Veritiv(VRTV) - 2022 Q3 - Quarterly Report

Financial Performance - The company reported a pre-tax gain of approximately $10.3 million from the sale of its logistics solutions business, with net cash proceeds of about $18.3 million[109]. - The sale of Veritiv Canada, Inc. resulted in an initial pre-tax gain of approximately $10.0 million and an additional gain of $8.3 million, with net cash proceeds of approximately $147.4 million[110]. - For the three months ended September 30, 2022, net sales increased by $36.3 million, or 2.1%, while organic sales increased by $230.8 million, or 14.9%[124]. - For the nine months ended September 30, 2022, net sales increased by $497.2 million, or 10.0%, with organic sales rising by $779.9 million, or 17.9%[125]. - Operating income for the three months ended September 30, 2022, was $133.9 million, a 135.7% increase compared to the same period in 2021[122]. - Net income for the three months ended September 30, 2022, was $96.7 million, representing a 141.8% increase year-over-year[122]. - Adjusted EBITDA for the three months ended September 30, 2022, was $115.1 million, representing 11.6% of net sales, compared to $107.0 million and 11.0% for the same period in 2021[147]. - Adjusted EBITDA for the nine months ended September 30, 2022, increased by $40.5 million, or 14.4%, primarily due to higher net sales[153]. Sales and Market Trends - The company’s net sales are typically higher in the third and fourth quarters, influenced by seasonal demand patterns[120]. - The divestiture of the Canadian business resulted in a decrease in net sales of $184.5 million for the three months and $260.8 million for the nine months ended September 30, 2022[124][125]. - Net sales for the Packaging segment increased by $17.5 million, or 1.8%, for the three months ended September 30, 2022, and by $252.6 million, or 9.2%, for the nine months ended September 30, 2022[148]. - The total change in net sales for the three months ended September 30, 2022, was an increase of $17.5 million, attributed to a $107.7 million increase in price/mix[150]. - Net sales decreased by $57.8 million, or 8.7%, for the nine months ended September 30, 2022, with organic sales increasing by $49.1 million, or 10.5%[157]. Cost and Expenses - Cost of products sold for the three months ended September 30, 2022, decreased primarily due to the divestiture of the Canadian business, despite higher net sales[126]. - Selling and administrative expenses increased by $5.2 million, or 2.7%, for the three months ended September 30, 2022, primarily due to a $9.7 million increase in personnel expenses[130]. - For the nine months ended September 30, 2022, selling and administrative expenses rose by $36.5 million, or 6.8%, driven by a $36.2 million increase in personnel expenses[131]. - Distribution expenses decreased by $10.0 million, or 9.7%, for the three months ended September 30, 2022, mainly due to a $15.6 million decrease related to the divestiture of the Canadian business[128]. - For the nine months ended September 30, 2022, distribution expenses decreased by $5.1 million, or 1.7%, primarily due to a $23.7 million decrease related to the divestiture of the Canadian business[129]. Strategic Initiatives - The company completed a restructuring plan in 2020, reducing its U.S. salaried workforce by approximately 15% and closing certain facilities, with the plan substantially complete as of September 30, 2022[115]. - The company continues to focus on its core packaging business, emphasizing higher growth and higher margin opportunities[111]. - The company operates under three reportable segments: Packaging, Facility Solutions, and Print Solutions, with a focus on aligning resources to meet changing market needs[118]. - The Company expects to spend approximately $30 million for capital expenditures in 2022, covering both maintenance and strategic investments[180]. Risks and Challenges - The company experienced economic improvements in 2022, although the ongoing impacts of the COVID-19 pandemic remain uncertain[108]. - The company has taken measures to enhance employee safety during the COVID-19 pandemic, including implementing health protocols in its facilities[106]. - The company’s financial results are subject to risks including supply chain disruptions, competition, and changes in raw material prices[102]. - Management expects higher market prices and supply chain challenges to continue throughout 2022[124]. Cash Flow and Financing - Net cash provided by operating activities increased by $67.3 million compared to the prior year, primarily due to improved operating results[172]. - Net cash from investing activities increased by $141.7 million, mainly due to proceeds from the sale of the logistics solutions business and the Canadian business[173]. - Net cash used for financing activities increased by $146.4 million, primarily due to increased common stock repurchases totaling $200.0 million during the nine months ended September 30, 2022[174]. - As of September 30, 2022, the available additional borrowing capacity under the ABL Facility was approximately $643.2 million[176]. Price Adjustments - The company has adjusted prices to reflect inflationary market price increases, particularly in the Packaging and Print Solutions product portfolios[124]. - The Company has adjusted its prices to reflect the impact of inflation on the cost of purchased materials and services[181].