Exhibit 99.1
| | |
Executive Offices One Parkway North Blvd. Suite 100 Deerfield, IL 60015-2559 | | For Further Information Contact: investorrelations@essendant.com (847) 627-2900 |
ESSENDANT REPORTS THIRD QUARTER 2016 RESULTS
DEERFIELD, Ill., October 26, 2016 – 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.”
| (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.
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Essendant Reports Third Quarter 2016 Results
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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 |
| o | Janitorial/Sanitation: decreased $4.9 million, or 1.3%, to $372.9 million |
| o | Technology Products: increased $2.3 million, or 0.7%, to $345.6 million |
| o | Traditional Office Products: increased $3.7 million, or 1.6% to $240.0 million |
| o | Industrial: decreased $6.9 million, or 4.7%, to $139.8 million |
| o | Cut-sheet Paper: increased $23.0 million, or 27.6% to $106.6 million |
| o | Automotive: increased $3.0 million, or 3.9%, to $78.6 million |
| o | 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: |
| o | Shifts in customer channel and product category mix |
| o | Lower supplier allowances related to reductions of inventory during the quarter |
| o | Higher freight cost due to new customers, growth by large customers and inflation |
| o | 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: |
| o | Gains on the sale of the City of Industry, CA facility in the third quarter of 2016 totaling $20.5 million, pre-tax |
| o | 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: |
| o | Utilization of a capital loss carry forward totaling $5.0 million |
| o | 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: |
| o | Reduction in inventory of $117.8 million |
| o | Proceeds of $31.0 million from a sale of the City of Industry facility |
| o | 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 |
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Essendant Reports Third Quarter 2016 Results
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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.
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Essendant Reports Third Quarter 2016 Results
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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.
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Essendant Reports Third Quarter 2016 Results
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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 | |
| | | | | | | | | | | | | | | |
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Essendant Reports Third Quarter 2016 Results
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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 | |
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Essendant Reports Third Quarter 2016 Results
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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 | |
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Essendant Reports Third Quarter 2016 Results
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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.
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Essendant Reports Third Quarter 2016 Results
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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.
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Essendant Reports Third Quarter 2016 Results
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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 | |
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Essendant Reports Third Quarter 2016 Results
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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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