Essendant Inc. (NASDAQ:ESND) Q4 2015 Earnings Conference Call - Final Transcript

Feb 17, 2016 • 08:30 am ET


Essendant Inc. (NASDAQ:ESND) Q4 2015 Earnings Conference Call - Final Transcript


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Bob Aiken

on a year over year basis. For the full year, we also increased free cash flow by nearly $80 million versus the prior year. I'm pleased with the rapid progress we made in our efforts to transition the business and position Essendant for the long term.

That said, the year was not without challenges. We saw 4.6% decline in organic sales across our portfolio, which was impacted in part by the energy in industrial markets. As a result of the market challenges and energy in industrial, we took $121 million write down of our ORS industrial business.

We are proceeding with a plan to redefine the value proposition at ORS industrial aimed at diversifying into customer segments outside of the oilfield and energy sectors. As you know, industrial is a relatively small percentage of our revenue today at about 11% in Q4. We continue to view the industrial sector as a long term opportunity, particularly as we work to diversify our customer base. During the fourth quarter, the common platform project also entered a peak period of resource strain causing temporary disruptions to our customer service and sales teams, particularly those serving JanSan distributors.

In response, we have implemented a cross functional team to assist with customer issues, and service levels are rebounding quickly. To give you a sense for the operational and commercial improvements we're making. They include improving the paperwork language and usability of our packing lists and invoices, improving sourcing processes for limited stock and out of stock items, and collecting trend data to improve the visibility and speed with which we resolve customer issues. These are fixes being implemented now with deployment over the next 8 to 10 weeks. As these conversion issues are resolved, we expect to start realizing the revenue and cost benefits of the common platform implementation.

Continuing to deliver solid execution in a challenging environment is a clear sign to me that we are well on our way to creating a stronger, more competitive company. In fact, with the exception of ORS industrial, which appears to be in the midst of a continuing industry downturn, all of our other businesses performed more or less, as we planned last year, and leave us well positioned going into 2016.

With that as backdrop, let me turn my attention to this year. In yesterday's earnings release, we reiterated our guidance for 2016 of low to mid single digit revenue growth and high single digit adjusted EPS growth versus the prior year. I remain confident in our ability to deliver on these targets in our 2016 sales outlook remains positive. And that outlook excludes any potential revenue upside from the proposed staples Office Depot merger divestiture that we announced yesterday.

I'll talk more about that transaction, shortly. The fact that we are growing sales to the independent dealer channel supports our outlook. In the last two months alone, we have added three new large independent dealer customers, plus a large national retailer. These new customers are