Good morning, and welcome to the Veritiv Second Quarter 2014 Conference Call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions. I would like to turn the call over to Neil Russell, Senior Vice President of Corporate Affairs. Please go ahead.

Thank you, Lianne, and good morning, everyone. Welcome to Veritiv Corporation's Second Quarter 2014 Earnings Call. Today, you will hear prepared remarks from Mary Laschinger, our Chairman and Chief Executive Officer; and Steve Smith, our Chief Financial Officer. Before we begin, please note that statements made during this presentation that state the company's or management's intentions, beliefs, expectations or predictions of the future are forward-looking statements, and actual results could differ in a material manner. Additional information that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes, but is not limited to, risk factors contained in our S-1 registration statement and in the news release issued earlier this morning, which is posted in the Investors section at veritivcorp.com and can be found on the Veritiv IR app, which can be downloaded from the iTunes App Store and Google Play. Non-GAAP financial measures are included in our comments today and in the presentation slides. The reconciliation of these non-GAAP measures to the applicable GAAP measures are included at the end of the presentation, which can also be found in the Investors section of our website. Lastly, we will be participating in investor conferences during early September in Boston, New York and Chicago. Additional information regarding dates and times will be provided in the next couple of weeks. At this time, I'd like to turn the call over to our Chairman and Chief Executive Officer, Mary Laschinger.

Thanks, Neil. Hello, everyone, and thank you for joining us today. I want to start out by welcoming all of our new investors and thank you for making Veritiv's first month so successful. We are encouraged and energized by the support for Veritiv as a North American leader in distribution solutions, as well as an investment opportunity. Before we move into our financials, I'd like to briefly bring you up-to-date on the work that has taken place toward our 2014 priorities. On July 2, the Veritiv leadership team and I made a commitment to execute an integration plan with much diligence. This plan includes focusing on achieving our stated synergies while remaining laser-focused on providing industry-leading products and solutions to our customers. At the same time, I shared my vision for what the merger and our new company will bring to our customers and suppliers. First of all, we have created the foundation for being the distribution market leader in North America. We have assembled the best professionals in the business, equipped with industry expertise that will ensure greater sourcing strategies and supply chain capabilities. Second, we are positioned to create significant value for both our customers and suppliers while capturing synergies across the business, creating a strong and sustainable company for the future. And lastly, we are building a 1 Veritiv culture from 2 companies, strategically focused on what we do best and looking towards future growth and investment. I am proud to say that we are on track to meet these goals. We had a tremendous success with our complicated merger transaction, and we are really pleased that we hit day 1 without any significant operational issues, and we are now executing against our integration plan. Over the past few weeks, I've had the opportunity to travel to some of our locations across North America and visit our teams in the field. And it has been truly inspiring to see the level of collaboration and the energy around bringing these 2 great companies together. This morning, I'll make a few comments about our second quarter performance and provide an update on our integration progress and the execution of our priorities. I want to note that the results we discussed today are limited consolidated pro forma results for the quarter and year-to-date. Tomorrow, on August 14, we will file a second quarter Form 10-Q, which will include full second quarter results for the xpedx business. Beginning with the third quarter, we will report consolidated financial results for the combined company. Pro forma results for the second quarter ending on June 30, 2014. We reported a net sales of $2.3 billion and a net loss of $3.3 million, resulting in a diluted net loss per share of $0.21. Veritiv also achieved an adjusted EBITDA of a positive $37.8 million. These results are in line with our expectations. Before I turn it over to Steve for a few additional details on these results, I'd like to leave you with a few key takeaways. First, we are stabilizing our ongoing operations as a combined business. We continue to focus on our customers by providing consistent service and meeting our commitment. Second, we continue to execute our plans for integration and capturing synergies. And lastly, we are aligning our segment strategies, our operational model and our organizational design to operate as one Veritiv. Now I'll turn things over to our CFO, Steve Smith, so he can provide you with additional details on our financial results for the second quarter. Stephen J. Smith: Thanks, Mary, and good morning, everyone. As Mary mentioned, this quarter, we are reporting limited financial results for Veritiv. Because of the SEC reporting rules, our 10-Q tomorrow will include full xpedx results but only limited pro forma Veritiv results. This unusual reporting pattern is due to the fact that our SEC registration was effective in the second quarter, but the merger occurred after the June second quarter end. Therefore, for accounting purposes, the merger is treated as a subsequent event in Veritiv's second quarter Form 10-Q. Our third quarter Form 10-Q, which we currently anticipate filing in mid-November, will include consolidated financial results for the combined company. Against that backdrop, we did share limited combined company financial information in today's press release for both the second quarter and the first 6 months of the year. I will now take a few minutes to highlight a handful of key metrics, all of which are presented on a pro forma consolidated basis. For the second quarter ended June 30, 2014, net sales were $2.3 billion, a decrease of 4.2% from the prior year's second quarter. For the 6 months ended June 30, net sales were $4.5 billion, a decrease of 4.8% from the comparable prior year period. Looking at our sales by segment, we had a roughly 8% decline in sales in the print and facility solutions segments. The declines in these segments were the results of both continued industry pressure and our portfolio optimization process that is consistent with our strategy. The decline in the sales in these segments was partially offset by the increase in sales of just under 4% in the packaging segment. Additionally, for the second quarter ended June 30, 2014, our net loss was $3.3 million. For the 6 months ended June 30, net earnings were $6.1 million. Diluted net loss per share for the second quarter was $0.21. Diluted net earnings per share for the 6 months ended June 30, 2014, was $0.38. Lastly, for the second quarter ended June 30, adjusted EBITDA was $37.8 million, a decrease of 10.8% from the prior year. For the 6 months ended June 30, adjusted EBITDA was $61.9 million, a decrease of 4.8% from the prior year. These results are on track with our expectations, and as such, for the full year 2014, we continue to expect adjusted EBITDA to be in the range of $135 million to $145 million. Also consistent with prior guidance, we expect adjusted EBITDA improvement of approximately $100 million over the next few years. As discussed with some prior to our merger, we continue to see net cost savings and other synergies in the range of $150 million to $225 million over the next 5 years. The pacing of these cost savings and the synergies suggests no net benefit in 2014 and between 15% and 25% of the total benefit by the end of 2015. These synergies are mostly driven by a concerted effort in sourcing strategies and in lowering operating expenses in areas such as warehouse, transportation and back office. We continue to expect total cost to achieve those synergies of approximately $225 million and of that, capital spending related to the integration to be approximately $55 million. As expected, on July 1, the company drew approximately $755 million of its $1.4 billion asset-based loan facility to fund the transactions, and then, as now, we have available liquidity of approximately $500 million. The drawdown on the facility was used to repay legacy Unisource debt to fund the cash dividend of $40 million paid to International Paper and to pay certain transaction costs. As a reminder, the ABL Facility is backed by the inventory and receivables of the business and generally has no financial covenants. Excluding onetime integration costs which may be capitalized, we continue to expect capital spending for the remainder of the year to be approximately $10 million. Excluding any post-closing working capital adjustments, we anticipate each of the legacy companies will continue to generate positive cash flow for the second half of 2014. Going forward, we believe that cash flow from the business, combined with an anticipated improvement in adjusted EBITDA, will allow us to fund the costs associated with achieving synergies, paying down debt and growing the overall value of the enterprise. In closing, while we have much work to do, we are focused on supporting our customers as we work through our integration process and give our team members the tools they need to execute effectively. We are confident we are on the right path, and we are excited about our future as one company, Veritiv Corporation.

Thank you, Steve, and thank you, everyone, for joining us this morning. As you can tell, we have a tremendous opportunity in front of us, and we're excited about what the future holds for Veritiv. Our second quarter earnings results are about what we expected. The potential of these 2 leading businesses combined is why we created Veritiv. We created Veritiv to form a North American market leader that can leverage our size and scale in a fragmented industry. With the combined capabilities of xpedx and Unisource, we expect to be able to capture and sustain cost savings and other synergies up to $225 million while driving operational excellence in support of our customers. We have the plan and team in place to achieve our goals, and we are delighted to have you as important partners in our journey. Now I would like to welcome any of you with your questions and comments.

[Operator Instructions] Your first question comes from the line of Scott Gaffner from Barclays.

This is actually Taylor Saunders [ph] on for Scott. I guess to start, would you mind just giving us a little more color? So you mentioned, when looking at the segments, you mentioned, I think, an 8% decline in sales in print and facility solutions and then a 4% increase in packaging. Would you mind just providing a little more color on the specific trends that you're seeing in each of these segments? And then I think you talked about maybe a portfolio optimization that's going on, and can you talk a little bit more about what you're doing there?

Yes, Taylor. Thank you for the question. So when you look at this by segment, first of all, on the print segment, we were down roughly 8% quarter-on-quarter, in line with expectations. The market structure is -- also, the market itself continues to decline due to the structure of the industry. Our decline was slightly higher than that for 2 -- or 3 primary reasons. One, we did anticipate that we would have some losses due to the integration, and that was part of our plan. But we also have embedded in those numbers some loss of business due to a, I will say, a bankruptcy from a supplier that impacted some of our customers. And so those were some of the key drivers that drove our decline a little bit higher than the industry decline in the range of -- which was, we estimate, in the range of about 3% to 5%. We also have mix in our business in print that has -- can have a greater decline based on the product categories, and that varies on any given quarter. So print is about what we expected given what we're dealing with today. On the facilities business, during our investor roadshow, we shared with you that, as you saw in the S-1, in particular, when you look at the xpedx facilities business, we have significant opportunity to improve that portfolio. Historically, the business has not been managed strategically. We are moving forward with that and have gone through significant restructuring over prior years to reposition that business. Through that process, we are looking at optimizing that portfolio because we have significant tails on that business, both in terms of SKUs that are unprofitable to us, as well as looking how we improve the supply chain. So there has been some rationalization in that segment, which has driven the revenues down. However, we are beginning to see profitability in that segment improve over this past quarter relative to prior year quarter. And in the packaging business, which is the -- where we see tremendous potential, we reported a year-on-year growth of almost 4% in the segment, consistent with our overarching strategy of continuing to invest in that segment because that's the value proposition that we have is significant to offer our customer base. And we would anticipate that we'll continue to see growth in that segment.

Okay, perfect. And then just to confirm, so the customer losses, you would say that's kind of in line with what you had expected prior to the merger?

That is correct.

Okay. Okay, great. And then I was just wondering also on the synergy target, the $150 million to $225 million, would you be able to provide sort of any sort of bucket for the synergy target broken down between cost -- any sort of specific buckets there?

Taylor, I'm going to turn that question over to Steve. Stephen J. Smith: Sure, Taylor. We haven't been so specific as to give you a precise figure, but let me characterize how we're thinking about it internally and then see if that's helpful to you. What we've done, as we said, that if you took kind of the midpoint of the synergy band, and let's just assume for a moment in time a roughly $200 million figure, and if you apply half of that figure, $100 million, against the COGS of the corporation, you would see that over the 5-year horizon, so not 1 year but multiple years, you would see an improvement of 1 to 2 percentage in COGS. Applying that other half against the SG&A of the corporation on a combined basis of roughly $1.5 billion, you would see that it's in the high-single-digits range as far as cost takeout. Some areas, it's greater, some areas, it's less. I'm trying to focus away from the customer where we're looking for efficiencies.

Your next question comes from the line of Chip Dillon from Vertical Research.

Well, first question is, could you -- obviously, we're going to know a lot more of the picture tomorrow, and I'm trusting, in the future, you'll give us the full picture when you report. But I understand totally that this is the first time out. But one thing I noticed that you did tell us is the stock compensation expense was $3.2 million this quarter, and that was up from $1.1 million, from what I gather, in the first quarter. And I just wondered, what is sort of a normal -- how does that kind of -- how should we think about that number in the future periods? Is there -- what's a more normal level, and is there going to be some variability? And I recognize in the perspectives that there were some upfront payments. So I'm assuming the $3.2 million in the second quarter was probably higher than normal.

Chip, okay. So I'll take the first part of that. That $3.2 million is a carryover from International Paper for the former -- or for the xpedx employees who are now Veritiv. So it has no connection to the ongoing Veritiv performance around stock comp. And then to answer the second part of your question, I will turn it over to Steve. Stephen J. Smith: So just a point of clarification as it relates to the amount of information we could share at this point. I just wanted to make sure that -- and I think you stated it, but just to confirm that we share the information that was appropriate at this time. We will continue to provide, to the best of our ability, information that we believe is helpful. The EBITDA tables at the back, Table 1, we believe being supplemental or helpful to their prospective listener. And so as it relates to the compensation expense, just so you know, there have been no Veritiv shares issued. And the plans are going through the appropriate process with the Board of Directors and the compensation committee for the second half of this year and for subsequent periods.

Okay, that's helpful. And then if you could give us a little -- a further update. You had given us some good detail about a month or so ago, I think, just after the spin-off occurred. But as you look at the facilities business, which I know from the xpedx side had -- was probably the one area that has the most opportunity for, at least, some improvement even if it shrinks. I got the feeling from the last call that it might be a number of years before you could sort of get that one right. And I just -- is that because of legacy contracts? Or kind of what do you think would be a realistic time frame to see that get to breakeven, that particular business, and kind of what are some brackets around that?

Chip, okay. So yes, as you commented, there's tremendous opportunity for us in that business, even if it means getting it smaller and more profitable. I wouldn't suggest that it's going to take us years to get there. We don't have a definitive timeline in front of us at this point in time, but I don't see that taking 5 years for us to achieve that. One of the benefits that we have is that we started this work over 2013 with some of the strategic initiatives from the former xpedx organization to improve the supply chain capabilities and develop more strategic approach to the business. So we're not starting from scratch. Additionally, as you saw in the S-1, that the former legacy Unisource facilities business is a profitable business today. And so we have some opportunities to learn from that as well as we combine and bring those 2 businesses together.

Your next question comes from the line of Elie Mishaan from Corsair Capital Management.

I have a question for Steve, I guess. In terms of the -- and I think you mentioned liquidity. I just wanted to understand how your availability of cash will be over the next, call it, 12 months given you're going to be spending a lot of onetime cash costs on the payment of synergies. It seems like there's not a lot of -- might be none or negative free cash flow over the next year. I wanted to understand, are you going to be just adding more debt and how much? If you can give us a sense for that. Stephen J. Smith: Sure. Thanks for the question. So the company anticipates that for the second half of this year, both the businesses, together, will generate cash flow, as we stated in our prepared remarks, positive cash flow. The company will be able to absorb, we believe, the restructuring charges as they occur, including the capital associated with the synergies business -- synergies activity, rather, and still be cash flow in most quarters, if not all. The business has a natural seasonality to it from a working capital perspective, which we believe, although we're still proving this out internally, is about a trough to peak of about $100 million, the trough being, from a usage perspective, in the end of the first fiscal quarter and the peak being during the third quarter into the beginning of the fourth. And so you'll see both of those patterns occurring, both the seasonality and then the overlay of the restructuring costs, but we believe in most periods, we'll have positive cash flow.

Right, okay. So in terms of any increased leverage, do you expect that or... Stephen J. Smith: Well, currently, we anticipate the leverage for the end of this fiscal year to be lower than the starting point in July. We haven't shared a view to '15, so I can't comment to that yet.

And yet you didn't report any balance sheet today, right, a pro forma balance sheet? Stephen J. Smith: We did not report a pro forma balance sheet today. What we did share, though, was that our, in my prepared remarks, that our availability today, literally, in the last few business days, is roughly comparable to where it was on July 1. So that's one data point for you.

And the other question I had is for either of you, and it came -- the stock comp question came up. I think it's my understanding that there were no options in Veritiv Corp. issued to the management team. It's a little -- I don't remember seeing that before. I'm curious if I'm right about that and why that decision was made.

Yes, Elie, thank you for the question. You are correct. There were no shares or options distributed to any of the management on the outset primarily due to the nature of the transaction itself. However, as we come out of 2014, we will be, as we get approval with the Board of Directors over the next couple of months, we will be embarking, though, a management team into stock compensation based on long-term incentive and performance incentive, performance-based.

Okay. And do you guys -- just last question. Do you guys have a sense for where the, I guess, sort of market share loss came in the print segment? Obviously, you guys expected some loss from the merger. I'm curious if there's -- if you guys have a sense for where it went and is there more to come or just a little more color on that.

So we've -- in terms of the market share loss, it's cut of across the business. We anticipated, because of the nature of these 2 businesses, that the customer overlap occurs primarily in our print segment, and so there weren't any surprises there for us. And again, in terms of the go-forward nature of customer activity, it's impossible for us to predict precisely. But we did, as we communicated with you in prior discussions, that we did anticipate some dis-synergies as it relates to the merger, and so those forecast and outlooks are still embedded in our plans.

Your next question comes from the line of Taylor Saunders [ph] from Barclays.

Just a couple of quick ones. So I think you talked about it in your prepared remarks a little bit, but just to confirm, any sort of unforeseen disruptions throughout the supply chain following the merger or any other obstacles that maybe you didn't anticipate?

Taylor, no. In fact, we would characterize the kickoff on day 1 to have met or exceeded our expectations. Given the nature of the dynamics and the complication of this transaction, we were very well prepared, and we have not seen any supply disruption or customer disruption for that matter or employee disruption. So we're very pleased with the planning and the execution of day 1. And recognize, too, we had all of the management team in place as we jumped into day 1, which also facilitated that, and that same management team going forward with the execution of our integration plan.

Okay, great. And then you also just talked on the peak to trough. I think you're about to -- I guess you're getting closer to your seasonally strong period. And I was wondering, do you have any sort of visibility into orders or holiday orders, which I think you said is a stronger period? Or is it a little bit too early for that? Stephen J. Smith: Generally, we don't comment about customer order patterns, so at this time, Taylor, we'll decline to respond to that one.

[Operator Instructions] Your next question comes from the line of Chip Dillon from Vertical Research.

That was very helpful, giving us the seasonal working capital pattern that you guys see. One thing I noticed, too, was the swing, and maybe there's a rhyme or reason or not that we can -- that would help us in our forecasting also, and that's in the LIFO inventory adjustments. And I noticed that in the first quarter, it looks like it was a positive, and again, this is just for the xpedx part. It was a positive $3.7 million, and then in the next quarter, in the second quarter, it was a negative $3.4 million. And I didn't know if that -- if there's some pattern there or some rule of thumb that we can use. Does it swing one way each quarter, or how can you anticipate that movement?

Chip, thank you for the question. I'm going to turn that over to Steve. Stephen J. Smith: Thanks, Mary. So Chip, as much as we would like to have some predictability around the LIFO inventory changes, there really isn't a pattern historically that we would recognize. There are so many variables that go into the LIFO that it isn't one that we would, A, be able to share on a forward-looking basis, and B, we haven't seen a consistent pattern historically.

Okay, okay. And as you merged the 2 entities together, was the -- were the inventory systems or accounting, and maybe this was in the prospectus and I just missed it, but were they different or were they the same? And if they were different, sort of which system are you going to adopt?

Chip, so the systems are different. And as part of our integration planning and execution, we are making some of those choices as we speak, as we go forward. Some of those systems integrations have a long tail on them because of the sheer number of locations that we have. But they are different today. But we will be integrating them over time, and we haven't made any specific choices at this point in time.

Okay. And then I guess the last one was you were talking about being cash flow-positive, and I'm assuming that is after working capital changes, which, I know, can make that tougher in, like, something like the first quarter but easier in the second, third. But in terms of free cash flow, I guess if I define that as after restructuring charges, that could actually, given the magnitude of those, that would probably end up being a slightly negative number in most quarters as you look out over the next year or so. Or would you expect to actually see enough cash to pay down some of your debt in the next -- I know you mentioned you expected to pay out some, and maybe that's tied to working capital. But let's say if we go from mid-'14 to mid-'15, on a pro forma basis for mid-'14, do you think you'll be able to reduce debt any, given the magnitude of the restructuring charges? Stephen J. Smith: Okay, so Chip, let me answer the 3 elements of that question. First, with regard to the second half of this year, we do believe that we'll be positive cash flow, even after the restructuring charges and the working capital movements. The second element of the question was with regard to '15. In 2015, again, we haven't provided a forecast for that year, specifically. At this time, and I emphasize at this time, we believe the company will be cash flow-positive in most quarters, including the restructuring charges necessary to effect the synergies we're going after. And the third part of the question was, overall, within specific quarters, you mentioned the first and second and third, first being more of a challenge because of the operating losses generally incurred, we have taken that into account in our seasonality. And so again, we're still merging the businesses together and understanding the nuances of the working capital movement. We do believe the information we shared in the prepared remarks is accurate, and we'll share with you our view on '15 when that operating plan is decided.

And this concludes Veritiv's Second Quarter 2014 Conference Call. You may now disconnect. Thank you for your participation today.