VERITIV CORP, 10-Q filed on 5/4/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2017
Apr. 28, 2017
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
VERITIV CORPORATION 
 
Entity Central Index Key
0001599489 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus (Q1,Q2,Q3,FY)
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
15,690,745 
Condensed Consolidated Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]
 
 
Net sales (including sales to related party of $8.9 and $9.0, respectively)
$ 1,994.6 
$ 2,019.8 
Cost of products sold (including purchases from related party of $47.1 and $56.3, respectively) (exclusive of depreciation and amortization shown separately below)
1,629.3 
1,654.5 
Distribution expenses
126.2 
127.5 
Selling and administrative expenses
211.6 
200.9 
Depreciation and amortization
13.1 
13.5 
Integration expenses
6.4 
6.2 
Restructuring charges
4.1 
1.7 
Operating income
3.9 
15.5 
Interest expense, net
6.4 
6.5 
Other expense, net
1.1 
1.5 
Income (loss) before income taxes
(3.6)
7.5 
Income tax expense (benefit)
(1.4)
4.2 
Net income (loss)
$ (2.2)
$ 3.3 
Earnings (loss) per share:
 
 
Basic and diluted earnings (loss) per share
$ (0.14)
$ 0.21 
Weighted average shares outstanding:
 
 
Weighted average number of shares outstanding – basic and diluted (in shares)
15.69 
16.00 
Condensed Consolidated Statements of Operations (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]
 
 
Related party sales
$ 8.9 
$ 9.0 
Related party cost of products sold
$ 47.1 
$ 56.3 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
 
 
Net income (loss)
$ (2.2)
$ 3.3 
Other comprehensive income (loss):
 
 
Foreign currency translation adjustments
2.8 
3.8 
Change in fair value of cash flow hedge, net of $0.0 and $0.1 tax, respectively
(0.1)
(0.3)
Pension liability adjustments, net of $0.0 and $0.1 tax, respectively
0.1 
0.1 
Other comprehensive income
2.8 
3.6 
Total comprehensive income
$ 0.6 
$ 6.9 
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
 
 
Change in fair value of cash flow hedge, tax
$ 0 
$ 0.1 
Pension liability adjustments, tax
$ 0 
$ 0.1 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash
$ 52.4 
$ 69.6 
Accounts receivable, less allowances of $34.7 and $34.5, respectively
1,038.6 
1,048.3 
Related party receivable
3.7 
3.9 
Inventories
725.2 
707.9 
Other current assets
120.8 
118.9 
Total current assets
1,940.7 
1,948.6 
Property and equipment (net of depreciation and amortization of $296.5 and $292.8, respectively)
371.2 
371.8 
Goodwill
50.2 
50.2 
Other intangibles, net
20.4 
21.0 
Deferred income tax assets
64.1 
61.8 
Other non-current assets
30.4 
30.3 
Total assets
2,477.0 
2,483.7 
Current liabilities:
 
 
Accounts payable
604.3 
654.1 
Related party payable
10.1 
9.0 
Accrued payroll and benefits
67.7 
84.4 
Other accrued liabilities
95.8 
102.5 
Current maturities of long-term debt
2.6 
2.9 
Financing obligations to related party, current portion
14.9 
14.9 
Total current liabilities
795.4 
867.8 
Long-term debt, net of current maturities
825.7 
749.2 
Financing obligations to related party, less current portion
171.4 
176.1 
Defined benefit pension obligations
26.6 
27.6 
Other non-current liabilities
111.8 
121.2 
Total liabilities
1,930.9 
1,941.9 
Commitments and contingencies (Note 10)
   
   
Shareholders' equity:
 
 
Preferred stock, $0.01 par value, 10.0 million shares authorized, none issued
0 
0 
Common stock, $0.01 par value, 100.0 million shares authorized, 16.0 million shares issued; shares outstanding - 15.7 million at March 31, 2017 and December 31, 2016 respectively
0.2 
0.2 
Additional paid-in capital
578.2 
574.5 
Accumulated earnings
17.5 
19.7 
Accumulated other comprehensive loss
(36.2)
(39.0)
Treasury stock at cost - 0.3 million shares at March 31, 2017 and December 31, 2016
(13.6)
(13.6)
Total shareholders' equity
546.1 
541.8 
Total liabilities and shareholders' equity
$ 2,477.0 
$ 2,483.7 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Assets
 
 
Allowance for doubtful accounts
$ 34.7 
$ 34.5 
Depreciation and amortization
$ 296.5 
$ 292.8 
Shareholders' equity:
 
 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized (in shares)
10,000,000 
10,000,000 
Preferred stock, shares issued (in shares)
0 
0 
Common stock par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
100,000,000 
100,000,000 
Common stock, shares issued (in shares)
16,000,000 
16,000,000 
Common stock, shares outstanding (in shares)
15,700,000 
15,700,000 
Treasury stock, at cost (in shares)
300,000 
300,000 
Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating Activities
 
 
Net income (loss)
$ (2.2)
$ 3.3 
Depreciation and amortization
13.1 
13.5 
Amortization of deferred financing fees
0.6 
1.1 
Net losses on dispositions of property and equipment
0.5 
0.2 
Long-lived asset impairment charges
0.7 
0.4 
Provision for allowance for doubtful accounts
0.6 
(2.3)
Deferred income tax provision (benefit)
(2.1)
2.6 
Stock-based compensation
3.7 
2.0 
Other non-cash items, net
(0.3)
2.1 
Changes in operating assets and liabilities
 
 
Accounts receivable and related party receivable
11.8 
58.5 
Inventories
(15.6)
(2.8)
Other current assets
(0.9)
(6.3)
Accounts payable and related party payable
(25.9)
37.6 
Accrued payroll and benefits
(16.9)
(20.7)
Other accrued liabilities
(5.5)
(15.1)
Other
(2.4)
0.4 
Net cash provided by (used for) operating activities
(40.8)
74.5 
Investing activities
 
 
Property and equipment additions
(11.4)
(8.9)
Proceeds from asset sales
2.0 
1.0 
Net cash used for investing activities
(9.4)
(7.9)
Financing Activities
 
 
Change in book overdrafts
(24.2)
(15.4)
Borrowings of long-term debt
1,200.9 
1,122.0 
Repayments of long-term debt
(1,131.3)
(1,175.9)
Payments under equipment capital lease obligations
(0.7)
(1.0)
Payments under financing obligations to related party
(3.6)
(3.6)
Payments under Tax Receivable Agreement
(8.5)
0 
Net cash provided by (used for) financing activities
32.6 
(73.9)
Effect of exchange rate changes on cash
0.4 
0.6 
Net change in cash
(17.2)
(6.7)
Cash at beginning of period
69.6 
54.4 
Cash at end of period
52.4 
47.7 
Supplemental cash flow information
 
 
Cash paid for income taxes, net of refunds
1.3 
0.6 
Cash paid for interest
5.6 
5.2 
Non-cash investing and financing activities
 
 
Non-cash additions to property and equipment
$ 6.8 
$ 0 
Business and Summary of Significant Accounting Policies
Business and Summary of Significant Accounting Policies
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Veritiv Corporation ("Veritiv" or the "Company") is a North American business-to-business distributor of packaging, facility solutions, print and publishing products and services. Additionally, Veritiv provides logistics and supply chain management solutions to its customers. Veritiv was established in 2014, following the merger (the "Merger") of International Paper Company's xpedx distribution solutions business ("xpedx") and UWW Holdings, Inc. ("UWWH"), the parent company of Unisource Worldwide, Inc. ("Unisource"). The Company operates from approximately 170 distribution centers primarily throughout the U.S., Canada and Mexico.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for a complete set of annual audited financial statements.

The accompanying unaudited financial information should be read in conjunction with the Consolidated and Combined Financial Statements and Notes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016. In the opinion of management, all adjustments, including normal recurring accruals and other adjustments, considered necessary for a fair presentation of the interim financial information have been included. The operating results for the interim periods are not necessarily indicative of results for the full year.

All significant intercompany transactions between Veritiv's businesses have been eliminated.
        
Use of Estimates

The preparation of unaudited 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, accounts receivable valuation, inventory valuation, employee benefit plans, income tax contingency accruals and valuation allowances, multi-employer pension plan withdrawal liabilities 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. Estimates are revised as additional information becomes available.
Recently Issued Accounting Standards Not Yet Adopted
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606)
 
The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.
 
January 1, 2018; early adoption date is no earlier than the annual period beginning after December 15, 2016
 
The Company’s analysis of the impact of this standard is ongoing. The Company has identified areas requiring further analysis and that analysis continued during the quarter. Those areas include accounting for customer rebates, principal/agent considerations and bill and hold transactions. The Company expects to complete its analysis of these areas during the second quarter and begin working on the disclosure requirements. The Company has not made a decision on the method of adoption. The Company has not determined the effect of the new standard on its internal control over financial reporting or other changes in business practices and processes, but will do so during 2017. The Company will adopt this ASU on January 1, 2018.

ASU 2016-02, Leases (Topic 842)
 
The standard requires lessees to put most leases on their balance sheet but recognize expenses in their statement of operations in a manner similar to current accounting guidance. The new standard also eliminates the current guidance related to real estate specific provisions. The guidance requires application on a modified retrospective basis.
 
January 1, 2019; early adoption is permitted
 
The Company anticipates that the adoption of the standard will have a material impact to its Consolidated Financial Statements and related disclosures as it will result in recording virtually all operating leases on the balance sheet as a lease obligation and right to use asset. The Company currently plans to adopt this ASU on January 1, 2019.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)
 
The standard will replace the currently required incurred loss impairment methodology with guidance that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to be considered in making credit loss estimates. The guidance requires application on a modified retrospective basis. Other application requirements exist for specific assets impacted by a more-than-insignificant credit deterioration since origination.
 
January 1, 2020; early adoption for fiscal years beginning after December 15, 2018
 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company currently plans to adopt this ASU on January 1, 2020.
 
 
 
 
 
 
 
Recently Issued Accounting Standards Not Yet Adopted (continued)
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
ASU 2016-15,
Statement of Cash
Flows (Topic 230)

 
The standard addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance requires application on a retrospective basis.

 
January 1, 2018; early adoption is permitted (early adoption requires the adoption of all amendments in the same period)

 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company will adopt this ASU on January 1, 2018.
ASU 2017-01, Business Combinations (Topic 805)
 
The standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance requires application on a prospective basis.
 
January 1, 2018; early adoption is permitted
 
The Company will adopt this ASU on January 1, 2018.
ASU 2017-07, Compensation-Retirement Benefits (Topic 715)
 
The standard requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose the amount of net benefit cost that is included in the income statement or capitalized in assets, by line item. The standard requires employers to report the service cost component in the same line
item(s) as other compensation costs and to report other pension-related costs (which include interest costs, amortization of pension-related costs from prior periods and the gains or losses on plan assets) separately and exclude them from the subtotal of operating income. The standard also allows only the service cost component to be eligible for capitalization when applicable. The guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and on a prospective basis for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.
 
January 1, 2018; early adoption is permitted as of the first interim period of an annual period for which interim or annual financial statements have not been issued
 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company will adopt this ASU on January 1, 2018.


Recently Adopted Accounting Standards
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
ASU 2015-11, Simplifying the Measurement of Inventory
 
The standard requires companies to measure inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories measured by either the last-in first-out method or retail inventory method. The guidance requires application on a prospective basis.
 
January 1, 2017
 
The Company adopted this ASU on January 1, 2017. The adoption did not materially impact its Consolidated Financial Statements or related disclosures. For the three months ended March 31, 2017, approximately 87% of the inventory balance was measured using LIFO.
ASU 2017-04, Intangibles - Goodwill and Other (Topic 350)
 
The standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The guidance requires application on a prospective basis.
 
January 1, 2020; early adoption is permitted
 
The Company adopted this ASU on January 1, 2017.
Integration and Restructuring Charges
Integration and Restructuring Charges
2. INTEGRATION AND RESTRUCTURING CHARGES

Integration Charges

The Company currently expects costs and charges associated with achieving anticipated cost savings and other synergies from the Merger (excluding charges relating to the complete or partial withdrawal from multi-employer pension plans, the majority of which are uncertain at this time), to be approximately $225 million to $250 million over a five-year period from July 1, 2014, including approximately $90 million for capital expenditures, primarily consisting of information technology infrastructure, systems integration and planning. Through March 31, 2017, the Company has incurred approximately $209 million in charges, including approximately $71 million for capital expenditures.
    
During the three months ended March 31, 2017 and 2016, Veritiv incurred costs and charges related primarily to: professional services and project management fees, internally dedicated integration management resources, retention compensation, information technology conversion costs, rebranding and other costs to integrate the combined businesses of xpedx and Unisource.

The following table summarizes the components of integration expenses:
 
Three Months Ended 
 March 31,
(in millions)
2017
 
2016
Integration management
$
3.0

 
$
1.8

Retention compensation
0.1

 
1.1

Information technology conversion costs
1.8

 
1.1

Rebranding
0.1

 
0.7

Legal, consulting and other professional fees
0.4

 
0.5

Other
1.0

 
1.0

Total integration expenses
$
6.4

 
$
6.2




Veritiv Restructuring Plan
As part of the Merger, the Company is executing on 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 includes 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 continues to evaluate its operations outside of North America to identify additional cost saving opportunities. The Company may elect to restructure its operations in specific countries, which may include staff reductions, lease terminations and facility closures or the complete exit of a market.

Related to these company-wide initiatives, the Company recorded estimated restructuring charges of $4.1 million and $1.7 million for the three months ended March 31, 2017 and 2016, respectively. See Note 11, Segment Information, for the impact these charges had on the Company's reportable segments. Other direct costs reported in the table below include facility closing costs and other incidental costs associated with the development, communication, administration and implementation of these initiatives.

The following is a summary of the Company's restructuring activity for the three months ended March 31, 2017:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Total
Balance at December 31, 2016
$
1.8

 
$
8.0

 
$
9.8

Costs incurred
1.4

 
3.1

 
4.5

Payments
(1.2
)
 
(2.8
)
 
(4.0
)
Balance at March 31, 2017
$
2.0

 
$
8.3

 
$
10.3



In addition, for the three months ended March 31, 2017, the Company recognized a $0.4 million net non-cash gain related to vacating certain of its facilities.

The following is a summary of the Company's restructuring activity for the three months ended March 31, 2016:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Total
Balance at December 31, 2015
$
1.7

 
$
0.4

 
$
2.1

Costs incurred
0.7

 
0.3

 
1.0

Payments
(0.9
)
 
(0.4
)
 
(1.3
)
Balance at March 31, 2016
$
1.5

 
$
0.3

 
$
1.8



In addition, for the three months ended March 31, 2016, the Company recognized a $0.7 million non-cash loss from the early exit of a facility lease.
Debt
Debt
3. DEBT

The Company's long-term debt obligations were as follows:
(in millions)
March 31, 2017
 
December 31, 2016
Asset-Based Lending Facility (the "ABL Facility")
$
796.8

 
$
726.9

Equipment capital lease and other obligations
31.5

 
25.2

Total debt
828.3

 
752.1

Less: current portion of long-term debt
(2.6
)
 
(2.9
)
Long-term debt, net of current maturities
$
825.7

 
$
749.2



The equipment capital lease and other obligations reported in the table above includes $26.1 million and $19.1 million related to the accumulated construction costs for the Toronto build-to-suit arrangement as of March 31, 2017 and December 31, 2016, respectively. This arrangement will continue to be reported as a financing obligation on the Company's balance sheets.    

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 March 31, 2017, the available additional borrowing capacity under the ABL Facility was approximately $365.3 million.
Income Taxes
Income Taxes
4. INCOME TAXES

The Company’s provision for income taxes for the three months ended March 31, 2017 and 2016 is based on the estimated annual effective tax rate, plus any discrete items.

The following table presents the provision for income taxes and the effective tax rates for the three months ended March 31, 2017 and 2016:
 
Three Months Ended March 31,
(in millions)
2017
 
2016
Income (loss) before income taxes
$
(3.6
)
 
$
7.5

Income tax expense (benefit)
$
(1.4
)
 
$
4.2

Effective tax rate
38.9
%
 
56.0
%


The difference between the Company’s effective tax rates for the three months ended March 31, 2017 and 2016 and the U.S. statutory tax rate of 35.0% primarily relates to changes in the valuation allowance against deferred tax assets, non-deductible expenses, state income taxes (net of federal income tax benefit) and the Company's income (loss) by jurisdiction. The effective tax rate may vary significantly due to potential fluctuations in the amount and source, including both foreign and domestic, of pre-tax income and changes in amounts of non-deductible expenses and other items that could impact the effective tax rate.
Related Party Transactions
Related Party Transactions
5. RELATED PARTY TRANSACTIONS

On March 22, 2017, UWW Holdings, LLC (the "UWWH Stockholder"), one of Veritiv's existing stockholders and the former sole stockholder of UWWH, sold 1.80 million shares of Veritiv common stock in a block trade. The Company did not sell any shares and did not receive any of the proceeds. In conjunction with this transaction, Veritiv incurred approximately $0.2 million in transaction-related fees, which were included in selling and administrative expenses on the Condensed Consolidated Statements of Operations. After giving effect to this transaction, the UWWH Stockholder beneficially owned 27.3% of Veritiv's outstanding common stock as of March 31, 2017.
 
Transactions with Georgia-Pacific

Veritiv purchases certain inventory items from, and sells certain inventory items to, Georgia-Pacific in the normal course of business. As a result of the Merger and related private placement, Georgia-Pacific, as joint owner of the UWWH Stockholder, is a related party. The following tables summarize the financial impact of these related party transactions with Georgia-Pacific:
 
 
Three Months Ended March 31,
(in millions)
 
2017
 
2016
Sales to Georgia-Pacific, reflected in net sales
 
$
8.9

 
$
9.0

Purchases of inventory from Georgia-Pacific, recognized in cost of products sold
 
$
47.1

 
$
56.3


(in millions)
 
March 31, 2017
 
December 31, 2016
Inventories purchased from Georgia-Pacific that remained on Veritiv's balance sheet
 
$
24.0

 
$
24.8

Related party payable to Georgia-Pacific
 
$
10.1

 
$
9.0

Related party receivable from Georgia-Pacific
 
$
3.7

 
$
3.9



In January 2017, in connection with the Tax Receivable Agreement ("TRA") executed at the time of the Merger, Veritiv paid $8.7 million total, of which $8.5 million was the principal amount, to the UWWH Stockholder for the utilization of pre-merger net operating losses in its 2015 federal and state tax returns. See Note 7, Fair Value Measurements for additional information regarding the TRA.
Defined Benefit Plans
Defined Benefit Plans
6. DEFINED BENEFIT PLANS

In conjunction with the Merger, Veritiv assumed responsibility for Unisource’s defined benefit plans and Supplemental Executive Retirement Plans in the U.S. and Canada. Net periodic benefit cost (credit) associated with these plans is summarized below:
    
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
(in millions)
U.S.
 
Canada
 
U.S.
 
Canada
Components of net periodic benefit cost (credit):
 
 
 
 
 
 
 
Service cost
$
0.5

 
$
0.1

 
$
0.4

 
$
0.1

Interest cost
0.7

 
0.7

 
0.9

 
0.8

Expected return on plan assets
(1.3
)
 
(0.9
)
 
(1.3
)
 
(0.9
)
Amortization of net loss
0.0

 
0.1

 
0.0

 
0.1

Net periodic benefit cost (credit)
$
(0.1
)
 
$
0.0

 
$
0.0

 
$
0.1


        
 
 
 
 
 
 
 
 
Fair Value Measurements
Fair Value Measurements
7. FAIR VALUE MEASUREMENTS

At March 31, 2017 and December 31, 2016, the carrying amounts of cash, receivables, payables and other components of other current assets and other current liabilities approximate their fair values due to the short maturity of these items.

Certain of the Company's assets and liabilities are also subject to nonrecurring fair value measurements. Generally, assets are recorded at their fair values on a nonrecurring basis as a result of impairment charges. For the three months ended March 31, 2017, the Company recognized $0.7 million in non-restructuring impairment charges related to a software asset which will not be placed into service and has no alternative use. For the three months ended March 31, 2016, the Company recognized $0.4 million in non-restructuring impairment charges related to software assets and the sale of a facility.

The Company's liabilities disclosed at fair value at March 31, 2017 were as follows:
(in millions)
 
Total

Level 1

Level 2

Level 3
ABL Facility
 
$
796.8



 
$
796.8

 

Tax Receivable Agreement
 
$
60.3



 

 
$
60.3


The Company's liabilities disclosed at fair value at December 31, 2016 were as follows:
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
ABL Facility
 
$
726.9

 

 
$
726.9

 

Tax Receivable Agreement
 
$
67.9

 

 

 
$
67.9



Borrowings under the ABL Facility are at variable market interest rates and, accordingly, the carrying amount approximates fair value.

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 fair value of the TRA is a Level 3 measurement which relied upon both Level 2 data (publicly observable data such as market interest rates) and Level 3 data (internal data such as the Company’s projected revenues, taxable income and assumptions about the utilization of Unisource’s net operating losses ("NOL" or "NOLs"), attributable to taxable periods prior to the Merger, by the Company). The amount payable under the TRA is contingent on the Company generating a certain level of taxable income prior to the expiration of the NOL carryforwards. Moreover, future trading of Company stock by significant shareholders may result in additional ownership changes as defined under Section 382 of the Internal Revenue Code, further limiting the use of Unisource's NOLs and the amount ultimately payable under the TRA. The contingent liability is remeasured at fair value at each reporting period with the change in fair value recognized in other expense, net on the Condensed Consolidated Statements of Operations. At March 31, 2017, the Company remeasured the contingent liability using a discount rate of 4.6% (Moody's daily long-term corporate BAA bond yield).

The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the three months ended March 31, 2017:    
(in millions)
 
Contingent Liability
Balance at December 31, 2016
 
$
67.9

Change in fair value adjustment recorded in other expense, net
 
0.9

Principal Payments
 
(8.5
)
Balance at March 31, 2017
 
$
60.3



The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the three months ended March 31, 2016:    
(in millions)
 
Contingent Liability
Balance at December 31, 2015
 
$
63.0

Change in fair value adjustment recorded in other expense, net
 
1.8

Balance at March 31, 2016
 
$
64.8



There have been no transfers between the fair value measurement levels for the three months ended March 31, 2017. The Company recognizes transfers between the fair value measurement levels at the end of the reporting period.
Earnings Per Share
Earnings (Loss) Per Share
8. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share for Veritiv common stock is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is similarly calculated, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued, except where the inclusion of such common shares would have an antidilutive impact.

A summary of the numerators and denominators used in the basic and diluted earnings (loss) per share calculation is as follows:
 
Three Months Ended 
 March 31,
(in millions, except per share data)
2017
 
2016
Numerator:
 
 
 
Net income (loss)
$
(2.2
)
 
$
3.3

 
 
 
 
Denominator:
 
 
 
Weighted average number of shares outstanding – basic and diluted
15.69

 
16.00

 
 
 
 
Earnings (loss) per share:
 
 
 
     Basic and diluted earnings (loss) per share
$
(0.14
)
 
$
0.21

 
 
 
 
Antidilutive stock-based awards excluded from computation of diluted earnings per share ("EPS")
0.47

 
0.15

Performance stock-based awards excluded from computation of diluted EPS because performance conditions had not been met
0.36

 
0.53

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
9. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides the components of accumulated other comprehensive loss ("AOCL") at March 31, 2017 (amounts are shown net of their related income tax effect, if any):
(in millions)
 
Foreign currency translation adjustments
 
Retirement liabilities
 
Interest rate swap
 
AOCL
Balance at December 31, 2016
 
$
(29.2
)
 
$
(9.1
)
 
$
(0.7
)
 
$
(39.0
)
     Unrealized net gains (losses) arising during the period
 
2.8

 
0.1

 
(0.1
)
 
2.8

Net current period other comprehensive income (loss)
 
2.8

 
0.1

 
(0.1
)
 
2.8

Balance at March 31, 2017
 
$
(26.4
)
 
$
(9.0
)
 
$
(0.8
)
 
$
(36.2
)
    
The following table provides the components of AOCL at March 31, 2016 (amounts are shown net of their related income tax effect, if any):
(in millions)
 
Foreign currency translation adjustments
 
Retirement liabilities
 
Interest rate swap
 
AOCL
Balance at December 31, 2015
 
$
(27.1
)
 
$
(7.4
)
 
$
(0.5
)
 
$
(35.0
)
     Unrealized net gains (losses) arising during the period
 
3.8

 
—

 
(0.3
)
 
3.5

     Amounts reclassified from AOCL
 
—

 
0.1

 
—

 
0.1

Net current period other comprehensive income (loss)
 
3.8

 
0.1

 
(0.3
)
 
3.6

Balance at March 31, 2016
 
$
(23.3
)
 
$
(7.3
)
 
$
(0.8
)
 
$
(31.4
)
Commitments and Contingencies
Commitments and Contingencies
10. 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 and cash flows.

Escheat Audit

During 2013, Unisource was notified by the State of Delaware that it intended to examine the books and records of Unisource to determine compliance with Delaware escheat laws. Since that date, seven other states have joined with Delaware in the audit process, which is conducted by an outside firm on behalf of the states. While the original time period for the audit was from 1981 to present, recent legal developments have resulted in Delaware narrowing the time period from 1998 to present. The Company has been informed that similar audits have generally taken four years or more to complete. The Company has determined that the ultimate outcome of this audit cannot be reasonably estimated at this time. Any claims or liabilities resulting from these audits could have a material impact on the Company’s results of operations, financial condition and cash flows.
Segment Information
Segment Information
11. SEGMENT INFORMATION

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 tables present net sales, Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges, stock-based compensation expense, changes in the LIFO reserve, non-restructuring asset impairment charges, non-restructuring severance charges, integration expenses, fair value adjustments on the contingent liability associated with the TRA 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 for the periods presented:
    
(in millions)
Packaging
 
Facility Solutions
 
Print
 
Publishing
 
Total Reportable Segments
 
Corporate & Other
 
Total
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
721.8

 
$
306.8

 
$
698.7

 
$
234.0

 
$
1,961.3

 
$
33.3

 
$
1,994.6

Adjusted EBITDA
50.5

 
5.0

 
14.1

 
6.1

 
75.7

 
(45.9
)
 


Depreciation and amortization
3.2

 
1.4

 
2.6

 
0.6

 
7.8

 
5.3

 
13.1

Restructuring charges
1.6

 
0.4

 
1.9

 
0.0

 
3.9

 
0.2

 
4.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
671.5

 
301.0

 
759.1

 
262.3

 
1,993.9

 
25.9

 
2,019.8

Adjusted EBITDA
46.7

 
7.4

 
16.0

 
4.0

 
74.1

 
(39.2
)
 


Depreciation and amortization
3.1

 
1.5

 
3.2

 
0.9

 
8.7

 
4.8

 
13.5

Restructuring charges
0.3

 
0.3

 
0.9

 
0.0

 
1.5

 
0.2

 
1.7


    
The table below presents a reconciliation of income (loss) before income taxes as reflected in the Condensed Consolidated Statements of Operations to Adjusted EBITDA for reportable segments:
 
Three Months Ended 
 March 31,
(in millions)
2017
 
2016
Income (loss) before income taxes
$
(3.6
)
 
$
7.5

Interest expense, net
6.4

 
6.5

Depreciation and amortization
13.1

 
13.5

Restructuring charges
4.1

 
1.7

Stock-based compensation
3.7

 
2.0

LIFO reserve decrease
(2.5
)
 
(5.3
)
Non-restructuring asset impairment charges
0.7

 
0.4

Non-restructuring severance charges
0.5

 
0.8

Integration expenses
6.4

 
6.2

Fair value adjustments on TRA contingent liability
0.9

 
1.8

Other
0.1

 
(0.2
)
Adjustment for Corporate and Other
45.9

 
$
39.2

Adjusted EBITDA for reportable segments
$
75.7

 
$
74.1

Business and Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for a complete set of annual audited financial statements.

The accompanying unaudited financial information should be read in conjunction with the Consolidated and Combined Financial Statements and Notes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016. In the opinion of management, all adjustments, including normal recurring accruals and other adjustments, considered necessary for a fair presentation of the interim financial information have been included. The operating results for the interim periods are not necessarily indicative of results for the full year.

All significant intercompany transactions between Veritiv's businesses have been eliminated.
Use of Estimates 
Use of Estimates

The preparation of unaudited 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, accounts receivable valuation, inventory valuation, employee benefit plans, income tax contingency accruals and valuation allowances, multi-employer pension plan withdrawal liabilities 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. Estimates are revised as additional information becomes available.
Recently Issued Not Yet Adopted and Adopted Accounting Standards 
Recently Issued Accounting Standards Not Yet Adopted
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606)
 
The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.
 
January 1, 2018; early adoption date is no earlier than the annual period beginning after December 15, 2016
 
The Company’s analysis of the impact of this standard is ongoing. The Company has identified areas requiring further analysis and that analysis continued during the quarter. Those areas include accounting for customer rebates, principal/agent considerations and bill and hold transactions. The Company expects to complete its analysis of these areas during the second quarter and begin working on the disclosure requirements. The Company has not made a decision on the method of adoption. The Company has not determined the effect of the new standard on its internal control over financial reporting or other changes in business practices and processes, but will do so during 2017. The Company will adopt this ASU on January 1, 2018.

ASU 2016-02, Leases (Topic 842)
 
The standard requires lessees to put most leases on their balance sheet but recognize expenses in their statement of operations in a manner similar to current accounting guidance. The new standard also eliminates the current guidance related to real estate specific provisions. The guidance requires application on a modified retrospective basis.
 
January 1, 2019; early adoption is permitted
 
The Company anticipates that the adoption of the standard will have a material impact to its Consolidated Financial Statements and related disclosures as it will result in recording virtually all operating leases on the balance sheet as a lease obligation and right to use asset. The Company currently plans to adopt this ASU on January 1, 2019.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)
 
The standard will replace the currently required incurred loss impairment methodology with guidance that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to be considered in making credit loss estimates. The guidance requires application on a modified retrospective basis. Other application requirements exist for specific assets impacted by a more-than-insignificant credit deterioration since origination.
 
January 1, 2020; early adoption for fiscal years beginning after December 15, 2018
 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company currently plans to adopt this ASU on January 1, 2020.
 
 
 
 
 
 
 
Recently Issued Accounting Standards Not Yet Adopted (continued)
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
ASU 2016-15,
Statement of Cash
Flows (Topic 230)

 
The standard addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance requires application on a retrospective basis.

 
January 1, 2018; early adoption is permitted (early adoption requires the adoption of all amendments in the same period)

 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company will adopt this ASU on January 1, 2018.
ASU 2017-01, Business Combinations (Topic 805)
 
The standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance requires application on a prospective basis.
 
January 1, 2018; early adoption is permitted
 
The Company will adopt this ASU on January 1, 2018.
ASU 2017-07, Compensation-Retirement Benefits (Topic 715)
 
The standard requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose the amount of net benefit cost that is included in the income statement or capitalized in assets, by line item. The standard requires employers to report the service cost component in the same line
item(s) as other compensation costs and to report other pension-related costs (which include interest costs, amortization of pension-related costs from prior periods and the gains or losses on plan assets) separately and exclude them from the subtotal of operating income. The standard also allows only the service cost component to be eligible for capitalization when applicable. The guidance requires application on a retrospective basis for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and on a prospective basis for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.
 
January 1, 2018; early adoption is permitted as of the first interim period of an annual period for which interim or annual financial statements have not been issued
 
The Company is currently evaluating the impact this ASU will have on its Consolidated Financial Statements and related disclosures. The Company will adopt this ASU on January 1, 2018.


Recently Adopted Accounting Standards
 
 
 
 
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
ASU 2015-11, Simplifying the Measurement of Inventory
 
The standard requires companies to measure inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories measured by either the last-in first-out method or retail inventory method. The guidance requires application on a prospective basis.
 
January 1, 2017
 
The Company adopted this ASU on January 1, 2017. The adoption did not materially impact its Consolidated Financial Statements or related disclosures. For the three months ended March 31, 2017, approximately 87% of the inventory balance was measured using LIFO.
ASU 2017-04, Intangibles - Goodwill and Other (Topic 350)
 
The standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The guidance requires application on a prospective basis.
 
January 1, 2020; early adoption is permitted
 
The Company adopted this ASU on January 1, 2017.
Integration and Restructuring Charges (Tables)
Summary of the Components of Integration Expense 
The following table summarizes the components of integration expenses:
 
Three Months Ended 
 March 31,
(in millions)
2017
 
2016
Integration management
$
3.0

 
$
1.8

Retention compensation
0.1

 
1.1

Information technology conversion costs
1.8

 
1.1

Rebranding
0.1

 
0.7

Legal, consulting and other professional fees
0.4

 
0.5

Other
1.0

 
1.0

Total integration expenses
$
6.4

 
$
6.2

Summary of the Company's Restructuring Activity 
The following is a summary of the Company's restructuring activity for the three months ended March 31, 2016:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Total
Balance at December 31, 2015
$
1.7

 
$
0.4

 
$
2.1

Costs incurred
0.7

 
0.3

 
1.0

Payments
(0.9
)
 
(0.4
)
 
(1.3
)
Balance at March 31, 2016
$
1.5

 
$
0.3

 
$
1.8

The following is a summary of the Company's restructuring activity for the three months ended March 31, 2017:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Total
Balance at December 31, 2016
$
1.8

 
$
8.0

 
$
9.8

Costs incurred
1.4

 
3.1

 
4.5

Payments
(1.2
)
 
(2.8
)
 
(4.0
)
Balance at March 31, 2017
$
2.0

 
$
8.3

 
$
10.3



Debt (Tables)
Long-term Debt Obligations
The Company's long-term debt obligations were as follows:
(in millions)
March 31, 2017
 
December 31, 2016
Asset-Based Lending Facility (the "ABL Facility")
$
796.8

 
$
726.9

Equipment capital lease and other obligations
31.5

 
25.2

Total debt
828.3

 
752.1

Less: current portion of long-term debt
(2.6
)
 
(2.9
)
Long-term debt, net of current maturities
$
825.7

 
$
749.2



Income Taxes (Tables)
Provision for Income Taxes and the Effective Tax Rates
The following table presents the provision for income taxes and the effective tax rates for the three months ended March 31, 2017 and 2016:
 
Three Months Ended March 31,
(in millions)
2017
 
2016
Income (loss) before income taxes
$
(3.6
)
 
$
7.5

Income tax expense (benefit)
$
(1.4
)
 
$
4.2

Effective tax rate
38.9
%
 
56.0
%
Related Party Transactions (Tables)
Summarized Financial Impact of Transactions with Related Party
The following tables summarize the financial impact of these related party transactions with Georgia-Pacific:
 
 
Three Months Ended March 31,
(in millions)
 
2017
 
2016
Sales to Georgia-Pacific, reflected in net sales
 
$
8.9

 
$
9.0

Purchases of inventory from Georgia-Pacific, recognized in cost of products sold
 
$
47.1

 
$
56.3


(in millions)
 
March 31, 2017
 
December 31, 2016
Inventories purchased from Georgia-Pacific that remained on Veritiv's balance sheet
 
$
24.0

 
$
24.8

Related party payable to Georgia-Pacific
 
$
10.1

 
$
9.0

Related party receivable from Georgia-Pacific
 
$
3.7

 
$
3.9

Defined Benefit Plans (Tables)
Net Periodic Benefit Costs and Credits
Net periodic benefit cost (credit) associated with these plans is summarized below:
    
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
(in millions)
U.S.
 
Canada
 
U.S.
 
Canada
Components of net periodic benefit cost (credit):
 
 
 
 
 
 
 
Service cost
$
0.5

 
$
0.1

 
$
0.4

 
$
0.1

Interest cost
0.7

 
0.7

 
0.9

 
0.8

Expected return on plan assets
(1.3
)
 
(0.9
)
 
(1.3
)
 
(0.9
)
Amortization of net loss
0.0

 
0.1

 
0.0

 
0.1

Net periodic benefit cost (credit)
$
(0.1
)
 
$
0.0

 
$
0.0

 
$
0.1


        
 
 
 
 
 
 
 
 
Fair Value Measurements (Tables)
Liabilities Disclosed at Fair Value 
The Company's liabilities disclosed at fair value at March 31, 2017 were as follows:
(in millions)
 
Total

Level 1

Level 2

Level 3
ABL Facility
 
$
796.8



 
$
796.8

 

Tax Receivable Agreement
 
$
60.3



 

 
$
60.3


The Company's liabilities disclosed at fair value at December 31, 2016 were as follows:
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
ABL Facility
 
$
726.9

 

 
$
726.9

 

Tax Receivable Agreement
 
$
67.9

 

 

 
$
67.9

Reconciliation of the Contingent Liability 
The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the three months ended March 31, 2017:    
(in millions)
 
Contingent Liability
Balance at December 31, 2016
 
$
67.9

Change in fair value adjustment recorded in other expense, net
 
0.9

Principal Payments
 
(8.5
)
Balance at March 31, 2017
 
$
60.3

The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the three months ended March 31, 2016:    
(in millions)
 
Contingent Liability
Balance at December 31, 2015
 
$
63.0

Change in fair value adjustment recorded in other expense, net
 
1.8

Balance at March 31, 2016
 
$
64.8

Earnings (Loss) Per Share (Tables)
Summary of the Numerators and Denominators Used in the Basic and Diluted Earnings Per Share Calculation
A summary of the numerators and denominators used in the basic and diluted earnings (loss) per share calculation is as follows:
 
Three Months Ended 
 March 31,
(in millions, except per share data)
2017
 
2016
Numerator:
 
 
 
Net income (loss)
$
(2.2
)
 
$
3.3

 
 
 
 
Denominator:
 
 
 
Weighted average number of shares outstanding – basic and diluted
15.69

 
16.00

 
 
 
 
Earnings (loss) per share:
 
 
 
     Basic and diluted earnings (loss) per share
$
(0.14
)
 
$
0.21

 
 
 
 
Antidilutive stock-based awards excluded from computation of diluted earnings per share ("EPS")
0.47

 
0.15

Performance stock-based awards excluded from computation of diluted EPS because performance conditions had not been met
0.36

 
0.53

Accumulated Other Comprehensive Loss (Tables)
Components of Accumulated Other Comprehensive Loss
The following table provides the components of accumulated other comprehensive loss ("AOCL") at March 31, 2017 (amounts are shown net of their related income tax effect, if any):
(in millions)
 
Foreign currency translation adjustments
 
Retirement liabilities
 
Interest rate swap
 
AOCL
Balance at December 31, 2016
 
$
(29.2
)
 
$
(9.1
)
 
$
(0.7
)
 
$
(39.0
)
     Unrealized net gains (losses) arising during the period
 
2.8

 
0.1

 
(0.1
)
 
2.8

Net current period other comprehensive income (loss)
 
2.8

 
0.1

 
(0.1
)
 
2.8

Balance at March 31, 2017
 
$
(26.4
)
 
$
(9.0
)
 
$
(0.8
)
 
$
(36.2
)
    
The following table provides the components of AOCL at March 31, 2016 (amounts are shown net of their related income tax effect, if any):
(in millions)
 
Foreign currency translation adjustments
 
Retirement liabilities
 
Interest rate swap
 
AOCL
Balance at December 31, 2015
 
$
(27.1
)
 
$
(7.4
)
 
$
(0.5
)
 
$
(35.0
)
     Unrealized net gains (losses) arising during the period
 
3.8

 
—

 
(0.3
)
 
3.5

     Amounts reclassified from AOCL
 
—

 
0.1

 
—

 
0.1

Net current period other comprehensive income (loss)
 
3.8

 
0.1

 
(0.3
)
 
3.6

Balance at March 31, 2016
 
$
(23.3
)
 
$
(7.3
)
 
$
(0.8
)
 
$
(31.4
)


Segment Information (Tables)
Segment Reporting Information, by Segment 
The following tables present net sales, Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges, stock-based compensation expense, changes in the LIFO reserve, non-restructuring asset impairment charges, non-restructuring severance charges, integration expenses, fair value adjustments on the contingent liability associated with the TRA 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 for the periods presented:
    
(in millions)
Packaging
 
Facility Solutions
 
Print
 
Publishing
 
Total Reportable Segments
 
Corporate & Other
 
Total
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
721.8

 
$
306.8

 
$
698.7

 
$
234.0

 
$
1,961.3

 
$
33.3

 
$
1,994.6

Adjusted EBITDA
50.5

 
5.0

 
14.1

 
6.1

 
75.7

 
(45.9
)
 


Depreciation and amortization
3.2

 
1.4

 
2.6

 
0.6

 
7.8

 
5.3

 
13.1

Restructuring charges
1.6

 
0.4

 
1.9

 
0.0

 
3.9

 
0.2

 
4.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
671.5

 
301.0

 
759.1

 
262.3

 
1,993.9

 
25.9

 
2,019.8

Adjusted EBITDA
46.7

 
7.4

 
16.0

 
4.0

 
74.1

 
(39.2
)
 


Depreciation and amortization
3.1

 
1.5

 
3.2

 
0.9

 
8.7

 
4.8

 
13.5

Restructuring charges
0.3

 
0.3

 
0.9

 
0.0

 
1.5

 
0.2

 
1.7

Reconciliation of Income Before Income Taxes to Total Adjusted EBITDA 
The table below presents a reconciliation of income (loss) before income taxes as reflected in the Condensed Consolidated Statements of Operations to Adjusted EBITDA for reportable segments:
 
Three Months Ended 
 March 31,
(in millions)
2017
 
2016
Income (loss) before income taxes
$
(3.6
)
 
$
7.5

Interest expense, net
6.4

 
6.5

Depreciation and amortization
13.1

 
13.5

Restructuring charges
4.1

 
1.7

Stock-based compensation
3.7

 
2.0

LIFO reserve decrease
(2.5
)
 
(5.3
)
Non-restructuring asset impairment charges
0.7

 
0.4

Non-restructuring severance charges
0.5

 
0.8

Integration expenses
6.4

 
6.2

Fair value adjustments on TRA contingent liability
0.9

 
1.8

Other
0.1

 
(0.2
)
Adjustment for Corporate and Other
45.9

 
$
39.2

Adjusted EBITDA for reportable segments
$
75.7

 
$
74.1

Business and Summary of Significant Accounting Policies - Narrative (Details)
Mar. 31, 2017
Distribution_Center
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of distribution centers
170 
Percentage of LIFO inventory
87.00% 
Integration and Restructuring Charges - Narrative (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 33 Months Ended 62 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Mar. 31, 2017
Sep. 1, 2019
Scenario, Forecast
Sep. 1, 2019
Scenario, Forecast
Minimum
Sep. 1, 2019
Scenario, Forecast
Maximum
Mar. 31, 2017
Veritiv Restructuring Plan
Mar. 31, 2016
Veritiv Restructuring Plan
Mar. 31, 2017
Veritiv Restructuring Plan
Non-Cash Items
Mar. 31, 2016
Veritiv Restructuring Plan
Non-Cash Items
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
 
 
 
 
 
Integration and restructuring charges including capital expenditures
 
 
$ 209 
 
$ 225 
$ 250 
 
 
 
 
Period over which costs are expected to be incurred
5 years 
 
 
 
 
 
 
 
 
 
Integration and restructuring charges, capital expenditures
 
 
71 
90 
 
 
 
 
 
 
Restructuring charges
4.1 
1.7 
 
 
 
 
4.1 
1.7 
 
 
Non-cash (gain) loss on restructuring activities
 
 
 
 
 
 
 
 
$ (0.4)
$ 0.7 
Integration and Restructuring Charges - Summary of the Components of Integration Expense (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Business Acquisition [Line Items]
 
 
Total integration expenses
$ 6.4 
$ 6.2 
UWW Holdings, Inc. XPEDX Merger
 
 
Business Acquisition [Line Items]
 
 
Integration management
3.0 
1.8 
Retention compensation
0.1 
1.1 
Information technology conversion costs
1.8 
1.1 
Rebranding
0.1 
0.7 
Legal, consulting and other professional fees
0.4 
0.5 
Other
1.0 
1.0 
Total integration expenses
$ 6.4 
$ 6.2 
Integration and Restructuring Charges - Summary of the Company's Restructuring Activity (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Restructuring Reserve [Roll Forward]
 
 
Costs incurred
$ 4.1 
$ 1.7 
Veritiv Restructuring Plan
 
 
Restructuring Reserve [Roll Forward]
 
 
Costs incurred
4.1 
1.7 
Severance and Related Costs |
Veritiv Restructuring Plan
 
 
Restructuring Reserve [Roll Forward]
 
 
Restructuring reserve, beginning balance
1.8 
1.7 
Costs incurred
1.4 
0.7 
Payments
(1.2)
(0.9)
Restructuring reserve, ending balance
2.0 
1.5 
Other Direct Costs |
Veritiv Restructuring Plan
 
 
Restructuring Reserve [Roll Forward]
 
 
Restructuring reserve, beginning balance
8.0 
0.4 
Costs incurred
3.1 
0.3 
Payments
(2.8)
(0.4)
Restructuring reserve, ending balance
8.3 
0.3 
Restructuring Costs, Excluding Non-Cash Items [Member] |
Veritiv Restructuring Plan
 
 
Restructuring Reserve [Roll Forward]
 
 
Restructuring reserve, beginning balance
9.8 
2.1 
Costs incurred
4.5 
1.0 
Payments
(4.0)
(1.3)
Restructuring reserve, ending balance
$ 10.3 
$ 1.8 
Debt - Long-Term Debt Obligations (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]
 
 
Equipment capital lease and other obligations
$ 31.5 
$ 25.2 
Total debt
828.3 
752.1 
Less: current portion of long-term debt
(2.6)
(2.9)
Long-term debt, net of current maturities
825.7 
749.2 
Line of Credit |
Asset-Based Lending Facility
 
 
Debt Instrument [Line Items]
 
 
Asset-Based Lending Facility (the ABL Facility)
$ 796.8 
$ 726.9 
Debt - Narrative (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Line of Credit Facility [Line Items]
 
 
Capital lease obligations
$ 31.5 
$ 25.2 
Toronto Build-to-Suit Arrangement
 
 
Line of Credit Facility [Line Items]
 
 
Capital lease obligations
26.1 
19.1 
Line of Credit |
Asset-Based Lending Facility
 
 
Line of Credit Facility [Line Items]
 
 
Remaining borrowing capacity
$ 365.3 
 
Income Taxes - Provision for Income Taxes and the Effective Tax Rates (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Tax Disclosure [Abstract]
 
 
Income (loss) before income taxes
$ (3.6)
$ 7.5 
Income tax expense (benefit)
$ (1.4)
$ 4.2 
Effective tax rate
38.90% 
56.00% 
Income Taxes - Narrative (Details)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Tax Disclosure [Abstract]
 
 
Federal statutory income tax rate
35.00% 
35.00% 
Related Party Transactions - Narrative (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended 1 Months Ended 0 Months Ended
Mar. 22, 2017
Mar. 31, 2017
Mar. 31, 2016
Mar. 31, 2017
UWW Holdings, LLC
Jan. 31, 2017
UWW Holdings, LLC
Tax Receivable Agreement
Mar. 22, 2017
Block Trade
UWW Holdings, LLC
Related Party Transaction [Line Items]
 
 
 
 
 
 
Shares sold by existing shareholders (in shares)
 
 
 
 
 
1.80 
Transaction-related fees
$ 0.2 
 
 
 
 
 
Percentage of Veritiv outstanding common stock owned
 
 
 
27.30% 
 
 
Payments to UWWF for utilization of pre-merger net operating losses in federal and state tax returns
 
 
 
 
8.7 
 
Payments under Tax Receivable Agreement
 
$ 8.5 
$ 0 
 
$ 8.5 
 
Related Party Transactions - Summarized Financial Impact of Transactions with Related Party (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Related Party Transaction [Line Items]
 
 
 
Related party sales
$ 8.9 
$ 9.0 
 
Inventories
725.2 
 
707.9 
Related party payable
10.1 
 
9.0 
Related party receivable
3.7 
 
3.9 
Georgia-Pacific
 
 
 
Related Party Transaction [Line Items]
 
 
 
Inventories
24.0 
 
24.8 
Related party payable
10.1 
 
9.0 
Related party receivable
3.7 
 
3.9 
Georgia-Pacific |
Sales
 
 
 
Related Party Transaction [Line Items]
 
 
 
Related party sales
8.9 
9.0 
 
Georgia-Pacific |
Cost of products sold
 
 
 
Related Party Transaction [Line Items]
 
 
 
Purchases of inventory recognized in cost of products sold
$ 47.1 
$ 56.3 
 
Defined Benefit Plans - Net Periodic Benefit Costs and Credits (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
U.S.
 
 
Components of net periodic benefit cost (credit):
 
 
Service cost
$ 0.5 
$ 0.4 
Interest cost
0.7 
0.9 
Expected return on plan assets
(1.3)
(1.3)
Amortization of net loss
0 
0 
Net periodic benefit cost (credit)
(0.1)
0 
Canada
 
 
Components of net periodic benefit cost (credit):
 
 
Service cost
0.1 
0.1 
Interest cost
0.7 
0.8 
Expected return on plan assets
(0.9)
(0.9)
Amortization of net loss
0.1 
0.1 
Net periodic benefit cost (credit)
$ 0 
$ 0.1 
Fair Value Measurements - Narrative (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 0 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Mar. 31, 2017
Fair Value, Measurements, Nonrecurring
Mar. 31, 2016
Fair Value, Measurements, Nonrecurring
Mar. 31, 2017
Fair Value, Measurements, Recurring
Level 3
Contingent Liability
UWW Holdings, Inc. XPEDX Merger
Business Acquisition [Line Items]
 
 
 
 
 
 
Non-restructuring asset impairment charges
$ 0.7 
$ 0.4 
 
$ 0.7 
$ 0.4 
 
Fair value of contingent liability associated with the Tax Receivable Agreement
 
 
$ 59.4 
 
 
 
Fair value discount rate
 
 
 
 
 
4.60% 
Fair Value Measurements - Liabilities Disclosed at Fair Value (Details) (Fair Value, Measurements, Nonrecurring, USD $)
In Millions, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Long-term Debt |
Asset-Backed Lending Facility |
Line of Credit
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Liabilities disclosed at fair value
$ 796.8 
$ 726.9 
Long-term Debt |
Asset-Backed Lending Facility |
Line of Credit |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Liabilities disclosed at fair value
796.8 
726.9 
Contingent Liability |
UWW Holdings, Inc. XPEDX Merger
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Liabilities disclosed at fair value
60.3 
67.9 
Contingent Liability |
UWW Holdings, Inc. XPEDX Merger |
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Liabilities disclosed at fair value
$ 60.3 
$ 67.9 
Fair Value Measurements - Reconciliation of the Contingent Liability (Details) (Contingent Liability, UWW Holdings, Inc. XPEDX Merger, Fair Value, Measurements, Recurring, Level 3, USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Contingent Liability |
UWW Holdings, Inc. XPEDX Merger |
Fair Value, Measurements, Recurring |
Level 3
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
Beginning balance
$ 67.9 
$ 63.0 
Change in fair value adjustment recorded in other expense (income), net
0.9 
1.8 
Principal Payments
(8.5)
 
Ending balance
$ 60.3 
$ 64.8 
Earnings (Loss) Per Share - Summary of the Numerators and Denominators Used in the Basic and Diluted Earnings Per Share Calculation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Numerator:
 
 
Net income (loss)
$ (2.2)
$ 3.3 
Denominator:
 
 
Weighted average number of shares outstanding – basic and diluted (in shares)
15.69 
16.00 
Earnings (loss) per share:
 
 
Basic and diluted earnings (loss) per share (usd per share)
$ (0.14)
$ 0.21 
Antidilutive stock-based awards excluded from computation of diluted earnings per share (in shares)
0.47 
0.15 
Performance stock-based awards excluded from computation of diluted earnings per share because performance conditions had not been met (in shares)
0.36 
0.53 
Accumulated Other Comprehensive Loss - Components of Accumulated Other Comprehensive Loss (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Foreign currency translation adjustments
Mar. 31, 2016
Foreign currency translation adjustments
Mar. 31, 2017
Retirement liabilities
Mar. 31, 2016
Retirement liabilities
Mar. 31, 2017
Interest rate swap
Mar. 31, 2016
Interest rate swap
Mar. 31, 2017
AOCL
Mar. 31, 2016
AOCL
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Beginning balance
$ 546.1 
$ 541.8 
$ (29.2)
$ (27.1)
$ (9.1)
$ (7.4)
$ (0.7)
$ (0.5)
$ (39.0)
$ (35.0)
Unrealized net gains (losses) arising during the period
 
 
2.8 
3.8 
0.1 
0 
(0.1)
(0.3)
2.8 
3.5 
Amounts reclassified from AOCL
 
 
 
0 
 
0.1 
 
0 
 
0.1 
Net current period other comprehensive income (loss)
 
 
2.8 
3.8 
0.1 
0.1 
(0.1)
(0.3)
2.8 
3.6 
Ending balance
$ 546.1 
$ 541.8 
$ (26.4)
$ (23.3)
$ (9.0)
$ (7.3)
$ (0.8)
$ (0.8)
$ (36.2)
$ (31.4)
Commitments and Contingencies - Narrative (Details)
3 Months Ended
Mar. 31, 2017
state
Loss Contingencies [Line Items]
 
Additional states joining escheat audit
7 
Maximum
 
Loss Contingencies [Line Items]
 
Escheat audit period
4 years 
Segment Information - Narrative (Details)
3 Months Ended
Mar. 31, 2017
segment
Segment Reporting [Abstract]
 
Number of reportable segments
4 
Segment Information - Segment Reporting Information, by Segment (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Segment Reporting Information [Line Items]
 
 
Net sales
$ 1,994.6 
$ 2,019.8 
Adjusted EBITDA
   
   
Depreciation and amortization
13.1 
13.5 
Costs incurred
4.1 
1.7 
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
1,961.3 
1,993.9 
Adjusted EBITDA
75.7 
74.1 
Depreciation and amortization
7.8 
8.7 
Costs incurred
3.9 
1.5 
Corporate & Other
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
33.3 
25.9 
Adjusted EBITDA
(45.9)
(39.2)
Depreciation and amortization
5.3 
4.8 
Costs incurred
0.2 
0.2 
Packaging |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
721.8 
671.5 
Adjusted EBITDA
50.5 
46.7 
Depreciation and amortization
3.2 
3.1 
Costs incurred
1.6 
0.3 
Facility Solutions |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
306.8 
301.0 
Adjusted EBITDA
5.0 
7.4 
Depreciation and amortization
1.4 
1.5 
Costs incurred
0.4 
0.3 
Print |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
698.7 
759.1 
Adjusted EBITDA
14.1 
16.0 
Depreciation and amortization
2.6 
3.2 
Costs incurred
1.9 
0.9 
Publishing |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Net sales
234.0 
262.3 
Adjusted EBITDA
6.1 
4.0 
Depreciation and amortization
0.6 
0.9 
Costs incurred
$ 0 
$ 0 
Segment Information - Reconciliation of Income Before Income Taxes to Total Adjusted EBITDA (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Segment Reporting Information [Line Items]
 
 
Income (loss) before income taxes
$ (3.6)
$ 7.5 
Interest expense, net
6.4 
6.5 
Depreciation and amortization
13.1 
13.5 
Restructuring charges
4.1 
1.7 
Stock-based compensation
3.7 
2.0 
LIFO reserve decrease
(2.5)
(5.3)
Non-restructuring asset impairment charges
0.7 
0.4 
Non-restructuring severance charges
0.5 
0.8 
Integration expenses
6.4 
6.2 
Fair value adjustments on TRA contingent liability
0.9 
1.8 
Other
0.1 
(0.2)
Adjusted EBITDA
   
   
Corporate & Other
 
 
Segment Reporting Information [Line Items]
 
 
Depreciation and amortization
5.3 
4.8 
Restructuring charges
0.2 
0.2 
Adjusted EBITDA
(45.9)
(39.2)
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Depreciation and amortization
7.8 
8.7 
Restructuring charges
3.9 
1.5 
Adjusted EBITDA
$ 75.7 
$ 74.1