Veritiv Corporation. Investor Presentation VRTV

Transcription

1 Veritiv Corporation Investor Presentation VRTV

2 Forward-Looking Statement This document contains forward-looking statements that involve risks, uncertainties and changes in circumstances. Forward-looking statements generally can be identified by the use of forwardlooking terminology such as may, will, expect, intend, estimate, anticipate, believe, project, continue or other similar words. The forward-looking statements are not historical facts, but rather are based on Veritiv Corporation s (the Company s) current expectations, estimates, assumptions and projections about our industry, business and future financial results. The Company s actual results could differ materially from the results contemplated by these forwardlooking statements due to a number of factors, including those discussed in the sections entitled Risk Factors and Note Regarding Forward-Looking Statements and Information in the prospectus forming part of the Company s Registration Statement on Form S-1 originally filed with the Securities and Exchange Commission on February 14, 2014, as the same has been amended to date. For the foregoing reasons, you are cautioned against relying on any forward-looking statements contained in this presentation. The Company does not undertake any obligation to update or revise these forward-looking statements, except as required by law. This presentation also contains certain non-gaap financial measures including adjusted EBITDA. Adjusted EBITDA is not considered a measure of financial performance under generally accepted accounting principles and the items excluded in the calculation are significant components in understanding and assessing our financial performance. Non-GAAP measures should not be considered in isolation or as an alternative to GAAP measures and such measures may not be comparable to other similarly titled measures of other companies. The reconciliation of these non-gaap items can be found in the appendix to this presentation. 2

3 Agenda Topic Transaction Overview Veritiv: Background and Investment Highlights Financials and Leadership 3

4 Executive Summary Ø Two industry leaders Ø Complimentary businesses Ø Significant synergies Ø Invest in high-margin growth 4

5 Merger Update Overview Ø On January 28, 2014, International Paper ( IP ) and UWW Holdings LLC ( UWWH ) announced xpedx and Unisource Worldwide, Inc. ( Unisource ) will merge resulting in the creation of a new public company, Veritiv Corporation ( Veritiv ) Structure and consideration Ø Reverse Morris Trust structure. xpedx will be distributed to IP shareholders through a taxfree separation; Unisource will immediately combine with xpedx creating Veritiv; NYSE listed: VRTV Ø $400 million special payment to IP at closing; up to $100 million earnout to IP, if Veritiv achieves certain targets (EBITDA) over a three year period , paid during 2020 Ownership Ø 51% Veritiv ownership to IP shareholders Ø 49% Veritiv ownership to UWWH (Bain Capital, Georgia-Pacific) UWWH does not have demand registration rights for 180 days post closing Closing Ø S-1 registration statement declared effective by SEC Ø Record date June 20, 2014; Distribution date July 1, 2014 Ø When issued trading of VRTV June 18, 2014; Regular way trading of VRTV July 2, 2014 Ø Targeting July 1, 2014 closing, subject to customary closing conditions 5

6 Transaction Rationale Market Leadership Strategic Focus Ø Creates North American market leader Ø Improves market position by combining top industry leaders Ø Strengthens relationships with top customers and suppliers Minimal customer overlap Greater supply chain capability Greater sourcing strategies Value Creation Ø Opportunity to capture significant synergies Overhead Strategic sourcing Supply chain efficiencies Fixed costs Ø Creates a standalone company allowing for strategic focus Ø Better positioned to take advantage of higher margin growth Ø Creates a unique combination of two like companies 6

7 Agenda Topic Transaction Overview Veritiv: Background and Investment Highlights Financials and Leadership 7

8 xpedx Business Overview Leading business-to-business distributor of print, packaging and facility solutions in the United States and Mexico. ($ Millions) YE 12/31/13 Net Sales $5,652 Adj. EBITDA $75 EBITDA Margin 1.3% Employees 5,200 DCs 73 Mini-DCs Revenue by Primary Segment Facility Solutions 15% Packaging 28% Print 57% North American Footprint Primary Segment Descriptions xpedx DCs Print Packaging Provides end-to-end print solutions, including the sale & distribution of print substrates, graphics supplies and wide format, corporate end-user paper solutions Provides packaging expertise through design, sourcing, sale and distribution of custom & standard packaging supplies and equipment Facility Solutions Facility Solutions provider through the sale and distribution of products necessary to maintain large facilities 8

9 Unisource Business Overview Leading business-to-business distributor of print, packaging and facility solutions in the United States and Canada. ($ Millions) YE 12/31/13 Net Sales $4,089 Adj. EBITDA $87 EBITDA Margin 2.1% Employees 4,200 DCs Revenue by Primary Segment Facility Solutions 16% Packaging 28% Logistics Solutions 2% Print 54% North American Footprint Primary Segment Descriptions Unisource DCs Print Packaging Facility Solutions Logistics Solutions Provides end-to-end print solutions: print management, the sale & distribution of print substrates, graphics supplies and wide format Provides custom, end-to-end packaging solutions, from material innovation to design, sourcing and selling of packing materials and equipment Facility solutions provider through the sale and distribution of products necessary to maintain large facilities Inbound and outbound logistics solutions, comprehensive supply chain analytics and valueadded offerings 9

10 Veritiv Will be a North American Leader in business-to-business Distribution Across Several Industrial Supply Categories PF metrics North American footprint Net Sales 1 ~$9.7 Billion xpedx DCs Unisource DCs Employees 2 ~9,400 Locations 2 US Canada Mexico Mini DCs PaperPlus Stores Net Sales by Segment 1 Facility Solutions 16% Packaging 28% Print 55% Other 1% Veritiv will be able to leverage its size and scale within a fragmented industry 1) As of FY ) As of 12/31/

11 Veritiv s Business Model Partner with world class suppliers then add value through multiple capabilities to a wide range of customer segments Ø Customer Reach Ø Effective Supply Chain Select Sell Solve Veritiv Service Source Ø Full product line to reduce inbound complexity Ø National network to service large customers Ø Service and solutions to customers where they lack expertise or capabilities Ø Veritiv conducts business with more than half of the Fortune

12 Veritiv Business Strategy Veritiv s business strategy will be underpinned by two foundational objectives growth in more profitable segments and operational excellence. Profitable Revenue Mix Segment Specific Market Leadership Operational Excellence Print Publishing and Print Mgmt. Packaging Ø Expertise in paper & access to best in class product breadth value Ø Expertise in paper & access to best in class product breadth value Ø Full service design, sourcing and delivery of substrate agnostic specialty packaging solutions, as well as standard packaging Ø Size and scale advantages Ø Standardized processes and procedures with local execution Ø Extensive supply chain capabilities (systems, tools, resources) Ø Monitoring and measuring tools Facility Supplies Ø Aggregate sourcing, tiered offerings, supply chain reach and assured buying compliance Ø Investment in tools and capabilities; continuously improving 12

13 Veritiv s Print Segment Providing more than just products creating solutions. Wide Format Solutions n Wide format solutions Equipment Substrates Small Order Service n Support growth of digital print small runs n Small order delivery Graphics n Graphics supplies n Equipment sales and service Sustainable Solutions n Sustainable green printing n Chain of Custody certifications High-Quality Commercial Paper n Printing, writing, copy, digital, and specialty n National and private brands Veritiv Net Sales¹ $4.0 billion Forecasted Market Growth Rate: (3%) 2 E-Commerce & E-Procurement n Automated e-procurement platforms, allowing customers to define specification, review estimates, and place orders 1) Combined xpedx and Unisource 2013 sales 2) Based on industry data and company estimates ( ) 13

14 Veritiv s Publishing & Print Management Segment Providing solutions to the world s largest publishers and consumer retail companies. Global Market Solutions n Paper procurement needs of multinational customers with offshore affiliates or locations Print Consulting n End user consulting for the most effective, cost competitive solutions Workflow Management n Customer workflow managed to optimize print jobs Paper Sourcing & Delivery n Extensive sourcing options n Expert service and delivery Veritiv Net Sales¹ $1.5 billion Print Management n End user end-to-end solutions in printing, substrate sourcing, and delivery Forecasted Market Growth Rate: (4%) 2 1) Combined xpedx and Unisource 2013 sales 2) Based on industry data and company estimates ( ) 14

15 Veritiv s Packaging Segment Positioned for growth as the single-point resource for all packaging needs, from design, to sourcing to delivery. Standard Packaging n Broad portfolio, tiered offerings Branded Private Label Value Added Services n Logistic and supply chain services Equipment Solutions & Support n Production packaging equipment solutions n Sales and service Material Innovation & Sustainable Sourcing n Design and/or sourcing of leading-edge alternative materials n Green packaging Custom Packaging n End-to-end design, engineering, sourcing and delivery n Nation-wide network of design centers Veritiv Net Sales¹ $2.7 billion International Capabilities n Sourcing and delivery outside the U.S. for U.S. based customers manufacturing in Asia, Europe and Brazil Specification Management n Master data management of all packaging material specifications Forecasted Market Growth Rate: 2% 2 1) Combined xpedx and Unisource 2013 sales 2) Based on industry data and company estimates ( ) 15

16 Veritiv s Facility Solutions Segment Providing products, services and solutions nationally across multiple channels. Healthy Building Consulting n Quality control audits and action plans n Certified specialists Re-distribution n Small distributors n One-stop shopping n Leverage supply chain Green Product Offerings n Branded and private label products n Chain of custody certifications Standard Products n Broad portfolio of branded and private label products n Supply chain efficiency Veritiv Net Sales¹ $1.5 billion Reporting & Analytics n Inventory management analytics n Green reporting n Spend reporting to support customer budgets Customer Inventory Optimization n System to optimize customer inventory n Automatic replenishment Forecasted Market Growth Rate: 2% 2 1) Combined xpedx and Unisource 2013 sales 2) Based on industry data and company estimates ( ) 16

17 Operational Excellence: Sourcing and Inventory Strategic Sourcing Process to consolidate suppliers and rationalize SKUs Optimize Inventory Centralized replenishment and automated tools $8 billion ¹ of Products & Services Sourced: Private Label Strategies with size and scale to enhance customer offerings and deliver improved margins Compliance Metrics and measurement processes 1) On a combined basis as of FY

18 Operational Excellence: Warehouse, Transportation & Support Services Warehouses Managed with technology to optimize inventory and productivity while improving customer reach and service Commercial Processes Customer service COE Price management tools Centralized training and development Selling tools Distribution Network: 179 Locations¹ Transportation RoadNet tool to optimize freight miles XRS technologies and Territory Planner Back Office Processes Centers of excellence: Credit AR / AP Data management Supply Chain Processes Centralized supply chain organization with analytical tools to drive consistency and standard practices 1) On a combined basis as of FY

19 Consolidating Operational Excellence Programs to capture and sustain synergies Operational Excellence Program Capture synergy Deliver operational excellence 1 2 Capture synergies: Rigorous programs to systematically attack the opportunity across business units a) Profitable service Provide field with information on opportunities to adjust handling/delivery, customer service, and inventory costs b) Logistics excellence Optimize routing, transfers, freight rates, warehouse productivity and space c) Sourcing Partner with SBUs to drive down unit costs and rationalize SKUs Deliver operational excellence: Enhance cross-functional processes while allowing for appropriate local flexibility Centralized Supply Chain will assist Field and SBUs to increase profit without sacrificing profitable growth 19

20 Agenda Topic Transaction Overview Veritiv: Background and Investment Highlights Financials and Leadership 20

21 Financial Summary Revenues Ø Investing in growth segments Ø Organized around Large nation/regional accounts scale matters Local accounts manage cost to serve Ø Strategic account management - optimize customer mix and SKUs Ø Initial downward pressure Synergies Ø Opportunity to capture significant synergies Ø Significant driver to business model in next several years Strategic sourcing Supply chain efficiencies Fixed costs (e.g. warehouse) Overhead (e.g. back office) 2014 Adjusted EBITDA expected to be $135 million - $145 million Ø Better positioned to take advantage of higher margin growth segments Ø Management intends to improve Adjusted EBITDA by an incremental $100 million over next few years Ø Transaction and transition expenses meaningful.but, one-time in nature 21

22 Synergies and one-time integration costs Veritiv expects significant net synergies of $150M - $225M Ø Key areas that synergies will be derived from include: Supply chain efficiencies Selling, General and Administrative 100% 80% Net synergies expected to be realized 80% - 90% 60% 50% - 60% 40% 20% 0% 0% 15% - 25% YE 2014 YE 2015 YE 2016 YE 2017 Costs to achieve 1 ($225M): 30-35% 60-70% 80-90% % 1) Includes ~ $55 million of one-time integration capital expenditures 22

23 Liquidity and Capital Discussion Cap Structure New $1.4bn ABL facility in place, matures 2019 Initial draw down of ~ $750 million at closing Available liquidity at closing of ~ $450 million Initial ABL drawings used to repay Unisource debt and to fund IP cash dividend of $400 million Over the next few years, Veritiv expects revolver availability plus cash flow from operations will be sufficient to fund costs of achieving synergies and other working capital needs Capital Allocation Fund costs of synergies and reinvest in the business Maintain fleet and facilities to preserve premium customer service levels compared to lesser capitalized, smaller, competitors Pay down debt Improve balance sheet Position company to return value to shareholders over time 23

24 Veritiv s Leadership & Governance Mary Laschinger Chairman and Chief Executive Officer Current President, xpedx and SVP, International Paper Management Team SVP, CFO Steve Smith SVP, Corporate Affairs Neil Russell SVP, General Counsel Mark Hianik SVP, Integration & Change Mgmt Bruce Henry SVP, Chief Human Resources Officer Beth Patrick SVP, Packaging Darin Tang SVP, Print Dan Watkoske SVP, Publishing & Print Management Barry Nelson SVP, Facility Solutions/ Strategy & Commercial Excellence Joe Myers SVP, Supply Chain Tim Kutz SVP, Field Sales & Operations Tom Lazzaro Board of Directors q Lead Director William E. Mitchell, retired chairman and chief executive officer, Arrow Electronics, Inc. and founder of Sequel Capital Management, LLC q Allan Dragone, current Unisource CEO, will serve as a director of the new company and will advise on integration activities. q Daniel T. Henry, retired executive vice president and chief financial officer, American Express q Tracy Leinbach, retired executive vice president and CFO, Ryder System, Inc. q Seth Meisel, managing director, Bain Capital q Michael Muldowney, former CFO and interim CEO of Houghton Mifflin Harcourt Publishing Co., and founder and CEO of Foxford Capital, LLC q Charles G. Ward, partner, Perella Weinberg Partners, and former president, Lazard Ltd. q John Zillmer, retired chairman, president and chief executive officer, Univar, Inc. Significant leadership incentives will be linked to earnings performance 24

25 Why Invest in Veritiv (VRTV) Ø Industry leader with significant size and scale Ø Business model creates value for both customers and suppliers Ø Growth segments in packaging, facility solutions and logistics with differentiating value propositions Ø Positioned to win in the print segment Ø Strong and stable platform to invest for future growth Ø Experienced team 25

26 Non-GAAP Reconciliations 26

27 Non-GAAP Adjusted EBITDA Reconciliation Disclaimer Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, cash and non-cash restructuring (gains) expenses, merger expenses, gain from sale of equity investments, asset impairments, non-restructuring stock-based compensation expense, LIFO (income) expense, non-restructuring severance charges, non-restructuring pension settlement charges, (loss) income from discontinued operations, net of income taxes, and certain other costs. Adjusted EBITDA Margin is calculated based on Adjusted EBITDA divided by net sales. Veritiv supplements its financial information prepared in accordance with GAAP with Adjusted EBITDA because we believe investors commonly use Adjusted EBITDA as a main component of valuing companies such as Veritiv. In addition, the credit agreement governing Veritiv s ABL Facility will permit Veritiv to exclude these and other charges and expenses in calculating Consolidated EBITDA pursuant to such credit agreement. A reconciliation of Adjusted EBITDA to net income determined in accordance with GAAP is provided for the periods presented. 27

28 Veritiv Historical Non-GAAP Adjusted EBITDA Reconciliation Veritiv Historical Non-GAAP Adjusted EBITDA Reconciliation ($mm) FY '11A FY '12A FY '13A LTM 1Q '14A 1Q '13A 1Q '14A Net income (loss) $(5) $10 $243 $251 $(6) $2 Interest expense, net Income tax provision (benefit) ¹ (228) (225) (0) 3 Depreciation and amortization EBITDA $117 $102 $84 $96 $11 $23 Restructuring expenses (gains) Merger expenses Gain from sale of equity investment² (7) - (7) Asset impairments³ Non-restructuring stock-based compensation LIFO (income) expense (3) (4) Non-restructuring severance charges Non-restructuring pension settlement charges (Loss) income from discontinued operations, net of income taxes (14) (10) 0 (0) 0 (0) Employee strike related costs Bain athisory fees Adjusted EBITDA $208 $181 $162 $163 $22 $24 1) FY '12 includes a $17 million charge related to a deferred tax asset valuation allowance for Unisource Canada FY '13 and LTM 1Q '14 includes a $230 million of tax benefit related to the reversal of the Unisource U.S. tax valuation allowance 2) LTM 1Q '14 includes gains of $5 million and $2 million from the sale of two of Unisource's joint ventures 3) FY '11 includes write-off of trade names by Unisource Canada of $1 million FY '12 primarily includes a $3 million impairment of cold storage equipment by Unisource Canada, a $1 million of impairment of packaging equipment Unisource Sweden and a $1 million impairment of goodwill by Unisource Canada 28

29 xpedx Historical Non-GAAP Adjusted EBITDA Reconciliation xpedx Historical Non-GAAP Adjusted EBITDA Reconciliation ($mm) FY '11A FY '12A FY '13A LTM 1Q '14A 1Q '13A 1Q '14A Net income (loss) $22 $4 $0 $6 $(1) $6 Interest expense, net Income tax provision (benefit) (1) 4 Depreciation and amortization EBITDA $59 $28 $18 $28 $3 $14 Restructuring expenses (gains) (0) Non-restructuring stock-based compensation LIFO (income) expense (1) (2) (4) Non-restructuring severance charges (Loss) income from discontinued operations, net of income taxes (14) (10) 0 (0) 0 (0) Employee strike related costs Adjusted EBITDA $126 $90 $75 $75 $13 $13 29

30 Unisource Historical Non-GAAP Adjusted EBITDA Reconciliation Unisource Historical Non-GAAP Adjusted EBITDA Reconciliation ($mm) FY '11A FY '12A FY '13A LTM 1Q '14A 1Q '13A 1Q '14A Net income (loss) $(27) $5 $242 $245 $(6) $(3) Interest expense, net Income tax provision (benefit)¹ (6) 15 (229) (229) 0 (0) Depreciation and amortization EBITDA $59 $74 $66 $67 $8 $9 Restructuring expenses (gains) 15 7 (3) (4) 1 0 Merger expenses Gain from sale of equity investment² (7) - (7) Asset impairments³ Non-restructuring stock-based compensation LIFO (income) expense 2 (0) 3 4 (1) (0) Non-restructuring severance charges Non-restructuring pension settlement charges Bain advisory fees Adjusted EBITDA $83 $92 $87 $89 $10 $11 1) FY '12 includes a $17 million charge related to a deferred tax asset valuation allowance in Canada FY '13 and LTM 1Q '14 includes a $230 million of tax benefit related to the reversal of the Unisource U.S. tax valuation allowance 2) LTM 1Q '14 includes gains of $5 million and $2 million from the sale of two of Unisource's joint ventures 3) FY '11 includes impairment of trade names in Canada FY '12 primarily includes a $3 million impairment of cold storage equipment in Canada, a $1 million of impairment of packaging equipment in Sweden and a $1 million impairment of goodwill in Canada 30