UNIVAR INC., 10-Q filed on 5/10/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 30, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
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   141,301,164
v3.8.0.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Net sales $ 2,158.0 $ 1,998.8
Cost of goods sold 1,671.4 1,559.4
Gross profit 486.6 439.4
Operating expenses:    
Outbound freight and handling 79.3 71.0
Warehousing, selling and administrative 241.0 228.5
Other operating expenses, net 13.6 19.8
Depreciation 31.4 35.9
Amortization 13.4 16.7
Total operating expenses 378.7 371.9
Operating income 107.9 67.5
Other (expense) income:    
Interest income 1.2 0.9
Interest expense (36.1) (36.7)
Loss on extinguishment of debt 0.0 (0.8)
Other income (expense), net 2.6 (6.7)
Total other expense (32.3) (43.3)
Income before income taxes 75.6 24.2
Income tax expense 10.2 1.6
Net income $ 65.4 $ 22.6
Income per common share:    
Basic (in dollars per share) $ 0.46 $ 0.16
Diluted (in dollars per share) $ 0.46 $ 0.16
Weighted average common shares outstanding:    
Basic (in shares) 140.9 139.4
Diluted (in shares) 142.0 140.8
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
Net income $ 65.4 $ 22.6
Other comprehensive income (loss), net of tax:    
Impact due to adoption of ASU 2017-12 [1] 0.5 0.0
Foreign currency translation (7.2) 18.2
Derivative financial instruments 9.1 0.0
Total other comprehensive income, net of tax 2.4 18.2
Comprehensive income $ 67.8 $ 40.8
[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.
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 115.9 $ 467.0
Trade accounts receivable, net 1,288.5 1,062.4
Inventories 921.9 839.5
Prepaid expenses and other current assets 174.6 149.6
Total current assets 2,500.9 2,518.5
Property, plant and equipment, net 983.8 1,003.0
Goodwill 1,809.2 1,818.4
Intangible assets, net 279.0 287.7
Deferred tax assets 30.3 22.8
Other assets 91.1 82.3
Total assets 5,694.3 5,732.7
Current liabilities:    
Short-term financing 8.5 13.4
Trade accounts payable 1,011.7 941.7
Current portion of long-term debt 20.5 62.0
Accrued compensation 74.6 100.7
Other accrued expenses 330.7 301.6
Total current liabilities 1,446.0 1,419.4
Long-term debt 2,683.5 2,820.0
Pension and other postretirement benefit liabilities 252.5 257.1
Deferred tax liabilities 45.8 35.4
Other long-term liabilities 100.8 110.7
Total liabilities 4,528.6 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 March 31, 2018 and December 31, 2017 0.0 0.0
Common stock, 2.0 billion shares authorized at $0.01 par value with 141.3 million and 141.1 million shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively 1.4 1.4
Additional paid-in capital 2,308.8 2,301.3
Accumulated deficit (868.4) (934.1)
Accumulated other comprehensive loss (276.1) (278.5)
Total stockholders’ equity 1,165.7 1,090.1
Total liabilities and stockholders’ equity $ 5,694.3 $ 5,732.7
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 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) 141,300,000 141,100,000
Common stock, shares outstanding (in shares) 141,300,000 141,100,000
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating activities:    
Net income $ 65.4 $ 22.6
Adjustments to reconcile net income to net cash provided (used) by operating activities:    
Depreciation and amortization 44.8 52.6
Amortization of deferred financing fees and debt discount 2.0 2.0
Loss on extinguishment of debt 0.0 0.8
Deferred income taxes (3.0) (3.3)
Stock-based compensation expense 9.4 6.4
Other 0.4 0.5
Changes in operating assets and liabilities:    
Trade accounts receivable, net (219.4) (142.4)
Inventories (80.1) (66.4)
Prepaid expenses and other current assets (14.1) (18.9)
Trade accounts payable 67.3 79.9
Pensions and other postretirement benefit liabilities (11.6) (9.0)
Other, net (0.1) (1.9)
Net cash used by operating activities (139.0) (77.1)
Investing activities:    
Purchases of property, plant and equipment (16.2) (20.9)
Purchases of businesses, net of cash acquired (8.9) (0.5)
Proceeds from sale of property, plant and equipment 2.2 0.0
Other 0.0 (0.3)
Net cash used by investing activities (22.9) (21.7)
Financing activities:    
Proceeds from issuance of long-term debt 141.8 2,264.0
Payments on long-term debt and capital lease obligations (320.1) (2,211.5)
Short-term financing, net (6.6) (5.2)
Financing fees paid 0.0 (4.4)
Taxes paid related to net share settlements of stock-based compensation awards (2.7) (6.0)
Stock option exercises 0.8 23.8
Contingent consideration payments 0.0 (3.2)
Net cash (used) provided by financing activities (186.8) 57.5
Effect of exchange rate changes on cash and cash equivalents (2.4) 5.5
Net decrease in cash and cash equivalents (351.1) (35.8)
Cash and cash equivalents at beginning of period 467.0 336.4
Cash and cash equivalents at end of period 115.9 300.6
Non-cash activities:    
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses 7.3 6.7
Additions of property, plant and equipment under a capital lease obligation $ 6.0 $ 9.8
v3.8.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
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 22.6        
Foreign currency translation adjustment, net of tax 18.2        
Ending balance at Mar. 31, 2017         (371.7)
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 0.0 $ 0.0      
Restricted stock units vested (in shares)   0.8      
Tax withholdings related to net share settlements of stock-based compensation awards (8.5)   (8.5)    
Tax withholdings related to net share settlements of stock-based compensation awards (in shares)   (0.3)      
Stock option exercises 36.5   36.5    
Stock option exercises (in shares)   1.8      
Employee stock purchase plan [2] 1.1   1.1    
Employee stock purchase plan (in shares) [2]   0.0      
Stock-based compensation 19.7   19.7    
Stock-based compensation (in shares)   0.0      
Ending balance at Dec. 31, 2017 $ 1,090.1 $ 1.4 2,301.3 (934.1) (278.5)
Ending balance (in shares) at Dec. 31, 2017 141.1 141.1      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Impact due to adoption of ASU, net of tax [3] $ 0.8     0.3 0.5
Net income 65.4     65.4  
Foreign currency translation adjustment, net of tax (7.2)       (7.2)
Derivative financial instruments, net of tax (9.1)       (9.1)
Restricted stock units vested 0.0 $ 0.0      
Restricted stock units vested (in shares)   0.2      
Tax withholdings related to net share settlements of stock-based compensation awards (2.7)   (2.7)    
Tax withholdings related to net share settlements of stock-based compensation awards (in shares)   (0.1)      
Stock option exercises 0.8   0.8    
Stock option exercises (in shares)   0.1      
Employee stock purchase plan 0.0   0.0    
Employee stock purchase plan (in shares)   0.0      
Stock-based compensation 9.4   9.4    
Stock-based compensation (in shares)   0.0      
Ending balance at Mar. 31, 2018 $ 1,165.7 $ 1.4 $ 2,308.8 $ (868.4) (276.1)
Ending balance (in shares) at Mar. 31, 2018 141.3 141.3      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Impact due to adoption of ASU, net of tax         $ 0.5
[1] Adjusted due to the adoption of ASU 2016-09 “Improvement to Employee Share-Based Payment Accounting” on January 1, 2017.
[2] During November 2016, our Board of Directors approved the Univar Employee Stock Purchase Plan, or ESPP, authorizing the issuances of up to 2.0 million shares of the Company's common stock effective January 1, 2017. The total number of shares issued under the plan for the first two offering periods from January through December 2017 was 39,418 shares.
[3] 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.
v3.8.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Nov. 30, 2016
Deferred tax assets $ 30.3 $ 22.8  
Impact due to adoption of ASU's (0.3)    
Foreign currency translation adjustments, tax 0.0 (2.1)  
Pension and post-employment benefits, tax 0.0 0.6  
Derivative financial instruments tax $ (3.2) (4.3)  
ASU 2016-09 [Member]      
Deferred tax assets   $ 0.2  
Employee Stock [Member]      
Number of employee stock purchase plan shares authorized (in shares)     2,000,000.0
Employee stock purchase plan (in shares)   39,418  
v3.8.0.1
Nature of operations
3 Months Ended
Mar. 31, 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.
v3.8.0.1
Significant accounting policies
3 Months Ended
Mar. 31, 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.
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 FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). On January 1, 2018, the Company adopted the new accounting standard 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, as allowed, 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 quarter ended March 31, 2018:
 
 
Three months ended March 31, 2018
(in millions)
 
As reported
 
Balances without adoption of ASC 606
 
Effect of change higher/(lower)
 
 
 
 
 
 
 
Net sales
 
$
2,158.0

 
$
2,151.7

 
$
6.3

Cost of goods sold
 
1,671.4

 
1,665.5

 
5.9

Gross profit
 
$
486.6

 
$
486.2

 
$
0.4

 
 
 
 
 
 
 
Income tax expense
 
$
10.2

 
$
10.1

 
$
0.1

Net income
 
65.4

 
65.1

 
0.3

 
 
March 31, 2018
(in millions)
 
As reported
 
Balances without adoption of ASC 606
 
Effect of change higher/(lower)
Assets
 
 
 
 
 
 
Trade accounts receivable, net
 
$
1,288.5

 
$
1,240.2

 
$
48.3

Inventories
 
921.9

 
930.3

 
(8.4
)
Prepaid expenses and other current assets
 
174.6

 
165.8

 
8.8

Liabilities
 
 
 
 
 
 
Trade accounts payable
 
$
1,011.7

 
$
997.8

 
$
13.9

Other accrued expenses
 
330.7

 
297.0

 
33.7

Equity
 
 
 
 
 
 
Accumulated deficit
 
$
(868.4
)
 
$
(869.5
)
 
$
1.1


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 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.
The effect of the retrospective presentation change related to the net periodic cost of our defined benefit pension and other postretirement employee benefits (“OPEB”) plans on our consolidated income statement was as follows:
 
 
Three months ended March 31, 2017
(in millions)
 
As revised
 
Previously reported
 
Effect of change higher/(lower)
 
 
 
 
 
 
 
Warehousing, selling and administrative
 
$
228.5

 
$
226.1

 
$
2.4

Other income (expense), net

(6.7
)
 
(9.1
)
 
(2.4
)

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 currently addressed by 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 three months ended March 31, 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 three months ended March 31, 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
 
 
 
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 and has begun implementing a software solution 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. Upon adoption of this standard, 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 evaluating early adoption of this guidance, and 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.
v3.8.0.1
Revenue
3 Months Ended
Mar. 31, 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 March 31, 2018
Chemical Distribution
 
$
1,160.8

 
$
232.0

 
$
538.4

 
$
99.9

 
$
2,031.1

Crop Sciences
 

 
69.4

 

 

 
69.4

Services
 
43.6

 
12.0

 
0.2

 
1.7

 
57.5

Total external customer net sales
 
$
1,204.4

 
$
313.4

 
$
538.6

 
$
101.6

 
$
2,158.0

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 March 31, 2018, none of the Company's contracts contained a significant financing component.
Chemical Distribution
The Company generates revenue when control is transferred for products provided 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 is transferred for products provided 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 impacts 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 are 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 $0.8 million and $2.0 million are included in other current assets and other assets as of March 31, 2018.
Deferred revenue
Deferred revenues are recognized as a contract liability when customers have provided 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 March 31, 2018
 
80.5

Revenue recognized that was included in the deferred revenue balance at the beginning of the period
 
49.5


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.
v3.8.0.1
Other operating expenses, net
3 Months Ended
Mar. 31, 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
March 31,
(in millions)
 
2018
 
2017
Stock-based compensation expense
 
$
9.4

 
$
6.4

Restructuring charges
 
0.5

 
1.7

Other employee termination costs
 
2.4

 
1.7

Business transformation costs
 

 
9.1

Acquisition and integration related expenses
 
0.4

 
0.2

Other
 
0.9

 
0.7

Total other operating expenses, net
 
$
13.6

 
$
19.8

v3.8.0.1
Restructuring charges
3 Months Ended
Mar. 31, 2018
Restructuring and Related Activities [Abstract]  
Restructuring charges
5. Restructuring charges
Restructuring charges relate to the implementation of several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. These actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. The following table presents cost information related to restructuring plans that have not been completed as of March 31, 2018 and does not contain any estimates for plans that may be developed and implemented in future periods.
(in millions)
 
USA
 
Canada
 
EMEA
 
ROW
 
Other
 
Total
Anticipated total costs
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
16.5

 
$
5.8

 
$
22.5

 
$
6.2

 
$
5.8

 
$
56.8

Facility exit costs
 
24.1

 

 
3.7

 
0.2

 

 
28.0

Other exit costs
 
1.7

 

 
6.7

 
0.1

 
0.8

 
9.3

Total
 
$
42.3

 
$
5.8

 
$
32.9

 
$
6.5

 
$
6.6

 
$
94.1

 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred to date costs
 
 
 
 
 
 
 
 
 
 
 
 
Inception of plans through March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
16.5

 
$
5.8

 
$
22.5

 
$
6.2

 
$
5.8

 
$
56.8

Facility exit costs
 
22.4

 

 
3.7

 
0.2

 

 
26.3

Other exit costs
 
1.7

 

 
6.7

 
0.1

 
0.8

 
9.3

Total
 
$
40.6

 
$
5.8

 
$
32.9

 
$
6.5

 
$
6.6

 
$
92.4

 
 
 
 
 
 
 
 
 
 
 
 
 
Inception of plans through December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
16.5

 
$
5.7

 
$
22.5

 
$
6.2

 
$
5.8

 
$
56.7

Facility exit costs
 
22.2

 

 
3.7

 
0.2

 

 
26.1

Other exit costs
 
1.7

 

 
6.6

 

 
0.8

 
9.1

Total
 
$
40.4

 
$
5.7

 
$
32.8

 
$
6.4

 
$
6.6

 
$
91.9



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
 
March 31, 2018
Employee termination costs
 
$
3.0

 
$
0.1

 
$
(0.9
)
 
$
0.1

 
$
2.3

Facility exit costs
 
10.2

 
0.2

 
(1.1
)
 

 
9.3

Other exit costs
 
(0.5
)
 
0.2

 
(0.2
)
 

 
(0.5
)
Total
 
$
12.7

 
$
0.5

 
$
(2.2
)
 
$
0.1

 
$
11.1


(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 March 31, 2018 and December 31, 2017, respectively. The long-term portion of restructuring liabilities of $6.0 million and $6.9 million were recorded in other long-term liabilities in the condensed consolidated balance sheets as of March 31, 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.
v3.8.0.1
Other income (expense), net
3 Months Ended
Mar. 31, 2018
Other Income and Expenses [Abstract]  
Other income (expense), net
6. Other income (expense), net
Other income (expense), net consisted of the following gains (losses):
 
 
Three months ended
March 31,
(in millions)
 
2018

2017
Foreign currency transactions
 
$
(0.1
)

$
(2.1
)
Foreign currency denominated loans revaluation
 
1.2


(3.0
)
Undesignated foreign currency derivative instruments (1)
 
(1.3
)

1.0

Debt amendment costs
 


(4.2
)
Non-operating retirement benefits (2)
 
3.5

 
2.4

Other
 
(0.7
)

(0.8
)
Total other income (expense), net
 
$
2.6

 
$
(6.7
)
 
(1)
Refer to “Note 14: Derivatives” for more information.
(2)
Refer to “Note 7: Employee benefit plans” for more information.
v3.8.0.1
Employee benefit plans
3 Months Ended
Mar. 31, 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
 
Foreign - Defined Benefit Pension Plans
 

Three months ended
March 31,
 
Three months ended
March 31,
(in millions)

2018

2017
 
2018
 
2017
Service cost (1)
 
$

 
$

 
$
0.7

 
$
0.6

Interest cost (2)

6.8


7.7

 
4.0

 
3.9

Expected return on plan assets (2)

(7.8
)

(7.7
)
 
(6.5
)
 
(6.3
)
Net periodic benefit

$
(1.0
)

$

 
$
(1.8
)
 
$
(1.8
)
 

(1)
Service cost is included in warehouse, selling and administrative expenses.
(2)
These amounts are included in other income (expense), net.
v3.8.0.1
Income taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income taxes
8. Income taxes
The income tax expense for the three months ended March 31, 2018 was $10.2 million, resulting in an effective tax rate of 13.5%. The Company’s effective tax rate for the three month period ended March 31, 2018 was lower than the US federal statutory rate of 21.0% primarily due to discrete tax benefits of a $9.0 million release of valuation allowance on certain foreign tax attributes and a $2.7 million recognition of previously unrecognized tax benefits due to a statute of limitation expiration. Without consideration of the $12.3 million discrete benefits in the period, the Company's estimated effective annual tax rate was 29.5%, which is higher than the US federal rate of 21.0% due to state income taxes, foreign rate differential, and the overall impact of the new provisions of the Tax Cuts and Jobs Act (discussed below).
The income tax expense for the three months ended March 31, 2017 was $1.6 million, resulting in an effective tax rate of 6.6%. The Company’s effective tax rate for three months ended March 31, 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 $1.6 million expense for March 31, 2017 was $2.2 million benefit related to excess tax benefits from equity compensation now reported as a discrete item on the quarter due to the Company's adoption of ASU 2016-09.
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 law. 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. The GILTI provisions require the Company to include in its US income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate the provision of the Tax Act and the application of ASC 740. 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 incurred (the “period cost method”) or (2) factoring such amounts into a Company’s measurement of its deferred taxes (the “deferred method”). The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future US inclusions in taxable income related to GILTI. This determination depends not only on the Company’s current structure and estimated future results of global operations but also on the Company’s intent and ability to reasonably estimate the effect of this provision of the Tax Act. 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.
Based on the existing legislative guidance and interpretation, the Company has provisionally estimated the impact on the tax provision of the GILTI inclusion, offset by the related foreign tax credit, and expects that the annual effective tax rate will increase by approximately 3.8%. The Company does not expect it will be subject to BEAT in 2018.
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 has 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, $47.6 million of foreign tax credits, of which $34.0 million was recorded as a deferred tax asset, net of a valuation allowance. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. The accounting is expected to be complete within the measurement period of one year from December 22, 2017.
v3.8.0.1
Earnings per share
3 Months Ended
Mar. 31, 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 March 31,
(in millions, except per share data)
 
2018
 
2017
Basic:
 
 
 
 
Net income
 
$
65.4

 
$
22.6

Less: earnings allocated to participating securities
 
0.1

 

Earnings allocated to common shares outstanding
 
$
65.3

 
$
22.6

Weighted average common shares outstanding
 
140.9

 
139.4

Basic income per common share
 
$
0.46

 
$
0.16

Diluted:
 
 
 
 
Net income
 
$
65.4

 
$
22.6

Less: earnings allocated to participating securities
 

 

Earnings allocated to common shares outstanding
 
$
65.4

 
$
22.6

Weighted average common shares outstanding
 
140.9

 
139.4

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

 
1.4

Weighted average common shares outstanding – diluted
 
142.0

 
140.8

Diluted income per common share
 
$
0.46

 
$
0.16

 
  
(1)
Stock options to purchase 0.6 million shares of common stock were outstanding during the three months ended March 31, 2018 and 2017, but were not included in the calculation of diluted income per share as the impact of these stock options would have been anti-dilutive.
v3.8.0.1
Accumulated other comprehensive loss
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Accumulated other comprehensive income (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
 
9.1

 

 
(7.2
)
 
1.9

Net current period other comprehensive income (loss)
 
$
9.6

 
$

 
$
(7.2
)
 
$
2.4

Balance as of March 31, 2018
 
$
16.3

 
$
(1.2
)
 
$
(291.2
)
 
$
(276.1
)
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2016
 
$

 
$
1.2

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

 

 
18.2

 
18.2

Net current period other comprehensive income (loss)
 
$

 
$

 
$
18.2

 
$
18.2

Balance as of March 31, 2017
 
$

 
$
1.2

 
$
(372.9
)
 
$
(371.7
)

 
(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.
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. There were no foreign currency gains and losses related to such intercompany borrowings for the three month period ended March 31, 2018. Total foreign currency gains related to such intercompany borrowings were $0.5 million for the three month period ended March 31, 2017.
v3.8.0.1
Debt
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Debt
11. Debt
Short-term financing
Short-term financing consisted of the following:
(in millions)
 
March 31, 2018
 
December 31, 2017
Amounts drawn under credit facilities
 
$
6.9

 
$
9.1

Bank overdrafts
 
1.6

 
4.3

Total short-term financing
 
$
8.5

 
$
13.4


As of March 31, 2018 and December 31, 2017, the Company had $147.2 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)
 
March 31, 2018
 
December 31, 2017
Senior Term Loan Facilities:




Term B Loan due 2024, variable interest rate of 4.38% and 4.07% at March 31, 2018 and December 31, 2017, respectively

$
1,977.8


$
2,277.8

Asset Backed Loan (ABL) Facilities:




North American ABL Facility due 2020, variable interest rate of 3.38% and 5.00% at March 31, 2018 and December 31, 2017, respectively

296.6


155.0

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



16.7

Senior Unsecured Notes:




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

399.5


399.5

Capital lease obligations

56.8


60.9

Total long-term debt before discount

$
2,730.7


$
2,909.9

Less: unamortized debt issuance costs and discount on debt

(26.7
)

(27.9
)
Total long-term debt

$
2,704.0


$
2,882.0

Less: current maturities

(20.5
)

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

$
2,683.5


$
2,820.0



The weighted average interest rate on long-term debt was 4.17% and 4.50% as of March 31, 2018 and December 31, 2017, respectively.
On February 12, 2018, Univar made an optional $300.0 million early repayment of principal against the $2,277.8 million balance of its Term B Loan due 2024. This early repayment used existing cash balances that were remitted to the US from non-US subsidiary earnings, subject to the newly enacted US Tax Cuts and Jobs Act.
v3.8.0.1
Supplemental balance sheet information
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Supplemental balance sheet information
12. Supplemental balance sheet information
Property, plant and equipment, net
(in millions)
 
March 31, 2018
 
December 31, 2017
Property, plant and equipment, at cost
 
$
1,923.9

 
$
1,930.2

Less: accumulated depreciation
 
(940.1
)
 
(927.2
)
Property, plant and equipment, net
 
$
983.8

 
$
1,003.0

Capital lease assets, net
Included within property, plant and equipment, net are assets related to capital leases where the Company is the lessee. The below table summarizes the cost and accumulated depreciation related to these assets:
(in millions)
 
March 31, 2018
 
December 31, 2017
Capital lease assets, at cost
 
$
83.8

 
$
86.0

Less: accumulated depreciation
 
(28.9
)
 
(27.0
)
Capital lease assets, net
 
$
54.9

 
$
59.0






Intangible assets, net
The gross carrying amounts and accumulated amortization of the Company’s intangible assets were as follows:
 
 
March 31, 2018
 
December 31, 2017
(in millions)
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
 
$
852.5

 
$
(593.0
)
 
$
259.5

 
$
853.5

 
$
(582.1
)
 
$
271.4

Other
 
182.8

 
(163.3
)
 
19.5

 
177.8

 
(161.5
)
 
16.3

Total intangible assets
 
$
1,035.3

 
$
(756.3
)
 
$
279.0

 
$
1,031.3

 
$
(743.6
)
 
$
287.7


Other intangible assets consist of intellectual property trademarks, trade names, supplier relationships, non-compete agreements and exclusive distribution rights.
Other accrued expenses    
Other accrued expenses that were greater than five percent of total current liabilities consisted of customer prepayments and deposits, which were $91.4 million and $97.7 million as of March 31, 2018 and December 31, 2017, respectively.
v3.8.0.1
Fair value measurements
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair value measurements
13. Fair value measurements
Items measured at fair value on a recurring basis
The following table presents the Company’s gross assets and liabilities measured on a recurring basis:
 
 
Level 2
 
Level 3
(in millions)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018
 
December 31, 2017
Financial current assets:
 
 
 
 
 
 
 
 
Forward currency contracts
 
$
0.3

 
$
0.3

 
$

 
$

Interest rate swap contracts
 
10.8

 
1.2

 

 

Financial non-current assets:
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
13.2

 
10.6

 

 

Financial current liabilities:
 
 
 
 
 
 
 
 
Forward currency contracts
 
0.3

 
0.4

 

 

Contingent consideration
 

 

 
0.3

 

Financial non-current liabilities:
 
 
 
 
 
 
 
 
Contingent consideration
 

 

 
0.3

 
0.4


The net amounts by legal entity related to forward currency contracts included in prepaid and other current assets were $0.2 million and $0.2 million as of March 31, 2018 and December 31, 2017, respectively. The net amounts related to foreign currency contracts included in other accrued expenses were $0.2 million and $0.3 million as of March 31, 2018 and December 31, 2017, respectively.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swaps is determined by estimating the net present value of amounts to be paid under the agreement offset by the net present value of the expected cash inflows based on market rates and associated yield curves. Based on these valuation methodologies, these derivative contracts are classified as Level 2 in the fair value hierarchy.
The fair value of the contingent consideration is based on a real options approach, which takes into account management’s best estimate of the acquired business performance, as well as achievement risk. Based on the valuation methodology, contingent consideration is classified as Level 3 in the fair value hierarchy.
The following table is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3), which consists of contingent consideration related to prior acquisitions.
(in millions)
 
Contingent
  Consideration  
Fair value as of December 31, 2017
 
$
0.4

Fair value adjustments
 
0.2

Fair value as of March 31, 2018
 
$
0.6


The change in the fair value and payments related to the contingent consideration are recorded in the other, net line item of the operating activities within the condensed consolidated statement of cash flows.
Financial instruments not carried at fair value
The estimated fair value of financial instruments not carried at fair value in the condensed consolidated balance sheets were as follows:
 
 
March 31, 2018
 
December 31, 2017
(in millions)
 
Carrying    
Amount
 
Fair
Value    
 
Carrying    
Amount
 
Fair
Value    
Financial liabilities:
 
 
 
 
 
 
 
 
Long-term debt including current portion (Level 2)
 
$
2,704.0

 
$
2,760.6

 
$
2,882.0

 
$
2,939.7


The fair values of the long-term debt, including the current portions, were based on current market quotes for similar borrowings and credit risk adjusted for liquidity, margins and amortization, as necessary.
Fair value of other financial instruments
The carrying value of cash and cash equivalents, trade accounts receivable, net, trade accounts payable and short-term financing included in the condensed consolidated balance sheets approximate fair value due to their short-term nature.
v3.8.0.1
Derivatives
3 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
14. Derivatives
Interest rate swaps
The objective of the interest rate swap contracts is to offset the variability of cash flows in LIBOR indexed debt interest payments attributable to changes in the aforementioned benchmark interest rate related to the Term B Loan due 2024.
At March 31, 2018, the Company had interest rate swap contracts with a total notional amount of $2.0 billion whereby a fixed rate of interest (weighted-average of 1.70%) is paid and a variable rate of interest (three-month LIBOR) is received as calculated on the notional amount.
As of July 6, 2017, the Company designated the interest rate swaps as a cash flow hedge in an effort to reduce the mark-to-market volatility recognized within the condensed consolidated statement of operations. As of March 31, 2018, the interest rate swaps held by the Company continue to qualify for hedge accounting. Prior to the hedge accounting designation, changes in fair value of the interest rate swap contracts were recognized directly in other income (expense), net in the condensed consolidated statement of operations. Refer to “Note 6: Other income (expense), net” for additional information. With the adoption of ASU 2017-12, the Company recognizes the changes in fair value of the interest rate swap contracts, whether it is due to effectiveness or ineffectiveness, in other comprehensive income and subsequently is reclassified to the income statement when the hedged item impacts earnings.
During the three months ended March 31, 2018, there were no gains or losses on our interest rate swap contracts that were reclassified to interest expense in the condensed consolidated statement of operations. As of March 31, 2018, we estimate that $10.8 million of derivative gains included in accumulated other comprehensive loss will be reclassified into the condensed consolidated statement of operations within the next 12 months. The activity related to our cash flow hedges is included in “Note 10: Accumulated other comprehensive loss.”
The fair value of interest rate swaps is recorded either in prepaids and other current assets, other assets, other accrued expenses or other long-term liabilities in the condensed consolidated balance sheets. As of March 31, 2018 and December 31, 2017, a current asset of $10.8 million and $1.2 million was included in other current assets, respectively. As of March 31, 2018 and December 31, 2017, a non-current asset of $13.2 million and $10.6 million