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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________
Commission file number 001-36479

vrtv-20220331_g1.jpg

VERITIV CORPORATION
(Exact name of registrant as specified in its charter)
Delaware46-3234977
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
1000 Abernathy Road NE
Building 400, Suite 1700
                           Atlanta,Georgia30328
(Address of principal executive offices)(Zip Code)

(770) 391-8200
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueVRTVNew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  

The number of shares outstanding of the registrant's common stock as of May 3, 2022 was 14,686,739.




TABLE OF CONTENTS





Page



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

VERITIV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data, unaudited)
Three Months Ended
March 31,
20222021
Net sales$1,858.1 $1,559.3 
Cost of products sold (exclusive of depreciation and amortization shown separately below)1,455.4 1,238.1 
Distribution expenses112.2 101.5 
Selling and administrative expenses187.9 166.4 
Depreciation and amortization12.7 14.5 
Restructuring charges, net2.7 4.3 
Operating income (loss)87.2 34.5 
Interest expense, net3.5 5.1 
Other (income) expense, net(0.6)(1.0)
Income (loss) before income taxes84.3 30.4 
Income tax expense (benefit)5.8 9.1 
Net income (loss)$78.5 $21.3 
Earnings (loss) per share:
Basic$5.31 $1.34 
Diluted$5.12 $1.28 
Weighted-average shares outstanding:
Basic14.77 15.88 
Diluted15.32 16.66 

See accompanying Notes to Condensed Consolidated Financial Statements.
1

VERITIV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, unaudited)
Three Months Ended
March 31,
20222021
Net income (loss)$78.5 $21.3 
Other comprehensive income (loss):
Foreign currency translation adjustments2.6 (0.3)
Other comprehensive income (loss)2.6 (0.3)
Total comprehensive income (loss)$81.1 $21.0 


See accompanying Notes to Condensed Consolidated Financial Statements.



2

VERITIV CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except par value, unaudited)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$33.8 $49.3 
Accounts receivable, less allowances of $30.2 and $34.4, respectively
944.3 1,011.2 
Inventories407.7 

484.5 
Other current assets118.9 

131.5 
Assets-held-for-sale300.5 

1.2 
Total current assets1,805.2 1,677.7 
Property and equipment (net of accumulated depreciation and amortization of $313.9 and $332.4, respectively)
137.1 

162.9 
Goodwill96.3 

99.6 
Other intangibles, net38.9 

42.7 
Deferred income tax assets59.8 

47.1 
Other non-current assets369.9 

408.4 
Total assets$2,507.2 $2,438.4 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$512.4 $561.9 
Accrued payroll and benefits54.9 110.0 
Other accrued liabilities165.8 185.7 
Liabilities-held-for-sale172.9  
Current portion of debt15.0 

16.0 
Total current liabilities921.0 873.6 
Long-term debt, net of current portion511.5 

499.7 
Defined benefit pension obligations3.5 

7.2 
Other non-current liabilities391.4 

422.1 
Total liabilities1,827.4 1,802.6 
Commitments and contingencies (Note 11)

Shareholders' equity:
Preferred stock, $0.01 par value, 10.0 million shares authorized, none issued
 

 
Common stock, $0.01 par value, 100.0 million shares authorized; shares issued - 17.5 million and 17.0 million, respectively; shares outstanding - 15.0 million and 14.6 million, respectively
0.2 

0.2 
Additional paid-in capital607.1 

633.8 
Accumulated earnings (deficit)221.7 

143.2 
Accumulated other comprehensive loss(21.7)

(24.3)
Treasury stock at cost - 2.5 million and 2.4 million shares, respectively
(127.5)(117.1)
Total shareholders' equity679.8 635.8 
Total liabilities and shareholders' equity$2,507.2 $2,438.4 

See accompanying Notes to Condensed Consolidated Financial Statements.
3

VERITIV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)
Three Months Ended March 31,
20222021
Operating activities
Net income (loss)$78.5 $21.3 
Depreciation and amortization12.7 14.5 
Amortization and write-off of deferred financing fees0.4 0.3 
Net losses (gains) on disposition of assets and sale of a business(2.3)(2.2)
Provision for expected credit losses(0.6)0.9 
Deferred income tax provision (benefit)(12.7)3.1 
Stock-based compensation2.8 1.2 
Other non-cash items, net0.5 0.8 
Changes in operating assets and liabilities
Accounts receivable(25.8)(10.3)
Inventories(8.8)(30.7)
Other current assets(1.1)1.7 
Accounts payable4.5 54.3 
Accrued payroll and benefits(50.6)(29.8)
Other accrued liabilities1.0 (10.9)
Other(4.4)(1.0)
Net cash provided by (used for) operating activities(5.9)13.2 
Investing activities
Property and equipment additions(9.4)(6.3)
Proceeds from asset sales and sale of a business0.2 8.0 
Proceeds from insurance related to property and equipment2.1  
Net cash provided by (used for) investing activities(7.1)1.7 
Financing activities
Change in book overdrafts20.3 (9.2)
Borrowings of long-term debt1,515.2 1,392.8 
Repayments of long-term debt(1,481.8)(1,378.9)
Payments under right-of-use finance leases(3.4)(3.3)
Payments under vendor-based financing arrangements(3.2) 
Purchase of treasury stock(10.4)(24.6)
Impact of tax withholding on share-based compensation(29.5)(3.3)
Other0.2 0.4 
Net cash provided by (used for) financing activities7.4 (26.1)
Effect of exchange rate changes on cash0.0 (0.4)
Net change in cash and cash equivalents, including cash classified within assets-held-for-sale(5.6)(11.6)
Less: cash included in assets-held-for-sale, end of period(9.9) 
Net change in cash and cash equivalents(15.5)(11.6)
Cash and cash equivalents at beginning of period49.3 120.6 
Cash and cash equivalents at end of period$33.8 $109.0 
Supplemental cash flow information
Cash paid for income taxes, net of refunds$15.1 $11.2 
Cash paid for interest2.9 4.6 
Non-cash investing and financing activities
Non-cash additions to property and equipment for right-of-use finance leases and vendor-based financing arrangements$15.6 $0.2 
Non-cash additions to other non-current assets for right-of-use operating leases31.2 11.3 

See accompanying Notes to Condensed Consolidated Financial Statements.
4

VERITIV CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions, unaudited)
2022
Common Stock IssuedAdditional Paid-in CapitalAccumulated Earnings (Deficit)
AOCL (1)
Treasury StockTotal
SharesAmountSharesAmount
Balance at December 31, 202117.0 $0.2 $633.8 $143.2 $(24.3)(2.4)$(117.1)$635.8 
Net income (loss)78.5 78.5 
Other comprehensive income (loss)2.6 2.6 
Stock-based compensation2.8 2.8 
Issuance of common stock, net of stock received for minimum tax withholdings0.5 0.0 (29.5)(29.5)
Treasury stock purchases(0.1)(10.4)(10.4)
Balance at March 31, 202217.5 $0.2 $607.1 $221.7 $(21.7)(2.5)$(127.5)$679.8 
(1) Accumulated other comprehensive loss.

2021
Common Stock IssuedAdditional Paid-in CapitalAccumulated Earnings (Deficit)
AOCL (1)
Treasury StockTotal
SharesAmountSharesAmount
Balance at December 31, 202016.6 $0.2 $634.9 $(1.4)$(33.5)(0.7)$(17.1)$583.1 
Net income (loss)21.3 21.3 
Other comprehensive income (loss)(0.3)(0.3)
Stock-based compensation1.2 1.2 
Issuance of common stock, net of stock received for minimum tax withholdings0.2 0.0 (3.3)(3.3)
Treasury stock purchases(0.6)(24.6)(24.6)
Balance at March 31, 202116.8 $0.2 $632.8 $19.9 $(33.8)(1.3)$(41.7)$577.4 
(1) Accumulated other comprehensive loss.

See accompanying Notes to Condensed Consolidated Financial Statements.

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VERITIV CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Veritiv Corporation ("Veritiv" or the "Company") is a North American business-to-business full-service provider of value-added packaging products and services, as well as facility solutions and print-based products and services. Additionally, Veritiv provides logistics and supply chain management solutions to its customers. Veritiv was established in 2014, following the merger of International Paper Company's xpedx distribution solutions business and UWW Holdings, Inc., the parent company of Unisource Worldwide, Inc. ("Unisource"). Veritiv operates primarily throughout the United States ("U.S."), Canada and Mexico.

In March 2022, the Company signed a definitive agreement to sell its Veritiv Canada, Inc. business to Imperial Dade Canada Inc. for a purchase price of CAD $240 million (approximately U.S. $190 million) in cash payable at closing, subject to certain customary adjustments. The sale includes substantially all of the Company's facility solutions and print operations in Canada, and a majority of the Company's Canada-based packaging business, which primarily serves food service customers. The Company maintains the ability to supply packaging solutions to the Canadian locations of certain U.S.-based customers. The sale does not represent a strategic shift that will have a major effect on the Company's operations or financial results and it did not meet the requirements to be classified as a discontinued operation. See Note 13, Divestitures and Note 14, Subsequent Event, for additional information regarding the sale of Veritiv Canada, Inc.

As the print and publishing industries continue to evolve, the Company continues to focus on ways to share costs and leverage combined resources where possible. In order to better align the resources of the Company's print and publishing organizations with the needs of the changing marketplaces, during the first quarter of 2022 the Company reevaluated the way in which it would service its customers, manage its product offerings and allocate resources to support these areas of its business. This resulted in a decision to combine the print and publishing operations, resulting in a new reportable segment known as Print Solutions. Prior period results have been revised to align with the new presentation. See Note 2, Revenue Recognition and Credit Losses, for additional information regarding the Company's product offerings and reportable segments.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for a complete set of annual audited financial statements. The accompanying unaudited financial information should be read in conjunction with the Consolidated Financial Statements and Notes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2021. In the opinion of management, all adjustments, including normal recurring accruals and other adjustments, considered necessary for a fair presentation of the interim financial information have been included. The operating results for the interim periods are not necessarily indicative of results for the full year, particularly in light of the divestiture of Veritiv Canada, Inc. and the ongoing impacts of the COVID-19 pandemic and its effects on the domestic and global economies. These financial statements include all of the Company's subsidiaries. All significant intercompany transactions between Veritiv's businesses have been eliminated.

Use of Estimates

The preparation of unaudited financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and certain financial statement disclosures. Estimates and assumptions are used for, but not limited to, revenue recognition, right-of-use ("ROU") asset and liability valuations, accounts and notes receivable valuations, inventory valuation, employee benefit plans, long-term incentive plans, income tax contingency accruals and valuation allowances, multi-employer pension plan ("MEPP") withdrawal liabilities, contingency accruals, goodwill and other intangible asset valuations and the determination of assets and liabilities that are held-for-sale. 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.

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Primarily beginning in April 2020, the COVID-19 pandemic has affected Veritiv's operational and financial performance to varying degrees. As a result of the COVID-19 pandemic, the Company could continue to experience impacts including, but not limited to, charges from potential adjustments of the carrying amount of accounts and notes receivables and inventory, asset impairment charges and deferred tax valuation allowances. The extent to which the COVID-19 pandemic continues to impact the Company's business, results of operations, access to sources of liquidity and financial condition will depend on future developments. These developments, which are uncertain and difficult to predict, include, but are not limited to, the duration, spread and severity of the COVID-19 pandemic including new variants, the effects of the COVID-19 pandemic on the Company's employees, customers, suppliers and vendors, measures adopted or recommended by local and federal governments or health authorities in response to the pandemic, the availability, adoption and effectiveness of vaccines and vaccine boosters and to what extent normal economic and operating conditions can resume and be sustained. Even after the COVID-19 pandemic has subsided, the Company may experience an impact to its business as a result of any economic recession, downturn or volatility or long-term changes in customer behavior. Estimates are revised as additional information becomes available.

Accounting Pronouncements

Recently Adopted Accounting Standards

Effective January 1, 2022, the Company adopted Accounting Standards Update ("ASU") 2021-10, Government Assistance (Topic 832) on a prospective basis. This standard increases the transparency of government assistance provided to entities by including disclosure of (1) the types of assistance, (2) an entity's accounting for the assistance and (3) the effect of the assistance on an entity's financial statements. The amendments in this update are effective for annual periods beginning after December 15, 2021. An entity should apply the amendments in this update either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. The adoption did not materially impact the Company's consolidated financial statements and disclosures.

Recently Issued Accounting Standards Not Yet Adopted

ASU 2020-04, Reference Rate Reform (Topic 848). This standard provides temporary optional expedients and exceptions to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting burdens as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. The guidance is available for prospective application upon its issuance and can generally be applied to contract modifications and hedging relationships entered into March 12, 2020 through December 31, 2022. The Company has long-term debt for which existing payments are based on LIBOR. The Company's ABL Facility includes certain provisions, which are not yet in effect, to facilitate the transition from LIBOR to a new replacement benchmark rate. Currently, the Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.

2. REVENUE RECOGNITION AND CREDIT LOSSES

Veritiv applies the five-step model to assess its contracts with customers. The Company's revenue is reported as net sales and is measured as the determinable transaction price, net of any variable consideration (e.g., sales incentives and rights to return product) and any taxes collected from customers and remitted to governmental authorities. Certain revenues are derived from shipments which are made directly from a manufacturer to a Veritiv customer. The Company is considered to be a principal to these transactions. Revenues from these sales are reported on a gross basis on the Condensed Consolidated Statements of Operations and have historically represented approximately 35% of Veritiv's total net sales. As a normal business practice, Veritiv does not enter into contracts that require more than one year to complete or that contain significant financing components. The Company considers handling and delivery as activities to fulfill its performance obligations. Billings for third-party freight are accounted for as net sales and handling and delivery costs are accounted for as distribution expenses. Veritiv enters into incentive programs with certain of its customers, which are generally based on sales to those same customers. 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. The Company has established credit and collection processes whereby collection assessments are performed and expected credit losses are recognized.

Customer product returns are estimated based on historical experience and the identification of specific events necessitating an adjustment. The estimated return value is recognized as a reduction of gross sales and related cost of products
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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 Condensed Consolidated Balance Sheets. As of March 31, 2022 and December 31, 2021, estimated inventory returns were not significant.

A customer contract liability will arise when Veritiv has received payment for goods and services but has not yet transferred the items to a customer and satisfied its performance obligations. Veritiv records a customer contract liability for performance obligations outstanding related to payments received in advance for customer deposits on equipment sales and other sale arrangements requiring prepayment, which are included in accounts payable and other accrued liabilities on the Condensed Consolidated Balance Sheets. Veritiv expects to satisfy these remaining performance obligations and recognize the related revenues upon delivery of the goods and services to the customer's designated location within 12 months following receipt of the payment. Most equipment sales deposits are held for approximately 90 days and other sale arrangements requiring prepayment initially cover a 60 - 90 day period but can be renewed by the customer.

See the table below for a year-to-date summary of the changes to the customer contract liabilities balance:
Customer Contract Liabilities
(in millions)20222021
Balance at January 1,$21.8 $12.2 
    Payments received15.3 14.2 
    Revenue recognized from beginning balance(11.4)(7.3)
    Revenue recognized from current year receipts(5.1)(7.1)
    Reclassified to liabilities-held-for-sale (1)
(1.1) 
Balance at March 31,$19.5 $12.0 
(1) See Note 13, Divestitures, for information on the sale of Veritiv Canada, Inc.

Historically, the Company's ten largest customers have generated approximately 10% - 15% of its consolidated annual net sales. Veritiv's principal markets are concentrated primarily across North America with first quarter 2022 net sales in the U.S., Canada and Mexico of approximately 86%, 11% and 2%, respectively. Veritiv evaluated the nature of the products and services provided to its customers as well as the nature of the customer and the geographical distribution of its customer base and determined that the best representative level of disaggregated revenue is the product category basis. The following is a brief description of the Company's three reportable segments, organized by major product category. This segment structure is consistent with the way the Chief Operating Decision Maker, who is Veritiv's Chief Executive Officer, makes operating decisions and manages the growth and profitability of the Company's business. The Company also has a Corporate & Other category, which includes certain assets and costs not primarily attributable to any of the reportable segments, as well as the Veritiv logistics solutions business which provides transportation and warehousing solutions.

Packaging – The Packaging segment provides custom and standard packaging solutions for customers based in North America and in key global markets. This segment services its customers with a full spectrum of packaging product materials within flexible, corrugated and fiber, ancillary packaging, rigid and equipment categories. The business is strategically focused on higher growth industry sectors including manufacturing, food and beverage, wholesale and retail, healthcare and transportation, as well as specialty sectors based on industry and product expertise. This segment also provides supply chain solutions, structural and graphic packaging design and engineering, automation, workflow and equipment services and kitting.

Facility Solutions – The Facility Solutions segment sources and sells cleaning, break-room and other supplies in product categories that include towels and tissues, food service, personal protective equipment, cleaning chemicals and skincare, primarily in North America. Additionally, the Company offers total cost of ownership solutions with re-merchandising, budgeting and compliance reporting and inventory management.

Print Solutions – The Print Solutions segment sells and distributes commercial printing, writing and copying products and services primarily in North America. Veritiv's broad geographic platform of operations and services, coupled with the breadth of paper and graphics products, including exclusive private brand offerings, provides a comprehensive suite of solutions in paper procurement, print management, supply chain and distribution.

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See Note 12, Segment and Other Information, for the disaggregation of revenue and other information related to the Company's reportable segments and Corporate & Other.

Allowance for Credit Losses

The components of the accounts receivable allowances were as follows:
(in millions)March 31, 2022December 31, 2021
Allowance for credit losses$21.5 $23.7 
Other allowances(1)
8.7 10.7 
Total accounts receivable allowances$30.2 $34.4 
(1) Includes amounts reserved for credit memos, customer discounts, customer short pays and other miscellaneous items. The current period amount is shown net of $1.2 million related to Veritiv Canada, Inc., which was reclassified from the allowance to assets-held-for-sale.

Below is a year-to-date rollforward of the Company’s allowance for credit losses:

Packaging and Facility SolutionsPrint Solutions - High RiskPrint Solutions - Medium/Low Risk
(in millions)U.S.CanadaU.S.Canada
U.S.(1)
CanadaRest of world
Corporate & Other(2)
Total
Balance at December 31, 2021$12.6 $1.0 $6.2 $0.5 $1.7 $0.0 $1.0 $0.7 $23.7 
Add / (Deduct):
Provision for expected credit losses0.0 0.1 (0.2)0.0 (0.2)0.0 0.1 0.1 (0.1)
Write-offs charged against the allowance(0.4) (0.3) 0.0   (0.1)(0.8)
Recoveries of amounts previously written off0.0  0.1  0.0   0.0 0.1 
Other adjustments(3)
 (1.1)0.2 (0.5) 0.0 0.0  (1.4)
Balance at March 31, 2022$12.2 $ $6.0 $ $1.5 $ $1.1 $0.7 $21.5 
(1) Reflects the combined results for print and publishing operations.
(2) Corporate & Other have only U.S. operations.
(3) 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. These adjustments may also include accounts receivable allowances recorded in connection with acquisitions and divestitures, including reclassifications from the allowance to assets-held-for-sale.

The Company, under certain circumstances, enters into note receivable agreements with customers. Expected credit losses are recognized when collectability is uncertain; these losses are included in selling and administrative expenses on the Condensed Consolidated Statements of Operations. For the three months ended March 31, 2022 and 2021, the Company recognized $(0.5) million and $0.0 million, respectively, in the provision for expected credit losses related to these notes receivable. During the first quarter of 2022, the Company received higher than expected payments, resulting in a favorable reduction to the required provision. At March 31, 2022 and December 31, 2021, the Company held $0.1 million and $0.5 million, respectively, in notes receivable, which is reflected within other current assets on the Condensed Consolidated Balance Sheets.

3. LEASES

The Company leases certain property and equipment used for operations to limit its exposure to risks related to ownership. The major leased asset categories include: real estate, delivery equipment, material handling equipment and computer and office equipment. As of March 31, 2022, the Company operated from approximately 115 distribution centers of which approximately 110 were leased; of the leased facilities, 12 are located in Canada. 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.

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The components of lease expense were as follows:
(in millions)Three Months Ended
March 31,
Lease ClassificationFinancial Statement Classification20222021
Short-term lease expense(1)
Operating expenses$0.8 $1.0 
Operating lease expense(2)
Operating expenses$25.1 $25.6 
Finance lease expense:
Amortization of right-of-use assets
Depreciation and amortization$3.7 $3.7 
Interest expense
Interest expense, net0.7 0.7 
Total finance lease expense
$4.4 $4.4 
Total Lease Cost
$30.3 $31.0 
(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 periods presented.

Supplemental balance sheets and other information were as follows (the current period amounts do not include Veritiv Canada, Inc. See Note 13, Divestitures, for information on the sale of this business):
(in millions, except weighted-average data)March 31, 2022December 31, 2021
Lease ClassificationFinancial Statement Classification
Operating Leases:
Operating lease right-of-use assetsOther non-current assets$344.6 $375.6 
Operating lease obligations - currentOther accrued liabilities$73.5 $80.2 
Operating lease obligations - non-currentOther non-current liabilities304.3 329.3 
Total operating lease obligations
$377.8 $409.5 
Weighted-average remaining lease term in years6.36.2
Weighted-average discount rate4.4 %4.5 %
Finance Leases:
Finance lease right-of-use assetsProperty and equipment$32.7 $66.3 
Finance lease obligations - currentCurrent portion of debt$9.8 $13.9 
Finance lease obligations - non-currentLong-term debt, net of current portion26.1 58.9 
Total finance lease obligations
$35.9 $72.8 
Weighted-average remaining lease term in years4.06.4
Weighted-average discount rate3.7 %3.7 %

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Cash paid for amounts included in the measurement of lease liabilities was as follows:
(in millions)Three Months Ended March 31,
Lease ClassificationFinancial Statement Classification20222021
Operating Leases:
Operating cash flows from operating leases
Operating activities$25.0 $26.5 
Finance Leases:
Operating cash flows from finance leases
Operating activities$0.7 $0.7 
Financing cash flows from finance leases
Financing activities3.4 3.3 

Lease Commitments

Future minimum lease payments at March 31, 2022 were as follows:
(in millions)
Finance Leases(1)
Operating Leases (1)(2)
2022 (excluding the three months ended March 31, 2022)$8.9 $67.6 
20238.9 79.1 
20247.3 65.7 
20256.7 54.4 
20264.0 50.1 
20272.0 43.6 
Thereafter1.3 75.0 
Total future minimum lease payments39.1 435.5 
    Amount representing interest(3.2)(57.7)
Total future minimum lease payments, net of interest$35.9 $377.8 
(1) The table does not include total future minimum lease payments of $35.7 million for finance leases and $43.2 million for operating leases that are classified as liabilities-held-for sale on the Condensed Consolidated Balance Sheets. See Note 13, Divestitures, for information on the sale of Veritiv Canada, Inc.
(2) Future sublease income of $2.7 million is excluded from the operating leases amount in the table above.

Total future minimum lease payments at March 31, 2022 for finance and operating leases, including the amount representing interest, are comprised of $429.0 million for real estate leases and $45.6 million for non-real estate leases.

At March 31, 2022, the Company had committed to additional future obligations of approximately $1.4 million for delivery equipment finance leases that have not yet commenced and therefore are not included in the table above. These leases will commence within the next three months with an average lease term of approximately seven years.

4. RESTRUCTURING CHARGES

2020 Restructuring Plan

During 2020, the Company initiated a restructuring plan (the "2020 Restructuring Plan") to (1) respond to the impact of the COVID-19 pandemic on its business operations, (2) address the ongoing secular changes in its print and publishing operations and (3) further align its cost structure with ongoing business needs as the Company executes on its stated corporate strategy. The 2020 Restructuring Plan was substantially complete as of December 31, 2021, with remaining charges of approximately $4 million expected to be incurred through the end of 2022.
Other direct costs reported in the tables below include facility closing costs and other incidental costs associated with the development, communication, administration and implementation of these initiatives; costs incurred exclude any non-cash portion of restructuring gains or losses on asset disposals.

The following table presents a summary of restructuring charges, net, related to restructuring initiatives that were incurred during the three months ended March 31, 2022 and the cumulative amounts since the initiatives began:
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(in millions)Severance and Related CostsOther Direct Costs(Gain) Loss on Sale of Assets and Other (non-cash portion)Total
2022$0.4 $2.3 $0.0 $2.7 
Cumulative41.2 33.0 (3.9)70.3 


The following is a summary of the Company's 2020 Restructuring Plan liability activity for the current year:

(in millions)Severance and Related CostsOther Direct CostsTotal
Balance at December 31, 2021$4.7 $3.7 $8.4 
Costs incurred0.4 1.4 1.8 
Payments(2.3)(2.1)(4.4)
Balance at March 31, 2022$2.8 $3.0 $5.8 

In addition to the costs incurred in the table above, during the three months ended March 31, 2022, the Company expensed $0.9 million of Other Direct Costs, which was prepaid at December 31, 2021.

The following is a summary of the Company's 2020 Restructuring Plan liability activity for the prior year comparable period:
(in millions)Severance and Related CostsOther Direct CostsTotal
Balance at December 31, 2020$15.4 $6.9 $22.3 
Costs incurred(0.3)2.7 2.4 
Payments(5.2)(1.6)(6.8)
Balance at March 31, 2021$9.9 $8.0 $17.9 

In addition to the costs incurred in the table above, during the three months ended March 31, 2021, the Company expensed $1.9 million of Other Direct Costs, which was prepaid at December 31, 2020.

In addition to the 2020 Restructuring Plan, the Company has recorded other restructuring liabilities related to the previous restructuring plans that as of March 31, 2022, totaled $21.9 million, of which $18.5 million was related to MEPP withdrawal obligations that will be paid-out over an approximate 20-year period. These other liabilities as of December 31, 2021, totaled $22.2 million, of which $18.8 million was related to MEPP withdrawal obligations.

See Note 12, Segment and Other Information, for the impact that charges from these restructuring plans had on the Company's reportable segments.

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5. DEBT

The Company's debt obligations were as follows (the current period amounts do not include Veritiv Canada, Inc. See Note 13, Divestitures, for information on the sale of this business):
(in millions)March 31, 2022December 31, 2021
Asset-Based Lending Facility (the "ABL Facility")$474.2 $440.8 
Commercial card program2.3 2.1 
Vendor-based financing arrangements14.1  
Finance leases35.9 72.8 
Total debt526.5 515.7 
Less: current portion of debt(15.0)(16.0)
Long-term debt, net of current portion$511.5 $499.7 

ABL Facility

In 2021, the Company amended its ABL Facility to extend the maturity date to May 20, 2026, adjust the pricing grid for applicable interest rates and update certain provisions to facilitate the transition from LIBOR to a new replacement benchmark rate. All other significant terms remained substantially the same. The Company incurred and deferred certain financing costs associated with the transaction, reflected in other non-current assets on the Condensed Consolidated Balance Sheets, which are being amortized to interest expense on a straight-line basis over the amended term of the ABL Facility.

Availability under the ABL Facility is determined based upon a monthly borrowing base calculation which includes eligible customer receivables and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As of March 31, 2022, the available additional borrowing capacity under the ABL Facility was approximately $576.6 million. As of March 31, 2022, the Company held $11.0 million in outstanding letters of credit.

The ABL Facility has a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing four-quarter basis, which will be tested only when specified availability is less than the limits outlined under the ABL Facility. At March 31, 2022, the above test was not applicable and based on information available as of the date of this report it is not expected to be applicable in the next 12 months.

Commercial Card Program

The Company has a commercial purchasing card program that is used for business purpose purchasing and must be paid in-full monthly. At March 31, 2022, the card carried a maximum credit limit of $37.5 million. At March 31, 2022 and December 31, 2021, $2.3 million and $2.1 million, respectively, was outstanding on the commercial card. The net change in the outstanding balance is included in other financing activities on the Condensed Consolidated Statements of Cash Flows.

Vendor-Based Financing Arrangements

On occasion, the Company enters into long-term vendor-based financing arrangements with suppliers to obtain products, services or property in exchange for extended payment terms. During the three months ended March 31, 2022, the Company entered into a vendor-based financing agreement with a principal amount of $18.5 million to finance the acquisition of certain internal use software licenses to be paid over a five-year term. At March 31, 2022, the vendor-based financing arrangement had an outstanding balance of $14.1 million. In order to determine the present value of the commitments, the Company used an imputed interest rate of 3.17%. The payments associated with this arrangement are classified as financing activities on the Condensed Consolidated Statements of Cash Flows.

6. INCOME TAXES

The Company calculated the expense or benefit for income taxes during the three months ended March 31, 2022 and 2021, by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting periods.

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The following table presents the Company's expense (benefit) for income taxes and the effective tax rates:
Three Months Ended March 31,
(in millions)20222021
Income (loss) before income taxes$84.3 $30.4 
Income tax expense (benefit)5.8 9.1 
Effective tax rate6.9 %29.9 %

The difference between the Company's effective tax rates for the three months ended March 31, 2022 and 2021 and the U.S. statutory tax rate of 21.0% primarily relates to vesting of stock compensation, non-deductible expenses, state income taxes (net of federal income tax benefit), tax credits and the Company's pre-tax book income (loss) by jurisdiction. Additionally, the effective tax rate for the three months ended March 31, 2022 includes recognition of a deferred tax asset on the Company's investment in a foreign subsidiary.

7. DEFINED BENEFIT PLANS

Veritiv does not maintain any open defined benefit plans for its non-union employees. Veritiv maintains an open defined benefit pension plan in the U.S. for employees covered by certain collectively bargained agreements. Veritiv also assumed responsibility for Unisource's defined benefit plans, which include frozen cash balance accounts for certain former Unisource employees.

Effective December 1, 2021, the Company divided the U.S. Veritiv Pension Plan by establishing a new Veritiv Hourly Pension Plan to provide benefits to certain employees who were accruing a benefit under the U.S. Veritiv Pension Plan pursuant to the terms of a collective bargaining agreement. Veritiv currently has the intent to subsequently terminate and settle the U.S. Veritiv Pension Plan. The Veritiv Hourly Pension Plan will remain open.

Total net periodic benefit cost (credit) associated with these plans is summarized below:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
(in millions)U.S.CanadaU.S.Canada
Components of net periodic benefit cost (credit):
Service cost
$0.8 $0.1 $0.6 $0.1 
Interest cost
$0.3 $0.6 $0.3 $0.5 
Expected return on plan assets
(0.5)(1.1)(1.1)(1.0)
 Total other components
$(0.2)$(0.5)$(0.8)$(0.5)
Net periodic benefit cost (credit)$0.6 $(0.4)$(0.2)$(0.4)
The components of net periodic benefit cost (credit) other than the service cost component are included in other (income) expense, net on the Condensed Consolidated Statements of Operations. Amounts are generally amortized from AOCL over the expected future working lifetime of active plan participants.

8. FAIR VALUE MEASUREMENTS

At March 31, 2022 and December 31, 2021, the carrying amounts of cash and cash equivalents, receivables, payables, other components of other current assets and other accrued liabilities, and the short-term debt associated with the commercial card program approximate their fair values due to the short maturity of these items. Cash and cash equivalents may include highly-liquid investments with original maturities to the Company of three months or less that are readily convertible into known amounts of cash.

Borrowings under the ABL Facility are at variable market interest rates, and accordingly, the carrying amount approximates fair value, which is a Level 2 measurement. The fair value of the debt-related interest rate cap was derived from a discounted cash flow analysis based on the terms of the agreement and Level 2 data for the forward interest rate curve adjusted for
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the Company's credit risk and was not significant for the periods presented in this report. See Note 5, Debt, for additional information regarding the Company's ABL Facility and other obligations.

At March 31, 2022 and December 31, 2021, the Company had assets-held-for-sale of $300.5 million and $1.2 million, respectively. At March 31, 2022 the Company had liabilities-held-for-sale of $172.9 million. These assets and liabilities are included, at the lower of their carrying value or fair value, within the current assets and current liabilities sections of the Condensed Consolidated Balance Sheets. The majority of the current year amounts are related to the divestiture of Veritiv Canada, Inc., which is described in Note 13, Divestitures.

At March 31, 2022, the Company held a goodwill balance of $96.3 million for its Packaging reportable segment. Additionally, at March 31, 2022, the Company held an other intangibles, net asset balance of $38.9 million for its Packaging and Facility Solutions reportable segments, related to its customer relationships. As a result of the announced sale of Veritiv Canada, Inc., which the Company concluded represented a triggering event, the Company reviewed its goodwill and other intangible assets for possible impairment indicators. Utilizing Level 3 data (internal data such as the Company's operating and cash flow projections), the Company allocated $3.3 million of the goodwill amount and $2.6 million of the other intangibles, net asset amount to the Canadian business being divested. The fair value analyses used in the impairment assessments for the retained goodwill and other intangibles, net asset also relied upon Level 3 data. Management determined that the carrying values of the goodwill and other intangibles, net asset for both the Veritiv Canada, Inc. business and the remaining Veritiv business were not impaired as of March 31, 2022. The divestiture of Veritiv Canada, Inc. is more fully described in Note 13, Divestitures.

9. EARNINGS (LOSS) PER SHARE

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

A summary of the numerators and denominators used in the basic and diluted earnings (loss) per share calculations is as follows:
Three Months Ended
March 31,
(in millions, except per share data)20222021
Numerator:
Net income (loss)$78.5 $21.3 
Denominator:
Weighted-average shares outstanding – basic
14.77 15.88 
Dilutive effect of stock-based awards
0.55 0.78 
Weighted-average shares outstanding – diluted
15.32 16.66 
Earnings (loss) per share:
Basic$5.31 $1.34 
Diluted$5.12 $1.28 
Antidilutive stock-based awards excluded from computation of diluted earnings per share ("EPS")
0.14 0.11 
Performance stock-based awards excluded from computation of diluted EPS because performance conditions had not been met
0.00 0.07 

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10. SHAREHOLDERS' EQUITY

Share Repurchase Programs

On March 1, 2022, Veritiv announced that its Board of Directors authorized a $200 million share repurchase program (the "2022 Share Repurchase Program"). The 2022 Share Repurchase Program authorizes the Company, from time to time, to purchase shares of its common stock through open market transactions, privately negotiated transactions, forward, derivative or accelerated repurchase transactions, tender offers or otherwise, including Rule 10b5-1 trading plans, in accordance with all applicable securities laws and regulations. The timing and method of any repurchases, which will depend on a variety of market factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and other factors. This authorization may be suspended, terminated, increased or decreased by the Board of Directors at any time. During the month ended March 31, 2022, the Company repurchased 78,025 shares of its common stock at a cost of $10.4 million under its 2022 Share Repurchase Program.

On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program (the "2021 Share Repurchase Program"), which was increased to $100 million in May 2021. Executing within the 2021 Share Repurchase Program, on March 9, 2021, Veritiv entered into a Share Repurchase Agreement with UWW Holdings, LLC (the "UWWH Stockholder"), pursuant to which the Company agreed to repurchase (the "Share Repurchase") an aggregate of 553,536 shares of its common stock owned by the UWWH Stockholder for an aggregate purchase price of $23.2 million. The Share Repurchase closed on March 12, 2021 and the Company funded the Share Repurchase with cash on hand. Concurrently with the closing of the Share Repurchase, the UWWH Stockholder sold the remainder of its shares of Veritiv common stock to an unrelated third party. As of March 31, 2021, the Company had repurchased a total of 586,003 shares of its common stock at a cost of $24.6 million under its 2021 Share Repurchase Program. As of December 31, 2021, the Company had completed its repurchases under the 2021 Share Repurchase Program bringing the total purchases to $100 million, the authorized repurchase limit.

Veritiv Omnibus Incentive Plan

In accordance with the Company's 2014 Omnibus Incentive Plan, as amended and restated as of March 8, 2017, shares of the Company's common stock were issued to plan participants whose Restricted Stock Units, Performance Share Units, Market Condition Performance Share Units and/or non-employee director grants (grants not deferred) vested during those periods. The net share issuance is included on the Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2022 and 2021. The related cash flow impacts are included in financing activities on the Condensed Consolidated Statements of Cash Flows. For additional information related to these plans, refer to the Company's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021.

See the table below for information related to these transactions:
(in millions)20222021
Three months ended March 31,
Shares issued0.7 0.3 
Shares recovered for minimum tax withholding(0.2)(0.1)
Net shares issued0.5 0.2 

Accumulated Other Comprehensive Loss ("AOCL")

Comprehensive income (loss) is reported on the Condensed Consolidated Statements of Comprehensive Income (Loss) and consists of net income (loss) and other gains and losses affecting shareholders' equity that, under U.S. GAAP, are excluded from net income (loss).

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The following tables provide the components of AOCL (amounts are shown net of their related income tax effects, if any):
(in millions)Foreign currency translation adjustmentsRetirement liabilitiesInterest rate capAOCL
Balance at December 31, 2021$(25.2)$1.0 $(0.1)$(24.3)
     Unrealized net gains (losses) arising during the period2.6 0.0 0.0 2.6 
Net current period other comprehensive income (loss)2.6 0.0 0.0 2.6 
Balance at March 31, 2022$(22.6)$1.0 $(0.1)$(21.7)

(in millions)Foreign currency translation adjustmentsRetirement liabilitiesInterest rate capAOCL
Balance at December 31, 2020$(24.2)$(9.1)$(0.2)$(33.5)
Unrealized net gains (losses) arising during the period(0.3)0.0 0.0 (0.3)
Net current period other comprehensive income (loss)(0.3)0.0 0.0 (0.3)
Balance at March 31, 2021$(24.5)$(9.1)$(0.2)$(33.8)