Veritiv(US:VRTV)2023-08-08 20:01PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Veritiv's unaudited condensed consolidated financial statements for Q2 2023, covering operations, balance sheets, cash flows, and notes Condensed Consolidated Statements of Operations Net sales and net income declined for both Q2 and YTD Q2 2023 due to lower volumes and divestitures | Metric (in millions, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($ in millions) | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :--------- | | Net sales | $1,457.3 | $1,820.7 | $(363.4) | (20.0)% | | Operating income | $98.9 | $118.4 | $(19.5) | (16.5)% | | Net income | $70.7 | $91.1 | $(20.4) | (22.4)% | | Basic EPS | $5.22 | $6.24 | $(1.02) | (16.3)% | | Diluted EPS | $5.15 | $6.12 | $(0.97) | (15.8)% | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($ in millions) | Change (%) | | | Net sales | $2,967.5 | $3,678.8 | $(711.3) | (19.3)% | | Operating income | $193.8 | $205.6 | $(11.8) | (5.7)% | | Net income | $139.4 | $169.6 | $(30.2) | (17.8)% | | Basic EPS | $10.30 | $11.55 | $(1.25) | (10.8)% | | Diluted EPS | $10.15 | $11.23 | $(1.08) | (9.6)% | Condensed Consolidated Statements of Comprehensive Income (Loss) Total comprehensive income decreased for Q2 and YTD Q2 2023, driven by foreign currency and pension adjustments | Metric (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($ in millions) | | :------------------- | :------------------------------- | :------------------------------- | :--------------------- | | Net income | $70.7 | $91.1 | $(20.4) | | Foreign currency translation adjustments | $1.4 | $(4.5) | $5.9 | | Pension liability adjustments, net of tax | $(0.5) | $6.4 | $(6.9) | | Total comprehensive income (loss) | $70.9 | $95.6 | $(24.7) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($ in millions) | | | Net income | $139.4 | $169.6 | $(30.2) | | Foreign currency translation adjustments | $4.3 | $(1.9) | $6.2 | | Pension liability adjustments, net of tax | $(0.6) | $6.4 | $(7.0) | | Total comprehensive income (loss) | $142.4 | $176.7 | $(34.3) | Condensed Consolidated Balance Sheets Total assets and liabilities decreased by June 30, 2023, driven by lower receivables and debt, while equity increased | Metric (in millions) | June 30, 2023 | December 31, 2022 | Change ($ in millions) | | :------------------- | :------------ | :---------------- | :--------------------- | | Total assets | $2,022.3 | $2,089.6 | $(67.3) | | Cash and cash equivalents | $43.9 | $40.6 | $3.3 | | Accounts receivable, net | $750.5 | $889.6 | $(139.1) | | Inventories | $487.0 | $423.9 | $63.1 | | Total liabilities | $1,139.0 | $1,333.5 | $(194.5) | | Long-term debt, net of current portion | $171.6 | $264.8 | $(93.2) | | Total shareholders' equity | $883.3 | $756.1 | $127.2 | Condensed Consolidated Statements of Cash Flows Operating cash flow significantly increased for YTD Q2 2023 due to improved receivables, while investing and financing cash usage shifted | Cash Flow Activity (in millions) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($ in millions) | | :------------------------------- | :------------------------------- | :------------------------------- | :--------------------- | | Net cash provided by (used for) operating activities | $165.3 | $62.3 | $103.0 | | Net cash provided by (used for) investing activities | $(5.6) | $131.3 | $(136.9) | | Net cash provided by (used for) financing activities | $(156.8) | $(210.2) | $53.4 | | Net change in cash and cash equivalents | $3.3 | $(17.2) | $20.5 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased from December 2022 to June 2023 due to net income and stock compensation, offset by dividends | Metric (in millions) | Balance at December 31, 2022 | Balance at June 30, 2023 | Change ($ in millions) | | :------------------- | :--------------------------- | :----------------------- | :--------------------- | | Total Shareholders' Equity | $756.1 | $883.3 | $127.2 | | Accumulated Earnings | $472.6 | $595.0 | $122.4 | | Dividends paid (YTD 2023) | N/A | $17.0 | $17.0 | - The 2022 Share Repurchase Program, authorizing $200 million, was completed during the year ended December 31, 2022, with no share repurchases made in the three or six months ended June 30, 202365 Notes to Condensed Consolidated Financial Statements Detailed notes explain Veritiv's business, accounting policies, financial components, and recent events, including the merger agreement 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Veritiv is a North American B2B provider of packaging, facility, and print solutions; 2022 divestitures and new accounting standards had no material impact - Veritiv Corporation is a North American business-to-business full-service provider of value-added packaging products and services, facility solutions, and print-based products and services, operating primarily in the U.S. and Mexico23 - The Company sold its Veritiv Canada, Inc. business on May 2, 2022, and its logistics solutions business on September 1, 2022, with these divestitures not qualifying as discontinued operations24 - The Company adopted ASU 2022-04 (Supplier Finance Programs) and ASU 2020-04 (Reference Rate Reform) in 2023, neither of which had a material impact on the consolidated financial statements2729 2. REVENUE RECOGNITION AND CREDIT LOSSES Veritiv recognizes direct shipment revenue on a gross basis, with customer contract liabilities decreasing to $13.9 million and accounts receivable allowances to $22.9 million by June 30, 2023 - Veritiv is considered a principal in direct shipments from manufacturers to customers, reporting these revenues on a gross basis, with handling and delivery costs accounted for as distribution expenses30 | (in millions) | 2023 | 2022 | | :------------ | :---- | :---- | | Balance at January 1, | $16.1 | $21.8 | | Payments received | $28.4 | $28.7 | | Revenue recognized from beginning of year balance | $(11.7