Veritiv(US:VRTV)2023-11-03 12:01Merger and Acquisition - The Company entered into a definitive merger agreement on August 6, 2023, to be acquired for $170 per share in cash, with shareholder approval received on October 17, 2023[102] - The merger is expected to close in the fourth quarter of 2023, after satisfying customary closing conditions[102] - Professional fees increased by $12.7 million in the three months ended September 30, 2023, primarily due to costs associated with the pending merger with affiliates of Clayton, Dubilier & Rice, LLC[120] Business Segments and Strategy - The Company reported a strategic focus on organic and inorganic growth in its packaging segment, emphasizing higher growth and higher margin businesses[103] - Veritiv's business is organized into three reportable segments: Packaging, Facility Solutions, and Print Solutions, with a focus on value-added services[106] - The Packaging segment targets higher growth sectors including manufacturing, food and beverage, and healthcare, providing a full spectrum of packaging solutions[106] - The Facility Solutions segment sources and sells hygiene and facility products, managing a network of leading suppliers in North America[110] - The Print Solutions segment optimizes printed communication through sustainable paper sourcing and distribution, serving commercial printers and corporate end users[110] - The Company has divested its logistics solutions business and Veritiv Canada, allowing a shift towards core packaging operations[105] - The Company continues to evaluate alternatives for non-core components of its business to enhance overall performance[103] Financial Performance - For the three months ended September 30, 2023, net sales decreased by $343.1 million, or 19.0%, compared to the same period in 2022[113] - Organic sales for the same period decreased by $300.5 million, or 16.8%, with the divestiture of the logistics solutions business contributing $19.3 million to the decline[113] - For the nine months ended September 30, 2023, net sales decreased by $1,054.4 million, or 19.2%, and organic sales decreased by $692.9 million, or 13.5%[114] - The divestitures of the Canadian and logistics solutions businesses accounted for a combined decrease of $338.2 million in net sales for the nine months ended September 30, 2023[114] - For the three months ended September 30, 2023, net sales decreased by $97.8 million, or 9.9%, compared to the same period in 2022, primarily due to lower sales volume[139] - Adjusted EBITDA for the three months ended September 30, 2023, decreased by $7.0 million, or 6.1%, attributed to lower net sales volume, partially offset by a decrease in selling and administrative expenses[140] - For the nine months ended September 30, 2023, net sales decreased by $300.2 million, or 10.0%, with organic sales down by $185.7 million, or 6.4%, primarily due to lower sales volume and the divestiture of the Canadian business[141] - Adjusted EBITDA for the nine months ended September 30, 2023, decreased by $7.5 million, or 2.3%, mainly due to lower sales volume, despite decreases in distribution and selling expenses[142] Cost and Expense Management - Cost of products sold for the three months ended September 30, 2023, decreased by $290.0 million, or 20.9%, primarily due to lower net sales[116] - Distribution expenses decreased by $8.2 million, or 8.8%, for the three months ended September 30, 2023, driven by lower personnel and freight expenses[118] - Selling and administrative expenses decreased by $11.0 million, or 5.6%, for the three months ended September 30, 2023, mainly due to lower personnel and marketing expenses[120] - The decrease in distribution expenses for the nine months ended September 30, 2023, was primarily driven by a $9.4 million decrease related to the divestiture of the Canadian business[142] Market Conditions and Outlook - Management expects weak underlying demand in the print industry to continue into the fourth quarter of 2023, influenced by uncertain macroeconomic conditions[113] - The Company expects North American box shipments to return to growth in the fourth quarter of 2023[139] Cash Flow and Financing - Net cash provided by operating activities increased by $130.4 million to $289.3 million for the nine months ended September 30, 2023, driven by improved accounts receivable collection efforts[161] - Net cash used for investing activities increased by $153.3 million, primarily due to the absence of proceeds from the sales of the logistics solutions business and Veritiv Canada, Inc. in 2023[162] - Net cash used for financing activities decreased by $36.8 million, attributed to lower common stock repurchases and reduced tax withholdings on share-based compensation[163] - The ABL Facility has aggregate commitments of $1.1 billion with a maturity date of May 20, 2026[164] - As of September 30, 2023, the available additional borrowing capacity under the ABL Facility was approximately $820.2 million[166] - The Company expects to spend approximately $25 million on traditional capital expenditures and approximately $20 million on cloud computing arrangements during 2023[169] - The ABL Facility includes a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00, which was not applicable as of September 30, 2023[167] - The Company has $8.1 million in outstanding letters of credit as of September 30, 2023[166] - Management believes that current arrangements will allow the Company to finance its capital and operating needs on acceptable terms[168] Pricing and Inflation - The company has adjusted prices to reflect inflationary impacts on the cost of materials and services throughout the first nine months of 2023[115] - The Company has adjusted prices to reflect the impact of inflation on the cost of purchased materials and services[171] Internal Controls and Risk Management - The Company's disclosure controls and procedures were effective as of September 30, 2023[175] - There have been no changes in internal control over financial reporting that materially affected the Company during the quarter ended September 30, 2023[176] - There have been no material changes in market risk since the last annual report[174]