Essendant Inc. (ESND), a leading national wholesale distributor of workplace items, today announced financial results for the fourth quarter and year ended December 31, 2016. Key results for fourth quarter and full year 2016 were as follows:

Full Year 2016 Summary

Revenue, workday adjusted, declined 0.3% year-over-year, to $5.4 billion
GAAP diluted earnings per share of $1.73 compared to loss per share of $1.18 in 2015, including a $115.8 million, or $3.04 per share, impairment in the fourth quarter of 2015
Adjusted diluted earnings per share(1) of $1.54 compared to $3.08 in 2015, including the recognition of a $13.3 million allowance on receivables from one customer in 2016 which impacted adjusted earnings per share by $0.22 in 2016
Free cash flow(1) totaled $127.2 million compared to $134.7 million in 2015
In February 2017, the Company replaced two of its financing agreements with a new credit agreement to provide greater liquidity and capital availability

Fourth Quarter 2016 Summary

Revenue, workday adjusted, decreased 3.3% compared to fourth quarter last year, to $1.3 billion
GAAP net loss of ($2.4) million compared to a net loss of ($95.8) million in the prior year quarter
GAAP diluted loss per share of ($0.06) compared to loss of ($2.61) per share in the prior year quarter, including a $3.04 per share impairment in 2015
Adjusted operating income(1) of $3.3 million compared to $54.1 million fourth quarter last year including the recognition of a $13.3 million allowance on receivables from one customer in 2016
Adjusted diluted loss per share(1) of ($0.02) compared to earnings per share of $0.81 fourth quarter last year, including earnings per share impact in 2016 of the allowance on receivable for one customer of $0.22

"We continued to move aggressively in the fourth quarter to advance our transformation program and strengthen our balance sheet as we reposition Essendant to drive earnings growth," said Robert B. Aiken, Jr., president and chief executive officer of Essendant.

"While recognizing persistent industry headwinds, we are confident that our actions will position Essendant to deliver greater value to our shareholders, customers, suppliers and associates in the years ahead. Our actions are centered upon driving merchandising excellence through better sourcing and assortment and stronger alignment of our pricing with cost to serve. We are also intensely focused on winning back lost revenue in the JanSan distributor channel, diversifying and growing our industrial channel, driving productivity and cost reductions and further reducing our working capital. We expect these actions will enable us to deliver sequential improvement in our results throughout 2017."

Fourth Quarter Performance

Net sales, workday adjusted, decreased 3.3% year-over-year, driven principally by reduced sales in our JanSan, traditional office products, and technology products categories, partly offset by growth in our cut-sheet paper product category
- JanSan: decreased $17.9 million, or 5.1%, to $332.7 million
- Technology Products: decreased $8.1 million, or 2.5%, to $309.7 million
- Traditional Office Products: decreased $14.3 million, or 7.0% to $190.8 million
- Industrial Supplies: decreased $3.6 million, or 2.6%, to $138.4 million
- Cut-sheet Paper Products: increased $10.6 million, or 11.9% to $99.8 million
- Automotive: decreased $2.1 million, or 2.7%, to $78.0 million
- Office Furniture: decreased $6.5 million, or 8.8%, to $67.3 million
JanSan: decreased $17.9 million, or 5.1%, to $332.7 million
Technology Products: decreased $8.1 million, or 2.5%, to $309.7 million
Traditional Office Products: decreased $14.3 million, or 7.0% to $190.8 million
Industrial Supplies: decreased $3.6 million, or 2.6%, to $138.4 million
Cut-sheet Paper Products: increased $10.6 million, or 11.9% to $99.8 million
Automotive: decreased $2.1 million, or 2.7%, to $78.0 million
Office Furniture: decreased $6.5 million, or 8.8%, to $67.3 million
Gross profit was $165.1 million, a decline of $35.7 million from $200.8 million in the prior year quarter resulting from:
- Shifts in customer channel and product category mix, down $18.9 million
- Lower supplier allowances due primarily to lower purchases, down $13.9 million
- Higher freight cost, up $3.5 million
Shifts in customer channel and product category mix, down $18.9 million
Lower supplier allowances due primarily to lower purchases, down $13.9 million
Higher freight cost, up $3.5 million
Operating expenses were $166.8 million, a decline from $280.1 million in the prior year quarter resulting from:
- Fourth quarter 2015 impairment of certain Industrial (formerly ORS Industrial) assets of $115.8 million and work force reduction and facility closures charges of $12.1 million
- Increased litigation accruals in the fourth quarter 2016 of $4.0 million
- Recognition of an allowance on receivables from one customer totaling $13.3 million in the fourth quarter 2016
Fourth quarter 2015 impairment of certain Industrial (formerly ORS Industrial) assets of $115.8 million and work force reduction and facility closures charges of $12.1 million
Increased litigation accruals in the fourth quarter 2016 of $4.0 million
Recognition of an allowance on receivables from one customer totaling $13.3 million in the fourth quarter 2016
Income tax benefit was $4.1 million in the fourth quarter 2016 as compared to expense of $11.9 million in the prior year due to diminished operating results in 2016, exclusive of 2015 impairment, other non-deductible charges, and the utilization of a capital loss carryforward.
Loss per share was ($0.06) per share compared to a loss per share of ($2.61) per share fourth quarter last year. Adjusted loss per share(1) was ($0.02) compared to earnings per share of $0.81 fourth quarter last year

Outlook for 2017
The following outlooks exclude the impacts of any new acquisitions or unusual charges.

Net sales expected to be flat to down 4%
First quarter adjusted diluted earnings per share(1) are expected to be similar to Q4 2016, and we expect to generate sequential improvement in adjusted diluted earnings per share throughout 2017 apart from any impact of the allowances on receivables from the customer referred to above
Free cash flow(1) generation expected to be in the range of $50 million to $70 million