Veritiv(VRTV) - 2022 Q4 - Annual Report

Cautionary Note on Forward-Looking Statements Forward-Looking Statements Disclosure The report contains forward-looking statements about future operating results, performance, strategy, business plans, prospects, and guidance, subject to significant risks and uncertainties - The report contains forward-looking statements about future operating results, performance, strategy, business plans, prospects, and guidance, which are subject to significant risks and uncertainties[13] - Factors that could cause actual results to differ materially are described under 'Risk Factors' and other publicly available reports[14] - The Company undertakes no obligation to update or revise forward-looking statements, except as required by law, and historical information should not be considered an indicator of future performance[15] Part I Item 1. Business Overview Veritiv Corporation is a leading North American B2B provider of packaging, facility solutions, and print-based products, operating in the U.S. and Mexico through three segments Company Profile - Veritiv Corporation is a leading North American B2B full-service provider of packaging, facility solutions, and print-based products and services, focused on segment-tailored market leadership and operational excellence[17] - The company operates primarily in the U.S. and Mexico, serving diverse sectors like manufacturing, food and beverage, healthcare, and commercial printing[18] - Veritiv's three reportable segments are Packaging, Facility Solutions, and Print Solutions, with a Corporate & Other category for non-attributable assets and costs[19] Products and Services - Veritiv distributes national and regional brand products, as well as private label brands manufactured by third-party suppliers[23] - Private label brands include TUFflex for packaging, Reliable, Spring Grove, Steel, and PUR Value for facility solutions, and Endurance, Comet, Starbrite Opaque Select for print products[24] Private Label Sales as % of Segment/Total Net Sales | Segment | 2022 (%) | 2021 (%) | 2020 (%) | | :---------------- | :--- | :--- | :--- | | Packaging | 6% | 6% | 6% | | Facility Solutions | 9% | 8% | 8% | | Print Solutions | 21% | 17% | 14% | | Total Company | 11% | 10% | 9% | Customers - Veritiv serves a broad range of industry sectors through multi-year sales agreements and individual transactional sales[26] - No single customer accounted for more than 5% of the Company's consolidated net sales for the years ended December 31, 2022, 2021, and 2020[26] Suppliers - The company purchases products from thousands of domestic and international suppliers, including large corporations and independent regional suppliers[27] - Supplier selection is based on customer demand, total service, cost, and product quality[27] - Approximately 29% of purchases in 2022 were made from ten suppliers, highlighting a degree of supplier concentration[29] Competition - The business-to-business distribution industry is highly competitive and mature, characterized by slowing growth or declining demand (e.g., paper)[30] - Competitors include national, regional, and local distributors, manufacturers, merchants, brokers, and online suppliers[30] - Veritiv's competitive advantages include its sales and marketing professionals, wide product selection (including private brands), diverse customer base, and broad geographic footprint[31] Human Capital - Veritiv's human capital objectives focus on attracting, developing, engaging, and retaining skilled and diverse talent, and promoting safety[34] - As of December 31, 2022, Veritiv had approximately 5,000 employees worldwide, with 90% in the U.S., 8% in Mexico, and 2% elsewhere[35][36] - The company has implemented a multi-year Diversity, Equity and Inclusion (DEI) strategy, launched an Employee Engagement Survey, and introduced a recognition platform (BRAVO!)[37][38][39] - Veritiv contributed $3.5 million to the Veritiv Charitable Giving Fund in 2022 and reported a Total Injury Rate (TIR) of 0.92 for its U.S. and Mexico operations[41] - Talent development programs include tuition assistance and a Company-paid program for hourly warehouse workers to become certified truck drivers[43] Seasonality - Veritiv's operating results are subject to seasonal influences, with higher consolidated net sales typically in the third and fourth quarters and lowest in the first quarter[48] - Packaging segment sales traditionally increase throughout the year, Facility Solutions peak in Q3 due to summer demand, and Print Solutions are driven by back-to-school, political, and holiday advertising in H2[48][49] - The COVID-19 pandemic caused minor disruptions to seasonal patterns, and the magnitude of future disruption is uncertain[49] Executive Officers - Salvatore A. Abbate serves as Chief Executive Officer and a Board member since September 2020[50] - Stephen J. Smith is Senior Vice President and Chief Financial Officer since March 2014, with Eric J. Guerin becoming SVP and CFO effective March 1, 2023[50][52] - Key executive roles include Chief Human Resources Officer (Dean A. Adelman), SVP Marketing and Business Management (Daniel B. Calderwood), SVP Sales (Stephanie E. Mayerle), SVP and CIO (Karen K. Renner), SVP, General Counsel and Corporate Secretary (Susan B. Salyer), SVP, Developing Businesses and Global Operations (Michael D. Walkenhorst), and SVP, Print Solutions (Daniel J. Watkoske)[50][52] - Veritiv Corporation is a leading North American business-to-business full-service provider of value-added packaging products and services, facility solutions, and print-based products[17] - The company operates primarily throughout the U.S. and Mexico, serving diverse industry sectors including manufacturing, food and beverage, healthcare, and commercial printing[18] - Veritiv's business is organized under three reportable segments: Packaging, Facility Solutions, and Print Solutions. The logistics solutions business, previously in Corporate & Other, was divested in September 2022[19] Net Sales by Reportable Segment (as % of Consolidated Net Sales) | Segment | 2022 (%) | 2021 (%) | 2020 (%) | | :---------------- | :--- | :--- | :--- | | Packaging | 55% | 55% | 52% | | Facility Solutions | 11% | 13% | 15% | | Print Solutions | 33% | 31% | 32% | | Corporate & Other | 1% | 1% | 1% | | Total Company | 100% | 100% | 100% | Item 1A. Risk Factors This section outlines significant risks that could materially affect Veritiv's business, financial condition, results of operations, or cash flows, including industry decline, competition, supply chain, and economic conditions Industry and Business Risks - The decline in paper demand due to increased digital use and product substitution puts pressure on Print Solutions' revenues and profit margins[56] - Intense competition in the distribution industry, including new non-traditional sources, could lead to margin erosion and difficulty retaining customers[57] - Reliance on third-party suppliers means disruptions (e.g., raw material shortages, strikes, transportation issues) or increased product costs could negatively impact the ability to fulfill orders and profitability[59][60][61] - Changes in raw material prices (pulp, paper, containerboard, resin) can significantly impact operating results and cash flows, especially if price increases cannot be passed to customers[62] - Increases in fuel and third-party freight costs, or unavailability of providers, could adversely affect business and results of operations[64] - The loss of multiple significant customers (top 10 customers accounted for ~12% of 2022 consolidated net sales) could materially impact financial condition[65][66] Human Capital Risks - Failure to attract, train, and retain qualified employees, especially sales professionals, could materially adversely affect results of operations[72] - Pension and healthcare costs are subject to factors like market returns, interest rates, and retiree numbers, which could significantly impact cash flows and financial results[73] - Participation in multi-employer pension and health/welfare plans could create additional obligations and payment liabilities, including potential withdrawal liabilities[75][76][77] - Work stoppages, union negotiations, or labor disputes could disrupt business operations and increase operating costs, especially with 24% of unionized employees having agreements expiring in 2023[78][79] Capital Structure Risks - Despite current indebtedness of approximately $278.2 million (as of Dec 31, 2022), the company may incur substantially more debt, intensifying financial risks[80] - Increased indebtedness could limit additional financing, dedicate significant cash flow to debt payments, increase interest rate risk, and reduce flexibility to adapt to market changes[81] - Restrictive covenants in the ABL Facility agreements could limit operational flexibility (e.g., incurring debt, paying dividends, making acquisitions) and lead to serious consequences if violated[82] - The company's stock price may fluctuate significantly due to various factors, including operating results, industry trends, market conditions, and large sales by significant shareholders[83][84] - Concentrated ownership (four largest shareholders collectively owned ~57% of common stock as of Dec 31, 2022) may allow significant influence over shareholder approvals and impact stock liquidity[88] - Anti-takeover provisions in the company's charter and by-laws could discourage, delay, or prevent a change of control, potentially affecting the stock's trading price[89][90][91] - The company instituted a quarterly cash dividend policy in November 2022, but future payments are discretionary and depend on various factors, including financial condition and contractual restrictions[94] Regulatory and Legal Risks - Compliance with environmental, health, and safety laws, and potential liabilities under such laws, could negatively impact business, financial condition, and results of operations[96][97] - Increasing focus on Environmental, Social, and Governance (ESG) matters could adversely impact business and reputation if goals are not met or properly reported[98][99] - Expenditures related to compliance with various U.S. and international laws and regulations (e.g., DOT, customs, FCPA) could adversely impact business and operating results[100] - Changes in tax laws, tax assessments, and unclaimed property audits by governmental authorities could adversely impact operating results[101] - Legal proceedings related to product quality, premises-related liabilities, vehicle accidents, and regulatory inquiries could have a material adverse effect on business, reputation, and financial condition[102][103][104] COVID-19 Pandemic Risks - The COVID-19 pandemic has adversely affected, and may continue to affect, business, financial condition, results of operations, liquidity, and cash flows due to demand volatility, supply chain disruptions, and market volatility[107] - The extent of future impacts depends on uncertain developments like the pandemic's duration, new variants, and the effectiveness of vaccines, potentially leading to economic recession or long-term changes in customer behavior[107] General Risk Factors - Adverse developments in general business and economic conditions, including slow GDP growth or volatility in capital markets, could materially affect demand for products and the company's financial condition[108][109] - Business conditions in international operations (e.g., Mexico) are subject to political, social, economic, and criminal activity issues, which could negatively affect financial results[110] - Inclement weather, widespread illness outbreaks, anti-terrorism measures, and other disruptions could negatively affect the supply chain, distribution system, operations, and customer demand[111][112][113] - Dependence on IT and telecommunications systems means failures or security breaches could lead to operational disruptions, information misappropriation, lost sales, and business delays[114][115][116][118] - The industry-wide decline in demand for paper and related products, particularly affecting the Print Solutions business, could materially impact financial condition and results of operations[56] - High competition in the business-to-business distribution industry, including from national/regional distributors and e-commerce, may adversely impact margins and customer retention[57] - Dependence on third-party suppliers means conditions beyond control (e.g., raw material shortages, transportation interruptions) can interrupt supplies and increase product costs, potentially leading to lost sales[59][60] - Changes in raw material prices (pulp, paper, containerboard, resin) and fuel costs can negatively impact results if price increases cannot be passed to customers[62][64] - The loss of multiple significant customers (top ten customers generated ~12% of 2022 consolidated net sales) could adversely affect financial condition and cash flows[65][66] - Risks related to human capital include attracting and retaining qualified employees, managing pension and healthcare costs, and potential work stoppages or labor disputes[72][73][78] - High indebtedness levels ($278.2 million as of Dec 31, 2022) and restrictive covenants in debt agreements could limit operational flexibility and increase vulnerability to economic downturns[80][81] - The COVID-19 pandemic has adversely affected, and may continue to affect, business operations, demand, supply chain, and financial markets, with uncertain future impacts[107] Item 1B. Unresolved Staff Comments This section indicates that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[119] Item 2. Properties As of December 31, 2022, Veritiv operated a distribution network of 95 centers, with the majority being leased, strategically located across the U.S. and Mexico - As of December 31, 2022, Veritiv operated a distribution network from 95 distribution centers[120] Veritiv Properties as of December 31, 2022 | Type | Count | Square feet (in millions) | | :--- | :--- | :--- | | Leased | 89 | 13.3 | | Owned | 6 | 0.8 | | Total | 95 | 14.1 | - Facilities are strategically located throughout the U.S. and Mexico to efficiently serve customers and facilitate expedited delivery[121] Item 3. Legal Proceedings This section refers to Note 15 of the Notes to Consolidated Financial Statements for information regarding legal proceedings - Information related to legal proceedings can be found in Note 15 of the Notes to Consolidated Financial Statements[122] Item 4. Mine Safety Disclosures This item is not applicable to Veritiv Corporation - This item is not applicable[123] Part II Item 5. Common Equity Market, Stockholder Matters & Equity Purchases Veritiv's common stock trades on the NYSE under 'VRTV', with 4,348 shareholders of record as of February 21, 2023, and the company completed a $200 million share repurchase program and instituted a quarterly cash dividend policy in 2022 Performance Graph - The performance graph compares the cumulative total shareholder return (TSR) of Veritiv's common stock to the Russell 2000 Index and a customized peer group from December 31, 2017, through December 31, 2022[127] - The peer group includes companies like Beacon Roofing Supply, Genuine Parts Company, Sealed Air Corporation, and others, with adjustments for companies that filed for bankruptcy or were acquired[128][130] - Veritiv's common stock is publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol 'VRTV'[125] - As of February 21, 2023, there were 4,348 shareholders of record[125] Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Publicly Announced Program ($) | | :--------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | :------------------------------------------------------------------------------------------------ | | October 1-31 | 190 | $97.77 | — | $31,330 | | November 1-30 | — | $— | — | $31,330 | | December 1-31 | — | $— | — | $31,330 | | Total | 190 | | — | $31,330 | - The company completed its $200 million 2022 Share Repurchase Program during the third quarter of 2022, with an average price of $127.84 per share[126][139] - In November 2022, the Board instituted a policy of paying regular quarterly cash dividends, declaring $0.63 per share payable in December 2022 (payout of ~$8.5 million) and again in March 2023[126][140][141] Item 6. (Reserved) This item is reserved and contains no information - This item is reserved[130] Item 7. Management's Discussion and Analysis Management's discussion covers financial condition, results of operations, and liquidity, highlighting pandemic impacts, divestitures, share repurchases, and dividend policy, with a focus on packaging growth and non-core business evaluation Executive Overview - The COVID-19 pandemic negatively impacted Veritiv's financial results starting April 2020, leading to decreased sales activity and necessitating cost mitigation actions[132][134] - Economic improvements were observed in 2022 and 2021 due to global vaccine efforts, but future impacts of the pandemic remain uncertain[135] - In 2022, Veritiv divested its logistics solutions business and Veritiv Canada, Inc., recognizing pre-tax gains of $11.0 million and $18.7 million, respectively[137] - The company reevaluated its print and publishing operations in Q1 2022, combining them into a new 'Print Solutions' segment[138] - Veritiv completed its $200 million 2022 Share Repurchase Program and instituted a regular quarterly cash dividend policy in November 2022[139][140] - The 2020 Restructuring Plan, completed by December 31, 2022, included workforce reductions, facility closures, and compensation adjustments, incurring $69.6 million in costs[142][143] - Veritiv's long-term strategy focuses on being a leading provider of packaging, paper, and facility solutions, with continued investment in organic and inorganic packaging growth[144] Results of Operations Consolidated Operating Results (2022 vs. 2021) | Metric | 2022 (in millions) | 2021 (in millions) | Increase (Decrease) $ (in millions) | Increase (Decrease) % | | :--------------------------------------------------------------------------------- | :----- | :----- | :-------------------- | :-------------------- | | Net sales | $7,146.3 | $6,850.5 | $295.8 | 4.3% | | Cost of products sold | 5,526.0 | 5,417.9 | 108.1 | 2.0% | | Distribution expenses | 398.5 | 419.3 | (20.8) | (5.0)% | | Selling and administrative expenses | 762.7 | 735.8 | 26.9 | 3.7% | | Gain on sale of businesses | (29.7) | (3.1) | 26.6 | * | | Depreciation and amortization | 45.6 | 55.2 | (9.6) | (17.4)% | | Restructuring charges, net | 2.0 | 15.4 | (13.4) | (87.0)% | | Operating income (loss) | 441.2 | 210.0 | 231.2 | 110.1% | | Interest expense, net | 17.7 | 17.2 | 0.5 | 2.9% | | Other (income) expense, net | (8.4) | (4.7) | (3.7) | (78.7)% | | Income (loss) before income taxes | 431.9 | 197.5 | 234.4 | 118.7% | | Income tax expense (benefit) | 94.0 | 52.9 | 41.1 | 77.7% | | Net income (loss) | $337.9 | $144.6 | $193.3 | 133.7% | - Net sales increased by $295.8 million (4.3%) to $7,146.3 million in 2022, driven by inflationary market price increases in Packaging and Print Solutions, partially offset by divestitures[149][152] - Cost of products sold increased at a slower rate (2.0%) than net sales due to pricing improvements, the sale of the lower-margin Canadian business, and changes in segment mix[153] - Distribution expenses decreased by $20.8 million (5.0%), primarily due to the Canadian business divestiture, despite increases in freight and fuel costs[154] - Selling and administrative expenses increased by $26.9 million (3.7%), mainly due to higher personnel expenses and professional fees, partially offset by the Canadian divestiture[155] - Operating income more than doubled, increasing by $231.2 million (110.1%) to $441.2 million in 2022[149] - Net income increased by $193.3 million (133.7%) to $337.9 million in 2022[149] - The effective tax rate decreased to 21.8% in 2022 from 26.8% in 2021, partly due to a tax benefit on the disposition of a foreign subsidiary[161] Organic Sales (2022 vs. 2021) | Segment | 2022 (in millions) | 2021 (in millions) | Change $ (in millions) | Change % | | :-------------------- | :----- | :----- | :------- | :------- | | Total Company | $6,808.1 | $5,999.7 | $808.4 | 13.5% | | Packaging | $3,808.2 | $3,478.5 | $329.7 | 9.5% | | Facility Solutions | $693.7 | $632.4 | $61.3 | 9.7% | | Print Solutions | $2,306.2 | $1,888.8 | $417.4 | 22.1% | | Corporate & Other | $— | $— | $— | — | Segment Adjusted EBITDA (2022 vs. 2021) | Segment | 2022 Net Sales (in millions) | 2022 Adjusted EBITDA (in millions) | 2022 Adjusted EBITDA as % of net sales | 2021 Net Sales (in millions) | 2021 Adjusted EBITDA (in millions) | 2021 Adjusted EBITDA as % of net sales | | :-------------------- | :------------- | :------------------- | :------------------------------------- | :------------- | :------------------- | :------------------------------------- | | Packaging | $3,908.5 | $415.9 | 10.6% | $3,760.4 | $393.5 | 10.5% | | Facility Solutions | $780.6 | $60.7 | 7.8% | $894.0 | $52.7 | 5.9% | | Print Solutions | $2,378.8 | $239.6 | 10.1% | $2,080.8 | $114.7 | 5.5% | | Corporate & Other | $78.4 | $(198.3) | * | $115.3 | $(218.3) | * | Liquidity and Capital Resources - Cash requirements are primarily met by cash flows from operations and borrowings under the ABL Facility[179] Summary of Cash Flows (in millions) | Activity | 2022 (in millions) | 2021 (in millions) | | :-------------------------- | :----- | :----- | | Operating activities | $252.4 | $154.7 | | Investing activities | 168.0 | (4.3) | | Financing activities | (428.6) | (221.4) | - Net cash from operating activities increased by $97.7 million in 2022, driven by improved operating results[183] - Net cash from investing activities increased by $172.3 million in 2022, primarily due to net cash proceeds from the sale of the Canadian business ($162.2 million) and logistics solutions business ($18.0 million)[184] - Net cash used for financing activities increased by $207.2 million in 2022, mainly due to increased net repayments under the ABL Facility, higher common stock repurchases ($200 million), and dividend payments ($8.5 million)[185] - As of December 31, 2022, the available additional borrowing capacity under the ABL Facility was approximately $711.3 million[187] - Future cash needs include working capital, capital expenditures (estimated $30 million in 2023), contractual commitments, dividends, and strategic investments[190][191] Cash and Cash Equivalents (in millions) | Location | 2022 (in millions) | 2021 (in millions) | | :-------------------------- | :----- | :----- | | Held in the U.S. | $20.8 | $25.8 | | Held in foreign subsidiaries | 19.8 | 23.5 | | Total | $40.6 | $49.3 | Critical Accounting Estimates - Critical accounting estimates include revenue recognition (variable consideration, returns), allowance for credit losses, income taxes (deferred tax assets, valuation allowances), employee benefit plans (actuarial assumptions), leases (lease term, discount rates), and impairment of long-lived assets and goodwill[195][196] - Revenue from direct shipments from manufacturers to customers is reported on a gross basis, representing approximately 35% of total net sales[198] - The allowance for credit losses is based on historical experience, current conditions, forecasts, and specific troubled accounts, with a 0.1% change impacting pre-tax income by approximately $0.9 million[202][203] - Significant judgment is required for income tax provisions, deferred tax assets, and valuation allowances, with the COVID-19 pandemic increasing the risk of future valuation allowances[205] - Key actuarial assumptions for pension plans include discount rates (5.16% for U.S. plans in 2022) and expected long-term rates of return on plan assets (3.37% for U.S. plans in 2022)[208][209][210] - Impairment assessments for long-lived assets and goodwill involve estimating future cash flows and fair market values, which are subject to economic and operating conditions[216][218] - The COVID-19 pandemic negatively impacted financial results starting April 2020, leading to decreased sales activity and cost mitigation actions[132][134] - In 2022, Veritiv sold its logistics solutions business and Veritiv Canada, Inc., recognizing pre-tax gains of $11.0 million and $18.7 million, respectively, using proceeds for share repurchases and debt reduction[137] - The company completed a $200 million share repurchase program in 2022 and instituted a regular quarterly cash dividend policy[139][140] - Veritiv's strategy focuses on being a leading provider of packaging, paper, and facility solutions, investing in organic and inorganic packaging growth, and evaluating non-core businesses[144] Consolidated Operating Results (2022 vs. 2021) | Metric | 2022 (in millions) | 2021 (in millions) | Increase (Decrease) $ (in millions) | Increase (Decrease) % | | :--------------------------------------------------------------------------------- | :----- | :----- | :-------------------- | :-------------------- | | Net sales | $7,146.3 | $6,850.5 | $295.8 | 4.3% | | Cost of products sold | 5,526.0 | 5,417.9 | 108.1 | 2.0% | | Distribution expenses | 398.5 | 419.3 | (20.8) | (5.0)% | | Selling and administrative expenses | 762.7 | 735.8 | 26.9 | 3.7% | | Gain on sale of businesses | (29.7) | (3.1) | 26.6 | * | | Depreciation and amortization | 45.6 | 55.2 | (9.6) | (17.4)% | | Restructuring charges, net | 2.0 | 15.4 | (13.4) | (87.0)% | | Operating income (loss) | 441.2 | 210.0 | 231.2 | 110.1% | | Interest expense, net | 17.7 | 17.2 | 0.5 | 2.9% | | Other (income) expense, net | (8.4) | (4.7) | (3.7) | (78.7)% | | Income (loss) before income taxes | 431.9 | 197.5 | 234.4 | 118.7% | | Income tax expense (benefit) | 94.0 | 52.9 | 41.1 | 77.7% | | Net income (loss) | $337.9 | $144.6 | $193.3 | 133.7% | - Net cash provided by operating activities increased by $97.7 million to $252.4 million in 2022, primarily due to improved operating results[181][183] - Available additional borrowing capacity under the ABL Facility was approximately $711.3 million as of December 31, 2022[187] Item 7A. Market Risk Disclosures Veritiv is exposed to interest rate, foreign currency, and fuel price risks, monitoring these and potentially using hedging strategies, with a hypothetical 100 basis point interest rate increase resulting in approximately $3.7 million additional interest expense - Veritiv is exposed to interest rate changes, foreign currency fluctuations, and fuel price changes, and aims to manage these risks[223] - Interest rate risk primarily stems from ABL Facility borrowings, with a weighted-average borrowing rate of 6.1% at December 31, 2022[224] - A hypothetical 100 basis point increase in the interest rate would result in approximately $3.7 million of additional interest expense based on 2022 average borrowings[224] - Foreign currency exposure primarily relates to fluctuations between the U.S. dollar and the Mexican peso; the company has not used foreign exchange hedging instruments[225] - Fuel price risk impacts product costs and delivery expenses; a 10% increase in average annual diesel fuel price would result in approximately $3.2 million in additional annual transportation fuel costs[226] Item 8. Financial Statements and Supplementary Data This section presents Veritiv's audited consolidated financial statements and detailed notes, with Deloitte & Touche LLP issuing an unqualified opinion on the financial statements and internal control over financial reporting Consolidated Statements of Operations Consolidated Statements of Operations (in millions, except per share data) | Metric | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | | :--------------------------------------------------------------------------------- | :----- | :----- | :----- | | Net sales | $7,146.3 | $6,850.5 | $6,345.6 | | Cost of products sold | 5,526.0 | 5,417.9 | 5,040.2 | | Distribution expenses | 398.5 | 419.3 | 429.8 | | Selling and administrative expenses | 762.7 | 735.8 | 717.9 | | Gain on sale of businesses | (29.7) | (3.1) | — | | Depreciation and amortization | 45.6 | 55.2 | 57.7 | | Restructuring charges, net | 2.0 | 15.4 | 52.2 | | Operating income (loss) | 441.2 | 210.0 | 47.8 | | Interest expense, net | 17.7 | 17.2 | 25.1 | | Other (income) expense, net | (8.4) | (4.7) | (20.3) | | Income (loss) before income taxes | 431.9 | 197.5 | 43.0 | | Income tax expense (benefit) | 94.0 | 52.9 | 8.8 | | Net income (loss) | $337.9 | $144.6 | $34.2 | | Basic EPS | $23.85 | $9.50 | $2.14 | | Diluted EPS | $23.29 | $9.01 | $2.08 | | Weighted-average shares outstanding (Basic) | 14.17 | 15.22 | 15.96 | | Weighted-average shares outstanding (Diluted) | 14.51 | 16.05 | 16.48 | Consolidated Balance Sheets Consolidated Balance Sheets (in millions) | Asset/Liability | December 31, 2022 (in millions) | December 31, 2021 (in millions) | | :--------------------------------------------------------------------------------- | :---------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $40.6 | $49.3 | | Accounts receivable, net | 889.6 | 1,011.2 | | Inventories | 423.9 | 484.5 | | Other current assets | 103.7 | 132.7 | | Total current assets | 1,457.8 | 1,677.7 | | Property and equipment, net | 127.5 | 162.9 | | Goodwill | 96.3 | 99.6 | | Other intangibles, net | 35.6 | 42.7 | | Deferred income tax assets | 29.0 | 47.1 | | Other non-current assets | 343.4 | 408.4 | | Total assets | $2,089.6 | $2,438.4 | | Liabilities and shareholders' equity | | | | Accounts payable | $452.9 | $561.9 | | Accrued payroll and benefits | 106.2 | 110.0 | | Other accrued liabilities | 154.1 | 185.7 | | Current portion of debt | 13.4 | 16.0 | | Total current liabilities | 726.6 | 873.6 | | Long-term debt, net of current portion | 264.8 | 499.7 | | Defined benefit pension obligations | 0.4 | 7.2 | | Other non-current liabilities | 341.7 | 422.1 | | Total liabilities | 1,333.5 | 1,802.6 | | Shareholders' equity | | | | Common stock | 0.2 | 0.2 | | Additional paid-in capital | 613.1 | 633.8 | | Accumulated earnings (deficit) | 472.6 | 143.2 | | Accumulated other comprehensive loss | (12.7) | (24.3) | | Treasury stock at cost | (317.1) | (117.1) | | Total shareholders' equity | 756.1 | 635.8 | | Total liabilities and shareholders' equity | $2,089.6 | $2,438.4 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in millions) | Activity | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | | :--------------------------------------------------------------------------------- | :----- | :----- | :----- | | Net cash provided by (used for) operating activities | $252.4 | $154.7 | $289.2 | | Net cash provided by (used for) investing activities | 168.0 | (4.3) | (5.3) | | Net cash provided by (used for) financing activities | (428.6) | (221.4) | (202.6) | | Effect of exchange rate changes on cash | (0.5) | (0.3) | 1.3 | | Net change in cash and cash equivalents | (8.7) | (71.3) | 82.6 | | Cash and cash equivalents at beginning of period | 49.3 | 120.6 | 38.0 | | Cash and cash equivalents at end of period | $40.6 | $49.3 | $120.6 | | Cash paid for income taxes, net of refunds | $83.9 | $40.1 | $7.8 | | Cash paid for interest | $15.6 | $15.0 | $22.0 | Consolidated Statements of Shareholders' Equity Consolidated Statements of Shareholders' Equity (in millions) | Metric | Common Stock (Shares) | Common Stock (Amount) (in millions) | Additional Paid-in Capital (in millions) | Accumulated Earnings (Deficit) (in millions) | Accumulated Other Comprehensive Loss (in millions) | Treasury Stock (Shares) | Treasury Stock (Amount) (in millions) | Total (in millions) | | :--------------------------------------------------------------------------------- | :-------------------- | :-------------------- | :------------------------- | :----------------------------- | :----------------------------------- | :---------------------- | :---------------------- | :------ | | Balance at December 31, 2019 | 16.4 | $0.2 | $618.0 | $(35.3) | $(33.1) | (0.3) | $(13.6) | $536.2 | | 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 | 0.2 | 0.0 | (0.8) | | | | | (0.8) | | Adoption impact - ASU 2016-13 | | | | (0.3) | | | | (0.3) | | Treasury stock purchases | | | | | | (0.4) | (3.5) | (3.5) | | Balance at December 31, 2020 | 16.6 | $0.2 | $634.9 | $(1.4) | $(33.5) | (0.7) | $(17.1) | $583.1 | | Net income (loss) | | | | 144.6 | | | | 144.6 | | Other comprehensive income (loss) | | | | | 9.2 | | | 9.2 | | Stock-based compensation | | | 7.4 | | | | | 7.4 | | Issuance of common stock, net | 0.4 | 0.0 | (8.5) | | | | | (8.5) | | Treasury stock purchases | | | | | | (1.7) | (100.0) | (100.0) | | Balance at December 31, 2021 | 17.0 | $0.2 | $633.8 | $143.2 | $(24.3) | (2.4) | $(117.1) | $635.8 | | Net income (loss) | | | | 337.9 | | | | 337.9 | | Other comprehensive income (loss) | | | | | 11.6 | | | 11.6 | | Stock-based compensation | | | 9.5 | | | | | 9.5 | | Issuance of common stock, net | 0.5 | 0.0 | (30.2) | | | | | (30.2) | | Dividends | | | | (8.5) | | | | (8.5) | | Treasury stock purchases | | | | | | (1.6) | (200.0) | (200.0) | | Balance at December 31, 2022 | 17.5 | $0.2 | $613.1 | $472.6 | $(12.7) | (4.0) | $(317.1) | $756.1 | Notes to Consolidated Financial Statements - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated Statements of Operations, Comprehensive Income (Loss), Balance Sheets, Cash Flows, and Shareholders' Equity[228] - Deloitte & Touche LLP audited the financial statements and expressed an unqualified opinion on the financial position as of December 31, 2022 and 2021, and results of operations and cash flows for the three years ended December 31, 2022[230] - The auditor also expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022[231] - No critical audit matters were determined for the current-period audit[234] Item 9. Changes in and Disagreements with Accountants This section states that there have been no changes in or disagreements with accountants on accounting and financial disclosure matters - There are no changes in or disagreements with accountants on accounting and financial disclosure[448] Item 9A. Controls and Procedures Veritiv's management concluded disclosure controls and internal controls over financial reporting were effective as of December 31, 2022, with an ongoing technology transformation project - Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[449] - The company is implementing a multi-year technology transformation project to modernize legacy systems, with continuous assessment of internal control effectiveness[451] - Management concluded that internal controls over financial reporting were effective as of December 31, 2022, based on the COSO 2013 Framework[457] - Deloitte & Touche LLP issued an unqualified attestation report on the effectiveness of the company's internal control over financial reporting[458][461] Item 9B. Other Information This item is not applicable - This item is not applicable[468] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - This item is not applicable[469] Part III Item 10. Directors, Executive Officers and Corporate Governance This section incorporates by reference information from Part I, Item 1 and the 2023 Proxy Statement regarding directors, executive officers, and corporate governance - Information on directors, executive officers, and corporate governance is incorporated by reference from Part I, Item 1 and the 2023 Proxy Statement[471] Item 11. Executive Compensation This section incorporates by reference information from the 2023 Proxy Statement regarding executive compensation - Information on executive compensation is incorporated by reference from the 2023 Proxy Statement[472] Item 12. Security Ownership and Related Stockholder Matters This section incorporates by reference information from the 2023 Proxy Statement regarding security ownership of certain beneficial owners and management, and related stockholder matters - Information on security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the 2023 Proxy Statement[472] Item 13. Certain Relationships and Related Transactions, and Director Independence This section incorporates by reference information from the 2023 Proxy Statement regarding certain relationships and related transactions, and director independence - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the 2023 Proxy Statement[473] Item 14. Principal Accountant Fees and Services This section incorporates by reference information from the 2023 Proxy Statement regarding principal accountant fees and services - Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement[473] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements and schedules filed or incorporated by reference as part of the Form 10-K, along with a comprehensive list of exhibits and certifications - Financial statements are included as per Item 8, and all schedules have been omitted as the required information is in footnotes or not applicable[475][476] - A detailed list of exhibits is provided, including stock purchase agreements, organizational documents (Certificate of Incorporation, Bylaws), ABL Credit Agreement, offer letters, incentive plans, and various certifications[477][478] Item 16. Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K Summary is provided[480] Signatures Signatures and Certifications The Annual Report on Form 10-K is duly signed by Veritiv Corporation's CEO and other principal officers and directors, certifying compliance with the Securities Exchange Act of 1934 - The Annual Report on Form 10-K was signed on February 28, 2023, by Salvatore A. Abbate, Chief Executive Officer and Director[483][484] - Other signatories include the Principal Financial Officer (Stephen J. Smith), Principal Accounting Officer (Lance D. Gebert), and members of the Board of Directors[485]