UNIVAR INC., 10-Q filed on 11/6/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 22, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Trading Symbol UNVR  
Entity Registrant Name Univar Inc.  
Entity Central Index Key 0001494319  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   141,633,516
v3.10.0.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Net sales $ 2,130.7 $ 2,048.7 $ 6,661.3 $ 6,294.5
Cost of goods sold (exclusive of depreciation) 1,662.0 1,593.9 5,205.5 4,933.9
Operating expenses:        
Outbound freight and handling 82.7 74.8 248.5 217.7
Warehousing, selling and administrative 229.0 230.7 710.9 695.2
Other operating expenses, net 12.4 11.8 37.0 55.8
Depreciation 31.5 32.5 93.8 102.5
Amortization 13.5 16.8 40.7 50.0
Total operating expenses 369.1 366.6 1,130.9 1,121.2
Operating income 99.6 88.2 324.9 239.4
Other (expense) income:        
Interest income 0.6 0.9 2.7 2.6
Interest expense (32.8) (39.3) (101.8) (112.6)
Loss on extinguishment of debt 0.0 0.0 0.0 (0.8)
Other income (expense), net 2.5 (4.4) 3.0 (20.4)
Total other expense (29.7) (42.8) (96.1) (131.2)
Income before income taxes 69.9 45.4 228.8 108.2
Income tax expense 20.3 6.5 57.7 15.4
Net income $ 49.6 $ 38.9 $ 171.1 $ 92.8
Income per common share:        
Basic (in dollars per share) $ 0.35 $ 0.28 $ 1.21 $ 0.66
Diluted (in dollars per share) $ 0.35 $ 0.28 $ 1.20 $ 0.66
Weighted average common shares outstanding:        
Basic (in shares) 141.2 140.4 141.1 140.0
Diluted (in shares) 142.3 141.4 142.1 141.3
v3.10.0.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net income $ 49.6 $ 38.9 $ 171.1 $ 92.8
Other comprehensive income (loss), net of tax:        
Impact due to adoption of ASU 2017-12 [1] 0.0 0.0 0.5 0.0
Foreign currency translation 2.0 56.9 (61.0) 120.1
Derivative financial instruments (0.1) 0.9 9.3 0.9
Pension and other postretirement adjustment 0.0 (0.1) 0.1 (0.2)
Total other comprehensive income (loss), net of tax 1.9 57.7 (51.1) 120.8
Comprehensive income $ 51.5 $ 96.6 $ 120.0 $ 213.6
[1] Adjusted due to the adoption of Accounting Standards Update (“ASU”) 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018. Refer to “Note 2: Significant accounting policies” for more information.
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 85.9 $ 467.0
Trade accounts receivable, net 1,261.0 1,062.4
Inventories 843.6 839.5
Prepaid expenses and other current assets 164.8 149.6
Total current assets 2,355.3 2,518.5
Property, plant and equipment, net 960.7 1,003.0
Goodwill 1,807.1 1,818.4
Intangible assets, net 254.2 287.7
Deferred tax assets 20.7 22.8
Other assets 99.1 82.3
Total assets 5,497.1 5,732.7
Current liabilities:    
Short-term financing 8.7 13.4
Trade accounts payable 920.8 941.7
Current portion of long-term debt 57.3 62.0
Accrued compensation 91.1 100.7
Other accrued expenses 251.9 301.6
Total current liabilities 1,329.8 1,419.4
Long-term debt 2,543.7 2,820.0
Pension and other postretirement benefit liabilities 239.6 257.1
Deferred tax liabilities 49.9 35.4
Other long-term liabilities 103.4 110.7
Total liabilities 4,266.4 4,642.6
Stockholders’ equity:    
Preferred stock, 200.0 million shares authorized at $0.01 par value with no shares issued or outstanding as of September 30, 2018 and December 31, 2017 0.0 0.0
Common stock, 2.0 billion shares authorized at $0.01 par value with 141.6 and 141.1 million shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively 1.4 1.4
Additional paid-in capital 2,321.6 2,301.3
Accumulated deficit (762.7) (934.1)
Accumulated other comprehensive loss (329.6) (278.5)
Total stockholders’ equity 1,230.7 1,090.1
Total liabilities and stockholders’ equity $ 5,497.1 $ 5,732.7
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Preferred stock, shares authorized (in shares) 200,000,000 200,000,000
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, share issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, shares authorized (in shares) 2,000,000,000 2,000,000,000
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares issued (in shares) 141,600,000 141,100,000
Common stock, shares outstanding (in shares) 141,600,000 141,100,000
v3.10.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Operating activities:    
Net income $ 171.1 $ 92.8
Adjustments to reconcile net income to net cash provided (used) by operating activities:    
Depreciation and amortization 134.5 152.5
Amortization of deferred financing fees and debt discount 5.8 5.9
Amortization of pension credit from accumulated other comprehensive loss 0.1 (0.2)
Loss on extinguishment of debt 0.0 0.8
Deferred income taxes 8.9 (4.0)
Stock-based compensation expense 17.7 16.0
Other (0.8) (0.2)
Changes in operating assets and liabilities:    
Trade accounts receivable, net (216.3) (198.3)
Inventories (11.9) 1.5
Prepaid expenses and other current assets (13.3) (15.4)
Trade accounts payable (7.3) 58.1
Pensions and other postretirement benefit liabilities (32.6) (34.6)
Other, net (58.5) (39.1)
Net cash (used) provided by operating activities (2.6) 35.8
Investing activities:    
Purchases of property, plant and equipment (59.9) (58.0)
Purchases of businesses, net of cash acquired (20.0) (24.4)
Proceeds from sale of property, plant and equipment 8.7 3.2
Other (0.1) (1.2)
Net cash used by investing activities (71.3) (80.4)
Financing activities:    
Proceeds from issuance of long-term debt 267.7 2,234.0
Payments on long-term debt and capital lease obligations (558.1) (2,267.6)
Short-term financing, net (2.3) (18.9)
Financing fees paid 0.0 (4.4)
Taxes paid related to net share settlements of stock-based compensation awards (3.7) (8.0)
Stock option exercises 5.7 32.1
Contingent consideration payments 0.0 (3.2)
Other 0.6 0.5
Net cash used by financing activities (290.1) (35.5)
Effect of exchange rate changes on cash and cash equivalents (17.1) 37.6
Net decrease in cash and cash equivalents (381.1) (42.5)
Cash and cash equivalents at beginning of period 467.0 336.4
Cash and cash equivalents at end of period 85.9 293.9
Non-cash activities:    
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses 11.5 7.3
Additions of property, plant and equipment under a capital lease obligation $ 19.2 $ 17.0
v3.10.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Impact due to adoption of ASU, net of tax [1] $ 0.2   $ 0.7 $ (0.5)  
Beginning balance at Dec. 31, 2016 809.9 $ 1.4 2,251.8 (1,053.4) $ (389.9)
Beginning balance (in shares) at Dec. 31, 2016   138.8      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 92.8        
Foreign currency translation adjustment, net of tax 120.1        
Pension and other postretirement benefits adjustment, net of tax (0.2)        
Ending balance at Sep. 30, 2017         (269.1)
Beginning balance at Dec. 31, 2016 809.9 $ 1.4 2,251.8 (1,053.4) (389.9)
Beginning balance (in shares) at Dec. 31, 2016   138.8      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 119.8     119.8  
Foreign currency translation adjustment, net of tax 107.1       107.1
Pension and other postretirement benefits adjustment, net of tax (2.4)       (2.4)
Derivative financial instruments, net of tax 6.7       6.7
Restricted stock units vested (in shares)   0.8      
Restricted stock units vested 0.0        
Tax withholdings related to net share settlements of stock-based compensation awards (in shares)   (0.3)      
Tax withholdings related to net share settlements of stock-based compensation awards (8.5)   (8.5)    
Stock option exercises (in shares)   1.8      
Stock option exercises 36.5   36.5    
Employee stock purchase plan 1.1   1.1    
Stock-based compensation $ 19.7   19.7    
Ending balance (in shares) at Dec. 31, 2017 141.1 141.1      
Ending balance at Dec. 31, 2017 $ 1,090.1 $ 1.4 2,301.3 (934.1) (278.5)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Impact due to adoption of ASU, net of tax [2] 0.8     0.3 0.5
Net income 171.1     171.1  
Foreign currency translation adjustment, net of tax (61.0)       (61.0)
Pension and other postretirement benefits adjustment, net of tax 0.1       0.1
Derivative financial instruments, net of tax 9.3       9.3
Restricted stock units vested (in shares)   0.3      
Restricted stock units vested 0.0 $ 0.0      
Tax withholdings related to net share settlements of stock-based compensation awards (in shares)   (0.1)      
Tax withholdings related to net share settlements of stock-based compensation awards (3.7)   (3.7)    
Stock option exercises (in shares)   0.3      
Stock option exercises 5.7   5.7    
Employee stock purchase plan (in shares)   0.0      
Employee stock purchase plan 0.6   0.6    
Stock-based compensation (in shares)   0.0      
Stock-based compensation $ 17.7   17.7    
Ending balance (in shares) at Sep. 30, 2018 141.6 141.6      
Ending balance at Sep. 30, 2018 $ 1,230.7 $ 1.4 $ 2,321.6 $ (762.7) $ (329.6)
[1] Adjusted due to the adoption of ASU 2016-09 “Improvement to Employee Share-Based Payment Accounting” on January 1, 2017.
[2] Adjusted due to the adoption of ASU 2014-09 “Revenue from Contracts with Customers” and ASU 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018. Refer to “Note 2: Significant accounting policies” for more information.
v3.10.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($)
$ in Millions
9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Foreign currency translation adjustments, tax $ (0.1) $ (2.1)
Pension and post-employment benefits, tax 0.0 0.6
Derivative financial instruments tax (3.1) (4.3)
ASU 2016-09    
Impact due to adoption of ASU's   $ 0.2
Accounting Standards Update 2017-12    
Impact due to adoption of ASU's $ (0.3)  
v3.10.0.1
Nature of operations
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of operations
1. Nature of operations
Headquartered in Downers Grove, Illinois, Univar Inc. (“the Company” or “Univar”) is a leading global chemicals and ingredients distributor and provider of specialty chemicals. The Company’s operations are structured into four operating segments that represent the geographic areas under which the Company manages its business:
Univar USA (“USA”)
Univar Canada (“Canada”)
Univar Europe, the Middle East and Africa (“EMEA”)
Rest of World (“Rest of World”)
Rest of World includes certain developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.
v3.10.0.1
Significant accounting policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Significant accounting policies
2. Significant accounting policies
Basis of presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) as applicable to interim financial reporting. Unless otherwise indicated, all financial data presented in these condensed consolidated financial statements are expressed in US dollars. These condensed consolidated financial statements, in the Company's opinion, include all adjustments consisting of normal recurring accruals necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, comprehensive income, cash flows and changes in stockholders’ equity. The results of operations for the periods presented are not necessarily indicative of the operating results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as recast to the extent provided in the Current Report on Form 8-K and the exhibits attached thereto, filed with the Securities and Exchange Commission (the “SEC”) on November 1, 2018.
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are consolidated if the Company has a controlling financial interest, which may exist based on ownership of a majority of the voting interest, or based on the Company’s determination that it is the primary beneficiary of a variable interest entity (“VIE”) or if otherwise required by US GAAP. The Company did not have any material interests in VIEs during the periods presented in these condensed consolidated financial statements. All intercompany balances and transactions are eliminated in consolidation.
The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ materially from these estimates.
Recently issued and adopted accounting pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). On January 1, 2018, the Company adopted the new Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging” (Topic 815) - “Targeted Improvements to Accounting for Hedging Activities.” The ASU better aligns hedge accounting with the Company’s risk management activities, simplifies the application of hedge accounting, and improves transparency as to the scope and results of hedging programs. The Company early adopted the new pronouncement effective January 1, 2018, using the modified retrospective approach by recognizing the cumulative effect of initially applying the new pronouncement as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
The cumulative effect of the changes made to our January 1, 2018 condensed consolidated balance sheet for the adoption of ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) and ASU 2017-12 “Derivatives and Hedging” (Topic 815) - “Targeted Improvements to Accounting for Hedging Activities” is as follows:
(in millions)
 
Balance at December 31, 2017
 
Adjustments due to ASU 2014-09
 
Adjustments due to ASU 2017-12
 
Balance at January 1, 2018
Assets
 
 
 
 
 
 
 
 
Trade accounts receivable, net
 
$
1,062.4

 
$
41.3

 
$

 
$
1,103.7

Inventories
 
839.5

 
(2.1
)
 

 
837.4

Prepaid expenses and other current assets
 
149.6

 
1.8

 

 
151.4

Liabilities
 
 
 
 
 
 
 
 
Trade accounts payable
 
$
941.7

 
$
7.0

 
$

 
$
948.7

Other accrued expenses
 
301.6

 
33.2

 

 
334.8

Equity
 
 
 
 
 
 
 
 
Accumulated deficit
 
$
(934.1
)
 
$
0.8

 
$
(0.5
)
 
$
(933.8
)
Accumulated other comprehensive loss
 
(278.5
)
 

 
0.5

 
(278.0
)
The following tables summarize the impact of adopting the new revenue standard upon the Company’s condensed consolidated balance sheet and statement of operations as of and for the three and nine months ended September 30, 2018:
 
 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
(in millions)
 
As reported
 
Balances without adoption of ASC 606
 
Effect of change higher/(lower)
 
As reported
 
Balances without adoption of ASC 606
 
Effect of change higher/(lower)
Net sales
 
$
2,130.7

 
$
2,129.5

 
$
1.2

 
$
6,661.3

 
$
6,660.6

 
$
0.7

Cost of goods sold (exclusive of depreciation)
 
1,662.0

 
1,660.9

 
1.1

 
5,205.5

 
5,204.9

 
0.6

 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
$
20.3

 
$
20.3

 
$

 
$
57.7

 
$
57.7

 
$

Net income
 
49.6

 
49.5

 
0.1

 
171.1

 
171.0

 
0.1

 
 
September 30, 2018
(in millions)
 
As reported
 
Balances without adoption of ASC 606
 
Effect of change higher/(lower)
Assets
 
 
 
 
 
 
Trade accounts receivable, net
 
$
1,261.0

 
$
1,234.1

 
$
26.9

Inventories
 
843.6

 
849.2

 
(5.6
)
Prepaid expenses and other current assets
 
164.8

 
159.9

 
4.9

Liabilities
 
 
 
 
 
 
Trade accounts payable
 
$
920.8

 
$
913.1

 
$
7.7

Other accrued expenses
 
251.9

 
234.3

 
17.6

Equity
 
 
 
 
 
 
Accumulated deficit
 
$
(762.7
)
 
$
(763.6
)
 
$
0.9


In March 2017, the FASB issued ASU 2017-07 “Compensation - Retirement Benefits” (Topic 715) - “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” On January 1, 2018, the Company adopted the amendments to ASC Topic 715 that improves the presentation of net periodic pension and postretirement benefit costs, by separating the presentation of service costs from other components of net periodic costs. The interest cost, expected return on assets, and amortization of prior service costs have been reclassified from warehousing, selling, and administrative expenses to other expense, net. The mark to market, curtailment, and settlement expenses have been reclassified from other operating expenses, net to other expense, net.
Adoption of ASU 2017-07 resulted in a retrospective presentation change to the net periodic cost of our defined benefit pension and other postretirement employee benefits (“OPEB”) plans within our consolidated income statement as follows:
 
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
(in millions)
 
As revised
 
Previously reported
 
Effect of change higher/(lower)
 
As revised
 
Previously reported
 
Effect of change higher/(lower)
Warehousing, selling and administrative
 
$
230.7

 
$
228.0

 
$
2.7

 
$
695.2

 
$
687.7

 
$
7.5

Other income (expense), net

(4.4
)
 
(7.1
)
 
(2.7
)
 
(20.4
)
 
(27.9
)
 
(7.5
)

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows” (Topic 230) - “Classification of Certain Cash Receipts and Cash Payments.” The ASU clarifies and provides specific guidance on eight cash flow classification issues that were not addressed within the previous guidance. The Company adopted the ASU as of January 1, 2018 and accordingly restated the condensed consolidated statement of cash flows for the nine months ended September 30, 2017 to conform with the current period presentation under this new guidance. As a result of the adoption, the Company reclassified $3.2 million of cash outflows previously reported as operating activities to financing activities within the condensed consolidated statement of cash flows related to contingent consideration payments for the nine months ended September 30, 2017.
The Company also adopted the following standards during 2018, none of which had a material impact to the financial statements or financial statement disclosures:
Standard
 
Effective date
2018-07
Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting
July 1, 2018
2017-09
Compensation - Stock Compensation - Scope of Modification Accounting
January 1, 2018
2017-04
Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment
January 1, 2018
2017-01
Business Combinations - Clarifying the Definition of a Business
January 1, 2018
2016-18
Statement of Cash Flows - Restricted Cash
January 1, 2018
2016-16
Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory
January 1, 2018
2016-01
Financial Instrument - Recognition and Measurement of Financial Assets and Financial Liabilities
January 1, 2018

Accounting pronouncements issued and not yet adopted
In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842), which supersedes the lease recognition requirements in ASC Topic 840, “Leases.” The core principal of the guidance is that an entity should recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within such fiscal years. Early adoption is permitted. The guidance is to be applied using a modified retrospective transition method with the option to elect a package of practical expedients. The Company has established a project team who has completed the initial scoping assessment and is in the process of implementing a software solution, including lease data conversion, to comply with the new standard's reporting and disclosure requirements. The Company is also in the process of identifying changes to processes and controls related to the new compliance requirements and software implementation. Upon adoption of this standard on January 1, 2019, the Company expects the condensed consolidated balance sheet to include a right of use asset and liability related to certain operating lease arrangements.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326) - “Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to use a Current Expected Credit Loss model, which is a new impairment model based on expected losses rather than incurred losses. Under the model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity’s estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon initial recognition of the related assets. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. The Company expects to adopt this guidance when effective, and does not expect the guidance to have a significant impact to the condensed consolidated financial statements when adopted on January 1, 2020.
In January 2018, the FASB issued ASU 2018-02 “Income Statement - Reporting Comprehensive Income” (Topic 220)  “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“AOCI”), which gives entities the option to reclassify certain tax effects, that the FASB refers to as having been stranded, resulting from the Tax Cuts and Jobs Act from AOCI to retained earnings. The new guidance may be applied retrospectively to each period in which the effect of the Tax Cuts and Jobs Act is recognized, or in the period of adoption. The Company must adopt this guidance for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently determining the impact to the Company’s reported accumulated deficit and accumulated other comprehensive loss line items within the condensed consolidated balance sheet, which will be recorded when the ASU is adopted.
In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement” (Topic 820) - “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The ASU amends the requirements related to fair value disclosures to include new disclosure requirements and eliminate or modify certain historic disclosures. The ASU amendment was part of the FASB’s disclosure framework project that is designed to increase the effectiveness of companies’ disclosures to the users of the financial statements and footnotes. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. Early adoption is permitted. The Company is currently determining the impact to the Company’s disclosure requirements, which will be reflected in the footnote disclosures subsequent to the ASU adoption on January 1, 2020.
In August 2018, the FASB issued ASU 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General” (Subtopic 715-20) - “Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” The ASU amends the requirements related to defined benefit pension and other postretirement plan disclosures to include new disclosure requirements and eliminate or clarify certain historic disclosures. The ASU amendment was part of the FASB’s disclosure framework project that is designed to increase the effectiveness of companies’ disclosures to the users of the financial statements and footnotes. This guidance will be effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently determining the impact to the Company’s disclosure requirements, which will be reflected in the footnote disclosures subsequent to the ASU adoption.
In August 2018, the FASB issued ASU 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software” (Subtopic 350-40) - “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” The ASU aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The ASU stipulates that the implementation and set-up costs related to cloud computing arrangements that contain a software license are able to be capitalized. The ASU also prescribes the balance sheet, income statement, and cash flow classification related to the capitalized cloud computing costs. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on the consolidated financial statements and related disclosures upon adoption of the ASU on January 1, 2020.
v3.10.0.1
Revenue
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
3. Revenue
On January 1, 2018, the Company adopted the new revenue standard using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC Topic 605. The Company recorded a net decrease to the opening accumulated deficit of $0.8 million as of January 1, 2018 due to the cumulative impact of adopting the new revenue standard.
The Company disaggregates revenues from contracts with customers by both geographic segments and revenue contract types. Geographic reportable segmentation is pertinent to understanding Univar’s revenues, as it aligns to how the Company reviews the financial performance of its operations. Revenue contract types are differentiated by the type of good or service Univar offers customers, since the contractual terms necessary for revenue recognition are unique to each of the identified revenue contract types.
The following table disaggregates external customer net sales by major stream:
(in millions)
 
USA
 
Canada
 
EMEA
 
Rest of
World
 
Consolidated
 
 
Three Months Ended September 30, 2018
Chemical Distribution
 
$
1,237.8

 
$
206.7

 
$
472.0

 
$
96.2

 
$
2,012.7

Crop Sciences
 

 
56.2

 

 

 
56.2

Services
 
47.5

 
10.6

 
0.4

 
3.3

 
61.8

Total external customer net sales
 
$
1,285.3

 
$
273.5

 
$
472.4

 
$
99.5

 
$
2,130.7

(in millions)
 
USA
 
Canada
 
EMEA
 
Rest of
World
 
Consolidated
 
 
Nine Months Ended September 30, 2018
Chemical Distribution
 
$
3,659.3

 
$
664.4

 
$
1,521.9

 
$
293.8

 
$
6,139.4

Crop Sciences
 

 
340.6

 

 

 
340.6

Services
 
140.2

 
32.8

 
1.0

 
7.3

 
181.3

Total external customer net sales
 
$
3,799.5

 
$
1,037.8

 
$
1,522.9

 
$
301.1

 
$
6,661.3


Revenue is recognized when performance obligations under the terms of the contract are satisfied, which generally occurs when goods or services are transferred to a customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Payment terms and conditions vary by regions where the Company performs business and contract types. The term between invoicing and when payment is due is generally one year or less. As of September 30, 2018, none of the Company’s contracts contained a significant financing component.
Chemical Distribution
The Company generates revenue when control for products is transferred to customers. Certain customers may receive discounts off the transaction price, primarily due to price and volume incentives, or return product for non-conformance, which are accounted for as variable consideration. The Company estimates the change in the transaction price that is expected to be provided to customers based on historical experience, which impacts revenues recognized.
Crop Sciences
The Company generates revenue when control for products is transferred to customers. The amount of consideration recorded varies due to price movements and rights granted to customers to return product. Customer payment terms often extend through a growing season, which may be up to six months.
Transaction prices may move during an agricultural growing season and changes may affect the amount of consideration the Company will receive. Transaction prices are also affected by special offers or volume discounts. The Company estimates the expected changes in the transaction price based on the combination of historical experience and the impact of weather on the current agriculture season. The adjustments to the transaction price are recognized as variable consideration and impacts revenues recognized.
When customers are provided rights to return eligible products, the Company estimates the expected returns based on the combination of historical experience and the impact of weather on the current agriculture season, which affects the revenues recognized.
Services
The Company generates revenue from services as they are performed and economic value is transferred to customers. Univar's services provided to customers are primarily related to waste management services and warehousing services. Waste management services is primarily related to plant maintenance, environmental contracting, environmental consulting and the collection and disposal of both hazardous and non-hazardous waste products. Warehousing services is primarily inclusive of blending, warehousing, logistics and distribution services for customers. Waste management and warehousing services are recognized over time as the performance obligations are satisfied.
Costs to obtain or fulfill contracts with customers
Univar expenses costs to obtain contracts when the contract term and benefit period is expected to be one year or less. Contract costs where the contract term and benefit period is expected to be more than a year are capitalized and amortized over the performance obligation period. Capitalized contract costs of $1.1 million and $6.2 million are included in other current assets and other assets as of September 30, 2018.
Deferred revenue
Deferred revenues are recognized as a contract liability when customers provide Univar with consideration prior to the Company satisfying a performance obligation. The following table provides information pertaining to the deferred revenue balance and account activity:
(in millions)
 
 
Deferred revenue as of January 1, 2018
 
$
100.9

Deferred revenue as of September 30, 2018
 
5.6

Revenue recognized that was included in the deferred revenue balance at the beginning of the period
 
100.0


The deferred revenue balances are all expected to have a duration of one year or less and are recorded within the other accrued expenses line item of the condensed consolidated balance sheet.
v3.10.0.1
Other operating expenses, net
9 Months Ended
Sep. 30, 2018
Other Income and Expenses [Abstract]  
Other operating expenses, net
4. Other operating expenses, net
Other operating expenses, net consisted of the following activity:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Stock-based compensation expense
 
$
4.0

 
$
4.5

 
$
17.7

 
$
16.0

Restructuring charges
 
2.9

 
0.9

 
3.4

 
4.4

Other employee termination costs
 
2.7

 
2.8

 
9.5

 
5.9

Business transformation costs
 

 
3.0

 

 
23.6

Acquisition and integration related expenses
 
5.5

 
1.3

 
6.9

 
2.0

Other
 
(2.7
)
 
(0.7
)
 
(0.5
)
 
3.9

Total other operating expenses, net
 
$
12.4

 
$
11.8

 
$
37.0

 
$
55.8

v3.10.0.1
Restructuring charges
9 Months Ended
Sep. 30, 2018
Restructuring and Related Activities [Abstract]  
Restructuring charges
5. Restructuring charges
Restructuring charges recorded relate to large, strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. These actions primarily result in workforce reductions, lease termination costs and other facility rationalization costs. Restructuring charges are recorded in other operating expenses, net in the condensed consolidated statement of operations.
2018 Restructuring
During the three months and nine months ended September 30, 2018, the Company recorded restructuring charges of $2.8 million in USA and $0.9 million in Other, relating to employee termination costs for employees impacted by a decision to consolidate departments. The Company expects to incur approximately $5.2 million of additional employee termination and other exit costs over the next two years and expects this program to be substantially completed by 2020.
Also during the three months ended September 30, 2018, the Company recorded restructuring charges of $0.1 million for the Rest of the World segment, consisting of $0.1 million in facility exit costs.
During the nine months ended September 30, 2018, the Company recorded restructuring charges of $0.6 million for the Rest of World segment, consisting of $0.3 million in employee termination costs, $0.2 million in facility exit costs and $0.1 million in other exit costs. The Company does not expect to incur material costs in the future related to this restructuring program. The actions associated with this program are expected to be completed by the end of the current year.
The cost information above does not contain any estimates for programs that may be developed and implemented in future periods.
2014 to 2017 Restructuring
Between 2014 through 2017, management implemented several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. Total cumulative charges recorded through September 30, 2018 for USA related to these restructuring programs were $40.4 million, which included $16.5 million in employee termination costs, $22.2 million in facility exit costs, and $1.7 million in other exit costs. The Company did not record restructuring charges for the programs during 2018. The actions associated with the restructuring programs were completed as of June 30, 2018, although administratively cash payments will be made into the future. During the three months ended September 30, 2018, the Company reduced its estimate in the amount of $0.9 million within facility exit costs relating to a favorable lease buyout for USA.
Total cumulative charges recorded through September 30, 2018 for Canada were $5.7 million related to employee termination costs. There were no restructuring charges recorded for the programs during 2018. As of June 30, 2018, the actions associated with the restructuring programs were completed.
Total cumulative charges recorded through September 30, 2018 for EMEA were $32.8 million, which included $22.5 million in employee termination costs, $3.7 million in facility exit costs, and $6.6 million in other exit costs. During 2018, the Company did not record restructuring charges for the programs. The actions associated with the restructuring programs were completed as of June 30, 2018.
Total cumulative charges recorded through September 30, 2018 for ROW were $6.4 million, which included $6.2 million in employee termination costs and $0.2 million in facility exit costs. The Company did not record restructuring charges for these programs during 2018. As of June 30, 2018, the Company completed this program.
Total cumulative charges recorded through September 30, 2018 for Other were $6.6 million, which included $5.8 million in employee termination costs and $0.8 million in other exit costs. There were no restructuring charges recorded for these programs during 2018. As of June 30, 2018, the Company completed this program.
The following table summarizes activity related to accrued liabilities associated with restructuring:
(in millions)
 
January 1, 2018
 
Charge to 
earnings
 
Cash
paid
 
Non-cash 
and other
 
September 30, 2018
Employee termination costs
 
$
3.0

 
$
4.0

 
$
(2.0
)
 
$
(0.5
)
 
$
4.5

Facility exit costs
 
10.2

 
(0.7
)
 
(4.5
)
 
(0.1
)
 
4.9

Other exit costs
 
(0.5
)
 
0.1

 
(0.1
)
 
0.5

 

Total
 
$
12.7

 
$
3.4

 
$
(6.6
)
 
$
(0.1
)
 
$
9.4


(in millions)
 
January 1, 2017
 
Charge to 
earnings
 
Cash 
paid
 
Non-cash 
and other
 
December 31, 2017
Employee termination costs
 
$
6.9

 
$
2.9

 
$
(7.2
)
 
$
0.4

 
$
3.0

Facility exit costs
 
13.2

 
2.8

 
(5.5
)
 
(0.3
)
 
10.2

Other exit costs
 

 
(0.2
)
 
(0.3
)
 

 
(0.5
)
Total
 
$
20.1

 
$
5.5

 
$
(13.0
)
 
$
0.1

 
$
12.7



Restructuring liabilities of $5.1 million and $5.8 million were classified as current in other accrued expenses in the condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively. The long-term portion of restructuring liabilities of $4.3 million and $6.9 million were recorded in other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively, and primarily consists of facility exit costs that are expected to be paid within the next five years.
While the Company believes the recorded restructuring liabilities are adequate, revisions to current estimates may be recorded in future periods based on new information as it becomes available.
v3.10.0.1
Other (expense) income, net
9 Months Ended
Sep. 30, 2018
Other Income and Expenses [Abstract]  
Other (expense) income, net
6. Other income (expense), net
Other income (expense), net consisted of the following gains (losses):
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2018

2017
 
2018
 
2017
Foreign currency transactions
 
$
(3.7
)

$
(0.4
)
 
$
(8.0
)
 
$
(4.3
)
Foreign currency denominated loans revaluation
 
0.8


(6.8
)
 
(0.6
)
 
(15.2
)
Undesignated foreign currency derivative instruments (1)
 
2.7


(0.6
)
 
3.6

 
1.6

Undesignated interest rate swap contracts (1)
 

 
1.8

 

 
(3.0
)
Debt amendment costs
 



 

 
(4.2
)
Non-operating retirement benefits (2)
 
3.3

 
2.7

 
10.2

 
7.5

Other
 
(0.6
)

(1.1
)
 
(2.2
)
 
(2.8
)
Total other income (expense), net
 
$
2.5

 
$
(4.4
)
 
$
3.0

 
$
(20.4
)
 
(1)
Refer to “Note 14: Derivatives” for more information.
(2)
Refer to “Note 7: Employee benefit plans” for more information.
v3.10.0.1
Employee benefit plans
9 Months Ended
Sep. 30, 2018
Postemployment Benefits [Abstract]  
Employee benefit plans
7. Employee benefit plans
The following table summarizes the components of net periodic benefit recognized in the condensed consolidated statements of operations:
 
 
 
Domestic - Defined Benefit Pension Plans
 

Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)

2018

2017
 
2018
 
2017
Service cost (1)
 
$

 
$

 
$

 
$

Interest cost (2)

6.8


7.7

 
20.4

 
23.1

Expected return on plan assets (2)

(7.8
)

(7.7
)
 
(23.4
)
 
(23.2
)
Net periodic benefit

$
(1.0
)

$

 
$
(3.0
)
 
$
(0.1
)
 
 
Foreign - Defined Benefit Pension Plans
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Service cost (1)
 
$
0.7

 
$
0.6

 
$
2.1

 
$
1.8

Interest cost (2)
 
3.8

 
4.1

 
11.7

 
12.0

Expected return on plan assets (2)
 
(6.2
)
 
(6.6
)
 
(19.1
)
 
(19.3
)
Prior service cost (credits) (2)
 

 
(0.2
)
 
0.1

 
(0.2
)
Net periodic benefit
 
$
(1.7
)
 
$
(2.1
)
 
$
(5.2
)
 
$
(5.7
)

 
 
Other Postretirement Benefits
 
 
Three months ended
June 30,
 
Six months ended
June 30,
(in millions)
 
2018
 
2017
 
2018
 
2017
Service cost (1)
 
$

 
$

 
$

 
$

Interest cost (2)
 
0.1

 

 
0.1

 
0.1

Net periodic cost
 
$
0.1

 
$

 
$
0.1

 
$
0.1


 

(1)
Service cost is included in warehouse, selling and administrative expenses.
(2)
These amounts are included in other income (expense), net.
v3.10.0.1
Income taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income taxes
8. Income taxes
During the three months and nine months ended September 30, 2018, income tax expense was $20.3 million and $57.7 million, and resulted in an effective tax rate of 29.0% and 25.2%, respectively. The Company’s effective tax rate was higher than the US federal statutory rate of 21.0% primarily due to the addition of state taxes, and the higher tax rates incurred on the Company's earnings outside the US, including the expected net impact of the 2017 US Tax Cuts and Jobs Act on foreign net earnings. The increases in the effective tax rate were partially offset by the release of valuation allowances on certain tax attributes. The Company's effective tax rate for the nine month period ended September 30, 2018 was lower than its three month period effective tax rate ended September 30, 2018 mainly due to the impact of the discrete tax benefits recorded in previous quarters.
During the three months and nine months ended September 30, 2017, income tax expense was $6.5 million and $15.4 million, and resulted in an effective tax rate of 14.3% and 14.2%, respectively. The Company’s effective tax rate for the three and nine month periods ended September 30, 2017 was lower than the US federal statutory rate of 35.0% primarily due to the mix of earnings in multiple jurisdictions, non-taxable interest income and the release of a valuation allowance on certain foreign tax attributes. Included in the $6.5 million and $15.4 million expense for the three and nine months ended September 30, 2017 was $0.5 million and $4.0 million benefit, respectively, related to excess tax benefits from share-based compensation.
Impacts of the Tax Cuts and Jobs Act
On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”) was signed into US law. In addition to reduction of the corporate tax rate from 35% to 21%, the Tax Act contains significant changes to corporate taxation. Beginning in 2018, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions become effective. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate the provision of the Tax Act and application of ASC 740, “Income Taxes.” Under US GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future US inclusions in taxable income related to GILTI as a current-period expense when occurred (the “period cost method”) or (2) factoring such amounts into a Company's measurement of its deferred taxes (the “deferred method”). As the Company is still evaluating the impact of the Tax Act, no accounting policy election has been made yet regarding which method the Company will utilize for GILTI.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. As a result of the Tax Act, the Company recorded provisional amounts in 2017 including a one-time repatriation tax of $76.5 million and $47.6 million of foreign tax credits, of which $34.0 million was recorded as a deferred tax asset with an equally offsetting valuation allowance.
During the third quarter of 2018, we increased the Company’s 2017 provisional tax estimate related to the Tax Act by $6.8 million to reflect the impact of additional analysis, changes in interpretations due to new regulatory guidance, and assumptions the Company has made. This provisional tax estimate is included in the Company’s interim financial statements for the three and nine months ended September 30, 2018. The accounting is expected to be complete within the measurement period of one year from December 22, 2017.
v3.10.0.1
Earnings per share
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Earnings per share
9. Earnings per share
The following table presents the basic and diluted earnings per share computations:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except per share data)
 
2018
 
2017
 
2018
 
2017
Basic:
 
 
 
 
 
 
 
 
Net income
 
$
49.6

 
$
38.9

 
$
171.1

 
$
92.8

Less: earnings allocated to participating securities
 
0.1

 
0.1

 
0.3

 
0.2

Earnings allocated to common shares outstanding
 
$
49.5

 
$
38.8

 
$
170.8

 
$
92.6

Weighted average common shares outstanding
 
141.2

 
140.4

 
141.1

 
140.0

Basic income per common share
 
$
0.35

 
$
0.28

 
$
1.21

 
$
0.66

Diluted:
 
 
 
 
 
 
 
 
Net income
 
$
49.6

 
$
38.9

 
$
171.1

 
$
92.8

Less: earnings allocated to participating securities
 

 

 

 

Earnings allocated to common shares outstanding
 
$
49.6

 
$
38.9

 
$
171.1

 
$
92.8

Weighted average common shares outstanding
 
141.2

 
140.4

 
141.1

 
140.0

Effect of dilutive securities: stock compensation plans (1)
 
1.1

 
1.0

 
1.0

 
1.3

Weighted average common shares outstanding – diluted
 
142.3

 
141.4

 
142.1

 
141.3

Diluted income per common share (2)
 
$
0.35

 
$
0.28

 
$
1.20

 
$
0.66

 
  
(1)
Stock options to purchase 1.5 million and 0.9 million shares of common stock were outstanding during the three months ended September 30, 2018 and 2017, respectively, but were not included in the calculation of diluted income per share as the impact of these stock options would have been anti-dilutive. Stock options to purchase 1.6 million and 0.8 million shares of common stock were outstanding during the nine months ended September 30, 2018 and 2017, respectively, but were not included in the calculation of diluted income per share as the impact of these stock options would have been anti-dilutive.
(2)
As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters’ earnings per share may not equal the earnings per share for any year-to-date period.
v3.10.0.1
Accumulated other comprehensive loss
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Accumulated other comprehensive loss
10. Accumulated other comprehensive loss
The following tables present the changes in accumulated other comprehensive loss by component, net of tax:
(in millions)
 
Cash flow hedges
 
Defined
benefit
pension items
 
Currency
translation
items
 
Total
Balance as of December 31, 2017
 
$
6.7

 
$
(1.2
)
 
$
(284.0
)
 
$
(278.5
)
Impact due to adoption of ASU 2017-12 (1)
 
0.5

 

 

 
0.5

Other comprehensive income (loss) before reclassifications
 
13.3

 

 
(61.0
)
 
(47.7
)
Amounts reclassified from accumulated other comprehensive (loss) income
 
(4.0
)
 
0.1

 

 
(3.9
)
Net current period other comprehensive income (loss)
 
$
9.8

 
$
0.1

 
$
(61.0
)
 
$
(51.1
)
Balance as of September 30, 2018
 
$
16.5

 
$
(1.1
)
 
$
(345.0
)
 
$
(329.6
)
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2016
 
$

 
$
1.2

 
$
(391.1
)
 
$
(389.9
)
Other comprehensive (loss) income before reclassifications
 
(0.3
)
 

 
120.1

 
119.8

Amounts reclassified from accumulated other comprehensive income (loss)
 
1.2

 
(0.2
)
 

 
1.0

Net current period other comprehensive income (loss)
 
$
0.9

 
$
(0.2
)
 
$
120.1

 
$
120.8

Balance as of September 30, 2017
 
$
0.9

 
$
1.0

 
$
(271.0
)
 
$
(269.1
)

 
(1)
Adjusted due to the adoption of ASU 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018. Refer to “Note 2: Significant accounting policies” for more information.

The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net income:
 
 
Three months ended September 30,
 
 
(in millions)
 
2018 (1)
 
2017 (1)
 
Location of impact on
  statement of operations  
Amortization of defined benefit pension items:
 
 
 
 
 
 
Prior service credits
 
$

 
$
(0.1
)
 
Other income (expense), net
Tax expense
 

 

 
Income tax expense
Net of tax
 
$

 
$
(0.1
)
 
 
Cash flow hedges:
 
 
 
 
 
 
Interest rate swap contracts
 
$
(2.4
)
 
$
1.9

 
Interest expense
Tax expense
 
0.6

 
(0.7
)
 
Income tax expense
Net of tax
 
$
(1.8
)
 
$
1.2

 
 
Total reclassifications for the period
 
$
(1.8
)
 
$
1.1

 
 

 
 
Nine months ended September 30,
 
 
(in millions)
 
2018 (1)
 
2017 (1)
 
Location of impact on
  statement of operations  
Amortization of defined benefit pension items:
 
 
 
 
 
 
Prior service cost (credits)
 
$
0.1

 
$
(0.2
)
 
Other income (expense), net
Tax expense
 

 

 
Income tax expense
Net of tax
 
$
0.1

 
$
(0.2
)
 
 
Cash flow hedges:
 
 
 
 
 
 
Interest rate swap contracts
 
$
(5.4
)
 
$
1.9

 
Interest expense
Tax expense
 
1.4

 
(0.7
)
 
Income tax expense
Net of tax
 
$
(4.0
)
 
$
1.2

 
 
Total reclassifications for the period
 
$
(3.9
)
 
$
1.0

 
 
 
(1)
Amounts in parentheses indicate credits to net income in the condensed consolidated statement of operations.
Foreign currency gains and losses relating to intercompany borrowings that are considered a part of the Company’s investment in a foreign subsidiary are reflected in accumulated other comprehensive loss. Total foreign currency gains and losses related to such intercompany borrowings were nil and $4.3 million in losses which included $4.0 million of previously deferred losses that were realized as foreign currency expense in the three month period ended September 30, 2018 and 2017, respectively. Total foreign currency gains and losses related to such intercompany borrowings were nil and $4.8 million in losses for the nine month periods ended September 30, 2018 and 2017, respectively.
v3.10.0.1
Debt
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt
11. Debt
Short-term financing
Short-term financing consisted of the following:
(in millions)
 
September 30, 2018
 
December 31, 2017
Amounts drawn under credit facilities
 
$
6.2

 
$
9.1

Bank overdrafts
 
2.5

 
4.3

Total short-term financing
 
$
8.7

 
$
13.4


As of September 30, 2018 and December 31, 2017, the Company had $146.4 million and $147.0 million in outstanding letters of credit and guarantees, respectively.
Long-term debt
Long-term debt consisted of the following:
(in millions)
 
September 30, 2018
 
December 31, 2017
Senior Term Loan Facilities:




Term B Loan due 2024, variable interest rate of 4.49% and 4.07% at September 30, 2018 and December 31, 2017, respectively

$
1,747.8


$
2,277.8

Asset Backed Loan (ABL) Facilities:




North American ABL Facility due 2020, variable interest rate of 3.58% and 5.00% at September 30, 2018 and December 31, 2017, respectively

386.3


155.0

North American ABL Term Loan due 2018, fully paid off at September 30, 2018 and variable interest rate of 4.44% at December 31, 2017



16.7

Euro ABL Facility due 2019, variable interest rate of 1.75% at September 30, 2018
 
34.8

 

Senior Unsecured Notes:




Senior Unsecured Notes due 2023, fixed interest rate of 6.75% at September 30, 2018 and December 31, 2017

399.5


399.5

Capital lease obligations

56.9


60.9

Total long-term debt before discount

$
2,625.3


$
2,909.9

Less: unamortized debt issuance costs and discount on debt

(24.3
)

(27.9
)
Total long-term debt

$
2,601.0


$
2,882.0

Less: current maturities

(57.3
)

(62.0
)
Total long-term debt, excluding current maturities

$
2,543.7


$
2,820.0