VERITIV CORP, 10-Q filed on 11/12/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2015
Nov. 9, 2015
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
VERITIV CORPORATION 
 
Entity Central Index Key
0001599489 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
16,000,100 
Condensed Consolidated and Combined Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Statement [Abstract]
 
 
 
 
Net sales (including sales to related parties of $8.0, $9.2, $25.0 and $33.5, respectively)
$ 2,219.8 
$ 2,390.3 
$ 6,517.0 
$ 5,026.7 
Cost of products sold (including purchases from related parties of $67.0, $62.7, $205.0 and $339.2, respectively) (exclusive of depreciation and amortization shown separately below)
1,825.8 
1,987.1 
5,356.0 
4,192.2 
Distribution expenses
129.8 
138.2 
390.0 
289.5 
Selling and administrative expenses
207.1 
212.9 
635.7 
469.2 
Depreciation and amortization
13.7 
14.2 
42.5 
23.1 
Merger and integration expenses
8.3 
54.8 
28.6 
56.9 
Restructuring charges (income)
3.0 
0.1 
8.6 
(1.0)
Operating income (loss)
32.1 
(17.0)
55.6 
(3.2)
Interest expense, net
7.0 
6.8 
19.8 
6.8 
Other expense, net
1.7 
0.6 
3.7 
0.1 
Income (loss) from continuing operations before income taxes
23.4 
(24.4)
32.1 
(10.1)
Income tax expense (benefit)
8.9 
(10.4)
15.5 
(4.6)
Income (loss) from continuing operations
14.5 
(14.0)
16.6 
(5.5)
Loss from discontinued operations, net of income taxes
0 
0 
0 
(0.1)
Net income (loss)
$ 14.5 
$ (14.0)
$ 16.6 
$ (5.6)
Earnings (loss) per share: Basic and Diluted
 
 
 
 
Continuing operations (in dollars per share)
$ 0.91 
$ (0.88)
$ 1.04 
$ (0.51)
Discontinued operations (in dollars per share)
$ 0.00 
$ 0.00 
$ 0.00 
$ (0.01)
Basic and diluted earnings per share (in dollars per share)
$ 0.91 
$ (0.88)
$ 1.04 
$ (0.52)
Weighted-average shares outstanding - basic and diluted (in shares)
16.00 
16.00 
16.00 
10.77 
Condensed Consolidated and Combined Statements of Operations (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Statement [Abstract]
 
 
 
 
Related party sales
$ 8.0 
$ 9.2 
$ 25.0 
$ 33.5 
Related party cost of products sold
$ 67.0 
$ 62.7 
$ 205.0 
$ 339.2 
Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ 14.5 
$ (14.0)
$ 16.6 
$ (5.6)
Other comprehensive loss:
 
 
 
 
Foreign currency translation adjustments
(3.7)
(4.5)
(10.2)
(3.9)
Change in fair value of cash flow hedge, net of tax
(0.4)
0 
(0.4)
0 
Other comprehensive loss
(4.1)
(4.5)
(10.6)
(3.9)
Total comprehensive income (loss)
$ 10.4 
$ (18.5)
$ 6.0 
$ (9.5)
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Current assets:
 
 
Cash
$ 53.5 
$ 57.6 
Accounts receivable, less allowances of $37.0 and $39.0, respectively
1,074.0 
1,115.1 
Related party receivable
4.0 
3.9 
Inventories
705.4 
673.2 
Other current assets
120.1 
109.3 
Total current assets
1,957.0 
1,959.1 
Property and equipment, net
368.5 
377.4 
Goodwill
52.1 
52.4 
Other intangibles, net
31.2 
36.1 
Deferred income tax assets
94.9 
105.6 
Other non-current assets
39.2 
43.9 
Total assets
2,542.9 
2,574.5 
Current liabilities:
 
 
Accounts payable
645.3 
589.8 
Related party payable
12.7 
11.0 
Accrued payroll and benefits
110.3 
111.1 
Deferred income tax liabilities
20.8 
21.1 
Other accrued liabilities
94.9 
100.5 
Current maturities of long-term debt
3.3 
3.8 
Financing obligations to related party, current portion
14.5 
13.8 
Total current liabilities
901.8 
851.1 
Long-term debt, net of current maturities
777.5 
855.0 
Financing obligations to related party, less current portion
201.5 
212.4 
Defined benefit pension obligations
30.2 
36.3 
Other non-current liabilities
110.4 
107.2 
Total liabilities
2,021.4 
2,062.0 
Commitments and contingencies
   
   
Shareholders' equity:
 
 
Preferred stock, $0.01 par value, 10.0 million shares authorized, none issued
0 
0 
Common stock, $0.01 par value, 100.0 million shares authorized, 16.0 million shares issued and outstanding
0.2 
0.2 
Additional paid-in capital
565.4 
562.4 
Accumulated deficit
(11.4)
(28.0)
Accumulated other comprehensive loss
(32.7)
(22.1)
Total shareholders' equity
521.5 
512.5 
Total liabilities and shareholders' equity
$ 2,542.9 
$ 2,574.5 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 37.0 
$ 39.0 
Preferred stock par value (in Dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized (in Shares)
10,000,000 
10,000,000 
Preferred stock, shares issued (in Shares)
0 
0 
Common stock par value (in Dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized (in Shares)
100,000,000 
100,000,000 
Common stock, shares issued (in Shares)
16,000,000 
16,000,000 
Common stock, shares outstanding (in Shares)
16,000,000 
16,000,000 
Condensed Consolidated and Combined Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Operating Activities
 
 
Net income (loss)
$ 16.6 
$ (5.6)
Loss from discontinued operations, net of income taxes
0 
(0.1)
Income (loss) from continuing operations
16.6 
(5.5)
Depreciation and amortization
42.5 
23.1 
Amortization of deferred financing fees
3.3 
1.1 
Net losses (gains) on sales of property and equipment
0.5 
(1.8)
Long-lived asset impairment charges
2.6 
0 
Provision for allowance for doubtful accounts
6.8 
6.2 
Deferred income tax provision (benefit)
13.7 
(9.3)
Stock-based compensation
3.0 
4.3 
Other non-cash items, net
0 
1.0 
Changes in operating assets and liabilities
 
 
Accounts receivable and related party receivable
20.0 
(53.2)
Inventories
(43.6)
6.0 
Accounts payable and related party payable
81.5 
55.4 
Accrued payroll and benefits
0.1 
16.9 
Other
(16.5)
(14.6)
Net cash provided by operating activities – continuing operations
130.5 
29.6 
Net cash used for operating activities – discontinued operations
0 
(1.1)
Net cash provided by operating activities
130.5 
28.5 
Investing Activities
 
 
Net cash acquired in Merger
0 
37.0 
Property and equipment additions
(34.2)
(5.7)
Proceeds from asset sales
0.2 
4.8 
Other
0 
0.3 
Net cash (used for) provided by investing activities
(34.0)
36.4 
Financing Activities
 
 
Net cash transfers to Parent
0 
(61.5)
Change in book overdrafts
(15.1)
9.1 
Transfer to Parent in connection with Spin-off
0 
(404.2)
Borrowings of long-term debt
3,458.9 
1,774.1 
Repayments of long-term debt
(3,529.9)
(1,302.4)
Payments under equipment capital lease obligations
(2.8)
0 
Payments under financing obligations to related party
(10.3)
(3.9)
Deferred financing fees
0 
(22.5)
Other
0 
(0.6)
Net cash used for financing activities – continuing operations
(99.2)
(11.9)
Net cash provided by financing activities – discontinued operations
0 
1.1 
Net cash used for financing activities
(99.2)
(10.8)
Effect of exchange rate changes on cash
(1.4)
1.2 
Net change in cash
(4.1)
55.3 
Cash at beginning of period
57.6 
5.7 
Cash at end of period
53.5 
61.0 
Supplemental Cash Flow Information
 
 
Cash paid for income taxes, net of refunds
1.4 
1.4 
Cash paid for interest
16.0 
5.2 
Non-Cash Investing and Financing Activities
 
 
Common stock issued in connection with Spin-off
0 
302.3 
Common stock issued in connection with Merger
0 
284.7 
Contingent liability associated with the Tax Receivable Agreement
0 
60.9 
Non-cash transfers to Parent
0 
(21.1)
Non-cash additions to property and equipment
$ 3.1 
$ 0 
Business and Summary of Significant Accounting Policies
Business and Summary of Significant Accounting Policies
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Veritiv Corporation ("Veritiv" or the "Company") is a North American business-to-business distributor of print, publishing, packaging, facility and logistics solutions. Established in 2014 following the merger of International Paper Company’s ("International Paper" or "Parent") xpedx division ("xpedx") and UWW Holdings, Inc. ("UWWH"), the parent company of Unisource Worldwide, Inc. ("Unisource"), the Company operates from more than 180 distribution centers primarily throughout the U.S., Canada and Mexico.

On July 1, 2014 (the "Distribution Date"), International Paper completed the previously announced spin-off of xpedx to its shareholders (the "Spin-off"), forming a new public company called Veritiv. Immediately following the Spin-off, UWWH merged with and into Veritiv (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.
 
Basis of Presentation

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

The accompanying unaudited financial information should be read in conjunction with the Consolidated and Combined Financial Statements and Notes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The operating results for the interim periods are not necessarily indicative of results for the full year.

Prior to the Distribution Date, Veritiv’s financial position, results of operations and cash flows consisted of only the xpedx business of International Paper and were derived from International Paper’s historical accounting records. The financial results of xpedx have been presented on a carve-out basis through the Distribution Date, while the financial results for Veritiv, post Spin-off, are prepared on a stand-alone basis. As such, the Condensed Consolidated and Combined Financial Statements for the nine months ended September 30, 2014 consist of the consolidated results of Veritiv on a stand-alone basis for the three months ended September 30, 2014, and the combined results of operations of xpedx for the six months ended June 30, 2014 on a carve-out basis.

All significant intercompany transactions between Veritiv's businesses have been eliminated. All significant intercompany transactions between xpedx and International Paper have been included for the periods prior to the Spin-off and were considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Condensed Consolidated and Combined Statement of Cash Flows for the nine months ended September 30, 2014 as a financing activity. For periods prior to the Spin-off, the combined financial statements include expense allocations for certain functions previously provided by International Paper, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, insurance and stock-based compensation. See Note 7, Related Party Transactions, for further information.

Following the Spin-off, certain corporate and other related functions described above continue to be provided by International Paper under a transition services agreement. During the three months ended September 30, 2014, the Company recognized $8.0 million in selling and administrative expenses related to this agreement. During the three and nine months ended September 30, 2015, the Company recognized $0.8 million and $9.6 million, respectively, in selling and administrative expenses related to this agreement. As of September 30, 2015, a majority of the functions originally provided by International Paper under this agreement have been fully transitioned to the Company.

For the nine months ended September 30, 2014, certain amounts in the operating activities section of the Condensed Consolidated and Combined Statement of Cash Flows have been reclassified for comparative purposes to conform to the current year presentation. This reclassification did not have any impact on net cash flows from operations or the Condensed Consolidated and Combined Statement of Operations for the three and nine months ended September 30, 2014.

Use of Estimates

The preparation of unaudited financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and certain financial statement disclosures. Estimates and assumptions are used for, but not limited to, revenue recognition, accounts receivable valuation, inventory valuation, employee benefit plans, income tax contingency accruals and valuation allowances and goodwill and other intangible asset valuations. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Estimates are revised as additional information becomes available.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to exchange for those goods or services. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. In July 2015, the FASB approved a one year deferral of this standard, and this pronouncement is now effective for annual periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date of December 15, 2016. The Company is currently evaluating the alternative methods of adoption and the effect on its Consolidated Financial Statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which stated that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in these updates. These ASUs are effective for annual reporting periods beginning after December 15, 2015, and are to be applied retrospectively, with early adoption permitted. The Company adopted ASU 2015-03 during the second quarter of 2015 and ASU 2015-15 in the third quarter of 2015; neither had any impact to the Consolidated Financial Statements and related disclosures. Deferred financing fees related to the Company's asset-based lending facility (the "ABL Facility") remain classified within other non-current assets.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires companies to measure inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories that are measured by using either the last-in, first-out method or retail inventory method. This ASU is effective for annual reporting periods beginning after December 15, 2016, and is to be applied prospectively, with early adoption permitted. The Company is currently evaluating the impact the ASU will have on its first-in, first-out based inventory, which is approximately 12% of the Company's inventory balance as of September 30, 2015.
Merger with Unisource
Merger with Unisource
2. MERGER WITH UNISOURCE

On July 1, 2014, UWWH merged with and into Veritiv. The Merger was accounted for in the Company’s financial statements using the acquisition method of accounting, with Veritiv as the accounting acquirer of Unisource. The purchase price of $383.2 million was determined in accordance with the Agreement and Plan of Merger and is allocated to tangible and identifiable intangible assets and liabilities based upon their respective fair values.

The following table summarizes the components of the purchase price for Unisource. The fair value of Veritiv shares issued represents the aggregate value of 7.84 million shares issued at the closing "when-issued" market price of the Company’s stock on June 30, 2014, the day prior to the Merger, less a discount for lack of marketability. See Note 9, Fair Value Measurements, regarding the valuation of the contingent liability.

Purchase price:
(in millions)
Fair value of Veritiv shares issued in the Merger
$
284.7

Cash payments associated with customary working capital and net indebtedness adjustments
39.1

Fair value of contingent liability associated with the Tax Receivable Agreement
59.4

Total purchase price
$
383.2


    
During the first quarter of 2015, the Company recorded a $0.6 million increase to deferred income tax assets and a corresponding decrease to goodwill. This adjustment impacted the fair value of the contingent liability, resulting in a $0.6 million increase to the purchase price and corresponding adjustment to goodwill. The net impact of these adjustments to goodwill was zero. During the second quarter of 2015, the Company finalized the purchase price allocation, which resulted in a $0.3 million increase in deferred tax assets and a corresponding decrease in goodwill. These adjustments did not have a material impact on the Company's previously reported Consolidated Financial Statements and, therefore, the Company has not retrospectively adjusted those financial statements.

The following table summarizes the final allocation of the purchase price to assets acquired and liabilities assumed as of the date of the Merger:
Final Allocation:
(in millions)
Cash
$
70.9

Accounts receivable
448.4

Inventories
353.8

Deferred income tax assets
72.0

Property and equipment
299.0

Goodwill
25.7

Other intangible assets
31.5

Other current and non-current assets (including below market leasehold agreements)
61.8

Accounts payable
(284.2
)
Long-term debt (including equipment capital leases)
(313.2
)
Financing obligations to related party
(233.1
)
Defined benefit pension obligations
(30.3
)
Other current and non-current liabilities (including above market leasehold agreements)
(119.1
)
Total purchase price
$
383.2



The purchase price allocated to the identifiable intangible assets acquired is as follows:
 
Value
(in millions)
 
Estimated Weighted Average Useful Life (in years)
Customer relationships
$
24.3

 
14.8
Trademarks/Trade names
4.1

 
3.6
Non-compete agreements
3.1

 
1.0
Total identifiable intangible assets acquired
$
31.5

 
 

    
Goodwill of $25.7 million arising from the Merger consists largely of the synergies and other benefits expected from combining the operations. The goodwill is not expected to be deductible for income tax purposes.
Merger, Integration and Restructuring Charges
Merger, Integration and Restructuring Charges
3. MERGER, INTEGRATION AND RESTRUCTURING CHARGES

Merger and Integration Charges

During the three and nine months ended September 30, 2014, Veritiv incurred merger and integration expenses related primarily to third-party fees and costs associated with change-in-control agreements. During the three and nine months ended September 30, 2015, Veritiv incurred costs to integrate the combined businesses of xpedx and Unisource. Integration expenses include professional services and project management fees, retention compensation, information technology conversion costs, rebranding costs and other costs to integrate the combined businesses of xpedx and Unisource. The following table summarizes the components of merger and integration expenses:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Legal, consulting and other professional fees
$
1.4

 
$
24.1

 
$
6.8

 
$
26.2

Retention compensation
2.3

 
27.9

 
8.9

 
27.9

Information technology conversion costs
2.1

 
1.0

 
6.4

 
1.0

Rebranding
1.7

 
0.1

 
4.2

 
0.1

Other
0.8

 
1.7

 
2.3

 
1.7

Total merger and integration expenses
$
8.3

 
$
54.8

 
$
28.6

 
$
56.9



Veritiv Restructuring Plan
As part of the Spin-off and Merger, the Company is executing on a multi-year restructuring program of its North American operations intended to integrate the legacy xpedx and Unisource operations, generate cost savings and capture synergies across the combined company. The restructuring plan includes initiatives to: (i) consolidate warehouse facilities in overlapping markets, (ii) improve the efficiency of the delivery network, (iii) consolidate customer service centers, (iv) reorganize the field sales and operations functions and (v) restructure the corporate general and administrative functions. During the fourth quarter of 2014, the Company initiated the process of consolidating warehouse and customer service locations of the legacy organizations as well as realigning its field and sales management function. As part of its restructuring efforts, the Company is also evaluating its operations outside of North America to identify additional cost saving opportunities. The Company may elect to restructure its operations in specific countries, which may include staff reductions, lease terminations, and facility closures, or a complete exit of a market.

The Company recorded restructuring charges of $3.0 million and $8.6 million during the three and nine months ended September 30, 2015, respectively, related to these company-wide initiatives. For the three months ended September 30, 2014, no major initiatives had commenced as part of this effort. See Note 14, Segment Information, for the impact these charges had on the Company's reportable segments. Other direct costs reported in the table below include facility closing costs and other incidental costs associated with the development, communication, administration and implementation of these initiatives. The following is a summary of the Company's restructuring activity for the periods presented:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Asset Impairment
 
Total
Balance at December 31, 2014
$
3.7

 
$
0.2

 
$
—

 
$
3.9

Costs incurred
1.9

 
1.5

 
—

 
3.4

Payments
(2.7
)
 
(0.4
)
 
—

 
(3.1
)
Balance at March 31, 2015
2.9

 
1.3

 
—

 
4.2

Costs incurred
1.0

 
1.2

 
—

 
2.2

Payments
(1.1
)
 
(0.7
)
 
—

 
(1.8
)
Balance at June 30, 2015
2.8

 
1.8

 
—

 
4.6

Costs incurred
0.8

 
0.2

 
2.0

 
3.0

Payments
(1.3
)
 
(1.1
)
 
—

 
(2.4
)
Non-cash charges
—

 
—

 
(2.0
)
 
(2.0
)
Balance at September 30, 2015
$
2.3

 
$
0.9

 
$
—

 
$
3.2

Debt
Debt
4. DEBT

The Company's long-term debt obligations were as follows:
(in millions)
September 30, 2015
 
December 31, 2014
ABL Facility
$
772.6

 
$
847.8

Equipment capital lease obligations
8.2

 
11.0

Total debt
780.8

 
858.8

Less: current portion of long-term debt
(3.3
)
 
(3.8
)
Long-term debt, net of current maturities
$
777.5

 
$
855.0


        
ABL Facility

The ABL Facility will mature and the commitments thereunder will terminate on July 1, 2019; however, 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 both cases in an amount equal to such excess.

The ABL Facility has a springing minimum fixed charge coverage ratio of at least 1.00 to 1.00 on a trailing four-quarter basis, which will be tested only when specified availability is less than the limits outlined under the ABL Facility. At September 30, 2015, the above test was not applicable.

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 September 30, 2015, the available additional borrowing capacity under the ABL Facility was approximately $448.3 million.
Derivative Instrument, Hedging Activities and Risk Management
Derivative Instrument, Hedging Activities and Risk Management
5. DERIVATIVE INSTRUMENT, HEDGING ACTIVITIES AND RISK MANAGEMENT

Financial Risk Management Policy

The Company’s indebtedness under its financing arrangement creates interest rate risk. The Company’s objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in the interest rate. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

This interest rate exposure is actively monitored by management and in July 2015 the Company entered into an interest rate cap agreement. The interest rate cap effectively limits the floating LIBOR-based portion of the interest rate. The effective date of the interest rate cap agreement was July 31, 2015 with an expiration date of July 1, 2019. The initial notional amount of this agreement covered $392.9 million of the Company’s floating-rate debt at 3.0% plus the applicable credit spread. The Company paid $2.0 million for the interest rate cap agreement. Approximately $0.6 million of the amount paid was expensed immediately to earnings. As of September 30, 2015, the interest rate cap agreement had a fair value of $0.8 million, classified within other non-current assets on the Condensed Consolidated Balance Sheet. The fair value is estimated using observable market-based inputs including interest rate curves and implied volatilities (Level 2).

The Company designated the interest rate cap as a cash flow hedge of exposure to changes in cash flows due to changes in the LIBOR-based portion of the interest rate above 3.0% on an equivalent amount of debt. The notional amount of the cap is reduced throughout the term of the agreement to align with the expected repayment of the Company’s outstanding floating-rate debt.

The Company is exposed to counterparty credit risk for nonperformance and, in the event of nonperformance, to market risk for changes in the interest rate. The Company attempts to manage exposure to counterparty credit risk primarily by selecting counterparties only if they meet certain credit and other financial standards. The Company believes there has been no material change in the creditworthiness of its counterparty and believes the risk of nonperformance by such party is minimal.

Accounting for Derivative Instruments

The interest rate cap agreement is subject to Accounting Standards Codification 815, Accounting for Derivative and Hedging Transactions. For those instruments that are designated and qualify as hedging instruments, a company must designate the instrument, based upon the exposure being hedged, as a cash flow hedge, a fair value hedge or a hedge of a net investment in a foreign operation.

A cash flow hedge refers to hedging the exposure to variability in expected future cash flows attributable to a particular risk. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income until reclassified into earnings in the same period the hedged transaction affects earnings. The gain or loss on the ineffective portion, if any, is immediately recognized in earnings. The ineffective portion was not significant for the three months ended September 30, 2015.

For the three months ended September 30, 2015, the Company recognized a pre-tax loss of $0.6 million in other comprehensive income associated with the interest rate cap. There were no reclassifications from accumulated other comprehensive loss ("AOCL") into earnings for the three months ended September 30, 2015. The amount the Company expects to reclassify from AOCL into earnings within the following twelve months is not significant.
Income Taxes
Income Taxes
6. INCOME TAXES

The Company’s provision for income taxes for the three and nine months ended September 30, 2015 and 2014 is based on the estimated annual effective tax rate, plus any discrete items.

The following table presents the provision for income taxes and the effective tax rates for the three and nine months ended September 30, 2015 and 2014:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations before income taxes
$
23.4

 
$
(24.4
)
 
$
32.1

 
$
(10.1
)
Income tax expense (benefit)
8.9

 
(10.4
)
 
15.5

 
(4.6
)
Effective tax rate
38.0
%
 
42.6
%
 
48.3
%
 
45.5
%


The difference between the Company’s effective tax rate for the three and nine months ended September 30, 2015 and 2014 and the U.S. statutory tax rate of 35.0% primarily relates to the non-recognition of tax benefits on certain losses, non-deductible expenses, state income taxes (net of federal income tax benefit), and adjustments to uncertain tax positions. Additionally, the effective tax rate for the three and nine months ended September 30, 2015 includes the recognition of U.S. tax benefit with respect to foreign exchange loss on the capitalization of an intercompany loan with the Company's Canadian subsidiary. The effective tax rate may vary significantly due to potential changes in the amount and mix of pre-tax book income and changes in amounts of non-deductible expenses and other items.

As of September 30, 2015, the gross amount of uncertain tax positions was $0.5 million. All of the gross uncertain tax positions, if recognized, would impact Veritiv’s effective tax rate in the period of recognition. The Company accrues interest on unrecognized tax benefits as a component of interest expense, net. Penalties, if incurred, are recognized as a component of income tax expense. The corresponding liabilities are reflected in other non-current liabilities within the Condensed Consolidated Balance Sheets. As a result of the expiration of statutes of limitation, the Company currently estimates that the amount of unrecognized tax benefits could be reduced by up to $0.1 million during the next twelve months.

Undistributed earnings of the Company’s foreign subsidiaries are considered permanently reinvested and, accordingly, no provision for U.S. income taxes has been provided thereon.
Related-Party Transactions
Related Party Transactions
7. RELATED PARTY TRANSACTIONS

Transactions with Georgia-Pacific

Veritiv purchases certain inventory items from, and sells certain inventory items to, Georgia-Pacific in the normal course of business. As a result of the Merger and private placement, Georgia-Pacific, as joint owner of the sole stockholder of UWWH, is a related party. The following tables summarize the financial impact of those related party transactions with Georgia-Pacific:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2015
2014
 
2015
2014
Sales to Georgia-Pacific, reflected in net sales
 
$
8.0

$
9.2

 
$
25.0

$
9.2

Purchases of inventory from Georgia-Pacific, recognized in cost of products sold
 
67.0

62.7

 
205.0

62.7


(in millions)
 
September 30, 2015
 
December 31, 2014
Inventories purchased from Georgia-Pacific that remained on Veritiv's balance sheet
 
$
24.3

 
$
26.6

Related party payable to Georgia-Pacific
 
12.7

 
11.0

Related party receivable from Georgia-Pacific
 
4.0

 
3.9



Relationship between Veritiv and International Paper

Transactions with International Paper

Prior to the Spin-off, xpedx purchased certain inventory items from, and sold certain inventory items to, International Paper in the normal course of business. For the nine months ended September 30, 2014, the Company sold products to International Paper in the amount of $24.3 million, reflected in net sales. For the nine months ended September 30, 2014, the Company purchased, and recognized in cost of products sold, inventory from International Paper of $276.5 million. After the Spin-off and the Merger, Veritiv continues to purchase from and sell certain inventory items to International Paper that are considered transactions in the normal course of the Company’s operations. Although the Company and International Paper have entered into a transition services agreement, International Paper is not considered a related party subsequent to the Spin-off.

Parent Company Investment

The components of net transfers to Parent for the three and nine months ended September 30, 2014 were as follows:     
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2014
 
2014
Intercompany sales and purchases, net
 
$
—

 
$
255.4

Cash pooling and general financing activities
 
—

 
(322.5
)
Corporate allocations including income taxes
 
—

 
34.7

Net adjustments in conjunction with the Spin-off
 
(50.2
)
 
(50.2
)
Total net transfers to International Paper
 
$
(50.2
)
 
$
(82.6
)


In conjunction with the Spin-off, certain xpedx assets and liabilities were retained by International Paper. Additionally, all intercompany balances outstanding between International Paper and xpedx as of the Distribution Date were settled within 30 days of the Distribution Date. The net effect of assets and liabilities retained and adjustments to intercompany balances as of the Distribution Date are reflected in the table above in the net adjustments in conjunction with the Spin-off. These primarily include $24.3 million of net assets transferred to International Paper and settlement of intercompany balances of $24.6 million as of the Distribution Date.

Allocation of General Corporate Expenses

Prior to the Spin-off, the xpedx financial statements included expense allocations for certain functions previously provided by International Paper, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, insurance and stock-based compensation. These expenses were allocated on the basis of direct usage when identifiable, with the remainder principally allocated on the basis of percent of capital employed, headcount, sales or other measures. In 2014, prior to the Spin-off, $25.5 million of expenses were allocated to xpedx and were included within selling and administrative expenses.

Separation Agreements with Former Unisource CEO

Effective as of the Distribution Date, Allan R. Dragone, Jr. ceased to be the Chief Executive Officer of Unisource and became a member of Veritiv’s Board of Directors. As part of his employment agreement, Mr. Dragone exercised his right to sell his personal residence to the Company. The Company completed the purchase of the residence for $4.6 million during the first quarter of 2015. During the second quarter of 2015, the Company sold the residence for $4.6 million.
Defined Benefit Plans
Defined Benefit Plan
8. DEFINED BENEFIT PLANS

In conjunction with the Merger, Veritiv assumed responsibility for Unisource’s defined benefit pension plans and Supplemental Executive Retirement Plans in the U.S. and Canada. Net periodic benefit cost (credit) associated with these plans is summarized below:
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
Three Months Ended September 30, 2014
(in millions)
U.S.
 
Canada
 
U.S.
 
Canada
 
U.S.
 
Canada
Components of net periodic benefit cost (credit):
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
0.4

 
$
0.1

 
$
1.3

 
$
0.2

 
$
0.3

 
$
0.1

Interest cost
0.8

 
0.7

 
2.5

 
2.4

 
0.9

 
0.9

Expected return on plan assets
(1.4
)
 
(0.8
)
 
(4.1
)
 
(2.6
)
 
(1.6
)
 
(0.9
)
Net periodic benefit cost (credit)
$
(0.2
)
 
$
0.0

 
$
(0.3
)
 
$
0.0

 
$
(0.4
)
 
$
0.1


    
Certain of xpedx’s employees participated in defined benefit pension and other post-retirement benefit plans sponsored and accounted for by International Paper. In conjunction with the Spin-off, these plans were frozen for the xpedx employees, and International Paper retained the associated liabilities. Certain xpedx union employees were added as participants to the Unisource defined benefit pension plan. The amount of net pension and other post-employment benefit expense attributable to xpedx related to the International Paper sponsored plans was $8.0 million for the nine months ended September 30, 2014.
Fair Value Measurements
Fair Value Measurements
9. FAIR VALUE MEASUREMENTS

At September 30, 2015 and December 31, 2014, the carrying amounts of cash, receivables, payables and other components of other current assets and other current liabilities approximate their fair value due to the short maturity of these items. Borrowings under the ABL Facility are at variable market interest rates, and accordingly, the carrying amount approximates fair value. See Note 5, Derivative Instrument, Hedging Activities and Risk Management, for fair value information on the interest rate cap agreement.

At the time of the Merger, the Company recorded a $59.4 million contingent liability associated with the Tax Receivable Agreement at fair value using a discounted cash flow model that reflected management's expectations about probability of payment. Key assumptions utilized in the discounted cash flow model included a discount rate of 4.8%, projected revenues and projected taxable income. The Company’s discounted cash flow model used significant unobservable (Level 3) inputs that were tied to the utilization of Unisource’s net operating losses, attributable to taxable periods prior to the Merger, by the Company. The contingent liability is remeasured at fair value at each reporting period with the change in fair value recognized in other expense (income), net in the Company’s Condensed Consolidated and Combined Statements of Operations. At September 30, 2015, the Company remeasured the contingent liability using a discount rate of 5.4%.

The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the nine months ended September 30, 2015:    
(in millions)
 
Contingent Liability
Balance at December 31, 2014
 
$
60.5

Purchase accounting adjustment
 
0.6

Change in fair value adjustment recorded in other expense (income), net
 
1.3

Balance at March 31, 2015
 
62.4

Change in fair value adjustment recorded in other expense (income), net
 
(1.7
)
Balance at June 30, 2015
 
60.7

Change in fair value adjustment recorded in other expense (income), net
 
0.3

Balance at September 30, 2015
 
$
61.0



There have been no transfers between the fair value measurement levels for the three and nine months ended September 30, 2015 and 2014. The Company recognizes transfers between the fair value measurement levels at the end of the reporting period.
Earnings Per Share
Earnings Per Share
10. EARNINGS PER SHARE

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

On the Distribution Date, Veritiv had 16.0 million shares of common stock issued and outstanding, including 7.84 million shares issued in a private placement to the sole stockholder of UWWH in connection with the Merger. The calculation of both basic and diluted EPS for the three months ended September 30, 2014 utilized 16.0 million shares as the private placement of 7.84 million shares to UWW Holdings, LLC, the sole stockholder of UWWH, occurred on the Distribution Date. The calculation of both basic and diluted EPS for the nine months ended September 30, 2014 utilized 10.77 million shares based on the weighted average shares outstanding during this period, reflecting the impact of the private placement of shares to the sole stockholder of UWWH on the Distribution Date. The calculation of both basic and diluted EPS for the three and nine months ended September 30, 2015 utilized 16.0 million shares issued and outstanding based on the weighted average shares outstanding during this period. During 2015, the Company granted equity-based awards to certain of its employees. See Note 12, Equity-Based Incentive Plans, for additional information. These awards were excluded from the computation of diluted EPS because their inclusion would have been antidilutive, or they were subject to performance conditions that had not been met.

A reconciliation of the numerators and denominators used in the basic and diluted EPS calculation is as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
14.5

 
$
(14.0
)
 
$
16.6

 
$
(5.5
)
Loss from discontinued operations, net of income taxes
—

 
—

 
—

 
(0.1
)
Net income (loss)
$
14.5

 
$
(14.0
)
 
$
16.6

 
$
(5.6
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average number of shares outstanding – basic and diluted
16.00

 
16.00

 
16.00

 
10.77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Antidilutive stock-based awards excluded from computation of diluted EPS
0.06

 
—

 
0.06

 
—

Performance stock-based awards excluded from computation of diluted EPS because performance conditions had not been met
0.24

 
—

 
0.24

 
—

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

The following table provides the components of accumulated other comprehensive loss:
(in millions)
September 30, 2015
 
December 31, 2014
Foreign currency translation adjustments
$
(24.9
)
 
$
(14.7
)
Change in fair value of cash flow hedge, net of tax
(0.4
)
 
—

Adjustments to pension and other benefit liabilities, net of tax
(7.4
)
 
(7.4
)
Total accumulated other comprehensive loss
$
(32.7
)
 
$
(22.1
)


For the three and nine months ended September 30, 2015 and 2014, there were no reclassifications from accumulated other comprehensive loss into earnings.
Equity-Based Incentive Plans
Equity-Based Incentive Plans
12. EQUITY-BASED INCENTIVE PLANS

Veritiv Omnibus Incentive Plan

Veritiv's 2014 Omnibus Incentive Plan (the "2014 Plan") provides for the grant of options, stock appreciation rights, stock purchase rights, restricted shares, restricted stock units, dividend equivalents, deferred share units, performance shares, performance units and other equity-based awards. Awards may be granted under the 2014 Plan to any employee, director, consultant or other service provider of Veritiv or a subsidiary of Veritiv. Grants are made at the discretion of the Compensation and Leadership Development Committee of the Company's Board of Directors.
    
On June 30, 2015, the Company granted 27,424 deferred share units ("DSUs") to its non-employee directors. Each DSU is the economical equivalent of one share of Veritiv's common stock. The DSUs are fully vested and non-forfeitable as of the grant date and are payable in cash following the individual's termination of service as a Veritiv director. At June 30, 2015, the Company recognized $1.0 million in expense related to these units based on a grant date fair value of $36.46, the closing market price of the Company's common stock on June 30, 2015. The DSUs were classified as a non-current liability and will be remeasured at each reporting date, with a corresponding adjustment to compensation expense. The adjustment for the three months ended September 30, 2015 was not significant.

During 2015, the Company granted approximately 64,000 restricted stock units ("RSUs"), 161,000 performance condition stock units (“PCSUs”), and 97,000 market condition performance stock units (“MCPSUs”) to certain of its employees. These units will cliff vest at the end of three years and be settled in shares of common stock, subject to continued service and, in the case of the PCSUs and MCPSUs, the attainment of performance conditions. Dividends are not paid or accrued on unvested stock units. The grant date fair values are not reduced for dividends as none are expected to be paid during the vesting period.
 
The weighted average grant date fair value of the RSUs granted in 2015 is $51.64 and is based on either the closing price of Veritiv common stock on the trading day immediately prior to the date of grant or the closing price on the date of grant. The RSUs are only subject to a service requirement, thus compensation expense for the RSUs is recognized ratably from the grant date to the vesting date.

The PCSU award represents the contingent right to receive a number of shares equal to a portion, all or a multiple (not to exceed 200%) of the target number of PCSUs. The PCSUs are divided into three tranches, and each tranche is earned based on the achievement of an annual Adjusted EBITDA target which is set at the beginning of each of the three years in the vesting period. The Company defines Adjusted EBITDA as earnings before interest, income taxes, depreciation and amortization, restructuring charges (income), non-restructuring stock-based compensation expense, LIFO expense (income), non-restructuring severance charges, merger and integration expenses, loss from discontinued operations, net of income taxes, fair value adjustments on the contingent liability associated with the Tax Receivable Agreement ("TRA") and certain other adjustments. The PCSUs that can be earned in 2015 had a weighted average grant date fair value of $51.64 with compensation expense recognized ratably over the three year vesting period. The fair value of the 2016 and 2017 tranches will be based on the market value of Veritiv common stock on the date the Adjusted EBITDA targets are set for each year. Compensation expense for each tranche is recognized ratably from the date the fair value is determined to the vesting date for the number of awards expected to vest.

The MCPSU award represents the contingent right to receive a number of shares equal to a portion, all or a multiple (not to exceed 200%) of the target number of MCPSUs. The MCPSUs are divided into three tranches and each tranche is earned based on the achievement of an annual total shareholder return target relative to the total shareholder return of an applicable peer group over the one-, two- and three-year cumulative periods in the vesting period. The weighted average grant date fair value of the MCPSUs is $63.03, determined using a Monte Carlo simulation model. Assumptions used in the model included a 25.0% expected volatility rate and a 1.1% risk-free interest rate. The expected volatility rate is based on the historical volatility of a group of peer companies over the most recent period equal to the vesting period, as Veritiv has limited trading history to use the volatility of its own common stock. The risk-free interest rate is based on the yield on U.S. Treasury securities matching the vesting period. Compensation expense is recognized ratably from the grant date to the vesting date.

During the three and nine months ended September 30, 2015, the Company recognized $1.0 million and $3.0 million respectively, in expense related to these awards. As of September 30, 2015, total unrecognized stock-based compensation expense was $12.6 million and is expected to be recognized over a weighted average period of 2.5 years. Unrecognized compensation expense for the 2016 and 2017 tranches of the PCSU awards is estimated based on the Company's closing stock price at September 30, 2015.
 
International Paper Incentive Plans

At the time of the Spin-off, all equity awards held by employees of xpedx were granted under International Paper’s 2009 Incentive Compensation Plan or predecessor plans. In conjunction with the Spin-off and Merger, International Paper retained all rights and obligations of these incentive plans. xpedx's stock-based compensation expense and related income tax benefits associated with these International Paper plans were as follows:
 
 
Nine Months Ended 
 September 30,
(in millions)
 
2014
Total stock-based compensation expense
 
$
4.3

Income tax benefit related to stock-based compensation
 
$
1.3

Commitments and Contingencies
Commitments and Contingencies
13. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

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

Escheat Audit

During 2013, Unisource was notified by the State of Delaware that it intended to examine the books and records of Unisource to determine compliance with Delaware escheat laws. Since that date, seven other states have joined with Delaware in the audit process which is conducted by an outside firm on behalf of the states and covers the period from 1986 to present. The Company has been informed that similar audits have generally taken two to four years to complete. The Company has determined that the ultimate outcome of this audit cannot be reasonably estimated at this time. Any claims or liabilities resulting from these audits could have a material impact on the Company’s financial condition, results of operations and cash flows.
Segment Information
Segment Information
14. SEGMENT INFORMATION

The following tables present net sales, Adjusted EBITDA (as defined in Note 12, Equity-Based Incentive Plans) and certain other measures for each of the reportable segments and total continuing operations for the periods presented:
(in millions)
Print
 
Publishing
 
Packaging
 
Facility Solutions
 
Corporate & Other
 
Total
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
832.4

 
$
303.0

 
$
722.3

 
$
331.4

 
$
30.7

 
$
2,219.8

Adjusted EBITDA
23.2

 
9.3

 
59.0

 
12.7

 
(43.6
)
 
60.6

Depreciation and amortization
3.4

 
0.8

 
3.3

 
1.6

 
4.6

 
13.7

Restructuring charges
0.3

 
—

 
2.6

 
0.1

 
—

 
3.0

Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Net sales
947.2

 
338.2

 
725.0

 
357.0

 
22.9

 
2,390.3

Adjusted EBITDA
20.5

 
9.2

 
53.0

 
15.5

 
(46.7
)
 
51.5

Depreciation and amortization
3.7

 
0.5

 
4.2

 
1.8

 
4.0

 
14.2

Restructuring charges
—

 
—

 
—

 
—

 
0.1

 
0.1

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Net sales
2,465.6

 
906.9

 
2,097.1

 
965.0

 
82.4

 
6,517.0

Adjusted EBITDA
57.1

 
23.1

 
156.5

 
30.2

 
(137.2
)
 
129.7

Depreciation and amortization
10.2

 
2.3

 
11.1

 
5.5

 
13.4

 
42.5

Restructuring charges
1.9

 
—

 
4.0

 
1.4

 
1.3

 
8.6

Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Net sales
2,038.3

 
715.4

 
1,529.5

 
720.6

 
22.9

 
5,026.7

Adjusted EBITDA
38.1

 
16.6

 
104.4

 
18.4

 
(95.7
)
 
81.8

Depreciation and amortization
6.1

 
0.6

 
5.9

 
2.6

 
7.9

 
23.1

Restructuring charges (income)
(0.4
)
 
—

 
(0.2
)
 
(0.5
)
 
0.1

 
(1.0
)

    
The table below presents a reconciliation of income (loss) from continuing operations before income taxes reflected in the Condensed Consolidated and Combined Statements of Operations to Total Adjusted EBITDA:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations before income taxes
$
23.4

 
$
(24.4
)
 
$
32.1

 
$
(10.1
)
Interest expense, net
7.0

 
6.8

 
19.8

 
6.8

Depreciation and amortization
13.7

 
14.2

 
42.5

 
23.1

Restructuring charges (income)
3.0

 
0.1

 
8.6

 
(1.0
)
Non-restructuring stock-based compensation
1.0

 
—

 
3.0

 
4.0

LIFO expense (income)
2.2

 
(0.5
)
 
(7.8
)
 
(0.8
)
Non-restructuring severance charges
0.5

 
—

 
1.9

 
2.4

Merger and integration expenses
8.3

 
54.8

 
28.6

 
56.9

Fair value adjustments on TRA contingent liability
0.3

 
—

 
(0.1
)
 
—

Other
1.2

 
0.5

 
1.1

 
0.5

Total Adjusted EBITDA
$
60.6

 
$
51.5

 
$
129.7

 
$
81.8

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

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

The accompanying unaudited financial information should be read in conjunction with the Consolidated and Combined Financial Statements and Notes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The operating results for the interim periods are not necessarily indicative of results for the full year.

Prior to the Distribution Date, Veritiv’s financial position, results of operations and cash flows consisted of only the xpedx business of International Paper and were derived from International Paper’s historical accounting records. The financial results of xpedx have been presented on a carve-out basis through the Distribution Date, while the financial results for Veritiv, post Spin-off, are prepared on a stand-alone basis. As such, the Condensed Consolidated and Combined Financial Statements for the nine months ended September 30, 2014 consist of the consolidated results of Veritiv on a stand-alone basis for the three months ended September 30, 2014, and the combined results of operations of xpedx for the six months ended June 30, 2014 on a carve-out basis.

All significant intercompany transactions between Veritiv's businesses have been eliminated. All significant intercompany transactions between xpedx and International Paper have been included for the periods prior to the Spin-off and were considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Condensed Consolidated and Combined Statement of Cash Flows for the nine months ended September 30, 2014 as a financing activity. For periods prior to the Spin-off, the combined financial statements include expense allocations for certain functions previously provided by International Paper, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, insurance and stock-based compensation. See Note 7, Related Party Transactions, for further information.

Following the Spin-off, certain corporate and other related functions described above continue to be provided by International Paper under a transition services agreement. During the three months ended September 30, 2014, the Company recognized $8.0 million in selling and administrative expenses related to this agreement. During the three and nine months ended September 30, 2015, the Company recognized $0.8 million and $9.6 million, respectively, in selling and administrative expenses related to this agreement. As of September 30, 2015, a majority of the functions originally provided by International Paper under this agreement have been fully transitioned to the Company.

For the nine months ended September 30, 2014, certain amounts in the operating activities section of the Condensed Consolidated and Combined Statement of Cash Flows have been reclassified for comparative purposes to conform to the current year presentation. This reclassification did not have any impact on net cash flows from operations or the Condensed Consolidated and Combined Statement of Operations for the three and nine months ended September 30, 2014.

Use of Estimates 
Use of Estimates

The preparation of unaudited financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and certain financial statement disclosures. Estimates and assumptions are used for, but not limited to, revenue recognition, accounts receivable valuation, inventory valuation, employee benefit plans, income tax contingency accruals and valuation allowances and goodwill and other intangible asset valuations. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Estimates are revised as additional information becomes available.

Recently Issued Accounting Standards 
Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to exchange for those goods or services. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. In July 2015, the FASB approved a one year deferral of this standard, and this pronouncement is now effective for annual periods beginning after December 15, 2017. Early adoption is permitted, but not before the original effective date of December 15, 2016. The Company is currently evaluating the alternative methods of adoption and the effect on its Consolidated Financial Statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which stated that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in these updates. These ASUs are effective for annual reporting periods beginning after December 15, 2015, and are to be applied retrospectively, with early adoption permitted. The Company adopted ASU 2015-03 during the second quarter of 2015 and ASU 2015-15 in the third quarter of 2015; neither had any impact to the Consolidated Financial Statements and related disclosures. Deferred financing fees related to the Company's asset-based lending facility (the "ABL Facility") remain classified within other non-current assets.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires companies to measure inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories that are measured by using either the last-in, first-out method or retail inventory method. This ASU is effective for annual reporting periods beginning after December 15, 2016, and is to be applied prospectively, with early adoption permitted. The Company is currently evaluating the impact the ASU will have on its first-in, first-out based inventory, which is approximately 12% of the Company's inventory balance as of September 30, 2015.
Merger with Unisource (Tables)
Schedule of Business Acquisition Purchase Price 
The following table summarizes the components of the purchase price for Unisource. The fair value of Veritiv shares issued represents the aggregate value of 7.84 million shares issued at the closing "when-issued" market price of the Company’s stock on June 30, 2014, the day prior to the Merger, less a discount for lack of marketability. See Note 9, Fair Value Measurements, regarding the valuation of the contingent liability.

Purchase price:
(in millions)
Fair value of Veritiv shares issued in the Merger
$
284.7

Cash payments associated with customary working capital and net indebtedness adjustments
39.1

Fair value of contingent liability associated with the Tax Receivable Agreement
59.4

Total purchase price
$
383.2

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed 
The following table summarizes the final allocation of the purchase price to assets acquired and liabilities assumed as of the date of the Merger:
Final Allocation:
(in millions)
Cash
$
70.9

Accounts receivable
448.4

Inventories
353.8

Deferred income tax assets
72.0

Property and equipment
299.0

Goodwill
25.7

Other intangible assets
31.5

Other current and non-current assets (including below market leasehold agreements)
61.8

Accounts payable
(284.2
)
Long-term debt (including equipment capital leases)
(313.2
)
Financing obligations to related party
(233.1
)
Defined benefit pension obligations
(30.3
)
Other current and non-current liabilities (including above market leasehold agreements)
(119.1
)
Total purchase price
$
383.2

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination 
The purchase price allocated to the identifiable intangible assets acquired is as follows:
 
Value
(in millions)
 
Estimated Weighted Average Useful Life (in years)
Customer relationships
$
24.3

 
14.8
Trademarks/Trade names
4.1

 
3.6
Non-compete agreements
3.1

 
1.0
Total identifiable intangible assets acquired
$
31.5

 
 
Merger, Integration and Restructuring Charges (Tables)
Components of Merger and Integration Costs 
The following table summarizes the components of merger and integration expenses:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Legal, consulting and other professional fees
$
1.4

 
$
24.1

 
$
6.8

 
$
26.2

Retention compensation
2.3

 
27.9

 
8.9

 
27.9

Information technology conversion costs
2.1

 
1.0

 
6.4

 
1.0

Rebranding
1.7

 
0.1

 
4.2

 
0.1

Other
0.8

 
1.7

 
2.3

 
1.7

Total merger and integration expenses
$
8.3

 
$
54.8

 
$
28.6

 
$
56.9

Schedule of Restructuring Reserve 
The following is a summary of the Company's restructuring activity for the periods presented:
(in millions)
Severance and Related Costs
 
Other Direct Costs
 
Asset Impairment
 
Total
Balance at December 31, 2014
$
3.7

 
$
0.2

 
$
—

 
$
3.9

Costs incurred
1.9

 
1.5

 
—

 
3.4

Payments
(2.7
)
 
(0.4
)
 
—

 
(3.1
)
Balance at March 31, 2015
2.9

 
1.3

 
—

 
4.2

Costs incurred
1.0

 
1.2

 
—

 
2.2

Payments
(1.1
)
 
(0.7
)
 
—

 
(1.8
)
Balance at June 30, 2015
2.8

 
1.8

 
—

 
4.6

Costs incurred
0.8

 
0.2

 
2.0

 
3.0

Payments
(1.3
)
 
(1.1
)
 
—

 
(2.4
)
Non-cash charges
—

 
—

 
(2.0
)
 
(2.0
)
Balance at September 30, 2015
$
2.3

 
$
0.9

 
$
—

 
$
3.2

Debt (Tables)
Schedule of Long-term Debt Obligations
The Company's long-term debt obligations were as follows:
(in millions)
September 30, 2015
 
December 31, 2014
ABL Facility
$
772.6

 
$
847.8

Equipment capital lease obligations
8.2

 
11.0

Total debt
780.8

 
858.8

Less: current portion of long-term debt
(3.3
)
 
(3.8
)
Long-term debt, net of current maturities
$
777.5

 
$
855.0

Income Taxes (Tables)
Schedule of Provision for Income Tax (Benefit) Expense
The following table presents the provision for income taxes and the effective tax rates for the three and nine months ended September 30, 2015 and 2014:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations before income taxes
$
23.4

 
$
(24.4
)
 
$
32.1

 
$
(10.1
)
Income tax expense (benefit)
8.9

 
(10.4
)
 
15.5

 
(4.6
)
Effective tax rate
38.0
%
 
42.6
%
 
48.3
%
 
45.5
%
Related-Party Transactions (Tables)
Summarized Financial Impact of Transactions with Related Party 
The following tables summarize the financial impact of those related party transactions with Georgia-Pacific:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2015
2014
 
2015
2014
Sales to Georgia-Pacific, reflected in net sales
 
$
8.0

$
9.2

 
$
25.0

$
9.2

Purchases of inventory from Georgia-Pacific, recognized in cost of products sold
 
67.0

62.7

 
205.0

62.7


(in millions)
 
September 30, 2015
 
December 31, 2014
Inventories purchased from Georgia-Pacific that remained on Veritiv's balance sheet
 
$
24.3

 
$
26.6

Related party payable to Georgia-Pacific
 
12.7

 
11.0

Related party receivable from Georgia-Pacific
 
4.0

 
3.9

Parent Company Investment 
The components of net transfers to Parent for the three and nine months ended September 30, 2014 were as follows:     
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
 
2014
 
2014
Intercompany sales and purchases, net
 
$
—

 
$
255.4

Cash pooling and general financing activities
 
—

 
(322.5
)
Corporate allocations including income taxes
 
—

 
34.7

Net adjustments in conjunction with the Spin-off
 
(50.2
)
 
(50.2
)
Total net transfers to International Paper
 
$
(50.2
)
 
$
(82.6
)
Defined Benefit Plans (Tables)
Schedule of Net Periodic Benefit Costs
Net periodic benefit cost (credit) associated with these plans is summarized below:
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
Three Months Ended September 30, 2014
(in millions)
U.S.
 
Canada
 
U.S.
 
Canada
 
U.S.
 
Canada
Components of net periodic benefit cost (credit):
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
0.4

 
$
0.1

 
$
1.3

 
$
0.2

 
$
0.3

 
$
0.1

Interest cost
0.8

 
0.7

 
2.5

 
2.4

 
0.9

 
0.9

Expected return on plan assets
(1.4
)
 
(0.8
)
 
(4.1
)
 
(2.6
)
 
(1.6
)
 
(0.9
)
Net periodic benefit cost (credit)
$
(0.2
)
 
$
0.0

 
$
(0.3
)
 
$
0.0

 
$
(0.4
)
 
$
0.1

Fair Value Measurements (Tables)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following table provides a reconciliation of the beginning and ending balance of the contingent liability for the nine months ended September 30, 2015:    
(in millions)
 
Contingent Liability
Balance at December 31, 2014
 
$
60.5

Purchase accounting adjustment
 
0.6

Change in fair value adjustment recorded in other expense (income), net
 
1.3

Balance at March 31, 2015
 
62.4

Change in fair value adjustment recorded in other expense (income), net
 
(1.7
)
Balance at June 30, 2015
 
60.7

Change in fair value adjustment recorded in other expense (income), net
 
0.3

Balance at September 30, 2015
 
$
61.0



Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
A reconciliation of the numerators and denominators used in the basic and diluted EPS calculation is as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
14.5

 
$
(14.0
)
 
$
16.6

 
$
(5.5
)
Loss from discontinued operations, net of income taxes
—

 
—

 
—

 
(0.1
)
Net income (loss)
$
14.5

 
$
(14.0
)
 
$
16.6

 
$
(5.6
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average number of shares outstanding – basic and diluted
16.00

 
16.00

 
16.00

 
10.77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Antidilutive stock-based awards excluded from computation of diluted EPS
0.06

 
—

 
0.06

 
—

Performance stock-based awards excluded from computation of diluted EPS because performance conditions had not been met
0.24

 
—

 
0.24

 
—

Accumulated Other Comprehensive Loss (Tables)
Schedule of Accumulated Other Comprehensive Loss
The following table provides the components of accumulated other comprehensive loss:
(in millions)
September 30, 2015
 
December 31, 2014
Foreign currency translation adjustments
$
(24.9
)
 
$
(14.7
)
Change in fair value of cash flow hedge, net of tax
(0.4
)
 
—

Adjustments to pension and other benefit liabilities, net of tax
(7.4
)
 
(7.4
)
Total accumulated other comprehensive loss
$
(32.7
)
 
$
(22.1
)
Equity-Based Incentive Plans (Tables)
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan
At the time of the Spin-off, all equity awards held by employees of xpedx were granted under International Paper’s 2009 Incentive Compensation Plan or predecessor plans. In conjunction with the Spin-off and Merger, International Paper retained all rights and obligations of these incentive plans. xpedx's stock-based compensation expense and related income tax benefits associated with these International Paper plans were as follows:
 
 
Nine Months Ended 
 September 30,
(in millions)
 
2014
Total stock-based compensation expense
 
$
4.3

Income tax benefit related to stock-based compensation
 
$
1.3

Segment Information (Tables)
Schedule of Segment Reporting Information, by Segment 
The following tables present net sales, Adjusted EBITDA (as defined in Note 12, Equity-Based Incentive Plans) and certain other measures for each of the reportable segments and total continuing operations for the periods presented:
(in millions)
Print
 
Publishing
 
Packaging
 
Facility Solutions
 
Corporate & Other
 
Total
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
832.4

 
$
303.0

 
$
722.3

 
$
331.4

 
$
30.7

 
$
2,219.8

Adjusted EBITDA
23.2

 
9.3

 
59.0

 
12.7

 
(43.6
)
 
60.6

Depreciation and amortization
3.4

 
0.8

 
3.3

 
1.6

 
4.6

 
13.7

Restructuring charges
0.3

 
—

 
2.6

 
0.1

 
—

 
3.0

Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Net sales
947.2

 
338.2

 
725.0

 
357.0

 
22.9

 
2,390.3

Adjusted EBITDA
20.5

 
9.2

 
53.0

 
15.5

 
(46.7
)
 
51.5

Depreciation and amortization
3.7

 
0.5

 
4.2

 
1.8

 
4.0

 
14.2

Restructuring charges
—

 
—

 
—

 
—

 
0.1

 
0.1

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
Net sales
2,465.6

 
906.9

 
2,097.1

 
965.0

 
82.4

 
6,517.0

Adjusted EBITDA
57.1

 
23.1

 
156.5

 
30.2

 
(137.2
)
 
129.7

Depreciation and amortization
10.2

 
2.3

 
11.1

 
5.5

 
13.4

 
42.5

Restructuring charges
1.9

 
—

 
4.0

 
1.4

 
1.3

 
8.6

Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Net sales
2,038.3

 
715.4

 
1,529.5

 
720.6

 
22.9

 
5,026.7

Adjusted EBITDA
38.1

 
16.6

 
104.4

 
18.4

 
(95.7
)
 
81.8

Depreciation and amortization
6.1

 
0.6

 
5.9

 
2.6

 
7.9

 
23.1

Restructuring charges (income)
(0.4
)
 
—

 
(0.2
)
 
(0.5
)
 
0.1

 
(1.0
)
Reconciliation of Total Adjusted EBITDA to Net Income (Loss) 
The table below presents a reconciliation of income (loss) from continuing operations before income taxes reflected in the Condensed Consolidated and Combined Statements of Operations to Total Adjusted EBITDA:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(in millions)
2015
 
2014
 
2015
 
2014
Income (loss) from continuing operations before income taxes
$
23.4

 
$
(24.4
)
 
$
32.1

 
$
(10.1
)
Interest expense, net
7.0

 
6.8

 
19.8

 
6.8

Depreciation and amortization
13.7

 
14.2

 
42.5

 
23.1

Restructuring charges (income)
3.0

 
0.1

 
8.6

 
(1.0
)
Non-restructuring stock-based compensation
1.0

 
—

 
3.0

 
4.0

LIFO expense (income)
2.2

 
(0.5
)
 
(7.8
)
 
(0.8
)
Non-restructuring severance charges
0.5

 
—

 
1.9

 
2.4

Merger and integration expenses
8.3

 
54.8

 
28.6

 
56.9

Fair value adjustments on TRA contingent liability
0.3

 
—

 
(0.1
)
 
—

Other
1.2

 
0.5

 
1.1

 
0.5

Total Adjusted EBITDA
$
60.6

 
$
51.5

 
$
129.7

 
$
81.8

Business and Summary of Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Distribution_Center
Sep. 30, 2014
Sep. 30, 2015
Distribution_Center
Sep. 30, 2014
Accounting Policies [Line Items]
 
 
 
 
Number of distribution centers (more than)
180 
 
180 
 
Selling and administrative expenses
$ 207.1 
$ 212.9 
$ 635.7 
$ 469.2 
Percentage of FIFO Inventory
12.00% 
 
12.00% 
 
International Paper |
Transaction Service Agreement (TSA)
 
 
 
 
Accounting Policies [Line Items]
 
 
 
 
Selling and administrative expenses
$ 0.8 
$ 8.0 
$ 9.6 
 
Merger with Unisource - Narrative (Details) (USD $)
Share data in Millions, unless otherwise specified
0 Months Ended 3 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Jun. 30, 2015
UWW Holdings, Inc. XPEDX Merger
Mar. 31, 2015
UWW Holdings, Inc. XPEDX Merger
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Business Acquisition [Line Items]
 
 
 
 
 
 
Purchase price
 
 
$ 383,200,000 
 
 
 
Business acquisition, equity issued, number of shares
 
 
7.84 
 
 
 
Increase in deferred tax asset
 
 
 
300,000 
600,000 
 
Purchase price adjustment
 
 
 
 
600,000 
 
Goodwill accounting adjustment
 
 
 
(300,000)
0 
 
Goodwill
$ 52,100,000 
$ 52,400,000 
 
 
 
$ 25,700,000 
Merger with Unisource - Assets Acquired and Liabilities Assumed (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Purchase price:
 
 
 
 
Fair value of Veritiv shares issued in the Merger
 
 
$ 284.7 
 
Cash payments associated with customary working capital and net indebtedness adjustments
 
 
39.1 
 
Fair value of contingent liability associated with the Tax Receivable Agreement
 
 
59.4 
 
Total purchase price
 
 
383.2 
 
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
 
 
 
 
Cash
 
 
 
70.9 
Accounts receivable
 
 
 
448.4 
Inventories
 
 
 
353.8 
Deferred income tax assets
 
 
 
72.0 
Property and equipment
 
 
 
299.0 
Goodwill
52.1 
52.4 
 
25.7 
Other intangible assets
 
 
 
31.5 
Other current and non-current assets (including below market leasehold agreements)
 
 
 
61.8 
Accounts payable
 
 
 
(284.2)
Long-term debt (including equipment capital leases)
 
 
 
(313.2)
Financing obligations to related party
 
 
 
(233.1)
Defined benefit pension obligations
 
 
 
(30.3)
Other current and non-current liabilities (including above market leasehold agreements)
 
 
 
(119.1)
Total purchase price
 
 
 
$ 383.2 
Merger with Unisource - Intangible Assets Acquired (Details) (UWW Holdings, Inc. XPEDX Merger, USD $)
In Millions, unless otherwise specified
0 Months Ended
Jul. 1, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
 
Value (in millions)
$ 31.5 
Customer relationships
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Value (in millions)
24.3 
Estimated Useful Lives (in years)
14 years 9 months 
Trademarks/Trade names
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Value (in millions)
4.1 
Estimated Useful Lives (in years)
3 years 7 months 
Non-compete agreements
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Value (in millions)
$ 3.1 
Estimated Useful Lives (in years)
1 year 
Merger, Integration and Restructuring Charges - Merger and Integration Expense (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Business Acquisition [Line Items]
 
 
 
 
Total merger and integration expenses
$ 8.3 
$ 54.8 
$ 28.6 
$ 56.9 
UWW Holdings, Inc. XPEDX Merger
 
 
 
 
Business Acquisition [Line Items]
 
 
 
 
Legal, consulting and other professional fees
1.4 
24.1 
6.8 
26.2 
Retention compensation
2.3 
27.9 
8.9 
27.9 
Information technology conversion costs
2.1 
1.0 
6.4 
1.0 
Rebranding
1.7 
0.1 
4.2 
0.1 
Other
0.8 
1.7 
2.3 
1.7 
Total merger and integration expenses
$ 8.3 
$ 54.8 
$ 28.6 
$ 56.9 
Merger, Integration and Restructuring Charges - Restructuring Liability (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Veritiv Restructuring Plan
Jun. 30, 2015
Veritiv Restructuring Plan
Mar. 31, 2015
Veritiv Restructuring Plan
Sep. 30, 2015
Veritiv Restructuring Plan
Sep. 30, 2015
Severance and Related Costs
Veritiv Restructuring Plan
Jun. 30, 2015
Severance and Related Costs
Veritiv Restructuring Plan
Mar. 31, 2015
Severance and Related Costs
Veritiv Restructuring Plan
Sep. 30, 2015
Other Direct Costs
Veritiv Restructuring Plan
Jun. 30, 2015
Other Direct Costs
Veritiv Restructuring Plan
Mar. 31, 2015
Other Direct Costs
Veritiv Restructuring Plan
Sep. 30, 2015
Asset Impairment
Veritiv Restructuring Plan
Jun. 30, 2015
Asset Impairment
Veritiv Restructuring Plan
Mar. 31, 2015
Asset Impairment
Veritiv Restructuring Plan
Restructuring Reserve [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring reserve, beginning balance
 
 
 
 
$ 4.6 
$ 4.2 
$ 3.9 
$ 3.9 
$ 2.8 
$ 2.9 
$ 3.7 
$ 1.8 
$ 1.3 
$ 0.2 
$ 0 
$ 0 
$ 0 
Restructuring charges (income)
3.0 
0.1 
8.6 
(1.0)
3.0 
2.2 
3.4 
8.6 
0.8 
1.0 
1.9 
0.2 
1.2 
1.5 
2.0 
0 
0 
Payments
 
 
 
 
(2.4)
(1.8)
(3.1)
 
(1.3)
(1.1)
(2.7)
(1.1)
(0.7)
(0.4)
0 
0 
0 
Non-cash charges
 
 
 
 
(2.0)
 
 
 
0 
 
 
0 
 
 
(2.0)
 
 
Restructuring reserve, ending balance
 
 
 
 
$ 3.2 
$ 4.6 
$ 4.2 
$ 3.2 
$ 2.3 
$ 2.8 
$ 2.9 
$ 0.9 
$ 1.8 
$ 1.3 
$ 0 
$ 0 
$ 0 
Debt - Long-Term Debt Obligations (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Debt Instrument [Line Items]
 
 
Equipment capital lease obligations
$ 8.2 
$ 11.0 
Total debt
780.8 
858.8 
Less: current portion of long-term debt
(3.3)
(3.8)
Long-term debt, net of current maturities
777.5 
855.0 
Line of Credit |
Asset-Backed Lending Facility
 
 
Debt Instrument [Line Items]
 
 
ABL Facility
$ 772.6 
$ 847.8 
Debt - Narrative (Details) (Line of Credit, Asset-Backed Lending Facility, USD $)
In Millions, unless otherwise specified
Sep. 30, 2015
Line of Credit |
Asset-Backed Lending Facility
 
Line of Credit Facility [Line Items]
 
Minimum fixed charge coverage ratio
100.00% 
Remaining borrowing capacity
$ 448.3 
Derivative Instrument, Hedging Activities and Risk Management (Details) (Interest Rate Cap, USD $)
3 Months Ended 1 Months Ended
Sep. 30, 2015
Jul. 31, 2015
Cash flow hedging
Designated as Hedging Instrument
Sep. 30, 2015
Cash flow hedging
Designated as Hedging Instrument
Other Non-current Assets
Jul. 31, 2015
Cash flow hedging
Designated as Hedging Instrument
LIBOR
Derivative [Line Items]
 
 
 
 
Notional amount
 
$ 392,900,000 
 
 
Derivative, cap interest rate
 
 
 
3.00% 
Payment for interest rate cap
 
2,000,000 
 
 
Cost of hedge expensed during period
 
600,000 
 
 
Derivative fair value
 
 
800,000 
 
Other comprehensive income (loss), derivatives qualifying as hedges, before tax, portion attributable to parent
600,000 
 
 
 
Reclassification from AOCI, before tax
$ 0 
 
 
 
Income Taxes - Income Tax Expense (Benefit) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Tax Disclosure [Abstract]
 
 
 
 
Income (loss) from continuing operations before income taxes
$ 23.4 
$ (24.4)
$ 32.1 
$ (10.1)
Income tax expense (benefit)
8.9 
(10.4)
15.5 
(4.6)
Effective income tax rate (as percent)
38.00% 
42.60% 
48.30% 
45.50% 
Federal statutory income tax rate (as percent)
35.00% 
35.00% 
35.00% 
35.00% 
Unrecognized tax benefits
0.5 
 
0.5 
 
Unrecognized tax benefits that would impact effective tax rate
0.5 
 
0.5 
 
Decrease in unrecognized tax benefits is reasonably possible (up to)
$ 0.1 
 
$ 0.1 
 
Related-Party Transactions - Narrative (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Jul. 1, 2014
International Paper
Sep. 30, 2014
International Paper
Sales
Other International Paper Businesses
Sep. 30, 2014
International Paper
Cost of products sold
Other International Paper Businesses
Sep. 30, 2014
International Paper
Selling, general and administrative expenses
Mar. 31, 2015
CEO of Merged Company
Purchase of Personal Residence
Jun. 30, 2015
CEO of Merged Company
Sale of Personal Residence
Related Party Transaction [Line Items]
 
 
 
 
 
 
 
 
 
 
Related party sales
$ 8.0 
$ 9.2 
$ 25.0 
$ 33.5 
 
$ 24.3 
 
 
 
 
Purchases from related party
 
 
 
 
 
 
276.5 
 
 
 
Transfers (to) from parent, net adjustments related to spin-off, tangible assets
 
 
 
 
24.3 
 
 
 
 
 
Transfers (to) from parent, net adjustments related to spin-off, intercompany balance settlement
 
 
 
 
24.6 
 
 
 
 
 
General corporate expenses
 
 
 
 
 
 
 
25.5 
 
 
Related party transaction amount
 
 
 
 
 
 
 
 
$ 4.6 
$ 4.6 
Related-Party Transactions - Summarized Financial Impact of Transactions with Related Party (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Related Party Transaction [Line Items]
 
 
 
 
 
Related party sales
$ 8.0 
$ 9.2 
$ 25.0 
$ 33.5 
 
Inventories
705.4 
 
705.4 
 
673.2 
Related party payable
12.7 
 
12.7 
 
11.0 
Related party receivable
4.0 
 
4.0 
 
3.9 
Georgia-Pacific
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Inventories
24.3 
 
24.3 
 
26.6 
Related party payable
12.7 
 
12.7 
 
11.0 
Related party receivable
4.0 
 
4.0 
 
3.9 
Sales |
Georgia-Pacific
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Related party sales
8.0 
9.2 
25.0 
9.2 
 
Cost of products sold |
Georgia-Pacific
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Purchases from related party
$ 67.0 
$ 62.7 
$ 205.0 
$ 62.7 
 
Related-Party Transactions - Parent Company Investment (Details) (Parent Company Investment, USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2014
Parent Company Investment
 
 
Parent Company Investment [Line Items]
 
 
Intercompany sales and purchases, net
$ 0 
$ 255.4 
Cash pooling and general financing activities
0 
(322.5)
Corporate allocations including income taxes
0 
34.7 
Net adjustments in conjunction with the Spin-off
(50.2)
(50.2)
Total net transfers to International Paper
$ (50.2)
$ (82.6)
Defined Benefit Plans - Net Periodic Costs (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
U.S. Defined Benefit Pension Plan
 
 
 
Components of net periodic benefit cost (credit):
 
 
 
Service cost
$ 0.4 
$ 0.3 
$ 1.3 
Interest cost
0.8 
0.9 
2.5 
Expected return on plan assets
(1.4)
(1.6)
(4.1)
Net periodic benefit cost (credit)
(0.2)
(0.4)
(0.3)
Canada Pension Plan
 
 
 
Components of net periodic benefit cost (credit):
 
 
 
Service cost
0.1 
0.1 
0.2 
Interest cost
0.7 
0.9 
2.4 
Expected return on plan assets
(0.8)
(0.9)
(2.6)
Net periodic benefit cost (credit)
$ 0 
$ 0.1 
$ 0 
Defined Benefit Plans - Narrative (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Compensation and Retirement Disclosure [Abstract]
 
Net pension and other post-employment benefit expense
$ 8.0 
Fair Value Measurements - Narrative (Details) (UWW Holdings, Inc. XPEDX Merger, USD $)
In Millions, unless otherwise specified
0 Months Ended
Sep. 30, 2015
Jul. 1, 2014
Business Acquisition [Line Items]
 
 
Fair value of contingent liability associated with the Tax Receivable Agreement
 
$ 59.4 
Fair Value, Measurements, Recurring |
Level 3 |
Contingent Liability
 
 
Business Acquisition [Line Items]
 
 
Fair value discount rate
5.40% 
4.80% 
Fair Value Measurements - Contingent Liability (Details) (Fair Value, Measurements, Recurring, Level 3, Contingent Liability, UWW Holdings, Inc. XPEDX Merger, USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Fair Value, Measurements, Recurring |
Level 3 |
Contingent Liability |
UWW Holdings, Inc. XPEDX Merger
 
 
 
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
 
 
Beginning balance
$ 60.7 
$ 62.4 
$ 60.5 
Purchase accounting adjustment
 
 
0.6 
Change in fair value adjustment recorded in other expense (income), net
0.3 
(1.7)
1.3 
Ending balance
$ 61.0 
$ 60.7 
$ 62.4 
Earnings Per Share - Narrative (Details)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Jul. 1, 2014
Jul. 1, 2014
UWW Holdings, Inc. XPEDX Merger
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Common stock, shares issued (in Shares)
16.0 
 
16.0 
 
16.0 
16.0 
 
Business acquisition, equity issued, number of shares
 
 
 
 
 
 
7.84 
Weighted-average shares outstanding - basic and diluted (in shares)
16.00 
16.00 
16.00 
10.77 
 
 
 
Common stock, shares outstanding (in Shares)
16.0 
 
16.0 
 
16.0 
16.0 
 
Earnings Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Earnings Per Share [Abstract]
 
 
 
 
Income (loss) from continuing operations
$ 14.5 
$ (14.0)
$ 16.6 
$ (5.5)
Loss from discontinued operations, net of income taxes
0 
0 
0 
(0.1)
Net income (loss)
$ 14.5 
$ (14.0)
$ 16.6 
$ (5.6)
Weighted-average shares outstanding - basic and diluted (in shares)
16.00 
16.00 
16.00 
10.77 
Antidilutive stock-based awards excluded from computation of diluted earnings per share (in shares)
0.06 
0 
0.06 
0 
Performance stock-based awards excluded from computation of diluted earnings per share because performance conditions had not been met (in shares)
0.24 
0 
0.24 
0 
Accumulated Other Comprehensive Loss (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Equity [Abstract]
 
 
 
 
 
Foreign currency translation adjustments
$ (24,900,000)
 
$ (24,900,000)
 
$ (14,700,000)
Change in fair value of cash flow hedge, net of tax
(400,000)
 
(400,000)
 
0 
Adjustments to pension and other benefit liabilities, net of tax
(7,400,000)
 
(7,400,000)
 
(7,400,000)
Total accumulated other comprehensive loss
(32,700,000)
 
(32,700,000)
 
(22,100,000)
Reclassification out of AOCI
$ 0 
$ 0 
$ 0 
$ 0 
 
Equity-Based Incentive Plans - Narrative (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Omnibus Incentive Plan
Sep. 30, 2015
Omnibus Incentive Plan
Restricted Stock Units (RSUs)
Sep. 30, 2015
Omnibus Incentive Plan
Performance Condition Stock Units (PCSUs)
tranche
Sep. 30, 2015
Omnibus Incentive Plan
Market Condition Performance Stock Units (MCPSUs)
tranche
Jun. 30, 2015
Deferred Share Units (DSUs) [Member]
Non-employee director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
Deferred compensation arrangement, shares issued
 
 
 
 
 
 
 
 
27,424 
Deferred compensation arrangement, shares per award
 
 
 
 
 
 
 
 
1 
Deferred compensation arrangement, allocated share-based compensation expense
 
 
 
 
 
 
 
 
$ 1.0 
Grants in period, weighted average grant date fair value (in dollars per share)
 
 
 
 
 
$ 51.64 
$ 51.64 
$ 63.03 
$ 36.46 
Grants in period (in shares)
 
 
 
 
 
64,000 
161,000 
97,000 
 
Award vesting period
 
 
 
 
 
3 years 
3 years 
3 years 
 
Maximum percent of target award (not to exceed)
 
 
 
 
 
 
200.00% 
200.00% 
 
Number of tranches
 
 
 
 
 
 
3 
3 
 
Expected volatility rate
 
 
 
 
 
 
 
25.00% 
 
Risk free interest rate
 
 
 
 
 
 
 
1.10% 
 
Total stock-based compensation expense
1.0 
0 
3.0 
4.0 
 
 
 
 
 
Compensation not yet recognized
 
 
 
 
$ 12.6 
 
 
 
 
Compensation not yet recognized, period for recognition
 
 
 
 
2 years 6 months 
 
 
 
 
Equity-Based Incentive Plans - Stock Based Compensation Expense (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Total stock-based compensation expense
$ 1.0 
$ 0 
$ 3.0 
$ 4.0 
International Paper Incentive Plans
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Total stock-based compensation expense
 
 
 
4.3 
Income tax benefit related to stock-based compensation
 
 
 
$ 1.3 
Commitments and Contingencies (Details)
9 Months Ended
Sep. 30, 2015
state
Loss Contingencies [Line Items]
 
Additional states joining escheat audit
7 
Minimum
 
Loss Contingencies [Line Items]
 
Escheat audit period
2 years 
Maximum
 
Loss Contingencies [Line Items]
 
Escheat audit period
4 years 
Segment Information - Net Sales and Other Measures by Reportable Segment (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
$ 2,219.8 
$ 2,390.3 
$ 6,517.0 
$ 5,026.7 
Adjusted EBITDA
60.6 
51.5 
129.7 
81.8 
Depreciation and amortization
13.7 
14.2 
42.5 
23.1 
Restructuring charges (income)
3.0 
0.1 
8.6 
(1.0)
Operating Segments |
Print
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
832.4 
947.2 
2,465.6 
2,038.3 
Adjusted EBITDA
23.2 
20.5 
57.1 
38.1 
Depreciation and amortization
3.4 
3.7 
10.2 
6.1 
Restructuring charges (income)
0.3 
0 
1.9 
(0.4)
Operating Segments |
Publishing
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
303.0 
338.2 
906.9 
715.4 
Adjusted EBITDA
9.3 
9.2 
23.1 
16.6 
Depreciation and amortization
0.8 
0.5 
2.3 
0.6 
Restructuring charges (income)
0 
0 
0 
0 
Operating Segments |
Packaging
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
722.3 
725.0 
2,097.1 
1,529.5 
Adjusted EBITDA
59.0 
53.0 
156.5 
104.4 
Depreciation and amortization
3.3 
4.2 
11.1 
5.9 
Restructuring charges (income)
2.6 
0 
4.0 
(0.2)
Operating Segments |
Facility Solutions
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
331.4 
357.0 
965.0 
720.6 
Adjusted EBITDA
12.7 
15.5 
30.2 
18.4 
Depreciation and amortization
1.6 
1.8 
5.5 
2.6 
Restructuring charges (income)
0.1 
0 
1.4 
(0.5)
Corporate and Other
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Net sales
30.7 
22.9 
82.4 
22.9 
Adjusted EBITDA
(43.6)
(46.7)
(137.2)
(95.7)
Depreciation and amortization
4.6 
4.0 
13.4 
7.9 
Restructuring charges (income)
$ 0 
$ 0.1 
$ 1.3 
$ 0.1 
Segment Information - Reconciliation of Consolidated Adjusted EBITDA (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Segment Reporting [Abstract]
 
 
 
 
Income (loss) from continuing operations before income taxes
$ 23.4 
$ (24.4)
$ 32.1 
$ (10.1)
Interest expense, net
7.0 
6.8 
19.8 
6.8 
Depreciation and amortization
13.7 
14.2 
42.5 
23.1 
Restructuring charges (income)
3.0 
0.1 
8.6 
(1.0)
Non-restructuring stock-based compensation
1.0 
0 
3.0 
4.0 
LIFO expense (income)
2.2 
(0.5)
(7.8)
(0.8)
Non-restructuring severance charges
0.5 
0 
1.9 
2.4 
Merger and integration expenses
8.3 
54.8 
28.6 
56.9 
Fair value adjustments on TRA contingent liability
0.3 
0 
(0.1)
0 
Other
1.2 
0.5 
1.1 
0.5 
Total Adjusted EBITDA
$ 60.6 
$ 51.5 
$ 129.7 
$ 81.8