relevant documents to be filed with the SEC. You can find
information about the Company's executive officers and directors in
its Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 and in its
definitive proxy statement for the 2023 annual meeting of
stockholders as filed with the SEC on Schedule 14A on March 17, 2023.
Financial Statements
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in millions, except
per share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
|
$ 1,457.3
|
|
$ 1,820.7
|
|
$ 2,967.5
|
|
$ 3,678.8
|
Cost of products sold
(exclusive of depreciation and amortization
shown separately below)
|
|
1,096.6
|
|
1,410.9
|
|
2,240.7
|
|
2,866.3
|
Distribution
expenses
|
|
88.7
|
|
98.2
|
|
178.4
|
|
210.4
|
Selling and
administrative expenses
|
|
163.5
|
|
190.7
|
|
334.9
|
|
378.6
|
Gain on sale of
businesses
|
|
—
|
|
(10.0)
|
|
—
|
|
(10.0)
|
Depreciation and
amortization
|
|
9.6
|
|
11.1
|
|
19.7
|
|
23.8
|
Restructuring charges,
net
|
|
—
|
|
1.4
|
|
—
|
|
4.1
|
Operating
income
|
|
98.9
|
|
118.4
|
|
193.8
|
|
205.6
|
Interest expense,
net
|
|
4.3
|
|
4.0
|
|
9.0
|
|
7.5
|
Other (income) expense,
net
|
|
(1.9)
|
|
(6.6)
|
|
(0.9)
|
|
(7.2)
|
Income before income
taxes
|
|
96.5
|
|
121.0
|
|
185.7
|
|
205.3
|
Income tax
expense
|
|
25.8
|
|
29.9
|
|
46.3
|
|
35.7
|
Net
income
|
|
$
70.7
|
|
$
91.1
|
|
$
139.4
|
|
$
169.6
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
5.22
|
|
$
6.24
|
|
$
10.30
|
|
$
11.55
|
Diluted
|
|
$
5.15
|
|
$
6.12
|
|
$
10.15
|
|
$
11.23
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
13.55
|
|
14.61
|
|
13.54
|
|
14.69
|
Diluted
|
|
13.72
|
|
14.88
|
|
13.73
|
|
15.10
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(dollars in millions,
except par value, unaudited)
|
|
|
|
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
43.9
|
|
$
40.6
|
Accounts receivable,
less allowances of $22.9 and $26.7, respectively
|
|
750.5
|
|
889.6
|
Inventories
|
|
487.0
|
|
423.9
|
Other current
assets
|
|
95.0
|
|
103.7
|
Total current
assets
|
|
1,376.4
|
|
1,457.8
|
Property and equipment
(net of accumulated depreciation and amortization
of $326.6 and $325.5, respectively)
|
|
124.2
|
|
127.5
|
Goodwill
|
|
96.3
|
|
96.3
|
Other intangibles,
net
|
|
33.4
|
|
35.6
|
Deferred income tax
assets
|
|
25.5
|
|
29.0
|
Other non-current
assets
|
|
366.5
|
|
343.4
|
Total
assets
|
|
$
2,022.3
|
|
$
2,089.6
|
Liabilities and
shareholders' equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
418.1
|
|
$
452.9
|
Accrued payroll and
benefits
|
|
46.8
|
|
106.2
|
Other accrued
liabilities
|
|
147.2
|
|
154.1
|
Current portion of
debt
|
|
14.2
|
|
13.4
|
Total current
liabilities
|
|
626.3
|
|
726.6
|
Long-term debt, net of
current portion
|
|
171.6
|
|
264.8
|
Defined benefit pension
obligations
|
|
0.8
|
|
0.4
|
Other non-current
liabilities
|
|
340.3
|
|
341.7
|
Total
liabilities
|
|
1,139.0
|
|
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 - 17.6 million and 17.5 million, respectively; shares
outstanding - 13.6
million and 13.5 million, respectively
|
|
0.2
|
|
0.2
|
Additional paid-in
capital
|
|
614.9
|
|
613.1
|
Accumulated
earnings
|
|
595.0
|
|
472.6
|
Accumulated other
comprehensive loss
|
|
(9.7)
|
|
(12.7)
|
Treasury stock at cost
- 4.0 million and 4.0 million shares, respectively
|
|
(317.1)
|
|
(317.1)
|
Total shareholders'
equity
|
|
883.3
|
|
756.1
|
Total liabilities
and shareholders' equity
|
|
$
2,022.3
|
|
$
2,089.6
|
VERITIV
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
139.4
|
|
$
169.6
|
Depreciation and
amortization
|
|
19.7
|
|
23.8
|
Amortization and
write-off of deferred financing fees
|
|
0.8
|
|
0.8
|
Net (gains) losses on
disposition of assets and sale of businesses
|
|
0.1
|
|
(15.3)
|
Provision for expected
credit losses
|
|
(1.8)
|
|
(0.1)
|
Deferred income tax
provision (benefit)
|
|
4.1
|
|
(11.6)
|
Stock-based
compensation
|
|
5.4
|
|
5.9
|
Other non-cash items,
net
|
|
(1.7)
|
|
(7.0)
|
Changes in operating
assets and liabilities
|
|
|
|
|
Accounts
receivable
|
|
142.0
|
|
(51.4)
|
Inventories
|
|
(60.8)
|
|
(25.4)
|
Other current
assets
|
|
10.2
|
|
(1.5)
|
Accounts
payable
|
|
(0.7)
|
|
23.4
|
Accrued payroll and
benefits
|
|
(66.7)
|
|
(31.8)
|
Other accrued
liabilities
|
|
0.0
|
|
(13.9)
|
Other
|
|
(24.7)
|
|
(3.2)
|
Net cash provided by
(used for) operating activities
|
|
165.3
|
|
62.3
|
Investing
activities
|
|
|
|
|
Property and equipment
additions
|
|
(6.0)
|
|
(11.6)
|
Proceeds from asset
sales and sale of businesses, net of cash transferred
|
|
0.3
|
|
139.4
|
Proceeds from insurance
related to property and equipment
|
|
0.1
|
|
3.5
|
Net cash provided by
(used for) investing activities
|
|
(5.6)
|
|
131.3
|
Financing
activities
|
|
|
|
|
Change in book
overdrafts
|
|
(36.4)
|
|
12.9
|
Borrowings of long-term
debt
|
|
2,744.0
|
|
3,111.5
|
Repayments of long-term
debt
|
|
(2,835.8)
|
|
(3,190.9)
|
Payments under
right-of-use finance leases
|
|
(4.9)
|
|
(6.3)
|
Payments under
vendor-based financing arrangements
|
|
(3.4)
|
|
(3.2)
|
Purchase of treasury
stock
|
|
—
|
|
(104.8)
|
Impact of tax
withholding on share-based compensation
|
|
(3.6)
|
|
(29.7)
|
Dividends paid to
shareholders
|
|
(17.0)
|
|
—
|
Other
|
|
0.3
|
|
0.3
|
Net cash provided by
(used for) financing activities
|
|
(156.8)
|
|
(210.2)
|
Effect of exchange
rate changes on cash
|
|
0.4
|
|
(0.6)
|
Net change in cash
and cash equivalents
|
|
3.3
|
|
(17.2)
|
Cash and cash
equivalents at beginning of period
|
|
40.6
|
|
49.3
|
Cash and cash
equivalents at end of period
|
|
$
43.9
|
|
$
32.1
|
Supplemental cash
flow information
|
|
|
|
|
Cash paid for income
taxes, net of refunds
|
|
$
50.7
|
|
$
57.8
|
Cash paid for
interest
|
|
8.0
|
|
6.4
|
Non-cash investing
and financing activities
|
|
|
|
|
Non-cash additions to
property and equipment for right-of-use finance
leases and vendor-based financing arrangements
|
|
$
7.4
|
|
$
18.1
|
Non-cash additions to
other non-current assets for right-of-use operating
leases
|
|
45.4
|
|
37.3
|
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
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income
|
|
$
70.7
|
|
$
91.1
|
|
$ 139.4
|
|
$
169.6
|
Interest expense,
net
|
|
4.3
|
|
4.0
|
|
9.0
|
|
7.5
|
Income tax
expense
|
|
25.8
|
|
29.9
|
|
46.3
|
|
35.7
|
Depreciation and
amortization
|
|
9.6
|
|
11.1
|
|
19.7
|
|
23.8
|
EBITDA
|
|
110.4
|
|
136.1
|
|
214.4
|
|
236.6
|
Restructuring charges,
net
|
|
—
|
|
1.4
|
|
—
|
|
4.1
|
Gain on sale of
businesses
|
|
—
|
|
(10.0)
|
|
—
|
|
(10.0)
|
Facility closure
charges, including (gain) loss from asset
disposition
|
|
0.1
|
|
(0.3)
|
|
0.0
|
|
(0.9)
|
Stock-based
compensation
|
|
3.6
|
|
3.1
|
|
5.4
|
|
5.9
|
LIFO reserve (decrease)
increase
|
|
(3.5)
|
|
11.8
|
|
(6.0)
|
|
22.8
|
Non-restructuring
severance charges
|
|
(0.2)
|
|
(0.2)
|
|
0.1
|
|
1.5
|
Non-restructuring
pension charges (benefits)
|
|
(1.0)
|
|
(7.0)
|
|
(0.8)
|
|
(7.0)
|
Other
|
|
2.8
|
|
1.4
|
|
2.9
|
|
2.8
|
Adjusted
EBITDA
|
|
$ 112.2
|
|
$ 136.3
|
|
$ 216.0
|
|
$
255.8
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
1,457.3
|
|
$
1,820.7
|
|
$
2,967.5
|
|
$
3,678.8
|
Adjusted EBITDA as a %
of net sales
|
|
7.7 %
|
|
7.5 %
|
|
7.3 %
|
|
7.0 %
|
Table
II
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
FREE CASH
FLOW
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30, 2023
|
|
Six Months Ended
June 30, 2023
|
Net cash provided by
(used for) operating activities
|
|
$
94.4
|
|
$
165.3
|
Less: Capital
expenditures
|
|
(3.1)
|
|
(6.0)
|
Free cash
flow
|
|
$
91.3
|
|
$
159.3
|
Table
III
|
VERITIV
CORPORATION
|
RECONCILIATION OF
NON-GAAP MEASURES
|
REPORTED NET SALES
TO ORGANIC SALES
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reported net
sales
|
|
$ 1,457.3
|
|
$ 1,820.7
|
|
$ 2,967.5
|
|
$ 3,678.8
|
Impact of change in
selling days (1)
|
|
—
|
|
—
|
|
—
|
|
—
|
Net sales (on an
average daily sales basis)
|
|
1,457.3
|
|
1,820.7
|
|
2,967.5
|
|
3,678.8
|
Business divestitures
(2)
|
|
—
|
|
(98.4)
|
|
—
|
|
(319.0)
|
Organic
sales
|
|
$
1,457.3
|
|
$
1,722.3
|
|
$
2,967.5
|
|
$
3,359.8
|
|
|
|
|
|
|
|
|
|
Business
Days
|
|
64
|
|
64
|
|
127
|
|
127
|
(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