UNIVAR SOLUTIONS INC., 10-Q filed on 11/5/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 22, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 001-37443  
Entity Registrant Name Univar Solutions Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 26-1251958  
Entity Address, Address Line One 3075 Highland Parkway, Suite 200  
Entity Address, City or Town Downers Grove,  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60515  
City Area Code 331  
Local Phone Number 777-6000  
Title of 12(b) Security Common Stock ($0.01 par value)  
Trading Symbol UNVR  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   169,100,367
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001494319  
Current Fiscal Year End Date --12-31  
v3.20.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]        
Net sales $ 2,009.2 $ 2,387.3 $ 6,229.6 $ 7,131.9
Cost of goods sold (exclusive of depreciation) 1,513.2 1,842.4 4,711.9 5,513.3
Operating expenses:        
Outbound freight and handling 85.9 96.8 258.1 275.1
Warehousing, selling and administrative 245.5 269.2 770.5 803.4
Other operating expenses, net 21.4 30.2 69.1 258.8
Depreciation 41.6 41.6 123.7 114.5
Amortization 14.7 12.1 45.3 45.1
Impairment charges 20.7 7.0 37.6 7.0
Total operating expenses 429.8 456.9 1,304.3 1,503.9
Operating income 66.2 88.0 213.4 114.7
Other (expense) income:        
Interest income 0.5 0.6 1.7 2.3
Interest expense (28.2) (37.4) (87.4) (111.2)
Loss on sale of business (9.3) 0.0 (17.9) 0.0
Loss on extinguishment of debt 0.0 0.0 (1.8) (0.7)
Other (income) expense, net 2.4 (5.5) (7.4) (17.2)
Total other expense (34.6) (42.3) (112.8) (126.8)
Income (loss) before income taxes 31.6 45.7 100.6 (12.1)
Income tax expense 2.7 43.2 14.0 38.4
Net income (loss) from continuing operations 28.9 2.5 86.6 (50.5)
Net income from discontinued operations 0.0 0.0 0.0 5.4
Net income (loss) $ 28.9 $ 2.5 $ 86.6 $ (45.1)
Income (loss) per common share:        
Basic from continuing operations (in dollars per share) $ 0.17 $ 0.01 $ 0.51 $ (0.31)
Basic from discontinued operations (in dollars per share) 0 0 0 0.03
Basic income (loss) per common share (in dollars per share) 0.17 0.01 0.51 (0.28)
Diluted from continuing operations (in dollars per share) 0.17 0.01 0.51 (0.31)
Diluted from discontinued operations (in dollars per share) 0 0 0 0.03
Diluted income (loss) per common share (in dollars per share) $ 0.17 $ 0.01 $ 0.51 $ (0.28)
Weighted average common shares outstanding:        
Basic (in shares) 169.0 168.6 168.9 162.6
Diluted (in shares) 169.8 169.5 169.7 162.6
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net income (loss) $ 28.9 $ 2.5 $ 86.6 $ (45.1)
Other comprehensive (loss) income, net of tax:        
Impact due to adoption of ASUs [1] 0.0 0.0 0.0 (3.2)
Foreign currency translation 14.3 (31.9) (60.1) (12.1)
Pension and postretirement benefit adjustment 0.0 0.0 0.1 0.1
Derivative financial instruments 2.6 (4.4) (18.8) (28.6)
Total other comprehensive income (loss), net of tax 16.9 (36.3) (78.8) (43.8)
Comprehensive income (loss) $ 45.8 $ (33.8) $ 7.8 $ (88.9)
Accounting Standards Update [Extensible List]       us-gaap:AccountingStandardsUpdate201802Member
[1] Adjusted due to the adoption of Accounting Standards Update (“ASU”) 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019.
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 273.7 $ 330.3
Trade accounts receivable, net of allowance for doubtful accounts of $24.6 and $12.9 at September 30, 2020 and December 31, 2019, respectively. 1,276.8 1,160.1
Inventories 696.3 796.0
Prepaid expenses and other current assets 171.8 167.2
Total current assets 2,418.6 2,453.6
Property, plant and equipment, net 1,085.2 1,152.4
Goodwill 2,267.3 2,280.8
Intangible assets, net 263.3 320.2
Deferred tax assets 20.9 21.3
Other assets 252.0 266.5
Total assets 6,307.3 6,494.8
Current liabilities:    
Short-term financing 0.4 0.7
Trade accounts payable 761.8 895.0
Current portion of long-term debt 27.6 25.0
Accrued compensation 86.7 103.6
Other accrued expenses 393.2 425.1
Total current liabilities 1,269.7 1,449.4
Long-term debt 2,660.4 2,688.8
Pension and other postretirement benefit liabilities 279.8 295.6
Deferred tax liabilities 61.4 56.3
Other long-term liabilities 285.0 271.9
Total liabilities 4,556.3 4,762.0
Stockholders’ equity:    
Preferred stock, 200.0 million shares authorized at $0.01 par value with no shares issued or outstanding as of September 30, 2020 and December 31, 2019 0.0 0.0
Common stock, 2.0 billion shares authorized at $0.01 par value with 169.1 million and 168.7 million shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 1.7 1.7
Additional paid-in capital 2,979.3 2,968.9
Accumulated deficit (771.9) (858.5)
Accumulated other comprehensive loss (458.1) (379.3)
Total stockholders’ equity 1,751.0 1,732.8
Total liabilities and stockholders’ equity $ 6,307.3 $ 6,494.8
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 24.6 $ 12.9
Preferred stock, shares authorized (in shares) 200,000,000.0 200,000,000.0
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) 2,000,000,000.0 2,000,000,000.0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares issued (in shares) 169,100,000 168,700,000
Common stock, shares outstanding (in shares) 169,100,000 168,700,000
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Operating activities:    
Net income (loss) $ 86.6 $ (45.1)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:    
Depreciation and amortization 169.0 159.6
Impairment charges 37.6 7.0
Amortization of deferred financing fees and debt discount 4.7 7.0
Amortization of pension credit from accumulated other comprehensive loss 0.1 0.1
Loss on sale of business 17.9 0.0
(Gain) loss on sale of property, plant and equipment (8.3) 1.7
Loss on extinguishment of debt 1.8 0.7
Deferred income taxes 5.2 4.4
Stock-based compensation expense 10.9 21.7
Charge for inventory step-up of acquired inventory 0.0 5.3
Other 2.6 2.1
Changes in operating assets and liabilities:    
Trade accounts receivable, net (126.2) 3.7
Inventories 89.6 72.1
Prepaid expenses and other current assets (19.2) 20.0
Trade accounts payable (123.4) (85.2)
Pensions and other postretirement benefit liabilities (16.8) (22.6)
Other, net (50.5) (118.3)
Net cash provided by operating activities 81.6 34.2
Investing activities:    
Purchases of property, plant and equipment (82.1) (72.1)
Purchases of businesses, net of cash acquired 0.0 (1,201.0)
Proceeds from sale of property, plant and equipment 17.7 3.6
(Payments)/proceeds from sale of business (2.0) 664.3
Other (7.8) (1.3)
Net cash used by investing activities (74.2) (606.5)
Financing activities:    
Proceeds from issuance of long-term debt 0.0 947.0
Payments on long-term debt and finance lease obligations (196.8) (465.4)
Net proceeds under revolving credit facilities 137.2 130.6
Short-term financing, net 1.3 (4.4)
Taxes paid related to net share settlements of stock-based compensation awards (2.0) (2.8)
Stock option exercises 0.7 5.7
Other 0.7 0.6
Net cash (used) provided by financing activities (58.9) 611.3
Effect of exchange rate changes on cash and cash equivalents (5.1) (26.0)
Net (decrease) increase in cash and cash equivalents (56.6) 13.0
Cash and cash equivalents at beginning of period 330.3 121.6
Cash and cash equivalents at end of period 273.7 134.6
Cash paid during the period for:    
Income taxes 40.9 31.9
Interest, net of capitalized interest 73.1 109.9
Non-cash activities:    
Fair value of common stock issued for acquisition of business 0.0 613.8
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses 4.1 7.5
Additions of property, plant and equipment under a finance lease obligation 35.6 8.5
Additions of assets under an operating lease obligation $ 31.4 $ 9.8
v3.20.2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 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 2018-02 [1]       $ 3.2 $ (3.2)
Beginning balance (in shares) at Dec. 31, 2018   141.7      
Beginning balance at Dec. 31, 2018 $ 1,191.7 $ 1.4 $ 2,325.0 (761.5) (373.2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) (45.1)     (45.1)  
Foreign currency translation adjustment (12.1)       (12.1)
Pension and other postretirement benefits adjustment 0.1        
Derivative financial instruments, net of tax (28.6)       (28.6)
Common stock issued for the Nexeo acquisition (in shares) [2]   27.9      
Common stock issued for the Nexeo acquisition [2] 649.3 $ 0.3 649.0    
Shares cancelled (in shares)   (1.5)      
Shares cancelled (35.5)   (35.5)    
Restricted stock units vested (in shares)   0.4      
Tax withholdings related to net share settlements of stock-based compensation awards (in shares)   (0.2)      
Tax withholdings related to net share settlements of stock-based compensation awards (2.8)   (2.8)    
Stock option exercises (in shares)   0.3      
Stock option exercises 5.7   5.7    
Employee stock purchase plan 0.6   0.6    
Stock-based compensation 21.7   21.7    
Ending balance (in shares) at Sep. 30, 2019   168.6      
Ending balance at Sep. 30, 2019 1,745.0 $ 1.7 2,963.7 (803.4) (417.0)
Beginning balance (in shares) at Jun. 30, 2019   168.6      
Beginning balance at Jun. 30, 2019 1,774.5 $ 1.7 2,959.4 (805.9) (380.7)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 2.5     2.5  
Foreign currency translation adjustment (31.9)       (31.9)
Derivative financial instruments, net of tax (4.4)       (4.4)
Restricted stock units vested (in shares)   0.1      
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 0.0   0.0    
Stock-based compensation 4.4   4.4    
Other (0.1)        
Ending balance (in shares) at Sep. 30, 2019   168.6      
Ending balance at Sep. 30, 2019 $ 1,745.0 $ 1.7 2,963.7 (803.4) (417.0)
Beginning balance (in shares) at Dec. 31, 2019 168.7 168.7      
Beginning balance at Dec. 31, 2019 $ 1,732.8 $ 1.7 2,968.9 (858.5) (379.3)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 86.6     86.6  
Foreign currency translation adjustment (60.1)       (60.1)
Pension and other postretirement benefits adjustment 0.1       0.1
Derivative financial instruments, net of tax (18.8)       (18.8)
Restricted stock units vested (in shares)   0.4      
Restricted stock units vested 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 (2.0)   (2.0)    
Stock option exercises (in shares)   0.1      
Stock option exercises 0.7   0.7    
Employee stock purchase plan 0.7        
Stock-based compensation 10.9   10.9    
Other $ 0.1        
Ending balance (in shares) at Sep. 30, 2020 169.1 169.1      
Ending balance at Sep. 30, 2020 $ 1,751.0 $ 1.7 2,979.3 (771.9) (458.1)
Beginning balance (in shares) at Jun. 30, 2020   169.0      
Beginning balance at Jun. 30, 2020 1,703.2 $ 1.7 2,977.3 (800.8) (475.0)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income (loss) 28.9     28.9  
Foreign currency translation adjustment 14.3       14.3
Derivative financial instruments, net of tax 2.6       2.6
Restricted stock units vested (in shares)   0.1      
Tax withholdings related to net share settlements of stock-based compensation awards (0.6)   (0.6)    
Stock-based compensation $ 2.6   2.6    
Ending balance (in shares) at Sep. 30, 2020 169.1 169.1      
Ending balance at Sep. 30, 2020 $ 1,751.0 $ 1.7 $ 2,979.3 $ (771.9) $ (458.1)
[1] Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019.
[2] Refer to “Note 3: Business combinations” for more information.
v3.20.2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Stockholders' Equity [Abstract]        
Accounting Standards Update [Extensible List]       us-gaap:AccountingStandardsUpdate201802Member
Foreign currency translation adjustment tax expense (benefit)   $ 0.2 $ (4.7) $ 0.2
Derivative financial instruments, tax expense (benefit) $ (0.8) $ 1.5 $ 8.5 $ 9.6
v3.20.2
Nature of operations
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of operations
1. Nature of operations
Headquartered in Downers Grove, Illinois, Univar Solutions Inc. (“Univar Solutions,” “Company,” “we,” “our” and “us”) is a leading global chemical and ingredient distributor and provider of value-added services to customers across a wide range of industries. The Company’s operations are structured into four reportable segments that represent the geographic areas under which the Company manages its business:
Univar Solutions USA (“USA”)
Univar Solutions Europe, the Middle East and Africa (“EMEA”)
Univar Solutions Canada (“Canada”)
Univar Solutions Latin America (“LATAM”)
LATAM includes certain developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.
v3.20.2
Significant accounting policies
9 Months Ended
Sep. 30, 2020
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. 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. The accompanying condensed consolidated financial statements of Univar Solutions includes the combined results of all directly and indirectly controlled companies, which have been adjusted to account for the elimination of intercompany balances and transactions.
On our condensed consolidated statements of cash flows for the nine months ended September 30, 2019, the amounts included in “net proceeds under revolving credit facilities,” which were previously included in “proceeds from issuance of long-term debt,” are now presented separately to conform to the current year presentation.
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. These condensed consolidated financial statements and related footnotes are unaudited and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Recently adopted accounting pronouncements
On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The transition to the new methodology did not have a significant financial impact and the Company did not recognize a cumulative-effect adjustment to the opening balance of accumulated deficit.
On January 1, 2020, the Company adopted ASU 2018-13 “Fair Value Measurement” (Topic 820), which modifies the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures.
On January 1, 2020, the Company adopted ASU 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software” (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this guidance on a prospective basis.
Accounting pronouncements issued and not yet adopted
In August 2018, the FASB issued ASU 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General” (Subtopic 715-20), which amends the disclosure requirements related to defined benefit pension and other postretirement plans. The Company will adopt this guidance effective December 31, 2020 and does not expect it to have a material impact to our consolidated financial statements and disclosures.
In December 2019, the FASB issued ASU 2019-12 “Income Taxes” (Topic 740) – “Simplifying the Accounting for Income Taxes.” The Company will adopt this guidance effective January 1, 2021 and is currently determining the impacts of the guidance on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04 “Reference Rate Reform” (Topic 848) – “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform from currently referenced rates, such as LIBOR, to alternative rates. The ASU is effective beginning March 12, 2020 and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently determining the impacts of the guidance on our consolidated financial statements.
v3.20.2
Business combinations
9 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
Business combinations
3. Business combinations
2019 Acquisition
Acquisition of Nexeo Solutions
On February 28, 2019, the Company completed an acquisition of 100% of the equity interest of Nexeo Solutions, Inc. (“Nexeo”), a leading global chemicals and plastics distributor. The acquisition expanded and strengthened Univar Solutions’ presence in North America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution and the broadest product offering.
The total purchase price of the acquisition was $1,814.8 million, composed of $1,201.0 million of cash paid (net of cash acquired of $46.8 million) and $613.8 million of newly issued shares of Univar Solutions common stock, which represented approximately 26.4 million shares, based on Univar Solutions’ closing stock price of $23.29 on February 27, 2019. The final 26.4 million shares issued include the cancellation of 1.5 million shares in connection with the appraisal litigation settlement during the second quarter of 2019.
As of March 31, 2020, the Company updated the purchase price allocation to reflect final deferred income tax adjustments, resulting in a $7.0 million increase to goodwill. The accounting for this acquisition was complete as of March 31, 2020.
The final purchase price allocation is shown below:
(in millions)As of December 31, 2019Measurement Period AdjustmentsFinal March 31, 2020
Trade accounts receivable, net$296.3 $— $296.3 
Inventories150.2 — 150.2 
Prepaid expenses and other current assets65.4 (1.2)64.2 
Assets held for sale888.2 — 888.2 
Property, plant and equipment, net262.3 — 262.3 
Goodwill555.7 7.0 562.7 
Intangible assets, net138.7 — 138.7 
Other assets37.4 (0.4)37.0 
Trade accounts payable(137.7)— (137.7)
Other accrued expenses(145.8)1.3 (144.5)
Liabilities held for sale(221.5)— (221.5)
Deferred tax liabilities(4.2)(6.7)(10.9)
Other long-term liabilities(70.2)— (70.2)
Purchase consideration, net of cash$1,814.8 $— $1,814.8 
Assets and liabilities held for sale are related to the Nexeo plastics distribution business (“Nexeo Plastics”). Nexeo Plastics was not aligned with the Company’s strategic objectives and, on March 29, 2019, the business was sold for total net proceeds of $664.3 million. Refer to “Note 4: Discontinued operations and dispositions” for further information.
The Company recorded $562.7 million of goodwill, consisting of $547.1 million in the USA segment, $3.8 million in Canada and $11.8 million in LATAM. The goodwill is primarily attributable to expected synergies from combining operations. The Company expects approximately $76.0 million of goodwill to be deductible for income tax purposes.
The Company assumed 50.0 million warrants, equivalent to 25.0 million Nexeo shares, with an estimated aggregate fair value of $26.0 million at the February 28, 2019 closing date. The warrants were converted into the right to receive, upon exercise, the merger consideration consisting of approximately 7.6 million shares of Univar Solutions common stock plus cash. The warrants have an exercise price of $27.80 and will expire on June 9, 2021. The warrants are recorded as other accrued expenses within the condensed consolidated balance sheet. Refer to “Note 15: Fair value measurements” for more information.
v3.20.2
Discontinued operations and dispositions
9 Months Ended
Sep. 30, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued operations and dispositions
4. Discontinued operations and dispositions
Discontinued operations
On March 29, 2019, the Company completed the sale of Nexeo Plastics to an affiliate of One Rock Capital Partners, LLC (“Buyer”) for total proceeds of $664.3 million (net of cash disposed of $2.4 million), including $26.7 million for a working capital adjustment. The Nexeo purchase price allocation is inclusive of these working capital adjustments. Refer to “Note 3: Business combinations” for more information.
In connection with the transaction, the Company entered into a Transition Services Agreement (TSA), a Warehouse Service Agreement (WSA) and Real Property Agreements with the Buyer which are designed to ensure and facilitate an orderly transfer of business operations and will terminate at various times, between six and twenty-four months and can be renewed with a maximum of two twelve-month periods. The income and expense for the services will be reported as other operating expenses, net in the condensed consolidated statements of operations. The Real Property Agreements will have a maximum tenure of three years. These arrangements do not constitute significant continuing involvement in Nexeo Plastics. 
The following table summarizes the operating results of Nexeo Plastics for the nine months ended September 30, 2019, as presented in “Net (loss) income from discontinued operations” on the condensed consolidated statements of operations.
(in millions)Nine months ended September 30, 2019
External sales$156.9 
Cost of goods sold (exclusive of depreciation)136.7 
Outbound freight and handling3.5 
Warehousing, selling and administrative7.9 
Other expenses1.4 
Income from discontinued operations before income taxes$7.4 
Income tax expense from discontinued operations (1)
2.0 
Net (loss) income from discontinued operations$5.4 
(1)The provision for income taxes for the nine months ended September 30, 2019 includes an adjustment to the tax expense related to the one month operations reported as of March 31, 2019.
There were no significant non-cash operating activities from the Company’s discontinued operations related to Nexeo Plastics.
Dispositions
On December 31, 2019, the Company completed the sale of the Environmental Sciences business to affiliates of AEA Investors LP for total cash proceeds of $174.0 million (net of cash disposed of $0.7 million and $5.9 million of transaction expenses) plus a $5.0 million ($2.4 million present value) subordinated note receivable (the “Transaction”) and recorded a pre-tax gain on sale of $41.4 million. In the first quarter of 2020, we recorded a net working capital adjustment of $8.2 million, reducing the proceeds and the gain on sale recorded in the fourth quarter of 2019. The sale of the business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the disposition did not represent a strategic shift that had, or will have, a major effect on the Company's operations and financial results.
The following summarizes the income before income taxes attributable to the Environmental Sciences business:
(in millions)Three months ended September 30, 2019Nine months ended September 30, 2019
Income before income taxes$8.9 $23.6 
On September 1, 2020, the Company completed the sale of its industrial spill and emergency response businesses to EnviroServe Inc. for total net cash proceeds of $6.2 million after transaction-related expenses, and subject to a final working capital adjustment. The Company recorded a $9.3 million pre-tax loss on sale of business in the condensed consolidated
statements of operations and was included in the USA segment. The sale of these businesses did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the dispositions did not represent a strategic shift that had, or will have, a major effect on the Company's operations and financial results.
The following summarizes the loss before income taxes attributable to these businesses:
Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Loss before income taxes$(0.8)$(2.6)$(26.9)$(5.5)
v3.20.2
Revenue
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue
5. Revenue
The Company disaggregates revenues from contracts with customers by both geographic reportable segments and revenue contract types. Geographic reportable segmentation is pertinent to understanding Univar Solutions’ 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 Solutions offers customers, since the contractual terms necessary for revenue recognition are unique to each of the identified revenue contract types.
The following tables disaggregate external customer net sales by major stream:
USAEMEACanadaLATAMConsolidated
(in millions)Three months ended September 30, 2020
Chemical Distribution$1,179.0 $399.1 $179.8 $117.8 $1,875.7 
Crop Sciences— — 43.9 — 43.9 
Services75.4 0.3 11.2 2.7 89.6 
Total external customer net sales$1,254.4 $399.4 $234.9 $120.5 $2,009.2 
USAEMEACanadaLATAMConsolidated
(in millions)Three months ended September 30, 2019
Chemical Distribution$1,477.0 $424.7 $207.3 $114.0 $2,223.0 
Crop Sciences— — 64.3 — 64.3 
Services85.1 0.3 11.4 3.2 100.0 
Total external customer net sales$1,562.1 $425.0 $283.0 $117.2 $2,387.3 

USAEMEACanadaLATAMConsolidated
(in millions)Nine months ended September 30, 2020
Chemical Distribution$3,546.6 $1,268.3 $560.1 $319.9 $5,694.9 
Crop Sciences— — 255.7 — 255.7 
Services234.7 1.0 36.4 6.9 279.0 
Total external customer net sales$3,781.3 $1,269.3 $852.2 $326.8 $6,229.6 
USAEMEACanadaLATAMConsolidated
(in millions)Nine months ended September 30, 2019
Chemical Distribution$4,240.1 $1,365.6 $644.1 $321.2 $6,571.0 
Crop Sciences— — 281.9 — 281.9 
Services234.5 1.0 35.6 7.9 279.0 
Total external customer net sales$4,474.6 $1,366.6 $961.6 $329.1 $7,131.9 
Deferred revenue
Deferred revenues are recognized as a contract liability when customers provide Univar Solutions with consideration prior to the Company satisfying a performance obligation and are recognized in revenue when the performance obligations are met. Deferred revenues relate to revenues that are expected to be recognized within one year and are recorded within the other accrued expenses line items of the condensed consolidated balance sheets. Deferred revenues as of September 30, 2020 and December 31, 2019 were $6.0 million and $65.5 million, respectively.
Revenue recognized through the nine months ended September 30, 2020 and September 30, 2019 from amounts included in contract liabilities at the beginning of the period were $64.8 million and $44.4 million, respectively.
v3.20.2
Other operating expenses, net
9 Months Ended
Sep. 30, 2020
Other Income and Expenses [Abstract]  
Other operating expenses, net
6. Other operating expenses, net
Other operating expenses, net consisted of the following:
 Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Acquisition and integration related expenses$14.1 $18.6 $45.9 $128.3 
Stock-based compensation expense2.6 4.4 10.9 21.7 
Restructuring charges0.9 0.6 9.7 1.2 
Other employee severance costs2.9 4.2 11.2 23.3 
Other facility closure costs0.2 5.6 2.2 5.6 
Saccharin legal settlement— — — 62.5 
Fair value adjustment for warrants1.1 (4.2)(6.4)(6.8)
(Gain) loss on sale of property, plant and equipment(0.8)0.2 (8.3)1.7 
Other0.4 0.8 3.9 21.3 
Total other operating expenses, net$21.4 $30.2 $69.1 $258.8 
v3.20.2
Restructuring charges
9 Months Ended
Sep. 30, 2020
Restructuring and Related Activities [Abstract]  
Restructuring charges
7. 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 and other facility rationalization costs. Restructuring charges are recorded in other operating expenses, net in the condensed consolidated statement of operations.
2020 Restructuring
During the first quarter of 2020, management approved a plan to implement a new structure designed to streamline and accelerate the opportunities between Canada and USA operations with the reporting structure in Canada condensed and realigned to report under the leadership in the USA for commercial, operations, human resources and finance. This change did not impact the Company's reportable segments. All restructuring actions under this program were complete as of June 30, 2020, except for final cash payments that will be made in the future. During the third quarter of 2020, the Company increased its previously disclosed estimate and recorded an additional charge to earnings of $0.2 million within employee termination costs.
During the second quarter of 2020, the Company initiated workforce reductions spanning across many job functions and locations in the USA and Other in order to align the Company's workforce with its anticipated business needs. The actions associated with this program are expected to be completed by the end of 2020.
As a result of both of these plans, we recorded the following charges:
(in millions)Three months ended September 30, 2020Nine months ended September 30, 2020Anticipated total costs
USA:
Employee termination costs$1.5 $6.2 $6.2 
Canada:
Employee termination costs$0.2 $3.3 $3.3 
Other:
Employee termination costs$— $0.8 $0.8 
Total $1.7 $10.3 $10.3 
2018 Restructuring
During 2018, management approved a plan to consolidate departments. The actions associated with this program were substantially complete as of March 31, 2020, although cash payments will be made into the future. During the third quarter of
2020, the Company reduced its estimate, which was previously recorded as a charge to earnings, in the amount of $0.8 million within employee termination costs as a result of changes in organizational structure. The following table presents a summary of the financial impacts of that plan:
(in millions)Three months ended September 30, 2020Nine months ended September 30, 2020Cumulative costsAnticipated total costs
USA:
Employee termination costs$(0.5)$(0.4)$5.1 $5.1 
Other exit costs— — 0.1 0.1 
Total$(0.5)$(0.4)$5.2 $5.2 
Other:
Employee termination costs$(0.3)$(0.2)$1.0 $1.0 
Total:
Employee termination costs$(0.8)$(0.6)$6.1 $6.1 
Other exit costs— — 0.1 0.1 
Total$(0.8)$(0.6)$6.2 $6.2 
The following table summarizes activity related to accrued liabilities associated with restructuring:
(in millions)January 1, 2020Charge to earningsCash paidSeptember 30, 2020
Employee termination costs$3.7 $9.7 $(10.8)$2.6 
Facility exit costs1.9 — (0.6)1.3 
Other exit costs0.2 — — 0.2 
Total$5.8 $9.7 $(11.4)$4.1 

(in millions)January 1, 2019Charge to earningsCash paidDecember 31, 2019
Employee termination costs$4.2 $2.5 $(3.0)$3.7 
Facility exit costs5.0 0.1 (3.2)1.9 
Other exit costs0.2 — — 0.2 
Total$9.4 $2.6 $(6.2)$5.8 
Restructuring liabilities of $3.6 million and $5.3 million were classified as current in other accrued expenses in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. The long-term portion of restructuring liabilities of $0.5 million were recorded in other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, and primarily consists of facility exit costs that are expected to be paid within the next five years.
The cost information above does not contain any estimates for programs that may be developed and implemented in future periods. 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.
v3.20.2
Other income (expense), net
9 Months Ended
Sep. 30, 2020
Other Income and Expenses [Abstract]  
Other income (expense), net
8. Other income (expense), net
Other income (expense), net consisted of the following:
 Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Foreign currency transactions$0.3 $(0.9)$(6.1)$(3.7)
Foreign currency denominated loans revaluation0.2 16.8 — 17.3 
Undesignated foreign currency derivative instruments (1)
0.5 (20.6)0.6 (26.2)
Undesignated swap contracts (1)
(0.1)(1.0)(6.1)(3.8)
Non-operating retirement benefits (2)
2.2 0.5 6.5 1.7 
Debt refinancing costs— — (0.1)— 
Other(0.7)(0.3)(2.2)(2.5)
Total other income (expense), net$2.4 $(5.5)$(7.4)$(17.2)
(1)Refer to “Note 16: Derivatives” for more information.
(2)Refer to “Note 9: Employee benefit plans” for more information.
v3.20.2
Employee benefit plans
9 Months Ended
Sep. 30, 2020
Postemployment Benefits [Abstract]  
Employee benefit plans
9. Employee benefit plans
The following table summarizes the components of net periodic (benefit) cost recognized in the condensed consolidated statements of operations:
Domestic - Defined Benefit Pension PlansForeign - Defined Benefit Pension Plans
 Three months ended September 30,Nine months ended September 30,Three months ended September 30,Nine months ended September 30,
(in millions)20202019202020192020201920202019
Service cost (1)
$— $— $— $— $0.5 $0.6 $1.4 $1.8 
Interest cost (2)
5.8 6.8 17.4 20.4 3.2 3.9 9.3 11.7 
Expected return on plan assets (2)
(7.1)(6.3)(21.4)(18.9)(4.1)(4.9)(11.9)(15.0)
Prior service cost (2)
— — — — — — 0.1 0.1 
Net periodic (benefit) cost$(1.3)$0.5 $(4.0)$1.5 $(0.4)$(0.4)$(1.1)$(1.4)
(1)Service cost is included in warehouse, selling and administrative expenses.
(2)These amounts are included in other income (expense), net.
v3.20.2
Income taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income taxes
10. Income taxes
The income tax expense and effective income tax rate for the three and nine months ended September 30, 2020 and 2019 were as follows:
Three months ended September 30,Nine months ended September 30,
(dollars in millions)2020201920202019
Income tax expense$2.7 $43.2 $14.0 $38.4 
Effective income tax rate8.5 %94.5 %13.9 %(317.4)%
Discrete tax benefits of $13.9 million are included in the $2.7 million income tax expense for the three months ended September 30, 2020 primarily attributable to 2019 return to provision adjustments and impairment of unrealizable assets, offset by a reserve for uncertain tax positions. The Company’s effective income tax rate without discrete items was 26.8%, higher than the US federal statutory rate of 21.0% primarily due to the impact of higher tax rates in foreign jurisdictions, non-deductible expenses and US state income taxes.
Discrete tax benefits of $27.5 million are included in the $14.0 million income tax expense for the nine months ended September 30, 2020 primarily attributable to 2019 return to provision adjustments, impairment of unrealizable assets and benefits from provisions under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), offset by a reserve for uncertain tax positions. The Company’s effective income tax rate without discrete items was 29.9%, higher than the US federal statutory rate of 21.0% primarily due to the impact of higher tax rates in foreign jurisdictions, non-deductible expenses and US state income taxes.
Discrete tax expense of $9.1 million and discrete tax benefit of $4.9 million are included in the $43.2 million and $38.4 million income tax expense for the three and nine months ended September 30, 2019. The Company’s effective income tax rate without discrete items was 68.4%, higher than the US federal statutory rate of 21.0%, primarily due to the impact of non-deductible Nexeo related acquisition and integration costs, along with state taxes, foreign rate differential, non-deductible compensation and other expenses, and an increase in the valuation allowance on certain income tax attributes.
v3.20.2
Earnings per share
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Earnings per share
11. 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)2020201920202019
Numerator:
Net income (loss) from continuing operations$28.9 $2.5 $86.6 $(50.5)
Net income from discontinued operations— — — 5.4 
Net income (loss)$28.9 $2.5 $86.6 $(45.1)
Denominator:
Weighted average common shares outstanding – basic169.0 168.6 168.9 162.6 
Effect of dilutive securities: stock compensation plans0.8 0.9 0.8 — 
Weighted average common shares outstanding – diluted169.8 169.5 169.7 162.6 
Basic:
Basic income (loss) per common share from continuing operations$0.17 $0.01 $0.51 $(0.31)
Basic income per common share from discontinued operations— — — 0.03 
Basic income (loss) per common share (1)
$0.17 $0.01 $0.51 $(0.28)
Diluted:
Diluted income (loss) per common share from continuing operations$0.17 $0.01 $0.51 $(0.31)
Diluted income per common share from discontinued operations— — — 0.03 
Diluted income (loss) per common share (1)
$0.17 $0.01 $0.51 $(0.28)
(1)As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarter's earnings per share may not equal the earnings per share for any year-to-date period.
The shares that were not included in the computation of diluted earnings per share for those periods because their inclusion would be anti-dilutive were as follows:
 Three months ended September 30,Nine months ended September 30,
(in millions, common shares)2020201920202019
Stock options4.5 3.1 4.5 3.0 
Restricted stock0.1 — 0.4 0.8 
Warrants7.6 7.6 7.6 6.0 
v3.20.2
Accumulated other comprehensive loss
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Accumulated other comprehensive loss
12. Accumulated other comprehensive loss
The following tables present the changes in accumulated other comprehensive loss by component, net of tax:
(in millions)Cash flow hedgesDefined benefit pension itemsCurrency translation itemsTotal
Balance as of December 31, 2019$(15.4)$(1.0)$(362.9)$(379.3)
Other comprehensive loss before reclassifications(33.4)— (60.1)(93.5)
Amounts reclassified from accumulated other comprehensive loss14.6 0.1 — 14.7 
Net current period other comprehensive (loss) income$(18.8)$0.1 $(60.1)$(78.8)
Balance as of September 30, 2020$(34.2)$(0.9)$(423.0)$(458.1)
Balance as of July 1, 2020$(36.8)$(0.9)$(437.3)$(475.0)
Other comprehensive (loss) income before reclassifications(11.2)— 14.3 3.1 
Amounts reclassified from accumulated other comprehensive loss13.8 — — 13.8 
Net current period other comprehensive income (loss)$2.6 $— $14.3 $16.9 
Balance as of September 30, 2020$(34.2)$(0.9)$(423.0)$(458.1)
Balance as of December 31, 2018$8.9 $(1.1)$(381.0)$(373.2)
Impact due to adoption of ASU 2018-02 (1)
1.5 — (4.7)(3.2)
Other comprehensive loss before reclassifications(22.1)— (12.1)(34.2)
Amounts reclassified from accumulated other comprehensive loss(6.5)0.1 — (6.4)
Net current period other comprehensive (loss) income$(27.1)$0.1 $(16.8)$(43.8)
Balance as of September 30, 2019$(18.2)$(1.0)$(397.8)$(417.0)
Balance as of Balance as of July 1, 2019$(13.8)$(1.0)$(365.9)$(380.7)
Other comprehensive loss before reclassifications(3.5)— (31.9)(35.4)
Amounts reclassified from accumulated other comprehensive loss(0.9)— — (0.9)
Net current period other comprehensive loss$(4.4)$— $(31.9)$(36.3)
Balance as of September 30, 2019$(18.2)$(1.0)$(397.8)$(417.0)
(1)Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019.
The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net income (loss):
Statement of Operations ClassificationThree months ended September 30,Nine months ended September 30,
(in millions)
2020 (1)
2019 (1)
2020 (1)
2019 (1)
Amortization of defined benefit pension items:
Prior service costOther income (expense), net$— $— $0.1 $0.1 
Tax expenseIncome tax expense— — — — 
Net of tax$— $— $0.1 $0.1 
Cash flow hedges:
Interest rate swap contractsInterest expense$4.7 $(1.2)$7.8 $(8.7)
Cross-currency swap contracts
Interest expense and other income (expense), net
15.4 — 13.4 — 
Tax (benefit) expenseIncome tax expense(6.3)0.3 (6.6)2.2 
Net of tax$13.8 $(0.9)$14.6 $(6.5)
Total reclassifications for the period, net of tax$13.8 $(0.9)$14.7 $(6.4)
(1)Amounts in parentheses indicate credits to net income (loss) in the condensed consolidated statement of operations.
v3.20.2
Debt
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Debt
13. Debt
Short-term financing
Short-term financing consisted of the following:
(in millions)September 30, 2020December 31, 2019
Amounts drawn under credit facilities$— $0.5 
Bank overdrafts0.4 0.2 
Total short-term financing