VERITIV CORP, 10-K filed on 3/3/2021
Annual Report
v3.20.4
Cover Page - USD ($)
12 Months Ended
Dec. 31, 2020
Feb. 26, 2021
Jun. 30, 2020
Cover [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Document Transition Report false    
Entity File Number 001-36479    
Entity Registrant Name VERITIV CORPORATION    
Entity Central Index Key 0001599489    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 46-3234977    
Entity Address, Address Line One 1000 Abernathy Road NE    
Entity Address, Address Line Two Building 400, Suite 1700    
Entity Address, City or Town Atlanta,    
Entity Address, State or Province GA    
Entity Address, Postal Zip Code 30328    
City Area Code (770)    
Local Phone Number 391-8200    
Title of 12(b) Security Common stock, $0.01 par value    
Trading Symbol VRTV    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filer No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 216,502,354
Entity Common Stock, Shares Outstanding   15,973,884  
Documents Incorporated by Reference Portions of the Company's Proxy Statement for the 2021 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.    
v3.20.4
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Revenues $ 6,345.6 $ 7,659.4 $ 8,696.2
Cost of Goods and Service, Excluding Depreciation, Depletion, and Amortization 5,040.2 6,206.2 7,155.7
Distribution expenses 429.8 509.2 550.5
Selling and administrative expenses 717.9 823.3 867.6
Depreciation and amortization 57.7 53.5 53.5
Integration and acquisition expenses 0.0 17.5 31.8
Restructuring charges, net 52.2 28.8 21.3
Operating income (loss) 47.8 20.9 15.8
Interest expense, net 25.1 38.1 42.3
Other (income) expense, net (20.3) 11.6 (16.3)
Income (loss) before income taxes 43.0 (28.8) (10.2)
Income tax expense (benefit) 8.8 0.7 5.5
Net income (loss) $ 34.2 $ (29.5) $ (15.7)
Earnings (loss) per share:      
Basic earnings (loss) per share (usd per share) $ 2.14 $ (1.84) $ (0.99)
Diluted earnings (loss) per share (usd per share) $ 2.08 $ (1.84) $ (0.99)
Weighted-average shares outstanding:      
Weighted-average shares outstanding - basic (in shares) 15,960 16,060 15,820
Weighted-average shares outstanding - diluted (in shares) 16,480 16,060 15,820
v3.20.4
Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Revenue from related parties $ 19.7 $ 23.4 $ 28.0
Related party costs $ 55.6 $ 85.2 $ 146.5
v3.20.4
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income (loss) $ 34.2 $ (29.5) $ (15.7)
Other comprehensive income (loss):      
Foreign currency translation adjustments 2.4 3.7 (6.8)
Change in fair value of cash flow hedge, net of tax [1] 0.1 0.0 0.5
Pension liability adjustment, net of tax [1] (2.9) 3.9 (0.1)
Other comprehensive income (loss) (0.4) 7.6 (6.4)
Total comprehensive income (loss) $ 33.8 $ (21.9) $ (22.1)
[1] Amounts shown are net of tax impacts, which were not significant for the periods presented.
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 120.6 $ 38.0
Accounts receivable, less allowances of $41.6 and $43.8, respectively 849.5 910.8
Related party receivable 0.0 2.8
Inventories 465.4 552.9
Other current assets 119.5 126.1
Total current assets 1,555.0 1,630.6
Property and equipment (net of accumulated depreciation and amortization of $375.9 and $342.6, respectively) 194.7 216.9
Goodwill 99.6 99.6
Other intangibles, net 47.4 52.2
Deferred income tax assets 60.0 57.0
Other non-current assets 378.3 454.8
Total assets 2,335.0 2,511.1
Current liabilities:    
Accounts payable 471.9 476.9
Related party payable 0.0 4.3
Accrued payroll and benefits 80.6 53.9
Other accrued liabilities 182.2 183.8
Current portion of debt 14.7 12.6
Total current liabilities 749.4 731.5
Long-term debt, net of current portion 589.1 742.4
Defined benefit pension obligations 18.2 15.7
Other non-current liabilities 395.2 485.3
Total liabilities 1,751.9 1,974.9
Commitments and contingencies (Note 15)
Shareholders' equity:    
Preferred stock, $0.01 par value, 10.0 million shares authorized, none issued 0.0 0.0
Common stock, $0.01 par value, 100.0 million shares authorized; shares issued - 16.6 million and 16.4 million, respectively; shares outstanding - 15.9 million and 16.1 million, respectively 0.2 0.2
Additional paid-in capital 634.9 618.0
Accumulated earnings (deficit) (1.4) (35.3)
Accumulated other comprehensive loss (33.5) (33.1)
Treasury stock at cost - 0.7 million shares in 2020 and 0.3 million shares in 2019 (17.1) (13.6)
Total shareholders' equity 583.1 536.2
Total liabilities and shareholders' equity $ 2,335.0 $ 2,511.1
v3.20.4
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2020
Dec. 31, 2019
Assets    
Allowance for doubtful accounts $ 41.6 $ 43.8
Depreciation and amortization $ 375.9 $ 342.6
Shareholders' equity:    
Preferred stock par value (usd per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 10,000,000.0 10,000,000.0
Preferred stock, shares issued (in shares) 0 0
Common stock par value (usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 100,000,000.0 100,000,000.0
Common stock, shares issued (in shares) 16,600,000 16,400,000
Common stock shares outstanding (in shares) 15,900,000 16,100,000
Treasury stock at cost (in shares) 700,000 300,000
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Operating activities      
Net income (loss) $ 34,200,000 $ (29,500,000) $ (15,700,000)
Depreciation and amortization 57,700,000 53,500,000 53,500,000
Amortization and write-off of deferred financing fees 2,100,000 2,600,000 2,600,000
Net losses (gains) on dispositions of property and equipment (8,200,000) 600,000 (18,500,000)
Long-lived asset impairment charges 500,000 0 400,000
Provision for expected credit losses and doubtful accounts, respectively 12,400,000 14,900,000 27,100,000
Deferred income tax provision (benefit) (1,800,000) (2,700,000) 2,000,000.0
Stock-based compensation 17,700,000 14,600,000 18,100,000
Other non-cash items, net (12,400,000) 11,900,000 (8,300,000)
Changes in operating assets and liabilities      
Accounts receivable and related party receivable 56,500,000 252,300,000 (43,900,000)
Inventories 89,700,000 139,700,000 26,400,000
Other current assets (3,200,000) 37,100,000 (23,200,000)
Accounts payable and related party payable 5,500,000 (199,700,000) (15,900,000)
Accrued payroll and benefits 17,100,000 (2,900,000) (16,600,000)
Other accrued liabilities (1,000,000.0) (22,400,000) 17,200,000
Other 22,400,000 11,000,000.0 9,800,000
Net cash provided by (used for) operating activities 289,200,000 281,000,000.0 15,000,000.0
Investing activities      
Property and equipment additions (23,600,000) (34,100,000) (45,400,000)
Proceeds from asset sales 18,300,000 500,000 23,700,000
Net cash provided by (used for) investing activities (5,300,000) (33,600,000) (21,700,000)
Financing activities      
Change in book overdrafts (16,600,000) 26,200,000 (16,200,000)
Borrowings of long-term debt 5,566,000,000.0 6,746,500,000 5,805,300,000
Repayments of long-term debt (5,719,200,000) (7,007,000,000.0) (5,767,300,000)
Payments under right-of-use finance leases and capital leases, respectively (13,000,000.0) (9,100,000)  
Payments under right-of-use finance leases and capital leases, respectively     (6,700,000)
Payments under financing obligations (including obligations to related party of $0.0, $0.0 and $8.6, respectively) 0 0 (9,300,000)
Deferred financing fees (3,400,000) 0 0
Purchase of treasury stock (3,500,000) 0 0
Payments under Tax Receivable Agreement (12,300,000) (7,800,000) (9,900,000)
Payments under other contingent consideration 0 (20,000,000.0) (2,500,000)
Other (600,000) (2,700,000) (2,100,000)
Net cash provided by (used for) financing activities (202,600,000) (273,900,000) (8,700,000)
Effect of exchange rate changes on cash 1,300,000 200,000 (600,000)
Net change in cash and cash equivalents 82,600,000 (26,300,000) (16,000,000.0)
Cash and cash equivalents at beginning of period 38,000,000.0 64,300,000 80,300,000
Cash and cash equivalents at end of period 120,600,000 38,000,000.0 64,300,000
Supplemental cash flow information      
Cash paid for income taxes, net of refunds 7,800,000 4,800,000 2,400,000
Cash paid for interest 22,000,000.0 34,700,000 38,900,000
Non-cash investing and financing activities      
Non-cash additions to property and equipment for right-of-use finance leases and capital leases, respectively 14,800,000 22,300,000 31,500,000
Non-cash additions to other non-current assets for right-of-use operating leases $ 20,100,000 $ 129,300,000 $ 0
v3.20.4
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Cash Flows [Abstract]      
Repayments of related party obligation $ 0.0 $ 0.0 $ 8.6
v3.20.4
Consolidated Statements of Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Cumulative Effect, Period of Adoption, Adjustment
Common Stock Issued
Additional Paid-in Capital
Accumulated Earnings (Deficit)
Accumulated Earnings (Deficit)
Cumulative Effect, Period of Adoption, Adjustment
Accumulated Other Comprehensive Loss
Treasury Stock
Beginning balance (in shares) at Dec. 31, 2017     16.0         0.3
Beginning balance at Dec. 31, 2017 $ 549.7   $ 0.2 $ 590.2 $ 6.4   $ (33.5) $ (13.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Adoption impact - Accounting Standards Update 2016-02         0.8   (0.8)  
Net income (loss) (15.7)       (15.7)      
Other comprehensive income (loss) (6.4)           (6.4)  
Stock-based compensation 18.1     18.1        
Issuance of common stock, net of stock received for minimum tax withholdings (in shares)     0.2          
Issuance of common stock, net of stock received for minimum tax withholdings (2.6)   $ 0.0 (2.6)        
Ending balance (in shares) at Dec. 31, 2018     16.2         0.3
Ending balance at Dec. 31, 2018 $ 543.1 $ 2.7 $ 0.2 605.7 (8.5) $ 2.7 (40.7) $ (13.6)
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201602Member              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) $ (29.5)       (29.5)      
Other comprehensive income (loss) 7.6           7.6  
Stock-based compensation 14.6     14.6        
Issuance of common stock, net of stock received for minimum tax withholdings (in shares)     0.2          
Issuance of common stock, net of stock received for minimum tax withholdings (2.3)   $ 0.0 (2.3)        
Ending balance (in shares) at Dec. 31, 2019     16.4         0.3
Ending balance at Dec. 31, 2019 $ 536.2 $ (0.3) $ 0.2 618.0 (35.3) $ (0.3) (33.1) $ (13.6)
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201613Member              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) $ 34.2       34.2      
Other comprehensive income (loss) (0.4)           (0.4)  
Stock-based compensation 17.7     17.7        
Issuance of common stock, net of stock received for minimum tax withholdings (in shares)     0.2          
Issuance of common stock, net of stock received for minimum tax withholdings (0.8)   $ 0.0 (0.8)        
Treasury stock (in shares)               (0.4)
Treasury stock (3.5)             $ (3.5)
Ending balance (in shares) at Dec. 31, 2020     16.6         0.7
Ending balance at Dec. 31, 2020 $ 583.1   $ 0.2 $ 634.9 $ (1.4)   $ (33.5) $ (17.1)
v3.20.4
Business and Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
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 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 (the "Distribution Date"), following the merger (the "Merger") of International Paper Company's ("International Paper") xpedx distribution solutions business ("xpedx") and UWW Holdings, Inc. ("UWWH"), 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 125 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. See the adoption impact in the Recently Issued Accounting Standards section of this note. As a result of adopting ASU 2016-02, Leases (Topic 842) on January 1, 2019, applying the additional transition approach, which is a prospective approach, the accounting for operating leases for periods prior to 2019 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, 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, unfavorable impacts from the COVID-19 pandemic have had a negative impact on the Company's financial results, including decreased sales activity across all segments. 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, including goodwill, 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 highly uncertain and cannot be predicted, 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 and the remedial actions and stimulus measures adopted by local and federal governments, the availability, adoption and effectiveness of a vaccine 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 that has occurred or may occur in the future. 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 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, 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, 2020, approximately 30% 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 $273.6 million, $346.9 million and $398.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Integration and Acquisition Expenses

Integration and acquisition expenses are expensed as incurred. Integration and acquisition expenses include internally dedicated integration management resources, retention compensation, information technology conversion costs, professional services and other costs to integrate its businesses. See Note 4, Restructuring, Integration and Acquisition Charges, for additional information regarding the Company's integration and acquisition 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. As of December 31, 2020, the Company's cash and cash equivalents included a $75.0 million investment in a money market fund that is highly liquid and qualifies 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, prior periods have 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 and back-to-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.

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 for doubtful accounts 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.

Additional accounts and notes receivable information:

The components of the accounts receivable allowances were as follows:
As of December 31,
(in millions)20202019
Allowance for credit losses and doubtful accounts, respectively$31.4 $30.4 
Other allowances (1)
10.2 13.4 
Total accounts receivable allowances$41.6 $43.8 
(1) 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 for the years ended December 31, 2020, 2019 and 2018. Accounts receivable are written-off when management determines they are uncollectible.    
Year Ended December 31,
(in millions)202020192018
Balance at January 1,$43.8 $62.0 $44.0 
Add / (Deduct):
Provision for expected credit losses and doubtful accounts, respectively
7.3 13.8 26.5 
Net write-offs and recoveries
(6.5)(29.5)(6.3)
Other adjustments(1)
(3.0)(2.5)(2.2)
Balance at December 31,$41.6 $43.8 $62.0 
(1) 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.
Below is a rollforward of the Company’s allowance for credit losses for the year ended December 31, 2020:

Packaging and Facility SolutionsPrint - High RiskPrint - Medium/Low Risk
(in millions)U.S.CanadaU.S.CanadaU.S.Canada
Publishing(1)
Rest of world
Corporate & Other(1)
Total
Balance at December 31, 2019$13.3 $1.0 $11.9 $0.4 $0.9 $0.1 $1.3 $0.6 $0.9 $30.4 
Add / (Deduct):
Adoption impact - ASU 2016-131.0(0.3)(0.2)0.00.1(0.1)(0.1)0.00.4
Provision for expected credit losses2.80.12.30.30.10.01.30.40.07.3
Write-offs charged against the allowance(3.0)(0.3)(2.4)0.0(0.1)(0.9)(0.1)(6.8)
Recoveries of amounts previously written off0.30.00.00.00.00.00.3
Other adjustments(2)
0.0(1.4)0.01.20.00.0(0.2)
Balance at December 31, 2020$14.4 $0.5 $10.2 $0.7 $2.2 $0.0 $1.6 $1.0 $0.8 $31.4 
(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 has, under certain circumstances, entered into a note receivable agreement with a customer. 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, 2020, 2019 and 2018, the Company recognized $5.1 million, $1.1 million and $0.6 million, respectively, in the provision for credit losses related to these notes receivable. At December 31, 2020 and 2019, the Company held $2.2 million and $6.7 million, respectively, in notes receivable within other current assets on the Consolidated Balance Sheets.

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 76% and 81% of inventories were valued using the LIFO method as of December 31, 2020 and 2019, respectively. If the first-in, first-out method had been used, total inventory balances would be increased by approximately $93.2 million and $93.8 million at December 31, 2020 and 2019, 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 $20.5 million and $30.7 million of consigned inventory as of December 31, 2020 and 2019, 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.
The components of property and equipment were as follows:
(in millions)As of December 31,
20202019
Land, buildings and improvements$100.7 $96.4 
Machinery and equipment164.9 167.9 
Finance leases
111.8 99.5 
Internal use software188.6 178.5 
Construction-in-progress4.6 17.2 
Less: Accumulated depreciation and amortization(375.9)(342.6)
Property and equipment (net of accumulated depreciation and amortization)$194.7 $216.9 

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.

Depreciation and amortization for property and equipment, other than land, finance leases and CIP, is based upon the following estimated useful lives:
Buildings40years
Leasehold improvements1to20years
Machinery and equipment3to15years
Internal use software3to5years

Additional property and equipment information is as follows:

Year Ended December 31,
(in millions)202020192018
Depreciation expense (1)
$36.8 $33.5 $33.2 
Amortization expense - internal use software16.1 15.0 13.4 
Depreciation and amortization expense related to property and equipment$52.9 $48.5 $46.6 
(1) Includes depreciation expense for finance leases, capital leases and assets related to financing obligations (including financing obligations with related party).
As of December 31,
(in millions)20202019
Unamortized internal use software costs, including amounts recorded in CIP$24.6 $32.6 
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.
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. 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. In order to value the 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 ("CPI")). 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. See Note 3, Leases, for additional information related to the Company's leases.

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 in the U.S. and Canada. 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 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 grant date fair values over the vesting periods of the awards. Forfeitures are recognized when they occur. 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.

The Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law on December 22, 2017 and makes broad and complex changes to the U.S. tax code. Veritiv recognized provisional estimates of the impact of the Tax Act in the year ended December 31, 2017 and as of the year ended December 31, 2018, the Company recorded additional tax expense. Although the Company considers these items complete, the determination of the Tax Act's income tax effects may change following future legislation or further interpretation of the Tax Act based on the publication of U.S. Treasury regulations and
guidance from the Internal Revenue Service ("IRS") and state tax authorities.  Additionally, the Company has concluded the applicable accounting policy election associated with Global Intangible Low Tax Income ("GILTI") will be treated as a period cost.  See Note 7, Income Taxes, for additional details regarding the Tax Act.
               
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.

While Veritiv believes that these judgments and estimates are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.

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 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.

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, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). The standard replaces the previously 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 amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The standard requires application on a modified retrospective basis; accordingly, prior periods have 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.

Effective January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820). The standard modifies the disclosure requirements on fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The adoption did not materially impact the Company's financial statement disclosures.

Effective January 1, 2020, the Company adopted ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this update also require companies to expense capitalized implementation costs over the term of the hosting arrangement, including periods covered by renewal options that are reasonably certain to be exercised. The amendments also stipulate presentation requirements for the Statement of Operations, Balance Sheet and Statement of Cash Flows. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this ASU on a prospective basis. Capitalized amounts are reported on the Consolidated Balance Sheet as other non-current assets, pursuant to the standard which requires presentation in the same line item that a prepayment of the fees for the associated hosting arrangement would be presented. The related periodic expense is reported as part of operating expenses on the Consolidated Statement of Operations and the corresponding cash flow impact is reported as part of operating activities on the Consolidated Statement of Cash Flows. The adoption did not materially impact the Consolidated Financial Statements. The Company does not expect the adoption of this standard to have a material impact on its future consolidated financial statements and related disclosures.


Recently Issued Accounting Standards Not Yet Adopted

Effective January 1, 2021, the Company will adopt 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 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. 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 will not have a material impact on future consolidated financial statements and related disclosures.
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 and long-term debt as described in Note 6, Debt for which existing payments are based on LIBOR. The Company is currently evaluating the timing of adoption and the related impact on its consolidated financial statements. Currently, the Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
v3.20.4
Revenue Recognition
12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
2. REVENUE RECOGNITION

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 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. The Company has established credit and collection processes whereby collection assessments are performed and expected credit losses are recognized. 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.

Additionally, Veritiv enters into incentive programs with certain of its customers, which are generally based on sales to those same customers. 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. Estimates of the variable consideration are based primarily on contract terms, current customer forecasts as well as historical experience.

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.

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. 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.

As of December 31, 2020 and 2019, the Company recognized estimated inventory returns of approximately $1.5 million and $2.0 million, respectively, which are included in inventories on the Consolidated Balance Sheets. Additionally, the Company recognized customer contract liabilities related to its customer deposits for equipment sales and payments received for other sale arrangements requiring prepayment, which are included in accounts payable on the Consolidated Balance Sheets.
See the table below for a summary of the changes to the customer contract liabilities for the years ended December 31, 2020 and 2019:
Customer Contract Liabilities
(in millions)20202019
Balance at January 1,$11.7 $17.7 
    Payments received53.2 46.1 
    Revenue recognized from beginning balance(11.6)(17.7)
    Revenue recognized from current year receipts(41.1)(34.4)
Balance at December 31,$12.2 $11.7 

Revenue Composition

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 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 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.

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 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 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% 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 87%, 10% and 2%, respectively.

The following is a brief description of the Company's four reportable segments, organized by major product category:

Packaging – The Packaging segment provides custom and standard packaging solutions for customers based in North America and in key global markets. This segment services customers with a full spectrum of packaging product materials within the fiber-based, flexible and rigid categories. The business is strategically focused on higher growth industry sectors including manufacturing, food processing and service, fulfillment and internet retail, as well as niche 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 such as towels, tissues, commercial cleaning chemicals, personal protective equipment and safety supplies, wipers, can liners, soaps and sanitizers, dispensers, sanitary maintenance supplies and equipment, hazard supplies, and shampoos and amenities 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, graphics consumables and graphics equipment primarily in North America. This segment also includes customized paper conversion services of commercial printing paper for distribution to document centers and form printers. 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.

The Company's consolidated financial results also include a "Corporate & Other" category which includes certain assets and costs not primarily attributable to any of the reportable segments. Corporate & Other also includes the Veritiv logistics solutions business which provides transportation and warehousing solutions.

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.
v3.20.4
Leases
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases
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, 2020, the Company operated from 125 distribution centers of which approximately 117 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 leases3to10years
Delivery equipment leases3to8years
Other non-real estate leases3to5years

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. The Company does not include short-term leases on the 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 assets 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.

The components of lease expense were as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Short-term lease expense(1)
Operating expenses$2.3 $7.1 
Operating lease expense(2)
Operating expenses$111.8 $113.9 
Finance lease expense:
Amortization of right-of-use assets
Depreciation and amortization$14.7 $10.8 
Interest expense
Interest expense, net3.0 2.3 
Total finance lease expense
$17.7 $13.1 
Total Lease Cost
$131.8 $134.1 
(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, 2020 and 2019 .

Supplemental balance sheets and other information were as follows:
(in millions, except weighted-average data)As of December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating lease right-of-use assetsOther non-current assets$351.7 $429.2 
Operating lease obligations - currentOther accrued liabilities$81.9 $90.5 
Operating lease obligations - non-currentOther non-current liabilities307.4 376.6 
Total operating lease obligations
$389.3 $467.1 
Weighted-average remaining lease term in years6.16.6
Weighted-average discount rate4.7 %4.6 %
Finance Leases:
Finance lease right-of-use assetsProperty and equipment$76.6 $76.6 
Finance lease obligations - currentCurrent portion of debt$13.4 $11.5 
Finance lease obligations - non-currentLong-term debt, net of current portion68.9 69.2 
Total finance lease obligations
$82.3 $80.7 
Weighted-average remaining lease term in years7.17.8
Weighted-average discount rate3.7 %3.4 %
Cash paid for amounts included in the measurement of lease liabilities was as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating cash flows from operating leases
Operating activities$111.1 $109.5 
Finance Leases:
Operating cash flows from finance leases
Operating activities$3.0 $2.3 
Financing cash flows from finance leases
Financing activities13.0 9.1 

Lease Commitments

Future minimum lease payments at December 31, 2020 were as follows:
(in millions)Finance Leases
Operating Leases(1)
2021$16.0 $98.3 
202215.5 83.4 
202313.2 63.1 
202411.4 53.0 
202510.6 42.4 
Thereafter27.7 111.4 
Total future minimum lease payments94.4 451.6 
   Amount representing interest(12.1)(62.3)
Total future minimum lease payments, net of interest$82.3 $389.3 
(1) Future sublease income of $1.8 million is excluded from the operating leases amount in the table above.

Total future minimum lease payments at December 31, 2020 for finance and operating leases, including the amount representing interest, are comprised of $467.8 million for real estate leases and $78.2 million for non-real estate leases.

At December 31, 2020, the Company had committed to additional future obligations of approximately $10.2 million for a real estate operating lease that has not yet commenced and therefore is not included in the table above. This lease is expected to commence within the next three months with a lease term of three years.

Operating Leases - prior to the adoption of Topic 842

The Company recorded rent expense of $118.1 million for the year ended December 31, 2018.

Other Lease Transactions

In connection with Bain Capital Fund VII, L.P.'s acquisition of its 60% interest in UWWH on November 27, 2002, Unisource transferred 40 of its U.S. distribution facilities (the "Properties") to Georgia-Pacific who then sold 38 of the Properties to an unrelated third party (the "Purchaser/Landlord"). Contemporaneously with the sale, Georgia-Pacific entered into lease agreements with the Purchaser/Landlord with respect to the individual 38 Properties and concurrently entered into sublease agreements with Unisource, which expired in June 2018. As a result of certain forms of continuing involvement, these transactions did not qualify for sale-leaseback accounting. Accordingly, the leases were classified as financing transactions. As of June 30, 2018, the financing obligations for all of the related party financed Properties were either terminated early or had expired in accordance with their terms. Through formal termination or natural expiration of these agreements, the involvement of Georgia-Pacific ceased and the leases no longer qualified as failed sale-leaseback financing obligations. Of the original 38 financing obligations to related party Properties, 27 were settled by the return of the Properties to the landlord. See Note 4, Restructuring, Integration and Acquisition Charges, for additional information regarding the related party failed-sale leaseback agreements.
In May 2017, the Company entered into a purchase and sale agreement under which Veritiv agreed to sell its Austin, Texas facility to an unrelated third party. Upon the closing of the sale, Veritiv entered into a lease of the facility for an initial period of ten years with two optional five-year renewal terms. The sale-leaseback transaction did not provide for any continuing involvement by the Company other than a normal lease for use of the property during the lease term. The transaction resulted in net cash proceeds of $9.1 million and a related deferred gain of $5.4 million. Prior to 2019, the Company recognized a portion of the gain on a straight-line basis over the initial ten-year lease period as a reduction to selling and administrative expenses on the Consolidated Statements of Operations. 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 sale of this property.
Leases
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, 2020, the Company operated from 125 distribution centers of which approximately 117 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 leases3to10years
Delivery equipment leases3to8years
Other non-real estate leases3to5years

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. The Company does not include short-term leases on the 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 assets 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.

The components of lease expense were as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Short-term lease expense(1)
Operating expenses$2.3 $7.1 
Operating lease expense(2)
Operating expenses$111.8 $113.9 
Finance lease expense:
Amortization of right-of-use assets
Depreciation and amortization$14.7 $10.8 
Interest expense
Interest expense, net3.0 2.3 
Total finance lease expense
$17.7 $13.1 
Total Lease Cost
$131.8 $134.1 
(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, 2020 and 2019 .

Supplemental balance sheets and other information were as follows:
(in millions, except weighted-average data)As of December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating lease right-of-use assetsOther non-current assets$351.7 $429.2 
Operating lease obligations - currentOther accrued liabilities$81.9 $90.5 
Operating lease obligations - non-currentOther non-current liabilities307.4 376.6 
Total operating lease obligations
$389.3 $467.1 
Weighted-average remaining lease term in years6.16.6
Weighted-average discount rate4.7 %4.6 %
Finance Leases:
Finance lease right-of-use assetsProperty and equipment$76.6 $76.6 
Finance lease obligations - currentCurrent portion of debt$13.4 $11.5 
Finance lease obligations - non-currentLong-term debt, net of current portion68.9 69.2 
Total finance lease obligations
$82.3 $80.7 
Weighted-average remaining lease term in years7.17.8
Weighted-average discount rate3.7 %3.4 %
Cash paid for amounts included in the measurement of lease liabilities was as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating cash flows from operating leases
Operating activities$111.1 $109.5 
Finance Leases:
Operating cash flows from finance leases
Operating activities$3.0 $2.3 
Financing cash flows from finance leases
Financing activities13.0 9.1 

Lease Commitments

Future minimum lease payments at December 31, 2020 were as follows:
(in millions)Finance Leases
Operating Leases(1)
2021$16.0 $98.3 
202215.5 83.4 
202313.2 63.1 
202411.4 53.0 
202510.6 42.4 
Thereafter27.7 111.4 
Total future minimum lease payments94.4 451.6 
   Amount representing interest(12.1)(62.3)
Total future minimum lease payments, net of interest$82.3 $389.3 
(1) Future sublease income of $1.8 million is excluded from the operating leases amount in the table above.

Total future minimum lease payments at December 31, 2020 for finance and operating leases, including the amount representing interest, are comprised of $467.8 million for real estate leases and $78.2 million for non-real estate leases.

At December 31, 2020, the Company had committed to additional future obligations of approximately $10.2 million for a real estate operating lease that has not yet commenced and therefore is not included in the table above. This lease is expected to commence within the next three months with a lease term of three years.

Operating Leases - prior to the adoption of Topic 842

The Company recorded rent expense of $118.1 million for the year ended December 31, 2018.

Other Lease Transactions

In connection with Bain Capital Fund VII, L.P.'s acquisition of its 60% interest in UWWH on November 27, 2002, Unisource transferred 40 of its U.S. distribution facilities (the "Properties") to Georgia-Pacific who then sold 38 of the Properties to an unrelated third party (the "Purchaser/Landlord"). Contemporaneously with the sale, Georgia-Pacific entered into lease agreements with the Purchaser/Landlord with respect to the individual 38 Properties and concurrently entered into sublease agreements with Unisource, which expired in June 2018. As a result of certain forms of continuing involvement, these transactions did not qualify for sale-leaseback accounting. Accordingly, the leases were classified as financing transactions. As of June 30, 2018, the financing obligations for all of the related party financed Properties were either terminated early or had expired in accordance with their terms. Through formal termination or natural expiration of these agreements, the involvement of Georgia-Pacific ceased and the leases no longer qualified as failed sale-leaseback financing obligations. Of the original 38 financing obligations to related party Properties, 27 were settled by the return of the Properties to the landlord. See Note 4, Restructuring, Integration and Acquisition Charges, for additional information regarding the related party failed-sale leaseback agreements.
In May 2017, the Company entered into a purchase and sale agreement under which Veritiv agreed to sell its Austin, Texas facility to an unrelated third party. Upon the closing of the sale, Veritiv entered into a lease of the facility for an initial period of ten years with two optional five-year renewal terms. The sale-leaseback transaction did not provide for any continuing involvement by the Company other than a normal lease for use of the property during the lease term. The transaction resulted in net cash proceeds of $9.1 million and a related deferred gain of $5.4 million. Prior to 2019, the Company recognized a portion of the gain on a straight-line basis over the initial ten-year lease period as a reduction to selling and administrative expenses on the Consolidated Statements of Operations. 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 sale of this property.
Leases
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, 2020, the Company operated from 125 distribution centers of which approximately 117 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 leases3to10years
Delivery equipment leases3to8years
Other non-real estate leases3to5years

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. The Company does not include short-term leases on the 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 assets 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.

The components of lease expense were as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Short-term lease expense(1)
Operating expenses$2.3 $7.1 
Operating lease expense(2)
Operating expenses$111.8 $113.9 
Finance lease expense:
Amortization of right-of-use assets
Depreciation and amortization$14.7 $10.8 
Interest expense
Interest expense, net3.0 2.3 
Total finance lease expense
$17.7 $13.1 
Total Lease Cost
$131.8 $134.1 
(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, 2020 and 2019 .

Supplemental balance sheets and other information were as follows:
(in millions, except weighted-average data)As of December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating lease right-of-use assetsOther non-current assets$351.7 $429.2 
Operating lease obligations - currentOther accrued liabilities$81.9 $90.5 
Operating lease obligations - non-currentOther non-current liabilities307.4 376.6 
Total operating lease obligations
$389.3 $467.1 
Weighted-average remaining lease term in years6.16.6
Weighted-average discount rate4.7 %4.6 %
Finance Leases:
Finance lease right-of-use assetsProperty and equipment$76.6 $76.6 
Finance lease obligations - currentCurrent portion of debt$13.4 $11.5 
Finance lease obligations - non-currentLong-term debt, net of current portion68.9 69.2 
Total finance lease obligations
$82.3 $80.7 
Weighted-average remaining lease term in years7.17.8
Weighted-average discount rate3.7 %3.4 %
Cash paid for amounts included in the measurement of lease liabilities was as follows:
(in millions)Year Ended December 31,
Lease ClassificationFinancial Statement Classification20202019
Operating Leases:
Operating cash flows from operating leases
Operating activities$111.1 $109.5 
Finance Leases:
Operating cash flows from finance leases
Operating activities$3.0 $2.3 
Financing cash flows from finance leases
Financing activities13.0 9.1 

Lease Commitments

Future minimum lease payments at December 31, 2020 were as follows:
(in millions)Finance Leases
Operating Leases(1)
2021$16.0 $98.3 
202215.5 83.4 
202313.2 63.1 
202411.4 53.0 
202510.6 42.4 
Thereafter27.7 111.4 
Total future minimum lease payments94.4 451.6 
   Amount representing interest(12.1)(62.3)
Total future minimum lease payments, net of interest$82.3 $389.3 
(1) Future sublease income of $1.8 million is excluded from the operating leases amount in the table above.

Total future minimum lease payments at December 31, 2020 for finance and operating leases, including the amount representing interest, are comprised of $467.8 million for real estate leases and $78.2 million for non-real estate leases.

At December 31, 2020, the Company had committed to additional future obligations of approximately $10.2 million for a real estate operating lease that has not yet commenced and therefore is not included in the table above. This lease is expected to commence within the next three months with a lease term of three years.

Operating Leases - prior to the adoption of Topic 842

The Company recorded rent expense of $118.1 million for the year ended December 31, 2018.

Other Lease Transactions

In connection with Bain Capital Fund VII, L.P.'s acquisition of its 60% interest in UWWH on November 27, 2002, Unisource transferred 40 of its U.S. distribution facilities (the "Properties") to Georgia-Pacific who then sold 38 of the Properties to an unrelated third party (the "Purchaser/Landlord"). Contemporaneously with the sale, Georgia-Pacific entered into lease agreements with the Purchaser/Landlord with respect to the individual 38 Properties and concurrently entered into sublease agreements with Unisource, which expired in June 2018. As a result of certain forms of continuing involvement, these transactions did not qualify for sale-leaseback accounting. Accordingly, the leases were classified as financing transactions. As of June 30, 2018, the financing obligations for all of the related party financed Properties were either terminated early or had expired in accordance with their terms. Through formal termination or natural expiration of these agreements, the involvement of Georgia-Pacific ceased and the leases no longer qualified as failed sale-leaseback financing obligations. Of the original 38 financing obligations to related party Properties, 27 were settled by the return of the Properties to the landlord. See Note 4, Restructuring, Integration and Acquisition Charges, for additional information regarding the related party failed-sale leaseback agreements.
In May 2017, the Company entered into a purchase and sale agreement under which Veritiv agreed to sell its Austin, Texas facility to an unrelated third party. Upon the closing of the sale, Veritiv entered into a lease of the facility for an initial period of ten years with two optional five-year renewal terms. The sale-leaseback transaction did not provide for any continuing involvement by the Company other than a normal lease for use of the property during the lease term. The transaction resulted in net cash proceeds of $9.1 million and a related deferred gain of $5.4 million. Prior to 2019, the Company recognized a portion of the gain on a straight-line basis over the initial ten-year lease period as a reduction to selling and administrative expenses on the Consolidated Statements of Operations. 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 sale of this property.
v3.20.4
Restructuring, Integration and Acquisition Charges
12 Months Ended
Dec. 31, 2020
Restructuring and Related Activities [Abstract]  
Restructuring, Integration and Acquisition Charges
4. RESTRUCTURING, INTEGRATION AND ACQUISITION 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 will result in (i) the 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 estimates it will now incur total restructuring charges of between $77 million and $101 million in connection with the 2020 Restructuring Plan. These costs will consist of approximately (i) $52 million to $54 million in employee termination and other one-time compensation costs, (ii) $11 million to $29 million in real estate exit costs, (iii) $10 million in inventory related costs and (iv) $4 million to $8 million in other exit costs. In addition, the Company expects to incur approximately $4 million of inventory related costs to be reported in cost of products sold. The Company expects to substantially complete the 2020 Restructuring Plan by the end of 2021. Initial charges were incurred and recorded in June 2020.

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 2020 Restructuring Plan liability activity for the year ended December 31, 2020 (costs incurred exclude any non-cash portion of restructuring gains or losses on asset disposals):
(in millions)Severance and Related CostsOther Direct CostsTotal
Balance at December 31, 2019$— $— $— 
Costs incurred38.7 12.4 51.1 
Payments(23.3)(5.5)(28.8)
Balance at December 31, 2020$15.4 $6.9 $22.3 

In addition to the costs incurred and payments shown in the table above, during the fourth quarter of 2020 the Company prepaid $8.1 million of Other Direct Costs, of which $1.1 million was expensed during the quarter and $7.0 million remained as a component of other current assets on the Consolidated Balance Sheet as of December 31, 2020. The Company is expected to make another payment of approximately $8.1 million during the fourth quarter of 2021, of which approximately $4.1 million will represent a prepayment.

Merger of xpedx and Unisource

As of December 31, 2019, the integration and restructuring plans related to the Merger were complete and no further costs or charges are expected.
Integration and Acquisition Expenses

During the years ended December 31, 2019 and 2018, Veritiv incurred costs and charges related primarily to: internally dedicated integration management resources, retention compensation, information technology conversion costs, professional services and other costs to integrate its businesses. The following table summarizes the components of integration and acquisition expenses:
Year Ended December 31,
(in millions)20192018
Integration management$10.4 $17.3 
Retention compensation1.0 0.5 
Information technology conversion costs3.4 8.1 
Legal, consulting and other professional fees— 0.3 
Other1.9 3.5 
AAC integration and acquisition0.8 2.1 
     Total integration and acquisition expenses$17.5 $31.8 

Veritiv Restructuring Plan: Merger Related

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, of which $5.4 million was recognized during the fourth quarter of 2019. For the years ended December 31, 2019 and 2018, the Company recognized a net loss of $0.4 million, and a net gain of $15.0 million, respectively, related to the sale or exit of certain facilities. During the fourth quarter of 2018, three properties were sold as part of the Company's restructuring efforts. The Company recognized a gain on the sale of these assets of approximately $12.9 million. See additional information at Note 10, Fair Value Measurements.

On June 30, 2018, the related party failed sale-leaseback agreements, originally entered into with Georgia-Pacific, expired in accordance with their terms. The agreements contained provisions that required Veritiv to incur costs during the lease term related to general repairs and maintenance. Certain termination and repair costs were incurred at or near the end of the agreements' expirations. Costs related to the properties that were exited as part of the restructuring plan were classified within restructuring charges, net, on the Consolidated Statements of Operations, and totaled $11.2 million for the year ended December 31, 2018. See Note 3, Leases, for additional information related to the related party failed-sale leaseback agreements.

Other direct costs reported in the tables 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 years ended December 31, 2019 and 2018 and the cumulative recorded amounts since the initiative began:
(in millions)Severance and Related CostsOther Direct Costs(Gain) Loss on Sale of Assets and Other (non-cash portion)Total
2019$9.1 $20.3 $(0.6)$28.8 
20183.3 22.3 (15.0)10.6 
Cumulative32.4 90.5 (38.0)84.9 

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 that will be paid-out over an approximate 20-year period. The following is a summary of the Company's restructuring liability activity for the periods presented (costs incurred exclude any non-cash portion of restructuring gains or losses on asset disposals):    
(in millions)Severance and Related CostsOther Direct CostsTotal
Balance at December 31, 2018$4.7 $25.1 $29.8 
Costs incurred9.1 20.3 29.4 
Payments(7.6)(14.8)(22.4)
Balance at December 31, 20196.2 30.6 36.8 
Payments(5.8)(6.9)(12.7)
Other non-cash items— (0.1)(0.1)
Balance at December 31, 2020$0.4 $23.6 $24.0 

The Company has recorded undiscounted charges related to the complete or partial withdrawal from various MEPPs. 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 for the respective years ended December 31:
Year Ended December 31,
(in millions)Restructuring charges, netDistribution expensesTotal Net Charges
2019$1.5 $6.6 $8.1 
2018(2.8)11.2 8.4 

See Note 9, Employee Benefit Plans, for additional information regarding these MEPP transactions.


Veritiv Restructuring Plan: Print Segment

To ensure that Veritiv will be appropriately positioned to respond to the secular decline in the paper industry, the Company restructured its Print segment and completed its efforts as of December 31, 2018. The restructuring plan included initiatives within the Company's Print segment to improve the sustainability of the print business, better serve its customers' needs and work more effectively with suppliers by incorporating a more customer focused, collaborative, team-selling approach as well as better aligning its support functions. As of December 31, 2019, the Company had $0.1 million of restructuring liabilities related to this plan, which was paid in 2020.
The following is a summary of the Company's Print restructuring liability activity for the year ended December 31, 2019:
(in millions)Severance and Related Costs
Balance at December 31, 2018$2.0 
Payments(1.9)
Balance at December 31, 2019$0.1 
See Note 16, Segment and Other Information, for the impact these charges had on the Company's reportable segments.
v3.20.4
Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

At December 31, 2020, the net goodwill balance was $99.6 million. The following table sets forth the changes in the carrying amount of goodwill during 2020 and 2019:
(in millions)PackagingFacility SolutionsPrintPublishingCorporate & OtherTotal
Balance at December 31, 2018:
   Goodwill$99.6 $59.0 $265.4 $50.5 $6.1 $480.6 
   Accumulated impairment losses— (59.0)(265.4)(50.5)(6.1)(381.0)
      Net goodwill 201899.6 — — — — 99.6 
2019 Activity:
   Goodwill acquired— — — — — — 
   Impairment of goodwill— — — — — — 
Balance at December 31, 2019:
   Goodwill99.6 59.0 265.4 50.5 6.1 480.6 
   Accumulated impairment losses— (59.0)(265.4)(50.5)(6.1)(381.0)
      Net goodwill 201999.6 — — — — 99.6 
2020 Activity:
Goodwill acquired— — — — — —