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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
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-20201231_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)
Registrant's telephone number, including area code:(770)391-8200

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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No   
As of June 30, 2020, the aggregate market value of the voting common stock of the registrant held by non-affiliates of the registrant, based on the closing sale price of those shares on the New York Stock Exchange reported on June 30, 2020, was $216,502,354. For the purposes of this disclosure only, the registrant has assumed that its directors and executive officers (as defined in Rule 3b-7 under the Exchange Act) and UWW Holdings, LLC are the affiliates of the registrant.
The number of shares outstanding of the registrant's common stock as of February 26, 2021 was 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.





TABLE OF CONTENTS



Page
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.







Table of Contents

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements contained in this report regarding the Company's future operating results, performance, business plans, prospects, guidance, the 2020 Restructuring Plan and any other restructuring, statements related to the impact of COVID-19 and any other statements not constituting historical fact are "forward-looking statements" subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, the words "believe," "expect," "anticipate," "continue," "intend," "should," "will," "would," "planned," "estimated," "potential," "goal," "outlook," "may," "predicts," "could," or the negative of such terms, or other comparable expressions, as they relate to the Company or its business, have been used to identify such forward-looking statements. All forward-looking statements reflect only the Company's current beliefs and assumptions with respect to future operating results, performance, business plans, prospects, guidance and other matters, and are based on information currently available to the Company. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause the Company's actual operating results, performance, business plans, prospects or guidance to differ materially from those expressed in, or implied by, these statements.

Factors that could cause actual results to differ materially from current expectations include risks and other factors described under "Risk Factors" in this report and elsewhere in the Company's publicly available reports filed with the Securities and Exchange Commission ("SEC"), which contain a discussion of various factors that may affect the Company's business or financial results. Such risks and other factors, which in some instances are beyond the Company's control, include: adverse impacts of the COVID-19 pandemic; the industry-wide decline in demand for paper and related products; increased competition from existing and non-traditional sources; procurement and other risks in obtaining packaging, facility products and paper from our suppliers for resale to our customers; changes in prices for raw materials; changes in trade policies and regulations; increases in the cost of fuel and third-party freight and the availability of third-party freight providers; the loss of any of our significant customers; uncertainties as to the structure, timing, benefits and costs of the 2020 Restructuring Plan or any future restructuring plan that the Company may undertake; adverse developments in general business and economic conditions that could impair our ability to use net operating loss carryforwards and other deferred tax assets; our ability to adequately protect our material intellectual property and other proprietary rights, or to defend successfully against intellectual property infringement claims by third parties; our ability to attract, train and retain highly qualified employees; our pension and health care costs and participation in multi-employer pension, health and welfare plans; the effects of work stoppages, union negotiations and labor disputes; our ability to generate sufficient cash to service our debt; increasing interest rates; our ability to refinance or restructure our debt on reasonable terms and conditions as might be necessary from time to time; our ability to comply with the covenants contained in our debt agreements; costs to comply with laws, rules and regulations, including environmental, health and safety laws, and to satisfy any liability or obligation imposed under such laws; changes in tax laws; adverse results from litigation, governmental investigations or audits, or tax-related proceedings or audits; regulatory changes and judicial rulings impacting our business; the impact of adverse developments in general business and economic conditions as well as conditions in the global capital and credit markets on demand for our products and services, our business including our international operations, and our customers; foreign currency fluctuations; inclement weather, widespread outbreak of an illness, anti-terrorism measures and other disruptions to our supply chain, distribution system and operations; our dependence on a variety of information technology and telecommunications systems and the Internet; our reliance on third-party vendors for various services; cybersecurity risks; and other events of which we are presently unaware or that we currently deem immaterial that may result in unexpected adverse operating results.

For a more detailed discussion of these factors, see the information under the heading "Risk Factors" in this report and in other filings we make with the SEC. Forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.

1


Table of Contents

PART I

ITEM 1. BUSINESS

Our Company
Veritiv Corporation ("Veritiv" or the "Company" and sometimes referred to in this Annual Report on Form 10-K as "we", "our" or "us") is a leading North American business-to-business full-service provider of value-added packaging products and services, as well as facility solutions, print and publishing products and services. Additionally, Veritiv provides logistics and supply chain management solutions to its customers. Veritiv's focus on segment-tailored market leadership in distribution and a commitment to operational excellence allows it to partner with world class suppliers, add value through multiple capabilities and deliver solutions to a wide range of customer segments.
We operate from 125 distribution centers primarily throughout the United States ("U.S."), Canada and Mexico, serving customers across a broad range of industry sectors. These sectors include manufacturing, food processing and service, fulfillment and internet retail, property management, higher education, healthcare, entertainment and hospitality, commercial printing and publishing.
Veritiv's business is organized under four reportable segments: Packaging, Facility Solutions, Print, and Publishing and Print Management ("Publishing"). This segment structure is consistent with the way the Chief Operating Decision Maker, who is Veritiv's Chief Executive Officer, makes operating decisions and manages the growth and profitability of the Company's business. The Company also has a Corporate & Other category, which includes certain assets and costs not primarily attributable to any of the reportable segments as well as our Veritiv logistics solutions business, which provides transportation and warehousing solutions. The following summary describes the products and services offered in each of the reportable segments:
Packaging – Veritiv is a global provider of packaging products, services and solutions. The Packaging segment provides custom and standard packaging solutions for customers based in North America and in key global markets. We service our 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. Veritiv's packaging professionals create customer value through supply chain solutions, structural and graphic packaging design and engineering, automation, workflow and equipment services and kitting.

Facility Solutions – Veritiv is a global provider of hygiene and facility solutions products and services. The Facility Solutions segment sources and sells cleaning, break-room and other supplies 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. Through this segment we manage a world class network of leading suppliers in most facilities solutions categories. Additionally, we offer total cost of ownership solutions with re-merchandising, budgeting and compliance reporting, inventory management, and a sales-force trained to bring leading vertical expertise to the major North American geographies.

Print – The Print segment sells and distributes commercial printing, writing, copying, digital, specialty products, 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. Our broad geographic platform of operations coupled with the breadth of paper and graphics products, including our 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 our customers.

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The table below summarizes net sales for each of the above reportable segments, as well as the Corporate & Other category, as a percentage of consolidated net sales:
Year Ended December 31,
202020192018
Packaging52%45%41%
Facility Solutions15%15%15%
Print23%28%31%
Publishing9%10%12%
Corporate & Other1%2%1%
Total100%100%100%

Additional financial information regarding our reportable business segments and certain geographic information is included in Item 7 of this report and in Note 16 of the Notes to Consolidated Financial Statements in Item 8 of this report.

Our History

Veritiv was established in 2014, following the spin-off of International Paper Company's ("International Paper") xpedx distribution solutions business ("xpedx") and the merger (the "Merger") of xpedx with UWW Holdings, Inc. ("UWWH"), the parent company of Unisource Worldwide, Inc. ("Unisource"). Following the Merger, Veritiv's common stock began regular-way trading on the New York Stock Exchange on July 2, 2014 under the ticker symbol "VRTV".

On August 31, 2017, Veritiv completed its acquisition of 100% of the equity interests in various All American Containers entities (collectively, "AAC"), a family owned and operated distributor of rigid packaging products, including plastic, glass and metal containers, caps, closures and plastic pouches. The acquisition of AAC aligns with the Company's strategy of investing in higher growth and higher margin segments of the business. Through the acquisition, Veritiv gained expertise in rigid plastic, glass and metal packaging that complements its portfolio of packaging products and services. This acquisition also provided Veritiv with additional marketing, selling and distribution channels into the growing U.S. rigid packaging market.
Products and Services

Veritiv distributes well-known national and regional brand products as well as products marketed under its own private label brands. Products under the Company's private label brands are manufactured by third-party suppliers in accordance with specifications established by the Company. Our portfolio of private label products includes:

Packaging products under the TUFflex brand, which include stretch film, mailers, shrink film, carton sealing tape and other specialty tapes;
Foodservice disposable products, cleaning chemicals, towels and tissues, can liners, sanitary maintenance supplies and a wide range of facility supplies products under the Reliable, Spring Grove and PUR Value brands; and
Coated and uncoated papers, coated board and cut size under the Endurance, nordic+, Comet, Starbrite Opaque Select and other brands.

The table below summarizes sales of products sold under private label brands as a percentage of the respective reportable segment's or total Company's net sales for the periods shown:
Year Ended December 31,
202020192018
Packaging6%6%6%
Facility Solutions8%9%9%
Print20%19%19%
Total Company9%9%10%

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Customers

We serve customers across a broad range of industry sectors, through a variety of means ranging from multi-year sales agreements to transactional sales. For many of its largest customers, the Company enters into multi-year contracts that set forth the terms and conditions of sale including product pricing and incentive agreements, which are generally based on sales volume targets. The Company's customers are generally not required to purchase any minimum amount of products under these agreements and can place orders on an individual purchase order basis. For the years ended December 31, 2020, 2019 and 2018, no single customer accounted for more than 5% of the Company's consolidated net sales.

Suppliers

We purchase our products from thousands of suppliers, both domestic and international, across different business segments. Although varying by segment, the Company's suppliers consist generally of large corporations selling brand name and private label products and, to a more limited extent, independent regional and private label suppliers. Suppliers are selected based on customer demand for the product and a supplier's total service, cost and product quality offering.

Our sourcing organization supports the purchasing of well-known national and regional brand products as well as products marketed under our own private label brands from key national suppliers in the packaging, facility solutions and print industries. The Publishing segment primarily operates as a direct ship business aligned with the Company's core supplier strategy. In addition, under the guidance and oversight of the sourcing team, our merchandising personnel, located within individual distribution centers, source products not available within our core offering in order to meet specialized customer needs.

The product sourcing program is designed to ensure that the Company is able to offer consistent product selections and market competitive pricing across the enterprise while maintaining the ability to service localized market requirements. Our procurement program is also focused on replenishment which includes purchase order placement and controlling the total cost of inventory by proactively managing the number of days inventory on hand, negotiating favorable payment terms and maintaining vendor-owned and vendor-managed programs. As one of the largest purchasers of packaging, facility supplies, and paper and graphics products, we can qualify for volume allowances with some suppliers and can realize significant economies of scale. During the year ended December 31, 2020, approximately 30% of our purchases were made from ten suppliers.

Competition

The packaging, facility solutions, paper and publishing distribution industry is highly competitive, with numerous regional and local competitors, and is a mature industry characterized by slowing growth or, in the case of paper, declining demand. The Company's principal competitors include national, regional and local distributors, national and regional manufacturers, independent brokers and both catalog-based and online business-to-business suppliers. Most of these competitors generally offer a wide range of products at prices comparable to those Veritiv offers, though at varying service levels. Additionally, new competition could arise from non-traditional sources, group purchasing organizations, e-commerce, discount wholesalers or consolidation among competitors. Veritiv believes it offers the full range of services required to effectively compete, but if new competitive sources appear, it may result in margin erosion or make it more difficult to attract and retain customers.

The following summary briefly describes the key competitive landscape for each of Veritiv's reportable segments:

Packaging – The packaging market is fragmented and consists of competition from national and regional packaging distributors, national and regional manufacturers of packaging materials, independent brokers and both catalog-based and online business-to-business suppliers. Veritiv believes there are few national packaging distributors with substrate neutral design capabilities similar to the Company's capabilities.

Facility Solutions – There are few national, but numerous regional and local distributors of facility supply solutions. Several groups of distributors have created strategic alliances among multiple distributors to provide broader geographic coverage for larger customers. Other key competitors include the business-to-business divisions of big box stores, purchasing group affiliates and both catalog-based and online business-to-business suppliers.

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Print – Industry sources estimate that there are hundreds of regional and local companies engaged in the marketing and distribution of paper and graphics products. While the Company believes there are few national distributors of paper and graphics products similar to Veritiv, several regional and local distributors have cooperated together to serve customers nationally. The Company's customers also have the opportunity to purchase products directly from paper and graphics manufacturers. In addition, competitors include regional and local specialty distributors, office supply and big box stores, online business-to-business suppliers, independent brokers and large commercial printers that broker the sale of paper in connection with the sale of their printing services.

Publishing – The publishing market is serviced by printers, paper brokers and distributors. The Company's customers also have the opportunity to purchase paper directly from paper manufacturers. The market consists primarily of magazine and book publishers, cataloguers, direct mailers and retail customers using catalog, insert and direct mail as a method of advertising.

We believe that our competitive advantages include approximately 1,200 sales and marketing professionals and the breadth of our selection of quality products, including high-quality private brands. The breadth of products distributed and services offered, the diversity of the types of customers served, and our broad geographic footprint in the U.S., Canada and Mexico buffer the impact of regional economic declines while also providing a network to readily serve national accounts.

Distribution and Logistics

Timely and accurate delivery of a customer's order, on a consistent basis, are important criteria in a customer's decision to purchase products and services from Veritiv. Delivery of products is provided through two primary channels, either from the Company's distribution centers or directly from the manufacturer. Our distribution centers offer a range of delivery options depending on the customer's needs and preferences, and the strategic placement of the distribution centers also allows for delivery of special or "rush" orders to many customers.

Working Capital

Veritiv's working capital needs generally reflect the need to carry significant amounts of inventory in our distribution centers to meet delivery requirements of our customers, as well as significant accounts receivable balances. As is typical in our industry, our customers often do not pay upon receipt, but are offered terms which are dependent on the specific circumstances of the sale.

Human Capital

Veritiv’s key human capital management objectives include attracting, developing, engaging and retaining skilled and diverse talent to drive the success of our business and to meet and exceed the expectations of our customers. These objectives are aligned with our Veritiv Values: Integrity, One Team, People Commitment, Customer Focus, Operational Excellence and Passion for Results.

Our workforce includes employees in sales, customer service, and warehouse operations in addition to corporate functions. By geography, approximately 76% and 14% of our workforce is located in the U.S. and Canada, respectively, with a presence in almost every state in the U.S. and most provinces in Canada. We also have employees located in Mexico (8%) and other countries (2%). Approximately half of our workforce is male and the other half is female.

As of December 31, 2020, Veritiv had approximately 6,400 employees worldwide, of which approximately 9% were in collective bargaining units. Approximately 63% of those employees are covered by a collective bargaining agreement that will expire in 2021. Labor contract negotiations are handled on an individual basis by a cross-functional team including Human Resources and Operations, with legal support. We currently expect that we will be able to renegotiate these agreements on satisfactory terms. We consider labor relations to be good.

Our human resources programs are designed to promote employee safety and to attract, develop, engage and retain talent. We have a robust talent review and succession planning process and our goal is to have at least one "ready now" candidate and one "ready in 1 – 3 years" candidate for each critical position to prepare candidates for critical roles. We reward and support employees through competitive pay and benefit programs; enhance the Company’s culture through our values and other engagement efforts; develop talent internally through job rotations and learning programs to create a high-performing, diverse workforce; and strive to make safety a key focus across the organization.
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Some examples of programs and initiatives designed to attract, develop, engage and retain our workforce include:
Diversity, Equity and Inclusion:
Our Diversity, Equity and Inclusion ("DEI") Working Group developed and oversees our DEI strategy and objectives that include micro-learning modules focused on our talent acquisition teams, our managers, our leaders and our broader workforce. The key elements of our strategy are to engage with employees by creating experiences that celebrate diverse people and perspectives, equip our organization by creating a culture that encourages constant and relevant learning and empowers employees by cultivating confidence through a "One Veritiv" perspective that grows diverse and innovative leaders.
Employee Engagement:
In the fourth quarter of 2020, we hosted listening sessions to engage our employees in small group dialogue with Senior Lead Team members to encourage information sharing and drive engagement. We have developed in-depth action plans to address issues and feedback raised in the listening sessions.
Employee Well-Being and Safety:
We provide comprehensive healthcare benefits to virtually all our employees in the U.S. and Canada that are designed to meet the varied and evolving needs of our diverse workforce. In addition, we provide free mental and behavioral health resources, including on-demand access to the Employee Assistance Program for employees and their dependents.
We are committed to providing all team members with a safe and healthy workplace and continuing to refine our culture of proactive safety. Managing and reducing risks at our facilities remains a focus, and injury rates have continued to be low.
Talent Development and Learning:
We support the long-term career aspirations of our employees through education and personal development. We pay a portion of tuition costs for employees in the U.S., Canada and Mexico.
A unique Company-paid program supports hourly warehouse workers to become certified, licensed truck drivers and provides opportunities to get licensed and gain required driver hours on work time.
We prioritize and invest in creating opportunities to help employees gain skills and develop in their careers through a multitude of training and development programs. These include online, instructor-led and on-the-job learning formats as well as executive assessment, coaching, talent and succession planning.
A paid internship program provides job experience to high school and college students in a variety of job functions and is a source for future full-time talent.

Throughout the pandemic caused by the coronavirus ("COVID-19"), we have focused on protecting the health and safety of our employees in our distribution centers and our offices while meeting the needs of our customers and mitigating any interruptions to our business. Early in March 2020, we initiated our Corporate Incident Response Team and we adopted safety measures and practices across our facilities to limit exposure to the virus and to enhance employee safety. We modified practices at our distribution centers and offices based on guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities. These practices include social distancing, enhanced cleaning protocols, usage of personal protective equipment, as well as restricting all non-essential travel and promoting remote work wherever feasible. Our employees have adapted to the changes in work environment and have managed our business successfully during this challenging time. To thank our employees for their contributions to the Company’s success in managing through the COVID-19 pandemic by continuing to serve customers and meet business needs, we provided a cash bonus to employees who are not eligible for other bonus or commission programs.


Government Relations

Our transportation operations are subject to the U.S. Department of Transportation Federal Motor Carrier Safety Regulations. We are also subject to federal, state and local regulations regarding licensing and inspection of facilities, including compliance with the U.S. Occupational Safety and Health Act. These regulations require us to comply with health and safety standards to protect our employees from accidents and establish communication programs to transmit information on the hazards of certain chemicals present in specific products that we distribute.

We are also subject to regulation by numerous U.S., Canadian and Mexican federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. Although we are subject to other U.S., Canadian and Mexican federal, state and local provisions relating to the protection of the environment and the discharge or destruction of materials, these provisions do not materially impact the use or operation
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of the Company's facilities. Compliance with these laws has not had, and is not anticipated to have, a material effect on Veritiv's capital expenditures, earnings or competitive position.

Intellectual Property

We have numerous well-recognized trademarks, represented primarily by our private label brands. See the Products and Services section of this Item 1 Business for additional information regarding our private label brand sales. Most of our trademark registrations are effective for an initial period of ten years, and we generally renew our trademark registrations before their expiration dates for trademarks that are in use or have reasonable potential for future use. Although our Packaging, Facility Solutions and Print segments rely on a number of trademarks that, in the aggregate, provide important protections to the Company, no single trademark is material to any one of these segments. Additionally, Veritiv does not have any material patents or licenses.

Seasonality

The Company's operating results are subject to seasonal influences.  Historically, our higher consolidated net sales have occurred during the third and fourth quarters while our lowest consolidated net sales have occurred during the first quarter. The Packaging segment net sales have traditionally increased each quarter throughout the year and net sales for the first quarter have typically been less than net sales for the fourth quarter of the preceding year.  Production schedules for non-durable goods that build up to the holidays and peak in the fourth quarter drive this seasonal net sales pattern.  Net sales for the Facility Solutions segment have traditionally peaked in the third quarter due to increased summer demand in the away-from-home resort, cruise and hospitality markets and from back-to-school activities. Within the Print and Publishing segments, seasonality is driven by increased magazine advertising page counts, retail inserts, catalogs and direct mail primarily due to back-to-school, political election and holiday-related advertising and promotions in the second half of the year. The COVID-19 pandemic disrupted the Company's seasonal patterns in net sales across all segments and on a consolidated basis in 2020 due to the significant impacts of the pandemic on many of Veritiv's customers.
Information About Our Executive Officers

The following table sets forth certain information concerning the individuals who serve as executive officers of the Company as of March 1, 2021.
NameAgePosition
Salvatore A. Abbate52Chief Executive Officer
Stephen J. Smith57Senior Vice President and Chief Financial Officer
Dean A. Adelman55Senior Vice President and Chief Human Resources Officer
Daniel B. Calderwood40Senior Vice President, Marketing and Business Management
Mark W. Hianik60Senior Vice President, General Counsel and Corporate Secretary
Stephanie E. Mayerle43Senior Vice President, Sales
Tracy L. Pearson50Senior Vice President, Supply Chain Operations
Karen K. Renner59Senior Vice President and Chief Information Officer
Michael D. Walkenhorst42Senior Vice President, Developing Businesses
Daniel J. Watkoske52Senior Vice President, Print and Publishing

The following descriptions of the business experience of our executive officers include the principal positions held by them since February 2016.

Salvatore A. Abbate has served as Chief Executive Officer and a member of the Board of Directors of the Company since September 2020. Previously, Mr. Abbate served as Chief Operating Officer of the Company from January 2020 to September 2020 and as Senior Vice President and Chief Commercial Officer of the Company from April 2018 to December 2019.  Prior to that, Mr. Abbate served as Senior Vice President, Chief Sales & Marketing Officer for Andersen Windows & Doors, Inc., a leading North American window and door manufacturer, from July 2013 to March 2018. From September 2011 to June 2013, Mr. Abbate served as Senior Vice President, Sales and Marketing for Andersen. Prior to that, Mr. Abbate served as Vice President, Global Sales and Marketing for the performance films division of Solutia, Inc., a
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performance materials and specialty chemical provider now part of the Eastman Chemical Company. Mr. Abbate began his career at Armstrong World Industries, where he spent 15 years in various roles across all three of Armstrong's business units, including sales, marketing, manufacturing and process improvement. Mr. Abbate has significant leadership and operations experience in strategy, marketing, sales, distribution, customer service, logistics, manufacturing and process improvement.

Stephen J. Smith has served as Senior Vice President and Chief Financial Officer of the Company since March 2014. Previously, Mr. Smith served as Senior Vice President and Chief Financial Officer of American Greetings Corporation, a global greeting card company, from November 2006 to March 2014.  Previously, Mr. Smith served as Vice President of Investor Relations and Treasurer of American Greetings from April 2003 to November 2006. Prior to American Greetings, Mr. Smith served as Vice President and Treasurer of General Cable Corporation, a global wire and cable manufacturer and distributor, and Vice President, Treasurer and Assistant Secretary of Insilco Holding Company, a telecommunications and electrical component products manufacturer. During Mr. Smith's tenure as a public company chief financial officer, he helped lead several strategic acquisitions and was responsible for the design and execution of the capital structure for a management buyout.

Dean A. Adelman has served as Senior Vice President and Chief Human Resources Officer of the Company since March 2019. Previously, Mr. Adelman served as Chief Human Resources Officer for Caraustar Industries, Inc., a manufacturer of recycled materials, from August 2017 to March 2019. From February 2013 to August 2016, Mr. Adelman served as Chief Human Resources Officer and Senior Vice President – Human Resources for Axiall Corporation, a chemical and building products manufacturer. Mr. Adelman also held Human Resources leadership positions at BlueLinx Corporation, a North American building products distributor, Corrections Corporation of America and Arby's Restaurant Group. Mr. Adelman began his career as an employment lawyer for Georgia-Pacific Corporation. Mr. Adelman has significant human resources management and leadership experience in both publicly traded and private equity backed manufacturing and distribution businesses.

Daniel B. Calderwood has served as Senior Vice President, Marketing and Business Management of the Company since October 2020. Previously, Mr. Calderwood served as Vice President, Marketing and Business Management of the Company from January 2020 to October 2020 and as Vice President, Packaging of the Company from May 2019 to January 2020. Prior to that, Mr. Calderwood served as Vice President, Marketing for the Sealy, Stearns & Foster and Cocoon brands of Tempur Sealy International, Inc., a global mattress and bedding manufacturer, from January 2015 to April 2019. Mr. Calderwood started his career with Kohler Co., a global leader in kitchen and bath products, where he served in product management, national accounts and sales roles in both the retail and commercial markets. Mr. Calderwood has significant experience in product and customer marketing, category management, sourcing and sales.

Mark W. Hianik has served as Senior Vice President, General Counsel and Corporate Secretary of the Company since January 2014. Previously, Mr. Hianik served as Senior Vice President, General Counsel and Chief Administrative Officer for Dex One Corporation, an advertising and marketing services company, from March 2012 to May 2013. Prior to that Mr. Hianik served as Senior Vice President, General Counsel and Corporate Secretary for Dex One (and its predecessor, R.H. Donnelley Corporation) from April 2008 to March 2012. Dex One filed a pre-packaged bankruptcy petition under Chapter 11 in March 2013 to effect a merger consummated in April 2013. Mr. Hianik previously served as Vice President and Assistant General Counsel for Tribune Company, a diversified media company, and as a corporate and securities partner in private practice. Mr. Hianik has significant experience as a public company general counsel and leader of other corporate functions as well as significant mergers and acquisitions, securities, capital markets and corporate governance experience.

Stephanie E. Mayerle has served as Senior Vice President, Sales of the Company since October 2020. From June 2020 to October 2020, Ms. Mayerle served as Vice President, Sales of the Company. Prior to joining the Company, Ms. Mayerle served in various roles for Andersen Windows & Doors, Inc., a leading North American window and door manufacturer, including Senior Director – Strategic Accounts and Inside Sales from April 2019 to June 2020, Senior Director – Business Management from January 2018 to April 2019, Senior Director – Customer and Sales Operations from December 2016 to January 2018 and Director - Customer Experience from June 2014 to December 2016. Ms. Mayerle started her career with Andersen as an engineer responsible for product quality and design. Ms. Mayerle has significant experience in sales, marketing, project management, customer service, supply chain and manufacturing quality.

Tracy L. Pearson has served as Senior Vice President, Supply Chain Operations of the Company since January 2019. Previously, Ms. Pearson served as Senior Vice President, Packaging of the Company from October 2016 to January 2019. Prior to that, Ms. Pearson served as Vice President and General Manager, South Area, for the Container the Americas business of International Paper Company, a global packaging and paper manufacturing company, from May 2016 to October
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2016. Prior to that, Ms. Pearson served as Vice President and General Manager for the Foodservice packaging business of International Paper from August 2011 to May 2016. Ms. Pearson joined International Paper in 1994 and served in a variety of sales, supply chain, marketing, process engineering, product development, and sales and general management roles within International Paper's packaging and print businesses. Ms. Pearson has significant experience in general management, sales and sales management, and supply chain in the packaging and paper manufacturing and distribution industries.

Karen K. Renner has served as Senior Vice President and Chief Information Officer of the Company since November 2020. Previously, Ms. Renner served as Senior Vice President and Chief Information Officer of CommScope, Inc., a global network infrastructure provider, from August 2018 to November 2020. From March 2017 to August 2018, Ms. Renner served as Chief Information Officer for the North American region of Thales Group, a global aerospace defense supplier. From October 2010 to February 2016, Ms. Renner served as Vice President and Chief Information Officer of Novelis, Inc., a global aluminum and recycling company. From 1992 to 2010, Ms. Renner held Chief Information Officer roles for various business segments of the General Electric Company. Ms. Renner has significant information technology, information security and technology infrastructure experience.

Michael D. Walkenhorst has served as Senior Vice President, Developing Businesses of the Company since October 2020. Previously, Mr. Walkenhorst served as Vice President, Developing Businesses of the Company from February 2019 to October 2020. Prior to that, Mr. Walkenhorst served as Managing Director of All American Containers, a Veritiv business, from September 2017 to February 2019. Previously, Mr. Walkenhorst served as General Manager for the Company’s West Central Territory from July 2014 to August 2017. Mr. Walkenhorst began his career with xpedx, a legacy Veritiv company, in 2003 where he held various positions in sales and sales management. Mr. Walkenhorst has significant experience in sales, supply chain, and sales and operations management.

Daniel J. Watkoske has served as Senior Vice President, Print and Publishing of the Company since October 2020. Previously, Mr. Watkoske served as Senior Vice President, Print of the Company from July 2014 to October 2020 and, from October 2016 to January 2019, also served as Senior Vice President of Veritiv Services. Prior to that, Mr. Watkoske served as Executive Vice President, Sales for xpedx from January 2011 to July 2014 and was a member of the xpedx Senior Lead Team. Prior to that, Mr. Watkoske served as Group Vice President for the xpedx Metro New York Group from January 2008 to January 2011. Previously, Mr. Watkoske served as Vice President National Accounts for xpedx. Mr. Watkoske joined International Paper in 1989 as a sales trainee for Nationwide Papers, which later became part of xpedx. Mr. Watkoske has significant sales, sales management and operations experience in the paper and packaging distribution industries.

We have been advised that there are no family relationships among any of our executive officers or directors and that there is no arrangement or understanding between any of our executive officers and any other persons pursuant to which they were appointed, respectively, as an executive officer.

Company Information

Our principal executive offices are located at 1000 Abernathy Road NE, Building 400, Suite 1700, Atlanta, Georgia 30328. Our corporate website is https://www.veritivcorp.com. Information contained on our website is not part of this Annual Report on Form 10-K. Through the "Investor Relations" portion of this website, we make available, free of charge, our proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other relevant filings with the SEC and any amendments to those reports as soon as reasonably practicable after such material has been filed with, or furnished to, the SEC. These filings are also accessible on the SEC's website at https://www.sec.gov.

ITEM 1A. RISK FACTORS

The following is a discussion of certain important factors, some of which are beyond our control, that may cause our business, financial condition, results of operations or cash flows in future periods to differ materially from those currently expected or desired. Factors not currently known to Veritiv or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, results of operations or cash flows. You should carefully consider the following discussion, together with the other information contained in this report, in evaluating us and an investment in our common stock.

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Risks Relating to the COVID-19 Pandemic

The outbreak of the COVID-19 pandemic has adversely affected, and in the future may materially and adversely affect, our business, financial condition, results of operations, liquidity and cash flows.

The rapid spread of COVID-19, and the measures taken to slow its spread, have adversely affected our business and financial results and will likely continue to do so for an uncertain period of time in the future. The COVID-19 pandemic has had and may continue to have negative impacts on our business, including volatility in demand for our products; delays or inability to source products; disruptions in supply chain and transportation; and volatility in the global capital and credit markets, which impacts interest rates and currency exchange rates. The pandemic could also cause a material reduction in the values of our assets including, but not limited to, deferred tax assets, goodwill and intangibles. Our customers, suppliers and vendors may suffer disruptions in their business due to the COVID-19 pandemic causing them financial distress which could include delaying payments to us, filing for bankruptcy protection or going out of business. In addition, there are currently a large number of our employees working remotely as well as operationally critical employees working at our facilities for business continuity purposes as lawfully permitted. Extended periods of remote work arrangements could introduce further operational risk, such as additional cybersecurity risks. Despite our efforts to manage these impacts, due to the rapidly evolving situation with COVID-19, the effect on our operational and financial performance will depend on future developments, all of which are uncertain and difficult to predict and in the future may have material adverse effects on our business, financial condition, results of operations, liquidity and cash flows. Such developments may include, but are not limited to, the spread and future resurgences of the virus, the severity and duration of the outbreak and the severity and duration of the resulting impact on the economy. Even after the COVID-19 pandemic has subsided, we may experience impacts on our business as a result of any economic recession, downturn or volatility that has occurred or may occur in the future. The COVID-19 pandemic may also have the effect of heightening many of the other risks described below, including those related to dependence on information technology and telecommunications systems, cybersecurity risks, compliance with financial covenants, ability to service indebtedness and stock price fluctuation.


Risks Relating to Our Industry and Business

The industry-wide decline in demand for paper and related products could have a material adverse effect on our financial condition and results of operations.

Our Print and Publishing businesses rely heavily on the sale of paper and related products. The industry-wide decrease in demand for paper and related products in key markets we serve places continued pressure on our revenues and profit margins and makes it more difficult to maintain or grow earnings. This trend is expected to continue. The failure to effectively differentiate us from our competitors in the face of increased use of email, increased and permanent product substitution, including less print advertising, more electronic billing, more e-commerce, fewer catalogs and a reduced volume or slowdown of mail, could have a material adverse effect on market share, sales and profitability through increased expenditures or decreased prices. Our failure to grow the Packaging and Facility Solutions businesses at rates adequate to offset the expected decline in Print and Publishing could also have a material adverse effect on our financial results.

Competition in our industry may adversely impact our margins and our ability to retain customers and make it difficult to maintain our market share and profitability.

The business-to-business distribution industry is highly competitive, with numerous regional and local competitors, and is a mature industry characterized by slowing revenue growth. Our principal competitors include national distributors, national and regional manufacturers and independent brokers in the Packaging segment; national, regional and local distributors in the Facility Solutions segment; regional and local distributors in the Print segment; and regional, national and international paper manufacturers and other merchants and brokers in the Publishing segment. Most of these competitors generally offer a wide range of products at prices comparable to those we offer. Additionally, new competition could arise from non-traditional sources, group purchasing organizations, e-commerce, discount wholesalers or consolidation among competitors. New competitive sources may result in increased focus on pricing and on limiting price increases, or may require increased discounting. Such competition may result in margin erosion or make it difficult to attract and retain customers.

Increased competition within the industry, reduced demand for paper, increased and permanent product substitution through less print advertising, more electronic billing, more e-commerce, fewer catalogs, a reduced volume or slowdown of
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mail and general economic conditions has served to further increase pressure on the industry's profit margins, and continued margin pressure within the industry may have a material adverse impact on our operating results and profitability.

We purchase all of the products we sell to our customers from other parties, and conditions beyond our control can interrupt our supplies and increase our product costs.

We obtain our packaging, facility products and paper from third-party suppliers. Our business and financial results are dependent on our ability to purchase products from suppliers not controlled by us that we, in turn, sell to our customers. We may not be able to obtain the products we need on open credit, with market or other favorable terms, or at all. During the year ended December 31, 2020, approximately 30% of our purchases were made from ten suppliers. A sustained disruption in our ability to source products from one or more of the largest of these vendors might have a material impact on our ability to fulfill customer orders resulting in lost sales and, in rare cases, damages for late or non-delivery.

For the most part, we do not have a significant number of long-term contracts with our suppliers committing them to provide products to us. Suppliers may not provide the products and supplies needed in the quantities and at the prices and times requested. We are also subject to delays caused by interruption in production and increases in product costs based on conditions outside of our control. These conditions include raw material shortages, environmental restrictions on operations, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, product recalls, transportation interruptions, unavailability of fuel or increases in fuel costs, competitive demands and natural disasters or other catastrophic events. Our inability to obtain adequate supplies of packaging, facility products and paper as a result of any of the foregoing factors or otherwise could mean that we could not fulfill our obligations to customers, and customers may turn to other distributors.

In addition, increases in product costs may reduce our margins if we are unable to pass all or a portion of these costs along to our customers, which we have historically had difficulty doing. Any such inability may have a negative impact on our business and our profitability.

Changes in prices for raw materials, including pulp, paper and resin, could negatively impact our results of operations and cash flows.

Changes in prices for raw materials, such as pulp, paper and resin, could significantly impact our results of operations in the print market. Although we do not produce paper products and are not directly exposed to risk associated with production, declines in pulp and paper prices, driven by falling secular demand, periods of industry overcapacity and overproduction by paper suppliers, may adversely affect our revenues and net income to the extent such factors produce lower paper prices. Declining pulp and paper prices generally produce lower revenues and profits, even when volume and trading margin percentages remain constant. During periods of declining pulp and paper prices, customers may alter purchasing patterns and defer paper purchases or deplete inventory levels until long-term price stability occurs. Alternatively, if prices for raw materials rise and we are unable to pass these increases on to our customers, our results of operations and profits may also be negatively impacted.

Changes in U.S. and international trade policies and regulations could adversely affect our business and operating results.

Although we primarily serve markets in the U.S., Canada and Mexico, we purchase our products from a wide variety of domestic and international suppliers. Changes to U.S. trade policies, including the adoption or expansion of trade restrictions, sanctions and other related governmental actions or policies, can disrupt geographic and industry demand trends and prompt other countries to change their own trade policies, including through the adoption of retaliatory tariffs or expansion of other trade restrictions. These changes may cause us to make changes in our supply chain strategies or adversely impact our own costs. Increasing the costs of our products as a result of tariffs or other adverse trade restrictions, or minimizing the number of our products subject to tariffs or other adverse trade restrictions, could cause customers to turn to other distributors and we may be unable to locate alternative suppliers at acceptable costs. Such actions may result in margin erosion or make it difficult to attract and retain customers.

Increases in the cost of fuel and third-party freight as well as the availability of third-party freight providers could have an adverse effect on our business and results of operations.

Volatile fuel prices have a direct impact on our business.  We also depend upon third-party freight providers in order
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to conduct our business. The cost of fuel and third-party freight affects the price paid by us for products as well as the expense incurred to deliver products to our customers.  Increased fuel costs, increased government regulation and limitations on driver availability impacting the freight transportation industry may adversely impact the cost and availability of third-party freight services.  Although we have been able to pass along a portion of increased fuel and third-party freight costs to our customers in the past, there is no guarantee that we can continue to do so.  Increases in fuel and third-party freight costs or the unavailability of third-party freight providers may adversely affect our business and results of operations.

The loss of any of our significant customers could adversely affect our financial condition, operating results and cash flows.

Our ten largest customers generated approximately 10% of our consolidated net sales for the year ended December 31, 2020, and our largest customer accounted for approximately 4% of our consolidated net sales in that same period. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historic levels.

Generally, our customers are not contractually required to purchase any minimum amount of products. In addition, consolidation among customers could also result in changes to their purchasing habits and volumes. The loss of one or more of these significant customers, a significant customer's decision to purchase our products in substantially lower quantities than they have in the past, or a deterioration in the relationship with any significant customers could adversely affect our financial condition, operating results and cash flows.

We may not fully realize the expected benefits of our current and future restructuring plans or other operating or cost-saving initiatives, which may adversely affect our business, competitive position, financial condition, results of operations and cash flows.

We have initiated a restructuring plan in response to the impact of the COVID-19 pandemic on our business operations and the ongoing secular changes in our Print and Publishing segments (the "2020 Restructuring Plan"). The 2020 Restructuring Plan is designed to better align our cost structure with ongoing business needs as we execute on our stated corporate strategy. We may undertake additional restructuring plans in the future, including in connection with our ongoing evaluation of alternatives to restructure our integrated supply chain. Implementation of the 2020 Restructuring Plan or any subsequent restructuring plan may be disruptive to our business or more costly than anticipated, and we may not be able to obtain the estimated cost savings and other benefits that were initially anticipated in a timely manner, or at all. Additionally, as a result of any restructuring plan, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Reorganization and restructuring can require a significant amount of management and other employees’ time and focus, which may divert attention from operating and growing our business. In addition, any restructuring plan may have other consequences, such as attrition beyond our planned reduction in workforce, a negative effect on employee morale and productivity or our ability to attract highly skilled employees. Moreover, our competitors may also use our restructuring plans to seek to gain a competitive advantage over us. Failure to achieve some or all of the expected benefits of our restructuring plans could have a material adverse effect on our business, competitive position, financial condition, results of operations and cash flows. Furthermore, as the impact of the COVID-19 pandemic on our business continues to evolve, we may need to further adjust or expand our 2020 Restructuring Plan, which could increase the risks described above.

Adverse developments in general business and economic conditions, including the industry-wide decline in demand for paper and related products, could have a material adverse effect on our financial condition and results of operations impairing our ability to use Net Operating Loss ("NOL") carryforwards and other deferred tax assets.

The realization of our NOLs and other deferred tax assets depends on the timing and amount of taxable income earned by our Company in the future and a lack of future taxable income would adversely affect our ability to realize these tax assets. Tax attributes are generally subject to expiration at various times in the future to the extent that they have not previously been applied to offset the taxable income of our Company, and there is a risk that our existing NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities.

The Merger resulted in an ownership change for Unisource under Section 382 of the Internal Revenue Code (the "Code"), limiting the use of Unisource's NOLs to offset future taxable income for both U.S. federal and state income tax purposes. Moreover, future trading of our stock may result in additional ownership changes as defined under Section 382 of the Code, further limiting the use of Unisource's NOLs. These limitations may affect the availability and the timing of when
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these NOLs may be used which could impair our deferred tax assets which, in turn, may adversely impact the timing and amount of cash taxes payable by our Company.

Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. Although we believe that the judgments and estimates with respect to the valuation allowances are appropriate and reasonable under the circumstances, actual results could differ from projected results, which could give rise to additions to valuation allowances or reductions in valuation allowances. It is possible that such changes could have a material adverse effect on the amount of income tax expense (benefit) recorded in our Consolidated Statements of Operations.

We may not be able to adequately protect our material intellectual property and other proprietary rights, or to defend successfully against intellectual property infringement claims by third parties.

Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to trademarks, copyrights and proprietary technology. The use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect intellectual property rights and proprietary technology may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect proprietary technology, or to defend against claims by third parties that our conduct or our use of intellectual property infringes upon such third party's intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property, including ceasing the use of certain trademarks used by us to distinguish our services from those of others or ceasing the exercise of our rights in copyrightable works. In addition, we may be required to seek a license to continue practices found to be in violation of a third party's rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations could be adversely affected as a result.

Risks Relating to Human Capital

In order to compete, we must attract, train and retain highly qualified employees, and the failure to do so could have a material adverse effect on our results of operations.

To successfully compete, we must attract, train and retain a large number of highly qualified employees while controlling related labor costs. Specifically, we must recruit and retain qualified sales professionals. If we were to lose a significant amount of our sales professionals, we could lose a material amount of sales, which would have a material adverse effect on our financial condition and results of operations. Many of our sales professionals are subject to confidentiality and non-competition agreements. If our sales professionals were to violate these agreements, we could seek to legally enforce these agreements, but we may incur substantial costs in connection with such enforcement and may not be successful in such enforcement. We compete with other businesses for employees and invest significant resources in training and motivating them. There is no assurance that we will be able to attract or retain highly qualified employees. The inability to retain or hire qualified personnel at economically reasonable compensation levels would restrict our ability to improve our business and result in lower operating results and profitability.

Our pension and health care costs are subject to numerous factors which could cause these costs to change.

Our pension and health care costs are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience, including, for pension costs, actuarial assumptions regarding life expectancies. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns, changes in general interest rates and changes in the number of retirees may result in increased pension costs in future periods. Significant changes in any of these factors may adversely impact our cash flows, financial condition and results of operations.

We participate in multi-employer pension plans and multi-employer health and welfare plans, which could create additional obligations and payment liabilities.

We contribute to multi-employer defined benefit pension plans as well as multi-employer health and welfare plans under the terms of collective bargaining agreements that cover certain unionized employee groups in the U.S. The risks of
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participating in multi-employer pension plans differ from single employer-sponsored plans and such plans are subject to regulation under the Pension Protection Act (the "PPA"). Additionally, changes in regulations covering these plans could increase our costs and/or potential withdrawal liability.

Multi-employer pension plans are cost-sharing plans subject to collective-bargaining agreements. Contributions to a multi-employer plan by one employer are not specifically earmarked for its employees and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan are borne by the remaining participating employers. In addition, if a multi-employer plan is determined to be underfunded based on the criteria established by the PPA, the plan may be required to implement a financial improvement plan or rehabilitation plan that may require additional contributions or surcharges by participating employers.

In addition to the contributions discussed above, we could be obligated to pay additional amounts, known as withdrawal liabilities, upon decrease or cessation of participation in a multi-employer pension plan. Although an employer may obtain an estimate of such liability, the final calculation of the withdrawal liability may not be able to be determined for an extended period of time. Generally, the cash obligation of such withdrawal liability is payable over a 20-year period.

Our business may be adversely affected by work stoppages, union negotiations and labor disputes.

Approximately 9% of our employees were in collective bargaining units as of December 31, 2020. Historically, the effects of collective bargaining and other similar labor agreements have not been significant. However, if a larger number of our employees were to unionize, including in the wake of any future legislation or administrative regulation that makes it easier for employees to unionize, the effect may be negative.

Approximately 63% of the Company's unionized employees have collective bargaining agreements that expire during 2021. Any inability to negotiate acceptable new contracts under these collective bargaining arrangements could cause strikes or other work stoppages, and new contracts could result in increased operating costs. If any such strikes or other work stoppages occur, or if additional employees become represented by a union, a disruption of our operations and higher labor costs could result. Labor relations matters affecting our suppliers of products and services could also adversely affect our business from time to time.

Risks Relating to Our Capital Structure

Our significant indebtedness could adversely affect our financial condition and impair our ability to operate our business.

As of December 31, 2020, we had approximately $603.8 million in total indebtedness, reflecting borrowings of $520.2 million under the Asset-Based Lending Facility (the "ABL Facility"), $1.3 million under short-term debt and $82.3 million of finance leases. This level of indebtedness could have important consequences to our financial condition, operating results and business, including the following:

limiting our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
increasing our cost of borrowing;
requiring that a significant portion of our cash flows from operations be dedicated to payments on our indebtedness instead of other purposes, including operations, capital expenditures and future business opportunities;
making it more difficult for us to make payments on our indebtedness or satisfy other obligations;
exposing us to risk of increased interest rates on our borrowings due to the variable rate exposure associated with the ABL Facility, which can be worsened by (i) increased interest rates up to the level covered by our interest rate cap and (ii) increased interest rates on borrowings in excess of the notional amount of our interest rate cap;
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors that have less debt; and
increasing our vulnerability to a downturn in general economic conditions or in our business, and making us unable to carry out capital spending that is important to our growth.
 
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Despite our significant indebtedness, we may still be able to incur substantially more indebtedness in the future. This could further exacerbate the risks to our financial condition described above.

We may be able to incur significant additional indebtedness in the future, including secured indebtedness. Although the agreements governing the ABL Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. If new indebtedness is added to our current indebtedness levels, the related risks we will face could intensify.
 
The agreements governing our indebtedness contain restrictive covenants, which could restrict our operational flexibility, and a failure to comply with those covenants could have serious consequences.

The agreements governing the ABL Facility contain restrictions and limitations on our ability to engage in activities that may be in our long-term best interests, including financial and other restrictive covenants that could limit our ability to:

incur additional indebtedness or guaranties, or issue certain preferred shares;
pay dividends, redeem stock or make other distributions;
repurchase, prepay or redeem subordinated indebtedness;
make investments or acquisitions;
create liens;
make negative pledges;
consolidate or merge with another company;
sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with affiliates; and
change the nature of our business.

The agreements governing the ABL Facility also contain other restrictions customary for asset-based facilities of this nature. Our ability to borrow additional amounts under the ABL Facility will depend upon satisfaction of these covenants. Events beyond our control could affect our ability to meet these covenants. Our failure to comply with obligations under the agreements governing the ABL Facility may result in an event of default under those agreements. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. This could have serious consequences to our business, financial condition and operating results and could cause us to become bankrupt or insolvent.
  
Our stock price may fluctuate significantly.

The market price of our common stock may continue to fluctuate widely, depending on many factors, some of which may be beyond our control, including:

actual or anticipated fluctuations in the operating results of our Company due to factors related to our business;
success or failure of the strategy of our Company;
the quarterly or annual earnings of our Company, or those of other companies in our industry;
continued industry-wide decrease in demand for paper and related products;
our ability to obtain third-party financing as needed;
announcements by us or our competitors of significant acquisitions or dispositions;
restrictions on our ability to pay dividends under our ABL Facility;
changes in accounting standards, policies, guidance, interpretations or principles;
the operating and stock price performance of other comparable companies;
investor perception of our Company;
natural or environmental disasters that investors believe may affect our Company;
overall market fluctuations;
a large sale of our stock by a significant shareholder;
results from any material litigation or government investigation;
changes in laws and regulations affecting our Company or any of the principal products sold by our Company; and
general economic and political conditions and other external factors.

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Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.
 
If securities or industry analysts do not continue to publish research, or publish unfavorable research, about our Company, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us and our business. As of December 31, 2020, we had very limited research coverage by analysts. If the current coverage of our Company by securities or industry analysts ceases, the trading price for our stock would be negatively impacted. In addition, if one or more of these analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

A significant percentage of our outstanding common stock is held by our three largest shareholders, and certain of those shareholders exercise significant influence over matters requiring shareholder approval. So long as a significant percentage of our common stock continues to be held by a small number of shareholders, the liquidity of our common stock may be impacted, and future sales by those shareholders may result in a reduction in the market price of our common stock.

Our three largest shareholders collectively owned approximately 43% of our outstanding common stock as of December 31, 2020. As a result, certain of these shareholders may exercise significant influence over all matters requiring shareholder approval, including approval of significant corporate transactions, which may reduce the market price of our common stock. Additionally, the interests of these shareholders may conflict with the interests of our other shareholders.

This concentrated ownership could also result in a limited amount of shares being available to be traded in the market, resulting in reduced liquidity. Further, all of the shares of our common stock owned by UWW Holdings, LLC (the "UWWH Stockholder") are registered for resale under the Securities Act of 1933 and, subject to certain limitations, all or a portion of such shares may be offered and sold to the public in the future. When some or all of the shares held by the UWWH Stockholder are sold, or if it is perceived that they will be sold, the market price of our common stock could decline.
 
Anti-takeover provisions in our charter and amended and restated by-laws (our "by-laws") could discourage, delay or prevent a change of control of our Company and may affect the trading price of our common stock.

Our charter and by-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that shareholders may consider favorable. For example, our charter and by-laws collectively:

authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;
limit the ability of shareholders to remove directors;
provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office;
prohibit shareholders from calling special meetings of shareholders unless called by the holders of not less than 20% of our outstanding shares of common stock;
prohibit shareholder action by written consent, unless initiated by the holders of not less than 20% of the outstanding shares of common stock;
establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our shareholders; and
require the approval of holders of at least a majority of the outstanding shares of our common stock to amend our by-laws and certain provisions of our charter.

These provisions may prevent our shareholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.

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Our charter and by-laws may also make it difficult for shareholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our shareholders.

Our charter designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders' ability to obtain a favorable judicial forum for disputes with us.

Our charter provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our shareholders by any of our directors, officers or employees, (iii) any action asserting a claim against us or any director, officer, employee or agent arising under the Delaware General Corporation Law, our charter or by-laws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision in our charter may limit our shareholders' ability to obtain a favorable judicial forum for disputes with us.

We have not historically declared or paid dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have not historically declared or paid dividends on our common stock. We currently intend to invest our future earnings, if any, to fund our growth, to develop our business, for working capital needs, to reduce debt and for general corporate purposes. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain their current value.

Any decision to pay dividends in the future will be at the discretion of Veritiv's Board of Directors and will depend upon various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of indebtedness, restrictions imposed by applicable law, general business conditions and other factors that Veritiv's Board of Directors may deem relevant.  In addition, our operations are conducted almost entirely through our subsidiaries. As such, to the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends. Further, the agreements governing our ABL Facility can, and agreements governing future indebtedness may, in certain circumstances, restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us.

Risks Relating to Regulatory Compliance and Legal Matters

Costs to comply with environmental, health and safety laws, and to satisfy any liability or obligation imposed under such laws, could negatively impact our business, financial condition and results of operations.

Our operations are subject to U.S. and international environmental, health and safety laws, including laws regulating the emission or discharge of materials into the environment, the use, storage, treatment, disposal and management of hazardous substances and waste, the investigation and remediation of contamination and the health and safety of our employees and the public. We could incur substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures), investigation, remediation and closure costs and third-party claims for property damage and personal injury as a result of violations of, or liabilities or obligations under, environmental, health and safety laws. We could be held liable for the costs to address contamination at any real property we have ever owned, operated or used as a disposal site.

In addition, changes in, or new interpretations of, existing laws, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, may lead to additional compliance or other costs that could impact our business and results of operations. Moreover, as environmental issues, such as climate change, have become more prevalent, U.S. and foreign governments have responded, and may continue to respond, with increased legislation and regulation, which could negatively impact our business, financial condition and results of operations.

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Expenditures related to the cost of compliance with laws, rules and regulations could adversely impact our business and results of operations.

Our operations are subject to U.S. and international laws and regulations, including regulations of the U.S. Department of Transportation Federal Motor Carrier Safety Administration, the import and export of goods, customs regulations, Office of Foreign Asset Control and the Foreign Corrupt Practices Act of 1977. Expenditures related to the cost of compliance with laws, rules and regulations, tariffs and duties could adversely impact our business and results of operations. In addition, we could incur substantial fines or sanctions, enforcement actions (including orders limiting our operations or requiring corrective measures) and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, laws, regulations, codes and common law.

Changes in U.S. federal and state or foreign tax law, tax assessments and unclaimed property audits by governmental authorities could adversely impact our operating results.

We remit a variety of taxes and fees to various U.S. federal and state and foreign governmental authorities, including income taxes, excise taxes, property taxes, sales and use taxes and payroll taxes. From time to time, governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law. In addition, tax laws and regulations are extremely complex and subject to varying interpretations. The taxes and fees remitted by us are subject to review and audit by the applicable governmental authorities which could result in liability for additional assessments. Furthermore, we are subject to U.S. state unclaimed property (escheat) laws and audits which require us to turn over to certain government authorities the property of others held by us that has been unclaimed for a specified period of time. Although management believes that the positions we have taken are reasonable, various taxing authorities may challenge certain of the positions we have taken, which may also potentially result in additional liabilities for taxes, unclaimed property, interest and penalties in excess of accrued liabilities. Changes in tax laws or an unfavorable resolution of assessments by a governmental authority could have a material adverse effect on our operating results in future periods.

Results of legal proceedings relating to the products and distribution thereof, and regulatory inquiries or investigations by government authorities, could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flows.

We rely on manufacturers and other suppliers to provide us with the products and equipment we sell, distribute and service. As we do not have direct control over the quality of the products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of the products and equipment we sell, distribute and service. It is possible that inventory from a manufacturer or supplier could be sold to our customers and later be alleged to have quality problems or to have caused personal injury, subjecting us to potential claims from customers or third parties. Our ability to hold such manufacturer or supplier liable will depend on a variety of factors, including its financial viability. Moreover, increasing the number of private label products that we distribute could increase our exposure to potential liability for product liability claims. Finally, even if we are successful in defending any claim relating to the products or equipment we distribute, claims of this nature could negatively impact our reputation and customer confidence in our products, equipment and company. We have been subject to such claims in the past, which have been resolved without material financial impact. We also operate a significant number of facilities and a large fleet of trucks and other vehicles and therefore face the risk of premises-related liabilities and vehicle-related liabilities including traffic accidents.

From time to time, we may also be involved in government inquiries and investigations, as well as class action, employment and other litigation. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, including environmental remediation and other proceedings commenced by government authorities. The costs and other effects of pending litigation against us cannot be determined with certainty. There can be no assurance that the outcome of any lawsuit or claim or its effect on our business or financial condition will be as expected. The defense of these lawsuits and claims may divert our management's attention, and significant expenses may be incurred as a result. In addition, we may be required to pay damage awards or settlements, or become subject to injunctions or other equitable remedies, that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Although we currently maintain insurance coverage to address some of these types of liabilities, we cannot make assurances that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate coverage against potential claims. In addition, we may choose not to seek to obtain such insurance in the future. Moreover, indemnification rights that we have may be insufficient or unavailable to protect us against potential
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loss exposures.

General Risk Factors

Adverse developments in general business and economic conditions as well as conditions in the global capital and credit markets could have a material adverse effect on the demand for our products, the business, and the financial condition and results of operations of our Company and our customers.

The persistently slow rate of increase in the U.S. gross domestic product ("GDP") in recent years has adversely affected our results of operations. If GDP continues to increase at a slow rate or if economic growth declines, demand for the products we sell will be adversely affected. In addition, volatility in the global capital and credit markets, which impacts interest rates, currency exchange rates and the availability of credit, could have a material adverse effect on the business, financial condition and results of operations of our Company and our customers. Financial difficulties of customers, whether as a result of a downturn in general economic or industry conditions or otherwise, may result in failures of customers to timely pay amounts due or adversely affect the collectability of our accounts receivable, which could have a material adverse effect on our business, financial condition and results of operations. We also have exposure to counterparties with which we routinely execute transactions. A bankruptcy or liquidity event by one or more of our customers or counterparties, such as financial institutions, could have a material adverse effect on our business, financial condition and results of operations.

Changes in business conditions in our international operations could adversely affect our business and results of operations.

Our operating results and business prospects could be substantially affected by risks related to Canada, Mexico and other non-U.S. countries where we sell and distribute or purchase our products. Some of our operations are in or near locations that have suffered from political, social and economic issues; civil unrest; and a high level of criminal activity. In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel and the security of our operations. Downturns in economic activity, adverse tax consequences or any change in social, political or labor conditions in any of the countries in which we operate could negatively affect our financial results. In addition, our international operations are subject to regulation under U.S. law (including, among others, the Foreign Corrupt Practices Act of 1977) and other laws related to operations in foreign jurisdictions. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the imposition of civil or criminal sanctions and the prosecution of executives.

Inclement weather, widespread outbreak of an illness, anti-terrorism measures and other disruptions could negatively affect various aspects of our business including our supply chain, distribution system and operations, and could result in reduced demand from our customers.

Our ability to provide efficient distribution of products to our customers is an integral component of our overall business strategy. Disruptions at distribution centers or shipping ports or the closure of roads or imposition of other driving bans due to natural events such as flooding, tornadoes and blizzards may affect our ability to both maintain key products in inventory and deliver products to our customers on a timely basis, which may in turn adversely affect our results of operations.

Additionally, widespread outbreaks of an illness such as a pandemic and actions taken to contain or prevent further spread of such diseases could substantially interfere with general commercial activity related to our supply chain and customer base, which could have an adverse effect on our business, financial condition and results of operations. If our operations are curtailed, we may need to seek alternate sources of supply which may be more expensive, unavailable or may result in delays in shipments to us from our supply chain and subsequently to our customers. Further, if our customers’ businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of operations.

Furthermore, in the aftermath of terrorist attacks in the U.S., federal, state and local authorities have implemented and continue to implement various security measures that affect many parts of the transportation network in the U.S. and abroad. Our customers typically require delivery of products in short time frames and rely on our on-time delivery capabilities. If security measures disrupt or impede the timing of our deliveries, we may fail to meet the needs of our
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customers, or may incur increased expenses to do so. Any of these disruptions to our operations may reduce our sales and have an adverse effect on our business, financial condition and results of operations.

We are dependent on a variety of information technology ("IT") and telecommunications systems and the Internet, and any failure of these systems could adversely impact our business and operating results.

We depend on IT and telecommunications systems and the Internet for our operations. These systems support a variety of functions including inventory management, order placement and processing with vendors and from customers, shipping, shipment tracking and billing. Our information systems are vulnerable to natural disasters, wide-area telecommunications or power utility outages, terrorist or cyber-attacks and other major disruptions, and our redundant information systems may not operate effectively.

Failures or significant downtime of our IT or telecommunications systems for any reason could prevent us from taking customer orders, printing product pick-lists, shipping products, billing customers and handling call volume. Sales also may be adversely impacted if our reseller and retail customers are unable to access pricing and product availability information. We also rely on the Internet, electronic data interchange and other electronic integrations for a large portion of our orders and information exchanges with our suppliers and customers. The Internet and individual websites have experienced a number of disruptions and slowdowns, some of which were caused by organized attacks. In addition, some websites have experienced security breakdowns. If we were to experience a security breakdown, disruption or breach that compromised sensitive information, it could harm our relationships with our suppliers and customers. Disruption of our website or the Internet in general could impair our order processing or more generally prevent our suppliers and resellers from accessing information. Failures of our systems could also lead to delivery delays and may expose us to litigation and penalties under some of our contracts. Any significant increase in our IT and telecommunications costs or temporary or permanent loss of our IT or telecommunications systems could harm our relationships with our customers and suppliers and result in lost sales, business delays and bad publicity. The occurrence of any of these events, as well as the costs we may incur in preventing or responding to such events, could have a material adverse effect on our business, financial condition and results of operations.

We are subject to cybersecurity risks related to breaches of security pertaining to sensitive company, customer, employee and vendor information as well as breaches in the technology that manages operations and other business processes.

Our operations rely upon secure IT systems for data capture, processing, storage and reporting. Our IT systems, and those of our third-party providers, could become subject to cyber-attacks. The evolving nature of threats to data security, in light of new and sophisticated methods used by criminals and cyberterrorists, state-sponsored organizations and nation-states, including computer viruses, malware, phishing, misrepresentation, social engineering and forgery, make it increasingly challenging to anticipate and adequately mitigate these risks. Network, system, application and data breaches could result in operational disruptions or information misappropriation including, but not limited to, interruption of systems availability, or denial of access to and misuse of applications required by our customers to conduct business with us. Access to internal applications required to plan our operations, source materials, ship finished goods and account for orders could be denied or misused. Theft of intellectual property or trade secrets, and inappropriate disclosure of confidential information, could stem from such incidents. Any operational disruptions or misappropriation of information could harm our relationship with our customers and suppliers, result in lost sales, business delays and negative publicity and could have a material adverse effect on our business, financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of December 31, 2020, we had a distribution network operating from 125 distribution centers.
LeasedOwnedTotal
Properties117 125 
Square feet (in millions)16.2 0.9 17.1 
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These facilities are strategically located throughout the U.S., Canada and Mexico in order to efficiently serve our customer base in the surrounding areas while also facilitating expedited delivery services for special orders. We continually evaluate location, size and attributes to maximize efficiency, deliver top quality customer service and achieve economies of scale. The Company also leases various office spaces for corporate and sales functions.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in various lawsuits, claims, and regulatory and administrative proceedings arising out of its business relating to general commercial and contractual matters, governmental regulations, intellectual property rights, labor and employment matters, tax and other actions.

Although the ultimate outcome of any legal proceeding or investigation cannot be predicted with certainty, based on present information, including the Company's assessment of the merits of the particular claim, the Company does not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on its cash flow, results of operations or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Veritiv's common stock is publicly traded on the New York Stock Exchange ("NYSE") under the ticker symbol "VRTV". As of February 26, 2021, there were 4,878 shareholders of record. The number of record holders does not include shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

On March 16, 2020, Veritiv announced that its Board of Directors authorized a $25 million share repurchase program (the "2020 Share Repurchase Program"). During the first quarter of 2020, the Company repurchased 383,972 shares of its common stock at a cost of $3.5 million under its 2020 Share Repurchase Program, which has been suspended since March 27, 2020.

On March 3, 2021, Veritiv announced that its Board of Directors authorized a $50 million share repurchase program. Under this program the Company may purchase shares of its common stock through open market transactions, privately negotiated transactions, forward, derivative, or accelerated repurchase transactions, tender offers or otherwise, in accordance with all applicable securities laws and regulations. This authorization for the share repurchase program replaces the $25 million share repurchase authorization previously approved by the Board of Directors in March 2020 and may be suspended, terminated, increased or decreased by the Board at any time.

On November 19, 2020, the UWWH Stockholder, one of Veritiv's existing stockholders and the former parent company of Unisource Worldwide, Inc., sold 1.40 million shares of Veritiv common stock in an underwritten public offering. The Company did not sell or repurchase any shares and did not receive any of the proceeds.

The following table presents information with respect to purchases made by the Company of its common stock during the three months ended December 31, 2020 (shares are in whole units):

Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of the Publicly Announced Program (2)
Approximate Dollar Value of Shares that May Yet be Purchased Under the Publicly Announced Program
October 1-3130 $13.01— $21,478,003 
November 1-30— $0.00— $21,478,003 
December 1-31— $0.00— $21,478,003 
(1) The total number of shares purchased includes: (i) shares purchased pursuant to the 2020 Share Repurchase Program (if any) and (ii) shares surrendered to
the Company to satisfy tax withholding obligations in connection with the vesting of stock units issued as part of the Company's equity-based incentive
plans.
(2) This column discloses the number of shares purchased pursuant to the 2020 Share Repurchase Program during the indicated periods.

Veritiv has not historically declared or paid dividends on its common stock. The Company currently intends to invest its future earnings, if any, to fund its growth, to develop its business, for working capital needs, to reduce debt and for general corporate purposes. Any payment of dividends will be at the discretion of Veritiv's Board of Directors and will depend upon various factors then existing, including earnings, financial condition, results of operations, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that Veritiv's Board of Directors may deem relevant.


Performance Graph

The following graph provides a comparison of the cumulative total shareholder return on the Company's common stock to the cumulative total returns of the Russell 2000 Index and the average performance of two customized peer groups for the period from December 31, 2015 through December 31, 2020. The graph is not, and is not intended to be, indicative of future performance of our common stock. The graph assumes that the value of the investment in the Company's common
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stock, the Russell 2000 Index and the peer groups was $100 on December 31, 2015. Total return indices reflect reinvestment of dividends and are weighted on the basis of market capitalization at the time of each reported data point. The peer group is reviewed periodically based on industry, size and market dynamics. Because the Company changed the composition of the peer group for 2020, as noted in the tables below, the peer group used for the corresponding disclosures in 2019 is shown for comparison.

Companies included in the 2020 peer group are as follows:

Applied Industrial Technologies, Inc.Graphic Packaging Holding CompanyResolute Forest Products, Inc.
Avery Dennison CorporationInternational Paper CompanySealed Air Corporation
Beacon Roofing Supply, Inc.Kaman CorporationSonoco Products Company
Brady CorporationMSC Industrial Direct Co., Inc.Univar Solutions, Inc.
Deluxe CorporationNeenah Inc.Verso Corporation
Domtar CorporationOffice Depot, Inc.W.W. Grainger, Inc.
Ennis, Inc.P.H. Glatfelter CompanyWatsco, Inc.
Fastenal CompanyPackaging Corporation of America
Genuine Parts CompanyR.R. Donnelley & Sons Company


Companies included in the 2019 peer group are as follows:

Anixter International, Inc.Genuine Parts CompanyR.R. Donnelley & Sons Company
Applied Industrial Technologies, Inc.Graphic Packaging Holding CompanyResolute Forest Products, Inc.
Arrow Electronics, Inc.InnerWorkings, Inc.ScanSource, Inc.
Avery Dennison CorporationInternational Paper CompanySealed Air Corporation
Avnet, Inc.Kaman CorporationSonoco Products Company
Brady CorporationMSC Industrial Direct Co., Inc.W.W. Grainger, Inc.
Deluxe CorporationNeenah Inc.WESCO International, Inc.
Domtar CorporationOffice Depot, Inc.WestRock Company
Ennis, Inc.P.H. Glatfelter Company
Fastenal CompanyPackaging Corporation of America
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vrtv-20201231_g2.jpg



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ITEM 6. SELECTED FINANCIAL DATA

The following table presents the selected historical consolidated financial data for Veritiv and should be read in conjunction with Item 7 of this report and the audited Consolidated Financial Statements and notes thereto contained in Item 8 of this report. The Consolidated Statements of Operations data for the years ended December 31, 2020, 2019 and 2018 and the Consolidated Balance Sheets data as of December 31, 2020 and 2019 set forth below are derived from the audited Consolidated Financial Statements included in Item 8 of this report. The Consolidated Statements of Operations data for the years ended December 31, 2017 and 2016 and the Consolidated Balance Sheets data as of December 31, 2018, 2017 and 2016 set forth below are derived from the audited Consolidated Financial Statements for 2018 and 2017, which are not included in this report. The selected historical consolidated financial information presented below may not be indicative of Veritiv's future performance.

(in millions, except per share data)As of and for the Year Ended December 31,
Statements of Operations Data20202019201820172016
Net sales$6,345.6 $7,659.4 $8,696.2 $8,364.7 $8,326.6 
Cost of products sold5,040.2 6,206.2 7,155.7 6,846.6 6,826.4 
Distribution expenses429.8 509.2 550.5 516.9 505.1 
Selling and administrative expenses (1)
717.9 823.3 867.6 875.7 827.9 
Depreciation and amortization57.7 53.5 53.5 54.2 54.7 
Integration and acquisition expenses— 17.5 31.8 36.5 25.9 
Restructuring charges, net52.2 28.8 21.3 16.7 12.4 
Operating income (loss) (1)
47.8 20.9 15.8 18.1 74.2 
Income tax expense (benefit)8.8 0.7 5.5 11.4 19.8 
Net income (loss)34.2 (29.5)(15.7)(13.3)21.0 
Earnings (loss) per share(2):
Basic earnings (loss) per share$2.14 $(1.84)$(0.99)$(0.85)$1.31 
Diluted earnings (loss) per share$2.08 $(1.84)$(0.99)$(0.85)$1.30 
Balance Sheets Data (at period end)
Accounts receivable, net (3)
$849.5 $910.8 $1,181.4 $1,174.3 $1,048.3 
Inventories465.4 552.9 688.2 722.7 707.9 
Total assets (4,5)
2,335.0 2,511.1 2,529.7 2,708.4 2,483.7 
Long-term debt, net of current portion (5)
589.1 742.4 963.6 908.3 749.2 
Financing obligations, net of current portion (4,5)
— — 23.6 181.6 176.1 
Defined benefit pension obligations18.2 15.7 21.1 24.4 27.6 
Other non-current liabilities (5)
395.2 485.3 128.6 137.0 121.2 

(1) Amounts shown prior to 2018 have been revised to reflect the impact of the Company's adoption of Accounting Standards Update ("ASU") 2017-07 on
January 1, 2018.
(2) See Note 12 of the Notes to Consolidated Financial Statements for information regarding the shares of common stock utilized in the computation of basic
and diluted earnings (loss) per share for the years ended December 31, 2020, 2019 and 2018.
(3) See Note 1 of the Notes to Consolidated Financial Statements for information regarding the Company’s adoption of ASU 2016-13 on January 1, 2020, which included a cumulative effect decrease to retained earnings of approximately $0.3 million. The amounts prior to 2020 have not been revised.
(4) See Note 3 of the Notes to Consolidated Financial Statements for information regarding the impacts to property and equipment and financing obligations
due to the termination or expiration of the related party financing obligations, the majority of which occurred in 2018.
(5) See Note 3 of the Notes to Consolidated Financial Statements for information regarding the Company's adoption of ASU 2016-02 on January 1, 2019,
which included a cumulative effect increase to retained earnings of approximately $2.7 million. Amounts shown prior to 2019 have not been revised and
are not comparable to the amounts in 2020 and 2019.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company's results of operations and financial condition should be read in conjunction with the Consolidated Financial Statements and Notes thereto, included elsewhere in this report.


Executive Overview

The COVID-19 Pandemic

The global outbreak of the novel coronavirus ("COVID-19"), which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the United States ("U.S.") and global economies and created significant uncertainty regarding potential impacts to Veritiv Corporation's ("Veritiv" or the "Company") operations, supply chain and customer demand. The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global societies, economies, financial markets and business practices. Federal and state governments have implemented measures in an effort to contain the virus, including physical distancing recommendations, travel restrictions, border closures, limitations on public gatherings, work-from-home recommendations, supply chain logistical changes and closure of non-essential businesses. Veritiv’s logistics and distribution operations have fallen within guidance provided by various government authorities on essential businesses, services and workplaces and therefore the Company has not experienced any closures of distribution centers. Veritiv serves customers across a broad range of industry sectors and geographies, with varying COVID-19 impacts. 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. During the third and fourth quarters of 2020, the Company experienced improvements in sales activity in each of its reportable segments as compared to the second quarter of 2020, with the Packaging segment nearing pre-COVID-19 levels.

Veritiv's first priority remains the health and safety of its employees, customers and their families. The Company has taken steps to limit exposure and enhance the safety of its facilities for employees working to continue to supply vital products to its customers. In response to the pandemic, Veritiv initiated its Corporate Incident Response Team and initiated enhanced health and safety measures across its facilities. The Company modified practices at its distribution centers and offices to adhere to guidance from the U.S. Centers for Disease Control and Prevention and local health and governmental authorities with respect to social distancing, enhanced cleaning protocols and usage of personal protective equipment, where appropriate. In addition, the Company implemented global travel restrictions and work-from-home policies for employees who have the ability to work remotely.

Towards the end of the first quarter of 2020, the Company began to experience decreased sales activity in each of its reportable segments as compared to the corresponding prior year period. As a result, in April 2020, Veritiv took several actions to help mitigate the effects of the revenue decline and improve liquidity. These actions included (i) temporarily reducing salaries for senior leaders ranging from 10% to 50% through June 2020, (ii) temporarily reducing annual cash retainers for independent directors by 50% through June 2020, (iii) placing approximately 15% of its salaried workforce on temporary furloughs through mid-July 2020, (iv) adjusting its supply chain operations staff depending on volume at specific locations, (v) suspending its share repurchase program and (vi) reducing discretionary spending including planned capital expenditures. In July 2020, Veritiv took additional actions in response to the ongoing impacts of the COVID-19 pandemic to enhance liquidity, including implementing cost-savings and cash preservation initiatives. These actions included the permanent reduction of the Company's U.S. salaried workforce by approximately 15% across all business segments and corporate functions, as further described under "2020 Restructuring Plan" below. In addition, during the second, third and fourth quarters of 2020 the Company invested $75.0 million of its cash in highly-liquid investments instead of paying down its long-term debt.

Veritiv's management expects that cash provided by operating activities and available capacity under the Asset-Based Lending Facility (the "ABL Facility") will provide sufficient funds to operate the business and meet other liquidity needs. As of December 31, 2020, Veritiv had cash and cash equivalents of $120.6 million and also had $341.9 million in available additional borrowing capacity under the ABL Facility. In April 2020, Veritiv refinanced and extended the maturity date of the ABL Facility to April 2025.

The current circumstances are dynamic and the impacts of the COVID-19 pandemic on the Company's business operations, including the duration and impact on overall customer demand, cannot be reasonably estimated at this time. The extent to which the COVID-19 pandemic impacts the Company's business, results of operations, access to sources of liquidity
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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.

See Part I, Item 1A, Risk Factors, for additional information on risks related to the COVID-19 pandemic.

Other Recent Events

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. See Note 4 of the Notes to Consolidated Financial Statements for information related to the Company's restructuring efforts.

Supply Chain Restructuring

On March 13, 2020, Veritiv announced that its Board of Directors authorized Company management to evaluate alternatives to restructure the Company’s integrated supply chain in an effort to facilitate better alignment with the supply chain needs of the Company’s customers by segment, with a view towards reducing complexity and lowering overall supply chain costs. Each of the Company’s reportable segments has different market dynamics and business and service needs. As a result, the Company is investigating whether an alternative supply chain structure would be more economically or operationally desirable. Moreover, to address the ongoing and rapid secular decline of the paper industry, management continues to explore opportunities to adapt the cost structure necessary to support the Print segment. In an effort to ensure all aspects of the Company can operate most effectively, the Company intends to review and evaluate restructuring options and what the optimal path forward will be. The Company plans to proceed with this review in a timely manner, but no decision has been made to pursue any specific course of action, and there can be no assurance as to what form the restructuring may take or whether this evaluation will result in any restructuring. Additionally, any restructuring may result in a significant charge to earnings in any given financial reporting period or periods.

Business Overview

Veritiv is a leading North American business-to-business full-service provider of value-added packaging products and services, as well as facility solutions, print and publishing products and services. Additionally, Veritiv provides logistics and supply chain management solutions to its customers. On August 31, 2017, Veritiv completed its acquisition of 100% of the equity interest in various All American Containers entities (collectively, "AAC"). AAC was a family owned and operated distributor of rigid packaging products, including plastic, glass and metal containers, caps, closures and plastic pouches. The Company operates from 125 distribution centers primarily throughout the United States ("U.S."), Canada and Mexico.
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Veritiv's business is organized under four reportable segments: Packaging, Facility Solutions, Print, and Publishing and Print Management ("Publishing"). This segment structure is consistent with the way the Chief Operating Decision Maker, who is Veritiv's Chief Executive Officer, makes operating decisions and manages the growth and profitability of the Company's business. The Company also has a Corporate & Other category which includes certain assets and costs not primarily attributable to any of the reportable segments, as well as the Veritiv logistics solutions business which provides transportation and warehousing solutions. The following summary describes the products and services offered in each of the reportable segments:
Packaging – Veritiv is a global provider of packaging products, services and solutions. The Packaging segment provides custom and standard packaging solutions for customers based in North America and in key global markets. We service our 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. Veritiv's packaging professionals create customer value through supply chain solutions, structural and graphic packaging design and engineering, automation, workflow and equipment services and kitting.

Facility Solutions – Veritiv is a global provider of hygiene and facility solutions products and services. The Facility Solutions segment sources and sells cleaning, break-room and other supplies 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. Through this segment, Veritiv manages a world class network of leading suppliers in most facilities solutions categories. Additionally, the Company offers total cost of ownership solutions with re-merchandising, budgeting and compliance reporting, inventory management and a sales-force trained to bring leading vertical expertise to the major North American geographies.

Print – The Print segment sells and distributes commercial printing, writing, copying, digital, specialty products, 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 Veritiv's customers.



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Results of Operations, Including Business Segments

The following discussion compares the consolidated operating results of Veritiv for the years ended December 31, 2020, 2019 and 2018:
Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$6,345.6 $7,659.4 $8,696.2 $(1,313.8)(17.2)%$(1,036.8)(11.9)%
Cost of products sold (exclusive of depreciation and amortization shown separately below)
5,040.2 6,206.2 7,155.7 (1,166.0)(18.8)%(949.5)(13.3)%
Distribution expenses429.8 509.2 550.5 (79.4)(15.6)%(41.3)(7.5)%
Selling and administrative expenses717.9 823.3 867.6 (105.4)(12.8)%(44.3)(5.1)%
Depreciation and amortization57.7 53.5 53.5 4.2 7.9 %0.0 0.0 %
Integration and acquisition expenses— 17.5 31.8 (17.5)(100.0)%(14.3)(45.0)%
Restructuring charges, net52.2 28.8 21.3 23.4 81.3 %7.5 35.2 %
Operating income (loss)47.8 20.9 15.8 26.9 128.7 %5.1 32.3 %
Interest expense, net25.1 38.1 42.3 (13.0)(34.1)%(4.2)(9.9)%
Other (income) expense, net(20.3)11.6 (16.3)(31.9)(275.0)%27.9 171.2 %
Income (loss) before income taxes43.0 (28.8)(10.2)71.8 249.3 %(18.6)(182.4)%
Income tax expense (benefit)8.8 0.7 5.5 8.1 1,157.1 %(4.8)(87.3)%
Net income (loss)$34.2 $(29.5)$(15.7)$63.7 215.9 %$(13.8)(87.9)%


Net Sales
2020 compared to 2019: Net sales decreased by $1,313.8 million, or 17.2%. Primarily beginning in April 2020, the Company experienced decreased net sales in each of its segments due to the negative impacts from the COVID-19 pandemic. Declines in the Print and Publishing segments' net sales were responsible for approximately 70% of the total decline in net sales. However, net sales declines of 10.5% in the fourth quarter of 2020 and 17.3% in the third quarter of 2020 were sequential improvements as compared to the decline of 28.3% in the second quarter of 2020. See the "Segment Results" section for additional discussion. Management expects net sales during the first half of 2021 to be unfavorably impacted in each of the Company's reportable segments, with the possible exception of the Packaging segment, due to the continuing negative effects of the COVID-19 pandemic. The duration and extent of the COVID-19 pandemic is highly uncertain and the magnitude of net sales declines is difficult to predict.

2019 compared to 2018: Net sales decreased by $1,036.8 million, or 11.9%, primarily due to the Print and Publishing segments' decline in net sales as those segments were responsible for over 75% of the total decline in net sales. See the "Segment Results" section for additional discussion.
Cost of Products Sold (exclusive of depreciation and amortization shown separately below)
2020 compared to 2019: Cost of products sold decreased by $1,166.0 million, or 18.8%, primarily due to the decline in net sales as previously discussed. Cost of products sold decreased at a faster rate than net sales due to improvements in pricing, as well as changes in both segment and customer mix. See the "Segment Results" section for additional discussion.

2019 compared to 2018: Cost of products sold decreased by $949.5 million, or 13.3%, primarily due to the decline in net sales as previously discussed. See the "Segment Results" section for additional discussion.
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Distribution Expenses
2020 compared to 2019: Distribution expenses decreased by $79.4 million, or 15.6%. The decrease was primarily attributable to (i) a $39.1 million decrease in wages and temporary employee expenses, (ii) a $23.8 million decrease in freight and logistics expense, (iii) a $10.9 million decrease in equipment and facility rent expense and (iv) a $3.3 million decrease in maintenance costs. The decrease in wages and temporary employee expenses was primarily driven by actions taken by the Company in response to the COVID-19 pandemic, including lowering headcount across the Company's distribution network. The decrease in freight and logistics expense was primarily driven by a decrease in third-party freight and fuel expenses mostly related to lower net sales volumes. The decrease in equipment and facility rent expense was primarily driven by consolidation of the Company's facilities.

2019 compared to 2018: Distribution expenses decreased by $41.3 million, or 7.5%. The decrease was primarily attributable to (i) a $25.7 million decrease in freight and logistics expenses, primarily driven by a decrease in third-party freight and fuel expenses, (ii) an $18.7 million decrease in personnel expenses driven by lower wages, temporary employee expenses and multi-employer pension plan ("MEPP") withdrawal charges and (iii) a $3.5 million decrease related to replacing certain equipment leases, previously treated as operating leases (expenses included in distribution expense), with finance leases (expenses included in depreciation and amortization and interest expense, net), partially offset by a $7.4 million increase in storage expenses mostly during the first half of 2019, primarily due to replacing certain property leases, previously treated as financing arrangements (expenses included in depreciation and amortization and interest expense, net) with operating leases. Charges associated with withdrawals from MEPPs were $6.6 million in 2019 and $11.2 million in 2018.
Selling and Administrative Expenses
2020 compared to 2019: Selling and administrative expenses decreased by $105.4 million, or 12.8%. The decrease was primarily due to (i) a $78.9 million decrease in personnel expenses, (ii) an $8.6 million decrease in professional fees expense, (iii) an $8.3 million net gain on the sale of property, (iv) a $3.9 million decrease related to the escheat audit expense in 2019 that did not repeat in 2020 and (v) a $2.5 million decrease in bad debt expense. The decrease in personnel expenses was primarily driven by (i) lower wages and temporary employee expenses primarily as a result of actions taken by the Company in response to the COVID-19 pandemic, (ii) a decrease in commission expenses driven by lower net sales and (iii) a decrease in travel and entertainment expenses in response to the COVID-19 pandemic, partially offset by higher incentive compensation expenses.

2019 compared to 2018: Selling and administrative expenses decreased by $44.3 million, or 5.1%. The decrease was primarily due to (i) a $30.6 million decrease in personnel expense, mainly driven by a decrease in commission and compensation expenses primarily related to the Print segment, (ii) a $12.2 million decrease in bad debt expense primarily related to the Print segment and (iii) an $8.7 million decrease in professional fees expense, partially offset by a $2.7 million decrease related to a facility sale net gain in 2018, a $1.4 million increase in insurance expense and a $1.2 million increase related to the escheat audit.
Depreciation and Amortization
2020 compared to 2019: Depreciation and amortization expense increased by $4.2 million, or 7.9%, primarily due to increases in depreciation related to capitalized delivery equipment.

2019 compared to 2018: Depreciation and amortization expense was flat as compared to 2018.
Integration and Acquisition Expenses
During the years ended December 31, 2019 and 2018, Veritiv incurred costs and charges to integrate its combined businesses.  Integration expenses included internally dedicated integration management resources, retention compensation, information technology conversion costs, professional services and other costs to integrate its businesses. Additionally, Veritiv incurred integration and acquisition expenses of $0.8 million and $2.1 million in 2019 and 2018, respectively, related to the acquisition of AAC on August 31, 2017. The Company completed its integration efforts as of December 31, 2019. See Note 4 of the Notes to Consolidated Financial Statements for information related to integration and acquisition expenses.
Restructuring Charges, Net
During the three and twelve months ended December 31, 2020, the Company incurred charges of $11.8 million and
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$52.2 million, respectively related to the 2020 Restructuring Plan. The Company expects to substantially complete the 2020 Restructuring Plan by the end of 2021. Initial charges were incurred and recorded in June 2020.

For periods prior to 2020, Restructuring charges, net related primarily to Veritiv's Merger related restructuring of its North American operations intended to integrate the legacy xpedx and Unisource operations, generate cost savings and capture synergies across the combined company. Restructuring charges, net in 2018 also included impacts from its Print restructuring plan, which was completed in 2018. Restructuring charges, net included net (losses) or gains related to the sale or exit of certain facilities totaling ($0.4) million and $15.0 million for the years ended December 31, 2019 and 2018, respectively. The Company completed its Merger related restructuring efforts as of December 31, 2019.

See Note 4 of the Notes to Consolidated Financial Statements for information related to the Company's restructuring efforts.
Interest Expense, Net
Interest expense, net in 2020 consisted of (i) $18.9 million of interest expense on the Company's ABL Facility, (ii) $3.0 million of finance lease interest expense, (iii) $2.1 million for amortization and write-off of deferred financing costs related to the ABL Facility and (iv) $1.1 million in miscellaneous interest expense. Interest expense, net in 2020 decreased by $13.0 million, or 34.1%, compared to 2019 primarily due to (i) lower average interest rates and (ii) a lower average balance on the ABL Facility. The decreased average balance was due to an increase in operating cash flow used to reduce the ABL Facility balance. See Note 6 of the Notes to Consolidated Financial Statements for information related to the ABL Facility.

Interest expense, net in 2019 consisted of (i) $32.8 million of interest expense on the ABL Facility, (ii) $2.6 million for amortization of deferred financing costs related to the ABL Facility and (iii) $2.7 million in miscellaneous interest expense. Interest expense, net in 2019 decreased by $4.2 million compared to 2018 primarily due to a lower average balance on the ABL Facility. The decreased average balance was due to an increase in operating cash flow used to reduce the ABL Facility balance. See Note 6 of the Notes to Consolidated Financial Statements for information related to the ABL Facility.

Other (Income) Expense, Net

2020 compared to 2019: Other (income) expense, net, in 2020 was income of $20.3 million. This was a net improvement of $31.9 million, as compared to the same period in 2019. In December 2020, the Company and UWW Holdings, LLC (the "UWWH Stockholder") agreed to settle the Tax Receivable Agreement ("TRA"), which was entered into at the time of the Merger. The Company paid the UWWH Stockholder a total of $12.0 million in settlement of all past and future liabilities that would have been owed under the TRA and the parties agreed to a mutual release of claims under the TRA. As a result of the settlement, the Company recognized a favorable fair value adjustment of $20.1 million in other (income) expense, net in the fourth quarter of 2020. The remaining net improvement in 2020 was primarily due to the 2020 AAC contingent consideration expense being $12.1 million lower than the 2019 expense. The AAC contingent consideration liability was settled in March 2020. See Note 10 of the Notes to Consolidated Financial Statements for information related to the AAC contingent consideration.

2019 compared to 2018: Other (income) expense, net, in 2019 was expense of $11.6 million. This was a net other expense increase of $27.9 million, compared to the same period in 2018. In 2019 there was a $13.1 million increase in the fair value of the AAC contingent consideration as compared to a reduction of $12.3 million in 2018. See Note 10 of the Notes to Consolidated Financial Statements for information related to the AAC contingent consideration. The remaining expense was primarily driven by changes associated with the TRA.

See Note 8 and Note 10 of the Notes to Consolidated Financial Statements for information related to the TRA.
Effective Tax Rate
Veritiv's effective tax rates were 20.5%, (2.4)% and (53.9)% for the years ended December 31, 2020, 2019 and 2018, respectively. The difference between the Company's effective tax rates and the U.S. statutory tax rate of 21.0% primarily relates to the tax effect of TRA changes, state income taxes (net of federal income tax benefit), tax expense for stock compensation vesting, Global Intangible Low-Taxed Income, non-deductible expenses, tax credits and the Company's pre-tax book income (loss) by jurisdiction, and changes in the valuation allowance against deferred tax assets. In addition, the
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Company's effective tax rate for the year ended December 31, 2020 includes a $2.4 million benefit related to the carryback of net operating losses under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The Company's effective tax rate for the year ended December 31, 2018 was impacted by the following discrete item:
A $1.3 million expense recorded in 2018 for the accounting completed under the measurement period related to the Tax Cuts and Jobs Act of 2017 (the "Tax Act") under Staff Accounting Bulletin 118, totaling $31.5 million of cumulative effect of which $24.0 million is remeasurement of our deferred taxes and $7.5 million for the one-time transition tax. See Note 7 of the Notes to the Consolidated Financial Statements for additional details regarding the Tax Act.

The volatility of the Company's effective tax rate has been primarily due to both the level of pre-tax book income (loss) as well as variations in the Company's income (loss) by jurisdiction. The Company expects continued volatility of the effective tax rate for the foreseeable future due to potential fluctuations in the amount and source, including both foreign and domestic, of pre-tax book income (loss) by jurisdiction, potential deferred tax valuation allowance increases in certain jurisdictions, changes in amounts of non-deductible expenses, and other items that could impact the effective tax rate. Additionally, continued unfavorable impacts from the COVID-19 pandemic have had a negative impact on the Company's financial results during the year ended December 31, 2020. The negative impact on the Company's financial and operating results and other one-time costs further influence volatility. See further discussion of the COVID-19 pandemic impacts in the Executive Overview section above. See Note 7 of the Notes to Consolidated Financial Statements for additional information related to the Company's income taxes.
Segment Results
Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, restructuring charges, net, integration and acquisition expenses and other similar charges including any severance costs, costs associated with warehouse and office openings or closings, consolidation, and relocation and other business optimization expenses, stock-based compensation expense, changes in the LIFO reserve, non-restructuring asset impairment charges, non-restructuring severance charges, non-restructuring pension charges, net, fair value adjustments related to contingent liabilities assumed in mergers and acquisitions and certain other adjustments) is the primary financial performance measure Veritiv uses to manage its businesses, to monitor its results of operations, to measure its performance against the ABL Facility and to incentivize its management. Veritiv believes investors commonly use Adjusted EBITDA as a key financial metric for valuing companies. In addition, the credit agreement governing the ABL Facility permits the Company to exclude these and other charges in calculating Consolidated EBITDA, as defined in the ABL Facility. This common metric is intended to align shareholders, debt holders and management. Adjusted EBITDA is a non-GAAP financial measure and is not an alternative to net income, operating income or any other measure prescribed by U.S. generally accepted accounting principles ("U.S. GAAP").

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of Veritiv's results as reported under U.S. GAAP. For example, Adjusted EBITDA:

Does not reflect the Company's income tax expenses or the cash requirements to pay its taxes; and
Although depreciation and amortization charges are non-cash charges, it does not reflect that the assets being depreciated and amortized will often have to be replaced in the future, and the foregoing metric does not reflect any cash requirements for such replacements.

Other companies in the industry may calculate Adjusted EBITDA differently than Veritiv does, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to Veritiv to invest in the growth of its business. Veritiv compensates for these limitations by relying both on the Company's U.S. GAAP results and by using Adjusted EBITDA for supplemental purposes. Additionally, Adjusted EBITDA is not an alternative measure of financial performance under U.S. GAAP and therefore should be considered in conjunction with net income and other performance measures such as operating income or net cash provided by operating activities and not as an alternative to such U.S. GAAP measures.

Due to the shared nature of the distribution network to support the Packaging, Facility Solutions and Print segments, distribution expenses are not a specific charge to each segment, but are instead allocated to each segment based primarily on operational metrics that correlate with changes in volume. Accordingly, distribution expenses allocated to each segment are highly interdependent on the results of other segments. Lower volume in any segment that is not offset by a reduction in
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distribution expenses can result in the other segments absorbing a larger share of distribution expenses. Conversely, higher volume in any segment can result in the other segments absorbing a smaller share of distribution expenses. The impact of this at the segment level is that the changes in distribution expense trends may not correspond with volume trends within a particular segment.

The Company sells thousands of products. In the Packaging and Facility Solutions segments, Veritiv is unable to compute the impact of changes in sales volume based on changes in sales of each individual product. Rather, the Company assumes that the margin stays constant and estimates the volume impact based on changes in cost of products sold as a proxy for the change in sales volume. After any other significant sales variances are identified, the remaining sales variance is attributed to price/mix.

The Company approximates foreign currency effects by applying the foreign currency exchange rate for the prior period to the local currency results for the current period. We believe the elimination of the foreign currency translation impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

The Company believes that the decline in the demand for paper and related products is due to the widespread use of electronic media and permanent product substitution, more e-commerce, less print advertising, fewer catalogs and a reduced volume of direct mail, among other factors. This trend, which may have been accelerated by the COVID-19 pandemic, is expected to continue and will place continued pressure on the Company's revenues and profit margins and make it more difficult to maintain or grow Adjusted EBITDA within the Print and Publishing segments.

Included in the following table are net sales and Adjusted EBITDA for each of the reportable segments and Corporate & Other:    
(in millions)PackagingFacility SolutionsPrintPublishingCorporate & Other
Year Ended December 31, 2020
Net sales$3,316.7 $922.3 $1,458.2 $543.5 $104.9 
Adjusted EBITDA300.0 41.6 33.7 12.8 (200.5)
Adjusted EBITDA as a % of net sales9.0 %4.5 %2.3 %2.4 %*
Year Ended December 31, 2019
Net sales$3,446.3 $1,181.8 $2,104.6 $798.0 $128.7 
Adjusted EBITDA243.5 33.1 43.1 21.4 (185.2)
Adjusted EBITDA as a % of net sales7.1 %2.8 %2.0 %2.7 %*
Year Ended December 31, 2018
Net sales$3,547.1 $1,311.7 $2,676.7 $1,019.2 $141.5 
Adjusted EBITDA246.7 29.0 64.0 24.6 (178.9)
Adjusted EBITDA as a % of net sales7.0 %2.2 %2.4 %2.4 %*
* - not meaningful

See Note 16 of the Notes to Consolidated Financial Statements for a reconciliation of net income (loss) as reflected on the Consolidated Statements of Operations to Adjusted EBITDA for the reportable segments.

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Packaging

The table below presents selected data with respect to the Packaging segment:
Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$3,316.7 $3,446.3 $3,547.1 $(129.6)(3.8)%$(100.8)(2.8)%
Adjusted EBITDA300.0 243.5 246.7 56.5 23.2 %(3.2)(1.3)%
Adjusted EBITDA as a % of net sales9.0 %7.1 %7.0 %190 BPS10 BPS

The table below presents the components of the net sales change compared to the prior year:
Increase (Decrease)
(in millions)2020 vs. 20192019 vs. 2018
Volume$(183.9)$(140.1)
Foreign currency(1.6)(8.4)
Price/Mix55.9 47.7 
$(129.6)$(100.8)

Comparison of the Years Ended December 31, 2020 and 2019
Net sales decreased $129.6 million, or 3.8%, compared to 2019. The net sales decrease was primarily attributable to decreased sales of films, tapes, corrugated products and bags that was in part attributable to the negative effects of the COVID-19 pandemic beginning in April 2020, partially offset by favorable price/mix. Net sales increased 4.3% in the fourth quarter of 2020 from the 2019 fourth quarter, as compared to declines of 2.7% and 11.3% in the third and second quarters of 2020, respectively, from the corresponding quarters of the prior year. The sequential quarterly improvement in net sales was due in part to strong e-commerce and rigid packaging demand and improvements in sales to industrial manufacturing customers that had been previously impacted by partial or complete shutdowns due to the COVID-19 pandemic.

Adjusted EBITDA increased $56.5 million, or 23.2%, compared to 2019. The increase in Adjusted EBITDA was primarily attributable to (i) cost of products sold decreasing at a faster rate than net sales, (ii) a $35.9 million decrease in selling and administrative expenses and (iii) a $10.1 million decrease in distribution expenses, partially offset by a decline in net sales. The decrease in selling and administrative expenses was primarily driven by (i) a $26.2 million decrease in personnel expenses, primarily driven by actions taken by the Company in response to the COVID-19 pandemic and (ii) a $5.5 million decrease in bad debt expense. The decrease in distribution expenses was primarily driven by (i) a $5.9 million decrease in freight and logistics expense, primarily driven by third-party freight and fuel expenses and (ii) a $4.5 million decrease in personnel expenses.

Comparison of the Years Ended December 31, 2019 and 2018
Net sales decreased $100.8 million, or 2.8%, compared to 2018. The net sales decrease was primarily attributable to decreased sales of films, corrugated products and food packaging.

Adjusted EBITDA decreased $3.2 million, or 1.3%, compared to 2018. The decrease in Adjusted EBITDA was primarily attributable to (i) a $12.2 million increase in selling and administrative expenses, (ii) a $4.8 million increase in distribution expenses and (iii) a decline in net sales, partially offset by cost of products sold decreasing at a faster rate than net sales. The increase in selling and administrative expenses was primarily driven by (i) an $8.3 million increase in personnel expenses associated with a reallocation of resources to support the Company's Packaging growth strategy and (ii) a $2.0 million increase in bad debt expense. The increase in distribution expenses was primarily due to an increase in facility rent mostly during the first half of 2019 related to replacing certain property leases, previously treated as financing arrangements (expenses included in depreciation and amortization and interest expense, net) with operating leases (expenses included in distribution expense).

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Facility Solutions

The table below presents selected data with respect to the Facility Solutions segment:
Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$922.3 $1,181.8 $1,311.7 $(259.5)(22.0)%$(129.9)(9.9)%
Adjusted EBITDA41.6 33.1 29.0 8.5 25.7 %4.1 14.1 %
Adjusted EBITDA as a % of net sales4.5 %2.8 %2.2 %170 BPS60 BPS

The table below presents the components of the net sales change compared to the prior year:
Increase (Decrease)
(in millions)2020 vs. 20192019 vs. 2018
Volume$(266.4)$(129.0)
Foreign currency(2.6)(6.5)
Price/Mix9.5 5.6 
$(259.5)$(129.9)

Comparison of the Years Ended December 31, 2020 and 2019
Net sales decreased $259.5 million, or 22.0%, compared to 2019. The net sales decrease was primarily attributable to (i) decreased sales of towels and tissues, food service products and can liners primarily driven by the negative impact on demand from the COVID-19 pandemic and (ii) the Company exiting a branded re-distribution business. The Company began exiting a branded re-distribution business in the third quarter of 2019 and substantially completed the exit by December 31, 2019. During 2020, net sales associated with this business decreased $96.7 million from 2019 and have historically been approximately 12% of the Facility Solutions segment's net sales. Beginning in April 2020 net sales were negatively impacted due to reduced customer demand resulting from the COVID-19 pandemic despite strong demand in the product categories of personal protective equipment and hygiene-related products. Negative impacts to customer demand have included business and school temporary closures, travel restrictions, constraints on large venues hosting sporting, conventions and entertainment events as well as extended work-from-home measures. In addition, net sales were lower due to strategic decisions to exit certain customer relationships that were not aligned with the Company's product and service capabilities.

Beginning in March 2020, the Facility Solutions segment experienced significant sales growth driven by increased demand for sanitizers and soap products, gloves and other personal protective products, and cleaning supplies due to the COVID-19 pandemic. Demand for these personal protective equipment and hygiene-related products was strong in the second, third and fourth quarters of 2020. However, as noted above, net sales for other Facility Solutions products were negatively impacted beginning in April 2020 due to overall reduced customer demand.

Adjusted EBITDA increased $8.5 million, or 25.7%, compared to 2019. The increase in Adjusted EBITDA was primarily attributable to (i) a $29.6 million decrease in distribution expenses, (ii) a $29.3 million decrease in selling and administrative expenses and (iii) cost of products sold decreasing at a faster rate than net sales, partially offset by a decline in net sales. The decrease in distribution expenses was primarily driven by (i) a $16.8 million decrease in personnel expenses, (ii) an $8.7 million decrease in freight and logistics expense, primarily driven by third-party freight and fuel expenses and (iii) a $2.7 million decrease in equipment and facility rent expense, primarily driven by consolidation of the Company's facilities. The decrease in selling and administrative expense was primarily driven by a $27.5 million decrease in personnel expenses, primarily driven by actions taken by the Company in response to the COVID-19 pandemic and a decrease in commission expense driven by lower net sales.

Comparison of the Years Ended December 31, 2019 and 2018
Net sales decreased $129.9 million, or 9.9%, compared to 2018. The net sales decrease was primarily attributable to decreased sales of food service products, towels and tissues and chemicals. The decrease in net sales was also due to strategic
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decisions to exit certain customer relationships that were not aligned with the Company's product and service capabilities. During the 2019 third quarter the Company began exiting a branded re-distribution business which was substantially completed by year-end 2019. Net sales associated with this business decreased $53.7 million from 2018 and have historically been approximately 12% of the Facility Solutions segment's net sales.

Adjusted EBITDA increased $4.1 million, or 14.1%, compared to 2018. The increase in Adjusted EBITDA was primarily attributable to (i) a $17.9 million decrease in distribution expenses, (ii) a $10.2 million decrease in selling and administrative expenses and (iii) cost of products sold decreasing at a faster rate than net sales, partially offset by a decline in net sales. The decrease in distribution expenses was primarily driven by (i) an $8.0 million decrease in freight and logistics expenses, primarily driven by a decrease in third-party freight and fuel expenses, (ii) a $6.2 million decrease in personnel expenses and (iii) a $3.1 million decrease in facilities rent and other related expenses. The decrease in selling and administrative expenses was primarily driven by a $8.8 million decrease in personnel expenses.


Print

The table below presents selected data with respect to the Print segment:
Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$1,458.2 $2,104.6 $2,676.7 $(646.4)(30.7)%$(572.1)(21.4)%
Adjusted EBITDA33.7 43.1 64.0 (9.4)(21.8)%(20.9)(32.7)%
Adjusted EBITDA as a % of net sales2.3 %2.0 %2.4 %30 BPS(40) BPS

The table below presents the components of the net sales change compared to the prior year:
Increase (Decrease)
(in millions)2020 vs. 20192019 vs. 2018
Volume$(578.3)$(678.7)
Foreign currency(1.2)(4.7)
Price/Mix(66.9)111.3 
$(646.4)$(572.1)

Comparison of the Years Ended December 31, 2020 and 2019
Net sales decreased $646.4 million, or 30.7%, compared to 2019. The net sales decrease was primarily attributable to (i) the continued secular decline in the paper industry in addition to managing risk in the segment through strategic adjustments to the Company's customer base and (ii) the negative impact on demand from the COVID-19 pandemic beginning in April 2020.

Adjusted EBITDA decreased $9.4 million, or 21.8%, compared to 2019. The Adjusted EBITDA decrease was primarily attributable to a decline in net sales, partially offset by (i) a $42.9 million decrease in distribution expenses and (ii) a $37.2 million decrease in selling and administrative expenses. The decrease in distribution expenses was primarily driven by (i) a $19.3 million decrease in personnel expenses, (ii) an $11.4 million decrease in equipment and facility rent expense, primarily driven by consolidation of the Company's facilities, (iii) a $9.1 million decrease in freight and logistics expense, primarily driven by a decrease in third-party freight and fuel expenses and (iv) a $2.3 million decrease in maintenance expenses. The decrease in selling and administrative expenses was primarily driven by (i) a $33.2 million decrease in personnel expenses, primarily driven by actions taken by the Company in response to the COVID-19 pandemic and a decrease in commission expense driven by lower net sales and (ii) a $1.5 million decrease in professional fees expense.

Comparison of the Years Ended December 31, 2019 and 2018
Net sales decreased $572.1 million, or 21.4%, compared to 2018. The net sales decrease was primarily attributable to the continued secular decline in the paper industry as well as managing risk in the Print segment through strategic adjustments
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to the Company's customer base and product offerings, partially offset by higher market prices.

Adjusted EBITDA decreased $20.9 million, or 32.7%, compared to 2018. The Adjusted EBITDA decrease was primarily driven by the decline in net sales and cost of products sold decreasing at a slower rate than net sales, partially offset by (i) a $41.0 million decrease in selling and administrative expenses and (ii) a $24.2 million decrease in distribution expenses. The decrease in selling and administrative expenses was primarily due to (i) a $26.0 million decrease in personnel expenses due to a decrease in commission expense driven by lower net sales and a decrease in headcount and commission expense related to the Print segment restructuring plan and (ii) a $13.1 million decrease in bad debt expense. The decrease in distribution expenses was driven by (i) a $12.4 million decrease in freight and logistics expenses, primarily driven by a decrease in third-party freight and fuel expenses and (ii) a $9.7 million decrease in personnel expenses.

Publishing

The table below presents selected data with respect to the Publishing segment:
Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$543.5 $798.0 $1,019.2 $(254.5)(31.9)%$(221.2)(21.7)%
Adjusted EBITDA12.8 21.4 24.6 (8.6)(40.2)%(3.2)(13.0)%
Adjusted EBITDA as a % of net sales2.4 %2.7 %2.4 %(30) BPS30 BPS

The table below presents the components of the net sales change compared to the prior year:
Increase (Decrease)
(in millions)2020 vs. 20192019 vs. 2018
Volume$(214.5)$(267.3)
Foreign currency— — 
Price/Mix(40.0)46.1 
$(254.5)$(221.2)

Comparison of the Years Ended December 31, 2020 and 2019
Net sales decreased $254.5 million, or 31.9%, compared to 2019. The net sales decrease was primarily attributable to (i) the continued secular decline in the paper industry, managing risks in the segment through strategic adjustments to the Company's customer base, and changes in order patterns due to customer consolidation, digital advertising and other factors as well as (ii) the negative impact on demand from the COVID-19 pandemic beginning in April 2020.

Adjusted EBITDA decreased $8.6 million, or 40.2%, compared to 2019. The Adjusted EBITDA decrease was primarily attributable to a decline in net sales, partially offset by (i) cost of products sold decreasing at a faster rate than net sales and (ii) a $2.5 million decrease in selling and administrative expenses. The decrease in selling and administrative expenses was primarily driven by a $5.4 million decrease in personnel expenses, primarily driven by a decrease in commission expense driven by lower net sales and actions taken by the Company in response to the COVID-19 pandemic, partially offset by a $3.6 million increase in bad debt expense.

Comparison of the Years Ended December 31, 2019 and 2018
Net sales decreased $221.2 million, or 21.7%, compared to 2018. The net sales decrease was primarily attributable to the continued secular decline in the paper industry as well as managing risk in the Publishing segment through strategic adjustments to the Company's customer base, partially offset by higher market prices.

Adjusted EBITDA decreased $3.2 million, or 13.0%, compared to 2018. The Adjusted EBITDA decrease was primarily attributable to the decline in net sales, partially offset by cost of products sold decreasing at a faster rate than net sales,
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and a $5.0 million decrease in selling and administrative expenses which was primarily driven by a decrease in personnel expenses.

Corporate & Other

Year Ended December 31,2020 vs. 20192019 vs. 2018
Increase (Decrease)Increase (Decrease)
(in millions)202020192018$%$%
Net sales$104.9 $128.7 $141.5 $(23.8)(18.5)%$(12.8)(9.0)%
Adjusted EBITDA(200.5)(185.2)(178.9)(15.3)(8.3)%(6.3)(3.5)%

Comparison of the Years Ended December 31, 2020 and 2019
Net sales decreased $23.8 million, or 18.5%, compared to 2019. The net sales decrease was primarily attributable to a decrease in volume of freight brokerage services including the negative impact on demand from the COVID-19 pandemic beginning in April 2020.

Adjusted EBITDA decreased $15.3 million, or 8.3%, compared to 2019. The Adjusted EBITDA decrease was primarily driven by (i) a $10.4 million increase in selling and administrative expenses, (ii) cost of products sold decreasing at a slower rate than net sales and (iii) a decline in net sales. The increase in selling and administrative expenses was primarily driven by a $33.8 million increase in incentive compensation expenses driven by the Company outperforming incentive targets and a one-time discretionary payout for employees not participating in the annual incentive program for helping to ensure Veritiv's continued operations during the pandemic, partially offset by (i) a $13.9 million decrease in wages and temporary employee expenses, primarily driven by actions taken by the Company in response to the COVID-19 pandemic, (ii) a $7.7 million decrease in professional fees expense and (iii) a $2.5 million decrease in travel and entertainment expenses.

Comparison of the Years Ended December 31, 2019 and 2018
Net sales decreased $12.8 million, or 9.0%, compared to 2018, driven by a decrease in volume of freight brokerage services.

Adjusted EBITDA decreased $6.3 million, or 3.5%, compared to 2018, primarily driven by (i) a $2.9 million increase in incentive compensation driven by strong cash flow results, (ii) a $1.4 million increase in casualty insurance losses and (iii) the decline in net sales.

Liquidity and Capital Resources

The cash requirements of the Company are provided by cash flows from operations and borrowings under the ABL Facility. See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding the Company's debt position.

The following table sets forth a summary of cash flows:
Year Ended December 31,
(in millions)202020192018
Net cash provided by (used for):
Operating activities$289.2 $281.0 $15.0 
Investing activities(5.3)(33.6)(21.7)
Financing activities(202.6)(273.9)(8.7)

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Analysis of Cash Flows

2020 Cash Flows

The Company ended 2020 with $120.6 million in cash and cash equivalents, an increase of $82.6 million over the prior year-end balance. Cash flow from operations was $289.2 million in 2020 compared with $281.0 million in 2019. Net cash provided by operating activities increased by $8.2 million as compared to the prior year, primarily as a result of improvements in operating results partially offset by lower cash flows from operating assets and liabilities as decreases in cash flows from inventory, accounts receivable and supplier purchase incentives were offset by improvements in cash flows from accounts payable, deferred payroll taxes and restructuring accruals. The decrease in working capital was driven by the decline in net sales primarily due to the COVID-19 pandemic and the continued secular decline in the paper industry. The factors driving cash flow from operating activities in 2020 were: (i) an $89.7 million decrease in inventories, (ii) a $56.5 million decrease in accounts receivable and related party receivable and (iii) net income of $34.2 million. Net cash used for investing activities decreased by $28.3 million as compared to the prior year, due to cash proceeds received from the sale of two properties and lower capital expenditures. The primary use of cash for financing activities during 2020 was $153.2 million to pay outstanding revolving loan borrowings under the ABL Facility, a net decrease of $107.3 million compared to the prior year. Additionally, beginning in the second quarter of 2020, in response to the COVID-19 pandemic, the Company invested $75.0 million of its cash in highly-liquid investments instead of paying down its long-term debt.

2020 Special Financing Activities

During the first quarter of 2020, the Company repurchased 383,972 shares of its common stock at a cost of $3.5 million under its 2020 Share Repurchase Program, which has been suspended since March 27, 2020. See Part II, Item 5 of this report for additional information on the Company's 2020 Share Repurchase Program. The Company expects to finance any future repurchases from a combination of cash on hand, cash provided by operating activities or borrowings under the Company's ABL Facility.

During the second quarter of 2020, in conjunction with the amendment of the ABL Facility, the Company incurred and paid $3.4 million in new financing fees.

2020 Special Operating Activities

During the fourth quarter of 2020, the Company prepaid $8.1 million of restructuring costs for other one-time compensation, 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.

Additionally, during the fourth quarter, the Company and the UWWH Stockholder agreed to settle the TRA. The Company paid the UWWH Stockholder a total of $12.0 million in settlement of all past and future liabilities that would have been owed under the TRA and the parties agreed to a mutual release of claims under the TRA. In response to the COVID-19 pandemic, the Company deferred the payment of $19.1 million in payroll taxes incurred through December 31, 2020, as provided by the CARES Act, until 2021 and 2022.

2019 Cash Flows

The Company ended 2019 with $38.0 million in cash, a decrease of $26.3 million over the prior year-end balance. Cash flow from operations was $281.0 million in 2019 compared with $15.0 million in 2018. The improvement in cash flow from operations was primarily due to a decrease in working capital, driven by the decline in net sales and management's focus on working capital improvement. The factors driving cash flow from operating activities in 2019 were: (i) a $252.3 million decrease in accounts receivable and related party receivable, (ii) a $139.7 million decrease in inventories and (iii) a $37.1 million decrease in other current assets. The increase in cash from operating activities was partially offset by: (i) a net loss, (ii) a $199.7 million decrease in accounts payable and related party payable and (iii) a $22.4 million decrease in other accrued liabilities. The primary uses of cash during 2019 were: (i) $260.5 million from a net decrease in revolving loan borrowings under the ABL Facility, (ii) $34.1 million for property and equipment additions, of which $22.7 million were ordinary capital expenditures and $11.4 million were integration-related capital expenditures and (iii) $20.0 million for payments under other contingent consideration.

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For information regarding the Company's cash flows for 2018, refer to the "Liquidity and Capital Resources" section of Item 7 of the Company's Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019.
 
Funding and Liquidity Strategy

On April 9, 2020, the Company amended its ABL Facility to extend the maturity date to April 9, 2025, reduced the aggregate commitments from $1.4 billion to $1.1 billion and adjusted the pricing grid for applicable interest rates. All other significant terms remained substantially the same.

The ABL Facility is comprised of U.S. and Canadian sub-facilities of $1.1 billion and $150.0 million, respectively. The ABL Facility is available to be drawn in U.S. dollars, in the case of the U.S. sub-facilities, and in U.S. dollars or Canadian dollars, in the case of the Canadian sub-facilities, or in other currencies that are mutually agreeable.

The ABL Facility provides for the right of the individual lenders to extend the maturity date of their respective commitments and loans upon the request of Veritiv and without the consent of any other lenders. The ABL Facility may be prepaid at Veritiv's option at any time without premium or penalty and is subject to mandatory prepayment if the amount outstanding under the ABL Facility exceeds either the aggregate commitments with respect thereto or the current borrowing base, in an amount equal to such excess. In conjunction with the amendment of the ABL Facility in 2020, the Company incurred and deferred $3.4 million in new financing costs, which are reflected in other non-current assets in the Consolidated Balance Sheets, and will be 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 December 31, 2020, the available additional borrowing capacity under the ABL Facility was approximately $341.9 million. As of December 31, 2020, the Company held $12.1 million in outstanding letters of credit.

The ABL Facility has a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing four-quarter basis, which will be tested only when specified availability is less than limits outlined under the ABL Facility. At December 31, 2020 the above test was not applicable and based on information available as of the date of this report it is not expected to be applicable in the next 12 months.

Under the terms of the ABL Facility, interest rates are based upon LIBOR or the prime rate plus a margin rate, or in the case of Canada, a banker's acceptance rate or base rate plus a margin rate. For the years ended December 31, 2020, 2019 and 2018, the weighted-average borrowing interest rates were 2.9%, 3.4% and 4.6%, respectively.
Veritiv's ability to fund its capital needs will depend on its ongoing ability to generate cash from operations, borrowings under the ABL Facility and funds received from capital market offerings. If Veritiv's cash flows from operating activities are lower than expected, the Company will need to borrow under the ABL Facility and may need to incur additional debt or issue additional equity. Although management believes that the arrangements currently in place will permit Veritiv to finance its operations on acceptable terms and conditions, the Company's access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. To preserve liquidity, particularly during the COVID-19 pandemic, the Company may invest a portion of its cash in highly-liquid investments with original maturities to the Company of three months or less that are readily convertible into known amounts of cash. As of December 31, 2020, the Company held $75.0 million in these cash equivalents. The Company also elected to defer the payment of $19.1 million in payroll taxes incurred through December 31, 2020, as provided by the CARES Act, until 2021 and 2022.

Veritiv's management expects that the Company's primary future cash needs will be for working capital, capital expenditures, contractual commitments, share repurchases and strategic investments. The Company estimates it will incur total restructuring charges of between $77 million and $101 million in connection with the 2020 Restructuring Plan. In addition, Veritiv expects to incur approximately $4 million of inventory related costs to be reported in cost of products sold. Management expects that cash on hand, cash provided by operating activities and the available capacity under the ABL Facility will provide sufficient funds to operate the business and meet other liquidity needs.

All of the cash held by Veritiv's non-U.S. subsidiaries is available for general corporate purposes. Veritiv considers the earnings of certain non-U.S. subsidiaries to be permanently invested outside the U.S. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and management's specific plans for
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reinvestment of those subsidiary earnings. The table below summarizes the Company's cash and cash equivalent positions as of December 31, 2020 and 2019:

As of December 31,
(in millions)20202019
Cash and cash equivalents held in the U.S.$101.0 $23.3 
Cash held in foreign subsidiaries19.6 14.7 
Total Cash and cash equivalents$120.6 $38.0 

Off-Balance Sheet Arrangements
Veritiv does not have any off-balance sheet arrangements as of December 31, 2020, other than leases that have not yet commenced and the letters of credit under the ABL Facility (see Note 3 and Note 6 of the Notes to Consolidated Financial Statements, respectively, for additional information on these items). The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Overview of Contractual Obligations
The table below summarizes the Company's contractual obligations as of December 31, 2020:
Payment Due by Period
(in millions)20212022 – 20232024 – 2025After 2025Total
Finance lease obligations (1)
$16.0 $28.7 $22.0 $27.7 $94.4 
Operating lease obligations (2)
98.3 146.5 95.4 111.4 451.6 
ABL Facility (3)
15.0 30.0 540.6 — 585.6 
Deferred compensation (4)
4.2 6.7 3.8 4.6 19.3 
MEPP withdrawal obligations (5)
1.8 3.5 3.5 22.1 30.9