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Delivering Innovative and Sustainable Solutions
Through Collaboration and Expertise
2021 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
In millions, except per share
2021 2020
amounts, at December 31
Net Sales _________________________________ $6,850.5 _____ $6,345.6
Cost of Products Sold ______________________ $5,417.9 _____ $5,040.2
Net Sales Less Cost of Products Sold _________ $1,432.6 _____ $1,305.4
Net Income (Loss) ____________________________ $144.6 ________ $34.2
Earnings (Loss) Per Share:
Basic ________________________________________ $9.50 ________ $2.14
Diluted ______________________________________ $9.01 ________ $2.08
Weighted Average Shares Outstanding:
Basic ________________________________________ 15.22 ________ 15.96
Diluted ______________________________________ 16.05 ________ 16.48
Adjusted EBITDA ____________________________ $342.6 _______ $187.6
1 See Note 16 of the Notes to Consolidated Financial Statements for information regarding our
Non-GAAP measurement.
VERITIV BY THE NUMBERS*
$6.9B
NET SALES
8.0%
INCREASE FROM
PRIOR YEAR
DISTRIBUTION
CENTERS
115
16.1M
SQ. FT. OF SPACE
RECORD
$342.6M
ADJ. EBITDA, FULL YEAR 2021
RECORD
5.0%
ADJ. EBITDA MARGIN
IMPROVEMENT VS. 2020:
+82.6%
IMPROVEMENT VS. 2020:
+200 bps
RECORD
$9.50 &$9.01
BASIC & DILUTED EPS
RECORD
$144.6M
NET INCOME, FULL YEAR 2021
COMPARED TO $2.14 & $2.08
PRIOR YEAR
COMPARED TO 2020
$34.2M
6,100
EMPLOYEES
RECORD LOW
1.1x
NET LEVERAGE
FULL YEAR 2021
*As of December 31, 2021
Veritiv Corporation (NYSE:
VRTV), headquartered in
Atlanta and a Fortune 500®
company, is a full-service
provider of packaging,
JanSan, and hygiene
products, services, and
solutions. Additionally,
Veritiv provides print and
publishing products and
logistics and supply chain
management solutions.
Serving customers in a wide
range of industries in both
North America and globally,
we have distribution centers
throughout the U.S.,
Canada, and Mexico and
team members around the
world helping shape the
success of our customers.
With approximately 6,100
employees, we are driven
by our values: Integrity,
One Team, People
Commitment, Customer
Focus, Operational
Excellence, and
Passion for Results.
We put decades of industry
knowledge, expertise,
and proven supply chain
ingenuity to work for our
customers in a wide range
of industries and a variety
of businesses—including
more than half of Fortune
500® companies. Our
focus is on the success of
our customers’ businesses
and their brands. Driven
by our innovative people,
our values, and providing
exceptional service, helping
to shape our customers’
business success is at the
heart of everything we do.
TO OUR SHAREHOLDERS
Delivering Innovative
and Sustainable Solutions
Through Collaboration
and Expertise
Businesses across the globe
continued to experience an
unprecedented operating
environment in 2021 with logistics
challenges, a constrained supply
chain, labor shortages, and rising
costs, and we were not immune.
Despite the challenges, our team
remained focused on our strengths
and collaborated successfully
with our customers and suppliers
to deliver record performance
and above-market growth in our
Packaging, Print, and Publishing
segments.
Our strength is our people.
Our team is knowledgeable,
hardworking, and resilient. With
our expertise and ability to
collaborate with the world’s most
critical businesses, we deliver what
others cannot. Our global sourcing
capabilities, industry-leading
suppliers, and internally managed
supply chain are key differentiators.
Our warehouse and transportation
teams delivered products and
services essential to the health and
safety of our communities, all while
maintaining industry-leading safety
performance. Our office teams
demonstrated their flexibility and
dedication daily by supporting our
operations from their homes.
2021 was a transformative year
for Veritiv. We continued the
successful execution of our multi-
year strategy and accelerated our
efforts to improve the customer
experience and simplify how
we operate. We substantially
completed our restructuring plan to
optimize our supply chain network
around our customers’ locations
to deliver operating efficiencies
and significant annual savings. We
increased our focus on collaborating
with customers and suppliers to
deliver more sustainable solutions.
Finally, we expanded efforts to
further engage our employees and
enhance our work environment
through a focus on communication,
recognition, and building a more
inclusive, equitable workplace.
These efforts were critical in helping
us deliver a record Adjusted EBITDA
of $342.6 million, an 83% increase
compared to 2020. We achieved
record net income and record
earnings per share of $144.6 million
and $9.50, respectively, and the
quality of our earnings continues
to improve significantly as our
restructuring efforts diminish and
our operating results accelerate. We
worked closely with our suppliers
and customers to ensure timely
passthrough of inflationary supplier
cost increases, enabled by our
disciplined approach to cost and
price management. The result was
record Adjusted EBITDA margins
across all segments and our eighth
consecutive quarter of year-over-
year margin improvement. Cash
and earnings growth resulted in
record low net leverage, even
with the successful execution of a
$100 million share repurchase
program to drive shareholder value.
The operational changes we
implemented over the past several
years have significantly improved
our business fundamentals and
should provide a strong foundation
for the future. The relentless
execution of our strategy enabled
us to successfully manage our Print,
Publishing, and Facility Solutions
businesses, transforming them
into smaller yet more profitable
businesses. Our focus on becoming
a leading provider of value-added
packaging goods and services from
concept to delivery, combined
with the scale and flexibility of our
business model, has positioned us as
the largest packaging distributor in
North America.
As we look to 2022 and beyond,
we will continue to invest in higher-
growth, higher-margin business
across all our operating segments
and further drive Packaging growth
by building on our industry-leading
capabilities and enhancing how
we serve our customers. We also
plan to significantly advance our
initiatives to create healthier, safer,
and more sustainable communities
through our responsible operations
and the expertise of our diverse
team. As always, our Veritiv values
will continue to guide our efforts to
deliver services and solutions that
make a more meaningful impact on
our customers, our suppliers, and
our communities.
Salvatore A. Abbate
Chief Executive Officer
1
Our Vision
One team shaping success
through exceptional service,
innovative people, and
consistent values.
Our Values
ONE TEAM
We cultivate an inclusive environment by embracing diverse perspectives that
foster collaboration and innovation to deliver value for our stakeholders.
INTEGRITY
We do the right things, act with honesty and consistency, and truthfully
represent our capabilities.
PEOPLE COMMITMENT
We engage our employees in the organization’s success and are committed
to performance management and talent development.
CUSTOMER FOCUS
We are committed to understanding our customers’ needs and providing
solutions that add value.
OPERATIONAL EXCELLENCE
We consistently execute, measure, and improve the safety, efficiency, and
quality of the work we do every single day.
PASSION FOR RESULTS
We are passionate about winning and our desire to meet financial,
operational, and people commitments in the right way.
2
“Creating a more diverse, equitable, and inclusive
culture is integral to the growth of our organization
and the accomplishment of our goals. I am
committed to listening and learning as we support
one another on this journey to make Veritiv a more
inclusive organization for our employees and the
communities we serve.”
BRANDI MONCRIEF Director of Diversity, Equity, and Inclusion
3
Deliver & Delight
Customer Experience
Veritiv is focused on our customer experience and
is committed to continuous improvement. All team
members are working to make it easier for our customers
to do business with Veritiv, including enhancing
touchpoints in the customer experience, aligned with
our Deliver and Delight operating tenet. Our people
share a customer-first mindset and rally around a
culture of rapid response, collaborative problem
solving, and honest feedback that optimizes how our
organization acknowledges and addresses customer
service performance.
Veritiv is measuring success through the Net Promoter
Score which is a single survey question asking customers
to rate the likelihood they would recommend our
company. The first step was to initiate Prompt Principles,
meaning teams commit to responding within the
timeframe required by their customers.
Veritiv also formed seven cross-functional Continuous
Improvement Councils. These councils oversee customer
touchpoints and purposefully break down division within
the organization and bring new perspectives to customer
challenges. Since starting Continuous Improvement
Councils in March, teams have brought forth challenges
from which more than 100 improvements have been
made to benefit customers.
Despite the challenges of virtual communication in
2021, we have continued to maintain a high level of
customer service, including responding to approximately
74 percent of Customer Experience cases in two hours,
with the average case response time of 2.1 hours. The
resilience and adaptability of our people are evident in
the ways we overcome obstacles and continue to deliver
and delight our valued customers.
4
“Eager to implement a strategy
to ensure Veritiv customers
would not feel the impact of
work-from-home teams, we
took this opportunity to refresh
our approach to customer
service. We know the customer
experience is influenced every
day with every touchpoint
within our organization.”
CHRISTINA NAWROCKI
Director, Customer Experience and Sales Operations
5
Innovate and Grow
Sustainability
At Veritiv we collaborate with our customers and
suppliers to deliver sustainable and innovative solutions.
Our mission is to create healthier, safer, and more
sustainable communities through our responsible
operations and the expertise of our diverse team.
Veritiv established a Sustainability Working Group in
2020 to coordinate the company’s efforts in this area
more effectively. This group is working with internal and
external stakeholders and our senior management team
to further develop our sustainability goals. As the leading
North American packaging solutions company, we
recognize it is our responsibility to drive positive social
and environmental changes in our industry. We believe
innovation can improve business, society, and the
environment. We focus our environmental sustainability
efforts in these areas: products, services, efficiencies,
and people.
PRODUCTS
Veritiv is committed to sourcing environmentally
sustainable products, in both our private brands and
supplier brand product lines. We offer a range of
products that meet widely acknowledged environmental
standards and certifications. We offer solutions for every
stage of a product’s life cycle. For the beginning of life,
Veritiv can responsibly source established and emerging
materials that are renewable or contain recycled content.
In the middle of life, Veritiv teams can discover new
ways to reduce waste and minimize use of materials that
can be or already are made of recycled content. At the
end of life, Veritiv can partner to explore materials that
can be returned, recycled, reused, or composted and
measure impact.
SERVICES
Veritiv’s packaging designers and continuous
improvement methodology can enhance packaging
and manufacturing processes to be more sustainable.
By thinking through the end-to-end processes, we can
help customers reduce costs on shipping, improve
productivity, minimize damage/return, enter new
markets, and strengthen e-Commerce sales. With
facilities, our continuous improvement approach is more
than continuous improvement—it is a philosophy that
eliminates waste and allows more effective management
of operations.
EFFICIENCY
In addition to helping our customers apply continuous
improvement principles, we do the same for our
own facilities and supply chain to eliminate waste
and reduce energy consumption. Veritiv strives to
deliver improvements in fuel efficiency through route
optimization, equipment upgrades, and maintaining
a modern fleet of trucks. For the fourth straight year,
Veritiv reduced total fuel consumption year over year.
In 2021, Veritiv proudly and successfully operated an
electric tractor-trailer trial. The company also partners
with ENGIE Impact to assess and optimize our energy
and water usage in all North American facilities.
“At Veritiv we’re passionate about sustainability and innovation, and
we’re organized to provide packaging solutions from concept to delivery.
We protect people, products, and the planet through responsible efforts,
sustainable results, and continuous improvement.”
BIN JIANG Director of Global Sourcing
6
7
“I enjoy being out on the road and meeting
with our customers each day. I was honored to
be recognized as the Driver of the Year in 2021,
and I look forward to many more with Veritiv.”
JEFFREY HUGHES Driver
Safety
At Veritiv, we are committed to providing
all team members with a safe and healthy
workplace and continuing to refine our
culture of proactive safety. Veritiv installed
industry-leading Artificial Intelligence dash
cameras in all our U.S.-based vehicles.
This enables Veritiv to coach drivers on
a range of in-cab audio alerts, including
tailgating, speeding, no seatbelt, and
more to help drivers improve safe driving
habits.
We strive to achieve zero unrecognized and
unresolved hazards that can lead to injuries.
Through our Target Zero approach we
empower and engage all Veritiv employees
in proactive identification of workplace
hazards and the development of practical
solutions integrated with business operations.
In 2021, our Total Injury Rate (TIR)1 for our operations
in the U.S., Canada, and Mexico was 0.64.
Our SCORE (Stop, Consider, Observe, React, and Execute)
safety initiative continued to improve safety results in 2021,
helping to reduce injuries. The program facilitates simple
communication to workers about how to approach daily
tasks safely, regardless of how routine the task may be.
In addition, our material handling equipment (MHE)
initiative, MHE SAFE (Share, Address, Facilitate,
Engage), continues to keep employees focused on safety
fundamentals while operating MHE.
This year, we recognized 35 drivers whose safe and efficient
driving habits placed them in the top three percent of the
company according to our key performance indicators.
1 TIR is calculated using the OSHA criteria for recordability and OSHA calculation meth-
odologies. TIR – Total Recordable Injuries X 200,000/Total Hours Worked. The 200,000
hours in the formula represent the equivalent of 100 employees working 40 hours per
week, 50 weeks per year and provides the standard basis for the injury rate.
8
Corporate Responsibility
With operations primarily in North America and
employees around the world, we recognize the impact
and responsibility our business has and prioritize the
overall well-being of our employees, customers, and
communities. Driven by our core values and Veritiv
Connects, our community engagement and philanthropy
program, Veritiv proudly partners with Junior
Achievement and the American Red Cross. We focus
our efforts on corporate giving and employee volunteer
efforts to help shape the success of the hundreds of
communities where we live and work.
We created our Corporate Social Responsibility
Report with additional information for each of the
following initiatives. More information can be found at
veritivcorp.com/sustainability.
Veritiv partners with Junior Achievement (JA) to provide
middle and high school students with the knowledge
and skills they need to plan for their futures. We recently
unveiled a Veritiv storefront in an Atlanta-area Junior
Achievement Discovery Center. The JA Discovery
Centers allow students to immerse themselves in
real-world business and experience work beyond the
classroom. Our storefront, designed by the Veritiv
Design Team, showcases how packaging design and
distribution works.
Veritiv team members volunteer with the American Red
Cross to aid in relief efforts. The team regularly makes
financial contributions, organizes blood drives, and
donates comfort kits to aid those in need after natural
disasters and home fires.
SUPPORTING LOCAL COMMUNITIES
Our people are our difference. Our culture is not
only shaped by who we are, but also by what we do.
Together we work on company-wide initiatives that are
closer to our local communities. Across the U.S., Canada,
and Mexico, our teams make a difference with food bank
donations, winter clothing drives, community clean-up
projects, and building houses for those in need.
EMPLOYEES HELPING EMPLOYEES
Funded by employee contributions, the One Veritiv
Fund provides short-term financial relief to eligible
Veritiv employees who have suffered significant hardship
as a result of unforeseen events such as natural disaster,
medical emergency, a pandemic, or military deployment.
EMPOWERING EMPLOYEES IN THE COMMUNITY
In 2021, the company committed to empowering
employees to give back by matching charitable
contributions dollar for dollar to registered nonprofits.
This allows our team members to share ownership of
where Veritiv gives back time, talent, and treasure.
9
Packaging
Veritiv works directly with customers to identify and
implement packaging solutions, from design to delivery.
Our packaging specialists are experts at discovering
untapped efficiencies in designing, sourcing, and
delivering standard and custom packaging for customers
across a range of industries—including consumer
packaged goods, fulfillment, food processing, retail,
and manufacturing.
Our packaging solutions span food-grade packaging,
industrial packaging, point-of-sale displays, and shipping
supplies. “As part of our value-add proposition, Veritiv
offers unique cold chain expertise including design,
kitting, and testing to ensure these critical packages
hold the right temperature through the shipping cycle,”
said Radhika Raje, Product Manager for Cushioning and
Temperature Controlled Packaging. “I am focused on
making sure Veritiv can provide the most innovative,
sustainable, and effective cold chain solutions.”
Our exclusive TUFflex® line of packaging essentials
delivers enduring performance, maximum efficiency, and
unmatched value. We also sell and distribute single-
function and fully automated packaging equipment.
In addition, we offer assembly and fulfillment services,
such as kitting—which help customers manage seasonal
spikes, new market testing, and promotions.
“The partnerships we have with our suppliers support
our broad range of products and services to meet
our customer needs in a dynamic market,” said Lisa
Richardson, Product Manager for Tapes & Adhesives,
Labels and Strapping.
Our packaging business connects form and function
for our customers through our experienced team
of designers, engineers, and marketers. Providing
expertise for custom improvements results in cost and
waste reduction and improved logistics, structural and
graphical integrity, and testing processes.
“We’re tasked with creating a portfolio of the right
products from the right suppliers at the right cost for
our diverse customer base,” said Kristen Ream, Product
Manager for Films. “We rose to the supply chain
challenges of 2020 and 2021 and were rewarded with
deeper relationships and understanding of product
availability by geography with our global suppliers.”
56%
70%
$3.8B • 56%
REVENUE1
$393.5M • 70%
ADJ. EBITDA1
1 Corporate and Other revenue and expenses are excluded from the calculation of Revenue by
Segment and Adjusted EBITDA by Segment, respectively.
1 BILLION
boxes sold this year
200 MILLION
pallets wrapped and protected by
Veritiv packaging solutions
8 BILLION
packaging labels and tags
supplied to customers
26+MILLION
miles traveled to deliver
essential goods
Pictured back: KRISTEN REAM Product Manager for Films, LISA RICHARDSON Product Manager for Tapes & Adhesives, Labels and Strapping
Front: RADHIKA RAJE Product Manager for Cushioning and Temperature Controlled Packaging, BIANCA MAZZARELLA Product Manager for Bags & Mailers
10
“We identify innovative solutions from leading manufacturers to distribute
sustainable packaging solutions to meet our customers’ needs no matter where they
are in their sustainability journey. With the growth in e-commerce and increased
demand for sustainable packaging, curbside recyclable mailers are very popular with
our Packaging customers and end users.”
BIANCA MAZZARELLA Product Manager for Bags & Mailers
11
“Our job is to break packages so
customers don’t. In our testing
labs we simulate real-world
conditions, including aircraft
vibrations, dropping pallets, and
environmental conditions to push
packaging to its limits.”
AUSTIN GIVEN
Director of Packaging Design and Development
Simplify and Speed
Form Meets Function: Packaging Design
Veritiv’s structural and visual designers create custom
packaging where form and function are interwoven.
With prototyping and testing on site, customers can fall
in love with a design and be confident it will perform in
production, throughout distribution, and in the market.
The designers start by listening to the customer’s vision,
goals, obstacles, and challenges, and then they begin
the creative ideation.
With Veritiv’s Global Packaging Design Network,
customers have access to creative resources in key
geographic locations around the world who provide
local support and improve design cycle efficiency. Veritiv
can also shift our resources to adapt to changes in
businesses, industries, or the market.
Testing is a critical part of the design process. Veritiv will
share samples or create fully functioning prototypes so
customers can see how the package will look and work.
Prototypes can be tested at one of Veritiv’s ISTA-certified
testing labs to help ensure the concept meets customer
requirements before moving to production.
Our global supply chain gives customers access to a
variety of materials, including innovative, sustainable
materials. Veritiv partners with top suppliers across
the globe to source the right mix for any package,
including paper-based, rigid, flexible, cushioning, or
engineered solutions.
12
13%
10%
$0.9B • 13%
REVENUE1
$52.7M • 9%
ADJ. EBITDA1
Facility Solutions
A clean facility cannot be underestimated for the health
of employees, customers, and guests. Veritiv offers a
wide selection of commercial cleaning products, backed
by our team of expert facility advisors. Veritiv changes
the way businesses perform by changing the way
people clean.
Veritiv manages an expansive supply chain, partnering
with world-class manufacturers in health and hygiene
products. Our experts can help customers in these vital
areas: surface cleaning chemicals, personal protective
equipment (PPE), cleaning tools and equipment, and
hand hygiene.
We have the hands-on expertise and sourcing
capabilities to serve customers across a wide range of
industries, including office buildings, manufacturing,
higher education, healthcare, government, and other
high-traffic venues.
Our private brands include Reliable Brand® commercial
cleaning solutions, Spring Grove® food service
disposable products, and our basic line of janitorial
supplies, PUR ValueTM. Together, this portfolio
of products offers a simplified approach to help
customers reduce waste, increase value, and redirect
surplus dollars.
FORDIS®, our Canadian redistribution business,
provides solutions to distributors in local markets.
“Thanks to Veritiv’s expansive
supply chain, protecting people
with world-class products and our
experts is at the heart of what we
do in Facility Solutions.”
MARTHA ISSA Director, Cleaning & Protection
1 Corporate and Other revenue and expenses are excluded from the calculation of Revenue by
Segment and Adjusted EBITDA by Segment, respectively.
13
Print
Veritiv is the North American leader in print and paper
solutions. We leverage a global network of world-
class suppliers and deliver locally to customers in the
commercial print, digital, and graphic communications
industries. Our national footprint of distribution centers is
stocked, and our experts are ready to help deliver paper
and print solutions where and when they’re needed. The
combination of our best-in-class private brand portfolio,
coupled with leading domestic and international mill
brands, offer customers the dependability they trust
and versatility they require. Our experience and unique
offerings in logistics and supply chain efficiency, new
revenue generation, service excellence, sustainability-
conscious sourcing and products, and customized
reporting are all aimed at helping our customers reach
their goals.
Together with our dedicated team members and
our deep understanding of the commercial printer
landscape, we can most effectively service our customers
across a multitude of platforms.
22%
17%
$1.5B • 22%
REVENUE1
$96.0M • 17%
ADJ. EBITDA1
1 Corporate and Other revenue and expenses are excluded from the calculation of Revenue by
Segment and Adjusted EBITDA by Segment, respectively.
Veritiv’s paper and print private brands include:
• Endurance®
• Starbrite® Opaque Select
• Comet® Multipurpose
• Econosource®
• Seville®
• ViV®
• Showcase™
• PoliPrint™
“The Print industry is more dynamic today than ever
before, and part of our role as leaders is to help
customers navigate through this landscape. I have
been conducting regular customer webinars, sharing
our insights on the current industry and supply
chain trends while also providing tips on how
to best address the challenges.”
JEFF PFISTER Director of Print Category Management, Marketing, and Strategy
14
Publishing and
Print Management
By way of Veritiv’s two
complementary publishing and
print management businesses,
Bulkley Dunton and
Graphic Communications,
our specialists provide
customized solutions that
offer retailers, publishers,
catalogers, direct mail
companies, grocers,
corporate enterprise
9%
3%
$0.6B • 9%
REVENUE1
$18.7M • 3%
ADJ. EBITDA1
businesses, and printers the greatest return on their media and print programs.
By differentiating paper purchasing from printing, Veritiv Publishing & Print
Management (VPPM) leverages our sophisticated and expansive supply
chain to ensure consistent and predictable costs, quality, and
paper availability for customers of all sizes. VPPM analyzes our
clients’ complete media requirements to complement their
print and paper programs. With a client base ranging
from Fortune 500® companies to small local businesses,
our industry consultants are experts at scaling
solutions to shield clients from market volatility
while maintaining their brand requirements and
appropriate certifications.
Our paper and print consultants match
customers’ unique needs with cutting-edge
marketing solutions, leading paper mills,
and printers that best meet their standards
for price, paper quality, production, and
environmental sustainability, including
Chain of Custody certification and
recycled papers.
1 Corporate and Other revenue and expenses are excluded from the calculation
of Revenue by Segment and Adjusted EBITDA by Segment, respectively.
15
Management Team
STANDING: MARK W. HIANIK Senior Vice President, General Counsel and Corporate Secretary, DANIEL J. WATKOSKE Senior Vice President, Print
and Publishing, KAREN K. RENNER Senior Vice President and Chief Information Officer, PETER C. TROUP Vice President, Corporate Development,
MICHAEL D. WALKENHORST Senior Vice President, Developing Businesses and Global Operations, DANIEL B. CALDERWOOD Senior Vice President,
Marketing and Business Management
SITTING: SUSAN B. SALYER Senior Vice President and Chief Compliance and Sustainability Officer, DEAN A. ADELMAN Senior Vice President and
Chief Human Resources Officer, SALVATORE A. ABBATE Chief Executive Officer, STEPHEN J. SMITH Senior Vice President and Chief Financial Officer,
STEPHANIE E. MAYERLE Senior Vice President, Sales
Board of Directors
16
STANDING:
MICHAEL P. MULDOWNEY 1*, 3 Chief
Executive Officer of Foxford Capital, LLC,
TRACY A. LEINBACH 2*, 3 Retired
Executive Vice President and Chief Financial
Officer of Ryder System, Inc., DAVID
E. FLITMAN 1, 2, President - Builders
FirstSource, Inc., GREG B. MORRISON
1, 2 Retired Senior Vice President and Chief
Information Officer of Cox Enterprises, Inc.,
STEPHEN E. MACADAM Chairman of
the Board of Veritiv Corporation
SITTING: SHANTELLA E. COO-
PER 2, 3 Former Executive Direc-
tor - Atlanta Committee for Progress,
SALVATORE A. ABBATE Chief Execu-
tive Officer, CHARLES G. WARD, III 1, 3*
Retired Partner of Perella Weinberg Partners
NOT PICTURED:
DANIEL T. HENRY 1,2 Retired Chief
Financial Officer and Executive Vice
President of American Express Company
Board Committees:
1– Audit and Finance
2– Compensation and Leadership
Development
3– Nominating and Governance
*– Denotes Committee Chair
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 001-36479
VERITIV CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
1000 Abernathy Road NE
Building 400, Suite 1700
Atlanta, Georgia
(Address of principal executive offices)
46-3234977
(I.R.S. Employer Identification
Number)
30328
(Zip Code)
Registrant's telephone number, including area code:
(770) 391-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value
VRTV
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
☐
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2021, the aggregate market value of the voting common stock of the registrant held by non-affiliates of the registrant,
based on the closing sale price of those shares on the New York Stock Exchange reported on June 30, 2021, was $919,818,734. For
the purposes of this disclosure only, the registrant has assumed that its directors and executive officers (as defined in Rule 3b-7 under
the Exchange Act) are the affiliates of the registrant.
The number of shares outstanding of the registrant's common stock as of February 22, 2022 was 14,695,863.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Form 10-K.
TABLE OF CONTENTS
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Part I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
(Reserved)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
SIGNATURES
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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements contained in this report regarding the Company's future operating results, performance, business
plans, prospects and guidance, statements related to the expected impact of COVID-19 and any other statements not
constituting historical fact are "forward-looking statements" subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. Where possible, the words "believe," "expect," "anticipate," "continue," "intend," "should,"
"will," "would," "planned," "estimated," "potential," "goal," "outlook," "may," "predicts," "could," or the negative of such
terms, or other comparable expressions, have been used to identify such forward-looking statements. All forward-looking
statements reflect only the Company's current beliefs and assumptions with respect to future operating results, performance,
business plans, prospects, guidance and other matters, and are based on information currently available to the Company.
Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause the
Company's actual operating results, performance, business plans, prospects or guidance to differ materially from those
expressed in, or implied by, these statements.
Factors that could cause actual results to differ materially from current expectations include the risks and other
factors described under "Risk Factors" and elsewhere in this report and in the Company's other publicly available reports
filed with the Securities and Exchange Commission ("SEC").
Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to
update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as
required by law. In addition, historical information should not be considered as an indicator of future performance.
1
ITEM 1. BUSINESS
Our Company
PART I
Veritiv Corporation ("Veritiv" or the "Company" and sometimes referred to in this Annual Report on Form 10-K as
"we", "our" or "us") is a leading North American business-to-business full-service provider of value-added packaging
products and services, as well as facility solutions, print and publishing products and services. Additionally, Veritiv provides
logistics and supply chain management solutions to its customers. Veritiv's focus on segment-tailored market leadership in
distribution and a commitment to operational excellence allows it to partner with world class suppliers, add value through
multiple capabilities and deliver solutions to a wide range of customer segments. See Item 7 of this report for additional
information regarding the Company's strategic initiatives.
We operate from 115 distribution centers primarily throughout the United States ("U.S."), Canada and Mexico,
serving customers across a broad range of industry sectors. These sectors include manufacturing, food and beverage,
wholesale and retail, healthcare, transportation, property management, higher education, entertainment and hospitality,
commercial printing and publishing.
Veritiv's business is organized under four reportable segments: Packaging, Facility Solutions, Print, and Publishing
and Print Management ("Publishing"). This segment structure is consistent with the way the Chief Operating Decision
Maker, who is Veritiv's Chief Executive Officer, makes operating decisions and manages the growth and profitability of the
Company's business. The Company also has a Corporate & Other category which includes certain assets and costs not
primarily attributable to any of the reportable segments, as well as the Veritiv logistics solutions business which provides
transportation and warehousing solutions. The following summary describes the products and services offered in each of the
reportable segments:
•
•
•
•
Packaging – Veritiv is a global provider of packaging products, services and solutions. The Packaging segment
provides custom and standard packaging solutions for customers based in North America and in key global markets.
This segment services its customers with a full spectrum of packaging product materials within flexible, corrugated
and fiber, ancillary packaging, rigid and equipment categories. The business is strategically focused on higher
growth industry sectors including manufacturing, food and beverage, wholesale and retail, healthcare and
transportation, as well as specialty sectors based on industry and product expertise. Veritiv's packaging
professionals create customer value through supply chain solutions, structural and graphic packaging design and
engineering, automation, workflow and equipment services and kitting.
Facility Solutions – Veritiv is a global provider of hygiene and facility solutions products and services. The Facility
Solutions segment sources and sells cleaning, break-room and other supplies in product categories that include
towels and tissues, food service, personal protective equipment, cleaning chemicals and skincare, primarily in North
America. Through this segment Veritiv manages a world class network of leading suppliers in most facilities
solutions categories. Additionally, the Company offers total cost of ownership solutions with re-merchandising,
budgeting and compliance reporting and inventory management. Its sales force is trained to bring leading vertical
expertise to the major North American geographies.
Print – The Print segment sells and distributes commercial printing, writing, copying, digital, specialty products and
graphics consumables primarily in North America. Veritiv's broad geographic platform of operations coupled with
the breadth of paper and graphics products, including exclusive private brand offerings, provides a foundation to
service national, regional and local customers across North America.
Publishing – The Publishing segment sells and distributes coated and uncoated commercial printing papers to
publishers, retailers, converters, printers and specialty businesses for use in magazines, catalogs, books, directories,
gaming, couponing, retail inserts and direct mail primarily in the U.S. This segment also provides print
management, procurement and supply chain management solutions to simplify paper and print procurement
processes for its customers.
2
The table below summarizes net sales for each of the above reportable segments, as well as the Corporate & Other
category, as a percentage of consolidated net sales:
Packaging
Facility Solutions
Print
Publishing
Corporate & Other
Total Company
2021
55%
13%
22%
9%
1%
100%
Year Ended December 31,
2020
52%
15%
23%
9%
1%
100%
2019
45%
15%
28%
10%
2%
100%
Additional financial information regarding our reportable business segments and certain geographic information is
included in Item 7 of this report and in Note 16 of the Notes to Consolidated Financial Statements in Item 8 of this report.
General Development of Business
Information regarding developments in our business can be found in Item 7 of this report.
Products and Services
Veritiv distributes well-known national and regional brand products as well as products marketed under its own
private label brands. Products under the Company's private label brands are manufactured by third-party suppliers in
accordance with specifications established by the Company. Our portfolio of private label products includes:
•
•
•
Packaging products under the TUFflex brand, which include stretch film, mailers, shrink film, carton sealing tape
and other specialty tapes;
Foodservice disposable products, cleaning chemicals, towels and tissues, can liners, sanitary maintenance supplies
and a wide range of facility supplies products under the Reliable, Spring Grove and PUR Value brands; and
Coated and uncoated papers, coated board and cut size under the Endurance, Comet, Starbrite Opaque Select and
other brands.
The table below summarizes sales of products sold under private label brands as a percentage of the respective
reportable segment's or total Company's net sales:
Packaging
Facility Solutions
Print
Total Company
Customers
Year Ended December 31,
2020
6%
8%
20%
9%
2021
6%
8%
24%
10%
2019
6%
9%
19%
9%
We serve customers across a broad range of industry sectors, through a variety of means ranging from multi-year
sales agreements to individual transactional sales. For many of its largest customers, the Company enters into multi-year
contracts that set forth the terms and conditions of sale including product pricing and incentive agreements, which are
generally based on sales volume targets. The Company's customers are generally not required to purchase any minimum
amount of products under these agreements. For the years ended December 31, 2021, 2020 and 2019, no single customer
accounted for more than 5% of the Company's consolidated net sales.
Suppliers
We purchase our products from thousands of suppliers, both domestic and international, across different business
segments. Although varying by segment, the Company's suppliers consist generally of large corporations selling brand name
3
and private label products and, to a more limited extent, independent regional and private label suppliers. Suppliers are
selected based on customer demand for the product and a supplier's total service, cost and product quality offering.
Our sourcing organization supports the purchasing of well-known national and regional brand products as well as
products marketed under our own private label brands from key national suppliers in the packaging, facility solutions and
print industries. The Publishing segment primarily operates as a direct ship business aligned with the Company's core
supplier strategy. In addition, under the guidance and oversight of the sourcing team, our merchandising personnel source
products not available within our core offering in order to meet specialized customer needs.
The product sourcing program is designed to ensure that the Company is able to offer consistent product selections
and market competitive pricing across the enterprise while maintaining the ability to service localized market requirements.
Our procurement program is also focused on replenishment which includes purchase order placement and controlling the total
cost of inventory by proactively managing the number of days inventory on hand, negotiating favorable payment terms and
maintaining vendor-owned and vendor-managed programs. As one of the largest purchasers of packaging, facility supplies,
and paper and graphics products, we can qualify for volume allowances with some suppliers and can realize significant
economies of scale. During the year ended December 31, 2021, approximately 28% of our purchases were made from ten
suppliers.
Competition
The packaging, facility solutions, paper and publishing distribution industry is highly competitive, with numerous
regional and local competitors, and is a mature industry characterized by slowing growth or, in the case of paper, declining
demand. The Company's principal competitors include national, regional and local distributors, national and regional
manufacturers, independent brokers and both catalog-based and online business-to-business suppliers. Most of these
competitors generally offer a wide range of products at prices comparable to those Veritiv offers, though at varying service
levels. Additionally, new competition could arise from non-traditional sources, group purchasing organizations, e-commerce,
discount wholesalers or consolidation among competitors. Veritiv believes it offers the full range of services required to
effectively compete, but if new competitive sources appear, it may result in margin erosion or make it more difficult to attract
and retain customers.
•
•
•
•
The following summary briefly describes the key competitive landscape for each of Veritiv's reportable segments:
Packaging – The packaging market is fragmented and consists of competition from national and regional packaging
distributors, national and regional manufacturers of packaging materials, independent brokers and both catalog-
based and online business-to-business suppliers. Veritiv believes there are few national packaging distributors with
substrate neutral design capabilities similar to the Company's capabilities.
Facility Solutions – There are few national, but numerous regional and local distributors of facility supply solutions.
Several groups of distributors have created strategic alliances among multiple distributors to provide broader
geographic coverage for larger customers. Other key competitors include the business-to-business divisions of big
box stores, purchasing group affiliates and both catalog-based and online business-to-business suppliers.
Print – Industry sources estimate that there are hundreds of regional and local companies engaged in the marketing
and distribution of paper and graphics products. While the Company believes there are few national distributors of
paper and graphics products similar to Veritiv, several regional and local distributors have cooperated together to
serve customers nationally. The Company's customers can also purchase products directly from paper and graphics
manufacturers. In addition, competitors include regional and local specialty distributors, office supply and big box
stores, online business-to-business suppliers, independent brokers and large commercial printers that broker the sale
of paper in connection with the sale of their printing services.
Publishing – The publishing market is serviced by printers, paper brokers and distributors. The Company's
customers can also purchase paper directly from paper manufacturers. The market consists primarily of magazine
and book publishers, cataloguers, direct mailers and retail customers using catalog, insert and direct mail as a
method of advertising.
We believe that our competitive advantages include approximately 1,100 sales and marketing professionals and the
wide selection of products, including high-quality private brands. The breadth of products and services offered, the diversity
4
of the types of customers served, and our broad geographic footprint in the U.S., Canada and Mexico buffer the impact of
regional economic declines while also providing a network to readily service national accounts.
Distribution and Logistics
Timely and accurate delivery of a customer's order, on a consistent basis, are important criteria in a customer's
decision to purchase products and services from Veritiv. Delivery of products is provided through two primary channels,
either from the Company's distribution centers or directly from the manufacturer. Our distribution centers offer a range of
delivery options depending on the customer's needs and preferences, and the strategic placement of the distribution centers
also allows for delivery of special or "rush" orders to many customers.
Working Capital
Veritiv's working capital needs generally reflect the need to carry significant amounts of inventory in our
distribution centers to meet delivery requirements of our customers, as well as significant accounts receivable balances. As is
typical in our industry, our customers often do not pay upon receipt, but are offered terms which are dependent on the
specific circumstances of the sale.
Human Capital
Veritiv’s key human capital management objectives include attracting, developing, engaging and retaining skilled
and diverse talent, and promoting safety to drive the success of our business and to meet and exceed the expectations of our
customers. These objectives are aligned with our Veritiv Values: Integrity, One Team, People Commitment, Customer
Focus, Operational Excellence and Passion for Results.
Our workforce includes employees in sales, customer service, warehouse operations and corporate functions. By
geography, approximately 77% and 15% of our workforce is located in the U.S. and Canada, respectively, with a presence in
almost every state in the U.S. and most provinces in Canada. We also have employees located in Mexico (7%) and other
countries (1%). Approximately two-thirds of our workforce is male, and the other one-third is female.
As of December 31, 2021, Veritiv had approximately 6,100 employees worldwide, of which approximately 9% were
in collective bargaining units. Approximately 13% of those employees are covered by a collective bargaining agreement that
will expire in 2022. Labor contract negotiations are handled on an individual basis by a cross-functional team including
Human Resources and Operations, with legal support. We currently expect that we will be able to renegotiate these
agreements on satisfactory terms. We consider labor relations to be good.
We reward and support employees through competitive pay and benefit programs; enhance the Company’s culture
through our values and other engagement efforts; develop talent internally through job rotations and learning programs to
create a high-performing, diverse workforce; and strive to make safety a key focus across the organization. Some examples
of programs and initiatives designed to attract, develop, engage and retain our workforce and to promote safety include:
•
Diversity, Equity and Inclusion ("DEI")
The key elements of our overall DEI strategy are to engage with employees by creating experiences that celebrate
diverse people and perspectives, equip our organization by creating a culture that encourages constant and relevant
learning and empower employees by cultivating confidence through a "One Veritiv" perspective that grows diverse
and innovative leaders. The DEI strategy includes broadening our applicant pools for open positions, prioritizing
pay equity and implementing micro-learning modules focused on our talent acquisition teams, our managers, our
senior leaders and our broader workforce.
In 2021, we created a new position to lead the development of our DEI strategy and objectives, with oversight from
our Senior Lead Team and assistance from third-party consultants. We continue to measure our progress through
regular evaluation of key metrics.
5
•
Employee Engagement
We have been successful in engaging our employees to participate in small group dialogue with Senior Lead Team
members, encouraging information sharing and driving engagement. We continue to make progress on in-depth
action plans to address issues and feedback raised in the listening sessions. In 2021, we launched our new Vibe
communications platform as a means of connecting employees across the organization. We have also announced
our new flexible workplace policies for office-based workers.
We recently launched the first phase of our Bravo! recognition and rewards program, featuring templates and tools
for ongoing recognition of performance and service. Additionally, we announced a broad-based Profit Sharing
Program, a discretionary annual incentive program to reward eligible employees based on achievement of certain
Company performance metrics.
•
Employee Well-Being and Safety
We provide comprehensive healthcare benefits to virtually all our employees in the U.S. and Canada that are
designed to meet the varied and evolving needs of our diverse workforce. In addition, we provide free mental and
behavioral health resources, including on-demand access to the Employee Assistance Program for employees and
their dependents. We are committed to providing all team members with a safe and healthy workplace and
continuing to refine our culture of proactive safety. Managing and reducing risks at our facilities remains a focus,
and in 2021, our Total Injury Rate for our operations in the U.S., Canada and Mexico was 0.64.
In 2021, Veritiv contributed $1.5 million to the Veritiv Charitable Giving Fund, a philanthropic fund that supports
non-profit charities that are qualified under Internal Revenue Code section 501(c)(3).
•
Talent Development and Learning
We prioritize and invest in creating opportunities to help employees gain skills and develop in their careers through
a multitude of training and development programs. These include online, instructor-led and on-the-job learning
formats as well as executive assessment, coaching, talent and succession planning. We have a robust talent review
and succession planning process, and our goal is to have at least one "ready now" candidate and one "ready in 1 – 3
years" candidate for each critical position to prepare candidates for critical roles.
We support the long-term career aspirations of our employees through education and personal development. These
educational opportunities include tuition assistance for employees in the U.S., Canada and Mexico; and a unique
Company-paid program that supports hourly warehouse workers to become certified, licensed truck drivers and
provides opportunities to get licensed and gain required driver hours on work time. We sponsor a paid internship
program that provides job experience to high school and college students in a variety of job functions and is a source
for future full-time talent. To identify our top talent and prepare them for future leadership roles, we launched the
first two cohorts of our LEAD Program in 2021, which we designed in partnership with the University of Georgia
Business School.
Throughout the COVID-19 pandemic, we have continued our focus on protecting the health and safety of our
employees in our distribution centers and our offices while meeting the needs of our customers and mitigating any
interruptions to our business. We have continued to modify practices at our distribution centers and offices informed by
guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities. These
practices include social distancing, enhanced cleaning protocols, usage of personal protective equipment, as well as
restricting all non-essential travel and promoting remote work wherever feasible. Our employees continue to adapt to the
changes in work environment and have managed our business successfully during this challenging time.
To thank our employees for their contributions to the Company’s success in managing through the COVID-19
pandemic, we provided a cash bonus for the second consecutive year to employees who are not eligible for other bonus or
commission programs. Additionally, in 2021 we provided a one-time disaster relief assistance payment for U.S. and
Canadian employees to help them with added costs they incurred due to COVID-19. We also offered a one-time incentive
payment to encourage all employees globally to become fully vaccinated against COVID-19.
6
Government Relations
Our transportation operations are subject to the U.S. Department of Transportation Federal Motor Carrier Safety
Regulations. We are also subject to federal, state and local regulations regarding licensing and inspection of facilities,
including compliance with the U.S. Occupational Safety and Health Act. These regulations require us to comply with health
and safety standards to protect our employees from accidents and establish communication programs to transmit information
on the hazards of certain chemicals present in specific products that we distribute.
We are also subject to regulation by numerous U.S., Canadian and Mexican federal, state and local regulatory
agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers.
Although we are subject to other U.S., Canadian and Mexican federal, state and local provisions relating to the protection of
the environment and the discharge or destruction of materials, these provisions do not materially impact the use or operation
of the Company's facilities. Compliance with these laws has not had, and is not anticipated to have, a material effect on
Veritiv's capital expenditures, earnings or competitive position.
Intellectual Property
We have numerous well-recognized trademarks, represented primarily by our private label brands. See the Products
and Services section of this Item 1. Business for additional information regarding our private label brand sales. Most of our
trademark registrations are effective for an initial period of ten years, and we generally renew our trademark registrations
before their expiration dates for trademarks that are in use or have reasonable potential for future use. Although our
Packaging, Facility Solutions and Print segments rely on a number of trademarks that, in the aggregate, provide important
protections to the Company, no single trademark is material to any one of these segments. Additionally, Veritiv does not
have any material patents or licenses.
Seasonality
The Company's operating results are subject to seasonal influences. Historically, our higher consolidated net sales
have occurred during the third and fourth quarters while our lowest consolidated net sales have occurred during the first
quarter. The Packaging segment net sales have traditionally increased each quarter throughout the year and net sales for the
first quarter have typically been less than net sales for the fourth quarter of the preceding year. Production schedules for non-
durable goods that build up to the holidays and peak in the fourth quarter drive this seasonal net sales pattern. Net sales for
the Facility Solutions segment have traditionally peaked in the third quarter due to increased summer demand in the away-
from-home resort, cruise and hospitality markets and from back-to-school activities. Within the Print and Publishing
segments, seasonality is driven by increased magazine advertising page counts, retail inserts, catalogs and direct mail
primarily due to back-to-school, political election and holiday-related advertising and promotions in the second half of the
year. The COVID-19 pandemic disrupted the Company's seasonal patterns in net sales across all segments and on a
consolidated basis in 2020, and to a lesser extent in 2021, due to the impacts of the pandemic on many of Veritiv's customers.
The duration and extent of the COVID-19 pandemic is highly uncertain and the magnitude of continuing seasonality
disruption is difficult to predict.
Information About Our Executive Officers
Name
Age Position and Business Experience for the Past Five Years
Salvatore A. Abbate
53
• Chief Executive Officer and a member of the Board of Directors since September
2020
• Chief Operating Officer from January 2020 - September 2020
• Senior Vice President and Chief Commercial Officer from April 2018 - December
2019
•
Senior Vice President, Chief Sales & Marketing Officer for Andersen Windows &
Doors, Inc., a leading North American window and door manufacturer, from July
2013 - March 2018
Stephen J. Smith
58
• Senior Vice President and Chief Financial Officer since March 2014
7
Name
Age Position and Business Experience for the Past Five Years
Dean A. Adelman
56
• Senior Vice President and Chief Human Resources Officer since March 2019
• Chief Human Resources Officer for Caraustar Industries, Inc., a manufacturer of
recycled materials, from August 2017 - March 2019
Daniel B. Calderwood
41
• Senior Vice President, Marketing and Business Management since October 2020
• Vice President, Marketing and Business Management from January 2020 - October
2020
• Vice President, Packaging from May 2019 - January 2020
• Vice President, Marketing for Tempur Sealy International, Inc., a global mattress
and bedding manufacturer, from January 2015 - April 2019
Mark W. Hianik
61
• Senior Vice President, General Counsel and Corporate Secretary since January 2014
•
Senior Vice President, General Counsel and Chief Administrative Officer for Dex
One Corporation from March 2012 - May 2013; Dex One filed a pre-packaged
bankruptcy petition under Chapter 11 in March 2013 to effect a merger
consummated in April 2013
Stephanie E. Mayerle
44
• Senior Vice President, Sales since October 2020
• Vice President, Sales from June 2020 - October 2020
•
Various roles for Andersen Windows & Doors, Inc., a leading North American
window and door manufacturer, including Senior Director – Strategic Accounts and
Inside Sales from April 2019 - June 2020, Senior Director – Business Management
from January 2018 - April 2019, and Senior Director – Customer and Sales
Operations from December 2016 - January 2018
Karen K. Renner
60
• Senior Vice President and Chief Information Officer since November 2020
• Senior Vice President and Chief Information Officer of CommScope, Inc., a global
network infrastructure provider, from August 2018 - November 2020
• Chief Information Officer for the North American region of Thales Group, a global
aerospace defense supplier, from March 2017 - August 2018
Susan B. Salyer
51
• Senior Vice President and Chief Compliance and Sustainability Officer since May
2021
• Vice President, Assistant General Counsel and Chief Compliance Officer from
March 2020 - April 2021
• Assistant General Counsel and Chief Compliance Officer from November 2017 -
March 2020
• Chief Compliance Officer and Senior Counsel Corporate Transactions from April
2016 - November 2017
Michael D. Walkenhorst
43
• Senior Vice President, Developing Businesses and Global Operations since July
2021
• Senior Vice President, Developing Businesses from October 2020 - July 2021
• Vice President, Developing Businesses from February 2019 - October 2020
• Managing Director of All American Containers, a Veritiv business, from September
2017 - February 2019
• General Manager for Veritiv's West Central Territory from July 2014 - August 2017
8
Name
Age Position and Business Experience for the Past Five Years
Daniel J. Watkoske
53
• Senior Vice President, Print and Publishing since October 2020
• Senior Vice President, Print from July 2014 - October 2020
• Senior Vice President of Veritiv Services from October 2016 - January 2019
We have been advised that there are no family relationships among any of our executive officers or directors and
that there is no arrangement or understanding between any of our executive officers and any other persons pursuant to which
they were appointed, respectively, as an executive officer.
Company Information
Our principal executive offices are located at 1000 Abernathy Road NE, Building 400, Suite 1700, Atlanta, Georgia
30328. Our corporate website is www.veritivcorp.com. Information contained on our website is not part of this Annual
Report on Form 10-K. Through the "Investor Relations" portion of this website, we make available, free of charge, our proxy
statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other
relevant filings with the SEC and any amendments to those reports as soon as reasonably practicable after such material has
been filed with, or furnished to, the SEC. These filings are also accessible on the SEC's website at www.sec.gov.
ITEM 1A. RISK FACTORS
The following is a discussion of certain important factors, some of which are beyond our control, that may cause our
business, financial condition, results of operations or cash flows in future periods to differ materially from those currently
expected or desired. Factors not currently known to Veritiv or that we currently deem to be immaterial may also materially
and adversely affect our business, financial condition, results of operations or cash flows. You should carefully consider the
following discussion, together with the other information contained in this report, in evaluating us and an investment in our
common stock.
Risks Relating to the COVID-19 Pandemic
The outbreak of the COVID-19 pandemic has adversely affected, and in the future may materially and adversely
affect, our business, financial condition, results of operations, liquidity and cash flows.
The rapid and continued spread of COVID-19, and the measures taken to slow its spread, have adversely affected
our business and financial results and will likely continue to do so for an uncertain period of time in the future. The
COVID-19 pandemic has had and may continue to have negative impacts on our business, including volatility in demand for
our products; delays or inability to source products; disruptions in supply chain and transportation; and volatility in the global
capital and credit markets, which impacts interest rates and currency exchange rates. The pandemic could also cause a
material reduction in the value of our assets including, but not limited to, deferred tax assets and accounts receivable. Our
customers, suppliers and vendors may suffer disruptions in their business due to the COVID-19 pandemic causing them
financial distress which could include delaying payments to us, filing for bankruptcy protection or going out of business. In
addition, there are currently a large number of our employees working remotely as well as operationally critical employees
working at our facilities for business continuity purposes as lawfully permitted. Extended periods of remote work
arrangements could introduce further operational risk, such as additional cybersecurity risks. Despite our efforts to manage
these impacts, due to the rapidly evolving situation with COVID-19, the effect on our operational and financial performance
will depend on future developments, all of which are uncertain and difficult to predict and in the future may have material
adverse effects on our business, financial condition, results of operations, liquidity and cash flows. Such developments may
include, but are not limited to, the spread and future resurgences of the virus, the severity and duration of the outbreak and the
severity and duration of the resulting impact on the economy. Even after the COVID-19 pandemic has subsided, we may
experience impacts on our business as a result of any economic recession, downturn or volatility that has occurred or may
occur in the future. The COVID-19 pandemic may also have the effect of heightening many of the other risks described
below, including those related to dependence on information technology and telecommunications systems, cybersecurity
risks, compliance with financial covenants, ability to service indebtedness and stock price fluctuation.
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Risks Relating to Our Industry and Business
The industry-wide decline in demand for paper and related products could have a material adverse effect on our
financial condition and results of operations.
Our Print and Publishing businesses rely heavily on the sale of paper and related products. The industry-wide
decrease in demand for paper and related products in key markets we serve places continued pressure on our revenues and
profit margins and makes it more difficult to maintain or grow earnings. This trend is expected to continue. The failure to
effectively differentiate us from our competitors in the face of increased use of email, increased and permanent product
substitution, including less print advertising, more electronic billing, more e-commerce, fewer catalogs and a reduced volume
or slowdown of mail, could have a material adverse effect on market share, sales and profitability through increased
expenditures or decreased prices. Our failure to grow the Packaging and Facility Solutions businesses at rates adequate to
offset the expected decline in Print and Publishing could also have a material adverse effect on our financial results.
Competition in our industry may adversely impact our margins and our ability to retain customers and make it
difficult to maintain our market share and profitability.
The business-to-business distribution industry is highly competitive, with numerous regional and local competitors,
and is a mature industry characterized by slowing revenue growth. Our principal competitors include national distributors,
national and regional manufacturers and independent brokers in the Packaging segment; national, regional and local
distributors in the Facility Solutions segment; regional and local distributors in the Print segment; and regional, national and
international paper manufacturers and other merchants and brokers in the Publishing segment. Most of these competitors
generally offer a wide range of products at prices comparable to those we offer. Additionally, new competition could arise
from non-traditional sources, group purchasing organizations, e-commerce, discount wholesalers or consolidation among
competitors. New competitive sources may result in increased focus on pricing and on limiting price increases, or may
require increased discounting. Such competition may result in margin erosion or make it difficult to attract and retain
customers.
Increased competition within the industry, reduced demand for paper, increased and permanent product substitution
through less print advertising, more electronic billing, more e-commerce, fewer catalogs, a reduced volume or slowdown of
mail and general economic conditions has served to further increase pressure on the industry's profit margins, and continued
margin pressure within the industry may have a material adverse impact on our operating results and profitability.
We purchase all of the products we sell to our customers from other parties, and conditions beyond our control
can interrupt our supplies and increase our product costs.
We obtain our packaging, facility products and paper from third-party suppliers. Our business and financial results
are dependent on our ability to purchase products from suppliers not controlled by us that we, in turn, sell to our customers.
We may not be able to obtain the products we need on open credit, with market or other favorable terms, or at all. During the
year ended December 31, 2021, approximately 28% of our purchases were made from ten suppliers. A sustained disruption
in our ability to source products from one or more of the largest of these vendors might have a material impact on our ability
to fulfill customer orders resulting in lost sales and, in rare cases, damages for late or non-delivery.
For the most part, we do not have a significant number of long-term contracts with our suppliers committing them to
provide products to us. Suppliers may not provide the products and supplies needed in the quantities and at the prices and
times requested. We are also subject to delays caused by interruption in production and increases in product costs based on
conditions outside of our control. These conditions include raw material shortages, environmental restrictions on operations,
work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, product recalls, transportation
interruptions, unavailability of fuel or increases in fuel costs, competitive demands and natural disasters or other catastrophic
events. Our inability to obtain adequate supplies of packaging, facility products and paper as a result of any of the foregoing
factors or otherwise could mean that we could not fulfill our obligations to customers, and customers may turn to other
distributors.
In addition, increases in product costs may reduce our margins if we are unable to pass all or a portion of these costs
along to our customers. Any such inability may have a negative impact on our business and our profitability.
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Changes in prices for raw materials, including pulp, paper, containerboard and resin, could negatively impact
our results of operations and cash flows.
Changes in prices for raw materials, such as pulp, paper, containerboard and resin, could significantly impact our
results of operations. Although we do not produce products and are not directly exposed to risk associated with production,
declines in raw material prices, driven by falling secular demand, periods of industry overcapacity or overproduction, may
adversely affect our revenues and net income to the extent such factors lower our resell prices. Declining prices generally
produce lower revenues and profits, even when volume and margin percentages remain constant. Additionally, during
periods of declining prices, customers may alter purchasing patterns and defer purchases or deplete inventory levels until
long-term price stability occurs. Alternatively, if prices for raw materials rise and we are unable to pass these increases on to
our customers, our results of operations and profits may also be negatively impacted.
Changes in U.S. and international trade policies and regulations could adversely affect our business and
operating results.
Although we primarily serve markets in the U.S., Canada and Mexico, we purchase our products from a wide variety
of domestic and international suppliers. Changes to U.S. trade policies, including the adoption or expansion of trade
restrictions, sanctions and other related governmental actions or policies, can disrupt geographic and industry demand trends
and prompt other countries to change their own trade policies, including through the adoption of retaliatory tariffs or
expansion of other trade restrictions. These changes may cause us to make changes in our supply chain strategies or
adversely impact our own costs. Increasing the costs of our products as a result of tariffs or other adverse trade restrictions,
or minimizing the number of our products subject to tariffs or other adverse trade restrictions, could cause customers to turn
to other distributors and we may be unable to locate alternative suppliers at acceptable costs. Such actions may result in
margin erosion or make it difficult to attract and retain customers.
Increases in the cost of fuel and third-party freight as well as the availability of third-party freight providers could
have an adverse effect on our business and results of operations.
Volatile fuel prices have a direct impact on our business. We also depend upon third-party freight providers in order
to conduct our business. The cost of fuel and third-party freight affects the price paid by us for products as well as the
expense incurred to deliver products to our customers. Increased fuel costs, increased government regulation and limitations
on driver availability impacting the freight transportation industry may adversely impact the cost and availability of third-
party freight services. Although we have been able to pass along a portion of increased fuel and third-party freight costs to
our customers in the past, there is no guarantee that we can continue to do so. Increases in fuel and third-party freight costs
or the unavailability of third-party freight providers may adversely affect our business and results of operations.
The loss of any of our significant customers could adversely affect our financial condition, operating results and
cash flows.
Our ten largest customers generated approximately 12% of our consolidated net sales for the year ended December
31, 2021, and our largest customer accounted for approximately 4% of our consolidated net sales in that same period. We
cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply
these customers at historic levels.
Generally, our customers are not contractually required to purchase any minimum amount of products. In addition,
consolidation among customers could also result in changes to their purchasing habits and volumes. The loss of one or more
of these significant customers, a significant customer's decision to purchase our products in substantially lower quantities
than they have in the past, or a deterioration in the relationship with any significant customers could adversely affect our
financial condition, operating results and cash flows.
We may not fully realize the expected benefits of our current and future restructuring plans or other operating or
cost-saving initiatives, which may adversely affect our business, competitive position, financial condition, results of
operations and cash flows.
We initiated a restructuring plan in response to the impact of the COVID-19 pandemic on our business operations
and the ongoing secular changes in our Print and Publishing segments (the "2020 Restructuring Plan"), which was
substantially completed by the end of 2021. The 2020 Restructuring Plan was designed to better align our cost structure with
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ongoing business needs as we execute on our stated corporate strategy. Implementation of any restructuring plan may be
disruptive to our business and more costly than anticipated, and we may not be able to obtain the estimated cost savings and
other benefits that were initially anticipated in a timely manner, or at all.
Adverse developments in general business and economic conditions, including the industry-wide decline in
demand for paper and related products, could have a material adverse effect on our financial condition and results of
operations impairing our ability to use Net Operating Loss ("NOL") carryforwards and other deferred tax assets.
The realization of our NOLs and other deferred tax assets depends on the timing and amount of taxable income
earned by our Company in the future and a lack of future taxable income would adversely affect our ability to realize these
tax assets. Tax attributes are generally subject to expiration at various times in the future to the extent that they have not
previously been applied to offset the taxable income of our Company, and there is a risk that our existing NOL carryforwards
could expire unused and be unavailable to offset future income tax liabilities.
The merger of International Paper Company's xpedx distribution solutions business and UWW Holdings, Inc., the
parent company of Unisource Worldwide, Inc. ("Unisource"), through which the Company was established, resulted in an
ownership change for Unisource under Section 382 of the Internal Revenue Code (the "Code"), limiting the use of
Unisource's NOLs to offset future taxable income for both U.S. federal and state income tax purposes. Moreover, future
trading of our stock may result in additional ownership changes as defined under Section 382 of the Code, further limiting the
use of Unisource's NOLs. These limitations may affect the availability and the timing of when these NOLs may be used
which could impair our deferred tax assets which, in turn, may adversely impact the timing and amount of cash taxes payable
by our Company.
Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances
against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as
successful implementation of various tax planning strategies. Although we believe that the judgments and estimates with
respect to the valuation allowances are appropriate and reasonable under the circumstances, actual results could differ from
projected results, which could give rise to additions or reductions in valuation allowances. It is possible that such changes
could have a material adverse effect on the amount of income tax expense (benefit) recorded in our Consolidated Statements
of Operations.
We may not be able to adequately protect our material intellectual property and other proprietary rights, or to
defend successfully against intellectual property infringement claims by third parties.
Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to
trademarks, copyrights and proprietary technology. The use of contractual provisions, confidentiality procedures and
agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect intellectual property rights
and proprietary technology may not be adequate. Litigation may be necessary to enforce our intellectual property rights and
protect proprietary technology, or to defend against claims by third parties that our conduct or our use of intellectual property
infringes upon such third party's intellectual property rights. Any intellectual property litigation or claims brought against us,
whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances
that favorable final outcomes will be obtained. The terms of any settlement or judgment may require us to pay substantial
amounts to the other party or cease exercising our rights in such intellectual property, including ceasing the use of certain
trademarks used by us to distinguish our services from those of others or ceasing the exercise of our rights in copyrightable
works. In addition, we may be required to seek a license to continue practices found to be in violation of a third party's
rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations
could be adversely affected as a result.
Risks Relating to Human Capital
In order to compete, we must attract, train and retain highly qualified employees, and the failure to do so could
have a material adverse effect on our results of operations.
To successfully compete, we must attract, train and retain a large number of highly qualified employees while
controlling related labor costs. Specifically, we must recruit and retain qualified sales professionals. If we were to lose a
significant amount of our sales professionals, we could lose a material amount of sales, which would have a material adverse
effect on our financial condition and results of operations. We compete with other businesses for employees and invest
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significant resources in training and motivating them. There is no assurance that we will be able to attract or retain highly
qualified employees. The inability to hire or retain qualified personnel at economically reasonable compensation levels
would restrict our ability to improve our business and result in lower operating results and profitability.
Our pension and health care costs are subject to numerous factors which could cause these costs to change.
Our pension and health care costs are dependent upon numerous factors resulting from actual plan experience and
assumptions of future experience, including, for pension costs, actuarial assumptions regarding life expectancies. Pension
plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns,
changes in general interest rates and changes in the number of retirees may result in increased pension costs in future periods.
Significant changes in any of these factors may adversely impact our cash flows, financial condition and results of operations.
We participate in multi-employer pension plans and multi-employer health and welfare plans, which could create
additional obligations and payment liabilities.
We contribute to multi-employer defined benefit pension plans as well as multi-employer health and welfare plans
under the terms of collective bargaining agreements that cover certain unionized employee groups in the U.S. The risks of
participating in multi-employer pension plans differ from single employer-sponsored plans and such plans are subject to
regulation under the Pension Protection Act (the "PPA"). Additionally, changes in regulations covering these plans could
increase our costs and/or potential withdrawal liability.
Multi-employer pension plans are cost-sharing plans subject to collective-bargaining agreements. Contributions to a
multi-employer plan by one employer are not specifically earmarked for its employees and may be used to provide benefits to
employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded
obligations of the plan are borne by the remaining participating employers. In addition, if a multi-employer plan is
determined to be underfunded based on the criteria established by the PPA, the plan may be required to implement a financial
improvement plan or rehabilitation plan that may require additional contributions or surcharges by participating employers.
In addition to the contributions discussed above, we could be obligated to pay additional amounts, known as
withdrawal liabilities, upon decrease or cessation of participation in a multi-employer pension plan. Although an employer
may obtain an estimate of such liability, the final calculation of the withdrawal liability may not be able to be determined for
an extended period of time. Generally, the cash obligation of such withdrawal liability is payable over a 20-year period.
Our business may be adversely affected by work stoppages, union negotiations and labor disputes.
Approximately 9% of our employees were in collective bargaining units as of December 31, 2021. Historically, the
effects of collective bargaining and other similar labor agreements have not been significant. However, if a larger number of
our employees were to unionize, including in the wake of any future legislation or administrative regulation that makes it
easier for employees to unionize, the effect may be negative.
Approximately 13% of the Company's unionized employees have collective bargaining agreements that expire
during 2022. Any inability to negotiate acceptable new contracts under these collective bargaining arrangements could cause
strikes or other work stoppages, and new contracts could result in increased operating costs. If any such strikes or other work
stoppages occur, or if additional employees become represented by a union, a disruption of our operations and higher labor
costs could result. Labor relations matters affecting our suppliers of products and services could also adversely affect our
business from time to time.
Risks Relating to Our Capital Structure
Our indebtedness could adversely affect our financial condition and impair our ability to operate our business.
As of December 31, 2021, we had approximately $515.7 million in total indebtedness, reflecting borrowings of
$440.8 million under the Asset-Based Lending Facility (the "ABL Facility"), $2.1 million of short-term debt and $72.8
million of finance leases. This level of indebtedness could have important consequences to our financial condition, operating
results and business, including the following:
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limiting our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt
service requirements, acquisitions and general corporate or other purposes;
increasing our cost of borrowing;
requiring that a significant portion of our cash flows from operations be dedicated to payments on our indebtedness
instead of other purposes, including operations, capital expenditures and future business opportunities;
• making it more difficult for us to make payments on our indebtedness or satisfy other obligations;
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exposing us to risk of increased interest rates on our borrowings due to the variable rate exposure associated with the
ABL Facility, which can be worsened by (i) increased interest rates up to the level covered by our interest rate cap
and (ii) increased interest rates on borrowings in excess of the notional amount of our interest rate cap;
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared
to our competitors that have less debt; and
increasing our vulnerability to a downturn in general economic conditions or in our business and making us unable
to carry out capital spending that is important to our growth.
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Despite our current level of indebtedness, we may incur substantially more indebtedness in the future. This could
further exacerbate the risks to our financial condition described above.
We may incur substantially more indebtedness in the future, including secured indebtedness. Although the
agreements governing the ABL Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are
subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these
restrictions could be substantial. If new indebtedness is added to our current indebtedness levels, the related risks we will
face could intensify.
The agreements governing our indebtedness contain restrictive covenants, which could restrict our operational
flexibility, and a failure to comply with those covenants could have serious consequences.
The agreements governing the ABL Facility contain restrictions and limitations on our ability to engage in activities
that may be in our long-term best interests, including financial and other restrictive covenants that could limit our ability to:
incur additional indebtedness or guaranties, or issue certain preferred shares;
pay dividends, redeem stock or make other distributions;
repurchase, prepay or redeem subordinated indebtedness;
create liens;
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consolidate or merge with another company;
sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with affiliates; and
change the nature of our business.
The agreements governing the ABL Facility also contain other restrictions customary for asset-based facilities of
this nature. Our ability to borrow additional amounts under the ABL Facility will depend upon satisfaction of these
covenants. Events beyond our control could affect our ability to meet these covenants. Our failure to comply with
obligations under the agreements governing the ABL Facility may result in an event of default under those agreements. A
default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be
certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to
refinance the accelerated indebtedness on terms favorable to us or at all. This could have serious consequences to our
business, financial condition and operating results and could cause us to become bankrupt or insolvent.
Our stock price may fluctuate significantly.
The market price of our common stock may continue to fluctuate widely, depending on many factors, some of which
may be beyond our control, including:
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actual or anticipated fluctuations in the operating results of our Company due to factors related to our business;
success or failure of the strategy of our Company;
the quarterly or annual earnings of our Company, or those of other companies in our industry;
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continued industry-wide decrease in demand for paper and related products;
our ability to obtain third-party financing as needed;
announcements by us or our competitors of significant acquisitions or dispositions;
restrictions on our ability to pay dividends under our ABL Facility;
changes in accounting standards, policies, guidance, interpretations or principles;
the operating and stock price performance of other comparable companies;
investor perception of our Company;
natural or environmental disasters that investors believe may affect our Company;
overall market fluctuations;
a large sale of our stock by a significant shareholder;
results from any material litigation or government investigation;
changes in laws and regulations affecting our Company or any of the principal products sold by our Company; and
general economic and political conditions and other external factors.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a
particular company. These broad market fluctuations could adversely affect the trading price of our common stock.
If securities or industry analysts publish unfavorable research, or do not continue to cover our Company, our
stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry
analysts publish about us and our business. As of December 31, 2021, we had very limited research coverage by analysts. If
an analyst downgrades our stock or publishes unfavorable research about our business, our stock price would likely decline.
If an analyst ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease,
which could cause our stock price or trading volume to decline.
A significant percentage of our outstanding common stock is held by our three largest shareholders, and certain
of those shareholders may exercise significant influence over matters requiring shareholder approval. So long as a
significant percentage of our common stock continues to be held by a small number of shareholders, the liquidity of our
common stock may be impacted.
Our three largest shareholders collectively owned approximately 48% of our outstanding common stock as of
December 31, 2021. As a result, certain of these shareholders may exercise significant influence over all matters requiring
shareholder approval, including approval of significant corporate transactions, which may reduce the market price of our
common stock. Additionally, the interests of these shareholders may conflict with the interests of our other shareholders.
This concentrated ownership could also result in a limited amount of shares being available to be traded in the market,
resulting in reduced liquidity.
Anti-takeover provisions in our amended and restated certificate of incorporation (our "charter") and amended
and restated by-laws (our "by-laws") could discourage, delay or prevent a change of control of our Company and may
affect the trading price of our common stock.
Our charter and by-laws include a number of provisions that may discourage, delay or prevent a change in our
management or control over us that shareholders may consider favorable. For example, our charter and by-laws collectively:
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authorize the issuance of "blank check" preferred stock that could be issued by our Board of Directors to thwart a
takeover attempt;
limit the ability of shareholders to remove directors;
provide that vacancies on our Board of Directors, including vacancies resulting from an enlargement of our Board of
Directors, may be filled only by a majority vote of directors then in office;
prohibit shareholders from calling special meetings of shareholders unless called by the holders of not less than 20%
of our outstanding shares of common stock;
prohibit shareholder action by written consent, unless initiated by the holders of not less than 20% of the outstanding
shares of common stock;
establish advance notice requirements for nominations of candidates for election as directors or to bring other
business before an annual meeting of our shareholders; and
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require the approval of holders of at least a majority of the outstanding shares of our common stock to amend our
by-laws and certain provisions of our charter.
These provisions may prevent our shareholders from receiving the benefit from any premium to the market price of
our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as
discouraging takeover attempts in the future.
Our charter and by-laws may also make it difficult for shareholders to replace or remove our management. These
provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our
control, which may not be in the best interests of our shareholders.
Our charter designates the Court of Chancery of the State of Delaware as the exclusive forum for certain
litigation that may be initiated by our shareholders, which could limit our shareholders' ability to obtain a favorable
judicial forum for disputes with us.
Our charter provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any
derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to
us or our shareholders by any of our directors, officers or employees, (iii) any action asserting a claim against us or any
director, officer, employee or agent arising under the Delaware General Corporation Law, our charter or by-laws or (iv) any
action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision in our
charter may limit our shareholders' ability to obtain a favorable judicial forum for disputes with us.
We have not historically declared or paid dividends on our common stock and, consequently, your ability to
achieve a return on your investment will depend on appreciation in the price of our common stock.
We have not historically declared or paid dividends on our common stock. We currently intend to invest our future
earnings, if any, to fund our growth, to develop our business, for working capital needs, to reduce debt and for general
corporate purposes. Therefore, the success of an investment in shares of our common stock will depend upon any future
appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain
their current value.
Any decision to pay dividends in the future will be at the discretion of Veritiv's Board of Directors and will depend
upon various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of
indebtedness, restrictions imposed by applicable law, general business conditions and other factors that Veritiv's Board of
Directors may deem relevant. In addition, our operations are conducted almost entirely through our subsidiaries. As such, to
the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to
make funds available to us for the payment of dividends. Further, the agreements governing our ABL Facility can, and
agreements governing future indebtedness may, in certain circumstances, restrict the ability of our subsidiaries to pay
dividends or otherwise transfer assets to us.
Risks Relating to Regulatory Compliance and Legal Matters
Costs to comply with environmental, health and safety laws, and to satisfy any liability or obligation imposed
under such laws, could negatively impact our business, financial condition and results of operations.
Our operations are subject to U.S. and international environmental, health and safety laws, including laws regulating
the emission or discharge of materials into the environment, the use, storage, treatment, disposal and management of
hazardous substances and waste, the investigation and remediation of contamination and the health and safety of our
employees and the public. We could incur substantial fines or sanctions, enforcement actions (including orders limiting our
operations or requiring corrective measures), investigation, remediation and closure costs and third-party claims for property
damage and personal injury as a result of violations of, or liabilities or obligations under, environmental, health and safety
laws. We could be held liable for the costs to address contamination at any real property we have ever owned, operated or
used as a disposal site.
In addition, changes in, or new interpretations of, existing laws, the discovery of previously unknown contamination,
or the imposition of other environmental liabilities or obligations in the future, may lead to additional compliance or other
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costs that could impact our business and results of operations. Moreover, as environmental issues, such as climate change,
have become more prevalent, U.S. and foreign governments have responded, and may continue to respond, with increased
legislation and regulation, which could negatively impact our business, financial condition and results of operations.
Expenditures related to the cost of compliance with laws, rules and regulations could adversely impact our
business and results of operations.
Our operations are subject to U.S. and international laws and regulations, including regulations of the U.S.
Department of Transportation Federal Motor Carrier Safety Administration, the import and export of goods, customs
regulations, the Office of Foreign Asset Control and the Foreign Corrupt Practices Act of 1977. Expenditures related to the
cost of compliance with laws, rules and regulations, tariffs and duties could adversely impact our business and results of
operations. In addition, we could incur substantial fines or sanctions, enforcement actions (including orders limiting our
operations or requiring corrective measures) and third-party claims for property damage and personal injury as a result of
violations of, or liabilities under, laws, regulations, codes and common law.
Changes in U.S. federal and state or foreign tax law, tax assessments and unclaimed property audits by
governmental authorities could adversely impact our operating results.
We remit a variety of taxes and fees to various U.S. federal and state and foreign governmental authorities, including
income taxes, excise taxes, property taxes, sales and use taxes and payroll taxes. From time to time, governments make
substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be
incurred under existing tax law. In addition, tax laws and regulations are extremely complex and subject to varying
interpretations. The taxes and fees remitted by us are subject to review and audit by the applicable governmental authorities
which could result in liability for additional assessments. Furthermore, we are subject to U.S. state unclaimed property
(escheat) laws and audits which require us to turn over to certain government authorities the property of others held by us that
has been unclaimed for a specified period of time. Although management believes that the positions we have taken are
reasonable, various taxing authorities may challenge certain of the positions we have taken, which may also potentially result
in additional liabilities for taxes, unclaimed property, interest and penalties in excess of accrued liabilities. Changes in tax
laws or an unfavorable resolution of assessments by a governmental authority could have a material adverse effect on our
operating results in future periods.
Results of legal proceedings relating to our products including the sale and distribution thereof, and regulatory
inquiries or investigations by government authorities, could have a material adverse effect on our business, reputation,
financial condition, results of operations and cash flows.
We rely on manufacturers and other suppliers to provide us with the products and equipment we sell, distribute and
service. As we do not have direct control over the quality of the products manufactured or supplied by such third-party
suppliers, we are exposed to risks relating to the quality of the products and equipment we sell, distribute and service. It is
possible that inventory from a manufacturer or supplier could be sold to our customers and later be alleged to have quality
problems or to have caused personal injury, subjecting us to potential claims from customers or third parties. Our ability to
hold such manufacturer or supplier liable will depend on a variety of factors, including its financial viability. Moreover,
increasing the number of private label products that we distribute could increase our exposure to potential liability for product
liability claims. Finally, even if we are successful in defending any claim relating to the products or equipment we distribute,
claims of this nature could negatively impact our reputation and customer confidence in our products, equipment and
company. We have been subject to such claims in the past, which have been resolved without material financial impact. We
also operate a significant number of facilities and a large fleet of trucks and other vehicles and therefore face the risk of
premises-related liabilities and vehicle-related liabilities including traffic accidents.
From time to time, we may also be involved in government inquiries and investigations, as well as class action,
employment and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other
contingencies, including environmental remediation and other proceedings commenced by government authorities. The costs
and other effects of pending litigation against us cannot be determined with certainty. There can be no assurance that the
outcome of any lawsuit or claim or its effect on our business or financial condition will be as expected. The defense of these
lawsuits and claims may divert our management's attention, and significant expenses may be incurred as a result. In addition,
we may be required to pay damage awards or settlements, or become subject to injunctions or other equitable remedies, that
could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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In addition, many of our sales professionals are subject to confidentiality and non-competition agreements. If our
sales professionals were to violate these agreements, we could seek to legally enforce these agreements, but we may incur
substantial costs in connection with such enforcement and may not be successful in such enforcement.
Although we currently maintain insurance coverage to address some of these types of liabilities, we cannot make
assurances that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance
will provide adequate coverage against potential claims. In addition, we may choose not to seek to obtain such insurance in
the future. Moreover, indemnification rights that we have may be insufficient or unavailable to protect us against potential
loss exposures.
General Risk Factors
Adverse developments in general business and economic conditions as well as conditions in the global capital and
credit markets could have a material adverse effect on the demand for our products, the business, and the financial
condition and results of operations of our Company and our customers.
The persistently slow rate of increase in the U.S. gross domestic product ("GDP") in recent years has adversely
affected our results of operations. If GDP continues to increase at a slow rate or if economic growth declines, demand for the
products we sell will be adversely affected. In addition, volatility in the global capital and credit markets, which impacts
interest rates, currency exchange rates and the availability of credit, could have a material adverse effect on the business,
financial condition and results of operations of our Company and our customers. Financial difficulties of customers, whether
as a result of a downturn in general economic or industry conditions or otherwise, may result in failures of customers to
timely pay amounts due or adversely affect the collectability of our accounts receivable, which could have a material adverse
effect on our business, financial condition and results of operations. We also have exposure to counterparties with which we
routinely execute transactions. A bankruptcy or liquidity event by one or more of our customers or counterparties, such as
financial institutions, could have a material adverse effect on our business, financial condition and results of operations.
Changes in business conditions in our international operations could adversely affect our business and results of
operations.
Our operating results and business prospects could be substantially affected by risks related to Canada, Mexico and
other non-U.S. countries where we sell and distribute or purchase our products. Some of our operations are in or near
locations that have suffered from political, social and economic issues; civil unrest; and a high level of criminal activity. In
those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our
personnel and the security of our operations. Downturns in economic activity, adverse tax consequences or any change in
social, political or labor conditions in any of the countries in which we operate could negatively affect our financial results.
In addition, our international operations are subject to regulation under U.S. law (including, among others, the Foreign
Corrupt Practices Act of 1977) and other laws related to operations in foreign jurisdictions. Failure to comply with domestic
or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions and the
prosecution of executives.
Inclement weather, widespread outbreak of an illness, anti-terrorism measures and other disruptions could
negatively affect various aspects of our business including our supply chain, distribution system and operations, and could
result in reduced demand from our customers.
Our ability to provide efficient distribution of products to our customers is an integral component of our overall
business strategy. Disruptions at distribution centers or shipping ports or the closure of roads or imposition of other driving
bans due to natural events such as flooding, tornadoes and blizzards may affect our ability to both maintain key products in
inventory and deliver products to our customers on a timely basis, which may in turn adversely affect our results of
operations.
Additionally, widespread outbreaks of an illness such as a pandemic and actions taken to contain or prevent further
spread of such diseases could substantially interfere with general commercial activity related to our supply chain and
customer base, which could have an adverse effect on our business, financial condition and results of operations. If our
operations are curtailed, we may need to seek alternate sources of supply which may be more expensive, unavailable or may
result in delays in shipments to us from our supply chain and subsequently to our customers. Further, if our customers’
18
businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of
operations.
Furthermore, in the aftermath of terrorist attacks in the U.S., federal, state and local authorities have implemented
and continue to implement various security measures that affect many parts of the transportation network in the U.S. and
abroad. Our customers typically require delivery of products in short time frames and rely on our on-time delivery
capabilities. If security measures disrupt or impede the timing of our deliveries, we may fail to meet the needs of our
customers, or may incur increased expenses to do so. Any of these disruptions to our operations may reduce our sales and
have an adverse effect on our business, financial condition and results of operations.
We are dependent on a variety of information technology ("IT") and telecommunications systems and the
Internet, and any failure of these systems could adversely impact our business and operating results.
We depend on IT and telecommunications systems and the Internet for our operations. These systems support a
variety of functions including inventory management, order placement and processing with vendors and from customers,
shipping, shipment tracking and billing. Our information systems are vulnerable to natural disasters, wide-area
telecommunications or power utility outages, terrorist or cyber-attacks and other major disruptions, and our redundant
information systems may not operate effectively.
Failures or significant downtime of our IT or telecommunications systems for any reason could prevent us from
taking customer orders, printing product pick-lists, shipping products, billing customers and handling call volume. Sales also
may be adversely impacted if our reseller and retail customers are unable to access pricing and product availability
information. We also rely on the Internet, electronic data interchange and other electronic integrations for a large portion of
our orders and information exchanges with our suppliers and customers. The Internet and individual websites have
experienced a number of disruptions and slowdowns, some of which were caused by organized attacks. In addition, some
websites have experienced security breakdowns. If we were to experience a security breakdown, disruption or breach that
compromised sensitive information, it could harm our relationships with our suppliers and customers. Disruption of our
website or the Internet in general could impair our order processing or more generally prevent our suppliers and resellers
from accessing information. Failures of our systems could also lead to delivery delays and may expose us to litigation and
penalties under some of our contracts. Any significant increase in our IT and telecommunications costs or temporary or
permanent loss of our IT or telecommunications systems could harm our relationships with our customers and suppliers and
result in lost sales, business delays and bad publicity. The occurrence of any of these events, as well as the costs we may
incur in preventing or responding to such events, could have a material adverse effect on our business, financial condition and
results of operations.
We are subject to cybersecurity risks related to breaches of security pertaining to sensitive company, customer,
employee and vendor information as well as breaches in the technology that manages operations and other business
processes.
Our operations rely upon secure IT systems for data capture, processing, storage and reporting. Our IT systems, and
those of our third-party providers, could become subject to cyber-attacks. The evolving nature of threats to data security, in
light of new and sophisticated methods used by criminals and cyberterrorists, state-sponsored organizations and nation-states,
including computer viruses, malware, phishing, misrepresentation, social engineering and forgery, make it increasingly
challenging to anticipate and adequately mitigate these risks. Network, system, application and data breaches could result in
operational disruptions or information misappropriation including, but not limited to, interruption of systems availability, or
denial of access to and misuse of applications required by our customers to conduct business with us. Access to internal
applications required to plan our operations, source materials, ship finished goods and account for orders could be denied or
misused. Theft of intellectual property or trade secrets, and inappropriate disclosure of confidential information, could stem
from such incidents. Any operational disruptions or misappropriation of information could harm our relationship with our
customers and suppliers, result in lost sales, business delays and negative publicity and could have a material adverse effect
on our business, financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
19
ITEM 2. PROPERTIES
As of December 31, 2021, we had a distribution network operating from 115 distribution centers.
Properties
Square feet (in millions)
Leased
Owned
Total
109
15.3
6
0.8
115
16.1
These facilities are strategically located throughout the U.S., Canada and Mexico in order to efficiently serve our
customer base in the surrounding areas while also facilitating expedited delivery services for special orders. We continually
evaluate location, size and attributes to maximize efficiency, deliver top quality customer service and achieve economies of
scale. The Company also leases various office spaces for corporate and sales functions.
ITEM 3. LEGAL PROCEEDINGS
See Note 15 of the Notes to Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Veritiv's common stock is publicly traded on the New York Stock Exchange ("NYSE") under the ticker symbol
"VRTV". As of February 22, 2022, there were 4,605 shareholders of record. The number of record holders does not include
shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
On March 1, 2022, Veritiv announced that its Board of Directors authorized a $200 million share repurchase program
(the "2022 Share Repurchase Program"). The 2022 Share Repurchase Program authorizes the Company, from time to time, to
purchase shares of its common stock through open market transactions, privately negotiated transactions, forward, derivative, or
accelerated repurchase transactions, tender offers or otherwise, including Rule 10b5-1 trading plans, in accordance with all
applicable securities laws and regulations. The timing and method of any repurchases, which will depend on a variety of
market factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and
other factors. This authorization may be suspended, terminated, increased or decreased by the Board of Directors at any time.
On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program,
which was increased to $100 million in May 2021 (collectively, the "2021 Share Repurchase Program"). The 2021 Share
Repurchase Program authorized the Company, from time to time, to purchase shares of its common stock through open market
purchases, privately negotiated transactions, accelerated repurchase programs, tender offers or otherwise, in accordance with all
applicable securities laws and regulations. As of December 31, 2021, the Company had completed its repurchases under the
2021 Share Repurchase Program bringing the total purchases to $100 million, the authorized repurchase limit.
20
The following table presents information with respect to purchases made by the Company of its common stock during
the three months ended December 31, 2021 (shares are in whole units):
Period
October 1-31
November 1-30
Total Number of
Shares Purchased (1)
372
—
Average Price Paid
Per Share
Total Number of
Shares Purchased as
Part of the Publicly
Announced Program (2)
Approximate Dollar
Value of Shares that
May Yet be
Purchased Under the
Publicly Announced
Program
$93.51
$—
— $
— $
2,660
2,660
December 1-31
2,660
(1) The total number of shares purchased includes: (i) shares purchased pursuant to the 2021 Share Repurchase Program (if any) and (ii) shares surrendered to
the Company to satisfy tax withholding obligations in connection with the vesting of stock units issued as part of the Company's equity-based incentive
plans.
(2) This column discloses the number of shares purchased pursuant to the 2021 Share Repurchase Program during the indicated periods.
— $
$—
—
Veritiv has not historically declared or paid dividends on its common stock. The Company currently intends to invest
its future earnings, if any, to fund its growth, to develop its business, for working capital needs, to reduce debt and for general
corporate purposes. Any payment of dividends will be at the discretion of Veritiv's Board of Directors and will depend upon
various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of
indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general
business conditions and other factors that Veritiv's Board of Directors may deem relevant.
Performance Graph
The following graph provides a comparison of the cumulative total shareholder return on the Company's common
stock to the cumulative total returns of the Russell 2000 Index and the average performance of a customized peer group for the
period from December 31, 2016 through December 31, 2021. The graph is not, and is not intended to be, indicative of future
performance of our common stock. The graph assumes that the value of the investment in the Company's common stock, the
Russell 2000 Index and the peer group was $100 on December 31, 2016. Total return indices reflect reinvestment of dividends
and are weighted on the basis of market capitalization at the time of each reported data point. The peer group is reviewed
periodically based on industry, size and market dynamics. During 2021, Innerworkings Inc. and LSC Communications Inc.
were added to the peer group.
Companies included in the peer group are as follows:
• Applied Industrial Technologies, Inc.
• Avery Dennison Corporation
• Beacon Roofing Supply, Inc.
• Graphic Packaging Holding Company
• Innerworkings Inc.
• International Paper Company
• Brady Corporation
• Deluxe Corporation
• Domtar Corporation
• Ennis, Inc.
• Fastenal Company
• Kaman Corporation
• LSC Communications Inc.
• MSC Industrial Direct Co., Inc.
• Neenah Inc.
• Office Depot, Inc.
• Packaging Corporation of America
• R.R. Donnelley & Sons Company
• Resolute Forest Products, Inc.
• Sealed Air Corporation
• Sonoco Products Company
• Univar Solutions, Inc.
• Verso Corporation
• W.W. Grainger, Inc.
• Genuine Parts Company
• P.H. Glatfelter Company
• Watsco, Inc.
21
Comparison of 5 Year Cumulative Total Return
Among Veritiv Corporation, the Russell 2000 Index and Peer Group
Veritiv Corporation
Russell 2000 Index
Peer Group
$250
$200
$150
$100
$50
$0
2016
2017
2018
2019
2020
2021
NOTE: Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2022.
NOTE: Index Data: Copyright Russell Investments. Used with permission. All rights reserved.
ITEM 6. (Reserved)
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a
reader of our financial statements with a narrative from the perspective of our management regarding our financial condition
and results of operations, liquidity and certain material events and uncertainties known to management that are reasonably
likely to cause reported financial information not to be necessarily indicative of our future financial condition or results of
operations. This discussion should be read in conjunction with the consolidated financial statements and accompanying notes
included in Item 8 of this report.
Executive Overview
The COVID-19 Pandemic
The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global societies,
economies, financial markets and business practices, and created significant uncertainty regarding potential impacts to Veritiv
("Veritiv" or the "Company"). Federal and state governments have implemented measures in an effort to contain the virus,
including physical distancing recommendations, travel restrictions, border closures, limitations on public gatherings, work-
from-home recommendations, supply chain logistical changes and closure of non-essential businesses, some of which have
since been eased. Although the Company has not experienced any closures of its distribution centers, Veritiv serves customers
across a broad range of industry sectors and geographies, with varying COVID-19 impacts. Primarily beginning in April 2020,
the COVID-19 pandemic began having a negative impact on the Company's financial results, including decreased sales activity.
The Company has seen economic improvements during 2021 in many of the markets where it operates as global vaccine
distribution efforts continue. Sales activity during 2021 exceeded 2020 levels for three out of four of the Company's reportable
segments, including the Packaging segment, which exceeded pre-COVID-19 levels.
Veritiv's first priority remains the health and safety of its employees, customers and their families. The Company has
taken steps to limit exposure and enhance the safety of its facilities for employees working to continue to supply vital products
to its customers. In response to the pandemic, Veritiv initiated its Corporate Incident Response Team and initiated enhanced
health and safety measures across its facilities. The Company modified practices at its distribution centers and offices to adhere
to guidance from the United States ("U.S") Centers for Disease Control and Prevention and local health and governmental
authorities with respect to social distancing, enhanced cleaning protocols and usage of personal protective equipment, where
appropriate. In addition, the Company implemented global travel restrictions and work-from-home policies for employees who
have the ability to work remotely.
In April 2020, Veritiv took several actions to help mitigate the effects of the decreased sales activity and improve
liquidity. These actions included (i) temporarily reducing salaries for senior leaders ranging from 10% to 50% through June
2020, (ii) temporarily reducing annual cash retainers for independent directors by 50% through June 2020, (iii) placing
approximately 15% of its salaried workforce on temporary furloughs through mid-July 2020, (iv) adjusting its supply chain
operations staff depending on volume at specific locations, (v) suspending its share repurchase program, which was resumed in
March 2021 and (vi) reducing discretionary spending including planned capital expenditures. In July 2020, Veritiv took
additional actions to enhance liquidity in response to the impacts of the COVID-19 pandemic, including implementing cost-
savings and cash preservation initiatives as described under the heading "2020 Restructuring Plan" below.
Veritiv's management expects that cash provided by operating activities and available capacity under the Asset-Based
Lending Facility (the "ABL Facility") will provide sufficient funds to operate the business and meet other liquidity needs. As
of December 31, 2021, Veritiv had cash and cash equivalents of $49.3 million and also had $557.2 million in available
additional borrowing capacity under the ABL Facility. In May 2021, the Company amended its ABL Facility to, among other
things, extend the maturity date to May 2026.
The current circumstances are dynamic and the impacts of the COVID-19 pandemic on the Company's business
operations, including the duration and impact on overall customer demand, cannot be reasonably estimated at this time. The
extent to which the COVID-19 pandemic impacts the Company's business, results of operations, access to sources of liquidity
and financial condition will depend on future developments. These developments, which are uncertain and difficult to predict,
include, but are not limited to, the duration, spread and severity of the COVID-19 pandemic, the effects of the COVID-19
pandemic on the Company's employees, customers, suppliers and vendors, measures adopted or recommended by local and
federal governments or health authorities in response to the pandemic, the availability, adoption and effectiveness of vaccines
23
and to what extent normal economic and operating conditions can resume and be sustained. Even after the COVID-19
pandemic has subsided, the Company may experience an impact to its business as a result of any economic recession, downturn
or volatility or long-term changes in customer behavior.
See Part I, Item 1A, Risk Factors in this report, for additional information on risks related to the COVID-19 pandemic.
Other Recent Developments
2022 Share Repurchase Program
On March 1, 2022, Veritiv announced that its Board of Directors authorized a $200 million share repurchase program
(the "2022 Share Repurchase Program"). The 2022 Share Repurchase Program authorizes the Company, from time to time, to
purchase shares of its common stock through open market transactions, privately negotiated transactions, forward, derivative, or
accelerated repurchase transactions, tender offers or otherwise, including Rule 10b5-1 trading plans, in accordance with all
applicable securities laws and regulations. The timing and method of any repurchases, which will depend on a variety of
market factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and
other factors. This authorization may be suspended, terminated, increased or decreased by the Board of Directors at any time.
2021 Share Repurchase Program
On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program
(the "2021 Share Repurchase Program"). On May 24, 2021, the Company announced that its Board of Directors increased the
2021 Share Repurchase Program authorization to a total of $100 million. The 2021 Share Repurchase Program replaced the
$25 million share repurchase authorization previously approved by Veritiv's Board of Directors in March 2020 (the "2020 Share
Repurchase Program"). The Company completed its repurchases under the 2021 Share Repurchase Program with repurchases
totaling nearly $100 million, the authorized repurchase limit, representing approximately 11% of the shares that were
outstanding at December 31, 2020.
2020 Restructuring Plan
During the second quarter of 2020, the Company initiated a restructuring plan in response to the impact of the
COVID-19 pandemic on its business operations and the ongoing secular changes in its Print and Publishing segments. During
the fourth quarter of 2020, the Company expanded the initial plan to further align its cost structure with ongoing business needs
as the Company executes on its stated corporate strategy. The initial and expansion activities are collectively referred to as the
"2020 Restructuring Plan." The 2020 Restructuring Plan includes (i) a reduction of the Company's U.S. salaried workforce by
approximately 15% across all business segments and corporate functions, (ii) the closure of certain warehouse facilities and
retail stores, (iii) adjustments to various compensation plans, (iv) repositioning of inventory to expand the Company's service
radius and (v) other actions. The Company currently estimates it will incur total restructuring charges of between $70 million
and $76 million in connection with the 2020 Restructuring Plan. Initial charges were incurred and recorded in June 2020. The
2020 Restructuring Plan was substantially complete as of December 31, 2021 with remaining charges to be incurred through the
end of 2022. See Note 4 of the Notes to Consolidated Financial Statements for information related to the Company's
restructuring efforts.
Company Strategy
In 2021, Veritiv continued to execute against its long-term strategy to be the leading provider of business-to-business
packaging products and services, as well as paper and facility solutions products and services. The Company continues to
invest in organic packaging growth including selling and supply chain capabilities and to pursue inorganic packaging growth
opportunities. The Company also continues to evaluate alternatives for non-core components of our business including
potential divestitures.
Business Overview
Veritiv is a leading North American business-to-business full-service provider of value-added packaging products and
services, as well as facility solutions, print and publishing products and services. Additionally, Veritiv provides logistics and
supply chain management solutions to its customers. Veritiv was established on July 1, 2014 following the merger of
International Paper Company's xpedx distribution solutions business and UWW Holdings, Inc., the parent company of
24
Unisource Worldwide, Inc. On August 31, 2017, Veritiv completed its acquisition of 100% of the equity interest in various All
American Containers entities (collectively, "AAC"). The Company operates from 115 distribution centers primarily throughout
the U.S., Canada and Mexico.
Veritiv's business is organized under four reportable segments: Packaging, Facility Solutions, Print, and Publishing
and Print Management ("Publishing"). This segment structure is consistent with the way the Chief Operating Decision Maker,
who is Veritiv's Chief Executive Officer, makes operating decisions and manages the growth and profitability of the Company's
business. The Company also has a Corporate & Other category which includes certain assets and costs not primarily
attributable to any of the reportable segments, as well as the Veritiv logistics solutions business which provides transportation
and warehousing solutions. The following summary describes the products and services offered in each of the reportable
segments:
•
•
•
•
Packaging – Veritiv is a global provider of packaging products, services and solutions. The Packaging segment
provides custom and standard packaging solutions for customers based in North America and in key global markets.
This segment services its customers with a full spectrum of packaging product materials within flexible, corrugated
and fiber, ancillary packaging, rigid and equipment categories. The business is strategically focused on higher growth
industry sectors including manufacturing, food and beverage, wholesale and retail, healthcare and transportation, as
well as specialty sectors based on industry and product expertise. Veritiv's packaging professionals create customer
value through supply chain solutions, structural and graphic packaging design and engineering, automation, workflow
and equipment services and kitting.
Facility Solutions – Veritiv is a global provider of hygiene and facility solutions products and services. The Facility
Solutions segment sources and sells cleaning, break-room and other supplies in product categories that include towels
and tissues, food service, personal protective equipment, cleaning chemicals and skincare, primarily in North America.
Through this segment Veritiv manages a world class network of leading suppliers in most facilities solutions
categories. Additionally, the Company offers total cost of ownership solutions with re-merchandising, budgeting and
compliance reporting and inventory management. Its sales force is trained to bring leading vertical expertise to the
major North American geographies.
Print – The Print segment sells and distributes commercial printing, writing, copying, digital, specialty products and
graphics consumables primarily in North America. Veritiv's broad geographic platform of operations coupled with the
breadth of paper and graphics products, including exclusive private brand offerings, provides a foundation to service
national, regional and local customers across North America.
Publishing – The Publishing segment sells and distributes coated and uncoated commercial printing papers to
publishers, retailers, converters, printers and specialty businesses for use in magazines, catalogs, books, directories,
gaming, couponing, retail inserts and direct mail primarily in the U.S. This segment also provides print management,
procurement and supply chain management solutions to simplify paper and print procurement processes for its
customers.
Results of Operations, Including Business Segments
The following discussion compares the consolidated operating results of Veritiv for the years ended December 31,
2021 and 2020. For the discussion of results for 2020 compared to 2019, refer to Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations of Veritiv's Annual Report on Form 10-K for the year ended
December 31, 2020, which was filed with the SEC on March 3, 2021.
25
(in millions)
Net sales
Cost of products sold (exclusive of depreciation and amortization shown
separately below)
Distribution expenses
Selling and administrative expenses
Depreciation and amortization
Restructuring charges, net
Operating income (loss)
Interest expense, net
Other (income) expense, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Net Sales
Year Ended
December 31,
2021 vs. 2020
Increase (Decrease)
2021
2020
$
%
$ 6,850.5 $ 6,345.6 $
504.9
8.0 %
5,417.9
5,040.2
419.3
732.7
55.2
15.4
210.0
17.2
429.8
717.9
57.7
52.2
47.8
25.1
377.7
(10.5)
14.8
(2.5)
7.5 %
(2.4) %
2.1 %
(4.3) %
(36.8)
(70.5) %
162.2
339.3 %
(7.9)
(31.5) %
(4.7)
(20.3)
15.6
76.8 %
197.5
52.9
43.0
8.8
154.5
359.3 %
44.1
501.1 %
$
144.6 $
34.2 $
110.4
322.8 %
Net sales increased by $504.9 million, or 8.0%. The Packaging segment's net sales were responsible for approximately
88% of the total increase. Net sales increased in all reportable segments, except Facility Solutions. Net sales for the Facility
Solutions segment declined by $28.3 million. Net sales in 2021 were negatively impacted by the COVID-19 pandemic while
inflationary market price increases across the Company's product portfolio continued throughout 2021. To the extent feasible,
the Company has adjusted its prices to reflect the impact of inflation on the cost of purchased materials and services. Also,
despite constraints in the broader supply chain, the Company was able to mitigate some of the impact to its customers through
leveraging its portfolio of suppliers and its North American supply chain network. Management expects higher market prices
and marketplace supply chain challenges to continue through at least the first half of 2022. See the "Segment Results" section
for additional discussion.
Cost of Products Sold (exclusive of depreciation and amortization shown separately below)
Cost of products sold increased by $377.7 million, or 7.5%, primarily due to higher net sales as previously discussed.
See the "Segment Results" section for additional discussion. Cost of products sold increased at a slower rate than net sales due
to improvements in pricing, as well as changes in both segment and customer mix.
Distribution Expenses
Distribution expenses decreased by $10.5 million, or 2.4%. The decrease was primarily attributable to (i) an $11.7
million decrease in facility and equipment rent expense, (ii) a $7.1 million multi-employer pension plan withdrawal charge in
the first quarter of 2020 that did not repeat in 2021 and (iii) a $6.4 million decrease in wages and temporary employee expenses,
partially offset by a $17.0 million increase in freight and logistics expense. The decrease in facility and equipment rent expense
was primarily driven by consolidation of the Company's facilities. The decrease in wages and temporary employee expenses
was primarily driven by actions taken by the Company in response to the COVID-19 pandemic, including lowering headcount
across the Company. The increase in freight and logistics expense was primarily driven by an increase in third-party freight
and higher diesel fuel and carrier prices.
Selling and Administrative Expenses
Selling and administrative expenses increased by $14.8 million, or 2.1%. The increase was primarily due to (i) a $12.3
million increase in personnel expenses, (ii) a $4.8 million increase in professional fees expense, (iii) $3.7 million in lower net
gains from the sale of a business and facilities as compared to the prior year period and (iv) a $1.5 million increase in marketing
and communications expense, partially offset by a $7.8 million decrease in bad debt expense. The increase in personnel
expenses was primarily driven by (i) higher wages, (ii) higher incentive compensation expenses and (iii) an increase in travel
26
and entertainment expenses, partially offset by a decrease in commission expenses due to a change in the sales force
compensation plans. Higher wages included the reinstatement of annual performance-related salary increases and the
Company's matching contributions to certain defined contribution plans. In the fourth quarter of 2021, selling and
administrative expenses were elevated due to higher compensation expenses associated with improved company performance
and higher professional fees expense.
Depreciation and Amortization
Depreciation and amortization expense decreased by $2.5 million, or 4.3%, primarily due to lower depreciation on
information technology related assets.
Restructuring Charges, Net
Restructuring charges, net decreased by $36.8 million, or 70.5%. During the second quarter of 2020, the Company
initiated a restructuring plan in response to the impact of the COVID-19 pandemic on its business operations and the ongoing
secular changes in its Print and Publishing segments. As of December 31, 2021, the Company has substantially completed its
2020 Restructuring Plan. See Note 4 of the Notes to Consolidated Financial Statements for information related to the
Company's restructuring efforts.
Interest Expense, Net
Interest expense, net decreased by $7.9 million, or 31.5%. The decrease was primarily due to (i) lower average interest
rates and (ii) a lower average balance on the ABL Facility. The lower average balance was due to positive operating cash flow,
which was used to reduce the ABL Facility balance. Interest expense, net in 2021 consisted of (i) $12.2 million of interest
expense on the Company's ABL Facility, (ii) $2.8 million of finance lease interest expense, (iii) $1.5 million for amortization
and write-off of deferred financing costs related to the ABL Facility and (iv) $0.7 million in miscellaneous interest expense.
Interest expense, net in 2020 consisted of (i) $18.9 million of interest expense on the Company's ABL Facility, (ii) $3.0 million
of finance lease interest expense, (iii) $2.1 million for amortization and write-off of deferred financing costs related to the ABL
Facility and (iv) $1.1 million in miscellaneous interest expense. See Note 6 of the Notes to Consolidated Financial Statements
for information related to the ABL Facility.
Other (Income) Expense, Net
Other (income) expense, net, in 2021 was income of $4.7 million. This was a net unfavorable change of $15.6 million,
as compared to 2020. In December 2020, the Company and UWW Holdings, LLC (the "UWWH Stockholder") agreed to settle
the Tax Receivable Agreement ("TRA"), resulting in the recognition of a favorable fair value adjustment of $20.1 million,
recorded in other (income) expense in 2020, that did not repeat in 2021. See Note 8 and Note 10 of the Notes to Consolidated
Financial Statements for information related to the TRA. This was partially offset by (i) $1.5 million of lower pension expenses
and (ii) a $1.0 million adjustment to a contingent consideration earnout in the prior year that did not repeat. The remainder was
driven by improvements in foreign exchange impacts and other miscellaneous items.
Effective Tax Rate
Veritiv's effective tax rates were 26.8% and 20.5% for the years ended December 31, 2021 and 2020, respectively.
The difference between the Company's effective tax rates and the U.S. statutory tax rate of 21.0% primarily relates to state
income taxes (net of federal income tax benefit), non-deductible expenses, tax credits, Global Intangible Low-Taxed Income,
the tax impact of stock compensation vesting and the Company's pre-tax book income (loss) by jurisdiction. In addition, the
Company's effective tax rate for the year ended December 31, 2020 includes a $3.7 million benefit related to the tax effect of
TRA changes and a $2.4 million benefit related to the carryback of net operating losses under the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act").
Segment Results
Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges, net,
integration and acquisition expenses and other similar charges including any severance costs, costs associated with warehouse
and office openings or closings, consolidation, and relocation and other business optimization expenses, stock-based
compensation expense, changes in the LIFO reserve, non-restructuring asset impairment charges, non-restructuring severance
charges, non-restructuring pension charges, net, fair value adjustments related to contingent liabilities assumed in mergers and
acquisitions and certain other adjustments) is the primary financial performance measure Veritiv uses to manage its businesses,
to monitor its results of operations, to measure its performance against the ABL Facility and to incentivize its management.
27
Veritiv believes investors commonly use Adjusted EBITDA as a key financial metric for valuing companies. In addition, the
credit agreement governing the ABL Facility permits the Company to exclude these and other charges in calculating
Consolidated EBITDA, as defined in the ABL Facility. This common metric is intended to align shareholders, debt holders and
management. Adjusted EBITDA is a non-GAAP financial measure and is not an alternative to net income, operating income or
any other measure prescribed by U.S. generally accepted accounting principles ("U.S. GAAP").
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for
analysis of Veritiv's results as reported under U.S. GAAP. For example, Adjusted EBITDA:
•
•
does not reflect the Company's income tax expenses or the cash requirements to pay its taxes; and
although depreciation and amortization charges are non-cash charges, it does not reflect that the assets being
depreciated and amortized will often have to be replaced in the future, and the foregoing metric does not reflect any
cash requirements for such replacements.
Other companies in the industry may calculate Adjusted EBITDA differently than Veritiv does, limiting its usefulness
as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as a measure of
discretionary cash available to Veritiv to invest in the growth of its business. Veritiv compensates for these limitations by
relying both on the Company's U.S. GAAP results and by using Adjusted EBITDA for supplemental purposes. Additionally,
Adjusted EBITDA is not an alternative measure of financial performance under U.S. GAAP and therefore should be considered
in conjunction with net income and other performance measures such as operating income or net cash provided by operating
activities and not as an alternative to such U.S. GAAP measures.
Due to the shared nature of the distribution network to support the Packaging, Facility Solutions and Print segments,
distribution expenses are not a specific charge to each segment but are instead allocated to each segment based primarily on
operational metrics that correlate with changes in volume. Accordingly, distribution expenses allocated to each segment are
highly interdependent on the results of other segments. Lower volume in any segment that is not offset by a reduction in
distribution expenses can result in the other segments absorbing a larger share of distribution expenses. Conversely, higher
volume in any segment can result in the other segments absorbing a smaller share of distribution expenses. The impact of this
at the segment level is that the changes in distribution expense trends may not correspond with volume trends within a
particular segment.
Prior to the fourth quarter of 2021, Veritiv was unable to compute the impact of changes in sales volume based on
changes in sales of each individual product for the Packaging and Facility Solutions segments. Rather, the Company assumed
that the margin stayed constant and estimated the volume impact based on changes in cost of products sold as a proxy for the
change in sales volume. After any other significant sales variances were identified, the remaining sales variance was attributed
to price/mix. As a result of the Company’s recent information technology enhancements, the Company has improved its insight
into products within these segments and is now able to isolate the change in sales attributed to volume and price separately at
the item level for the majority of products and thus it no longer needs to rely on cost of products sold as a proxy for the changes
in sales volumes. This change in calculation method is deemed to be a more accurate and transparent way to measure volume,
price and mix changes in sales for these segments.
The Company approximates foreign currency effects by applying the foreign currency exchange rate for the prior
period to the local currency results for the current period. We believe the elimination of the foreign currency translation impact
provides better year-to-year comparability without the distortion of foreign currency fluctuations.
The Company believes that the decline in the demand for paper and related products is due to the widespread use of
electronic media and permanent product substitution, more e-commerce, less print advertising, fewer catalogs and a reduced
volume of direct mail, among other factors. This trend, which may have been accelerated by the COVID-19 pandemic, is
expected to continue and will place continued pressure on the Company's revenues and profit margins and make it more
difficult to maintain or grow Adjusted EBITDA within the Print and Publishing segments.
28
Included in the following table are net sales and Adjusted EBITDA for each of the reportable segments and Corporate
& Other:
(in millions)
Year Ended December 31, 2021
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Year Ended December 31, 2020
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
* - not meaningful
Packaging
Facility
Solutions
Print
Publishing
Corporate &
Other
$
3,760.4
$
894.0
$
1,484.2
$
596.6
$
393.5
10.5 %
52.7
5.9 %
96.0
6.5 %
18.7
3.1 %
$
3,316.7
$
922.3
$
1,458.2
$
543.5
$
300.0
9.0 %
41.6
4.5 %
33.7
2.3 %
12.8
2.4 %
115.3
(218.3)
*
104.9
(200.5)
*
See Note 16 of the Notes to Consolidated Financial Statements for a reconciliation of net income (loss) as reflected on
the Consolidated Statements of Operations to Adjusted EBITDA for the reportable segments.
Packaging
The table below presents selected data with respect to the Packaging segment:
(in millions)
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Year Ended December 31,
Increase (Decrease)
2021
2020
$
$ 3,760.4
$ 3,316.7
$
443.7
393.5
10.5 %
300.0
9.0 %
93.5
%
13.4 %
31.2 %
150 bps
The table below presents the components of the net sales change compared to the prior year:
(in millions)
Volume
Foreign currency
Price/Mix
Total change
Increase (Decrease)
$
$
90.0
22.7
331.0
443.7
Net sales increased $443.7 million, or 13.4%, compared to 2020. The net sales increase was primarily attributable to
higher market prices as well as increased sales volume in all product categories and end use sectors and favorable foreign
currency impacts. Sales to consumer electronics, heavy manufacturing and healthcare customers improved significantly
compared to the prior year. Net sales were positively impacted by strong e-commerce demand in 2021. Management expects
the strong demand and supply chain constraints to continue through at least the first half of 2022 and the Company has invested
in additional inventory to support its customers.
Adjusted EBITDA increased $93.5 million, or 31.2%, compared to 2020. The increase in Adjusted EBITDA was
primarily attributable to cost of products sold increasing at a slower rate than net sales and higher net sales, partially offset by
(i) a $23.8 million increase in selling and administrative expenses and (ii) a $20.7 million increase in distribution expenses.
The increase in selling and administrative expenses was primarily driven by (i) a $15.4 million increase in personnel expenses,
(ii) a $3.1 million increase in professional fees expense and (iii) a $2.6 million increase in bad debt expense. The increase in
personnel expenses was associated with (i) higher wages and benefits to support the Company's Packaging growth strategy and
(ii) higher incentive compensation expenses, partially offset by a decrease in commission expenses driven by a change in the
sales force compensation plans. The increase in distribution expenses was primarily driven by increased utilization of the
29
distribution network, which is reflected in (i) a $12.6 million increase in freight and logistics expense, (ii) a $6.0 million
increase in facility expense and (iii) a $3.2 million increase in personnel expenses.
Facility Solutions
The table below presents selected data with respect to the Facility Solutions segment:
(in millions)
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Year Ended December 31,
Increase (Decrease)
2021
2020
$
$
894.0
$
922.3
$
(28.3)
52.7
5.9 %
41.6
4.5 %
11.1
%
(3.1) %
26.7 %
140 bps
The table below presents the components of the net sales change compared to the prior year:
(in millions)
Volume
Foreign currency
Price/Mix
Total change
Increase (Decrease)
$
$
(109.3)
16.7
64.3
(28.3)
Net sales decreased $28.3 million, or 3.1%, compared to 2020. The net sales decrease was primarily attributable to
decreased sales of skincare products, chemicals and wipers primarily driven by the negative impact on demand from the
COVID-19 pandemic which began in the prior year, partially offset by higher market prices and favorable foreign currency
impacts. Negative impacts to customer demand have included business and school temporary closures, travel restrictions,
constraints on large venues hosting sporting, conventions and entertainment events as well as extended work-from-home
measures. However, food service and can liners product categories had increased sales due to strong demand, which partially
offset the overall reduced customer demand in the Facility Solutions segment. Management expects the facility solutions future
growth to follow the broader facility solutions away-from-home market in 2022.
Adjusted EBITDA increased $11.1 million, or 26.7%, compared to 2020. The increase in Adjusted EBITDA was
primarily attributable to (i) a $6.3 million decrease in selling and administrative expenses, (ii) a $5.1 million decrease in
distribution expenses and (iii) cost of products sold decreasing at a faster rate than net sales, partially offset by decreased net
sales. The decrease in selling and administrative expense was primarily driven by a $7.8 million decrease in personnel
expenses, including lower commission expenses, primarily driven by a change in the sales force compensation plans. The
decrease in distribution expenses was primarily driven by a $4.2 million decrease in personnel expenses.
Print
The table below presents selected data with respect to the Print segment:
(in millions)
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Year Ended December 31,
Increase (Decrease)
2021
2020
$
$ 1,484.2
$ 1,458.2
$
96.0
6.5 %
33.7
2.3 %
26.0
62.3
%
1.8 %
184.9 %
420 bps
30
The table below presents the components of the net sales change compared to the prior year:
(in millions)
Volume
Foreign currency
Price/Mix
Total change
Increase (Decrease)
$
$
(86.7)
11.3
101.4
26.0
Net sales increased $26.0 million, or 1.8%, compared to 2020. The net sales increase was primarily attributable to
higher market prices driven by strong demand, compared to the prior year period when there was a significant negative impact
on demand due to the COVID-19 pandemic, and favorable foreign currency impacts. The net sales increase was partially offset
by lower volume primarily due to higher net sales in 2020 that occurred prior to the COVID-19 pandemic, resulting in a
negative impact on 2021. Management expects the strong demand and supply chain constraints to continue throughout 2022.
Adjusted EBITDA increased $62.3 million, or 184.9%, compared to 2020. The Adjusted EBITDA increase was
primarily attributable to (i) cost of products sold increasing at a slower rate than net sales, (ii) a $17.0 million decrease in
distribution expenses, (iii) a $14.2 million decrease in selling and administrative expenses and (iv) higher net sales. The
decrease in distribution expenses was primarily driven by (i) a $12.0 million decrease in facility and equipment rent expense,
primarily driven by consolidation of the Company's facilities and (ii) a $4.6 million decrease in personnel expenses. The
decrease in selling and administrative expenses was primarily driven by (i) an $8.3 million decrease in personnel expenses and
(ii) a $5.6 million decrease in bad debt expense.
Publishing
The table below presents selected data with respect to the Publishing segment:
(in millions)
Net sales
Adjusted EBITDA
Adjusted EBITDA as a % of net sales
Year Ended December 31,
Increase (Decrease)
2021
2020
$
$
596.6
$
543.5
$
18.7
3.1 %
12.8
2.4 %
53.1
5.9
%
9.8 %
46.1 %
70 bps
The table below presents the components of the net sales change compared to the prior year:
(in millions)
Volume
Foreign currency
Price/Mix
Total change
Increase (Decrease)
$
$
34.9
—
18.2
53.1
Net sales increased $53.1 million, or 9.8%, compared to 2020. The net sales increase was primarily attributable to an
increase in demand compared to prior year, when there was a significant negative impact on demand due to the COVID-19
pandemic, as well as higher market prices.
Adjusted EBITDA increased $5.9 million, or 46.1%, compared to 2020. The Adjusted EBITDA increase was
primarily attributable to (i) increased net sales and (ii) a $4.3 million decrease in selling and administrative expenses, partially
offset by cost of products sold increasing at a faster rate than net sales. The decrease in selling and administrative expenses was
primarily driven by a $4.8 million decrease in bad debt expense.
31
Corporate & Other
(in millions)
Net sales
Adjusted EBITDA
Year Ended December 31,
Increase (Decrease)
2021
2020
$
$
115.3 $
104.9 $
(218.3)
(200.5)
10.4
(17.8)
%
9.9 %
(8.9) %
Net sales increased $10.4 million, or 9.9%, compared to 2020. The net sales increase was primarily attributable to an
increase in the price of freight brokerage services, partially offset by a decrease in volume.
Adjusted EBITDA decreased $17.8 million, or 8.9%, compared to 2020. The Adjusted EBITDA decrease was
primarily driven by a $21.0 million increase in selling and administrative expenses, partially offset by increased net sales. The
increase in selling and administrative expenses was primarily driven by (i) a $16.7 million increase in incentive compensation
expense driven by the Company outperforming incentive targets and (ii) a $3.6 million increase in professional fees expense.
Liquidity and Capital Resources
The cash requirements of the Company are provided by cash flows from operations and borrowings under the ABL
Facility. See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding the Company's
debt position.
The following table sets forth a summary of cash flows for the years ended December 31, 2021 and 2020. For
information regarding the Company's cash flows for 2019, refer to the "Liquidity and Capital Resources" section of Part II, Item
7, Management's Discussion and Analysis of Financial Condition and Results of Operations of Veritiv's Annual Report on
Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 3, 2021.
(in millions)
Net cash provided by (used for):
Operating activities
Investing activities
Financing activities
Analysis of Cash Flows
2021 Cash Flows
Year Ended December 31,
2021
2020
$
154.7 $
289.2
(4.3)
(5.3)
(221.4)
(202.6)
The Company ended 2021 with $49.3 million in cash and cash equivalents, a decrease of $71.3 million from the prior
year-end balance. During 2021 the Company used its $75.0 million of cash held in highly-liquid investments to pay down its
long-term debt.
Net cash provided by operating activities decreased primarily as a result of an increase in accounts receivable and
inventory levels, partially offset by an increase in accounts payable, driven by increasing sales in the current period as
compared to the pandemic driven decreases in the 2020 period. The decrease in cash flows from operating assets and liabilities
was partially offset by improvements in operating results.
Net cash used for investing activities was a slightly lower use of cash due to lower capital expenditures offset by lower
cash proceeds received from the sale of a business and other assets.
Net cash used for financing activities was a higher use of cash primarily due to an increase in common stock
repurchases partially offset by lower net repayments under the Company's ABL Facility.
32
2021 Special Operating Activities
In December 2021, the Company prepaid $3.3 million of restructuring costs for other one-time compensation, which
remained as a component of other current assets on the Consolidated Balance Sheet as of December 31, 2021. Also, as of
December 31, 2021, the Company had not yet paid the $19.1 million in payroll taxes it had incurred and deferred through
December 31, 2020, related to the CARES Act. During 2021 the Company used its $75.0 million of cash held in highly-liquid
investments to pay down its long-term debt.
2021 Special Financing Activities
Throughout 2021, the Company repurchased 1,734,810 shares of its common stock at a cost of $100.0 million under
its 2021 Share Repurchase Program. During the second quarter of 2021, in conjunction with the amendment of the ABL
Facility, the Company incurred and paid $3.3 million in new financing fees. See Note 6 of the Notes to Consolidated Financial
Statements for additional information regarding the Company's debt obligations.
2020 Special Operating Activities
In response to the COVID-19 pandemic, the Company (i) deferred the payment of $19.1 million in payroll taxes
incurred through December 31, 2020, as provided by the CARES Act and (ii) beginning in the second quarter of 2020 invested
$75.0 million of its cash in highly-liquid investments instead of paying down its long-term debt. During the fourth quarter of
2020, the Company prepaid $8.1 million of restructuring costs for other one-time compensation, of which $7.0 million
remained as a component of other current assets on the Consolidated Balance Sheet as of December 31, 2020.
2020 Special Financing Activities
During the fourth quarter of 2020, the Company and the UWWH Stockholder agreed to settle the TRA. The Company
paid the UWWH Stockholder a total of $12.0 million in settlement of all past and future liabilities that would have been owed
under the TRA and the parties agreed to a mutual release of claims under the TRA. During the first quarter of 2020, the
Company repurchased 383,972 shares of its common stock at a cost of $3.5 million under its 2020 Share Repurchase Program,
which was suspended March 27, 2020. During the second quarter of 2020, in conjunction with the amendment of the ABL
Facility, the Company incurred and paid $3.4 million in new financing fees.
Funding and Liquidity Strategy
ABL Facility
On May 20, 2021, the Company amended its ABL Facility to extend the maturity date to May 20, 2026, adjust the
pricing grid for applicable interest rates and update certain provisions to facilitate the transition from LIBOR to a new
replacement benchmark rate. All other significant terms remained substantially the same. Previously, on April 9, 2020, the
Company amended its ABL Facility to extend the maturity date to April 9, 2025, reduce the aggregate commitments from $1.4
billion to $1.1 billion and adjust the pricing grid for applicable interest rates. All other significant terms remained substantially
the same. The ABL Facility is comprised of U.S. and Canadian sub-facilities of $1.1 billion and $150.0 million, respectively.
The ABL Facility is available to be drawn in U.S. dollars, in the case of the U.S. sub-facilities, and in U.S. dollars or Canadian
dollars, in the case of the Canadian sub-facilities, or in other currencies that are mutually agreeable. The ABL Facility provides
for the right of the individual lenders to extend the maturity date of their respective commitments and loans upon the request of
Veritiv and without the consent of any other lenders. The ABL Facility may be prepaid at Veritiv's option at any time without
premium or penalty and is subject to mandatory prepayment if the amount outstanding under the ABL Facility exceeds either
the aggregate commitments with respect thereto or the current borrowing base, in an amount equal to such excess.
In conjunction with the amendments of the ABL Facility in 2021 and 2020, the Company incurred and deferred
$3.3 million and $3.4 million, respectively, in new financing costs, which are reflected in other non-current assets on the
Consolidated Balance Sheets and will be amortized to interest expense on a straight-line basis over the new amended term of
the ABL Facility.
Availability under the ABL Facility is determined based upon a monthly borrowing base calculation which includes
eligible customer receivables and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As
33
of December 31, 2021, the available additional borrowing capacity under the ABL Facility was approximately $557.2 million.
As of December 31, 2021, the Company held $11.0 million in outstanding letters of credit.
The ABL Facility has a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing four-
quarter basis, which will be tested only when specified availability is less than limits outlined under the ABL Facility. At
December 31, 2021 the above test was not applicable and based on information available as of the date of this report it is not
expected to be applicable in the next 12 months.
Under the terms of the ABL Facility, interest rates are based upon LIBOR or the prime rate plus a margin rate, or in
the case of Canada, a banker's acceptance rate or base rate plus a margin rate. For the years ended December 31, 2021 and
2020, the weighted-average borrowing interest rates were 1.8% and 2.9%, respectively.
Short and long-term funding strategy
Veritiv's management expects that the Company's primary future cash needs will be for working capital, capital
expenditures, contractual commitments, share repurchases and strategic investments. Veritiv's ability to fund its capital and
operating needs will depend on its ongoing ability to generate cash from operations, availability of borrowings under the ABL
Facility and access to the capital markets. If Veritiv's cash flows from operating activities are lower than expected, the
Company would need to borrow under the ABL Facility and may need to incur additional debt or issue additional equity.
Although management believes that the arrangements currently in place will permit Veritiv to finance its capital and operating
needs on acceptable terms and conditions, the Company's access to, and the availability of, financing on acceptable terms and
conditions in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current
state of the economy. To preserve liquidity, particularly during the COVID-19 pandemic, the Company may invest a portion of
its cash in highly-liquid investments with original maturities to the Company of three months or less that are readily convertible
into known amounts of cash.
The Company currently estimates it will incur total restructuring charges of between $70 million and $76 million in
connection with the 2020 Restructuring Plan. The 2020 Restructuring Plan was substantially complete as of December 31,
2021. See Note 4 of the Notes to Consolidated Financial Statements for additional information regarding the Company's
restructuring efforts. The Company currently estimates that during 2022 it will spend approximately $35 million for capital
expenditures covering both maintenance and strategic investments. As provided by the CARES Act, in response to the
COVID-19 pandemic the Company deferred $19.1 million of payroll taxes, which it had incurred through December 31, 2020.
In January 2022 the Company paid $10.1 million of the deferred payroll taxes and currently expects to pay the remaining
amount in December 2022. See Note 3 of the Notes to Consolidated Financial Statements for information regarding the
Company's lease commitments, including leases that have not yet commenced. See Note 9 of the Notes to Consolidated
Financial Statements for information regarding the Veritiv Deferred Compensation Savings Plans obligation, the Company's
funding status of its pension plans and its multi-employer pension plan commitments. Additionally, the Company has
recognized liabilities for uncertain tax positions, cash-based long-term incentive plans and unscheduled portions of the Veritiv
Deferred Compensation Savings Plans, however, the Company cannot predict with reasonable certainty the timing of future
cash outflows associated with these liabilities.
All of the cash held by Veritiv's non-U.S. subsidiaries is available for general corporate purposes. Veritiv considers
the earnings of certain non-U.S. subsidiaries to be permanently invested outside the U.S. on the basis of estimates that future
domestic cash generation will be sufficient to meet future domestic cash needs and management's specific plans for
reinvestment of those subsidiary earnings. The table below summarizes the Company's cash and cash equivalent positions as of
December 31, 2021 and 2020:
(in millions)
Cash and cash equivalents held in the U.S.
Cash held in foreign subsidiaries
Total Cash and cash equivalents
As of December 31,
2021
2020
$
$
25.8
23.5
49.3
$
$
101.0
19.6
120.6
34
Inflation and Changing Prices
Essentially all of the Company's revenue is derived from the sale of its products and services in competitive markets.
To the extent feasible, the Company has adjusted its prices to reflect the impact of inflation on the cost of purchased materials
and services. Impacts on the Company's results from price and product mix are discussed in the "Segment Results" section.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to utilize estimates that
affect both the amounts and timing of the recording of assets, liabilities, net sales and expenses. Some of these estimates
require judgment about matters that are inherently uncertain. Different amounts would be reported under different operating
conditions or under alternative assumptions.
Management believes that the accounting estimates discussed below are the most critical accounting policies whose
application may have a significant effect on the reported results of operations and financial position of the Company and can
require judgments by management that affect their application. Although these estimates are based on management's
knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates
and assumptions, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies.
Estimates are revised as additional information becomes available. See the "Use of Estimates" section of Note 1 of the Notes
to Consolidated Financial Statements for additional information regarding the Company's estimates.
Revenue Recognition
Revenue generally consists of a single performance obligation to transfer a promised good or service and is short-term
in nature. Revenues are recognized when control of the promised goods or services is transferred to Veritiv's customers and in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services.
Certain revenues are derived from shipments which are made directly from a manufacturer to a Veritiv customer. The
Company is considered to be a principal to these transactions because, among other factors, it maintains control of the goods
after they leave the supplier and before they are received at the customer's location, in most cases it selects the supplier and sets
the price to the customer, and it bears the risk of the customer defaulting on payment or rejecting the goods. Revenues from
these sales are reported on a gross basis on the Consolidated Statements of Operations and have historically represented
approximately 35% of Veritiv's total net sales.
Veritiv enters into incentive programs with certain of its customers, which are generally based on sales to those same
customers. Estimates of the variable consideration are based primarily on contract terms, current customer forecasts as well as
historical experience. Veritiv follows the expected value method when estimating its retrospective incentives and records the
estimated amount as a reduction to gross sales when revenue is recognized.
Customer product returns are estimated based on historical experience and the identification of specific events
necessitating an adjustment. The estimated return value is recognized as a reduction of gross sales and related cost of products
sold.
See Note 2 of the Notes to Consolidated Financial Statements for additional information regarding the Company's
revenues.
Allowance for Credit Losses
The Company’s allowance for credit losses reflects the best estimate of expected losses to the Company's accounts
receivable portfolio determined on the basis of historical experience, current conditions, reasonable and supportable forecasts
and specific allowances for known troubled accounts. In developing the allowance for credit losses, the Company utilizes
internal risk ratings that are determined based on a number of factors including a periodic evaluation of each customer’s
financial condition where possible. In addition to leveraging the internally developed risk ratings and historical experience, the
expected credit loss estimates are developed using quantitative analyses, where meaningful, and qualitative analyses to forecast
the impact that external factors and economic indicators may have on the amount that the Company expects to collect. The
allowances contain uncertainties because the calculation requires management to make assumptions and apply judgment
35
regarding the customer's credit worthiness. Veritiv performs ongoing evaluations of its customers' financial condition and
adjusts credit limits based upon payment history and the customer's current credit worthiness as determined by its review of
their current financial information. The Company continuously monitors collections from its customers and maintains a
provision for estimated credit losses based upon the customers' financial condition, collection experience and any other relevant
customer specific information. Veritiv's assessment of this and other information forms the basis of its allowances.
If the financial condition of Veritiv's customers deteriorates, resulting in an inability to make required payments to the
Company, or if economic conditions deteriorate, additional allowances may be deemed appropriate or required. If the
allowance for doubtful accounts changed by 0.1% of gross billed receivables, reflecting either an increase or decrease in
expected future write-offs, the impact to consolidated pre-tax income would have been approximately $1.0 million.
See Note 2 of the Notes to Consolidated Financial Statements for additional information regarding the Company's
credit losses.
Income Taxes
The Company’s determination of the provision for income taxes requires significant judgment, the use of estimates and
the interpretation and application of complex tax laws. The provision for income taxes primarily reflects a combination of
income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Tax law changes, increases or
decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation
allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. The
impact of the COVID-19 pandemic may change the mix of earnings by jurisdiction and has increased the risk that operating
losses may occur within certain jurisdictions that could lead to the recognition of valuation allowances against certain deferred
tax assets in the future, if these losses are prolonged beyond current expectations. This would negatively impact Veritiv’s
income tax expense, net earnings, and balance sheet.
Employee Benefit Plans
Veritiv sponsors defined benefit plans and Supplemental Executive Retirement Plans. Except for certain union
employees who continue to accrue benefits under the U.S. defined benefit pension plan in accordance with their collective
bargaining agreements, the defined benefit pension plans are frozen. See Note 9 of the Notes to Consolidated Financial
Statements for additional information regarding these plans.
Management is required to make certain critical estimates related to actuarial assumptions used to determine the
Company's pension expense and related obligation. The Company believes the most critical assumptions are related to (i) the
discount rate used to determine the present value of the liabilities and (ii) the expected long-term rate of return on plan assets.
All of the actuarial assumptions are reviewed annually, or more frequently when changes in circumstances warrant a
reassessment. Changes in these assumptions could have a material impact on the measurement of pension expense and the
related obligation.
At each measurement date, management determines the discount rate by reference to rates of high-quality, long-term
corporate bonds that mature in a pattern similar to the future payments anticipated to be made under the plans. As of December
31, 2021, the weighted-average discount rates used to compute the benefit obligations were 2.54% and 2.95% for the U.S. and
Canadian plans, respectively.
The expected long-term rate of return on plan assets is based upon the long-term outlook of the investment strategy as
well as historical returns and volatilities for each asset class. Veritiv also reviews current levels of interest rates and inflation to
assess the reasonableness of the long-term rates. The Company's pension plan investment objective is to ensure all of its plans
have sufficient funds to meet their benefit obligations when they become due. As a result, the Company periodically revises
asset allocations, where appropriate, to improve returns and manage risk. The weighted-average expected long-term rates of
return used to calculate the pension expense for the year ended 2021 were 7.15% and 5.00% for the U.S. and Canadian plans,
respectively.
36
The following illustrates the effects of a 1% change in the discount rate or return on plan assets on the 2021 net
periodic pension cost and projected benefit obligation (in millions):
Assumption
Discount rate
Return on plan assets
Change
1% increase
1% decrease
1% increase
1% decrease
Net Periodic Benefit Cost
Projected Benefit
Obligation
$
0.7 $
1.1
(1.4)
1.4
(18.5)
22.8
N/A
N/A
See Note 9 of the Notes to Consolidated Financial Statements for a comprehensive discussion of Veritiv's pension and
postretirement benefit expense, including a discussion of the actuarial assumptions and the policy for recognizing the associated
gains and losses.
Leases
The Company determines if an arrangement is a lease at lease inception and reviews lease arrangements for finance or
operating lease classification at their commencement date. In order to value the right-of-use ("ROU") assets and related
liabilities, the Company makes certain estimates and assumptions related to establishing the lease term, discount rates and
variable lease payments (e.g., rent escalations tied to changes in the Consumer Price Index). The exercise of any lease renewal
or asset purchase option is at the Company's sole discretion. The lease term for all of the Company's leases includes the
noncancelable period of the lease and any periods covered by renewal options that the Company is reasonably certain to
exercise. Certain leases include rent escalations pre-set in the agreements, which are factored into the lease payment stream.
Similar to a variable lease payment, certain delivery equipment leases include a provision for an amount the Company may be
required to pay at the end of the lease for any residual value deficiency incurred by the lessor upon resale of the underlying
asset. The Company uses the implicit rate of interest when it is available; however, as most of the Company's leases do not
provide an implicit rate of interest, the Company uses its incremental borrowing rate based on information available at the lease
commencement date in determining the discounted value of the lease payments. Lease expense and depreciation expense are
recognized on a straight-line basis over the lease term, or for a finance lease, over the shorter of the life of the underlying asset
or the lease term.
The Company’s decisions to cease operations in certain warehouse facilities and retail locations leads to different
accounting treatment depending upon whether the leased properties are considered abandoned versus properties that the
Company has the intent and ability to sublease. Abandoned ROU assets are assessed for impairment based on estimates of
undiscounted operating cash flows until the anticipated cease-use date and any remaining lease expense is accelerated through
the anticipated cease-use date. Leases for which the Company has the intent and ability to sublease are assessed for impairment
and any remaining ROU asset values are amortized over the shorter of the remaining useful lives of the assets or lease term.
The intent and practical ability to sublease and estimates of future cash flows attributable to the sublease are assessed
considering the terms of the lease agreement, certain market conditions, remaining lease terms and the time required to sublease
the facility and other factors.
See Note 3 of the Notes to Consolidated Financial Statements for additional information regarding the Company's
leases.
Impairment or Disposal of Long-Lived Assets and Goodwill
A long-lived asset is potentially impaired when the asset's carrying amount exceeds its expected future undiscounted
cash flows. When this situation occurs, the Company must estimate the fair value of the long-lived asset and reduce the
carrying amount to the fair value if it is less than the carrying amount. A goodwill impairment exists when the carrying amount
of goodwill exceeds its fair value. Assessments of possible impairments of long-lived assets and goodwill are made annually in
the fourth quarter, and when events or changes in circumstances indicate that the carrying value of the assets may not be
recoverable through future operations. The amount and timing of any impairment charges based on these assessments require
the estimation of future cash flows and the fair market value of the related assets based on management's best estimates of
certain key factors. These key factors include future selling prices and volumes, operating, inventory, energy and freight costs
and various other projected operating economic factors.
37
The calculation of lease impairment charges requires significant judgments and estimates, including estimated sublease
rentals, discount rates and future cash flows based on the Company's experience and knowledge of the market in which the
property is located, previous efforts to dispose of similar assets and an assessment of current market conditions. As these key
factors change in future periods, the Company will update its impairment analyses to reflect the latest estimates and projections.
Goodwill is reviewed for impairment on a reporting unit basis. The testing of goodwill for possible impairment is
performed by completing a Step 0 test or electing to by-pass the Step 0 test and comparing the fair value of a reporting unit with
its carrying value, including goodwill. The Step 0 test utilizes qualitative factors to determine whether it is more likely than not
that the fair value of the reporting unit is less than its carrying value. Qualitative factors include: macroeconomic conditions;
industry and market considerations; overall financial performance and cost factors to determine whether a reporting unit is at
risk for goodwill impairment. In the event a reporting unit fails the Step 0 goodwill impairment test, it is necessary to move
forward with a comparison of the fair value of the reporting unit with its carrying value, including goodwill. In calculating the
estimated fair value of its reporting units, Veritiv uses an income approach that utilizes discounted cash flows and requires
management to make significant assumptions and estimates related to the forecasts of future revenues, profit margins and
discount rates. Subsequent changes in economic and operating conditions can affect these assumptions and could result in
additional interim testing and goodwill impairment charges in future periods. Upon completion, the resulting estimated fair
values are then analyzed for reasonableness by comparing them to earnings multiples for historic industry business transactions
and by comparing the sum of the reporting unit fair values to the fair value of the Company as a whole. As of the date of the
Company's annual goodwill impairment test in 2021 and 2020, the Company's analyses reflected an excess fair value over
carrying value of approximately 179% and 26%, respectively.
Intangible assets acquired in a business combination are recorded at fair value. The Company's intangible assets may
include customer relationships, trademarks and trade names and non-compete agreements. Intangible assets with finite useful
lives are subsequently amortized using the straight-line method over the estimated useful lives of the assets.
See Note 1, Note 5 and Note 10 of the Notes to Consolidated Financial Statements for additional information
regarding the Company's long-lived assets, goodwill, other intangible assets and impairment assessments.
Recently Issued Accounting Standards
See Note 1 of the Notes to Consolidated Financial Statements for information regarding recently issued accounting
standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Veritiv is exposed to the impact of interest rate changes, foreign currency fluctuations, primarily related to the
Canadian dollar, and fuel price changes. The Company's objective is to identify and understand these risks and implement
strategies to manage them. When evaluating potential strategies, Veritiv evaluates the fundamentals of each market and the
underlying accounting and business implications. To implement these strategies, the Company may enter into various hedging
or similar transactions. The sensitivity analyses presented below do not consider the effect of possible adverse changes in the
general economy, nor do they consider additional actions the Company may take from time to time in the future to mitigate the
exposure to these or other market risks. There can be no assurance that Veritiv will manage or continue to manage any risks in
the future or that any of its efforts will be successful.
Derivative Instrument
Borrowings under the ABL Facility bear interest at a variable rate, based on LIBOR or the prime rate, in either case
plus an applicable margin. From time to time, Veritiv may use interest rate cap agreements to manage the variable interest rate
characteristics on a portion of the outstanding debt. The Company evaluates its outstanding indebtedness, market conditions,
and the covenants contained in the ABL Facility in order to determine its tolerance for potential increases in interest expense
that could result from changes in variable interest rates.
Effective September 13, 2019, the Company entered into an interest rate cap agreement with an expiration date of
September 13, 2022. The interest rate cap effectively limits the floating LIBOR-based portion of the interest rate. The interest
rate cap covers $350.0 million of the Company's floating-rate debt at 2.75% plus the applicable credit spread. The Company
designated the interest rate cap as a cash flow hedge of exposure to changes in cash flows due to changes in the LIBOR-based
38
portion of the interest rate above 2.75%. As of and for the year ended December 31, 2021, impacts from the interest rate cap on
the Company's financial results were not significant. The December 31, 2021 fair value was estimated using observable
market-based inputs including interest rate curves and implied volatilities (Level 2), and was not significant.
The Company is exposed to counterparty credit risk for nonperformance and, in the event of nonperformance, to
market risk for changes in the interest rate. The Company attempts to manage exposure to counterparty credit risk primarily by
selecting only counterparties that meet certain credit and other financial standards. The Company believes there has not been a
material change in the creditworthiness of its counterparty and believes the risk of nonperformance by such party is minimal.
For additional information regarding Veritiv's debt arrangements see Note 6 of the Notes to Consolidated Financial Statements.
Interest Rate Risk
Veritiv's exposure to fluctuations in interest rates results primarily from its borrowings under the ABL Facility. Under
the terms of the ABL Facility, interest rates are based upon LIBOR or the prime rate plus a margin rate, or in the case of
Canada, a banker's acceptance rate or base rate plus a margin rate. LIBOR based loans can be set for durations of one week, or
for periods of one to nine months. The margin rate amount can be adjusted upward or downward based upon usage under the
line in two increments of 25 basis points. Veritiv's interest rate exposure under the ABL Facility results from changes in
LIBOR, bankers' acceptance rates, the prime/base interest rates and actual borrowings. The weighted-average borrowing
interest rate at December 31, 2021 was 1.8%. Based on the average borrowings under the ABL Facility during the year ended
December 31, 2021, a hypothetical 100 basis point increase in the interest rate would result in approximately $4.6 million of
additional interest expense.
Foreign Currency Exchange Rate Risk
Veritiv conducts business in various foreign currencies and is exposed to earnings and cash flow volatility associated
with changes in foreign currency exchange rates. This exposure is primarily related to international assets and liabilities, whose
value could change materially in reference to the U.S. dollar reporting currency.
Veritiv's most significant foreign currency exposure primarily relates to fluctuations in the foreign exchange rate
between the U.S. dollar and the Canadian dollar. Net sales from Veritiv's Canadian operations for the year ended December 31,
2021 represented approximately 11% of Veritiv's total net sales. Veritiv has not used foreign exchange currency options or
futures agreements to hedge its exposure to changes in foreign exchange rates.
Fuel Price Risk
Due to the nature of Veritiv's distribution business, the Company is exposed to potential volatility in fuel prices. The
cost of fuel affects the price paid for products as well as the costs incurred to deliver products to the Company's customers. The
price and availability of diesel fuel fluctuates due to changes in production, seasonality and other market factors generally
outside of the Company's control. Increased fuel costs may have a negative impact on the Company's results of operations and
financial condition. In times of higher fuel prices, Veritiv may have the ability to pass a portion of the increased costs on to
customers; however, there can be no assurance that the Company will be able to do so. Based on Veritiv's 2021 fuel
consumption, a 10% increase in the average annual price per gallon of diesel fuel would result in a potential increase of
approximately $2.4 million in annual transportation fuel costs (excluding any amounts recovered from customers). Veritiv does
not use derivatives to manage its exposure to fuel prices.
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 )
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Page
41
43
44
45
46
47
48
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and Board of Directors of Veritiv Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Veritiv Corporation and subsidiaries (the "Company") as
of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss),
shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 1, 2022, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Goodwill — Refer to Notes 1, 5, and 10 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the Packaging reporting
unit to its carrying value. The Company determines the fair value of the Packaging reporting unit using an income approach
that utilizes discounted cash flows and requires management to make significant assumptions and estimates related to the
forecasts of future revenues and the discount rate. Changes to the assumptions and estimates may result in a significantly
different estimate of the fair value of the reporting unit, which could result in a different assessment of the recoverability of
goodwill. The goodwill balance was $99.6 million as of December 31, 2021. The fair value of the reporting unit exceeded its
carrying value as of the measurement date, and therefore, no impairment was recognized.
41
We identified goodwill for the Packaging reporting unit as a critical audit matter because of the significant judgments made
by management to estimate the fair value of the reporting unit. This required a high degree of auditor judgment and an
increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to
evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts
of future revenues.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the discount rate and forecasts of future revenues included the following, among others:
• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the
determination of the fair value of the Packaging reporting unit, such as controls related to management’s selection of
the discount rate and forecasts of future revenue.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology
and (2) discount rate, including testing the source information underlying the determination of the discount rate,
testing the mathematical accuracy of the calculation, and developing a range of independent estimates and
comparing those to the discount rate selected by management.
• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical
forecasts.
• We evaluated the reasonableness of management’s forecasts of future revenue by comparing the forecasts to (1)
historical revenues, (2) internal communications to management and the Board of Directors, and (3) forecasted
industry information included in industry reports relevant to the reporting unit.
• We considered the impact of changes in the industry on management’s forecasts.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
March 1, 2022
We have served as the Company's auditor since 2013.
42
VERITIV CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Net sales (including sales to related party of $19.7 and $23.4, in 2020
and 2019, respectively)
$
Cost of products sold (including purchases from related party of $55.6
and $85.2, in 2020 and 2019, respectively) (exclusive of depreciation
and amortization shown separately below)
Distribution expenses
Selling and administrative expenses
Depreciation and amortization
Integration expenses
Restructuring charges, net
Operating income (loss)
Interest expense, net
Other (income) expense, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Earnings (loss) per share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
$
$
$
Year Ended December 31,
2021
2020
2019
6,850.5 $
6,345.6 $
7,659.4
5,417.9
5,040.2
6,206.2
419.3
732.7
55.2
—
15.4
210.0
17.2
429.8
717.9
57.7
—
52.2
47.8
25.1
(4.7)
(20.3)
197.5
52.9
43.0
8.8
144.6 $
34.2 $
509.2
823.3
53.5
17.5
28.8
20.9
38.1
11.6
(28.8)
0.7
(29.5)
9.50 $
9.01 $
2.14 $
2.08 $
(1.84)
(1.84)
15.22
16.05
15.96
16.48
16.06
16.06
See accompanying Notes to Consolidated Financial Statements.
43
VERITIV CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Change in fair value of cash flow hedge, net of tax (1)
Pension liability adjustments, net of tax (1)
Other comprehensive income (loss)
Year Ended December 31,
2021
2020
2019
$
144.6 $
34.2 $
(29.5)
(1.0)
0.1
10.1
9.2
2.4
0.1
(2.9)
(0.4)
3.7
0.0
3.9
7.6
Total comprehensive income (loss)
(21.9)
(1) Amounts shown are net of tax impacts, which were not significant for the periods presented except for the 2021 tax impact for the pension liability, which
was $3.5 million.
153.8 $
33.8 $
$
See accompanying Notes to Consolidated Financial Statements.
44
VERITIV CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except par value)
December 31, 2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $34.4 and $41.6, respectively
Inventories
Other current assets
Total current assets
Property and equipment (net of accumulated depreciation and amortization of
$332.4 and $375.9, respectively)
Goodwill
Other intangibles, net
Deferred income tax assets
Other non-current assets
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Accrued payroll and benefits
Other accrued liabilities
Current portion of debt
Total current liabilities
Long-term debt, net of current portion
Defined benefit pension obligations
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 15)
Shareholders' equity:
$
49.3 $
1,011.2
484.5
132.7
1,677.7
162.9
99.6
42.7
47.1
408.4
2,438.4 $
561.9 $
110.0
185.7
16.0
873.6
499.7
7.2
422.1
1,802.6
$
$
120.6
849.5
465.4
119.5
1,555.0
194.7
99.6
47.4
60.0
378.3
2,335.0
471.9
80.6
182.2
14.7
749.4
589.1
18.2
395.2
1,751.9
Preferred stock, $0.01 par value, 10.0 million shares authorized, none issued
—
—
Common stock, $0.01 par value, 100.0 million shares authorized; shares
issued - 17.0 million and 16.6 million, respectively; shares outstanding -
14.6 million and 15.9 million, respectively
Additional paid-in capital
Accumulated earnings (deficit)
Accumulated other comprehensive loss
Treasury stock at cost - 2.4 million and 0.7 million shares, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
$
0.2
633.8
143.2
(24.3)
(117.1)
635.8
2,438.4 $
0.2
634.9
(1.4)
(33.5)
(17.1)
583.1
2,335.0
See accompanying Notes to Consolidated Financial Statements.
45
VERITIV CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended December 31,
2020
2019
2021
Operating activities
Net income (loss)
Depreciation and amortization
Amortization and write-off of deferred financing fees
Net losses (gains) on disposition of assets and sale of a business
Long-lived asset impairment charges
Provision for expected credit losses and doubtful accounts, respectively
Deferred income tax provision (benefit)
Stock-based compensation
Other non-cash items, net
Changes in operating assets and liabilities
Accounts receivable and related party receivable
Inventories
Other current assets
Accounts payable and related party payable
Accrued payroll and benefits
Other accrued liabilities
Other
Net cash provided by (used for) operating activities
Investing activities
Property and equipment additions
Proceeds from asset sales and sale of a business
Net cash provided by (used for) investing activities
Financing activities
Change in book overdrafts
Borrowings of long-term debt
Repayments of long-term debt
Payments under right-of-use finance leases
Deferred financing fees
Purchase of treasury stock
Payments under Tax Receivable Agreement
Payments under other contingent consideration
Impact of tax withholding on share-based compensation
Other
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information
Cash paid for income taxes, net of refunds
Cash paid for interest
Non-cash investing and financing activities
$
144.6 $
34.2 $
55.2
1.5
(9.2)
0.5
4.7
9.2
7.4
9.8
(172.6)
(22.1)
(9.3)
110.0
19.9
(1.3)
6.4
154.7
(20.4)
16.1
(4.3)
57.7
2.1
(8.2)
0.5
12.4
(1.8)
17.7
(12.4)
56.5
89.7
(3.2)
5.5
17.1
(1.0)
22.4
289.2
(23.6)
18.3
(5.3)
(29.5)
53.5
2.6
0.6
—
14.9
(2.7)
14.6
11.9
252.3
139.7
37.1
(199.7)
(2.9)
(22.4)
11.0
281.0
(34.1)
0.5
(33.6)
(16.5)
5,734.4
(16.6)
5,566.0
26.2
6,746.5
(5,814.5)
(5,719.2)
(7,007.0)
(13.8)
(3.3)
(100.0)
—
—
(8.5)
0.8
(221.4)
(0.3)
(71.3)
120.6
(13.0)
(3.4)
(3.5)
(12.3)
—
(0.8)
0.2
(202.6)
1.3
82.6
38.0
$
$
49.3 $
120.6 $
40.1 $
7.8 $
15.0
22.0
(9.1)
—
—
(7.8)
(20.0)
(2.3)
(0.4)
(273.9)
0.2
(26.3)
64.3
38.0
4.8
34.7
22.3
129.3
Non-cash additions to property and equipment for right-of-use finance leases
$
4.1 $
14.8 $
Non-cash additions to other non-current assets for right-of-use operating leases
111.6
20.1
See accompanying Notes to Consolidated Financial Statements.
46
VERITIV CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions)
Common Stock
Issued
Shares Amount
Additional
Paid-in
Capital
Accumulated
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Shares Amount
Total
Balance at December 31,
2018
Net income (loss)
Other comprehensive
income (loss)
Stock-based
compensation
Issuance of common
stock, net of stock
received for minimum tax
withholdings
Adoption impact -
Accounting Standards
Update 2016-02
Balance at December 31,
2019
Net income (loss)
Other comprehensive
income (loss)
Stock-based
compensation
Issuance of common
stock, net of stock
received for minimum tax
withholdings
Adoption impact -
Accounting Standards
Update 2016-13
Treasury stock purchases
Balance at December 31,
2020
Net income (loss)
Other comprehensive
income (loss)
Stock-based
compensation
Issuance of common
stock, net of stock
received for minimum tax
withholdings
Treasury stock purchases
Balance at December 31,
2021
16.2 $
0.2 $
605.7 $
(8.5) $
(29.5)
(40.7)
(0.3) $
(13.6) $
14.6
7.6
0.2
0.0
(2.3)
16.4 $
0.2 $
618.0 $
17.7
0.2
0.0
(0.8)
2.7
(35.3) $
34.2
(33.1)
(0.3) $
(13.6) $
(0.4)
(0.3)
(0.4)
(3.5)
16.6 $
0.2 $
634.9 $
(1.4) $
(33.5)
(0.7) $
(17.1) $
144.6
9.2
7.4
0.4
0.0
(8.5)
543.1
(29.5)
7.6
14.6
(2.3)
2.7
536.2
34.2
(0.4)
17.7
(0.8)
(0.3)
(3.5)
583.1
144.6
9.2
7.4
(8.5)
17.0 $
0.2 $
633.8 $
143.2 $
(24.3)
(2.4) $ (117.1) $
635.8
(1.7)
(100.0)
(100.0)
See accompanying Notes to Consolidated Financial Statements.
47
VERITIV CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Veritiv Corporation ("Veritiv" or the "Company") is a North American business-to-business full-service provider of
value-added packaging products and services, as well as facility solutions, print and publishing products and services.
Additionally, Veritiv provides logistics and supply chain management solutions to its customers. Veritiv was established on
July 1, 2014 following the merger (the "Merger") of International Paper Company's xpedx distribution solutions business
("xpedx") and UWW Holdings, Inc., the parent company of Unisource Worldwide, Inc. ("Unisource"). On July 2, 2014,
Veritiv's common stock began regular-way trading on the New York Stock Exchange under the ticker symbol "VRTV".
Veritiv operates from 115 distribution centers primarily throughout the United States ("U.S."), Canada and Mexico.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") and include all of the Company's subsidiaries. All
significant intercompany transactions between Veritiv's businesses have been eliminated. As a result of adopting Accounting
Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326) on January 1, 2020, using the required
modified retrospective basis, the accounting for credit losses for periods prior to 2020 has not been revised and results are
reported in accordance with prior U.S. GAAP.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and certain financial statement
disclosures. Estimates and assumptions are used for, but not limited to, revenue recognition, right-of-use ("ROU") asset and
liability valuations, accounts and notes receivable valuations, inventory valuation, employee benefit plans, long-term
incentive plans, income tax contingency accruals and valuation allowances, multi-employer pension plan ("MEPP")
withdrawal liabilities, contingency accruals and goodwill and other intangible asset valuations. Although these estimates are
based on management's knowledge of current events and actions it may undertake in the future, actual results may ultimately
differ from these estimates and assumptions.
Primarily beginning in April 2020, the COVID-19 pandemic has affected our operational and financial performance
to varying degrees. As a result of the COVID-19 pandemic, the Company could continue to experience impacts including, but
not limited to, charges from potential adjustments of the carrying amount of accounts and notes receivables and inventory,
asset impairment charges and deferred tax valuation allowances. The extent to which the COVID-19 pandemic impacts the
Company's business, results of operations, access to sources of liquidity and financial condition will depend on future
developments. These developments, which are uncertain and difficult to predict, include, but are not limited to, the duration,
spread and severity of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company's employees,
customers, suppliers and vendors, measures adopted by local and federal governments or health authorities in response to the
pandemic, the availability, adoption and effectiveness of vaccines and to what extent normal economic and operating
conditions can resume and be sustained. Even after the COVID-19 pandemic has subsided, the Company may experience an
impact to its business as a result of any economic recession, downturn, or volatility or long-term changes in customer
behavior. Estimates are revised as additional information becomes available.
Summary of Significant Accounting Policies
Revenue Recognition
Veritiv applies the five step model to assess its contracts with customers. The Company's revenue is reported as net
sales and is measured as the determinable transaction price, net of any variable consideration (e.g., sales incentives and rights
to return product) and any taxes collected from customers and remitted to governmental authorities. When the Company
enters into a sales arrangement with a customer, it believes it is probable that it will collect substantially all of the
48
consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. When
management cannot conclude collectability is probable for shipments to a particular customer, revenue associated with that
customer is not recognized until cash is collected or management is otherwise able to establish that collectability is probable.
As a normal business practice, Veritiv does not enter into contracts that require more than one year to complete or that
contain significant financing components. See Note 2, Revenue Recognition and Credit Losses, for additional information
regarding the Company's revenue recognition practices.
Purchase Incentives
Veritiv enters into agreements with suppliers that entitle Veritiv to receive rebates, allowances and other discounts
based on the attainment of specified purchasing levels or sales to certain customers. Purchase incentives are recorded as a
reduction to inventory and recognized in cost of products sold when the sale occurs. During the year ended December 31,
2021, approximately 28% of the Company's purchases were made from ten suppliers.
Distribution Expenses
Distribution expenses consist of storage, handling and delivery costs including freight to the Company's customers'
destinations. Handling and delivery costs were $271.0 million, $273.6 million and $346.9 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
Integration Expenses
Integration costs are expensed as incurred and include internally dedicated integration management resources,
retention compensation, information technology conversion costs and other costs to integrate its businesses. See Note 4,
Restructuring and Integration Charges, for additional information regarding the Company's integration activities.
Cash and Cash Equivalents
The Company considers all highly liquid, unrestricted investments with original maturities to the Company of three
months or less to be cash equivalents, including investments in money market funds with no restrictions on withdrawals. The
Company held no cash equivalents as of December 31, 2021. As of December 31, 2020, the Company's cash and cash
equivalents included a $75.0 million investment in a money market fund that was highly liquid and qualified as a cash
equivalent.
Trade Accounts Receivable, Notes Receivable and Related Allowances
The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) on January 1, 2020, using
the required modified retrospective approach. Accordingly, 2019 has not been adjusted to conform to the new guidance.
Upon adoption, the Company recorded a $0.3 million decrease to retained earnings as the cumulative effect adjustment from
applying the standard.
Under Topic 326
The Company performs an assessment of its financial assets which consist primarily of accounts receivable and
identifies pools (i.e., groups of similar assets within the accounts receivable portfolio) based on the Company’s internal risk
ratings, geographical locations and historical loss information. The Company’s pools are classified by reportable segment,
risk level and the geographical location of the Company’s customers. The risk characteristics of each segment are
determined by the impact of economic and structural fluctuations that are specific to the industry sectors served by the
Company, competition from other suppliers and the nature of the products and services provided to the Company’s
customers. The Print and Publishing segments are faced with industry-wide decreases in demand for products and services
due to the increasing use of e-commerce and other on-line product substitutions. The risk characteristics of the Facility
Solutions segment include revenue declines and delinquency rates attributable to changes in the travel industry, constraints
and restrictions for large venues, return-to-office and in-person school activities. The risk characteristics of the Packaging
segment include changes in customer buying habits and product preferences. The Company considered the Packaging and
Facility Solutions segments to be a single pool as they share similar risk characteristics.
49
The Company’s allowance for credit losses reflects the best estimate of expected losses to the Company's accounts
receivable portfolio determined on the basis of historical experience, current conditions, reasonable and supportable forecasts
and specific allowances for known troubled accounts. In developing the allowance for credit losses, the Company utilizes
internal risk ratings that are determined based on a number of factors including a periodic evaluation of each customer’s
financial condition where possible. In addition to leveraging the internally developed risk ratings and historical experience,
the expected credit loss estimates are developed using quantitative analyses, where meaningful, and qualitative analyses to
forecast the impact that external factors and economic indicators may have on the amount that the Company expects to
collect.
Under prior guidance
Accounts receivable are recognized net of allowances. The allowance reflects the best estimate of losses inherent in
the Company's accounts receivable portfolio determined on the basis of historical experience, specific allowances for known
troubled accounts and other available evidence.
Inventories
The Company's inventories are primarily comprised of finished goods and predominantly valued at cost as
determined by the last-in first-out ("LIFO") method. Such valuations are not in excess of market. Elements of cost in
inventories include the purchase price invoiced by a supplier, plus inbound freight and related costs and reduced by estimated
volume-based discounts and early pay discounts available from certain suppliers. Approximately 80% and 76% of
inventories were valued using the LIFO method as of December 31, 2021 and 2020, respectively. If the first-in, first-out
method had been used, total inventory balances would be increased by approximately $134.5 million and $93.2 million at
December 31, 2021 and 2020, respectively.
The Company reduces the value of obsolete inventory based on the difference between the LIFO cost of the
inventory and the estimated market value using assumptions of future demand and market conditions. To estimate the net
realizable value, the Company considers factors such as the age of the inventory, the nature of the products, the quantity of
items on-hand relative to sales trends, current market prices and trends in pricing, its ability to use excess supply in another
channel, historical write-offs and expected residual values or other recoveries.
Veritiv maintains some of its inventory on a consignment basis in which the inventory is physically located at the
customer's premises or a third-party distribution center. Veritiv had $24.1 million and $20.5 million of consigned inventory
as of December 31, 2021 and 2020, respectively, valued on a LIFO basis, net of reserves.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for
replacements and major improvements are capitalized, whereas repair and maintenance costs that do not improve service
potential or extend economic life are expensed as incurred. The Company capitalizes certain computer software and
development costs incurred in connection with developing or obtaining software for internal use. Costs related to the
development of internal use software, other than those incurred during the application development stage, are expensed as
incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Land is not
depreciated, and construction-in-progress ("CIP") is not depreciated until ready for service. Leased property and leasehold
improvements are amortized on a straight-line basis over the lease term or useful life of the asset, whichever is less. Upon
retirement or other disposal of property and equipment, the cost and related amount of accumulated depreciation or
accumulated amortization are eliminated from the asset and accumulated depreciation or accumulated amortization accounts,
respectively. The difference, if any, between the net asset value and the proceeds is included in net income (loss) on the
Consolidated Statements of Operations.
50
The following tables summarize the Company's property and equipment:
(in millions, except for estimated useful life)
Estimated Useful Life
Land, buildings and improvements
Machinery and equipment
Finance leases
Internal use software
CIP
Less: Accumulated depreciation and amortization
Property and equipment (net of accumulated depreciation and
amortization)
Unamortized internal use software costs, including amounts
recorded in CIP
(in millions)
Depreciation expense (1)
Amortization expense - internal use software
Depreciation and amortization expense related to property and
equipment
$
$
(1) Includes depreciation expense for finance leases.
Leases
1
3
3
to
to
to
40
15
years
years
5
years
As of December 31,
2021
2020
$
94.6 $
156.1
112.2
122.8
9.6
100.7
164.9
111.8
188.6
4.6
(332.4)
(375.9)
$
162.9 $
194.7
$
10.5 $
24.6
Year Ended December 31,
2021
2020
2019
36.6 $
13.9
36.8 $
16.1
50.5 $
52.9 $
33.5
15.0
48.5
The Company determines if an arrangement is a lease at lease inception and reviews lease arrangements for finance
or operating lease classification at their commencement date. Operating leases are reported as part of other non-current
assets, other accrued liabilities and other non-current liabilities on the Consolidated Balance Sheets. Finance leases are
reported as part of property and equipment and debt obligations on the Consolidated Balance Sheets. The Company does not
include leases with a term of twelve months or less on the Consolidated Balance Sheets and does not separate lease and non-
lease components for its delivery equipment leases. In order to value the ROU assets and related liabilities, the Company
makes certain estimates and assumptions related to establishing the lease term, discount rates and variable lease payments
(e.g., rent escalations tied to changes in the Consumer Price Index). The exercise of any lease renewal or asset purchase
option is at the Company's sole discretion. The lease term for all of the Company's leases includes the noncancelable period
of the lease and any periods covered by renewal options that the Company is reasonably certain to exercise. Certain leases
include rent escalations pre-set in the agreements, which are factored into the lease payment stream. Similar to a variable
lease payment, certain delivery equipment leases include a provision for an amount the Company may be required to pay at
the end of the lease for any residual value deficiency incurred by the lessor upon resale of the underlying asset. The
Company uses the implicit rate of interest when it is available; however, as most of the Company's leases do not provide an
implicit rate of interest, the Company uses its incremental borrowing rate based on information available at the lease
commencement date in determining the discounted value of the lease payments. Lease expense and depreciation expense are
recognized on a straight-line basis over the lease term, or for a finance lease, over the shorter of the life of the underlying
asset or the lease term. The Company’s decisions to cease operations in certain warehouse facilities and retail locations leads
to different accounting treatment depending upon whether the leased properties are considered abandoned versus properties
that the Company has the intent and ability to sublease. Abandoned ROU assets are assessed for impairment based on
estimates of undiscounted operating cash flows until the anticipated cease-use date and any remaining lease expense is
accelerated through the anticipated cease-use date. Leases for which the Company has the intent and ability to sublease are
assessed for impairment and any remaining ROU asset values are amortized over the shorter of the remaining useful lives of
the assets or lease term. The intent and practical ability to sublease and estimates of future cash flows attributable to the
sublease are assessed considering the terms of the lease agreement, certain market conditions, remaining lease terms and the
time required to sublease the facility and other factors. See Note 3, Leases, for additional information related to the
Company's leases.
51
Goodwill and Other Intangible Assets
Goodwill relating to a single business reporting unit is included as an asset of the applicable segment. Goodwill
arising from major acquisitions that involve multiple reportable segments is allocated to the reporting units based on the
relative fair value of the reporting unit. Goodwill is reviewed by Veritiv for impairment on a reporting unit basis annually on
October 1st or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The
testing of goodwill for possible impairment is performed by completing a Step 0 test or electing to by-pass the Step 0 test and
comparing the fair value of a reporting unit with its carrying value, including goodwill. The Step 0 test utilizes qualitative
factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.
Qualitative factors include: macroeconomic conditions; industry and market considerations; overall financial performance
and cost factors to determine whether a reporting unit is at risk for goodwill impairment. In the event a reporting unit fails
the Step 0 goodwill impairment test, it is necessary to move forward with a comparison of the fair value of the reporting unit
with its carrying value, including goodwill. If the fair value exceeds the carrying value, goodwill is not considered to be
impaired. If the fair value of a reporting unit is below the carrying value, a goodwill impairment charge is recognized for the
amount by which the carrying amount exceeds the reporting unit's fair value; however, any loss recognized will not exceed
the total amount of goodwill allocated to the reporting unit.
Intangible assets acquired in a business combination are recorded at fair value. The Company's intangible assets
may include customer relationships, trademarks and trade names and non-compete agreements. Intangible assets with finite
useful lives are subsequently amortized using the straight-line method over the estimated useful lives of the assets. See the
Impairment of Long-Lived Assets section below for the accounting policy related to the periodic review of long-lived
intangible assets for impairment.
See Note 5, Goodwill and Other Intangible Assets, for additional information related to the Company's goodwill and
other intangible assets.
Impairment of Long-Lived Assets
Long-lived assets, including finite lived intangible assets, are tested for impairment whenever events or changes in
circumstances indicate their carrying value may not be recoverable. The Company assesses the recoverability of long-lived
assets based on the undiscounted future cash flow the assets are expected to generate and recognizes an impairment loss when
the estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from
disposition of the asset, if any, are less than the carrying value of the asset. When an impairment is identified, the Company
reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when
available and appropriate, to comparable market values. The calculation of lease impairment charges requires significant
judgments and estimates, including estimated sublease rentals, discount rates and future cash flows based on the Company's
experience and knowledge of the market in which the property is located, previous efforts to dispose of similar assets and an
assessment of current market conditions.
Employee Benefit Plans
The Company sponsors and/or contributes to defined contribution plans, defined benefit pension plans and MEPPs
in the U.S. Except for certain union employees who continue to accrue benefits under the U.S. defined benefit pension plan
in accordance with their collective bargaining agreements, as discussed below, the defined benefit pension plans are frozen.
In addition, the Company and its subsidiaries have various pension plans and other forms of retirement arrangements outside
the U.S. See Note 9, Employee Benefit Plans, for additional information related to these plans and arrangements.
The determination of defined benefit pension and postretirement plan obligations and their associated costs requires
the use of actuarial computations to estimate participant plan benefits to which the employees will be entitled. The
Company's significant assumptions in this regard include discount rates, rate of future compensation increases, expected
long-term rates of return on plan assets, mortality rates and other factors. Each assumption is developed using relevant
company experience in conjunction with market-related data. All actuarial assumptions are reviewed annually with third-
party consultants and adjusted as necessary.
For the recognition of net periodic postretirement cost, the calculation of the expected long-term rate of return on
plan assets is derived using the fair value of plan assets at the measurement date. Actual results that differ from the
52
Company's assumptions are accumulated and amortized on a straight-line basis only to the extent they exceed 10% of the
higher of the fair value of plan assets or the projected benefit obligation, over the estimated remaining service period of active
participants. The fair value of plan assets is determined based on market prices or estimated fair value at the measurement
date.
The Company also makes contributions to MEPPs for its union employees covered by such plans. For these plans,
the Company recognizes a liability only for any required contributions to the plans or surcharges imposed by the plans that
are accrued and unpaid at the balance sheet date. The Company does not record an asset or liability to recognize the funded
status of the plans. The Company records an estimated undiscounted charge when it becomes probable that it has incurred a
withdrawal liability, as the final amount and timing is not assured. When a final determination of the withdrawal liability is
received from the plan, the estimated charge is adjusted to the final amount determined by the plan.
Long-Term Incentive Compensation Plans
The Company measures and records compensation expense for all long-term incentive compensation awards based
on the respective plans' grant date fair values over the vesting periods of the awards. Forfeitures are recognized when they
occur. Performance-based plans require the Company to make estimates of its long-term future performance. See Note 14,
Long-Term Incentive Compensation Plans, for additional information.
Income Taxes
Veritiv's income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect
management's best assessment of estimated current and future taxes to be paid. Veritiv records its global tax provision based
on the respective tax rules and regulations for the jurisdictions in which it operates. Where treatment of a position is
uncertain, liabilities are recorded based upon an evaluation of the more likely than not outcome considering technical merits
of the position. Changes to recorded liabilities are made only when an identifiable event occurs that alters the likely outcome,
such as settlement with the relevant tax authority or the expiration of statutes of limitation for the subject tax year.
Significant judgments and estimates are required in determining the consolidated income tax expense.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will
not be realized. Significant judgment is required in evaluating the need for and amount of valuation allowances against
deferred tax assets. The realization of these assets is dependent on generating sufficient future taxable income.
Fair Value Measurements
Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting
inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Observable market-based inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs for the asset or liability reflecting the reporting entity's own assumptions or external inputs
from inactive markets.
See Note 10, Fair Value Measurements, for further details.
Foreign Currency
The assets and liabilities of the Company's foreign subsidiaries are translated from their respective local currencies
to the U.S. dollars at the appropriate spot rates as of the balance sheet date. Changes in the carrying values of these assets
and liabilities attributable to fluctuations in spot rates are recognized in foreign currency translation adjustment, a component
of accumulated other comprehensive loss ("AOCL"). See Note 13, Shareholders' Equity, for the impacts of foreign currency
translation adjustments on AOCL. The revenues and expenses of the foreign subsidiaries are translated using the monthly
average exchange rates during the year. The gains or losses from foreign currency transactions are included in other (income)
expense, net on the Consolidated Statements of Operations.
53
Treasury Stock
Common stock purchased for treasury is recorded at cost. Costs incurred by the Company that are associated with
the acquisition of treasury stock are treated in a manner similar to stock issue costs and are added to the cost of the treasury
stock. See Note 13, Shareholders' Equity, for additional information regarding the Company's treasury stock transactions.
Accounting for Derivative Instruments
The Company holds one interest rate cap agreement which is subject to Accounting Standards Codification ("ASC")
815, Derivatives and Hedging. For those instruments that are designated and qualify as hedging instruments, a company
must designate the instrument, based upon the exposure being hedged, as a cash flow hedge, a fair value hedge or a hedge of
a net investment in a foreign operation. A cash flow hedge refers to hedging the exposure to variability in expected future
cash flows attributable to a particular risk. For derivative instruments that are designated and qualify as a cash flow hedge,
the gains and losses resulting from changes in the fair value of the derivative instrument are reported as a component of
AOCL in the Company's Consolidated Balance Sheets and in the Consolidated Statements of Comprehensive Income (Loss),
until reclassified into the same Consolidated Statements of Operations line item in the same period the hedged transaction
affects earnings. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.
See Note 6, Debt and Note 13, Shareholders' Equity, for additional information regarding the Company's derivative
instrument.
Recently Issued Accounting Standards
Recently Adopted Accounting Standards
Effective January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740). The standard removes
certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income
taxes in interim periods. The update also adds guidance to reduce complexity in certain areas, including recognizing deferred
taxes for goodwill and allocating taxes to members of a consolidated group. The amendments in this update related to
separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all
periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign
subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings
as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on
income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a
cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments
should be applied on a prospective basis. The adoption did not materially impact the Company's financial statements and
disclosures.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2020-04, Reference Rate Reform (Topic 848) - This standard provides temporary optional expedients and
exceptions to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting
burdens as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to
alternative reference rates. The guidance is available for prospective application upon its issuance and can generally be
applied to contract modifications and hedging relationships entered into March 12, 2020 through December 31, 2022. The
Company has an interest rate cap arrangement, which currently carries an insignificant value, and long-term debt for which
existing payments are based on LIBOR. The Company recently amended its ABL Facility to, among other things, update
certain provisions to facilitate the transition from LIBOR to a new replacement benchmark rate. Currently, the Company
does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related
disclosures.
Effective January 1, 2022, the Company will adopt ASU 2021-10, Government Assistance (Topic 832). The
standard increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an
entity's accounting for the assistance, and (3) the effect of the assistance on an entity's financial statements. The amendments
in this update are effective for annual periods beginning after December 15, 2021. An entity should apply the amendments in
this update either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial
statements at the date of initial application and new transactions that are entered into after the date of initial application or (2)
54
retrospectively to those transactions. Currently, the Company does not expect the adoption of this guidance to have a
material impact on its consolidated financial statements and related disclosures.
2. REVENUE RECOGNITION AND CREDIT LOSSES
Revenue Recognition
Veritiv applies the five step model to assess its contracts with customers. The Company's revenue is reported as net
sales and is measured as the determinable transaction price, net of any variable consideration (e.g., sales incentives and rights
to return product) and any taxes collected from customers and remitted to governmental authorities. Certain revenues are
derived from shipments which are made directly from a manufacturer to a Veritiv customer. The Company is considered to
be a principal to these transactions because, among other factors, it maintains control of the goods after they leave the
supplier and before they are received at the customer's location, in most cases it selects the supplier and sets the price to the
customer, and it bears the risk of the customer defaulting on payment or rejecting the goods. Revenues from these sales are
reported on a gross basis on the Consolidated Statements of Operations and have historically represented approximately 35%
of Veritiv's total net sales. As a normal business practice, Veritiv does not enter into contracts that require more than one
year to complete or that contain significant financing components. The Company considers handling and delivery as
activities to fulfill its performance obligations. Billings for third-party freight are accounted for as net sales and handling and
delivery costs are accounted for as distribution expenses. Veritiv enters into incentive programs with certain of its customers,
which are generally based on sales to those same customers. Estimates of the variable consideration are based primarily on
contract terms, current customer forecasts as well as historical experience. Veritiv follows the expected value method when
estimating its retrospective incentives and records the estimated amount as a reduction to gross sales when revenue is
recognized.
Customer product returns are estimated based on historical experience and the identification of specific events
necessitating an adjustment. The estimated return value is recognized as a reduction of gross sales and related cost of
products sold. The estimated inventory returns value is recognized as part of inventories, while the estimated customer
refund liability is recognized as part of other accrued liabilities on the Consolidated Balance Sheets. As of December 31,
2021 and 2020, estimated inventory returns were not significant.
A customer contract liability will arise when Veritiv has received payment for goods and services but has not yet
transferred the items to a customer and satisfied its performance obligations. Veritiv records a customer contract liability for
performance obligations outstanding related to payments received in advance for customer deposits on equipment sales and
other sale arrangements requiring prepayment, which are included in accounts payable and other accrued liabilities on the
Consolidated Balance Sheets. Veritiv expects to satisfy these remaining performance obligations and recognize the related
revenues upon delivery of the goods and services to the customer's designated location within 12 months following receipt of
the payment. Most equipment sales deposits are held for approximately 90 days and other sale arrangements requiring
prepayment initially cover a 60 - 90 day period but can be renewed by the customer.
See the table below for a summary of the changes to the customer contract liabilities balance:
(in millions)
Balance at January 1,
Payments received
Revenue recognized from beginning balance
Revenue recognized from current year receipts
Balance at December 31,
Revenue Composition
Customer Contract Liabilities
2021
2020
$
$
12.2 $
52.2
(10.4)
(32.2)
21.8 $
11.7
53.2
(11.6)
(41.1)
12.2
Veritiv's revenues are primarily derived from purchase orders and rate agreements associated with (i) the delivery of
standard listed products with observable standalone sale prices or (ii) transportation and warehousing services. Revenue
generally consists of a single performance obligation to transfer a promised good or service and is short-term in nature.
Revenues are recognized when control of the promised goods or services is transferred to Veritiv's customers and in an
55
amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Sales
transactions with customers are designated free on board destination and revenue is recorded at the point in time when the
product is delivered to the customer's designated location or when the customer has otherwise obtained the benefit of the
goods, when title and risk of loss are transferred. Revenues from Veritiv's transportation services are recognized upon
completion of the related delivery services and revenues from warehousing services are recognized over time as the storage
services are provided. The Company is able to serve a wide variety of customers, from large national companies to small
local customers, through its distribution network.
Historically, the Company's ten largest customers have generated approximately 10% - 15% of its consolidated
annual net sales. Veritiv's principal markets are concentrated primarily across North America with net sales in the U.S.,
Canada and Mexico of approximately 86%, 11% and 2%, respectively. Veritiv evaluated the nature of the products and
services provided to its customers as well as the nature of the customer and the geographical distribution of its customer base
and determined that the best representative level of disaggregated revenue is the product category basis. The following is a
brief description of the Company's four reportable segments, organized by major product category. This segment structure is
consistent with the way the Chief Operating Decision Maker, who is Veritiv's Chief Executive Officer, makes operating
decisions and manages the growth and profitability of the Company's business. The Company also has a Corporate & Other
category, which includes certain assets and costs not primarily attributable to any of the reportable segments, as well as the
Veritiv logistics solutions business which provides transportation and warehousing solutions.
•
•
•
•
Packaging – The Packaging segment provides custom and standard packaging solutions for customers based in
North America and in key global markets. This segment services its customers with a full spectrum of packaging
product materials within flexible, corrugated and fiber, ancillary packaging, rigid and equipment categories. The
business is strategically focused on higher growth industry sectors including manufacturing, food and beverage,
wholesale and retail, healthcare and transportation, as well as specialty sectors based on industry and product
expertise. This segment also provides supply chain solutions, structural and graphic packaging design and
engineering, automation, workflow and equipment services and kitting.
Facility Solutions – The Facility Solutions segment sources and sells cleaning, break-room and other supplies in
product categories that include towels and tissues, food service, personal protective equipment, cleaning chemicals
and skincare, primarily in North America. Additionally, the Company offers total cost of ownership solutions with
re-merchandising, budgeting and compliance reporting and inventory management.
Print – The Print segment sells and distributes commercial printing, writing, copying, digital, specialty products and
graphics consumables primarily in North America. Veritiv's broad geographic platform of operations coupled with
the breadth of paper and graphics products, including exclusive private brand offerings, provides a foundation to
service national, regional and local customers across North America.
Publishing – The Publishing segment sells and distributes coated and uncoated commercial printing papers to
publishers, retailers, converters, printers and specialty businesses for use in magazines, catalogs, books, directories,
gaming, couponing, retail inserts and direct mail primarily in the U.S. This segment also provides print
management, procurement and supply chain management solutions to simplify paper and print procurement
processes for its customers.
See Note 16, Segment and Other Information, for the disaggregation of revenue and other information related to the
Company's reportable segments and Corporate & Other.
Credit Losses and Other Allowances
When the Company enters into a sales arrangement with a customer, it believes it is probable that it will collect
substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred
to the customer. When management cannot conclude collectability is probable for shipments to a particular customer,
revenue associated with that customer is not recognized until cash is collected or management is otherwise able to establish
that collectability is probable. See Note 1, Business and Summary of Significant Accounting Policies, for additional
information related to the Company's policy for credit losses.
56
The components of the accounts receivable allowances were as follows:
(in millions)
Allowance for credit losses
Other allowances (1)
Total accounts receivable allowances
(1)
As of December 31,
2021
2020
$
$
23.7 $
10.7
34.4 $
31.4
10.2
41.6
Includes amounts reserved for credit memos, customer discounts, customer short pays and other miscellaneous items.
Below is a rollforward of the Company's accounts receivable allowances. Accounts receivable are written-off when
management determines they are uncollectible.
(in millions)
Balance at January 1,
Add / (Deduct):
Year Ended December 31,
2021
2020
2019
$
41.6 $
43.8 $
62.0
Provision for expected credit losses (1)
Net write-offs and recoveries
Other adjustments (2)
Balance at December 31,
(1) For the year ended December 31, 2019, this represents the provision for doubtful accounts.
(2) Other adjustments represent amounts reserved for returns and discounts, foreign currency translation adjustments and reserves for certain customer
accounts where revenue is not recognized because collectability is not probable, and may include accounts receivable allowances recorded in connection
with acquisitions. The 2020 amount includes the impact of the Company's adoption of ASU 2016-13 on January 1, 2020.
41.6 $
34.4 $
(13.1)
(3.0)
(6.5)
4.4
7.3
1.5
43.8
13.8
$
(29.5)
(2.5)
Below are rollforwards of the Company’s allowance for credit losses:
Packaging and
Facility Solutions Print - High Risk
Print - Medium/
Low Risk
U.S.
Canada
U.S.
Canada
U.S.
Canada
Publish
ing(1)
Rest of
world
Corporate
& Other(1)
Total
$ 14.4 $ 0.5 $ 10.2 $ 0.7 $ 2.2 $ 0.0 $ 1.6 $ 1.0 $
0.8 $ 31.4
4.8
0.6
(1.7)
(0.1)
0.5
0.0
(0.1)
(7.3)
(0.1)
(4.7)
(0.1)
(0.5)
— (0.6)
0.7
—
—
0.0
0.0
2.4
0.0
0.0
0.0
(1.4)
—
0.0
—
—
0.0
0.0
—
0.0
0.4
4.4
(0.5)
(13.8)
0.0
—
0.7
1.0
$ 12.6 $ 1.0 $ 6.2 $ 0.5 $ 0.8 $ 0.0 $ 0.9 $ 1.0 $
0.7 $ 23.7
(in millions)
Balance at December 31,
2020
Add / (Deduct):
Provision for expected
credit losses
Write-offs charged
against the allowance
Recoveries of amounts
previously written off
Other adjustments(2)
Balance at December 31,
2021
(1)
Publishing and Corporate & Other have only U.S. operations.
(2)
Other adjustments represent amounts reserved for foreign currency translation adjustments and reserves for certain customer accounts where revenue is
not recognized because collectability is not probable and may include accounts receivable allowances recorded in connection with acquisitions.
57
Packaging and
Facility Solutions Print - High Risk
Print - Medium/
Low Risk
U.S.
Canada
U.S.
Canada
U.S.
Canada
Publish
ing(1)
Rest of
world
Corporate
& Other(1)
Total
$ 13.3 $ 1.0 $ 11.9 $ 0.4 $ 0.9 $ 0.1 $ 1.3 $ 0.6 $
0.9 $ 30.4
1.0
2.8
(0.3)
(0.2)
0.1
2.3
0.0
0.3
0.1
0.1
(0.1)
(0.1)
0.0
1.3
(3.0)
(0.3)
(2.4)
0.0
(0.1)
— (0.9)
0.3
—
—
0.0
0.0
(1.4)
0.0
0.0
0.0
1.2
—
0.0
0.0
—
—
0.4
—
—
0.0
0.0
0.0
0.4
7.3
(0.1)
(6.8)
0.0
0.3
— (0.2)
$ 14.4 $ 0.5 $ 10.2 $ 0.7 $ 2.2 $ 0.0 $ 1.6 $ 1.0 $
0.8 $ 31.4
(in millions)
Balance at December 31,
2019
Add / (Deduct):
Adoption impact - ASU
2016-13
Provision for expected
credit losses
Write-offs charged
against the allowance
Recoveries of amounts
previously written off
Other adjustments(2)
Balance at December 31,
2020
(1)
Publishing and Corporate & Other have only U.S. operations.
(2)
Other adjustments represent amounts reserved for foreign currency translation adjustments and reserves for certain customer accounts where revenue is
not recognized because collectability is not probable, and may include accounts receivable allowances recorded in connection with acquisitions.
The Company, under certain circumstances, enters into note receivable agreements with customers. Expected credit
losses are recognized when collectability is uncertain; these losses are included in selling and administrative expenses on the
Consolidated Statements of Operations. For the years ended December 31, 2021, 2020 and 2019, the Company recognized
$0.3 million, $5.1 million and $1.1 million, respectively, in the provision for expected credit losses related to these notes
receivable. At December 31, 2021 and 2020, the Company held $0.5 million and $2.2 million, respectively, in notes
receivable, the majority of which is reflected within other current assets on the Consolidated Balance Sheets.
3. LEASES
The Company leases certain property and equipment used for operations to limit its exposure to risks related to
ownership. The major leased asset categories include: real estate, delivery equipment, material handling equipment and
computer and office equipment. As of December 31, 2021, the Company operated from 115 distribution centers of which
109 were leased. These facilities are strategically located throughout the U.S., Canada and Mexico in order to efficiently
serve the customer base in the surrounding areas while also facilitating expedited delivery services for special orders. The
Company also leases various office spaces for corporate and sales functions.
The Company's leased asset categories generally carry the following lease terms:
Real estate leases
Delivery equipment leases
Other non-real estate leases
3
3
3
to 10 years
to
to
8
5
years
years
See Note 1, Business and Summary of Significant Accounting Policies, for information regarding the Company's
lease accounting policies.
58
The components of lease expense were as follows:
(in millions)
Lease Classification
Short-term lease expense(1)
Financial Statement
Classification
Operating expenses
Operating lease expense(2)
Operating expenses
Finance lease expense:
Amortization of right-of-use assets
Interest expense
Total finance lease expense
Depreciation and amortization
Interest expense, net
Year Ended December 31,
2021
2020
2019
4.0 $
2.3 $
7.1
100.9 $
111.8 $
113.9
14.7 $
2.8
17.5 $
14.7 $
3.0
17.7 $
10.8
2.3
13.1
$
$
$
$
Total Lease Cost
(1) Short-term lease expense is comprised of expenses related to leases with a term of twelve months or less, which includes expenses related to month-to
month leases.
(2) Sublease income and variable lease expense are not included in the above table as the amounts were not significant for the years ended December 31,
122.4 $
131.8 $
$
134.1
2021, 2020 and 2019.
Supplemental balance sheets and other information were as follows:
(in millions, except weighted-average data)
Lease Classification
Operating Leases:
Financial Statement
Classification
As of December 31,
2021
2020
Operating lease right-of-use assets
Other non-current assets
Operating lease obligations - current
Other accrued liabilities
Operating lease obligations - non-current
Total operating lease obligations
Other non-current liabilities
Weighted-average remaining lease term in years
Weighted-average discount rate
Finance Leases:
Finance lease right-of-use assets
Property and equipment
Finance lease obligations - current
Finance lease obligations - non-current
Total finance lease obligations
Current portion of debt
Long-term debt, net of current
portion
$
$
$
$
$
$
Weighted-average remaining lease term in years
Weighted-average discount rate
$
$
$
$
$
$
375.6
80.2
329.3
409.5
6.2
4.5 %
66.3
13.9
58.9
72.8
6.4
3.7 %
351.7
81.9
307.4
389.3
6.1
4.7 %
76.6
13.4
68.9
82.3
7.1
3.7 %
59
Cash paid for amounts included in the measurement of lease liabilities was as follows:
(in millions)
Lease Classification
Financial Statement
Classification
Year Ended December 31,
2021
2020
2019
Operating Leases:
Operating cash flows from operating leases Operating activities
$
103.3 $
111.1 $
109.5
Finance Leases:
Operating cash flows from finance leases
Financing cash flows from finance leases
Lease Commitments
Operating activities
Financing activities
$
2.8 $
13.8
3.0 $
13.0
2.3
9.1
Future minimum lease payments at December 31, 2021 were as follows:
(in millions)
2022
2023
2024
2025
2026
Thereafter
Total future minimum lease payments
Amount representing interest
Total future minimum lease payments, net of interest
$
$
Finance Leases
Operating Leases(1)
96.7
16.4 $
14.0
12.2
11.3
8.4
20.3
82.6
(9.8)
72.8 $
82.3
68.7
58.3
52.8
112.6
471.4
(61.9)
409.5
(1) Future sublease income of $3.3 million is excluded from the operating leases amount in the table above.
Total future minimum lease payments at December 31, 2021 for finance and operating leases, including the amount
representing interest, are comprised of $492.9 million for real estate leases and $61.1 million for non-real estate leases.
At December 31, 2021, the Company had committed to additional future obligations of approximately $31.5 million
for real estate operating leases that have not yet commenced and therefore are not included in the table above. These leases
are expected to commence within the next three months with an average lease term of approximately seven years. At
December 31, 2021, the Company also committed to future obligations of approximately $0.6 million for delivery equipment
finance leases that are expected to commence within the next three months with terms of eight years.
Upon the Company's adoption of ASU 2016-02 on January 1, 2019, it recognized an increase to retained earnings of
$2.7 million, primarily driven by the derecognition of the unamortized gain from the prior sale of a property.
4. RESTRUCTURING AND INTEGRATION CHARGES
2020 Restructuring Plan
During the second quarter of 2020, the Company initiated a restructuring plan in response to the impact of the
COVID-19 pandemic on its business operations and the ongoing secular changes in its Print and Publishing segments.
During the fourth quarter of 2020, the Company expanded the initial plan to further align its cost structure with ongoing
business needs as the Company executes on its stated corporate strategy. The initial and expansion activities are collectively
referred to as the "2020 Restructuring Plan." The 2020 Restructuring Plan includes (i) a reduction of the Company's U.S.
salaried workforce by approximately 15% across all business segments and corporate functions, (ii) the closure of certain
warehouse facilities and retail stores, (iii) adjustments to various compensation plans, (iv) repositioning of inventory to
expand the Company's service radius and (v) other actions. The Company currently estimates it will incur total restructuring
charges of between $70 million and $76 million in connection with the 2020 Restructuring Plan. Through December 31,
2021, the Company has incurred approximately $67.6 million in costs and charges, of which $15.4 million was incurred
60
during the year ended December 31, 2021. Initial charges were incurred and recorded in June 2020. The 2020 Restructuring
Plan was substantially complete as of December 31, 2021 with remaining charges to be incurred through the end of 2022.
Other direct costs reported in the tables below include facility closing costs and other incidental costs associated
with the development, communication, administration and implementation of these initiatives; costs incurred exclude any
non-cash portion of restructuring gains or losses on asset disposals.
The following is a summary of the Company's 2020 Restructuring Plan liability activity:
(in millions)
Balance at December 31, 2019
Costs incurred
Payments
Balance at December 31, 2020
Costs incurred
Payments
Severance and
Related Costs
Other Direct
Costs
Total
$
—
$
—
$
38.7
(23.3)
15.4
2.1
(12.8)
12.4
(5.5)
6.9
10.4
(13.6)
—
51.1
(28.8)
22.3
12.5
(26.4)
8.4
Balance at December 31, 2021
$
4.7
$
3.7
$
In addition to the costs incurred and payments shown in the table above, in December 2021 and 2020 the Company
prepaid Other Direct Costs of $3.3 million and $8.1 million, respectively, of which $3.3 million and $7.0 million,
respectively, remained as a component of other current assets on the Consolidated Balance Sheets at December 31, 2021 and
2020. During the year ended December 31, 2021, the Company recovered $0.2 million of the December 31, 2020 prepaid
Other Direct Costs as a result of forfeited agreements. For the year ended December 31, 2021, the Company recognized non-
cash gains of $3.9 million for lease terminations and retirement of assets.
Merger of xpedx and Unisource
As of December 31, 2019, the integration and restructuring plans related to the Merger were complete.
Integration Expenses
During the year ended December 31, 2019, Veritiv incurred costs and charges related primarily to: internally
dedicated integration management resources, retention compensation, information technology conversion costs and other
costs to integrate its businesses. The following table summarizes the components of integration expenses:
(in millions)
Integration management
Retention compensation
Information technology conversion costs
Other
Total integration expenses
Veritiv Restructuring Plan: Merger Related
Year Ended December 31,
2019
$
$
10.4
1.0
3.4
2.7
17.5
As part of the Merger, the Company executed a multi-year restructuring program of its North American operations
intended to integrate the legacy xpedx and Unisource operations, generate cost savings and capture synergies across the
combined company. The restructuring plan included initiatives to: (i) consolidate warehouse facilities in overlapping
markets, (ii) improve efficiency of the delivery network, (iii) consolidate customer service centers, (iv) reorganize the field
sales and operations functions and (v) restructure the corporate general and administrative functions. As part of its
restructuring efforts, the Company evaluated its operations outside of North America to identify additional cost saving
opportunities. Costs related to exiting a branded re-distribution business were included in restructuring charges, net, on the
Consolidated Statements of Operations and totaled $10.8 million for the year ended December 31, 2019. Other direct costs
61
reported in the table below include facility closing costs, actual and estimated MEPP withdrawal charges and other incidental
costs associated with the development, communication, administration and implementation of these initiatives.
The following table presents a summary of restructuring charges, net, related to restructuring initiatives that were
incurred during the year ended December 31, 2019 and the cumulative recorded amounts since the initiative began:
(in millions)
2019
Cumulative
Severance and
Related Costs
Other Direct
Costs
(Gain) Loss on
Sale of Assets
and Other (non-
cash portion)
Total
$
9.1
$
32.4
$
20.3
90.5
(0.6) $
(38.0)
28.8
84.9
The Company's Merger related restructuring liability as of December 31, 2021 was $22.2 million of which $18.8
million was related to MEPP withdrawal obligations that will be paid-out over an approximate 20-year period. The
Company's Merger related restructuring liability as of December 31, 2020 was $24.0 million of which $20.0 million was
related to MEPP withdrawal obligations. See Note 9, Employee Benefit Plans, for additional information regarding these
MEPP transactions.
See Note 16, Segment and Other Information, for the impact these charges had on the Company's reportable
segments.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
At December 31, 2021 and 2020, the net goodwill balance of $99.6 million was allocated to the Company's
Packaging reportable segment. There were no goodwill additions or impairments recognized during the years ended
December 31, 2021, 2020 and 2019. Cumulatively, the Company has recognized non-cash pre-tax goodwill impairment
charges for certain of its reportable segments as follows: Facility Solutions $1.9 million (in 2015) and for the Company’s
logistics solutions business $6.1 million (in 2017).
Other Intangible Assets
The components of the Company's other intangible assets were as follows:
December 31, 2021
December 31, 2020
(in millions)
Customer relationships
Trademarks/Trade names
Total
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
$
$
67.7 $
25.0 $
42.7
$
67.7 $
20.3 $
47.4
3.8
3.8
—
3.8
3.8
—
71.5 $
28.8 $
42.7
$
71.5 $
24.1 $
47.4
Upon retirement or full impairment of the intangible assets, the cost and related amount of accumulated amortization
are eliminated from the asset and accumulated amortization accounts, respectively. The Company recorded amortization
expense of $4.7 million, $4.8 million and $5.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.
62
Estimated aggregate amortization expense for each of the five succeeding years is as follows (in millions):
Year
Total
$
2022
2023
2024
2025
2026
See Note 10, Fair Value Measurements, for additional information related to impairment assessments.
6. DEBT
The Company's debt obligations were as follows:
(in millions)
Asset-Based Lending Facility (the "ABL Facility")
Commercial card program
Finance leases
Total debt
Less: current portion of debt
Long-term debt, net of current portion
ABL Facility
As of December 31,
2021
2020
$
$
440.8 $
2.1
72.8
515.7
(16.0)
499.7 $
4.8
4.8
4.8
4.8
4.8
520.2
1.3
82.3
603.8
(14.7)
589.1
On May 20, 2021, the Company amended its ABL Facility to extend the maturity date to May 20, 2026, adjust the
pricing grid for applicable interest rates and update certain provisions to facilitate the transition from LIBOR to a new
replacement benchmark rate. All other significant terms remained substantially the same. Previously, on April 9, 2020, the
Company amended its ABL Facility to extend the maturity date to April 9, 2025, reduce the aggregate commitments from
$1.4 billion to $1.1 billion and adjust the pricing grid for applicable interest rates. All other significant terms remained
substantially the same. The ABL Facility is comprised of U.S. and Canadian sub-facilities of $1.1 billion and $150 million,
respectively. The ABL Facility is available to be drawn in U.S. dollars, in the case of the U.S. sub-facility, and in U.S.
dollars or Canadian dollars, in the case of the Canadian sub-facility, or in other currencies that are mutually agreeable. The
ABL Facility provides for the right of the individual lenders to extend the maturity date of their respective commitments and
loans upon the request of Veritiv and without the consent of any other lenders. The ABL Facility may be prepaid at Veritiv's
option at any time without premium or penalty and is subject to mandatory prepayment if the amount outstanding under the
ABL Facility exceeds either the aggregate commitments with respect thereto or the current borrowing base, in an amount
equal to such excess. The Company's accounts receivable and inventories in the U.S. and Canada are collateral under the
ABL Facility.
Availability under the ABL Facility is determined based upon a monthly borrowing base calculation which includes
eligible customer receivables and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As
of December 31, 2021, the available additional borrowing capacity under the ABL Facility was approximately $557.2
million. As of December 31, 2021, the Company held $11.0 million in outstanding letters of credit.
The ABL Facility has a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing four-
quarter basis, which will be tested only when specified availability is less than the limits outlined under the ABL Facility. At
December 31, 2021, the above test was not applicable and based on information available as of the date of this report it is not
expected to be applicable in the next 12 months.
Under the terms of the ABL Facility, interest rates are based upon LIBOR or the prime rate plus a margin rate, or in
the case of Canada, a banker's acceptance rate or base rate plus a margin rate. For the years ended December 31, 2021, 2020
and 2019, the weighted-average borrowing interest rates were 1.8%, 2.9% and 3.4%, respectively.
63
In conjunction with the May 20, 2021 amendment to the ABL Facility, the Company incurred and deferred $3.3
million of new financing costs associated with the transaction, reflected in other non-current assets on the Consolidated
Balance Sheet. In conjunction with the April 9, 2020 amendment to the ABL Facility, the Company recognized a one-time
charge of $0.6 million to interest expense, net, on the Consolidated Statements of Operations, for the write-off of a portion of
the previously deferred financing costs associated with lenders in the ABL Facility that exited the amended ABL Facility. In
addition, the Company incurred and deferred $3.4 million of financing costs associated with the April 9, 2020 transaction,
reflected in other non-current assets on the Consolidated Balance Sheet. These deferred costs will be amortized to interest
expense on a straight-line basis over the new amended term of the ABL Facility. Interest expense, net on the Consolidated
Statements of Operations included $1.5 million, $2.1 million and $2.6 million of amortization and write-off charges related to
deferred financing fees for the years ended December 31, 2021, 2020 and 2019, respectively.
Finance Lease Obligations
See Note 3, Leases, for additional information regarding the Company's finance leases.
Interest Rate Cap
The Company's indebtedness under the ABL Facility creates interest rate risk. The Company actively monitors this
risk with the objective to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated
with changes in the interest rate. As of and for the years ended December 31, 2021, 2020 and 2019, the Company held one
interest rate cap for which impacts on the Company's financial results were not significant.
The Company is exposed to counterparty credit risk for nonperformance and, in the event of nonperformance, to
market risk for changes in the interest rate. The Company attempts to manage exposure to counterparty credit risk primarily
by selecting only those counterparties that meet certain credit and other financial standards. The Company believes there has
not been a material change in the creditworthiness of its counterparty and believes the risk of nonperformance by such party
is minimal.
Commercial Card Program
The Company has a commercial purchasing card program that is used for business purpose purchasing and must be
paid in-full monthly. At December 31, 2021, the card carried a maximum credit limit of $37.5 million. At December 31,
2021 and 2020, $2.1 million and $1.3 million, respectively, was outstanding on the commercial card. The net change in the
outstanding balance is included in other financing activities on the Consolidated Statements of Cash Flows.
7. INCOME TAXES
The Company is subject to federal, state and local income taxes in the U.S., as well as income taxes in Canada,
Mexico and other foreign jurisdictions. The domestic (U.S.) and foreign components of the Company's income (loss) before
income taxes were as follows:
(in millions)
Domestic (U.S.)
Foreign
Income (loss) before income taxes
Year Ended December 31,
2020
2021
2019
$
$
173.9 $
23.6
197.5 $
30.8 $
12.2
43.0 $
(50.5)
21.7
(28.8)
64
Income tax expense (benefit) on the Consolidated Statements of Operations consisted of the following:
(in millions)
Current Provision:
U.S. Federal
U.S. State
Foreign
Total current income tax expense
Deferred, net:
U.S. Federal
U.S. State
Foreign
Total deferred, net
Provision for income tax expense
Year Ended December 31,
2020
2021
2019
$
$
$
$
$
32.7 $
8.5
2.5
43.7 $
3.9 $
1.5
3.8
9.2 $
52.9 $
4.7 $
3.9
2.0
10.6 $
(2.6) $
(0.4)
1.2
(1.8) $
8.8 $
0.7
0.5
2.2
3.4
(4.8)
0.0
2.1
(2.7)
0.7
Reconciliation between the federal statutory rate and the effective tax rate is as follows (see Note 8, Related Party
Transactions, for additional information related to the Tax Receivable Agreement ("TRA")):
(in millions)
Income (loss) before income taxes
Statutory U.S. income tax rate
Tax expense (benefit) using statutory U.S. income tax rate
Foreign income tax rate differential
State tax (net of federal benefit)
Non-deductible expenses
Global Intangible Low Taxed Income
Foreign-Derived Intangible Income
TRA
Tax credits
Impact of CARES Act
Stock compensation vesting
Change in valuation allowance - Foreign
Foreign taxes
Bad debt
Other
Income tax provision
Effective income tax rate
$
$
Year Ended December 31,
2020
2021
$
$
197.5
21.0 %
41.5
1.3
8.8
3.5
1.8
(1.5)
—
(2.8)
—
(1.0)
0.2
1.2
—
$
$
43.0
21.0 %
9.0
0.6
2.6
2.3
(1.5)
—
(3.7)
(1.9)
(2.4)
2.1
—
1.6
—
$
(0.1)
52.9
26.8 %
$
0.1
8.8
20.5 %
$
2019
(28.8)
21.0 %
(6.0)
0.6
0.3
2.4
2.8
—
(0.1)
(1.1)
—
1.3
0.3
0.9
(0.9)
0.2
0.7
(2.4) %
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law on March 27,
2020 and makes significant economic stimulus changes and additional changes to the U.S. tax code, including, but not limited
to, allowing the carryback of net operating losses ("NOLs" or "NOL") occurring in 2018, 2019 and 2020 to the prior five
years and eliminating the taxable income limitation, changes to the interest expense limitation, a technical correction for
qualified improvement property depreciation and providing additional employee retention credits.
65
Components of deferred income tax assets and liabilities were as follows:
(in millions)
Deferred income tax assets:
Accrued compensation
Finance leases
Lease obligations
Net operating losses and credit carryforwards
Allowance for credit losses and doubtful accounts, respectively
Other
Gross deferred income tax assets
Less valuation allowance
Total deferred tax asset
Deferred income tax liabilities:
Property and equipment, net
Lease assets
Inventory reserve
Other
Total deferred tax liability
Net deferred income tax asset
Deferred income tax asset valuation allowance is as follows:
(in millions)
Balance at December 31, 2019
Additions
Subtractions
Currency translation adjustments
Balance at December 31, 2020
Additions
Subtractions
Currency translation adjustments
Balance at December 31, 2021
As of December 31,
2021
2020
U.S.
Non-U.S.
U.S.
Non-U.S.
$
$
$
$
$
$
$
41.8 $
8.9
91.2
23.7
9.5
5.4
180.5
(0.1)
180.4 $
0.0 $
9.4
15.6
1.1
0.2
1.0
27.3
(1.1)
26.2 $
39.4 $
10.8
90.2
27.8
12.3
8.3
188.8
(1.3)
187.5 $
(20.1) $
(84.6)
(20.5)
(11.0)
(136.2) $
44.2 $
(8.4) $
(14.9)
—
—
(23.3) $
2.9 $
(26.6) $
(82.9)
(17.9)
(10.1)
(137.5) $
50.0 $
3.6
9.9
12.1
4.6
0.2
1.0
31.4
(1.0)
30.4
(8.8)
(11.6)
—
—
(20.4)
10.0
U.S.
Non-U.S.
Total
2.4 $
—
(1.1)
—
1.3
—
(1.2)
—
0.1 $
2.4 $
—
(1.6)
0.2
1.0
0.2
—
(0.1)
1.1 $
4.8
—
(2.7)
0.2
2.3
0.2
(1.2)
(0.1)
1.2
The Merger resulted in a significant change in the ownership of the Company, which, pursuant to the Internal
Revenue Code Section 382, imposes annual limits on the Company's ability to utilize its U.S. federal and state NOL
carryforwards. The Company's NOLs will continue to be available to offset taxable income (until such NOLs are either
utilized or expire) subject to the Section 382 annual limitation. If the annual limitation amount is not fully utilized in a
particular tax year, then the unused portion from that particular tax year will be added to the annual limitation in subsequent
years.
In general, it is the practice and intention of Veritiv to reinvest the earnings of its non-U.S. subsidiaries in those
operations. As of December 31, 2021, Veritiv's tax basis exceeded its financial reporting basis in certain investments in non-
U.S. subsidiaries. The Company does not believe these temporary differences will reverse in the foreseeable future and,
therefore, no deferred tax asset has been recognized with respect to these basis differences. Additionally, no deferred tax
liability has been recognized for income and withholding tax liabilities associated with investments in non-U.S. subsidiaries
where book basis exceeds tax basis. The amount of such temporary differences totaled approximately $20.3 million as of
66
December 31, 2021. The income and withholding tax liability associated with these temporary differences is not significant.
Veritiv applies a "more likely than not" threshold to the recognition and de-recognition of uncertain tax positions. A
change in judgment related to prior years' uncertain tax positions is recognized in the period of such change.
The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if
incurred, are recognized as a component of income tax expense. Total gross unrecognized tax benefits as of December 31,
2021, 2020 and 2019, as well as activity within each of the years, was not material.
In the U.S., Veritiv is generally subject to examination by the IRS for fiscal years 2016 and later and certain states
for fiscal years 2017 and later; however, it may be subject to IRS and state tax authority adjustments for years prior to 2016 to
the extent of losses or other tax attributes carrying forward from the earlier years. Veritiv Canada remains subject to
examination by the Canadian Revenue Agency and certain provinces for fiscal years 2017 and later.
As of December 31, 2021, Veritiv has federal, state and foreign income tax NOLs available to offset future taxable
income of $99.4 million, $62.6 million and $4.9 million, respectively. Federal NOLs begin expiring in 2024. State and
foreign NOLs will expire at various dates from 2022 through 2041, with the exception of certain foreign NOLs that do not
expire but instead have a full valuation allowance.
8. RELATED PARTY TRANSACTIONS
On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program
(the "2021 Share Repurchase Program"). Executing within the 2021 Share Repurchase Program, on March 9, 2021, Veritiv
entered into a Share Repurchase Agreement with UWW Holdings, LLC (the "UWWH Stockholder"), pursuant to which the
Company agreed to repurchase (the “Share Repurchase”) an aggregate of 553,536 shares of its common stock owned by the
UWWH Stockholder for an aggregate purchase price of $23.2 million. The Share Repurchase closed on March 12, 2021 and
the Company funded the Share Repurchase with cash on hand. Concurrently with the closing of the Share Repurchase, the
UWWH Stockholder sold the remainder of its shares of Veritiv common stock to an unrelated third party.
In conjunction with the Merger, Veritiv and the UWWH Stockholder executed the TRA. The TRA set forth the
terms by which Veritiv was generally obligated to pay the UWWH Stockholder an amount equal to 85% of the U.S. federal,
state and Canadian income tax savings, if any, that Veritiv actually realized as a result of the utilization of Unisource's NOLs
attributable to taxable periods prior to the date of the Merger. In January 2020 and 2019, Veritiv paid $0.3 million and $8.1
million, respectively, in principal and interest, to the UWWH Stockholder for the utilization of pre-merger NOLs in its 2018
and 2017 federal and state tax returns, respectively. In December 2020, the Company and the UWWH Stockholder agreed to
settle the TRA. The Company paid the UWWH Stockholder a total of $12.0 million in settlement of all past and future
liabilities that would have been owed under the TRA and the parties agreed to a mutual release of claims under the TRA. See
Note 10, Fair Value Measurements, for additional information regarding the TRA.
The Company considers its stockholders that own more than 10.0% of its outstanding common stock to be related
parties as defined within ASC 850, Related Party Disclosures. As a result of the Merger and related private placement,
Georgia-Pacific LLC ("Georgia-Pacific"), as joint owner of the UWWH Stockholder, qualified as a related party. Effective
with the November 19, 2020 sale of the Company's common stock by the UWWH Stockholder, Georgia-Pacific was no
longer treated as a related party. The UWWH Stockholder beneficially owned 8.7% of Veritiv's outstanding common stock
as of December 31, 2020.
Transactions with Georgia-Pacific
Veritiv purchases certain inventory items from, and sells certain inventory items to, Georgia-Pacific in the normal
course of business. The following table summarizes the financial impact of the transactions with Georgia-Pacific during the
prior year period when it was considered a related party:
(in millions)
Sales to Georgia-Pacific, reflected in net sales
Purchases of inventory from Georgia-Pacific, recognized in cost of products sold
Year Ended December 31,
2020
2019
$
$
19.7
55.6
23.4
85.2
67
9. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
Veritiv sponsors qualified defined contribution plans covering its employees in the U.S. and Canada. The defined
contribution plans allow eligible employees to contribute a portion of their eligible compensation (including salary and
annual incentive plan bonus) to the plans and Veritiv makes matching contributions to participant accounts on a specified
percentage of employee deferrals as determined by the provisions of each plan. During the years ended December 31, 2021,
2020 and 2019 Veritiv's contributions to these plans totaled $16.2 million, $9.3 million and $19.9 million, respectively. As
part of the Company's cost-saving actions taken due to the COVID-19 pandemic, the Company's matching contributions for
all salaried employees not covered by collective bargaining agreements were suspended effective May 1, 2020 and were
resumed effective January 1, 2021.
Deferred Compensation Savings Plans
In conjunction with the Merger, Veritiv assumed responsibility for Unisource's legacy deferred compensation plans.
In general, the payout terms varied for each employee agreement and are paid in monthly or annual installments ranging up to
15 years from the date of eligibility.
Effective January 1, 2015, the Company adopted the Veritiv Deferred Compensation Savings Plan which provides
for the deferral of salaries, commissions or bonuses of eligible non-union employees and the deferral of cash and equity
retainers for non-employee members of the Company's Board of Directors. Under this plan, eligible employees may elect to
defer up to 85% of their base salary, commissions and annual incentive bonus. The amounts deferred are credited to notional
investment accounts selected by participants. At the time a deferral election is made, participants elect to receive payout of
the deferred amounts upon termination of employment or termination of Board service in the form of a lump sum or equal
annual installments ranging from two to ten years. Currently, Veritiv does not make matching contributions to this plan.
The liabilities associated with these plans are summarized in the table below.
(in millions)
Other accrued liabilities
Other non-current liabilities
Total liabilities
Defined Benefit Plans
As of December 31,
2021
2020
$
$
4.0
$
19.3
23.3
$
4.1
19.7
23.8
At December 31, 2021 and 2020, Veritiv did not maintain any open defined benefit plans for its non-union
employees. Veritiv maintains an open defined benefit pension plan in the U.S. for employees covered by certain collectively
bargained agreements. Veritiv also assumed responsibility for Unisource's defined benefit plans, which include frozen cash
balance accounts for certain former Unisource employees.
Effective December 1, 2021, the Company divided the U.S. Veritiv Pension Plan by establishing a new Veritiv
Hourly Pension Plan to provide benefits to certain employees who were accruing a benefit under the U.S Veritiv Pension Plan
pursuant to the terms of a collective bargaining agreement. Veritiv currently has the intent to subsequently terminate and
settle the U.S. Veritiv Pension Plan. The Veritiv Hourly Pension Plan will remain open.
68
Benefit Obligations and Funded Status
The following table provides information about Veritiv's U.S. and Canadian defined benefit pension plans and
Supplemental Executive Retirement Plans ("SERP"):
(in millions)
Year Ended December 31,
2021
2020
U.S.
Canada
U.S.
Canada
Accumulated benefit obligation, end of year
$
68.0 $
82.9
$
68.6 $
89.0
Change in projected benefit obligation:
Benefit obligation, beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Settlements
Foreign exchange adjustments
Projected benefit obligation, end of year
Change in plan assets:
Plan assets, beginning of year
Employer contributions
Investment returns
Benefits paid
Administrative expenses paid
Settlements
Foreign exchange adjustments
Plan assets, end of year
Funded status, end of year
Balance Sheet Positions
(in millions)
Non-current assets
Other accrued liabilities
Defined benefit pension obligations
Net asset (liability) recognized
$
68.6 $
95.3
$
65.4 $
87.6
$
$
1.3
1.0
1.7
(0.6)
(4.0)
—
0.4
2.0
(5.7)
(4.6)
—
0.4
1.3
1.6
4.3
(0.4)
(3.6)
—
68.0 $
87.8
$
68.6 $
63.4 $
82.0
$
59.2 $
0.0
6.9
(0.6)
(0.7)
(4.0)
—
0.3
11.1
(4.6)
—
—
0.2
0.1
8.9
(0.4)
(0.8)
(3.6)
—
$
$
65.0 $
(3.0) $
89.0
1.2
$
$
63.4 $
(5.2) $
0.4
2.4
7.4
(4.6)
—
2.1
95.3
77.8
0.4
6.7
(4.6)
—
—
1.7
82.0
(13.3)
As of December 31,
2021
2020
U.S.
Canada
U.S.
Canada
$
— $
5.7
$
— $
(0.1)
(2.9)
(0.2)
(4.3)
(0.1)
(5.1)
$
(3.0) $
1.2
$
(5.2) $
—
(0.2)
(13.1)
(13.3)
Amounts included in AOCL - net actuarial (gain) loss, net of tax $
(0.5) $
(0.5) $
0.2 $
8.9
69
Net Periodic Cost
Total net periodic benefit cost (credit) associated with the defined benefit pension and SERP plans is summarized
below:
(in millions)
2021
Year Ended December 31,
2020
2019
U.S.
Canada
U.S.
Canada
U.S.
Canada
Components of net periodic benefit cost (credit):
Service cost
$
2.1 $
0.4 $
2.1 $
0.4 $
1.9 $
0.3
Interest cost
Expected return on plan assets
Settlement loss
Amortization of net loss
Total other components
Net periodic benefit cost (credit)
Changes to funded status recognized in other
comprehensive (income) loss:
Net (gain) loss during year, net of tax
$
$
$
1.0 $
(4.3)
0.0
—
(3.3) $
(1.2) $
2.0 $
(4.1)
0.2
0.2
(1.7) $
(1.3) $
1.6 $
(3.9)
0.0
0.0
(2.3) $
(0.2) $
2.4 $
(3.9)
0.1
0.2
(1.2) $
(0.8) $
2.1 $
(3.4)
—
—
(1.3) $
0.6 $
2.9
(3.7)
—
0.2
(0.6)
(0.3)
$
(0.7) $
(9.4) $
(0.5) $
3.4 $
(4.7) $
0.8
The components of net periodic benefit cost (credit) other than the service cost component are included in other
(income) expense, net in the Company's Consolidated Statements of Operations. Amounts are generally amortized from
AOCL over the expected future working lifetime of active plan participants.
Fair Value of Plan Assets
U.S. and Canada pension plan assets are primarily invested in broad-based mutual funds and pooled funds
comprised of U.S. and non-U.S. equities, U.S. and non-U.S. high-quality and high-yield fixed income securities, hedge fund-
of-funds and short-term interest bearing securities or deposits.
The underlying Level 1 investments of the U.S. plan assets are valued using quoted prices in active markets. The
Level 2 investments are primarily valued by each fund’s third-party administrator based upon the valuation of the underlying
securities and instruments and primarily by applying a valuation methodology based on observable market data as appropriate
depending on the specific type of security or instrument held. The underlying investments of the Canada plan assets in equity
and fixed income securities are measured at fair value using the Net Asset Value ("NAV") provided by the administrator of
the fund and the Company has the ability to redeem such assets at the measurement date or within the near term without
redemption restrictions. In accordance with ASU 2015-07, Fair Value Measurement (Topic 820), investments that are
measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy.
The following tables present Veritiv's plan assets using the fair value hierarchy which is reconciled to the amounts
presented for the total pension benefit plan assets:
(in millions)
Investments – U.S.:
Equity securities
Fixed income securities
Hedge Fund-of-Funds
Cash and short-term securities
As of December 31, 2021
As of December 31, 2020
Total
Level 1
Level 2
Total
Level 1
Level 2
$
3.3 $
3.3 $
31.5
4.2
26.0
31.5
—
26.0
—
—
4.2
—
4.2
$
35.2 $
35.2 $
23.8
3.8
0.6
23.8
—
0.6
$
63.4 $
59.6 $
—
—
3.8
—
3.8
Total
$
65.0 $
60.8 $
70
(in millions)
Investments – Canada:
As of December 31, 2021
As of December 31, 2020
Total
Level 1
Total
Level 1
Cash and short-term securities
$
0.7 $
0.7
$
1.1 $
1.1
Investments measured at NAV:
Equity securities
Fixed income securities
61.9
26.4
53.9
27.0
Total
$
89.0 $
0.7
$
82.0 $
1.1
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is
significant to the measurement. Valuation methodologies used for assets and liabilities measured at fair value are as follows:
* Equity Securities: Commingled funds are valued at the net asset value of units held at year end, as determined by
a pricing vendor or the fund family. Mutual funds are valued at the net asset value of shares held at year end, as determined
by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the
fund family if an active market is not available.
* Fixed Income Securities: Mutual funds are valued at the net asset value of shares held at year end, as determined
by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the
fund family if an active market is not available.
* Hedge Fund-of-Funds: These investments represent limited partnership interests in private equity and hedge
funds. The partnership interests are valued by the general partners based on the underlying assets in each fund.
* Cash and Short-term Securities: Cash and cash equivalents consist of U.S. and foreign currencies. Foreign
currencies are reported in U.S. dollars based on currency exchange rates readily available in active markets. Short-term
securities are valued at the net asset value of units held at year end.
The weighted-average asset allocations of invested assets within Veritiv's defined benefit pension plans were as
follows:
As of December 31, 2021
(in millions)
Equity securities
Fixed income securities
Hedge Fund-of-Funds
Cash and short-term securities
Total
As of December 31, 2020
(in millions)
Equity securities
Fixed income securities
Hedge Fund-of-Funds
Cash and short-term securities
Total
Asset Allocation Range
U.S.
Canada
U.S.
Canada
$
3.3 $
31.5
4.2
26.0
61.9
26.4
—
0.7
0% - 15%
50% - 70%
45% - 55%
30% - 50%
0% - 10% —% - —%
35% - 45%
0% -
5%
$
65.0 $
89.0
Asset Allocation Range
U.S.
Canada
U.S.
Canada
$
35.2 $
23.8
3.8
0.6
53.9
27.0
—
1.1
45% - 60%
50% - 70%
30% - 50%
30% - 50%
0% - 10% —% - —%
0% -
5%
0% -
5%
$
63.4 $
82.0
Veritiv's current U.S. investment objectives reflect a recent realignment of the investment strategy to better address
the separate needs of the legacy plan and the newly established Veritiv Hourly Pension Plan. The investment objective of the
assets remaining in the legacy Veritiv Pension Plan is primarily to reduce the effects of volatility on the fair value of pension
assets relative to pension obligations by investing a majority of plan assets in high quality fixed income securities and cash
71
equivalents in preparation for the currently intended plan termination. The investment objective of the assets that will be
moved to the Veritiv Hourly Pension Plan include maximizing long-term returns at acceptable risk levels, diversifying among
asset classes, as applicable, and among investment managers as well as establishing certain risk parameters within asset
classes. Total returns are compared to the weighted-average return of a benchmark mix of investments. Individual fund
investments are compared to historical three year, five year and ten year returns achieved by funds with similar investment
objectives. Investment performance is evaluated at least quarterly.
Veritiv's current Canada investment objectives include maximizing long-term returns at acceptable risk levels,
diversifying among asset classes, as applicable, and among investment managers as well as establishing certain risk
parameters within asset classes. Veritiv's pension investment strategy is to reduce the effects of future volatility on the fair
value of pension assets relative to pension obligations by increasing the allocation to high quality, longer-term fixed income
securities and reducing the allocation to equity investments as the funded status improves. Total returns are compared to the
weighted-average return of a benchmark mix of investments. Individual fund investments are compared to historical three
year, five year and ten year returns achieved by funds with similar investment objectives. Investment performance is
evaluated at least quarterly.
Assumptions
The determination of Veritiv's defined benefit obligations and pension expense is based on various assumptions,
such as discount rates, expected long-term rates of return, rate of compensation increases, employee retirement patterns and
payment selections, inflation, and mortality rates.
Veritiv's weighted-average discount rates for its U.S. plans were determined by using cash flow matching techniques
whereby the rates of yield curves, developed from U.S. corporate yield curves, were applied to the benefit obligations to
determine the appropriate discount rate. Veritiv's weighted-average discount rates for its Canadian plans were determined by
using spot rates from yield curves, developed from high-quality bonds (rated AA or higher) by established rating agencies,
matching the duration of the future expected benefit obligations.
Veritiv's weighted-average expected rate of return was developed based on several factors, including projected and
historical rates of returns, investment allocations of pension plan assets and inflation expectations. Veritiv evaluates the
expected rate of return assumptions on an annual basis.
The following table presents significant weighted-average assumptions used in computing the benefit obligations:
Discount rate
Rate of compensation increases
As of December 31,
2021
2020
2019
U.S.
Canada
U.S.
Canada
U.S.
Canada
2.54 %
N/A
2.95 %
3.00 %
2.15 %
N/A
2.50 %
3.00 %
2.98 %
N/A
3.10 %
3.00 %
The following table presents significant weighted-average assumptions used in computing net periodic benefit cost
(credit):
Discount rate
Rate of compensation increases
Expected long-term rate of return on assets
Interest crediting rate
Year Ended December 31,
2021
2020
2019
U.S.
Canada
U.S.
Canada
U.S.
Canada
2.13 % 2.50 %
2.98 %
N/A
3.00 %
N/A
7.15 % 5.00 %
1.43 % N/A
7.15 %
2.73 %
3.10 %
3.00 %
5.25 %
N/A
4.01 %
N/A
7.15 %
5.00 %
3.90 %
3.00 %
5.50 %
N/A
72
Cash Flows
Veritiv expects to contribute $0.2 million and $0.4 million to its U.S. and Canadian defined benefit pension and
SERP plans, respectively, during 2022. Future benefit payments under the defined benefit pension and SERP plans are
estimated as follows:
(in millions)
2022
2023
2024
2025
2026
2027 – 2031
MEPPs
U.S.
Canada
$
5.4 $
4.4
4.2
4.3
4.3
19.5
3.1
3.2
3.4
3.6
3.7
20.9
Veritiv's contributions to MEPPs, excluding the payment of any withdrawal liabilities, were $1.7 million, $2.0
million and $2.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. It is reasonably possible that
changes to Veritiv employees covered under these plans might result in additional contribution obligations. Any such
obligations would be governed by the specific agreement between Veritiv and any such plan. Veritiv's contributions did not
represent more than 5% of total contributions to any MEPPs for the plan years in which Forms 5500 were available. At the
date these Consolidated Financial Statements were issued, Forms 5500 were not available for the plan year ended in 2021.
The risks of participating in these MEPPs are different from a single employer plan in the following aspects:
• Assets contributed to the MEPPs by one employer may be used to provide benefits to employees of other
•
•
participating employers,
If a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be inherited
by the remaining participating employers, and
If the Company stops participating in any of the MEPPs, the Company may be required to pay those plans an
amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company records an estimated undiscounted charge when it becomes probable that it has incurred a MEPP
withdrawal liability. Final charges for MEPP withdrawals are not known until the plans issue their respective determinations.
As a result, these estimates may increase or decrease depending upon the final determination. Charges not related to the
Company's restructuring efforts are recorded as distribution expenses. Initial amounts are recorded as other non-current
liabilities on the Consolidated Balance Sheets.
See the table below for a summary of the net withdrawal charges and the year-end balance sheet liability positions:
(in millions)
2021
2020
2019
(in millions)
2021
2020
Year Ended December 31,
Restructuring
charges, net
Distribution expenses
Total Net Charges
— $
—
1.5
0.5 $
7.2
6.6
0.5
7.2
8.1
As of December 31,
Other accrued
liabilities
Other non-current
liabilities
1.8 $
1.8
41.4
42.7
$
$
During the fourth quarter of 2021, in the course of negotiations for a collective bargaining agreement, Veritiv
negotiated a complete withdrawal from the Minneapolis Food Distributors Ind Pension Plan to take effect on July 31, 2022
73
and recognized an estimated complete withdrawal liability of $0.5 million as of December 31, 2021. The withdrawal charge
was recorded in distribution expenses as it was not related to a restructuring activity. As of December 31, 2021, the
Company has not yet received the determination letter for the complete withdrawal from the Minneapolis Food Distributors
Ind Pension Plan. The Company expects that payments will occur over an approximate 3-year period.
During the first quarter of 2020, Veritiv negotiated the complete withdrawal from the Western Pennsylvania
Teamsters and Employers Pension Fund (the "Western Pennsylvania Fund") related to the second bargaining unit at its
Warrendale, Pennsylvania location and recognized an estimated complete withdrawal liability of $7.1 million in distribution
expenses, as it was not related to a restructuring activity.
During the second quarter of 2019, in the course of negotiations for a collective bargaining agreement, Veritiv
negotiated a partial withdrawal from the Western Pennsylvania Fund and recognized an estimated partial withdrawal liability
of $6.5 million in distribution expenses, as it was not related to a restructuring activity. Also during the second quarter of
2019, Veritiv recognized an estimated complete withdrawal liability of $1.8 million in restructuring charges, net related to the
closing of its Philadelphia, Pennsylvania location for those employees who participated in the Warehouse Employees Local
Union 169 and Employer's Joint Pension Trust MEPP ("Local 169 MEPP"). In the fourth quarter of 2019, Veritiv received
the estimated determination letter from the Local 169 MEPP assessing a complete withdrawal liability of $1.8 million, which
was equal to the amount recognized during the second quarter of 2019 and is payable in 80 quarterly installments beginning
in December 2019.
As of December 31, 2021, the Company has not yet received the determination letters for the partial and
subsequent full withdrawal from the Western Pennsylvania Fund. The Company expects that payments will occur over an
approximate 20-year period, which could run consecutively.
Veritiv's participation in the MEPPs for the year ended December 31, 2021, is outlined in the table below. The
"EIN" and "Pension Plan Number" columns provide the Employer Identification Number and the three-digit plan number for
each applicable plan. The Pension Protection Act zone listed below is based on the latest information Veritiv received from
the plan and is certified by the plan's actuary. Plans in the red zone are generally less than 65% funded, plans in the yellow
zone are less than 80% funded and plans in the green zone are at least 80% funded. There were no changes in the status of
any zones based on the information provided to Veritiv during 2021. The "FIP/RP Status Pending/Implemented" column
indicates plans for which a financial improvement plan or a rehabilitation plan is either pending or has been implemented.
The last column lists the expiration date(s) of the collective-bargaining agreement(s). Contributions in the table below, for
the years ended December 31, 2021, 2020 and 2019, exclude $1.8 million, $1.9 million and $2.0 million, respectively, related
to payments made for accrued withdrawal liabilities.
Expiration
Date(s) of
Collective
Bargaining
Agreement(s)
9/30/2021 -
10/31/2023
Pension Fund
EIN
Pension
Plan
Number
Pension
Protection
Act Zone
Status
FIP/RP
Status
Pending/
Implemented
Veritiv's
Contributions
2021
2020
2019
Surcharge
Imposed
Western Conference of
Teamsters Pension Trust
Fund (1)
Teamsters Pension Plan
of Philadelphia &
Vicinity
Western Pennsylvania
Teamsters and
Employers Pension Plan
Contributions for
individually significant
plans
Contributions to other
multi-employer plans
Total contributions
91-6145047
001
Green
No
$ 0.9 $ 1.1 $ 1.3
No
23-1511735
001
Yellow
Implemented
0.4
0.4
0.4
Yes
7/31/2022
25-6029946
001
Red
Implemented
—
0.1
0.2
Yes
Partial exit
during 2019;
complete exit
during 2020
1.3
1.6
1.9
0.4
0.4
0.5
$ 1.7 $ 2.0 $ 2.4
(1) As of December 31, 2021, there were eight collective bargaining units participating in the Western Conference of Teamsters Pension Trust. As of
December 31, 2021, four were then in negotiations.
74
10. FAIR VALUE MEASUREMENTS
At December 31, 2021 and 2020, the carrying amounts of cash and cash equivalents, receivables, payables, other
components of other current assets and other accrued liabilities, and the short-term debt associated with the commercial card
program approximate their fair values due to the short maturity of these items. Cash and cash equivalents may include
highly-liquid investments with original maturities to the Company of three months or less that are readily convertible into
known amounts of cash.
Debt and Other Obligations
Borrowings under the ABL Facility are at variable market interest rates, and accordingly, the carrying amount
approximates fair value, which is a Level 2 measurement. The fair value of the debt-related interest rate cap was derived
from a discounted cash flow analysis based on the terms of the agreement and Level 2 data for the forward interest rate curve
adjusted for the Company's credit risk and was not significant for the periods presented in this report. See Note 6, Debt, for
additional information regarding the Company's ABL Facility and other obligations.
Goodwill and Other Intangibles
The fair value analyses used for the determination of goodwill and intangible asset impairments, as described in
Note 1, Business and Summary of Significant Accounting Policies, relied upon both Level 2 data (publicly observable data
such as market interest rates, the Company's stock price, the stock prices of peer companies and the capital structures of peer
companies) and Level 3 data (internal data such as the Company's operating and cash flow projections).
Goodwill is reviewed for impairment on a reporting unit basis annually as of October 1st or more frequently when
indicators are present or changes in circumstances suggest that the carrying amount of the asset may not be recoverable. The
Company performed a quantitative goodwill impairment test during the fourth quarter of 2021 and 2020, which required a
determination of whether the fair value of the reporting unit was less than its carrying value. The determination of the
reporting unit's fair value was based on an income approach that utilized discounted cash flows and required management to
make significant assumptions and estimates related to the forecasts of future revenues, profit margins and discount rates. The
principal assumptions utilized, all of which are considered Level 3 inputs under the fair value hierarchy, are subject to various
risks and uncertainties. As a result of the respective quantitative goodwill impairment tests, no goodwill impairment was
indicated or recorded. The continuing impact of the COVID-19 pandemic on estimated future cash flows is uncertain and
will largely depend on the outcome of future events. The Company will perform additional goodwill impairment testing
when indicators are present or changes in circumstances suggest the carrying amount of the asset may not be recoverable and
a triggering event has occurred.
Other Assets
At December 31, 2021 and 2020, the Company had assets-held-for-sale of $1.2 million and $0.4 million,
respectively. These assets are included, at the lower of their carrying value or fair value, in other current assets on the
Consolidated Balance Sheets. During the second and third quarters of 2021, the Company sold two properties and recognized
gains totaling approximately $4.6 million related to the exit and sale of those facilities, of which approximately $1.7 million
is included in selling and administrative expenses and approximately $2.9 million is included in restructuring charges, net on
the Consolidated Statements of Operations. During the third and fourth quarters of 2020, the Company sold two properties
and recognized gains totaling approximately $8.3 million related to the exit and sale of those facilities, which are included in
selling and administrative expenses on the Consolidated Statements of Operations.
The Company has on occasion recognized minor impairments when warranted as part of its normal review of long-
lived assets. Based on the underlying nature of each item, these impairment charges may be reported as restructuring
charges, net or selling and administrative expenses on the Consolidated Statements of Operations. Total long-lived asset
impairments for the years ended December 31, 2021, 2020 and 2019 were $0.5 million, $0.5 million and none, respectively.
At December 31, 2021 and 2020, the pension plan assets were primarily comprised of mutual funds and pooled
funds. The underlying investments of these funds were valued using either quoted prices in active markets or valued as of the
most recent trade date. See Note 9, Employee Benefits Plans, for additional information regarding the Company's pension
plans.
75
TRA Contingent Liability
At the time of the Merger, the Company recorded a $59.4 million contingent liability associated with the TRA at fair
value using a discounted cash flow model that reflected management's expectations about probability of payment. The
contingent liability was remeasured at fair value at each reporting period-end with the change in fair value recognized in
other (income) expense, net on the Consolidated Statements of Operations. In December 2020, the Company and the
UWWH Stockholder agreed to settle the TRA. The Company paid the UWWH Stockholder a total of $12.0 million in
settlement of all past and future liabilities that would have been owed under the TRA and the parties agreed to a mutual
release of claims under the TRA. As a result of the settlement, the Company recognized a favorable fair value adjustment of
$20.1 million in other (income) expense, net in the fourth quarter of 2020. See Note 8, Related Party Transactions, for
additional information regarding the TRA.
The following table provides a summary of the TRA contingent liability activity:
(in millions)
Balance at December 31, 2019
Change in fair value adjustment recorded in other (income) expense, net
Principal payment
Balance at December 31, 2020
AAC Contingent Consideration
TRA Contingent Liability
$
$
31.4
(19.1)
(12.3)
—
On August 31, 2017 (the "Acquisition Date"), Veritiv completed its acquisition of 100% of the equity interests in
various AAC entities. The purchase price allocation for the acquisition of AAC included $22.2 million for the estimated fair
value of contingent consideration. The maximum amount payable for the contingent consideration was $50.0 million, with
up to $25.0 million payable at each of the first and second anniversaries of the Acquisition Date. The Company paid $20.0
million on December 11, 2019 for contingent consideration earned as of the second anniversary of the Acquisition Date.
During the first quarter of 2020, the Company recognized an additional charge of $1.0 million and on March 19, 2020, the
Company paid $3.5 million to the sellers of AAC in full satisfaction of the contingent liability.
11. SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Other Current Assets
The components of other current assets as of December 31 were as follows:
(in millions)
Rebates receivable
Prepaid expenses
Value Added Tax receivable
Vendor Deposits
Other
Other current assets
2021
2020
$
59.3 $
44.2
11.9
8.2
9.1
44.5
46.9
11.1
5.3
11.7
$
132.7 $
119.5
76
Other Non-Current Assets
The components of other non-current assets as of December 31 were as follows:
(in millions)
Operating lease right-of-use assets
Investments in real estate joint ventures
Deferred financing costs
Other
Other non-current assets
Accrued Payroll and Benefits
2021
2020
$
$
375.6 $
7.7
7.3
17.8
408.4 $
The components of accrued payroll and benefits as of December 31 were as follows:
(in millions)
Accrued incentive plans
Accrued payroll and related taxes
Accrued commissions
Other
Accrued payroll and benefits
Other Accrued Liabilities
2021
2020
$
$
60.1 $
28.7
17.9
3.3
110.0 $
The components of other accrued liabilities as of December 31 were as follows:
(in millions)
Operating lease obligations - current
Accrued customer incentives
Accrued taxes
Accrued freight
Accrued professional fees
Other
Other accrued liabilities
Other Non-Current Liabilities
2021
2020
$
80.2 $
23.5
17.8
12.3
5.4
46.5
$
185.7 $
The components of other non-current liabilities as of December 31 were as follows:
(in millions)
Operating lease obligations - non-current
MEPP withdrawals
Deferred compensation
Other
Other non-current liabilities
12. EARNINGS (LOSS) PER SHARE
2021
2020
$
$
329.3 $
41.4
19.3
32.1
422.1 $
351.7
7.3
5.4
13.9
378.3
43.9
16.6
17.1
3.0
80.6
81.9
20.0
18.8
7.8
1.6
52.1
182.2
307.4
42.7
19.7
25.4
395.2
Basic earnings (loss) per share for Veritiv common stock is calculated by dividing net income (loss) by the
weighted-average number of shares of common stock outstanding during the respective periods. Diluted earnings per share is
similarly calculated, except that the denominator is increased to include the number of additional common shares that would
77
have been outstanding during those periods if the dilutive potential common shares had been issued, using the treasury stock
method, except where the inclusion of such common shares would have an antidilutive impact. See Note 14, Long-Term
Incentive Compensation Plans, for additional information regarding shares issued under incentive plans.
A summary of the numerators and denominators used in the basic and diluted earnings (loss) per share calculations
is as follows:
(in millions, except per share data)
Numerator:
Net income (loss)
Denominator:
Year Ended December 31,
2020
2021
2019
$
144.6 $
34.2 $
(29.5)
Weighted-average shares outstanding – basic
Weighted-average shares outstanding – diluted
15.22
16.05
15.96
16.48
16.06
16.06
Earnings (loss) per share:
Basic
Diluted
$
$
9.50 $
9.01 $
2.14 $
2.08 $
(1.84)
(1.84)
Antidilutive stock-based awards excluded from computation of diluted earnings
per share
Performance stock-based awards excluded from computation of diluted earnings
per share because performance conditions had not been met
0.00
0.28
0.00
0.08
1.17
0.33
In accordance with the Company's 2014 Omnibus Incentive Plan, as amended and restated as of March 8, 2017,
shares of the Company's common stock were issued to plan participants whose Restricted Stock Units ("RSUs"),
Performance Share Units ("PSUs"), Market Condition Performance Share Units ("MCPSUs") and/or non-employee director
grants (grants not deferred) vested during those periods. The net share issuance is included on the Consolidated Statements
of Shareholders' Equity for the years ended December 31, 2021, 2020 and 2019. The related cash flow impacts are included
in financing activities on the Consolidated Statements of Cash Flows.
See the table below for information related to these transactions:
(in millions)
Shares issued
Shares recovered for minimum tax withholding
Net shares issued
13. SHAREHOLDERS' EQUITY
Common Stock
Year Ended December 31,
2021
2020
2019
0.6
(0.2)
0.4
0.3
(0.1)
0.2
0.3
(0.1)
0.2
Shares Authorized and Outstanding: At December 31, 2021 and 2020, the Company had authorized 100.0 million
shares of common stock with a par value of $0.01.
Dividends: Each holder of common stock shall be entitled to participate equally in all dividends payable with
respect to the common stock.
Voting Rights: The holders of the Company's common stock are entitled to vote only in the circumstances set forth
in Veritiv's Amended and Restated Certificate of Incorporation. Each holder of common stock shall be entitled to one vote
78
for each share of common stock held of record by such holder upon all matters to be voted on by the holders of the common
stock.
Other Rights: Each holder of common stock shall be entitled to share equally, subject to any rights and preferences
of the preferred stock (as fixed by resolutions, if any, of Veritiv's Board of Directors), in the assets of the Company available
for distribution, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of Veritiv, or
upon any distribution of the assets of the Company.
Preferred Stock
Subject to the provisions of the Amended and Restated Certificate of Incorporation, the Board of Directors of
Veritiv is authorized to provide for the issuance of up to 10.0 million shares of preferred stock in one or more series. The
Board of Directors may fix the number of shares constituting any series and determine the designation of the series, the
dividend rates, rights of priority of dividend payment, the voting powers (if any) of the shares of the series, and the
preferences and relative participating, optional and other rights, if any, and any qualifications, limitations or restrictions,
applicable to the shares of such series. No preferred stock was issued and outstanding as of December 31, 2021 and 2020.
Treasury Stock
On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program,
the 2021 Share Repurchase Program, which was increased to $100 million in May 2021. The 2021 Share Repurchase
Program replaced the $25 million share repurchase authorization previously approved by the Board of Directors in March
2020 (the "2020 Share Repurchase Program") and may be suspended, terminated, increased or decreased by the Board at any
time. Under the repurchase authorization, the Company may, from time to time, purchase shares of its common stock
through open market purchases, privately negotiated transactions, accelerated repurchase programs, tender offers or
otherwise, in accordance with all applicable securities laws and regulations.
During the year ended December 31, 2021, the Company repurchased 1,734,810 shares of its common stock at a
cost of $100 million under its 2021 Share Repurchase Program. During the first quarter of 2020, the Company repurchased
383,972 shares of its common stock at a cost of $3.5 million under its 2020 Share Repurchase Program, prior to its
suspension as of March 27, 2020.
Accumulated Other Comprehensive Loss (AOCL)
Comprehensive income (loss) is reported on the Consolidated Statements of Comprehensive Income (Loss) and
consists of net income (loss) and other gains and losses affecting shareholders' equity that, under U.S. GAAP, are excluded
from net income (loss).
The following table provides the components of AOCL (amounts are shown net of their related income tax effect, if
any):
(in millions)
Foreign
currency
translation
adjustments
Retirement
liabilities
Interest
rate cap
AOCL
Balance at December 31, 2019
$
(26.6) $
(6.2) $
(0.3) $
(33.1)
Unrealized net gains (losses) arising during the period
Amounts reclassified from AOCL
Net current period other comprehensive income (loss)
Balance at December 31, 2020
Unrealized net gains (losses) arising during the period
Amounts reclassified from AOCL
Net current period other comprehensive income (loss)
2.1
0.3
2.4
(24.2)
(1.2)
0.2
(1.0)
(3.9)
1.0
(2.9)
(9.1)
10.1
0.0
10.1
(0.1)
0.2
0.1
(0.2)
0.0
0.1
0.1
(1.9)
1.5
(0.4)
(33.5)
8.9
0.3
9.2
Balance at December 31, 2021
$
(25.2) $
1.0 $
(0.1) $
(24.3)
79
14. LONG-TERM INCENTIVE COMPENSATION PLANS
Veritiv Omnibus Incentive Plan
The 2014 Plan provides for the grant of stock, Deferred Share Units ("DSUs"), RSUs, PSUs, Market Condition
Performance Share Units and cash-based Performance-Based Units ("PBUs"), among other awards. A total of 3.1 million
shares of Veritiv common stock may be issued under the 2014 Plan subject to certain adjustment provisions. As of December
31, 2021, there were approximately 1.0 million shares available to be granted to any employee, director or consultant of
Veritiv or a subsidiary of Veritiv. Grants are made at the discretion of the Compensation and Leadership Development
Committee of the Company's Board of Directors. For awards granted in 2021 and 2020, the Compensation and Leadership
Development Committee approved cash-based grants in lieu of equity-based PSU and MCPSU grants.
Stock
The Company made grants of common stock in 2021, 2020 and 2019 to its non-employee directors. The stock
grants were fully vested and non-forfeitable as of the grant dates. The non-employee directors were eligible to defer receipt
of the awards under the Veritiv Deferred Compensation Savings Plan, a nonqualified plan. The Company recognized
$1.1 million, $1.0 million and $1.0 million in expense related to these grants for the years ended December 31, 2021, 2020
and 2019 respectively.
Deferred Share Units
The Company granted DSUs in 2016, 2015 and 2014 to its non-employee directors. Each DSU is the economical
equivalent of one share of Veritiv's common stock. The DSUs were fully vested and non-forfeitable as of the grant date and
are payable following the individual's separation of service as a Veritiv director. The DSUs granted in 2015 and 2014 are
payable in cash and the DSUs granted in 2016 are settled in stock. The cash-settled DSUs are classified as a non-current
liability and are remeasured at each reporting date, with a corresponding adjustment to compensation expense. At December
31, 2021 there were approximately 34,600 DSUs outstanding with a fair value of $3.2 million. At December 31, 2020, there
were approximately 34,600 DSUs outstanding with a fair value of $1.0 million. The Company recognized impacts of
$2.1 million, $0.0 million and $(0.2) million in selling and administrative expenses related to these grants for the year ended
December 31, 2021, 2020 and 2019, respectively.
Restricted Stock Units
RSUs are awarded to key employees annually. RSUs granted prior to 2020 typically cliff vest at the end of three
years, subject to continued service. RSUs granted in 2021 and 2020 typically vest over four years, with 25% vesting on each
of the first, second, third and fourth anniversaries of the grant date, subject to continued service. The fair value of the RSU
awards is based typically on either the closing price of Veritiv common stock on the grant date or the closing price on the
trading date immediately prior to the grant date if the grant date is not a trading date. Compensation expense for RSUs
granted prior to 2020 is recognized ratably from the grant date to the vesting date. Compensation expense for RSUs granted
in 2021 and 2020 is recognized ratably over the requisite service period for the entire award, which is four years. The total
fair value of RSUs that vested during 2021, 2020 and 2019 was $7.2 million, $4.3 million and $3.8 million, respectively.
80
A summary of activity related to non-vested RSUs is presented below:
2021
2020
2019
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
RSUs
Weighted-
Average Grant
Date Fair
Value Per
Share
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
RSUs
Number of
RSUs
556 $
243 $
(288) $
(55) $
22.59
19.79
24.93
20.24
369 $
352 $
(99) $
(66) $
32.00
18.59
43.48
22.69
398 $
160 $
(102) $
(87) $
35.88
24.70
37.53
29.96
456 $
19.91
556 $
22.59
369 $
32.00
(units in thousands)
Non-vested at
beginning of year
Granted
Vested
Forfeited
Non-vested at end of
year
Performance Share Units
PSUs granted prior to 2020 were awarded to key employees annually and cliff vest at the end of three years, subject
to continued service and the attainment of performance conditions. The PSU award represents the contingent right to receive
a number of shares equal to a portion, all or a multiple (not to exceed 200%) of the target number of PSUs. The PSUs are
divided into three tranches, and each tranche is earned based on the achievement of an annual Adjusted EBITDA target which
is set at the beginning of each of the three years in the vesting period. The Company defines Adjusted EBITDA as earnings
before interest, income taxes, depreciation and amortization, restructuring charges, net, integration and acquisition expenses
and other similar charges including any severance costs, costs associated with warehouse and office openings or closings,
consolidation, and relocation and other business optimization expenses, stock-based compensation expense, changes in the
LIFO reserve, non-restructuring asset impairment charges, non-restructuring severance charges, non-restructuring pension
charges, net, fair value adjustments related to contingent liabilities assumed in mergers and acquisitions and certain other
adjustments. Compensation expense for each tranche is recognized ratably from the date the fair value is measured to the
vesting date for the number of awards expected to vest. The total fair value of PSUs that vested during 2021, 2020 and 2019
was $5.9 million, $3.6 million and $6.7 million, respectively. Cash-based PBUs were granted in 2021 and 2020 in lieu of
equity-based PSUs.
81
A summary of activity related to non-vested PSUs is presented below:
2021
2020
2019
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
PSUs
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
PSUs
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
PSUs
587 $
— $
(31) $
(249) $
(27) $
23.06
—
23.60
23.60
21.95
645 $
— $
183 $
(102) $
(139) $
25.10
—
19.67
35.70
28.26
627 $
392 $
(112) $
(174) $
(88) $
32.59
21.76
21.76
38.36
25.30
280 $
21.79
587 $
23.06
645 $
25.10
(units in thousands)
Non-vested at
beginning of year
Granted (1)
Shares gained (lost)
based on actual
performance (2) (3)
Vested
Forfeited
Non-vested at end of
year
(1) The per share value for the 2019 grants represents the weighted-average grant date fair value for the 2019, 2020 and 2021 tranches.
(2) Shares gained (lost) based on actual performance are reflected in the year of vesting. The current year amount may include adjustments for prior
years' activity.
(3) The per share value for shares gained (lost) based on actual performance in 2021 represents the weighted-average grant date fair value for the shares
vesting in that year.
Market Condition Performance Share Units
MCPSUs granted prior to 2020 were awarded to key employees annually and cliff vest at the end of three years,
subject to continued service and the attainment of performance conditions. The MCPSU award represents the contingent
right to receive a number of shares equal to a portion, all or a multiple (not to exceed 200%) of the target number of
MCPSUs. The MCPSUs are divided into three tranches and each tranche is earned based on the achievement of a total
shareholder return ("TSR") target relative to the TSR of an applicable peer group over the one-, two- and three-year
cumulative periods in the vesting period. The weighted-average grant date fair value of the MCPSUs is determined using a
Monte Carlo simulation model. Assumptions used in the 2019 model included an expected volatility rate of 53.6% and a
risk-free interest rate of 2.5%; no MCPSUs were granted in 2021 and 2020. The expected volatility rate is based on the
historical volatility over the most recent period equal to the vesting period. The risk-free interest rate is based on the yield on
U.S. Treasury securities matching the vesting period. Compensation expense is recognized ratably from the grant date to the
vesting date. The total fair value of MCPSUs that vested during 2021, 2020 and 2019 was $3.3 million, $0.0 million and
$2.7 million, respectively. None of the 2017 MCPSUs vested in 2020, due to the cumulative TSR performance resulting in a
0% of target final payout. Cash-based PBUs were granted in 2021 and 2020 in lieu of equity-based MCPSUs.
82
A summary of activity related to non-vested MCPSUs is presented below:
2021
2020
2019
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
MCPSUs
Weighted-
Average Grant
Date Fair
Value Per
Share
Weighted-
Average Grant
Date Fair
Value Per
Share
Number of
MCPSUs
Number of
MCPSUs
20 $
— $
250 $
(86) $
(16) $
34.35
—
37.79
37.79
31.95
274 $
— $
(110) $
— $
(144) $
40.81
—
34.35
—
58.89
308 $
235 $
(153) $
(64) $
(52) $
46.74
31.41
31.41
42.12
40.93
168 $
31.51
20 $
34.35
274 $
40.81
(units in thousands)
Non-vested at
beginning of year
Granted
Shares gained (lost)
based on actual
performance (1)(2)
Vested
Forfeited/cancelled
Non-vested at end of
year
(1) Shares gained (lost) based on actual performance are reflected in the year of vesting. The current year amount may include adjustments for prior years'
activity.
(2) The per share value for shares gained (lost) based on actual performance in 2021 represents the weighted-average grant date fair value for the shares
vesting in that year.
Performance-Based Units (cash-based)
In 2021 and 2020, PBUs valued at $1.00 per unit and payable in cash, were awarded to key employees and cliff vest
at the end of three years, subject to continued service and the attainment of performance conditions. The PBUs represent the
contingent right to receive a cash payment of performance units equal to a portion, all or a multiple (not to exceed 200%) of
the target value. Fifty percent of the PBUs vest based on the achievement of Packaging Gross Profit Dollar Growth targets,
which were set at the beginning of 2021 and 2020. Packaging Gross Profit Dollar Growth is defined as: net sales for the
Packaging reportable segment less the cost of product sold, excluding the impact of LIFO inventory accounting and certain
other adjustments. The remaining 50% of the PBUs vest based on the achievement of Return on Invested Capital targets,
which were set at the beginning of 2021 and 2020. Return on Invested Capital is defined as: (Net Operating Profit) divided
by (the sum of net working capital and property and equipment). Net Operating Profit is defined as: (Adjusted EBITDA less
depreciation and amortization) times (1 minus the standard tax rate). The standard tax rate used in 2021 and 2020 was 26%.
The maximum PBU payout based on the achievement of Packaging Gross Profit Dollar Growth and Return on Invested
Capital targets is 180% of the target values. The PBUs are then subject to an adjustment of 20 percentage points (increase or
decrease) based on the Company’s TSR relative to the TSR of an applicable peer group. The maximum total payout that can
be earned, including the 20% relative TSR modifier, is 200% of the target value. The PBUs are classified as a non-current
liability and are remeasured at each reporting date. Compensation expense is recognized ratably from the grant date to the
vesting date for the number of awards expected to vest.
83
A summary of activity related to non-vested PBUs is presented below:
(units in thousands)
Non-vested at beginning of year
Granted
PBUs gained (lost) based on actual performance (1)
Vested
Forfeited/cancelled
Non-vested at end of year
2021
2020
Number of
PBUs
Grant Date
Fair Value Per
Share
Number of
PBUs
Grant Date
Fair Value Per
Share
11,613 $
9,408 $
(1,057) $
(20) $
(1,960) $
17,984 $
1.00
1.00
1.00
1.00
1.00
1.00
— $
11,863 $
1,056 $
— $
(1,306) $
11,613 $
—
1.00
1.00
—
1.00
1.00
(1) Shares gained (lost) based on actual performance are reflected in the year of vesting. The current year amount may include adjustments for prior years'
activity.
For the years ended December 31, 2021, 2020 and 2019, the Company recognized $7.4 million, $17.7 million and
$14.6 million, respectively, in expense related to the aforementioned stock-based long-term incentive awards. For the years
ended December 31, 2021 and 2020, the Company recognized $10.8 million and $6.5 million, respectively, in expense
related to the aforementioned cash-based long-term incentive awards. The income tax benefit recognized in 2021, 2020 and
2019 related to the stock-based long-term incentive compensation expense was $1.9 million, $4.6 million and $3.8 million,
respectively. The income tax benefit recognized in 2021 and 2020 related to the cash-based long-term incentive
compensation expense was $2.8 million and $1.7 million, respectively. As of December 31, 2021, total unrecognized long-
term incentive compensation expense was $21.0 million and is expected to be recognized over a weighted-average period of
approximately 2.1 years. Dividends are not paid or accrued on unvested stock units. The grant date fair values are not
reduced for dividends as none are expected to be paid during the vesting period.
15. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company is involved in various lawsuits, claims and regulatory and administrative
proceedings arising out of its business relating to general commercial and contractual matters, governmental regulations,
intellectual property rights, labor and employment matters, tax and other actions.
Although the ultimate outcome of any legal proceeding or investigation cannot be predicted with certainty, based on
present information, including the Company's assessment of the merits of the particular claim, the Company does not expect
that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse
effect on its results of operations, financial condition or cash flows.
MEPPs
The Company records an estimated undiscounted charge when it becomes probable that it has incurred a withdrawal
liability when exiting a MEPP. Final charges for MEPP withdrawals are not known until the plans issue their respective
determinations. As a result, these estimates may increase or decrease depending upon the final determinations.
Western Pennsylvania Teamsters and Employers Pension Fund
During the first quarter of 2020, Veritiv negotiated the complete withdrawal from the Western Pennsylvania
Teamsters and Employers Pension Fund (the "Western Pennsylvania Fund"), a MEPP related to its Warrendale, Pennsylvania
location, related to the second bargaining unit at its Warrendale, Pennsylvania location and recognized an estimated complete
withdrawal liability of $7.1 million, which was unchanged as of December 31, 2021. The withdrawal charge was recorded in
distribution expenses as it was not related to a restructuring activity.
84
During the second quarter of 2019, in the course of negotiations for a collective bargaining agreement, Veritiv
negotiated a partial withdrawal from the Western Pennsylvania Fund and recognized an estimated partial withdrawal liability
of $6.5 million, which was unchanged as of December 31, 2021. The withdrawal charge was recorded in distribution
expenses as it was not related to a restructuring activity.
As of December 31, 2021, the Company has not yet received the determination letters for the partial and subsequent
full withdrawal from the Western Pennsylvania Fund. The Company expects that payments will occur over an approximate
20-year period, which could run consecutively.
Minneapolis Food Distributors Ind Pension Plan
During the fourth quarter of 2021, in the course of negotiations for a collective bargaining agreement, Veritiv
negotiated a complete withdrawal from the Minneapolis Food Distributors Ind Pension Plan to take effect on July 31, 2022,
and recognized an estimated complete withdrawal liability of $0.5 million as of December 31, 2021. The withdrawal charge
was recorded in distribution expenses as it was not related to a restructuring activity. As of December 31, 2021, the
Company has not yet received the determination letter for the complete withdrawal from the Minneapolis Food Distributors
Ind Pension Plan. The Company expects that payments will occur over an approximate 3-year period.
16. SEGMENT AND OTHER INFORMATION
Veritiv's business is organized under four reportable segments: Packaging, Facility Solutions, Print, and Publishing
and Print Management ("Publishing"). See Note 2, Revenue Recognition and Credit Losses, for descriptions of the
Company's reportable segments and Corporate & Other.
85
The following table presents net sales, Adjusted EBITDA (earnings before interest, income taxes, depreciation and
amortization, restructuring charges, net, integration and acquisition expenses and other similar charges including any
severance costs, costs associated with warehouse and office openings or closings, consolidation, and relocation and other
business optimization expenses, stock-based compensation expense, changes in the LIFO reserve, non-restructuring asset
impairment charges, non-restructuring severance charges, non-restructuring pension charges, net, fair value adjustments
related to contingent liabilities assumed in mergers and acquisitions and certain other adjustments), which is the metric
management uses to assess operating performance of the segments, and certain other measures for each of the reportable
segments and Corporate & Other for the periods presented:
(in millions)
Packaging
Facility
Solutions
Print
Publishing
Total
Reportable
Segments
Corporate
& Other
Total
Year Ended December 31,
2021
Net sales
Adjusted EBITDA
Depreciation and
amortization
Restructuring charges, net
$ 3,760.4 $
894.0 $ 1,484.2 $
596.6 $
6,735.2 $
115.3 $ 6,850.5
393.5
52.7
96.0
18.7
560.9
(218.3)
24.5
8.8
7.5
1.7
6.2
3.3
0.1
0.0
38.3
13.8
16.9
1.6
55.2
15.4
Total assets, end of period
1,482.6
280.6
420.2
126.5
2,309.9
128.5
2,438.4
Year Ended December 31,
2020
Net sales
Adjusted EBITDA
Depreciation and
amortization
Restructuring charges, net
$ 3,316.7 $
922.3 $ 1,458.2 $
543.5 $
6,240.7 $
104.9 $ 6,345.6
300.0
41.6
22.5
16.0
7.9
5.1
33.7
7.6
23.8
12.8
388.1
(200.5)
0.2
0.0
38.2
44.9
19.5
7.3
57.7
52.2
Total assets, end of period
1,332.9
314.7
424.2
104.7
2,176.5
158.5
2,335.0
Year Ended December 31,
2019
Net sales
Adjusted EBITDA
Depreciation and
amortization
Restructuring charges, net
$ 3,446.3 $ 1,181.8 $ 2,104.6 $
798.0 $
7,530.7 $
128.7 $ 7,659.4
243.5
18.9
10.3
33.1
7.0
14.7
43.1
21.4
341.1
(185.2)
8.4
7.2
0.5
(9.1)
34.8
23.1
18.7
5.7
53.5
28.8
Total assets, end of period
1,290.2
324.4
610.3
123.9
2,348.8
162.3
2,511.1
86
The table below presents a reconciliation of net income (loss) as reflected on the Consolidated Statements of
Operations to Adjusted EBITDA for the reportable segments:
(in millions)
Net income (loss)
Interest expense, net
Income tax expense (benefit)
Depreciation and amortization
Restructuring charges, net
Facility closure charges, including (gain) loss from asset disposition
Stock-based compensation
LIFO reserve (decrease) increase
Non-restructuring severance charges
Non-restructuring pension charges, net
Integration expenses
Fair value adjustment on TRA contingent liability
Fair value adjustment on contingent consideration liability
Escheat audit contingent liability
Other
Adjustment for Corporate & Other
Year Ended December 31,
2020
2019
2021
$
144.6 $
17.2
52.9
55.2
15.4
0.1
7.4
43.6
7.8
0.5
—
—
—
—
(2.1)
218.3
34.2 $
25.1
8.8
57.7
52.2
(3.7)
17.7
(1.5)
4.1
7.2
—
(19.1)
1.0
(0.2)
4.1
200.5
388.1 $
(29.5)
38.1
0.7
53.5
28.8
—
14.6
(3.7)
8.4
6.6
17.5
0.3
13.1
3.7
3.8
185.2
341.1
Adjusted EBITDA for reportable segments
$
560.9 $
The following table presents net sales as well as property and equipment and operating lease ROU assets, which are
shown net of accumulated depreciation and or accumulated amortization, by geographic area:
Net Sales
Property and
Equipment
Operating Lease
ROU Assets
Year Ended December 31,
As of December 31,
As of December 31,
(in millions)
2021
2020
2019
2021
2020
2021
2020
U.S.
Canada
Rest of world
Total
$
5,919.2 $
5,521.8 $
6,779.6
$
120.1 $
149.4
$
321.7 $
311.8
722.3
209.0
650.9
172.9
699.4
180.4
38.7
4.1
42.3
3.0
43.5
10.4
30.6
9.3
$
6,850.5 $
6,345.6 $
7,659.4
$
162.9 $
194.7
$
375.6 $
351.7
No single customer accounted for more than 5% of net sales for the years ended December 31, 2021, 2020 and 2019.
During the year ended December 31, 2021, approximately 28% of our purchases were made from ten suppliers.
On March 31, 2021, the Company sold its Print segment's Rollsource business, which provides specialized
converting of commercial printing paper for distribution to the business-forms, direct-mail and digital-printing industries.
The Company received total cash proceeds of approximately $8.2 million, which was immediately used to pay outstanding
revolving loan borrowings under the ABL Facility. The cash proceeds are reported as proceeds from asset sales and sale of a
business in the investing activities section of the Consolidated Statements of Cash Flows. The Company recognized a total
gain of approximately $3.1 million on the sale, which is included in selling and administrative expenses on the Consolidated
Statements of Operations. The transaction and post-close adjustments are now complete. The divestiture is not considered a
strategic shift that will have a major effect on the Company's operations or financial results; therefore it is not reported as
discontinued operations.
17. SUBSEQUENT EVENT
On March 1, 2022, Veritiv announced that its Board of Directors authorized a $200 million share repurchase
program (the "2022 Share Repurchase Program"). The 2022 Share Repurchase Program authorizes the Company, from time
87
to time, to purchase shares of its common stock through open market transactions, privately negotiated transactions, forward,
derivative, or accelerated repurchase transactions, tender offers or otherwise, including Rule 10b5-1 trading plans, in
accordance with all applicable securities laws and regulations. The timing and method of any repurchases, which will depend
on a variety of market factors, including market conditions, are subject to results of operations, financial conditions, cash
requirements and other factors. This authorization may be suspended, terminated, increased or decreased by the Board of
Directors at any time.
88
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act, of 1934, as amended (the "Exchange Act"), designed to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms. The Company's management, with the participation of the
Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures as of December 31, 2021. Based on that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2021.
Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures,
which, by their nature, can provide only reasonable assurance regarding management's control objectives. The Company's
management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure
controls and procedures can prevent all possible errors or fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that misstatements due to error or fraud will not occur or that
all control issues and instances of fraud, if any, within the Company have been detected. Judgments in decision-making can
be faulty and breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the
individual acts of one or more persons. The design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and while our disclosure controls and procedures are designed to be effective under
circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control
system, misstatements due to possible errors or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the fourth quarter of 2021 that
have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
Management's Annual Report On Internal Control Over Financial Reporting
Management's Responsibility for the Financial Statements
The management of Veritiv Corporation is responsible for the preparation and integrity of the Consolidated
Financial Statements appearing in our Annual Report on Form 10-K. The financial statements were prepared in conformity
with U.S. GAAP appropriate in the circumstances and, accordingly, include certain amounts based on our best judgments and
estimates. Financial information in this Annual Report on Form 10-K is consistent with that in the financial statements.
Internal Control Over Financial Reporting
Management of our Company is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the Consolidated Financial Statements. Our internal control over financial reporting is supported by a program
of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of
qualified personnel and a written code of conduct adopted by our Board of Directors that is applicable to all officers and
employees of our Company and subsidiaries, as well as a code of conduct that is applicable to all of our directors.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
and even when determined to be effective, can only provide reasonable assurance with respect to financial statement
89
preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management, including the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of
our internal control over financial reporting as of December 31, 2021. The scope of management's assessment of the
effectiveness of internal control over financial reporting includes all of the Company's businesses. In making this assessment
on the effectiveness of our internal control over financial reporting as of December 31, 2021, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —
Integrated Framework (2013 Framework). Based on our assessment, management has concluded that internal controls over
financial reporting were effective as of December 31, 2021.
Our independent auditors, Deloitte & Touche LLP, an independent registered public accounting firm, are appointed
by the Audit and Finance Committee of our Board of Directors. Deloitte & Touche LLP has audited and reported on the
Consolidated Financial Statements of Veritiv Corporation, and has issued an attestation report on the effectiveness of our
internal control over financial reporting. The report of the independent registered public accounting firm is contained in this
Annual Report.
Audit and Finance Committee Responsibility
The Audit and Finance Committee of our Board of Directors, composed solely of directors who are independent in
accordance with the requirements of the New York Stock Exchange listing standards, the Exchange Act and our Corporate
Governance Guidelines, meets with the independent auditors, management and internal auditors periodically to discuss
internal control over financial reporting and auditing and financial reporting matters. The Audit and Finance Committee
reviews with the independent auditors the scope and results of the audit effort. The Audit and Finance Committee also meets
periodically with the independent auditors and the chief internal auditor without management present to ensure that the
independent auditors and the chief internal auditor have free access to the Audit and Finance Committee. Our Audit and
Finance Committee's Report can be found in the Proxy Statement for the Annual Meeting of Stockholders to be held on May
4, 2022, which will be filed on or about March 18, 2022.
90
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and Board of Directors of Veritiv Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Veritiv Corporation and subsidiaries (the "Company") as of
December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established
in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our
report dated March 1, 2022 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
March 1, 2022
91
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
This information is incorporated by reference to "Information About Our Executive Officers" in Part I, Item 1 of this
report, and to the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders to be filed subsequent to the
filing of this report under the headings "Proposal 1 – Election of Directors," "Corporate Governance—Board Committees,"
"Corporate Governance—Corporate Governance Principles" and, if applicable, "Security Ownership of Certain Beneficial
Owners and Management—Delinquent Section 16(a) Reports."
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders to be filed subsequent to the filing of this report under the headings "Executive Compensation" and "Corporate
Governance—Director Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
This information is incorporated by reference to the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders to be filed subsequent to the filing of this report under the headings "Security Ownership of Certain Beneficial
Owners and Management" and "Executive Compensation—Equity Compensation Plans."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
This information is incorporated by reference to the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders to be filed subsequent to the filing of this report under the headings "Corporate Governance—Related Person
Transaction Policy" and "Corporate Governance—Director Independence."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
This information is incorporated by reference to the Company's Proxy Statement for the 2022 Annual Meeting of
Shareholders to be filed subsequent to the filing of this report under the heading "Principal Accountant Fees and Services."
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed or incorporated by reference as part of this Form 10-K:
1. Financial Statements:
See Item 8. Financial Statements and Supplementary Data.
92
2. Financial Statement Schedules:
All schedules have been omitted as the required information is included in the footnotes or not applicable.
Exhibit No. Description
3.1
Amended and Restated Certificate of Incorporation of Veritiv Corporation, incorporated by reference
from Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on July 3, 2014.
3.2
3.3
4.1
10.1
10.2
10.3
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Veritiv Corporation,
incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May
13, 2016.
Amended and Restated Bylaws of Veritiv Corporation, incorporated by reference from Exhibit 3.1 to the
Registrant's Current Report on Form 8-K filed on December 21, 2018.
Description of the Registrant's Securities, incorporated by reference from Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K filed on February 27, 2020.
Second Amendment to ABL Credit Agreement dated as of May 20, 2021 among Veritiv Corporation,
Veritiv Operating Company and the other borrowers from to time parties thereto, the several lenders and
financial institutions from time to time parties thereto, Bank of America, N.A., as administrative agent
and collateral agent for the lenders party thereto, and the other parties thereto, incorporated by reference
from Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 20, 2021.
U.S. Guarantee and Collateral Agreement, dated as of July 1, 2014, made by xpedx Intermediate, LLC,
xpedx, LLC, the Subsidiary Borrowers and the U.S. Guarantors parties thereto and Veritiv Corporation,
in favor of Bank of America, N.A., as administrative agent and collateral agent for the Secured Parties (as
defined therein), together with the Assumption and Supplemental Agreement, dated as of July 1, 2014,
made by Veritiv Corporation, Alco Realty, Inc., Graph Comm Holdings International, Inc., Graphic
Communications Holdings, Inc., Paper Corporation of North America, Unisource International Holdings,
Inc., Unisource International Holdings Poland, Inc., and Unisource Worldwide, Inc., in favor of Bank of
America, N.A., as collateral agent and as administrative agent, incorporated by reference from Exhibit
10.2 to the Registrant's Current Report on Form 8-K filed on July 3, 2014.
Canadian Guarantee and Collateral Agreement, dated as of July 1, 2014, made by Unisource Canada, Inc.
and the Canadian Guarantors parties thereto, in favour of Bank of America, N.A., as administrative agent
and collateral agent for the Secured Parties (as defined therein), incorporated by reference from Exhibit
10.3 to the Registrant's Current Report on Form 8-K filed on July 3, 2014.
Employment Agreement, dated as of December 29, 2017, between Veritiv Corporation and Mary A.
Laschinger, incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed on January 5, 2018.
Offer Letter, dated as of February 13, 2014, between Veritiv Corporation (f/k/a xpedx Holding Company)
and Stephen J. Smith, incorporated by reference from Exhibit 10.12 to the Registrant's Quarterly Report
on Form 10-Q filed on August 14, 2014.
Separation Agreement, dated as of September 15, 2021, by and between Veritiv Operating Company and
Tracy L. Pearson, incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed on September 17, 2021.
Offer Letter, dated as of February 15, 2018, between Veritiv Operating Company and Salvatore Abbate,
incorporated by reference from Exhibit 10.12 to the Registrant's Annual Report on Form 10-K filed on
February 28, 2019.
Form of Indemnification Agreement between Veritiv Corporation (f/k/a xpedx Holding Company) and
each of its directors, incorporated by reference from Exhibit 10.10 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-193950) filed on June 11, 2014.
Veritiv Corporation 2014 Omnibus Incentive Plan, as amended and restated, effective March 8, 2017,
incorporated by reference to Appendix A of the Registrant's Definitive Proxy Statement on Schedule 14A
filed on April 13, 2017.
10.10†
Veritiv Corporation Deferred Compensation Savings Plan, incorporated by reference from Exhibit 10.20
to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 2014.
93
Exhibit No. Description
10.11†
Form of Director Deferred Share Unit Award Agreement, incorporated by reference from Exhibit 10.21
to the Registrant's Annual Report on Form 10-K filed on March 24, 2015.
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
10.19†
10.20†
10.21†*
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
Form of Director Deferred Share Unit Award Agreement (Stock-Settled Award), incorporated by
reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on August 9, 2016.
Form of Restricted Stock Unit Award Agreement, incorporated by reference from Exhibit 10.22 to the
Registrant's Annual Report on Form 10-K filed on March 24, 2015.
Form of Performance Share Award Agreement (Adjusted EBITDA Performance Shares), incorporated by
reference from Exhibit 10.23 to the Registrant's Annual Report on Form 10-K filed on March 24, 2015.
Form of Performance Share Award Agreement (Relative TSR Performance Shares), incorporated by
reference from Exhibit 10.24 to the Registrant's Annual Report on Form 10-K filed on March 24, 2015.
2015 Veritiv Corporation Annual Incentive Plan, as amended and restated, effective March 8, 2017
incorporated by reference to Appendix B of the Registrant's Definitive Proxy Statement on Schedule 14A
filed on April 13, 2017.
Form of Restricted Stock Unit Award Agreement (2020 revision), incorporated by reference from Exhibit
10.24 to the Registrant's Annual Report on Form 10-K filed on February 27, 2020.
Form of Performance-Based Unit Award Agreement (ROIC, Packaging Gross Profit Dollar Growth &
Relative TSR Modifier), incorporated by reference from Exhibit 10.25 to the Registrant's Annual Report
on Form 10-K filed on February 27, 2020.
Separation Agreement, dated as of September 18, 2020, by and between Veritiv Corporation and Mary A.
Laschinger, incorporated by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K
filed on September 21, 2020.
Veritiv Corporation Executive Severance Plan, as amended and restated, effective September 30, 2020,
incorporated by reference from Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on
September 21, 2020.
Form of Performance Share Unit Award Agreement (ROIC, Packaging Gross Profit Dollar Growth &
Relative TSR Modifier)
List of Subsidiaries.
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
Rule 13a-14(a) Certification of the Chief Executive Officer.
Rule 13a-14(a) Certification of the Chief Financial Officer.
Section 1350 Certification of the Chief Executive Officer.
Section 1350 Certification of the Chief Financial Officer.
101.INS*
XBRL Instance Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
+ Omitted schedules will be furnished supplementally to the SEC upon request
94
Exhibit No. Description
† Management contract or compensatory plans or arrangements
* Furnished or filed herewith
ITEM 16. FORM 10-K SUMMARY
None.
95
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2022.
SIGNATURES
VERITIV CORPORATION
(Registrant)
By: /s/ Salvatore A. Abbate
Name: Salvatore A. Abbate
Title: Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities indicated on March 1, 2022.
(i)
Principal executive officer:
/s/ Salvatore A. Abbate
Salvatore A. Abbate
(ii)
Principal financial officer:
/s/ Stephen J. Smith
Stephen J. Smith
(iii) Principal accounting officer:
Chief Executive Officer and Director
Senior Vice President and Chief Financial Officer
/s/ Andrew E. Magley
Andrew E. Magley
Chief Accounting Officer
(iv) Directors:
/s/ Stephen E. Macadam
Stephen E. Macadam
Chairman of the Board of Directors
/s/ Shantella E. Cooper
Director
Shantella E. Cooper
/s/ David E. Flitman
David E. Flitman
/s/ Daniel T. Henry
Daniel T. Henry
/s/ Tracy A. Leinbach
Tracy A. Leinbach
Director
Director
Director
/s/ Gregory B. Morrison
Director
Gregory B. Morrison
/s/ Michael P. Muldowney
Michael P. Muldowney
/s/ Charles G. Ward, III
Charles G. Ward, III
Director
Director
96
LOGAN INGRAM Industrial Designer
Shareholder Information
TRANSFER AGENT
& REGISTRAR
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
computershare.com/investor
866.276.9370
INVESTOR CONTACT
Scott Palfreeman
Director, Finance and
Investor Relations
investor@veritivcorp.com
844.845.2136
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
FOR 2021
Deloitte & Touche LLP
Atlanta, GA
ANNUAL REPORT &
FORM 10-K COPIES
Copies of the Annual Report
and Form 10-K are available
and may be obtained by
contacting:
ANNUAL MEETING
The Veritiv Corporation
Annual Meeting of
Shareholders will be held
virtually on Wednesday,
May 4, 2022
Veritiv Corporation
c/o Investor Relations
1000 Abernathy Rd. NE
Building 400, Suite 1700
Atlanta, GA 30328
844.845.2136
ir.veritivcorp.com
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report regarding the
Company’s future operating results, performance, business
plans, prospects, guidance and any other statements not
constituting historical fact are “forward-looking statements”
subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. All forward-looking statements
reflect only the Company’s current beliefs and assumptions
with respect to future operating results, performance,
business plans, prospects, guidance and other matters, and
are based on information currently available to the Company.
Accordingly, the statements are subject to significant risks,
uncertainties and contingencies, which could cause the
Company’s actual operating results, performance or business
plans or prospects to differ materially from those expressed
in, or implied by, these statements. For a detailed discussion
of specific risks and uncertainties that could cause actual
results to differ from those contained in the forward-looking
statements, see the information under the heading “Risk
Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2021, which is included in this report,
and in other filings we make with the SEC. The Company
undertakes no obligation to update or revise the forward-
looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In
addition, historical information should not be considered as
an indicator of future performance.
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LinkedIn.com/company/ Veritiv
Facebook.com/ VeritivCorp
Twitter.com/ Veritiv
1000 Abernathy Rd. NE
Building 400, Suite 1700
Atlanta, GA 30328
veritivcorp.com
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