Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________ 
Form 10-Q
__________________________________________________________ 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                 
Commission File Number 001-37443
__________________________________________________________ 
Univar Solutions Inc.
(Exact name of registrant as specified in its charter)
__________________________________________________________ 
Delaware26-1251958
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

3075 Highland Parkway, Suite 200 Downers Grove,Illinois60515
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (331) (331) 777-6000
__________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)UNVRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
At October 24, 2019, 168,616,57922, 2020, 169,100,367 shares of the registrant’s common stock, $0.01 par value, were outstanding.


Table of Contents
Univar Solutions Inc.
Form 10-Q
For the quarterly period ended September 30, 20192020
TABLE OF CONTENTS
 
Page
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Operations
1
Condensed Consolidated Statements of Comprehensive Income (Loss) Income
2
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Cash Flows
4
Condensed Consolidated Statements of Changes in Stockholders’ Equity
5
Notes to Condensed Consolidated Statements
7
Note 1: Nature of operations
7
Note 2: Significant accounting policies
7
Note 3: Business combinations
8
Note 4: Discontinued operations and dispositions
9
Note 5: Revenue
10
Note 6: Other operating expenses, net
11
Note 7: Restructuring charges
11
Note 8: Other expense, net
13
Note 9: Employee benefit plans
13
Note 10: Income taxes
13
Note 11: Earnings per share
14
Note 12: Accumulated other comprehensive loss
15
Note 13: Debt
16
Note 14: Supplemental balance sheet information
17
Note 15: Fair value measurements
19
Note 16: Derivatives
19
Note 17: Commitments and contingencies
21
Note 18: Leasing
23
Note 19: Segments
25
Note 20: Subsequent events
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2827
Item 3. Quantitative and Qualitative Disclosures about Market Risk
44
Item 4. Controls and Procedures
44
Item 1. Legal Proceedings
44
Item 1A. Risk Factors
44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4544
Item 3. Defaults upon Senior Securities
4544
Item 4. Mine Safety Disclosures
45
Item 5. Other Information
45
Item 6. Exhibits
46
47



Table of Contents
PART I.
FINANCIAL INFORMATION

Item 1.Financial Statements

Item 1.Financial Statements
Univar Solutions Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
   Three months ended September 30, Nine months ended September 30,  Three months ended September 30,Nine months ended September 30,
(in millions, except per share data) Note   2019
2018 2019 2018(in millions, except per share data)Note2020201920202019
Net sales $2,387.3

$2,130.7
 $7,131.9
 $6,661.3
Net sales$2,009.2 $2,387.3 $6,229.6 $7,131.9 
Cost of goods sold (exclusive of depreciation) 1,842.4

1,662.0
 5,513.3
 5,205.5
Cost of goods sold (exclusive of depreciation)1,513.2 1,842.4 4,711.9 5,513.3 
Operating expenses:        Operating expenses:
Outbound freight and handling 96.8

82.7
 275.1
 248.5
Outbound freight and handling85.9 96.8 258.1 275.1 
Warehousing, selling and administrative 269.2

229.0
 803.4
 710.9
Warehousing, selling and administrative245.5 269.2 770.5 803.4 
Other operating expenses, net 6 30.2

12.4
 258.8
 37.0
Other operating expenses, net621.4 30.2 69.1 258.8 
Depreciation 41.6

31.5
 114.5
 93.8
Depreciation41.6 41.6 123.7 114.5 
Amortization 12.1

13.5
 45.1
 40.7
Amortization14.7 12.1 45.3 45.1 
Impairment charges 14 7.0
 —
 7.0
 —
Impairment charges1420.7 7.0 37.6 7.0 
Total operating expenses $456.9
 $369.1
 $1,503.9
 $1,130.9
Total operating expenses$429.8 $456.9 $1,304.3 $1,503.9 
Operating income $88.0
 $99.6
 $114.7
 $324.9
Operating income$66.2 $88.0 $213.4 $114.7 
Other (expense) income:        Other (expense) income:
Interest income 0.6

0.6
 2.3
 2.7
Interest income0.5 0.6 1.7 2.3 
Interest expense (37.4)
(32.8) (111.2) (101.8)Interest expense(28.2)(37.4)(87.4)(111.2)
Loss on sale of businessLoss on sale of business4(9.3)0 (17.9)0 
Loss on extinguishment of debt —

—
 (0.7) —
Loss on extinguishment of debt130 0 (1.8)(0.7)
Other (expense) income, net 8 (5.5)
2.5
 (17.2) 3.0
Other income (expense), netOther income (expense), net82.4 (5.5)(7.4)(17.2)
Total other expense $(42.3) $(29.7) $(126.8) $(96.1)Total other expense$(34.6)$(42.3)$(112.8)$(126.8)
Income (loss) before income taxes 45.7
 69.9
 (12.1) 228.8
Income (loss) before income taxes31.6 45.7 100.6 (12.1)
Income tax expense from continuing operations 10 43.2

20.3
 38.4
 57.7
Income tax expense from continuing operations102.7 43.2 14.0 38.4 
Net income (loss) from continuing operations $2.5

$49.6
 $(50.5) $171.1
Net income (loss) from continuing operations$28.9 $2.5 $86.6 $(50.5)
Net income from discontinued operations 4 $—
 $—
 $5.4
 $—
Net income from discontinued operations4$0 $0 $0 $5.4 
Net income (loss) $2.5
 $49.6
 $(45.1)
$171.1
Net income (loss)$28.9 $2.5 $86.6 $(45.1)
        
Income (loss) per common share:        Income (loss) per common share:
Basic from continuing operations 11 $0.01
 $0.35
 $(0.31) $1.21
Basic from continuing operations11$0.17 $0.01 $0.51 $(0.31)
Basic from discontinued operations 11 —
 —
 0.03
 —
Basic from discontinued operations110 0 0 0.03 
Basic income (loss) per common share $0.01
 $0.35
 $(0.28) $1.21
Basic income (loss) per common share$0.17 $0.01 $0.51 $(0.28)
Diluted from continuing operations 11 $0.01
 $0.35
 $(0.31) $1.20
Diluted from continuing operations11$0.17 $0.01 $0.51 $(0.31)
Diluted from discontinued operations 11 —
 —
 0.03
 —
Diluted from discontinued operations110 0 0 0.03 
Diluted income (loss) per common share $0.01
 $0.35
 $(0.28) $1.20
Diluted income (loss) per common share$0.17 $0.01 $0.51 $(0.28)
        
Weighted average common shares outstanding:        Weighted average common shares outstanding:
Basic 11 168.6

141.2
 162.6
 141.1
Basic11169.0 168.6 168.9 162.6 
Diluted 11 169.5

142.3
 162.6
 142.1
Diluted11169.8 169.5 169.7 162.6 
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1
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Univar Solutions Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) Income
(Unaudited)
  Three months ended September 30,Nine months ended September 30,
(in millions)Note2020201920202019
Net income (loss)$28.9 $2.5 $86.6 $(45.1)
Other comprehensive (loss) income, net of tax:
Impact due to adoption of ASU 2018-02 (1)
120 0 0 (3.2)
Foreign currency translation1214.3 (31.9)(60.1)(12.1)
Pension and postretirement benefit adjustment120 0 0.1 0.1 
Derivative financial instruments122.6 (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)
(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.
    Three months ended
September 30,		 Nine months ended
September 30,
(in millions) Note   2019
2018 2019 2018
Net income (loss)   $2.5
 $49.6
 $(45.1) $171.1
           
Other comprehensive (loss) income, net of tax:          
Impact due to adoption of ASU 2018-02 (1)
   —
 —
 (3.2) —
Impact due to adoption of ASU 2017-12 (2)
 12 —
 —
 —
 0.5
Foreign currency translation 12 (31.9)
2.0
 (12.1) (61.0)
Pension and postretirement benefit adjustment 12 —
 —
 0.1
 0.1
Derivative financial instruments 12 (4.4) (0.1) (28.6) 9.3
Total other comprehensive (loss) income, net of tax   $(36.3) $1.9
 $(43.8) $(51.1)
Comprehensive (loss) income   $(33.8) $51.5
 $(88.9) $120.0


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



































The accompanying notes are an integral part of these condensed consolidated financial statements.

2
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Univar Solutions Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except per share data)NoteSeptember 30,
2020		December 31,
2019
Assets
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.141,276.8 1,160.1 
Inventories696.3 796.0 
Prepaid expenses and other current assets171.8 167.2 
Total current assets$2,418.6 $2,453.6 
Property, plant and equipment, net141,085.2 1,152.4 
Goodwill142,267.3 2,280.8 
Intangible assets, net14263.3 320.2 
Deferred tax assets20.9 21.3 
Other assets252.0 266.5 
Total assets$6,307.3 $6,494.8 
Liabilities and stockholders’ equity
Current liabilities:
Short-term financing13$0.4 $0.7 
Trade accounts payable761.8 895.0 
Current portion of long-term debt1327.6 25.0 
Accrued compensation86.7 103.6 
Other accrued expenses14393.2 425.1 
Total current liabilities$1,269.7 $1,449.4 
Long-term debt132,660.4 2,688.8 
Pension and other postretirement benefit liabilities279.8 295.6 
Deferred tax liabilities61.4 56.3 
Other long-term liabilities285.0 271.9 
Total liabilities$4,556.3 $4,762.0 
Stockholders’ equity:
Preferred stock, 200.0 million shares authorized at $0.01 par value with 0 shares issued or outstanding as of September 30, 2020 and December 31, 2019$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, respectively1.7 1.7 
Additional paid-in capital2,979.3 2,968.9 
Accumulated deficit(771.9)(858.5)
Accumulated other comprehensive loss12(458.1)(379.3)
Total stockholders’ equity$1,751.0 $1,732.8 
Total liabilities and stockholders’ equity$6,307.3 $6,494.8 

(in millions, except per share data) Note   September 30,
2019		 December 31,
2018
Assets      
Current assets:      
Cash and cash equivalents   $134.6
 $121.6
Trade accounts receivable, net   1,375.7
 1,094.7
Inventories   872.9
 803.3
Prepaid expenses and other current assets   193.1
 169.1
Total current assets   $2,576.3
 $2,188.7
Property, plant and equipment, net 14 1,161.1
 955.8
Goodwill   2,409.5
 1,780.7
Intangible assets, net 14 348.2
 238.1
Deferred tax assets   22.0
 24.8
Other assets (1)
   267.6
 84.3
Total assets   $6,784.7
 $5,272.4
Liabilities and stockholders’ equity      
Current liabilities:      
Short-term financing 13 $2.9
 $8.1
Trade accounts payable   973.3
 925.4
Current portion of long-term debt 13 19.0
 21.7
Accrued compensation   100.7
 93.6
Other accrued expenses   349.8
 285.8
Total current liabilities   $1,445.7
 $1,334.6
Long-term debt 13 2,977.1
 2,350.4
Pension and other postretirement benefit liabilities   244.6
 254.4
Deferred tax liabilities   111.1
 42.9
Other long-term liabilities (1)
   261.2
 98.4
Total liabilities   $5,039.7
 $4,080.7
Stockholders’ equity:      
Preferred stock, 200.0 million shares authorized at $0.01 par value with no shares issued or outstanding as of September 30, 2019 and December 31, 2018   $—
 $—
Common stock, 2.0 billion shares authorized at $0.01 par value with 168.6 million and 141.7 million shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively   1.7
 1.4
Additional paid-in capital   2,963.7
 2,325.0
Accumulated deficit   (803.4) (761.5)
Accumulated other comprehensive loss 12 (417.0) (373.2)
Total stockholders’ equity   $1,745.0
 $1,191.7
Total liabilities and stockholders’ equity   $6,784.7
 $5,272.4


(1)Operating lease assets and operating lease liabilities are included in other assets and other long-term liabilities. Refer to “Note 18: Leasing” for more information.



The accompanying notes are an integral part of these condensed consolidated financial statements.

3
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Univar Solutions Inc.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
   Nine months ended
September 30,		  Nine months ended September 30,
(in millions) Note    2019 2018(in millions)Note20202019
Operating activities:    Operating activities:
Net (loss) income $(45.1) $171.1
Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities:    
Net income (loss)Net income (loss)$86.6 $(45.1)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization 159.6
 134.5
Depreciation and amortization169.0 159.6 
Impairment charges 14 7.0
 —
Impairment charges1437.6 7.0 
Amortization of deferred financing fees and debt discount 7.0
 5.8
Amortization of deferred financing fees and debt discount4.7 7.0 
Amortization of pension credit from accumulated other comprehensive loss 0.1
 0.1
Amortization of pension credit from accumulated other comprehensive loss0.1 0.1 
Loss on sale of businessLoss on sale of business417.9 0 
(Gain) loss on sale of property, plant and equipment(Gain) loss on sale of property, plant and equipment(8.3)1.7 
Loss on extinguishment of debt 0.7
 —
Loss on extinguishment of debt131.8 0.7 
Deferred income taxes 4.4
 8.9
Deferred income taxes5.2 4.4 
Stock-based compensation expense 21.7
 17.7
Stock-based compensation expense610.9 21.7 
Charge for inventory step-up of acquired inventory 5.3
 —
Charge for inventory step-up of acquired inventory0 5.3 
Other 3.8
 (0.8)Other2.6 2.1 
Changes in operating assets and liabilities:    Changes in operating assets and liabilities:
Trade accounts receivable, net 3.7
 (216.3)Trade accounts receivable, net(126.2)3.7 
Inventories 72.1
 (11.9)Inventories89.6 72.1 
Prepaid expenses and other current assets 20.0
 (13.3)Prepaid expenses and other current assets(19.2)20.0 
Trade accounts payable (85.2) (7.3)Trade accounts payable(123.4)(85.2)
Pensions and other postretirement benefit liabilities (22.6) (32.6)Pensions and other postretirement benefit liabilities(16.8)(22.6)
Other, net (118.3) (58.5)Other, net(50.5)(118.3)
Net cash provided (used) by operating activities $34.2
 $(2.6)
Net cash provided by operating activitiesNet cash provided by operating activities$81.6 $34.2 
Investing activities:    Investing activities:
Purchases of property, plant and equipment $(72.1) $(59.9)Purchases of property, plant and equipment$(82.1)$(72.1)
Purchases of businesses, net of cash acquired 3 (1,201.0) (20.0)Purchases of businesses, net of cash acquired30 (1,201.0)
Proceeds from sale of property, plant and equipment 3.6
 8.7
Proceeds from sale of property, plant and equipment17.7 3.6 
Proceeds from sale of business 4 664.3
 —
(Payments)/proceeds from sale of business(Payments)/proceeds from sale of business4(2.0)664.3 
Other (1.3) (0.1)Other(7.8)(1.3)
Net cash used by investing activities $(606.5) $(71.3)Net cash used by investing activities$(74.2)$(606.5)
Financing activities:    Financing activities:
Proceeds from issuance of long-term debt 13 $1,077.6
 $267.7
Proceeds from issuance of long-term debt13$0 $947.0 
Payments on long-term debt and finance lease obligations 13 (465.4) (558.1)Payments on long-term debt and finance lease obligations13(196.8)(465.4)
Net proceeds under revolving credit facilitiesNet proceeds under revolving credit facilities13137.2 130.6 
Short-term financing, net 13 (4.4) (2.3)Short-term financing, net131.3 (4.4)
Taxes paid related to net share settlements of stock-based compensation awards (2.8) (3.7)Taxes paid related to net share settlements of stock-based compensation awards(2.0)(2.8)
Stock option exercises 5.7
 5.7
Stock option exercises0.7 5.7 
Other 0.6
 0.6
Other0.7 0.6 
Net cash provided (used) by financing activities $611.3
 $(290.1)
Net cash (used) provided by financing activitiesNet cash (used) provided by financing activities$(58.9)$611.3 
Effect of exchange rate changes on cash and cash equivalents $(26.0) $(17.1)Effect of exchange rate changes on cash and cash equivalents$(5.1)$(26.0)
Net increase (decrease) in cash and cash equivalents 13.0
 (381.1)
Net (decrease) increase in cash and cash equivalentsNet (decrease) increase in cash and cash equivalents(56.6)13.0 
Cash and cash equivalents at beginning of period 121.6
 467.0
Cash and cash equivalents at beginning of period330.3 121.6 
Cash and cash equivalents at end of period $134.6
 $85.9
Cash and cash equivalents at end of period$273.7 $134.6 
Supplemental disclosure of cash flow information:    Supplemental disclosure of cash flow information:
Cash paid during the period for:Cash paid during the period for:
Income taxesIncome taxes$40.9 $31.9 
Interest, net of capitalized interestInterest, net of capitalized interest73.1 109.9 
Non-cash activities:    Non-cash activities:
Fair value of common stock issued for acquisition of business 3 $613.8
 $—
Fair value of common stock issued for acquisition of business3$0 $613.8 
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses 7.5
 11.5
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses4.1 7.5 
Additions of property, plant and equipment under a finance lease obligation 8.5
 19.2
Additions of property, plant and equipment under a finance lease obligation35.6 8.5 
Additions of assets under an operating lease obligation 9.8
 —
Additions of assets under an operating lease obligation31.4 9.8 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4
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Univar Solutions Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(in millions)Common
stock
(shares)		Common
stock		Additional
paid-in
capital		Accumulated
deficit		Accumulated
other
comprehensive
loss		Total
Balance, January 1, 2020168.7 $1.7 $2,968.9 $(858.5)$(379.3)$1,732.8 
Net income— — — 86.6 — 86.6 
Foreign currency translation adjustment, net of tax $(4.7)— — — — (60.1)(60.1)
Pension and other postretirement benefits adjustment— — — — 0.1 0.1 
Derivative financial instruments, net of tax $8.5— — — — (18.8)(18.8)
Restricted stock units vested0.4 — — — — 0 
Tax withholdings related to net share settlements of stock-based compensation awards(0.1)— (2.0)— — (2.0)
Stock option exercises0.1 — 0.7 — — 0.7 
Employee stock purchase plan— — 0.7 — — 0.7 
Stock-based compensation— — 10.9 — — 10.9 
Other— 0.1 — — 0.1 
Balance, September 30, 2020169.1 $1.7 $2,979.3 $(771.9)$(458.1)$1,751.0 
(in millions)
Common
stock
(shares)
 
Common
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 Total
Balance, January 1, 2019141.7
 $1.4
 $2,325.0
 $(761.5)
$(373.2) $1,191.7
Impact due to adoption of ASU (1)
—
 —
 —
 3.2

(3.2) —
Net loss—
 —
 —
 (45.1)
—
 (45.1)
Foreign currency translation adjustment, net of tax $0.2—
 —
 —
 —

(12.1) (12.1)
Pension and other postretirement benefits adjustment—
 —
 —
 —
 0.1
 0.1
Derivative financial instruments, net of tax $9.6—
 —
 —
 —

(28.6) (28.6)
Common stock issued for the Nexeo acquisition (2)
27.9
 0.3
 649.0
 —
 —
 649.3
Shares canceled (2)
(1.5) —
 (35.5) —
 —
 (35.5)
Restricted stock units vested0.4
 —
 —
 —
 —
 —
Tax withholdings related to net share settlements of stock-based compensation awards(0.2) —
 (2.8) —
 —
 (2.8)
Stock option exercises0.3
 —
 5.7
 —
 —
 5.7
Employee stock purchase plan—
 —
 0.6
 —
 —
 0.6
Stock-based compensation—
 —
 21.7
 —
 —
 21.7
Balance, September 30, 2019168.6
 $1.7
 $2,963.7
 $(803.4) $(417.0) $1,745.0
(in millions)Common
stock
(shares)		 Common
stock		 Additional
paid-in
capital		 Accumulated
deficit		 Accumulated
other
comprehensive
loss		 Total
Balance, July 1, 2019168.6
 $1.7
 $2,959.4
 $(805.9) $(380.7) $1,774.5
Net income—
 —
 —
 2.5
 —
 2.5
Foreign currency translation adjustment, net of tax $0.2—
 —
 —
 —
 (31.9) (31.9)
Derivative financial instruments, net of tax $1.5—
 —
 —
 —
 (4.4) (4.4)
Restricted stock units vested0.1
 —
 —
 —
 —
 —
Tax withholdings related to net share settlements of stock-based compensation awards(0.1) —
 —
 —
 —
 —
Stock-based compensation—
 —
 4.4
 —
 —
 4.4
Other—
 —
 (0.1) —
 —
 (0.1)
Balance, September 30, 2019168.6
 $1.7
 $2,963.7
 $(803.4) $(417.0) $1,745.0
(1)Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019. Refer to “Note 2: Significant accounting policies” for more information.
(2)Refer to “Note 3: Business combinations” for more information.


(in millions)
Common
stock
(shares)
 
Common
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 Total
Balance, January 1, 2018141.1
 $1.4
 $2,301.3
 $(934.1) $(278.5) $1,090.1
Impact due to adoption of ASU’s, net of tax ($0.3) (1)
—
 —
 —
 0.3
 0.5
 0.8
Net income—
 —
 —
 171.1
 —
 171.1
Foreign currency translation adjustment, net of tax ($0.1)—
 —
 —
 —
 (61.0) (61.0)
Pension and other postretirement benefits adjustment—
 —
 —
 —
 0.1
 0.1
Derivative financial instruments, net of tax ($3.1)—
 —
 —
 —
 9.3
 9.3
Restricted stock units vested0.3
 —
 —
 —
 —
 —
Tax withholdings related to net share settlements of stock-based compensation awards(0.1) —
 (3.7) —
 —
 (3.7)
Stock option exercises0.3
 —
 5.7
 —
 —
 5.7
Employee stock purchase plan—
 —
 0.6
 —
 —
 0.6
Stock-based compensation—
 —
 17.7
 —
 —
 17.7
Balance, September 30, 2018141.6
 $1.4
 $2,321.6
 $(762.7) $(329.6) $1,230.7
(in millions)Common
stock
(shares)		 Common
stock		 Additional
paid-in
capital		 Accumulated
deficit		 Accumulated
other
comprehensive
loss		 Total
Balance, July 1, 2018141.4
 $1.4
 $2,313.4
 $(812.3) $(331.5) $1,171.0
Net income—
 —
 —
 49.6
 —
 49.6
Foreign currency translation adjustment—
 —
 —
 —
 2.0
 2.0
Derivative financial instruments, net of tax $0.3—
 —
 —
 —
 (0.1) (0.1)
Tax withholdings related to net share settlements of stock-based compensation awards—
 —
 (0.5) —
 —
 (0.5)
Stock option exercises0.2
 —
 4.6
 —
 —
 4.6
Employee stock purchase plan—
 —
 0.1
 —
 —
 0.1
Stock-based compensation—
 —
 4.0
 —
 —
 4.0
Balance, September 30, 2018141.6
 $1.4
 $2,321.6
 $(762.7) $(329.6) $1,230.7

(1)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.

(in millions)Common
stock
(shares)		Common
stock		Additional
paid-in
capital		Accumulated
deficit		Accumulated
other
comprehensive
loss		Total
Balance, July 1, 2020169.0 $1.7 $2,977.3 $(800.8)$(475.0)$1,703.2 
Net income— — — 28.9 — 28.9 
Foreign currency translation adjustment— — — — 14.3 14.3 
Derivative financial instruments, net of tax $(0.8)— — — — 2.6 2.6 
Restricted stock units vested0.1 — — — — — 
Tax withholdings related to net share settlements of stock-based compensation awards— — (0.6)— — (0.6)
Stock-based compensation— — 2.6 — — 2.6 
Balance, September 30, 2020169.1 $1.7 $2,979.3 $(771.9)$(458.1)$1,751.0 


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(in millions)Common
stock
(shares)		Common
stock		Additional
paid-in
capital		Accumulated
deficit		Accumulated
other
comprehensive
loss		Total
Balance, January 1, 2019141.7 $1.4 $2,325.0 $(761.5)$(373.2)$1,191.7 
Impact due to adoption of ASU (1)
— — — 3.2 (3.2)— 
Net loss— — — (45.1)— (45.1)
Foreign currency translation adjustment, net of tax $0.2— — — — (12.1)(12.1)
Pension and other postretirement benefits adjustment— — — — 0.1 0.1 
Derivative financial instruments, net of tax $9.6— — — — (28.6)(28.6)
Common stock issued for the Nexeo acquisition (2)
27.9 0.3 649.0 — — 649.3 
Shares canceled (2)
(1.5)— (35.5)— — (35.5)
Restricted stock units vested0.4 — — — — — 
Tax withholdings related to net share settlements of stock-based compensation awards(0.2)— (2.8)— — (2.8)
Stock option exercises0.3 — 5.7 — — 5.7 
Employee stock purchase plan— — 0.6 0.6 
Stock-based compensation— — 21.7 — — 21.7 
Balance, September 30, 2019168.6 $1.7 $2,963.7 $(803.4)$(417.0)$1,745.0 


(in millions)Common
stock
(shares)		Common
stock		Additional
paid-in
capital		Accumulated
deficit		Accumulated
other
comprehensive
loss		Total
Balance, July 1, 2019168.6 $1.7 $2,959.4 $(805.9)$(380.7)$1,774.5 
Net income— — — 2.5 — 2.5 
Foreign currency translation adjustment, net of tax $0.2— — — — (31.9)(31.9)
Derivative financial instruments, net of tax $1.5— — — — (4.4)(4.4)
Restricted stock units vested0.1 — — — — — 
Tax withholdings related to net share settlements of stock-based compensation awards(0.1)— 0 — — 0 
Stock-based compensation— — 4.4 — — 4.4 
Other— — (0.1)— — (0.1)
Balance, September 30, 2019168.6 $1.7 $2,963.7 $(803.4)$(417.0)$1,745.0 

(1)Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019.

(2)Refer to “Note 3: Business combinations” for more information.
















The accompanying notes are an integral part of these condensed consolidated financial statements.

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Univar Solutions Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Nature of operations
Headquartered in Downers Grove, Illinois, Univar Solutions Inc. (“the Company” or “Univar Solutions”Univar Solutions,” “Company,” “we,” “our” and “us”) is a leading global chemicalschemical and ingredientsingredient distributor and provider of specialty chemicals.value-added services to customers across a wide range of industries. The Company’s operations are structured into 4 operatingreportable segments that represent the geographic areas under which the Company manages its business:
•Univar Solutions USA (“USA”)
Univar Solutions Canada (“Canada”)
•Univar Solutions Europe, the Middle East and Africa (“EMEA”)
•Univar Solutions Canada (“Canada”)
•Univar Solutions Latin America (“LATAM”)
In 2019, the Company renamed its “Rest of World” segment “Latin America” whichLATAM includes certain developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.
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, 2018.2019.
Recently adopted accounting pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02 “Leases” (Topic 842), which supersedes the lease recognition requirements in ASC Topic 840, “Leases.” On January 1, 2019,2020, the Company adopted the new Accounting Standards Codification (“ASC”) Topic 842 (“new lease standard”) using the modified retrospective method. The Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the historical lease classification to carry forward. The Company also made an accounting policy election to not recognize leases with an initial term of 12 months or less on the balance sheet. The Company will recognize short-term lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term. The Company recognized the cumulative effect of initially applying the new lease standard as an adjustment to the 2019 opening balance sheet. The cumulative effect of the standard’s adoption also includes adjustments related to previously unrecognized finance leases. 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 the January 1, 2019 condensed consolidated balance sheet for the adoption of ASU 2016-02 “Leases” (Topic 842) is as follows:
(in millions) Balance at December 31, 2018 Adjustments due to ASU 2016-02 Balance at January 1, 2019
Assets      
Property, plant and equipment, net $955.8
 $5.4
 $961.2
Other assets 84.3
 166.8
 251.1
Liabilities      
Current portion of long-term debt $21.7
 $(4.5) $17.2
Other accrued expenses 285.8
 43.8
 329.6
Long-term debt 2,350.4
 9.9
 2,360.3
Other long-term liabilities 98.4
 123.0
 221.4

In February 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 gave entities the option to reclassify certain tax effects the FASB refers to as having been stranded, resulting from the Tax Cuts and Jobs Act from AOCI to retained earnings. The Company adopted the ASU as of January 1, 2019 and elected to reclassify $3.2 million of the stranded tax effects from accumulated other comprehensive loss to accumulated deficit.
The Company also adopted the following standard during 2019, which did not have a material impact to the financial statements or financial statement disclosures:
StandardEffective date
2018-16Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting PurposesJanuary 1, 2019

Accounting pronouncements issued and not yet adopted
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326) - “Measurement, which requires the measurement and recognition 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 credit losses rather than incurred losses. The model requires entities to recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect fromfor financial assets measuredheld at amortized cost. Components included inThe transition to the computationnew methodology did not have a significant financial impact and the Company did not recognize a cumulative-effect adjustment to the opening balance of the estimated contractual cash flows include relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in the recognition of lifetime expected credit losses upon the initial recognition of the related assets. The guidance in this ASU will be included in financial statement and footnote disclosures subsequent to theaccumulated deficit.
On January 1, 2020, adoption date. Thethe Company is currently determining the impacts that will be reflected in the financial statements and financial statement disclosures subsequent to the ASU adoption date.
In August 2018, the FASB issuedadopted ASU 2018-13 “Fair Value Measurement” (Topic 820) - “Disclosure Framework - Changes to, which modifies the Disclosure Requirementsdisclosure requirements for Fair Value Measurement.” The ASU amends the requirements related to fair value disclosures to include new disclosure requirementsmeasurements by removing, modifying and eliminates or modifiesadding certain historic disclosures. The guidance in this ASU will be included in disclosures subsequent to the
On January 1, 2020, adoption date.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 is currently determining the impacts that will be reflected in financial statement disclosures subsequent to the ASU adoption date.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) - “Disclosure Framework - Changes to, which amends the Disclosure Requirements for Defined Benefit Plans.” The ASU amends thedisclosure requirements related to defined benefit pension and other postretirement plan disclosuresplans. The Company will adopt this guidance effective December 31, 2020 and does not expect it to include new disclosure requirementshave a material impact to our consolidated financial statements and eliminates or clarifies certain historic disclosures.
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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 in this ASU will be included in disclosures subsequent to theeffective January 1, 2021 adoption date. 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 that will be reflected inof the guidance on our consolidated financial statement disclosures subsequent to the ASU adoption date.

The Company has not yet adopted the following standards, none of which is expected to have a material impact to the financial statements or financial statement disclosures:
ASUExpected adoption date
2018-18Collaborative Arrangements (Topic 808) - Clarifying the Interaction between Topic 808 and Topic 606January 1, 2020
2018-17Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest EntitiesJanuary 1, 2020
2018-15Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)January 1, 2020

statements.
3. Business combinations
2019 AcquisitionsAcquisition
Acquisition of Nexeo Solutions
On February 28, 2019, the Company completed its previously announcedan acquisition of 100% of the equity interest of Nexeo Solutions, Inc. (“Nexeo”), a leading global chemicals and plastics distributor. The acquisition expandsexpanded and strengthensstrengthened 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 see “Note 17: Commitments and contingencies” for more information.
The cash portionduring the second quarter of the purchase price, acquisition related costs and repayment of approximately $936.3 million of Nexeo’s debt and other long-term liabilities were funded using the proceeds from the $781.5 million of incremental Term B Loans, $309.3 million borrowings under the New Senior ABL Facility and $175.0 million borrowings under the ABL Term Loan issued on February 28, 2019. Refer to “Note 13: Debt” for more information.
As of September 30, 2019,March 31, 2020, the Company updated the purchase price allocation to reflect final deferred income tax adjustments, from the third-party valuation firm's preliminary report valuing Nexeo’s tangible and intangible assets which included changes in working capital, assets and liabilities held for sale, property, plant and equipment, net, other assets and other liabilities. The adjustments to these balances resultedresulting in a $65.0$7.0 million decreaseincrease to goodwill.
The initial accounting for this acquisition is considered preliminary, and is subject to adjustments on receiptwas complete as of additional information relevant to the acquisition to complete the opening balances for deferred income taxes. This valuation is in process and the preliminary values below are based on initial information that continues to be subject to the completion of the valuation and allocation of the assets acquired.

March 31, 2020.
The preliminaryfinal purchase price allocation at February 28, 2019 is as follows:shown below:
(in millions)  
Trade accounts receivable, net $296.3
Inventories 150.2
Prepaid expenses and other current assets 55.6
Assets held for sale 888.2
Property, plant and equipment, net 262.3
Goodwill 617.2
Intangible assets, net 155.7
Other assets 37.4
Trade accounts payable (137.7)
Other accrued expenses (139.4)
Liabilities held for sale (221.5)
Deferred tax liabilities (78.5)
Other long-term liabilities (71.0)
Purchase consideration, net of cash $1,814.8

(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 to an affiliate of One Rock Capital Partners, LLC for total net proceeds of $664.3 million, net of cash disposed.million. Refer to “Note 4: Discontinued operations”operations and dispositions” for further information.
The Company recorded $617.2$562.7 million of goodwill, consisting of $600.7$547.1 million in the USA segment, $6.2$3.8 million in Canada and $10.3$11.8 million in LATAM. The goodwill is primarily attributable to expected synergies from combining operations. The Company is in process of determining the amountexpects approximately $76.0 million of goodwill that isto be deductible for income tax purposes.
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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. These warrants$27.80 and will expire on June 9, 2021. The Companywarrants are recorded the warrants as other long-term liabilitiesaccrued expenses within the condensed consolidated balance sheet. Refer to “Note 15: Fair value measurements” for more information.
The amounts of net sales and net loss from continuing operations related to the Nexeo chemical distribution business, included in the Company’s condensed consolidated statements of operations from March 1, 2019 to September 30, 2019 are as follows:
(in millions)  
Net sales $1,061.1
Net loss from continuing operations (2.4)

The following unaudited pro forma financial information combines the unaudited results of operations as if the acquisition of Nexeo had occurred at the beginning of the periods presented below. The unaudited pro forma results for all periods presented below exclude the results of operations related to Nexeo Plastics, as this divestiture was reflected as discontinued operations. Refer to “Note 4: Discontinued operations” for additional information.
The unaudited pro forma financial information is as follows:
  Three months ended September 30, Nine months ended September 30,
(in millions) 2019 2018 2019 2018
Net sales $2,387.3
 $2,659.6
 $7,457.9
 $8,248.1
Net income (loss) from continuing operations 1.1
 70.4
 (39.5) 227.7

The pro forma financial information is for comparative purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2018.

The unaudited pro forma information is based upon accounting estimates and judgments the Company believes are reasonable. The unaudited pro forma information reflects adjustments directly attributed to the business combination including amortization on acquired intangible assets, interest expense, transaction and acquisition related costs, depreciation related to purchase accounting fair value adjustments and the related tax effects.
4. Discontinued operations and dispositions
Discontinued operations
On March 29, 2019, the Company completed the sale of the plastics distribution business 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 excessa working capital.capital adjustment. The Nexeo preliminary 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 One Rock Capital Partners, LLCthe Buyer which are designed to ensure and facilitate an orderly transfer of business operations. The services provided under the transitional arrangementsoperations and will terminate at various times, between six and twenty-four months and can be renewed with a maximum of 2 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 3three years. These arrangements do not constitute significant continuing involvement in the plastics distribution business. Nexeo Plastics. 
The following table summarizes the operating results of the Company’s discontinued operations related to the sale described aboveNexeo 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 handling 3.5
Warehousing, selling and administrative 7.9
Other expenses 1.4
Income from discontinued operations before income taxes $7.4
Income tax expense from discontinued operations (1)
 2.0
Net income from discontinued operations $5.4

(1)(in millions)The provision for income taxes for the nineNine months ended September 30, 2019 includes an adjustment to the
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 related to the one monthfrom discontinued operations reported as of March 31, 2019.(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 plastics distribution business.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 $9.3 million pre-tax loss on sale of business in the condensed consolidated
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statements of operations and was included in the USA segment. The sale of these businesses did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the dispositions did not represent a strategic shift that had, or will have, a major effect on the Company's operations and financial results.
The following summarizes the loss before income taxes attributable to these businesses:
Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Loss before income taxes$(0.8)$(2.6)$(26.9)$(5.5)

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 table disaggregatestables 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 Sciences0 0 43.9 0 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 Sciences0 0 64.3 0 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 
(in millions) USA Canada EMEA LATAM Consolidated
  Three months ended September 30, 2019
Chemical Distribution $1,477.0
 $207.3
 $424.7
 $114.0
 $2,223.0
Crop Sciences —
 64.3
 —
 —
 64.3
Services 85.1
 11.4
 0.3
 3.2
 100.0
Total external customer net sales $1,562.1
 $283.0
 $425.0
 $117.2
 $2,387.3


USAEMEACanadaLATAMConsolidated
(in millions) USA Canada EMEA LATAM Consolidated(in millions)Nine months ended September 30, 2020
 Nine months ended September 30, 2019
Chemical Distribution $4,240.1
 $644.1
 $1,365.6
 $321.2
 $6,571.0
Chemical Distribution$3,546.6 $1,268.3 $560.1 $319.9 $5,694.9 
Crop Sciences —
 281.9
 —
 —
 281.9
Crop Sciences0 0 255.7 0 255.7 
Services 234.5
 35.6
 1.0
 7.9
 279.0
Services234.7 1.0 36.4 6.9 279.0 
Total external customer net sales $4,474.6
 $961.6
 $1,366.6
 $329.1
 $7,131.9
Total external customer net sales$3,781.3 $1,269.3 $852.2 $326.8 $6,229.6 
USAEMEACanadaLATAMConsolidated
(in millions)(in millions)Nine months ended September 30, 2019
Chemical DistributionChemical Distribution$4,240.1 $1,365.6 $644.1 $321.2 $6,571.0 
Crop SciencesCrop Sciences0 0 281.9 0 281.9 
ServicesServices234.5 1.0 35.6 7.9 279.0 
Total external customer net salesTotal 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. The following table provides information pertainingobligation and are recognized in revenue when the performance obligations are met. Deferred revenues relate to the deferred revenue balance and account activity:
(in millions)  
Deferred revenue as of January 1, 2019 $45.6
Deferred revenue as of September 30, 2019 5.7
Revenue recognized that was included in the deferred revenue balance at the beginning of the period 44.4

The deferred revenue balancesrevenues that are all expected to have a duration ofbe recognized within one year or less and are recorded within the other accrued expenses line itemitems 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.
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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.
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 settlement0 0 0 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 
  Three months ended
September 30,		 Nine months ended
September 30,
(in millions) 2019 2018 2019 2018
Acquisition and integration related expenses $18.6
 $5.5
 $128.3
 $6.9
Stock-based compensation expense 4.4
 4.0
 21.7
 17.7
Restructuring charges 0.6
 2.9
 1.2
 3.4
Other employee termination costs 4.2
 2.7
 23.3
 9.5
Other facility exit costs (1)
 5.6
 —
 5.6
 —
Saccharin legal settlement —
 —
 62.5
 —
Other (3.2) (2.7) 16.2
 (0.5)
Total other operating expenses, net $30.2
 $12.4
 $258.8
 $37.0

(1)Other facility exit costs includes $3.6 million recorded as an estimated withdrawal liability associated with a multiemployer pension plan related to a facility closure.
7. Restructuring charges
Restructuring charges recorded relate to large,the implementation of several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. These actions primarily resultresulted in workforce reductions lease termination costs and other facility rationalization costs. Restructuring charges are recorded in other operating expenses, net in the condensed consolidated statement of operations.
20182020 Restructuring
In 2018,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 restructuring chargesan additional charge to earnings of $3.2 million in USA, consisting of $3.1 million in employee termination costs and $0.1 million in other exit costs for employees impacted by a decision to consolidate departments. Additionally, the Company recorded restructuring charges of $0.9 million in Other, relating to employee termination costs. The Company recorded restructuring charges of $0.5 million and $1.3 million in USA, consisting of $0.7 million and $1.3 million in employee termination costs during the three and nine months ended September 30, 2019 as well as reduced its estimate by $0.1 million in both facility and other exist costs during the three months ended September 30, 2019. The Company expects to incur approximately $1.3 million of additional employee termination and other exit costs over the next year and expects this program to be substantially completed by 2020.

Also during the year ended December 31, 2018, the Company recorded restructuring charges of $0.9 million in EMEA relating to employee termination costs. The Company recorded restructuring charges of $0.1 million in facility exit costs during the three and nine months ended September 30, 2019 and reduced its estimate by $0.2 million within employee termination costs for this program duringcosts.
During the nine months ended September 30, 2019. Thesecond quarter of 2020, the Company does not expect to incur material costsinitiated workforce reductions spanning across many job functions and locations in the future relatedUSA and Other in order to this restructuring program.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 2019.2020.
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 $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
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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 $5.1 
Other exit costs0 0 0.1 0.1 
Total$(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 $6.1 
Other exit costs0 0 0.1 0.1 
Total$(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 (0.6)1.3 
Other exit costs0.2 0 0 0.2 
Total$5.8 $9.7 $(11.4)$4.1 
(in millions) January 1, 2019 
Charge to 
earnings
 
Cash
paid
 
Non-cash 
and other
 September 30, 2019
Employee termination costs $4.2
 $1.1
 $(4.6) $—
 $0.7
Facility exit costs 5.0
 0.1
 (0.1) —
 5.0
Other exit costs 0.2
 —
 —
 —
 0.2
Total $9.4
 $1.2
 $(4.7) $—
 $5.9

(in millions) January 1, 2018 
Charge to 
earnings
 
Cash 
paid
 
Non-cash 
and other
 December 31, 2018
Employee termination costs $3.0
 $5.3
 $(3.4) $(0.7) $4.2
Facility exit costs 10.2
 (0.7) (4.4) (0.1) 5.0
Other exit costs (0.5) 0.2
 (0.1) 0.6
 0.2
Total $12.7
 $4.8
 $(7.9) $(0.2) $9.4


(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 0 0.2 
Total$9.4 $2.6 $(6.2)$5.8 
Restructuring liabilities of $5.5$3.6 million and $5.9$5.3 million were classified as current in other accrued expenses in the condensed consolidated balance sheets as of September 30, 20192020 and December 31, 2018,2019, respectively. The long-term portion of restructuring liabilities of $0.4 million and $3.5$0.5 million were recorded in other long-term liabilities in the condensed consolidated balance sheets as of September 30, 20192020 and December 31, 2018, respectively,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.
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8. Other (expense) income (expense), net
Other income (expense) income,, net consisted of the following gains (losses):following:
  Three months ended
September 30,		 Nine months ended
September 30,
(in millions) 2019
2018 2019 2018
Foreign currency transactions $(0.9)
$(3.7) $(3.7) $(8.0)
Foreign currency denominated loans revaluation 16.8

0.8
 17.3
 (0.6)
Undesignated foreign currency derivative instruments (1)
 (20.6)
2.7
 (26.2) 3.6
Undesignated interest rate swap contracts (1)
 (1.0) —
 (3.8) —
Non-operating retirement benefits (2)
 0.5
 3.3
 1.7
 10.2
Other (0.3)
(0.6) (2.5) (2.2)
Total other (expense) income, net $(5.5) $2.5
 $(17.2) $3.0
(1)Refer to “Note 16: Derivatives” for more information.
(2)Refer to “Note 9: Employee benefit plans” for more information.

 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 0 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 costs0 0 (0.1)0 
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.
9. Employee benefit plans
The following table summarizes the components of net periodic (benefit) cost (benefit) 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 $0 $0 $0 $0.5 $0.6 $1.4 $1.8 
Interest cost (2)
5.8 6.8 17.4 20.4 3.2 3.9 9.3 11.7 
Expected return on plan assets (2)
(7.1)(6.3)(21.4)(18.9)(4.1)(4.9)(11.9)(15.0)
Prior service cost (2)
0 0 0 0 0 0 0.1 0.1 
Net periodic (benefit) cost$(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.
  Domestic - Defined Benefit Pension Plans
 
Three months ended
September 30,		 Nine months ended
September 30,
(in millions)
2019
2018 2019 2018
Interest cost (1)

$6.8

$6.8
 $20.4
 $20.4
Expected return on plan assets (1)

(6.3)
(7.8) (18.9) (23.4)
Net periodic cost (benefit)
$0.5
 $(1.0) $1.5
 $(3.0)
  Foreign - Defined Benefit Pension Plans
  Three months ended
September 30,		 Nine months ended
September 30,
(in millions) 2019 2018 2019 2018
Service cost (2)
 $0.6
 $0.7
 $1.8
 $2.1
Interest cost (1)
 3.9
 3.8
 11.7
 11.7
Expected return on plan assets (1)
 (4.9) (6.2) (15.0) (19.1)
Prior service cost (1)
 —
 —
 0.1
 0.1
Net periodic benefit $(0.4) $(1.7) $(1.4) $(5.2)

(1)These amounts are included in other (expense) income, net.
(2)Service cost is included in warehouse, selling and administrative expenses.

10. Income taxes
The Company’s tax provision for interim periods is determined using an estimate of the annual effective income tax rate, adjusted for discrete items, if any, that occur in the relevant period. Each quarter, an estimate of the annual effective income tax rate is updated should management revise its forecast of earnings based upon the Company’s operating results. If there is a change in the estimated effective annual income tax rate, a cumulative adjustment is made. The quarterly income tax provision and forecast estimate of the annual effective income tax rate may be subject to volatility due to several factors, including the complexity in forecasting jurisdictional earnings before income tax, the rate of realization of forecasting earnings or losses by quarter, acquisitions, divestitures, foreign currency gains and losses, pension gains and losses, and other factors.
The income tax expense of $43.2 million and $38.4 millioneffective income tax rate for the three and nine months ended September 30, 2020 and 2019 resultedwere 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 anthe $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 94.5%21.0% primarily due to the impact of higher tax rates in foreign jurisdictions, non-deductible expenses and (317.4)%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”), respectively. 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.
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Discrete tax expense (benefit) of $9.1 million and $(4.9)discrete tax benefit of $4.9 million are included in the $43.2 million and the $38.4 million income tax expense for the three and nine month periodmonths 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. The nine months ended September 30, 2019 discrete tax benefit of $4.9 million is attributable to the indirect effects of the Nexeo Plastics sale offset by the US return to provision adjustment, an increase in valuation allowance on tax attributes and various other items.
The income tax expense of $20.3 million and $57.7 million for the three and nine months ended September 30, 2018, resulted in an effective income tax rate of 29.0% and 25.2%, respectively. The Company’s effective income tax rate for the three and nine month period ended September 30, 2018 was higher than the US federal statutory rate of 21.0% primarily due to the addition of state taxes, and the higher tax rates incurred on the Company’s earnings outside the US, including the overall net impact of the 2017 US Tax Cuts and Jobs Act on foreign net earnings. The increases in the effective income tax rate were partially offset by the release of valuation allowances on certain tax attributes. The Company’s effective income tax rate for the nine month period ended September 30, 2018 was lower than its three month period effective income tax rate ended September 30, 2018 mainly due to the impact of the discrete tax benefits recorded in previous quarters.

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 operations0 0 0 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 0 
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 operations0 0 0 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 operations0 0 0 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 0.4 0.8 
Warrants7.6 7.6 7.6 6.0 

14
  Three months ended September 30, Nine months ended September 30,
(in millions, except per share data) 2019 2018 2019 2018
Basic:        
Net income (loss) from continuing operations $2.5
 $49.6
 $(50.5) $171.1
Net income from discontinued operations —
 —
 5.4
 —
Net income (loss) $2.5
 $49.6
 $(45.1) $171.1
Less: earnings allocated to participating securities —
 0.1
 —
 0.3
Earnings allocated to common shares outstanding $2.5
 $49.5
 $(45.1) $170.8
  

      
Weighted average common shares outstanding 168.6
 141.2
 162.6
 141.1
Basic income (loss) per common share from continuing operations $0.01
 $0.35
 $(0.31) $1.21
Basic income per common share from discontinued operations —
 —
 0.03
 —
Basic income (loss) per common share (2)
 $0.01
 $0.35
 $(0.28) $1.21
         
Diluted:        
Net income (loss) from continuing operations $2.5
 $49.6
 $(50.5) $171.1
Net income from discontinued operations —
 —
 5.4
 —
Net income (loss) $2.5
 $49.6
 $(45.1) $171.1
Less: earnings allocated to participating securities —
 —
 —
 —
Earnings allocated to common shares outstanding $2.5
 $49.6
 $(45.1) $171.1
         
Weighted average common shares outstanding 168.6
 141.2
 162.6
 141.1
Effect of dilutive securities: stock compensation plans (1)
 0.9
 1.1
 —
 1.0
Weighted average common shares outstanding – diluted 169.5
 142.3
 162.6
 142.1
Diluted income (loss) per common share from continuing operations $0.01
 $0.35
 $(0.31) $1.20
Diluted income per common share from discontinued operations —
 —
 0.03
 —
Diluted income (loss) per common share (2)
 $0.01
 $0.35
 $(0.28) $1.20
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(1)
Stock options to purchase 3.1 million and 1.5 million shares of common stock and restricted stock of NaN were outstanding during the three months ended September 30, 2019 and 2018, respectively, but were not included in the calculation of diluted income per share as the impact of these awards would have been anti-dilutive. Stock options to purchase 3.0 million and 1.6 million shares of common stock and restricted stock of 0.8 million and NaN were outstanding during the nine months ended September 30, 2019 and 2018, respectively, but were not included in the calculation of diluted income per share as the impact of these awards would have been anti-dilutive. Diluted shares outstanding also did not include 7.6 million and 6.0 million shares of common stock issuable on the exercise of warrants because the warrants were out-of-the-money for the three and nine months ended September 30, 2019.
(2)As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters’ earnings per share may not equal the earnings per share for any year-to-date period.

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)0 (60.1)(93.5)
Amounts reclassified from accumulated other comprehensive loss14.6 0.1 0 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)0 14.3 3.1 
Amounts reclassified from accumulated other comprehensive loss13.8 0 0 13.8 
Net current period other comprehensive income (loss)$2.6 $0 $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)$(373.2)
Impact due to adoption of ASU 2018-02 (1)
1.5 0 (4.7)(3.2)
Other comprehensive loss before reclassifications(22.1)0 (12.1)(34.2)
Amounts reclassified from accumulated other comprehensive loss(6.5)0.1 0 (6.4)
Net current period other comprehensive (loss) income$(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)0 (31.9)(35.4)
Amounts reclassified from accumulated other comprehensive loss(0.9)0 0 (0.9)
Net current period other comprehensive loss$(4.4)$0 $(31.9)$(36.3)
Balance as of September 30, 2019$(18.2)$(1.0)$(397.8)$(417.0)
(in millions) Cash flow hedges 
Defined
benefit
pension items
 
Currency
translation
items
 Total
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) income 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 December 31, 2017 $6.7
 $(1.2) $(284.0) $(278.5)
Impact due to adoption of ASU 2017-12 (2)
 0.5
 —
 —
 0.5
Other comprehensive income (loss) before reclassifications 13.3
 —
 (61.0) (47.7)
Amounts reclassified from accumulated other comprehensive loss $(4.0) $0.1
 $—
 $(3.9)
Net current period other comprehensive income (loss) $9.8
 $0.1
 $(61.0) $(51.1)
Balance as of September 30, 2018 $16.5
 $(1.1) $(345.0) $(329.6)

(1)Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019.
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(1)Adjusted due to the adoption of ASU 2018-02 “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” on January 1, 2019. Refer to “Note 2: Significant accounting policies” for more information.
(2)Adjusted due to the adoption of ASU 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018.

The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net income (loss):
  Three months ended September 30, Nine months ended September 30,  
(in millions) 
2019 (1)
 
2018 (1)
 
2019 (1)
 
2018 (1)
 Location of impact on
  statement of operations  
Amortization of defined benefit pension items:          
Prior service cost $—
 $—
 $0.1
 $0.1
 Other (expense) income, net
Tax expense —
 —
 —
 —
 Income tax expense
Net of tax $—
 $—
 $0.1
 $0.1
  
Cash flow hedges:          
Interest rate swap contracts $(1.2) $(2.4) $(8.7) $(5.4) Interest expense
Tax expense 0.3
 0.6
 2.2
 1.4
 Income tax expense
Net of tax $(0.9) $(1.8) $(6.5) $(4.0)  
Total reclassifications for the period $(0.9) $(1.8) $(6.4) $(3.9)  
(1)Amounts in parentheses indicate credits to net income (loss) in the condensed consolidated statement of operations.

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 $0 $0.1 $0.1 
Tax expenseIncome tax expense0 0 0 0 
Net of tax$0 $0 $0.1 $0.1 
Cash flow hedges:
Interest rate swap contractsInterest expense$4.7 $(1.2)$7.8 $(8.7)
Cross-currency swap contractsInterest expense and other income (expense), net15.4 0 13.4 0 
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.
13. Debt
Short-term financing
Short-term financing consisted of the following:
(in millions) September 30, 2019 December 31, 2018
Amounts drawn under credit facilities $2.1
 $4.7
Bank overdrafts 0.8
 3.4
Total short-term financing $2.9
 $8.1

(in millions)September 30, 2020December 31, 2019
Amounts drawn under credit facilities$0 $0.5 
Bank overdrafts0.4 0.2 
Total short-term financing$0.4 $0.7 
As of September 30, 20192020 and December 31, 2018,2019, the Company had $140.2$164.1 million and $139.4$158.5 million in outstanding letters of credit, respectively.
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Long-term debt
Long-term debt consisted of the following:
(in millions) September 30, 2019 December 31, 2018
Senior Term Loan Facilities:



Term B Loan due 2024, variable interest rate of 4.29% and 4.77% at September 30, 2019 and December 31, 2018, respectively
$1,438.0

$1,747.8
Euro Term B-2 Loan due 2024, variable interest rate of 2.75% at September 30, 2019 381.7
 —
Term B-4 Loan due 2024, variable interest rate of 4.54% at September 30, 2019 245.0
 —
Asset Backed Loan (ABL) Facilities:



North American ABL Facility due 2024, variable interest rate of 3.74% at September 30, 2019
284.3

—
Canadian ABL Term Loan due 2022, variable interest rate of 4.20% at September 30, 2019 173.7
 —
Euro ABL Facility due 2023, variable interest rate of 1.75% at September 30, 2019 and December 31, 2018 38.1
 58.5
North American ABL Facility due 2020, variable interest rate of 4.19% at December 31, 2018 (amended February 2019) —
 134.7
Senior Unsecured Notes:



Senior Unsecured Notes due 2023, fixed interest rate of 6.75% at September 30, 2019 and December 31, 2018
399.5

399.5
Finance lease obligations
64.9

54.8
Total long-term debt before discount
$3,025.2

$2,395.3
Less: unamortized debt issuance costs and discount on debt
(29.1)
(23.2)
Total long-term debt
$2,996.1

$2,372.1
Less: current maturities
(19.0)
(21.7)
Total long-term debt, excluding current maturities
$2,977.1

$2,350.4


(in millions)September 30, 2020December 31, 2019
Senior Term Loan Facilities:
Term B-3 Loan due 2024, variable interest rate of 2.40% and 4.05% at September 30, 2020 and December 31, 2019, respectively$1,264.1 $1,438.0 
Term B-5 Loan due 2026, variable interest rate of 2.15% and 3.80% at September 30, 2020 and December 31, 2019, respectively397.0 400.0 
Asset Backed Loan (ABL) Facilities:
North American ABL Facility due 2024, variable interest rate of 2.00% and 5.25% at September 30, 2020 and December 31, 2019, respectively337.9 200.0 
Canadian ABL Term Loan due 2022, variable interest rate of 2.73% and 4.31% at September 30, 2020 and December 31, 2019, respectively127.6 130.9 
Senior Unsecured Notes:
Senior Unsecured Notes due 2027, fixed interest rate of 5.13% at September 30, 2020 and December 31, 2019500.0 500.0 
Finance lease obligations82.8 71.2 
Total long-term debt before discount$2,709.4 $2,740.1 
Less: unamortized debt issuance costs and discount on debt(21.4)(26.3)
Total long-term debt$2,688.0 $2,713.8 
Less: current maturities(27.6)(25.0)
Total long-term debt, excluding current maturities$2,660.4 $2,688.8 
The weighted average interest rate on long-term debt was 4.39%3.72% and 4.29%4.25% as of September 30, 20192020 and December 31, 2018,2019, respectively.
On April 3, 2019,January 7, 2020, using the proceeds from the sale of Nexeo Plastics,the Environmental Sciences business, the Company repaid $448.8$174.0 million of its outstanding Euro and USDthe Term LoansB-3 Loan due 2024. As a result of the prepayment, of $309.8 million of the Term B Loan, €74.8 million of the Euro Term B-2 Loan and $55.0 million of the Term B-4 Loan, there are no mandatory principal payments required under the Senior Term Facilities until 2024.
On February 28, 2019, the Company and certain of its subsidiaries entered into the Fourth Amendment (the “Fourth Amendment”) to that certain credit agreement, dated July 1, 2015 (as amended prior to the Fourth Amendment, the “Credit Agreement” and as amended by the Fourth Amendment, the “Amended Credit Agreement”). Pursuant to the Fourth Amendment, Goldman Sachs Bank USA and the other lenders agreed to provide a new Term B-4 loan facility in an aggregate principal amount

of $300.0 million and a new Euro Term B-2 loan facility in an aggregate principal amount of €425.0 million (collectively, the “Incremental Term Loans”, and together with the Amended Credit Agreement, the “Senior Term Facilities”).
The interest rates applicable to the term loans under the Senior Term Facilities are based on, at the borrower’s option, (i) in the case of dollar denominated Term B-4 loan facility, a fluctuating rate of interest determined by reference to a base rate plus an applicable margin equal to 1.75% or a Eurocurrency rate plus an applicable margin equal to 2.75% (in each case with one 0.25% step down based on achievement of a specific leverage level) and (ii) in the case of Euro denominated Euro Term B-2 loan facility, a fluctuating rate of interest determined by reference to a EURIBOR rate plus an applicable margin equal to 2.75%. The Term B-4 loan and the Euro Term B-2 loan remaining balances are due on the maturity date of July 1, 2024. The Company can repay either loan in whole or part without penalty.
On February 28, 2019, the Company and certain of its US and Canadian subsidiaries entered into an Amended and Restated ABL Credit Agreement pursuant to which Bank of America N.A. and the other lenders party thereto agreed to provide for a five year senior secured ABL credit facility in an aggregate amount of $1.2 billion US dollars and $325.0 million Canadian dollars and a three year secured Canadian dollar ABL term loan facility (“ABL Term Loan”) in an aggregate principal amount of the Canadian dollar equivalent of $175.0 million (collectively, the “New Senior ABL Facility”). The New Senior ABL Facility amends and restates in full the ABL facility entered into by the Company on July 28, 2015. Under the two revolving tranches, the borrowers may request loan advances and make loan repayments until the maturity date of February 28, 2024. The maximum amount available to be borrowed under the New Senior ABL Facility will be determined by a borrowing base consisting of eligible inventory, eligible accounts receivable and cash of Univar Solutions and certain of its subsidiaries.
The interest rates applicable to the loans under the New Senior ABL Facility are based on, at the borrower’s option, (i) with respect to initial term loan facility under the New Senior ABL Facility, a fluctuating rate of interest determined by reference to either a prime rate plus an applicable margin ranging from 1.00% to 1.25% or a BA rate plus an applicable margin ranging from 2.00% to 2.25% and (ii) with respect to the US and Canadian revolving loans under the New Senior ABL Facility, a fluctuating rate of interest determined by reference to a base rate plus an applicable margin ranging from 0.25% to 0.50% or a Eurocurrency rate plus an applicable margin ranging from 1.25% to 1.50%. The applicable margin will be adjusted after the completion of each full fiscal quarter based upon the pricing grid in the New Senior ABL Facility. The ABL Term Loan is payable in quarterly installments of 25.0% of the aggregate initial principal amount commencing June 30, 2021 with a final amortization payment on February 28, 2022.
Assets pledged under the New Senior ABL Facility, Senior Term Facilities and the Euro ABL include $52.7 million of cash, $1,175.7 million of trade accounts receivable, net, $735.5 million of inventories, $136.0 million of prepaid expenses and other current assets and $975.0 million of property, plant and equipment, net.
As a result of the February 2019 amendment related to the New Senior ABL Facility, the Company recognized a loss on extinguishment of debt of $0.7$1.8 million during the ninethree months ended September 30, 2019.March 31, 2020.
Other Information
September 30, 2020December 31, 2019
(in millions)Carrying amountFair valueCarrying amountFair value
Fair value of debt$2,688.0 $2,702.6 $2,713.8 $2,770.7 
The fair values of debt were based on current market quotes for similar borrowings and credit risk adjusted for liquidity, margins and amortization, as necessary and are classified as level 2 in the fair value hierarchy.
14. Supplemental balance sheet information
Allowance for doubtful accounts
The allowance for doubtful accounts reflects the Company's current estimate of credit losses expected to be incurred over the life of the trade accounts receivable. Collectability of the trade accounts receivable balance is assessed on an ongoing basis and determined based on the delinquency of customer accounts, the financial condition of individual customers, past collections experience and future economic expectations. The change in the allowance for doubtful accounts is as follows:
(in millions)
Balance, January 1, 2020$12.9 
Provision for credit losses14.8 
Write-offs(2.0)
Recoveries0.3 
Dispositions(0.5)
Foreign exchange(0.9)
Balance, September 30, 2020$24.6 
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Property, plant and equipment, net
(in millions) September 30, 2019 December 31, 2018
Property, plant and equipment, at cost $2,228.7
 $1,925.9
Less: accumulated depreciation (1,067.6) (970.1)
Property, plant and equipment, net $1,161.1
 $955.8
Finance lease assets, net
(in millions)September 30, 2020December 31, 2019
Property, plant and equipment, at cost$2,210.4 $2,190.3 
Less: accumulated depreciation(1,125.2)(1,037.9)
Property, plant and equipment, net$1,085.2 $1,152.4 
Included within property, plant and equipment, net are assets related to finance leases whereGoodwill
The following is a summary of the Company is the lessee. The below table summarizes the cost and accumulated depreciation related to these assets:
(in millions) September 30, 2019 December 31, 2018
Finance lease assets, at cost $115.4
 $89.4
Less: accumulated depreciation (52.0) (37.4)
Finance lease assets, net $63.4
 $52.0

activity in goodwill by segment.

(in millions)USAEMEACanadaLATAMTotal
Balance, January 1, 2020$1,802.3 $8.4 $441.1 $29.0 $2,280.8 
Purchase price adjustments7.0 0 0 0 7.0 
Other adjustments(4.1)0 0 (0.5)(4.6)
Foreign exchange0 (0.3)(10.9)(4.7)(15.9)
Balance, September 30, 2020$1,805.2 $8.1 $430.2 $23.8 $2,267.3 
Intangible assets, net
The gross carrying amounts and accumulated amortization of the Company’s intangible assets were as follows:
  September 30, 2019 December 31, 2018
(in millions) Gross 
Accumulated
Amortization
 Net Gross 
Accumulated
Amortization
 Net
Intangible assets:            
Customer relationships $1,001.9
 $(663.0) $338.9
 $846.1
 $(620.3) $225.8
Other 174.1
 (164.8) 9.3
 175.1
 (162.8) 12.3
Total intangible assets $1,176.0
 $(827.8) $348.2
 $1,021.2
 $(783.1) $238.1

 September 30, 2020December 31, 2019
(in millions)GrossAccumulated AmortizationNetGrossAccumulated AmortizationNet
Customer relationships$928.0 $(670.5)$257.5 $986.4 $(680.8)$305.6 
Other173.8 (168.0)5.8 182.0 (167.4)14.6 
Total intangible assets$1,101.8 $(838.5)$263.3 $1,168.4 $(848.2)$320.2 
Other intangible assets consist of intellectual property (mostly trademarks and trade names, suppliernames), producer relationships and contracts, non-compete agreements and exclusive distribution rights.
The estimated annual amortization expense in each of the next five years is as follows:
(in millions) 
2020$60.1 
202151.3 
202243.3 
202338.4 
202431.6 
Other accrued expenses
As of September 30, 2020, other accrued expenses that were greater than five percent of total current liabilities consisted of current tax liabilities of $74.6 million, comprised of income, VAT and local indirect taxes payable. As of December 31, 2019, other accrued expenses that were greater than five percent of total current liabilities consisted of current tax liabilities of $87.1 million and customer prepayments and deposits of $81.5 million.
Impairment charges
The Company has announced closure of certain production facilitiesreviews long-lived assets for impairment whenever events or changes in USA during the third quarter of 2019. The Company determined that these decisions indicated a triggering event, requiring the assessment of recoverability of these long-lived assets.circumstances indicate an asset’s carrying amount may not be recoverable. Testing the assetsasset groups for recoverability involves developing estimates of future cash flows directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the assets. An impairment of a group of long-lived assets exists when the sum of the estimated undiscounted future cash flows expected to be generated directly by the asset group are less than the carrying value of the asset group. The impairment charge computation is based on the difference between carrying value and fair value of the asset group, as determined by discounted future cash flows. Significant estimates include forecasted Adjusted EBITDA, working capital, capital expenditures and discount rates. As the inputs for testing recoverability and determining fair value of the asset groups are largely based on management’s judgments and are not generally observable in active markets, the Company considers such measurementsinputs to be Level 3 measurements in the fair value hierarchy.
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During the second quarter of 2020, the Company determined there was a more likely than not expectation that the industrial spill and emergency response businesses within the USA segment would be sold. The Company determined this to be a triggering event, requiring the assessment of the recoverability of these long lived asset groups. The Company tested the recoverability of its long-lived assets and determined the carrying amount of the assets exceeded the sum of the expected undiscounted future cash flows.to be impaired. As a result, the Company recorded a non-cash, pretax impairment charge of $7.0$15.5 million, consisting of $12.8 million of intangible assets, net and $2.7 million of property, plant and equipment, net within the condensed consolidated statement of operations during the three months ended June 30, 2020.
During the third quarter of 2020, the Company decided to cease further investment in, and seek to restructure or exit a contract related to, certain technology assets, consisting of capitalized software and hardware components. This event represented a triggering event requiring an impairment analysis within the Other segment. As a result of the analysis, the Company recorded a non-cash, pretax impairment charge of $19.7 million relating to property, plant and equipment, net within itsthe condensed consolidated statementsstatement of operations during the three months ended September 30, 2019.2020.
Additionally, the Company announced the closure of certain production facilities in the USA segment during the second and third quarters of 2020. The closures resulted in impairment charges related to property, plant and equipment, net of $1.4 million and $1.0 million within the condensed consolidated statement of operations during the three months ended June 30, 2020 and September 30, 2020, respectively.
15. Fair value measurements
Items measured atThe following is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3):
(in millions)Warrant Liability
Fair value as of December 31, 2019$33.0 
Fair value adjustments(6.4)
Fair value as of September 30, 2020$26.6 
The assumptions used in the Black-Scholes-Merton valuation model to measure the fair value of the warrants are:
Weighted Average
Unobservable InputsRangeAmountMethod
Warrant lifeN/A2 yearsExpected term
Expected volatility28.75% to 61.86%43.61%Industry peer group
Risk-free interest rateN/A0.13%US Treasury rates
Fair value adjustments are recorded within other operating expenses, net in the condensed consolidated statement of operations.
16. Derivatives
Foreign currency derivatives
The Company uses forward currency contracts to hedge earnings from the effects of foreign exchange relating to certain of the Company’s intercompany and third-party receivables and payables denominated in a foreign currency. These derivative instruments are not formally designated as cash flow hedges by the Company and the terms of these instruments range from one to three months.
Interest rate swaps
The objective of the designated interest rate swap contracts is to offset the variability of cash flows in LIBOR indexed debt interest payments attributable to changes in the benchmark interest rate related to the Term B-3 Loan and a portion of debt outstanding under the North American ABL Facility. On March 17, 2020, the Company executed $250.0 million of interest rate swap contracts effective June 30, 2020 to replace swaps with maturities on June 30, 2020. The interest rate swap contracts have maturities at various dates through June 2024.
Cross currency swap contracts
Cross currency swap contracts are used to effectively convert the Term B-5 Loan’s principal amount of floating rate US dollar denominated debt, including interest payments, to fixed-rate Euro denominated debt maturing in November 2024. As of September 30, 2020, approximately 95% of the cross currency swaps are designated as a recurring basiscash flow hedge.
The Company uses both undesignated interest rate swap contracts and cross currency swaps to manage interest rate variability and mitigate foreign exchange exposure.
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Notional amounts and fair value of derivative instruments
The following table presents the notional amounts of the Company’s outstanding derivative instruments by type:
(in millions)September 30, 2020December 31, 2019
Derivatives designated as hedging instruments:
Interest rate swap contracts$1,050.0 $1,050.0 
Cross currency swap contracts381.0 381.0 
Derivatives not designated as hedging instruments:
Interest rate swap contracts200.0 200.0 
Foreign currency derivatives90.9 141.4 
Cross currency swap contracts19.0 19.0 
The following are the pre-tax effects of derivative instruments on the condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2020 and 2019:
Statement of Operations ClassificationAmount of gain (loss) reclassified from other comprehensive loss into incomeAmount to be reclassified to Statement of Operations within the next 12 months
Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Derivatives in cash flow hedging relationships: 
Interest rate swap contractsInterest expense$(4.7)$1.2 $(7.8)$8.7 $(18.5)
Cross currency swap contractsInterest expense0.4 0 3.1 0 1.4 
Other income (expense), net(15.8)0 (16.5)0 — 
Refer to “Note 8: Other income (expense), net” for the gains and losses related to derivatives not designated as hedging instruments.
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The following table presents the Company’s gross assets and liabilities measured on a recurring basis:basis and classified as level 2 within the fair value hierarchy:
  Level 2 Level 3
(in millions) September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
Financial current assets:        
Forward currency contracts $0.3
 $0.3
 $—
 $—
Interest rate swap contracts —
 12.4
 —
 —
Financial non-current assets:        
Interest rate swap contracts —
 1.5
 —
 —
Financial current liabilities:        
Forward currency contracts 20.0
 0.2
 —
 —
Interest rate swap contracts 5.6
 —
 —
 —
Financial non-current liabilities:        
Interest rate swap contracts 22.7
 —
 —
 —
Warrant liability —
 —
 19.2
 —

Derivative AssetsDerivative Liabilities
(in millions)Balance Sheet ClassificationSeptember 30, 2020December 31, 2019Balance Sheet ClassificationSeptember 30, 2020December 31, 2019
Designated Derivatives:
Cross currency swap contractsPrepaid expenses and other current assets$1.4 $7.2 Other long-term liabilities$28.8 $12.1 
Interest rate swap contractsPrepaid expenses and other current assets0 0 Other accrued expenses18.5 6.4 
Interest rate swap contractsOther assets0 0 Other long-term liabilities23.8 14.0 
Total designated derivatives$1.4 $7.2 $71.1 $32.5 
Undesignated Derivatives:
Foreign currency contractsPrepaid expenses and other current assets$0.2 $0.5 Other accrued expenses$0.4 $1.0 
Cross currency swap contractsPrepaid expenses and other current assets0.1 0.4 Other long-term liabilities1.4 0.6 
Interest rate swap contractsPrepaid expenses and other current assets0 0 Other accrued expenses3.1 1.0 
Interest rate swap contractsOther assets0 0 Other long-term liabilities4.3 1.9 
Total undesignated derivatives$0.3 $0.9 $9.2 $4.5 
Total derivativesTotal assets$1.7 $8.1 Total liabilities$80.3 $37.0 
The net amounts by legal entity related to forward currency contracts included in prepaid and other current assets were $0.3$0.1 million and $0.3$0.2 million as of September 30, 20192020 and December 31, 2018,2019, respectively. The net amounts related to forward currency contracts included in other accrued expenses were $20.0$0.3 million and $0.2$0.7 million as of September 30, 20192020 and December 31, 2018,2019, 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 warrant liability in the table above consisted of the fair value of warrants assumed in connection with the Nexeo acquisition. Refer to “Note 3: Business combinations” for more information. The fair value of the warrant liability is calculated

using the Black-Scholes-Merton option valuation model. The fair value of the warrants was computed using the following assumptions: expected option life two years, volatility 26.07%, and risk-free interest rate of 1.63%. As the Company does not have sufficient historical volatility data, the expected volatility is based on the average historical data of a peer group of public companies over a period equal to the expected term of the stock options. The risk-free interest rate assumption was based on the US Treasury rates. Based on the valuation methodology, the warrant liability 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 the warrant liability related to the Nexeo acquisition.
(in millions) Warrant Liability
Fair value as of December 31, 2018 $—
Additions 26.0
Fair value adjustments (6.8)
Fair value as of September 30, 2019 $19.2

Fair value adjustments are recorded within other operating expenses, net in the condensed consolidated statement of operations.
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:
  September 30, 2019 December 31, 2018
(in millions) 
Carrying 
Amount
 
Fair
Value
 
Carrying 
Amount
 Fair
Value
Financial liabilities:        
Long-term debt including current portion (Level 2) $2,996.1
 $3,043.8
 $2,372.1
 $2,314.3

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.
16. Derivatives
Interest rate swaps
The objective of the designated 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 USD Term B Loans and USA ABL Facility due 2024.
As of September 30, 2019 and December 31, 2018, the Company had designated interest rate swap contracts with a total notional amount of $1.8 billion and $2.0 billion, respectively. In March 2019 and December 2018, the Company entered into interest rate swap contracts with a total notional amount of $300.0 million and $500.0 million effective March 2019 and June 2019, respectively whereby a fixed rate of interest (weighted average of 2.27% and 2.73%, respectively) is paid and a variable rate of interest (three-month LIBOR) is received as calculated on the notional amount. In 2017, the Company entered into interest rate swap contracts with a remaining notional amount of $1.0 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 September 30, 2019, the designated interest rate swaps held by the Company continue to qualify for hedge accounting. 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 and nine months ended September 30, 2019, there were $1.2 million and $8.7 million in gains on our interest rate swap contracts that were reclassified to interest expense in the condensed consolidated statement of operations, respectively. As of September 30, 2019, the Company estimates that $4.6 million of derivative losses 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 12: Accumulated other comprehensive loss.”
In March 2019, the Company entered into an interest rate swap contract with a total notional amount of $200.0 million effective March 2019 which is not designated against long-term debt. The interest rate swap is used to manage interest rate risk. The Company does not apply hedge accounting for this interest rate swap contract. Changes in fair value of the interest rate swap

contract is recognized directly in other (expense) income, net in the condensed consolidated statement of operations. Refer to “Note 8: Other (expense) income, net” for additional information.
The fair value of interest rate swaps is recorded either in prepaid expenses and other current assets, other assets, other accrued expenses or other long-term liabilities in the condensed consolidated balance sheets. As of September 30, 2019 and December 31, 2018 a current liability of $5.6 million was included in other accrued expenses and a current asset of $12.4 million was included in other current assets, respectively. As of September 30, 2019 a non-current liability of $22.7 million was included in other long-term liabilities. As of December 31, 2018, a non-current asset of $1.5 million was included in other assets.
Foreign currency derivatives
The Company uses forward currency contracts to hedge earnings from the effects of foreign exchange relating to certain of the Company’s monetary assets and liabilities denominated in a foreign currency. These derivative instruments are not formally designated as hedges by the Company and the terms of these instruments range from one to three months. Forward currency contracts are recorded at fair value in either prepaid expenses and other current assets or other accrued expenses in the condensed consolidated balance sheet, reflecting their short-term nature. The fair value adjustments and gains and losses are included in other (expense) income, net within the condensed consolidated statements of operations. Refer to “Note 8: Other (expense) income, net” for more information. On June 28, 2019, the Company entered into a €350.0 million forward currency contract to hedge foreign exchange risk related to the Euro Term B loan. On September 30, 2019, the Company entered into a new forward currency contract with a total notional amount of €350.0 million with a termination date of November 1, 2019 to replace its existing forward currency contract which has a termination date of October 1, 2019. The total notional amount of undesignated forward currency contracts were $894.2 million and $108.1 million as of September 30, 2019 and December 31, 2018, respectively.
Cash flows associated with derivative financial instruments are recognized in the operating section of the condensed consolidated statement of cash flows.
17. Commitments and contingencies
Litigation
In the ordinary course of business, the Company is subject to pending or threatened claims, lawsuits, regulatory matters and administrative proceedings from time to time. Where appropriate the Company has recorded provisions in the condensed consolidated financial statements for these matters. The liabilities for injuries to persons or property are in some instances covered by liability insurance, subject to various deductibles and self-insured retentions.
The Company is not aware of any claims, lawsuits, regulatory matters or administrative proceedings, pending or threatened, that are likely to have a material effect on its overall financial position, results of operations, or cash flows. However, the Company cannot predict the outcome of any present or future claims or litigation or the potential for future claims or litigation and adverse developments could negatively impact earnings or cash flows in a particular future period.
The Company is subject to liabilities from claims alleging personal injury from exposure to asbestos. The claims result primarily from an indemnification obligation related to Univar Solutions USA Inc.’s (“Univar”) 1986 purchase of McKesson Chemical Company from McKesson Corporation (“McKesson”). Once certain conditions have been met, Univar will have the ability to pursue insurance coverage, if any, that may be available under McKesson's historical insurance coverage to offset the impact of any fees, settlements, or judgments that Univar is also a defendant in a small numberobligated to pay because of asbestos claims.its obligation to defend and indemnify McKesson. As of September 30, 2019,2020, there were fewer than 77approximately 182 asbestos-related claimscases for which Univar has the Company has liability for defenseobligation to defend and indemnity pursuantindemnify; however, this number tends to the indemnification obligation. The volume of such cases has decreased in recent quarters.fluctuate up and down over time. Historically, the vast majority of the claims against both McKesson and Univarthese asbestos cases have been dismissed without payment or with a nominal payment. The Company does incur costs in defending these claims. While the Company is unable to predict
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the outcome of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any of these matters will have a material effect on its overall financial position, results of operations or cash flows. However, the Company cannot predict the outcome of any present or future claims or litigation and adverse developments could negatively impact earnings or cash flows in a particular future period.
Merger-related Appraisal Litigation
In connection with the previously disclosed acquisition of Nexeo Solutions, Inc., on June 26, 2019, the Company reached an agreement with BCIM to resolve a dispute regarding the fair value of 5.0 million shares of Nexeo common stock, for which BCIM sought appraisal in a petition filed in the Delaware Court of Chancery, captioned BCIM Strategic Value Master Fund, LP v. Nexeo Solutions, Inc., No. 2019-0363-KSJM. The terms of the agreement, among other matters, provide that, in exchange for a release and dismissal of all asserted claims, the Company will make a cash payment of $63.5 million to BCIM and, as a result, BCIM will relinquish any and all rights to approximately $15.1 million in cash and 1.5 million shares of Univar Solutions common stock valued at $35.5 million in the custody of Equiniti, the transfer agent. With this resolution, the cash and shares were returned to the Company. During the third quarter of 2019, the Company paid the $63.5 million due to BCIM. The period during which former holders of Nexeo common stock were eligible to seek appraisal has expired, and no other such claims are pending.
Environmental
The Company is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively “environmental remediation work”) and from time to time becomes aware of compliance matters regarding possible or alleged violations of these laws or regulations. For example, over the years, the Company has been identified as one of numerousa “potentially responsible parties”party” (“PRP”) under the Comprehensive Environmental

Response, Compensation and Liability Act and/or similar state laws that impose liability for costs relating to environmental remediation work.work at various sites. As a PRP, the Company may be required to pay a share of the costs of investigation and clean upcleanup of certain sites. The Company is currently engaged in environmental remediation work at approximately 130127 locations, some that are now or were previously Company-owned/occupied and some that were never Company-owned/occupied (“non-owned sites”).
The Company’s environmental remediation work at some sites is being conducted pursuant to governmental proceedings or investigations. At other sites, the Company, with appropriate state or federal agency oversight and approval, is conducting the environmental remediation work voluntarily. The Company is currently undergoing remediation efforts or is in the process of active review of the need for potential remediation efforts at approximately 108107 current or formerly Company-owned/occupied sites. In addition, the Company may be liable as a PRP for a share of the clean-upcleanup of approximately 2220 non-owned sites. These non-owned sites are typically (a) locations of independent waste disposal or recycling operations with alleged or confirmed contaminated soil and/or groundwater to which the Company may have shipped waste products or drums for re-conditioning, or (b) contaminated non-owned sites near historical sites owned or operated by the Company or its predecessors from which contamination is alleged to have arisen.
In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; changes in the scope of remediation; the interpretation, application and enforcement of laws and regulations; changes in the costs of remediation programs; the development of alternative cleanup technologies and methods; and the relative level of the Company’s involvement at various sites for which the Company is allegedly associated. It is the Company’s policy to record appropriate liabilities on a case by case basis when remedial efforts or claims are probable, and the costs are reasonable to estimate. The Company continually monitors its own sites and work with other PRPs to deploy feasible remediation techniques. The recorded liabilities are adjusted periodically as remediation progresses or other relevant information becomes available. The level of annual expenditures for remedial, monitoring and investigatory activities will change in the future as major components of planned remediation activities are completed and the scope, timing and costs of remediationexisting activities are changed. Given the uncertainties regarding laws, regulations, technology, information related to sites and potentially responsible parties, the Company does not believe it is possible to develop an estimate of the range of reasonably possible losses in excess of the recorded liabilities. Project lives, vary,and therefore cash flows, range from 2 to 30 years, depending on the specific site and type of remediation project. Associated
Although the Company believes that its reserves are adequate for environmental contingencies, it is possible, due to the uncertainties noted above; that additional reserves could be required in the future that could have a material effect on the overall financial position, results of operations, or cash payments are expected toflows in a particular period. This additional loss or range of losses cannot be paid from operating activities.recorded at this time, as it is not reasonably estimable.
Changes in total environmental liabilities are as follows:
(in millions)
Environmental liabilities at December 31, 2019$78.7 
Revised obligation estimates16.0 
Environmental payments(9.5)
Foreign exchange0.2 
Environmental liabilities at September 30, 2020$85.4 
  Nine months ended September 30,
(in millions) 2019 2018
Environmental liabilities at beginning of period $83.5
 $89.2
Revised obligation estimates 11.8
 10.3
Environmental payments (12.3) (12.2)
Foreign exchange (0.2) (0.2)
Environmental liabilities at end of period $82.8
 $87.1

Environmental liabilities
(in millions)Balance Sheet ClassificationSeptember 30, 2020December 31, 2019
Current environmental liabilitiesOther accrued expenses$27.8 $25.0 
Long-term environmental liabilitiesOther long-term liabilities57.6 53.7 
Tax Matters
During 2017, the Brazilian Federal Supreme Court (the “Court”) ruled that the inclusion of $24.6the state VAT tax collected by a taxpayer in the taxpayer’s federal social contribution calculation base is unconstitutional. In 2019, the Court ruled in the Company's favor allowing the recoverability of amounts previously paid, plus interest. As a result, the Company recorded a benefit of $10.9 million in net sales, of which $9.7 million related to prior years, and $32.1$4.6 million were classified as current in other accrued expensesinterest income in the consolidated statement of operations during the fourth quarter of 2019. During the second quarter of 2020, the Company
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reduced its benefit from prior year and recorded a charge of $0.4 million in net sales and $0.3 million in interest income in the condensed consolidated balance sheets asstatement of September 30, 2019 and December 31, 2018, respectively. The long-term portion of environmental liabilities is recorded in other long-term liabilities in the condensed consolidated balance sheets.
Customs and International Trade Laws
On April 3, 2019, the Company reached a settlement in a previously disclosed case with the Department of Justice (the “DOJ”) regarding saccharin that allegedly transshipped from the Peoples Republic of China (“China”) through the Republic of China (“Taiwan”) and entered into commerce of the United States between 2007 and 2012. Under the settlement, the Company agreed to pay $62.5 million to fully resolve the matter, which was paid on April 8, 2019. The Company does not admit any liability and the DOJ has dismissed the complaint in its entirety.
operations.

18. Leasing
The Company engages in leasing transactions to meet the needs of the business. The determination to lease, rather than purchase, an asset is primarily contingent upon capital requirements, duration of the forecasted business investment, and asset availability.
The Company determines if an arrangement is a lease at inception and all arrangements deemed to be leases are subject to an assessment to determine the classification between finance and operating leases. Operating leases are included in other assets, other accrued expenses, and other long-term liabilities on the condensed consolidated balance sheet for the period ended

September 30, 2019. Finance leases are included in property, plant and equipment, net, current portion of long-term debt, and long-term debt on the condensed consolidated balance sheets.
Right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term as of the commencement date. The Company’s lease agreements have terms that include both lease and non-lease components. Lease component fees are included in the present value of future minimum lease payments. Conversely, non-lease components are not subject to capitalization and are expensed as incurred. Certain lease agreements include rental payments based on the usage of the equipment or adjustments subject to a change in an index. To the extent the variability in the lease payments is known or subject to a minimum floor, the fees would be included in the present value of the future minimum lease payments. Conversely, variable fees that are not known or subject to a minimum floor are expensed as incurred. The contractual interest rate is used to calculate the present value of the future minimum lease payments. In the event an arrangement excludes a stated interest rate, the Company uses an incremental borrowing rate based on Company and contract specific information available as of the commencement date to determine the present value of future minimum lease payments. The valuation of the ROU asset also includes lease payments made in advance of the lease commencement date and initial direct costs incurred to secure the lease and is reduced for lease incentives.
The Company leases certain warehouses and distribution centers, office space, transportation equipment, and other machinery and equipment. Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the condensed consolidated balance sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term.
To the extent the Company is reasonably certain to exercise, the lease term related to outstanding leases include renewal or termination options that are at the Company’s sole discretion. Certain leases also include options to purchase the leased property, which are deemed to be finance leases to the extent the Company is reasonably certain to exercise the option. The depreciable life of assets and leasehold improvements are limited by the expected lease term; unless there is either a transfer of title or purchase option the Company is reasonably certain to exercise, which would necessitate the asset or leasehold improvement to be depreciated over the standard property, plant and equipment estimated useful lives.
The Company has certain leasing agreements, related to leased vehicles available to our sales personnel, that contain guaranteed residual value terms, which are not expected to be triggered. The Company’s leasing portfolio does not contain any material restrictive covenants.
The Company has rental or sublease income that is primarily derived from operating leases with third parties for the usage of idled real estate assets.
Leases
(in millions) Condensed Consolidated Balance Sheet Classifications September 30, 2019
Assets    
Operating lease assets Other assets $162.9
Finance lease assets 
Property, plant and equipment, net (1)
 63.4
Total lease assets   $226.3
Liabilities    
Current liabilities:    
Current portion of operating lease liabilities Other accrued expenses $49.7
Current portion of finance lease liabilities Current portion of long-term debt 19.0
Noncurrent liabilities:    
Operating lease liabilities Other long-term liabilities 118.1
Finance lease liabilities Long-term debt 45.9
Total lease liabilities   $232.7
(1)Finance lease right-of-use assets are recorded net of accumulated amortization of $52.0 million as of September 30, 2019.

(in millions)Balance Sheet ClassificationSeptember 30, 2020December 31, 2019
Assets
Operating lease assetsOther assets$146.2 $157.3 
Finance lease assetsProperty, plant and equipment, net80.6 69.5 
Total lease assets$226.8 $226.8 
Liabilities
Current liabilities:
Current portion of operating lease liabilitiesOther accrued expenses$42.8 $47.4 
Current portion of finance lease liabilitiesCurrent portion of long-term debt23.6 20.9 
Noncurrent liabilities:
Operating lease liabilitiesOther long-term liabilities111.4 114.5 
Finance lease liabilitiesLong-term debt59.2 50.3 
Total lease liabilities$237.0 $233.1 
Lease cost
(in millions)Three months ended September 30, 2020Three months ended September 30, 2019
Statement of Operations ClassificationOperating LeasesFinance LeasesTotalOperating LeasesFinance LeasesTotal
Cost of goods sold (exclusive of depreciation)$4.7 $0 $4.7 $3.6 $0 $3.6 
Outbound freight and handling1.5 0 1.5 1.9 0 1.9 
Warehousing, selling and administrative7.8 0 7.8 7.1 0 7.1 
Depreciation— 6.7 6.7 — 4.8 4.8 
Interest expense— 0.8 0.8 — 0.7 0.7 
Total gross lease component cost$14.0 $7.5 $21.5 $12.6 $5.5 $18.1 
Variable lease costs0.2 (0.2)
Short-term lease costs5.9 11.3 
Total gross lease costs$27.6 $29.2 
Sublease income0.6 1.3 
Total net lease cost$27.0 $27.9 
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(in millions) Three months ended September 30, 2019 Nine months ended September 30, 2019
Condensed Consolidated Statement of Operations Classification Operating Leases Finance Leases Total Operating Leases Finance Leases Total
Cost of goods sold (exclusive of depreciation) $3.6
 $—
 $3.6
 $11.3
 $—
 $11.3
Outbound freight and handling 1.9
 —
 1.9
 5.6
 —
 5.6
Warehousing, selling and administrative 7.1
 —
 7.1
 21.0
 —
 21.0
Depreciation —
 4.8
 4.8
 —
 14.2
 14.2
Interest expense —
 0.7
 0.7
 —
 2.0
 2.0
Total gross lease component cost $12.6
 $5.5
 $18.1
 $37.9
 $16.2
 $54.1
Variable lease costs     (0.2)     0.7
Short-term lease costs     11.3
     22.9
Total gross lease costs     $29.2
     $77.7
Sublease income     1.3
     2.9
Total net lease cost     $27.9
     $74.8


(in millions)Nine months ended September 30, 2020Nine months ended September 30, 2019
Statement of Operations ClassificationOperating LeasesFinance LeasesTotalOperating LeasesFinance LeasesTotal
Cost of goods sold (exclusive of depreciation)$13.4 $0 $13.4 $11.3 $0 $11.3 
Outbound freight and handling4.2 0 4.2 5.6 0 5.6 
Warehousing, selling and administrative24.1 0 24.1 21.0 0 21.0 
Depreciation— 18.8 18.8 — 14.2 14.2 
Interest expense— 2.5 2.5 — 2.0 2.0 
Total gross lease component cost$41.7 $21.3 $63.0 $37.9 $16.2 $54.1 
Variable lease costs0.6 0.7 
Short-term lease costs19.8 22.9 
Total gross lease costs$83.4 $77.7 
Sublease income1.8 2.9 
Total net lease cost$81.6 $74.8 
Maturity of lease liabilities
(in millions) Operating Leases Finance Leases Total
2019 $17.3
 $5.2
 $22.5
2020 50.4
 19.0
 69.4
2021 40.2
 15.6
 55.8
2022 30.8
 12.4
 43.2
2023 19.7
 3.6
 23.3
2024 and After 30.7
 1.9
 32.6
Total lease payments $189.1
 $57.7
 $246.8
Less: interest 21.6
 4.2
  
Present value of lease liabilities, excluding guaranteed residual values (1)
 $167.5
 $53.5
  
Plus: present value of guaranteed residual values (1)
 0.3
 11.4
  
Present value of lease liabilities $167.8
 $64.9
  
(1)The Company is not expected to have cash outflows related to the present value of guaranteed residual values. The Company’s current present value of lease liabilities includes guaranteed residual values related to leases in effect prior to ASC 842 due to the Company’s practical expedient elections denoted within “Note 2: Significant accounting policies.” The gross value of the guaranteed residual values for operating and finance leases is $0.4 million and $12.5 million as of September 30, 2019, respectively.

(in millions)Operating LeasesFinance LeasesTotal
2020$13.4 $6.7 $20.1 
202144.4 24.3 68.7 
202235.3 20.8 56.1 
202324.5 12.0 36.5 
202416.2 8.8 25.0 
2025 and After39.2 15.8 55.0 
Total lease payments$173.0 $88.4 $261.4 
Less: interest18.8 7.1 
Present value of lease liabilities, excluding guaranteed residual values$154.2 $81.3 
Plus: present value of guaranteed residual values0 1.5 
Present value of lease liabilities$154.2 $82.8 
Lease term and discount rate
September 30, 2019
Weighted-average remaining lease term (years)
Operating leases4.9
Finance leases3.2
Weighted-average discount rate
Operating leases4.97%
Finance leases4.35%
September 30, 2020December 31, 2019
Weighted-average remaining lease term (years)
Operating leases5.35.0
Finance leases4.64.0
Weighted-average discount rate
Operating leases4.82 %4.95 %
Finance leases3.98 %4.33 %
Other information
Nine months ended September 30,
(in millions)20202019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$41.4 $43.3 
Operating cash flows from finance leases2.5 2.0 
Financing cash flows from finance leases17.9 14.5 
(in millions) Nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities  
Operating cash flows from operating leases $43.3
Operating cash flows from finance leases 2.0
Financing cash flows from finance leases 14.5

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19. Related party transactions
On September 25, 2019, the investment funds affiliated with Clayton, Dubilier & Rice LLC (“CD&R”) sold their remaining investment in the Company in conjunction with a registered public offering. No shares were sold by Univar Solutions.
20. Segments
Management monitors the operating results of its operatingreportable segments separately for the purpose of making decisions about resource allocation and performance assessment. Management evaluates performance on the basis of Adjusted EBITDA. Adjusted EBITDA is defined as consolidated net income (loss), plus the sum of: net incomeloss (income) from discontinued operations, interest expense, net of interest income; income tax expense;expense (benefit); depreciation; amortization; impairment charges; loss on extinguishment of debt; other operating expenses, net (see “Note 6: Other operating expenses, net” for more information)); and other income (expense) income,, net (see “Note 8: Other (expense) income (expense), net”). For 2020, Adjusted EBITDA also includes an adjustment to remove a Brazil VAT charge (see “Note 17: Commitments and contingencies” for more information). ForIn addition, for 2019, Adjusted EBITDA also includes an adjustment to remove the charge of the inventory fair value step-up recorded in connection with the Nexeo purchase price allocation.
Transfer prices between operatingreportable segments are set on an arms-length basis in a similar manner to transactions with third parties. Corporate operating expenses that directly benefit segments have been allocated to the operatingreportable segments. Allocable operating expenses are identified through a review process by management. These costs are allocated to the operatingreportable segments on a basis that reasonably approximates the use of services. This is typically measured on a weighted distribution of margin, asset, headcount or time spent.
Financial information for the Company’s reportable segments is as follows:
USAEMEACanadaLATAM
Other/Eliminations (1)
Consolidated
(in millions)Three months ended September 30, 2020
External customers$1,254.4 $399.4 $234.9 $120.5 $— $2,009.2 
Inter-segment14.6 0.6 0.5 0 (15.7)— 
Total net sales$1,269.0 $400.0 $235.4 $120.5 $(15.7)$2,009.2 
Adjusted EBITDA$110.3 $33.3 $16.6 $13.1 $(8.7)$164.6 
Long-lived assets (2)
$805.7 $184.7 $187.4 $30.2 $23.4 $1,231.4 
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1)
 Consolidated
  Three months ended September 30, 2019
External customers $1,562.1
 $283.0
 $425.0
 $117.2
 $—
 $2,387.3
Inter-segment 29.5
 1.7
 0.6
 —
 (31.8) —
Total net sales $1,591.6
 $284.7
 $425.6
 $117.2
 $(31.8) $2,387.3
             
Adjusted EBITDA $127.6
 $22.2
 $31.9
 $10.2
 $(7.7) $184.2
             
Total assets $6,215.9
 $1,580.4
 $991.9
 $310.9
 $(2,314.4) $6,784.7


USAEMEACanadaLATAM
Other/Eliminations (1)
Consolidated
(in millions)Three months ended September 30, 2019
External customers$1,562.1 $425.0 $283.0 $117.2 $— $2,387.3 
Inter-segment29.5 0.6 1.7 0 (31.8)— 
Total net sales$1,591.6 $425.6 $284.7 $117.2 $(31.8)$2,387.3 
Adjusted EBITDA$127.6 $31.9 $22.2 $10.2 $(7.7)$184.2 
Long-lived assets (2)
$897.9 $176.3 $189.6 $32.9 $27.3 $1,324.0 

USAEMEACanadaLATAM
Other/Eliminations (1)
Consolidated
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1)
 Consolidated(in millions)Nine months ended September 30, 2020
 Three months ended September 30, 2018
External customers $1,285.3
 $273.5
 $472.4
 $99.5
 $—
 $2,130.7
External customers$3,781.3 $1,269.3 $852.2 $326.8 $— $6,229.6 
Inter-segment 28.6
 3.0
 0.9
 0.1
 (32.6) —
Inter-segment63.3 2.3 2.0 0 (67.6)— 
Total net sales $1,313.9
 $276.5
 $473.3
 $99.6
 $(32.6) $2,130.7
Total net sales$3,844.6 $1,271.6 $854.2 $326.8 $(67.6)$6,229.6 
            
Adjusted EBITDA $99.4
 $19.2
 $35.6
 $9.1
 $(6.3) $157.0
Adjusted EBITDA$302.1 $113.3 $69.1 $32.4 $(27.5)$489.4 
            
Total assets $3,263.9
 $1,640.4
 $994.2
 $209.6
 $(611.0) $5,497.1
Long-lived assets (2)
Long-lived assets (2)
$805.7 $184.7 $187.4 $30.2 $23.4 $1,231.4 

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USAEMEACanadaLATAM
Other/Eliminations (1)
Consolidated
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1)
 Consolidated(in millions)Nine months ended September 30, 2019
 Nine months ended September 30, 2019
External customers $4,474.6
 $961.6
 $1,366.6
 $329.1
 $—
 $7,131.9
External customers$4,474.6 $1,366.6 $961.6 $329.1 $— $7,131.9 
Inter-segment 77.8
 4.5
 2.6
 —
 (84.9) —
Inter-segment77.8 2.6 4.5 0 (84.9)— 
Total net sales $4,552.4
 $966.1
 $1,369.2
 $329.1
 $(84.9) $7,131.9
Total net sales$4,552.4 $1,369.2 $966.1 $329.1 $(84.9)$7,131.9 
            
Adjusted EBITDA $352.3
 $77.7
 $112.2
 $25.3
 $(22.1) $545.4
Adjusted EBITDA$352.3 $112.2 $77.7 $25.3 $(22.1)$545.4 
            
Total assets $6,215.9
 $1,580.4
 $991.9
 $310.9
 $(2,314.4) $6,784.7
Long-lived assets (2)
Long-lived assets (2)
$897.9 $176.3 $189.6 $32.9 $27.3 $1,324.0 
(1)Other/Eliminations represents the elimination of intersegment transactions as well as unallocated corporate costs consisting of costs specifically related to parent company operations that do not directly benefit segments, either individually or collectively.
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1)
 Consolidated
  Nine months ended September 30, 2018
External customers $3,799.5
 $1,037.8
 $1,522.9
 $301.1
 $—
 $6,661.3
Inter-segment 101.6
 7.2
 3.5
 0.2
 (112.5) —
Total net sales $3,901.1
 $1,045.0
 $1,526.4
 $301.3
 $(112.5) $6,661.3
             
Adjusted EBITDA $287.8
 $83.3
 $120.4
 $26.0
 $(21.1) $496.4
             
Total assets $3,263.9
 $1,640.4
 $994.2
 $209.6
 $(611.0) $5,497.1
(1)Other/Eliminations represents the elimination of intersegment transactions as well as unallocated corporate costs consisting of costs specifically related to parent company operations that do not directly benefit segments, either individually or collectively.


(2)Long-lived assets consist of property, plant and equipment, net and operating lease assets.
The following is a reconciliation of net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 20192020 and 2018, respectively:2019:
 Three months ended September 30,Nine months ended September 30,
(in millions)2020201920202019
Net income (loss)$28.9 $2.5 $86.6 $(45.1)
Net income from discontinued operations0 0 0 (5.4)
Inventory step-up adjustment0 5.3 0 5.3 
Depreciation41.6 41.6 123.7 114.5 
Amortization14.7 12.1 45.3 45.1 
Interest expense, net27.7 36.8 85.7 108.9 
Income tax expense2.7 43.2 14.0 38.4 
Other operating expenses, net21.4 30.2 69.1 258.8 
Other (income) expense, net(2.4)5.5 7.4 17.2 
Impairment charges20.7 7.0 37.6 7.0 
Loss on sale of business9.3 0 17.9 0 
Loss on extinguishment of debt0 0 1.8 0.7 
Brazil VAT charge0 0 0.3 0 
Adjusted EBITDA$164.6 $184.2 $489.4 $545.4 
  Three months ended September 30, Nine months ended September 30,
(in millions) 2019 2018 2019 2018
Net income (loss) $2.5
 $49.6
 $(45.1) $171.1
Net income from discontinued operations —
 —
 (5.4) —
Inventory step-up adjustment 5.3
 —
 5.3
 —
Other operating expenses, net 30.2
 12.4
 258.8
 37.0
Depreciation 41.6
 31.5
 114.5
 93.8
Amortization 12.1
 13.5
 45.1
 40.7
Impairment charges 7.0
 —
 7.0
 —
Interest expense, net 36.8
 32.2
 108.9
 99.1
Loss on extinguishment of debt —
 —
 0.7
 —
Other expense (income), net 5.5
 (2.5) 17.2
 (3.0)
Income tax expense 43.2
 20.3
 38.4
 57.7
Adjusted EBITDA $184.2
 $157.0
 $545.4
 $496.4



20. Subsequent events
On November 4, 2020, the Company entered into an agreement to sell its Canadian Agriculture services business. The Company expects to recognize a pre-tax loss upon the sale of approximately $30 million within the condensed consolidated statements of operations upon closing. The completion of the sale is subject to regulatory approval and customary closing and financing conditions and is expected to close in the fourth quarter of 2020.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is based on financial data derived from the financial statements prepared in accordance with the United States (“US”) generally accepted accounting principles (“GAAP”) and certain other financial data that is prepared using non-GAAP financial measures. For a reconciliation of each non-GAAP financial measure to its most comparable GAAP measure, see “Analysis of Segment Results” within this Item and “Note 20:19: Segments” to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q. Refer to “Non-GAAP Financial Measures” within this Item for more information about our use of Non-GAAP financial measures.
Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flow.
Overview
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. We purchase chemicals from thousands of chemical producers worldwide and warehouse, repackage, blend, dilute, transport and sell those chemicals to more than 100,000 customer locations across approximately 130 countries. Our specialized services include e-commerce and digital marketing of chemicals for our producers, chemical waste removal and ancillary services, on-site storage of chemicals for our customers, and support services for the agricultural and pest control industries. We derive competitive advantage from our scale, broad product offering, leading digital solutions, technical expertise, specialized services, long-standing relationships with leading chemical producers and our industry leading safety record.
The global chemical distribution industry is large and fragmented with thousands of distributors but represents a relatively small portion of the total chemical industry. While the total chemical industry is projected to grow at rates about equal to the growth of the gross national product of countries we operate in around the world, the distributed chemicals portion of the market is projected to grow faster as producers and customers increasingly realize the benefits of outsourcing. Chemical producers rely on us to warehouse, repackage, transport and sell their products as a way to expand their market access, enhance their geographic reach, lower their costs and grow their business. Customers who purchase products and services from us benefit from a lower total cost of ownership, as they are able to simplify their chemical sourcing process and outsource functions to us such as just-in-time availability of the right product, packaging, mixing, blending and technical expertise. They also rely on us for safe delivery and off-loading of chemicals that is fully compliant with increasing local and federal regulations.
Our operations are structured into four operatingreportable segments that represent the geographic areas under which we operate and manage our business. These segments are Univar Solutions USA (“USA”), Univar Solutions Canada (“Canada”), Univar Solutions Europe and the Middle East and Africa (“EMEA”), Univar Solutions Canada (“Canada”) and Univar Solutions Latin America (“LATAM”), which includes developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.
Recent Developments and Items Impacting Comparability
On February 28, 2019, we completed the acquisition of 100% of the equity interest of Nexeo, Solutions, Inc. (“Nexeo”), a leading global chemicals and plastics distributor. The acquisition expandsexpanded and strengthensstrengthened 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.
On March 29,December 31, 2019, the Company completed thewe sold our Environmental Sciences business. The sale of the Nexeo plastics distribution business which is presenteddid not meet the criteria to be classified as a discontinued operationoperations in the Company’s financial statements and, as such, the results prior to the disposition date are presented within the comparative 2019 results.
On September 1, 2020, we sold our industrial spill and emergency response businesses. The sale of these businesses did not meet the criteria to be classified as discontinued operations in the Company’s financial statements.
The Company has decided to stop future operations of a component of the agriculture business within the Canada segment. For the third quarter of 2020, that component of the business is held in use while we dispose of the remaining products as part of our inventory.
Market Conditions
We continue to monitor the potential impact of the novel coronavirus (COVID-19) pandemic to our global business. The full financial impact of the pandemic on global economic conditions, as well as our business, remains unknown at this time and will depend on the duration of government restrictions, including travel restrictions, quarantines, shelter in place orders and shutdowns, and the duration of the economic slowdown and nature and timing of a recovery. Our top priority is the safety and health of employees, customers, and suppliers. We activated a global, cross-functional response team, which is closely monitoring the situation and implementing additional safety measures to help ensure the well-being of Univar Solutions’ employees, customers and suppliers, minimize disruptions and provide for the nine months ended September 30, 2019.safe and reliable supply of Univar Solutions’ chemicals and ingredients. The Company has implemented recommended policies and practices to help protect our workforce so they can safely and effectively carry out their essential work. As government restrictions are lifted or reinstated in the different jurisdictions where we operate, we are implementing agile worksite plans that can adapt to changing circumstances and help maximize the safety of our employees. As part of these plans, employees who are reasonably able to work remotely are increasingly utilizing a hybrid working model with some days being spent working from a Company office and other days being spent working from a remote location, which is often a person's home. The Company is following guidelines from global health experts and has taken additional precautionary steps to help protect our employees working in our distribution centers and other worksites.
As of the date of this filing, the Company’s global distribution centers continue to be operational and supplying products that help preserve essential businesses and infrastructure. This includes providing products and services that are essential for maintaining clean drinking water, waste water treatment, home, industrial and health care facility sanitization and that are used in the manufacturing of food and pharmaceuticals.
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We are actively monitoring key product availability, remaining up to date with the current status of our primary modes of transportation and staying up to date with current port operating statuses. We continue to stay connected with our customers to understand impacts on their operations, including whether operations remain open with no change or reduced operations or if operations have closed and whether closure is temporary or permanent. In the first quarter of 2020, we organized our product portfolio offering into the following end markets: General Industrial, Consumer Solutions, Industrial Solutions, Refining & Chemical Processing and Services and Other Markets. The primary impacts of the pandemic and the current economic events on our end markets are as follows (percentages represent 2019 Consolidated Net Sales by End Market):
General Industrial (29%) – Strong performance in chemical manufacturing. Also experienced growth in Lumber & Forestry along with general machinery. Continue to experience headwinds in Transportation as well as Pulp & Paper.
Consumer Solutions (25%) – Growth year-on-year globally led by Pharmaceuticals and a resurgence in Personal Care demand. Carefully monitoring fourth quarter risk in Food and Personal Care with new lockdowns and other measures being considered globally.
Industrial Solutions (23%) – Robust recovery in Architectural Coatings business driven by the DIY market. Automotive sector beginning to show signs of a recovery and Lubricants business showing incremental growth month-on-month throughout the third quarter.
Refining & Chemical Processing (12%) – Ongoing challenges in the upstream market. Market expected to continue to be depressed until global oil demand recovers.
Services and Other Markets (11%) – Performance was generally stable with incrementally improving trends through September.
The Company is taking steps to maintain sufficient cash and additional credit availability in recognition of the increased risk and uncertainty related to the COVID-19 pandemic and challenging macroeconomic headwinds. See “Liquidity and Capital Resources” in Item 2 of this Quarterly Report on Form 10-Q for a discussion on our liquidity. In anticipation of ongoing challenges, the Company is carefully managing its working capital and realizing and planning for cost reductions to maintain financial health while continuing to help serve supplier and customer needs. Cash outflows related to operating expenses have decreased due to lower travel and event costs, overtime and temporary labor, as well as hiring freezes, elimination of certain workforce positions and delays of some discretionary annual merit increases, temporary furloughs to match changes in demand in certain locations anddeferral of certain capital project spending. We will continue to monitor customer activity and match our workforce with demand to the extent possible.
On March 27, 2020, the CARES Act was signed into law and it provides for certain tax law changes, which impact the Company and are discussed in “Note 10: Income taxes” in Item 1 of this Quarterly Report on Form 10-Q.
The current business environment and quickly evolving market conditions require significant management judgment to interpret and quantify the potential impact on our assumptions about future operating cash flows. To the extent changes in the current business environment impact our ability to achieve levels of forecasted operating results and cash flows, if our stock price were to trade below book value per share for an extended period of time and/or should other events occur indicating the carrying value of our assets might be impaired, we may be required to recognize impairment losses on goodwill, intangible and tangible assets.
See “Risk Factors” in Item 1A of this Quarterly Report on Form 10-Q for further information of the possible impact of the COVID-19 pandemic on our business.
Constant Currency
Currency impacts on consolidated and segment results have been derived by translating current period financial results in local currency using the average exchange rate for the prior period to which the financial information is being compared. We believe providing information on a constant currency informationbasis provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance.
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Results of Operations
The following is management’s discussion and analysis oftables set forth, for the financial condition and resultsperiods indicated, certain statements of operations data, on the basis of reported data for the three and nine months ended September 30, 2019 as compared to the corresponding period in the prior year.relevant period.

Three Months Ended September 30, 20192020 Compared to Three Months Ended September 30, 20182019
 Three months ended September 30,Favorable
(unfavorable)		% Change
(in millions)20202019
Net sales$2,009.2 $2,387.3 $(378.1)(15.8)%
Cost of goods sold (exclusive of depreciation)1,513.2 1,842.4 329.2 (17.9)%
Operating expenses:
Outbound freight and handling85.9 96.8 10.9 (11.3)%
Warehousing, selling and administrative245.5 269.2 23.7 (8.8)%
Other operating expenses, net21.4 30.2 8.8 (29.1)%
Depreciation41.6 41.6 — — %
Amortization14.7 12.1 (2.6)21.5 %
Impairment charges20.7 7.0 (13.7)195.7 %
Total operating expenses$429.8 $456.9 $27.1 (5.9)%
Operating income$66.2 $88.0 $(21.8)(24.8)%
Other (expense) income:
Interest income0.5 0.6 (0.1)(16.7)%
Interest expense(28.2)(37.4)9.2 (24.6)%
Loss on sale of business(9.3)— (9.3)100.0 %
Other income (expense), net2.4 (5.5)7.9 N/M
Total other expense$(34.6)$(42.3)$7.7 (18.2)%
Income before income taxes31.6 45.7 (14.1)(30.9)%
Income tax expense2.7 43.2 40.5 (93.8)%
Net income$28.9 $2.5 $26.4 1,056.0 %
  Three Months Ended 
Favorable
(unfavorable)
 % Change 
Impact of
currency (1)
(in millions) September 30, 2019 September 30, 2018 
Net sales $2,387.3
 100.0 % $2,130.7
 100.0 % $256.6
 12.0 % (1.0)%
Cost of goods sold (exclusive of depreciation) 1,842.4
 77.2 % 1,662.0
 78.0 % (180.4) 10.9 % 0.9 %
Operating expenses:              
Outbound freight and handling 96.8
 4.1 % 82.7
 3.9 % (14.1) 17.0 % 1.1 %
Warehousing, selling and administrative 269.2
 11.3 % 229.0
 10.7 % (40.2) 17.6 % 0.9 %
Other operating expenses, net 30.2
 1.3 % 12.4
 0.6 % (17.8) 143.5 % — %
Depreciation 41.6
 1.7 % 31.5
 1.5 % (10.1) 32.1 % 0.9 %
Amortization 12.1
 0.5 % 13.5
 0.6 % 1.4
 (10.4)% 0.8 %
Impairment charges 7.0
 0.3 % —
 — % (7.0) 100.0 % — %
Total operating expenses $456.9
 19.1 % $369.1
 17.3 % $(87.8) 23.8 % 0.9 %
Operating income $88.0
 3.7 % $99.6
 4.7 % $(11.6) (11.6)% (1.1)%
Other (expense) income:              
Interest income 0.6
 — % 0.6
 — % —
 — % — %
Interest expense (37.4) (1.6)% (32.8) (1.5)% (4.6) 14.0 % 0.3 %
Other (expense) income, net (5.5) (0.2)% 2.5
 0.1 % (8.0) N/M
 — %
Total other expense $(42.3) (1.8)% $(29.7) (1.4)% $(12.6) 42.4 % 0.4 %
Income before income taxes 45.7
 1.9 % 69.9
 3.3 % (24.2) (34.6)% (1.4)%
Income tax expense 43.2
 1.8 % 20.3
 1.0 % (22.9) 112.8 % 1.0 %
Net income $2.5
 0.1 % $49.6
 2.3 % $(47.1) (95.0)% (1.5)%
(1)Foreign currency translation is included in the percentage change. Unfavorable impacts from foreign currency translation are designated with parentheses.
Net sales
Net sales were $2,387.3$2,009.2 million for the three months ended September 30, 2019, an increase2020, a decrease of $256.6$378.1 million, or 12.0%15.8%, from the three months ended September 30, 2018.2019. Net sales increased from the February 2019 Nexeo acquisition in USA, Canada and LATAM. On a constant currency basis, net sales decreased due to lower sales volumesdemand in USA, EMEAthe global industrial end markets, the Environmental Sciences divestiture and Canada as well as from changesprice deflation on certain products. The decrease was partially offset by demand for our products in sales pricing and product mix in all segments for the three months ended September 30, 2019 compared to the three months ended September 30, 2018.certain essential end markets. Refer to the “Analysis of Segment Results” for the three months ended September 30, 2019 discussion2020 for additional information.
Gross profit (exclusive of depreciation)
Gross profit (exclusive of depreciation) increased $76.2decreased $48.9 million, or 16.3%9.0%, to $544.9$496.0 million for the three months ended September 30, 2019.2020. The increasedecrease in gross profit (exclusive of depreciation) is attributable to higher average selling prices resulting from changes in market and product mix. The increase in gross profit (exclusive of depreciation) from acquisitions was attributable to lower sales volumes in USA, EMEA and Canada due to soft demand across most global industrial end markets, the February 2019 Nexeo acquisitionEnvironmental Sciences divestiture and price deflation affecting certain products. The decrease was partially offset by favorable changes in the USA, Canada and LATAM segments. Included in gross profit (exclusive of depreciation) is a $5.3 million charge in the USA related to the inventory fair value step-up adjustment resultingproduct mix from our February 2019 Nexeo acquisition. Excluding this impact gross profit (exclusive of depreciation) increased $81.5 million, or 17.4%, to $550.2 million for the three months ended September 30, 2019.essential end markets. Refer to the “Analysis of Segment Results” for the three months ended September 30, 2019 discussion2020 for additional information.
Outbound freight and handling
Outbound freight and handling expenses increased $14.1decreased $10.9 million, or 17.0%11.3%, to $96.8$85.9 million for the three months ended September 30, 2019.2020 primarily due to lower sales volumes. On a constant currency basis, outbound freight and handling expenses increased $15.0decreased $11.0 million, or 18.1%, primarily due to the February 2019 Nexeo acquisition, partially offset by lower sales volumes.11.4%. Refer to the “Analysis of Segment Results” for the three months ended September 30, 2019 discussion2020 for additional information.

Warehousing, selling and administrative
Warehousing, selling and administrative expenses increased $40.2decreased $23.7 million, or 17.6%8.8%, to $269.2$245.5 million for the three months ended September 30, 2019.2020. On a constant currency basis, the $42.4warehousing, selling and administrative expenses decreased $23.7 million, increase is primarily dueor 8.8%, attributable to incremental expenses from the February 2019 Nexeo acquisition. These costs were partially offset by cost containment effortsreduction measures across all of our segments. segments, partially offset by higher bad debt charges. Refer to the “Analysis of Segment Results” for the three months ended September 30, 2019 discussion2020 for additional information.
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Other operating expenses, net
Other operating expenses, net increased $17.8decreased $8.8 million from $12.4 million for the three months ended September 30, 2018 to $30.2 million for the three months ended September 30, 2019.2019 to $21.4 million for the three months ended September 30, 2020. The increasedecrease was primarily due to higherlower facility closure costs, acquisition and integration related expenses, higherlower stock-based compensation higher other facility exit costsexpense and higher other employee termination costs in connection with the February 2019 Nexeo acquisition.severance costs. Refer to “Note 6: Other operating expenses, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information. 
Depreciation and amortization
Depreciation expense increased $10.1 million, or 32.1%, toremained flat at $41.6 million for the three months ended September 30, 2019. On a constant currency basis, the $10.4 million increase was primarily due to the February 2019 Nexeo acquisition.2020.
Amortization expense decreased $1.4increased $2.6 million, or 10.4%21.5%, to $12.1$14.7 million for the three months ended September 30, 2019. On a constant currency basis,2020, primarily due to the decreasemonthly amortization of $1.3 million was primarily attributable to fair value adjustments associated withintangibles acquired during the February 2019 Nexeo acquisition.period.
Impairment charges
Impairment charges of $7.0$20.7 million were recorded in the three months ended September 30, 20192020 related to property, plant and equipment in connection with the Company’s decision to cease further investment in, and seek to restructure or exit a contract related to, certain technology assets within the Other segment and the announced closure of certain production facilities. Refer to “Note 14: Supplemental balance sheet information” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Interest expense
Interest expense increased $4.6decreased $9.2 million, or 14.0%24.6%, to $37.4$28.2 million for the three months ended September 30, 20192020 due to higherlower average outstanding borrowings in connection with the February 2019 Nexeo acquisition.as well as lower interest rates. Refer to “Note 13: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Other (expense) income, netLoss on sale of business
Other (expense) income, net changed $8.0A loss of $9.3 million from an income of $2.5 million forwas recorded in the three months ended September 30, 20182020 related to the sale of the industrial spill and emergency response businesses, which was completed on September 1, 2020. Refer to “Note 4: Discontinued operations and dispositions” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Other income (expense), net
Other expense, net changed $7.9 million, from an expense of $5.5 million for the three months ended September 30, 2019.2019 to income of $2.4 million for the three months ended September 30, 2020. The increasechange was primarily related to lossesgains on undesignated foreign currency derivative instruments.instruments and foreign currency transactions, as well as the increase in non-operating pension income. The change was partially offset by foreign currency denominated loan revaluation losses. Refer to “Note 8: Other income (expense) income,, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Income tax expense
Income tax expense was $2.7 million for the three months ended September 30, 2020, resulting in an effective income tax rate of 8.5%. A discrete tax benefit of $13.9 million was included in the $2.7 million tax expense, 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 the higher tax rates in foreign jurisdictions, non-deductible expenses and US state income taxes.
Income tax expense was $43.2 million for the three months ended September 30, 2019, resulting in an effective income tax rate of 94.5%. A discrete tax expense of $9.1 million, attributable to the indirect effects of the Nexeo plastics sale, the US return to provision adjustment, an increase in valuation allowance on tax attributes and various other items, was included in the $43.2 million tax expense. The Company’s effective income tax rate for the three months ended September 30, 2019, without the discrete items was 74.6%, higher than the US federal statutory rate of 21.0%. This is 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 tax attributes. The discrete tax expense of $9.1 million is attributable to the indirect effects of the Nexeo Plastics sale, the US return to provision adjustment, an increase in valuation allowance on tax attributes and various other items.
Income tax expense was $20.3 million for the three months ended September 30, 2018, resulting in an effective income tax rate of 29.0%. The Company’s effective income tax rate for three months ended September 30, 2018 was higher than the US federal statutory rate of 21.0%, primarily due to the addition of state taxes and the higher tax rates incurred on the company's earnings outside the US. These increases in the effective income tax rate were partially offset by the release of valuation allowances on certain tax attributes.
Results of Reportable Business Segments
The Company’s operations are structured into four operatingreportable segments that represent the geographic areas under which we operate and manage our business. Management believes Adjusted EBITDA is an important measure of operating performance,

which is used as the primary basis for the chief operating decision maker to evaluate the performance of each of our reportable segments. We believe certain other financial measures that are not calculated in accordance with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin. Such non-GAAP financial measures are used from time to time herein but should not be viewed as a substitute for GAAP
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measures of performance. See “Note 20:19: Segments” to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q and “Analysis of Segment Results” within this Item for additional information.
Analysis of Segment Results
Our financial results by operating segment and in aggregate is summarized in the following tables:USA
Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$1,254.4 $1,562.1 $(307.7)(19.7)%
Inter-segment14.6 29.5 (14.9)(50.5)%
Total net sales$1,269.0 $1,591.6 $(322.6)(20.3)%
Cost of goods sold (exclusive of depreciation)946.8 1,225.5 278.7 (22.7)%
Inventory step-up adjustment (1)
— 5.3 5.3 (100.0)%
Outbound freight and handling60.1 69.7 9.6 (13.8)%
Warehousing, selling and administrative151.8 174.1 22.3 (12.8)%
Adjusted EBITDA$110.3 $127.6 $(17.3)(13.6)%
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Three months ended September 30, 2019
Net sales:            
External customers $1,562.1
 $283.0
 $425.0
 $117.2
 $—
 $2,387.3
Inter-segment 29.5
 1.7
 0.6
 —
 (31.8) —
Total net sales $1,591.6
 $284.7
 $425.6
 $117.2
 $(31.8) $2,387.3
Cost of goods sold (exclusive of depreciation) $1,225.5
 $228.9
 $327.4
 $92.4
 $(31.8) $1,842.4
Inventory step-up adjustment (2)
 5.3
 —
 —
 —
 —
 5.3
Outbound freight and handling 69.7
 10.5
 14.3
 2.3
 —
 96.8
Warehousing, selling and administrative 174.1
 23.1
 52.0
 12.3
 7.7
 269.2
Adjusted EBITDA (3)
 $127.6
 $22.2
 $31.9
 $10.2
 $(7.7) $184.2

Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$1,269.0 $1,591.6 $(322.6)(20.3)%
Cost of goods sold (exclusive of depreciation)946.8 1,225.5 278.7 (22.7)%
Gross profit (exclusive of depreciation)$322.2 $366.1 $(43.9)(12.0)%
Inventory step-up adjustment (1)
— 5.3 5.3 (100.0)%
Adjusted gross profit (exclusive of depreciation) (1)
$322.2 $371.4 $(49.2)(13.2)%
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Three months ended September 30, 2019
Gross profit (exclusive of depreciation):            
Net sales $1,591.6
 $284.7
 $425.6
 $117.2
 $(31.8) $2,387.3
Cost of goods sold (exclusive of depreciation) 1,225.5
 228.9
 327.4
 92.4
 (31.8) 1,842.4
Gross profit (exclusive of depreciation) $366.1
 $55.8
 $98.2
 $24.8
 $—
 $544.9
Inventory step-up adjustment (2)
 5.3
 —
 —
 —
 —
 5.3
Adjusted gross profit (exclusive of depreciation) (2)
 $371.4
 $55.8
 $98.2
 $24.8
 $—
 $550.2



(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Three months ended September 30, 2018
Net sales:            
External customers $1,285.3
 $273.5
 $472.4
 $99.5
 $—
 $2,130.7
Inter-segment 28.6
 3.0
 0.9
 0.1
 (32.6) —
Total net sales $1,313.9
 $276.5
 $473.3
 $99.6
 $(32.6) $2,130.7
Cost of goods sold (exclusive of depreciation) $1,023.5
 $227.8
 $365.4
 $77.9
 $(32.6) $1,662.0
Inventory step-up adjustment —
 —
 —
 —
 —
 —
Outbound freight and handling 56.1
 10.1
 14.6
 1.9
 —
 82.7
Warehousing, selling and administrative 134.9
 19.4
 57.7
 10.7
 6.3
 229.0
Adjusted EBITDA (3)
 $99.4
 $19.2
 $35.6
 $9.1
 $(6.3) $157.0
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Three months ended September 30, 2018
Gross profit (exclusive of depreciation):            
Net sales $1,313.9
 $276.5
 $473.3
 $99.6
 $(32.6) $2,130.7
Cost of goods sold (exclusive of depreciation) 1,023.5
 227.8
 365.4
 77.9
 (32.6) 1,662.0
Gross profit (exclusive of depreciation) $290.4
 $48.7
 $107.9
 $21.7
 $—
 $468.7
Inventory step-up adjustment —
 —
 —
 —
 —
 —
Adjusted gross profit (exclusive of depreciation) $290.4
 $48.7
 $107.9
 $21.7
 $—
 $468.7
(1)
(1)Other/Eliminations represents the elimination of intersegment transactions as well as unallocated corporate costs consisting of costs specifically related to parent company operations that do not directly benefit segments, either individually or collectively.
(2)See definition of adjusted gross profit (exclusive of depreciation) at the end of this Item under “Non-GAAP Financial Measures.” Adjusted gross profit (exclusive of depreciation) excludes the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition in the USA segment. Adjusted gross profit (exclusive of depreciation) is equal to gross profit (exclusive of depreciation) for EMEA, Canada and LATAM segments.
(3)See “Note 20: Segments” in our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for the definition of Adjusted EBITDA and a reconciliation of consolidated net income to Adjusted EBITDA.
USA
External sales in the USA segment were $1,562.1 million, an increase of $276.8 million, or 21.5%, for the three months ended September 30, 2019. The increase in external net sales was primarily related to the February 2019 Nexeo acquisition partially offset by lower sales volumes attributable to soft market demand across most end markets.
For the three months ended September 30, 2019, gross profit (exclusive of depreciation) increased $75.7 million, or 26.1%, to $366.1 million. The increase in gross profit (exclusive of depreciation) was primarily related to the February 2019 Nexeo acquisition and favorable changes in sales pricing and product mix partially offset by lower sales volumes. Excluding the $5.3 million impact related to the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition, adjusted gross profit (exclusiveacquisition.
External sales in the USA segment were $1,254.4 million, a decrease of depreciation) increased $81.0$307.7 million, or 27.9%19.7%, to $371.4 million. Both gross margin and adjusted gross margin increased duringfor the three months ended September 30, 20192020. The decrease in external net sales was primarily due to favorable changes in product andlower industrial end market mix.demand, the Environmental Sciences divestiture, energy headwinds and price deflation on certain products, partially offset by higher demand for our products in certain essential end markets.
Outbound freight and handling expenses increased $13.6Gross profit (exclusive of depreciation) decreased $43.9 million, or 24.2%12.0%, to $69.7$322.2 million for the three months ended September 30, 20192020, primarily due to lower sales volumes due to soft demand across most industrial end markets and the FebruaryEnvironmental Sciences divestiture. Gross margin increased from 23.4% for the three months ended September 30, 2019 Nexeo acquisition, partially offset byto 25.7% for the three months ended September 30, 2020. The increase was primarily related to favorable changes in product mix, including higher demand in certain essential end markets.
Outbound freight and handling expenses decreased $9.6 million, or 13.8%, to $60.1 million for the three months ended September 30, 2020, primarily due to lower sales volumes.
Warehousing, selling and administrative expenses increased $39.2decreased $22.3 million, or 29.1%12.8%, to $174.1$151.8 million for the three months ended September 30, 20192020, primarily due to incremental expenses from the February 2019 Nexeo acquisitioncost reduction measures partially offset by strong cost containment. Warehousing, selling and administrative expenses ashigher bad debt charges. As a percentage of external sales, warehousing, selling and administrative expenses increased from 10.5% for the three months ended September 30, 2018 to 11.1% for the three months ended September 30, 2019.

2019 to 12.1% for the three months ended September 30, 2020.
Adjusted EBITDA increaseddecreased by $28.2$17.3 million, or 28.4%13.6%, to $127.6$110.3 million for the three months ended September 30, 2020, primarily as a result of lower industrial end market demand, energy headwinds and the Environmental Sciences divestiture, partially offset by higher demand for our products in certain essential end markets. Adjusted EBITDA margin increased from 8.2% in the three months ended September 30, 2019 to 8.8% for the three months ended September 30, 2020, primarily as a result of higher gross profit (exclusivemargin and lower warehousing, selling and administrative costs.
31
Table of depreciation) which offset the effect of higher outbound freight and handling expenses and higher operating expenses. Adjusted EBITDA margin increased from 7.7% in the three months ended September 30, 2018 to 8.2% for the three months ended September 30, 2019 primarily as a result of higher gross margin.Contents
CanadaEMEA
Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$399.4 $425.0 $(25.6)(6.0)%
Inter-segment0.6 0.6 — — %
Total net sales$400.0 $425.6 $(25.6)(6.0)%
Cost of goods sold (exclusive of depreciation)301.6 327.4 25.8 (7.9)%
Outbound freight and handling13.9 14.3 0.4 (2.8)%
Warehousing, selling and administrative51.2 52.0 0.8 (1.5)%
Adjusted EBITDA$33.3 $31.9 $1.4 4.4 %

Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$400.0 $425.6 $(25.6)(6.0)%
Cost of goods sold (exclusive of depreciation)301.6 327.4 25.8 (7.9)%
Gross profit (exclusive of depreciation)$98.4 $98.2 $0.2 0.2 %
External sales in the CanadaEMEA segment were $283.0$399.4 million, an increasea decrease of $9.5$25.6 million, or 3.5%6.0%, for the three months ended September 30, 2019. On a constant currency basis, external net sales increased $11.0 million, or 4.0%, primarily related to the February 2019 Nexeo acquisition along with contributions from the core industrial chemical business and certain commodity products. The increase was partially offset by lower demand from Canada’s energy sector and lower average selling prices due to changes in market and product mix.
Gross profit (exclusive of depreciation) increased $7.1 million, or 14.6%, to $55.8 million for the three months ended September 30, 2019.On a constant currency basis, gross profit (exclusive of depreciation) increased $7.5 million, or 15.4%, primarily due to favorable product and market mix, contributions from the February 2019 Nexeo acquisition, partially offset by lower sales volumes in agriculture. Gross margin increased 1.9% to 19.7% for the three months ended September 30, 2019 as a result of higher margins on certain commodity chemicals.
Outbound freight and handling expenses increased $0.4 million, or 4.0%, to $10.5 million for the three months ended September 30, 2019 primarily due to the February 2019 Nexeo acquisition, partially offset by lower sales volumes.
Warehousing, selling and administrative expenses increased by $3.7 million, or 19.1%, to $23.1 million for the three months ended September 30, 2019. Operating expenses as a percentage of external sales increased from 7.1% for the three months ended September 30, 2018 to 8.2% for the three months ended September 30, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition as well as lower variable compensation cost in the prior year. On a constant currency basis, warehousing, selling and administrative expenses increased $4.0 million, or 20.6%.
Adjusted EBITDA increased by $3.0 million, or 15.6%, to $22.2 million for the three months ended September 30, 2019. On a constant currency basis, Adjusted EBITDA increased $2.9 million, or 15.1%. Adjusted EBITDA margin increased from 7.0% for the three months ended September 30, 2018 to 7.8% for the three months ended September 30, 2019 primarily as a result of higher gross margin.
EMEA
External sales in the EMEA segment were $425.0 million, a decrease of $47.4 million, or 10.0%, for the three months ended September 30, 2019.2020. On a constant currency basis, external net sales decreased $31.0$41.4 million, or 6.6%9.7%, primarily due to lower sales volumes attributable to soft demand.industrial end market demand, partially offset by strong demand for our products in certain essential end markets.
Gross profit (exclusive of depreciation) decreased $9.7increased $0.2 million, or 9.0%0.2%, to $98.2$98.4 million infor the three months ended September 30, 2019.2020. On a constant currency basis, gross profit (exclusive of depreciation) decreased $5.9$4.1 million, or 5.5%4.2%, fromprimarily due to lower sales volumes, partially offset by higher average selling prices.volumes. Gross margin increased from 22.8% for the three months ended September 30, 2018 to 23.1% for the three months ended September 30, 2019 to 24.6% for the three months ended September 30, 2020, primarily due to the favorable changes in product and market mix, andmargin management initiatives.including higher demand in certain essential end markets.
Outbound freight and handling expenses decreased $0.3$0.4 million, or 2.1%2.8%, to $14.3$13.9 million for the three months ended September 30, 2020, primarily due to lower sales volumes.
Warehousing, selling and administrative expenses decreased $5.7$0.8 million, or 9.9%1.5%, to $52.0$51.2 million for the three months ended September 30, 2019, and remained flat as a percentage of external sales at 12.2% when comparing the three months ended September 30, 2018 to the three months ended September 30, 2019.2020. On a constant currency basis, warehousing, selling and administrative expenses decreased $3.7$3.1 million, or 6.4%6.0%, which was primarily due to lower variable compensation cost.cost reduction measures. As a percentage of external sales, warehousing, selling and administrative expenses increased from 12.2% for the three months ended September 30, 2019 to 12.8% for the three months ended September 30, 2020.
Adjusted EBITDA decreasedincreased by $3.7$1.4 million, or 10.4%4.4%, to $31.9$33.3 million for the three months ended September 30, 2019.2020. On a constant currency basis, Adjusted EBITDA increased $0.2 million, or 0.6%, attributable to the positive impact from demand for our products in certain essential end markets and lower warehousing, selling and administrative costs, partially offset by lower industrial end market demand and increased market pressures in the pharmaceutical finished goods product line. Adjusted EBITDA margin increased from 7.5% for the three months ended September 30, 2019 to 8.3% for the three months ended September 30, 2020, primarily as a result of higher gross margin.
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Table of Contents
Canada
Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$234.9 $283.0 $(48.1)(17.0)%
Inter-segment0.5 1.7 (1.2)(70.6)%
Total net sales$235.4 $284.7 $(49.3)(17.3)%
Cost of goods sold (exclusive of depreciation)188.0 228.9 40.9 (17.9)%
Outbound freight and handling9.5 10.5 1.0 (9.5)%
Warehousing, selling and administrative21.3 23.1 1.8 (7.8)%
Adjusted EBITDA$16.6 $22.2 $(5.6)(25.2)%

Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$235.4 $284.7 $(49.3)(17.3)%
Cost of goods sold (exclusive of depreciation)188.0 228.9 40.9 (17.9)%
Gross profit (exclusive of depreciation)$47.4 $55.8 $(8.4)(15.1)%
External sales in the Canada segment were $234.9 million, a decrease of $48.1 million, or 17.0%, for the three months ended September 30, 2020. On a constant currency basis, external net sales decreased $46.8 million, or 16.5%, primarily due to the Environmental Sciences divestiture, lower demand from Canada’s agriculture and energy sectors and price deflation. The decrease was partially offset by higher demand for our products in certain essential end markets.
Gross profit (exclusive of depreciation) decreased $8.4 million, or 15.1%, to $47.4 million for the three months ended September 30, 2020.On a constant currency basis, gross profit (exclusive of depreciation) decreased $8.1 million, or 14.5%, primarily due to the Environmental Sciences divestiture and the write-down of inventory related to a component of the agriculture business. Gross margin increased from 19.7% for the three months ended September 30, 2019 to 20.2% for the three months ended September 30, 2020 driven by favorable changes in product mix, including higher demand in certain essential end markets.
Outbound freight and handling expenses decreased $1.0 million, or 9.5%, to $9.5 million for the three months ended September 30, 2020, primarily due to lower sales volumes.
Warehousing, selling and administrative expenses decreased by $1.8 million, or 7.8%, to $21.3 million for the three months ended September 30, 2020. On a constant currency basis, warehousing, selling and administrative expenses decreased $1.6 million, or 6.9%, primarily due to cost reduction measures. As a percentage of external sales, warehousing, selling and administrative expenses increased from 8.2% for the three months ended September 30, 2019 to 9.1% for the three months ended September 30, 2020.
Adjusted EBITDA decreased by $5.6 million, or 25.2%, to $16.6 million for the three months ended September 30, 2020. On a constant currency basis, Adjusted EBITDA decreased $2.5$5.5 million, or 7.0% attributable24.8%, primarily as a result of the write-down of inventory related to soft demand. Fora component of the agriculture business, price deflation, the Environmental Sciences divestiture and lower demand from the energy sector, partially offset by cost reduction measures. Adjusted EBITDA margin decreased from 7.8% for the three months ended September 30, 2019 the pharmaceutical finished goods product line represented approximately 23% of Adjusted EBITDA in the EMEA segment declining from prior year due to increased market pressures. Adjusted EBITDA margin remained flat at 7.5% when comparing7.1% for the three months ended September 30, 2018 to the three months ended September 30, 2019.2020.

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Table of Contents
LATAM
Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$120.5 $117.2 $3.3 2.8 %
Total net sales (1)
$120.5 $117.2 $3.3 2.8 %
Cost of goods sold (exclusive of depreciation)92.5 92.4 (0.1)0.1 %
Outbound freight and handling2.4 2.3 (0.1)4.3 %
Warehousing, selling and administrative12.5 12.3 (0.2)1.6 %
Adjusted EBITDA$13.1 $10.2 $2.9 28.4 %

Three months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$120.5 $117.2 $3.3 2.8 %
Cost of goods sold (exclusive of depreciation)92.5 92.4 (0.1)0.1 %
Gross profit (exclusive of depreciation)$28.0 $24.8 $3.2 12.9 %
External sales in the LATAM segment were $117.2$120.5 million, an increase of $17.7$3.3 million, or 17.8%2.8%, for the three months ended September 30, 2019.2020. On a constant currency basis, external net sales increased $19.7$23.3 million, or 19.8%19.9%, primarily due to higher sales volumesdemand for our products in all regionsindustrial solutions and the February 2019 Nexeo acquisition.certain essential end markets.
Gross profit (exclusive of depreciation) increased $3.1$3.2 million, or 14.3%12.9%, to $24.8$28.0 million for the three months ended September 30, 2019.2020. On a constant currency basis, gross profit (exclusive of depreciation) increased $3.6$9.0 million, or 16.6%36.3%, due to higher sales volumesfavorable changes in all regionsproduct mix from industrial solutions and due to the February 2019 Nexeo acquisition.essential end markets. Gross margin decreasedincreased from 21.8% for the three months ended September 30, 2018 to 21.2% for the three months ended September 30, 2019.2019 to 23.2% for the three months ended September 30, 2020.
Outbound freight and handling expenses increased $0.4$0.1 million, or 21.1%4.3%, to $2.3$2.4 million for the three months ended September 30, 2019 compared to September 30, 20182020, primarily due to higher sales volumes.
Warehousing, selling and administrative expenses increased $1.6$0.2 million, or 15.0%1.6%, to $12.3$12.5 million for the three months ended September 30, 2019 and decreased as a percentage of external sales from 10.8% when comparing the three months ended September 30, 2018 to 10.5% for the three months ended September 30, 2019.2020. On a constant currency basis, warehousing, selling and administrative expenses increased $1.8$2.4 million, or 16.8%19.5%, primarily due to incrementalhigher bad debt charges and higher variable compensation costs. As a percentage of external sales, warehousing, selling and administrative expenses decreased slightly from 10.5% for the Februarythree months ended September 30, 2019 Nexeo acquisition partially offset by strong cost control.to 10.4% for the three months ended September 30, 2020.
Adjusted EBITDA increased by $1.1$2.9 million, or 12.1%28.4%, to $10.2$13.1 million for the three months ended September 30, 2019.2020. On a constant currency basis, Adjusted EBITDA increased $1.3$6.0 million, or 14.3%58.8%, primarily due to increased gross profit (exclusive of depreciation). due to higher demand for our products in industrial solutions and certain essential end markets. Adjusted EBITDA margin decreasedincreased from 9.1% for the three months ended September 30, 2018 to 8.7% for the three months ended September 30, 2019.2019 to 10.9% for the three months ended September 30, 2020, primarily as a result of higher gross margin.

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Table of Contents
Results of Operations
The following tables set forth, for the periods indicated, certain statements of operations data, first on the basis of reported data and then as a percentage of total net sales for the relevant period.
Nine Months Ended September 30, 20192020 Compared to Nine Months Ended September 30, 20182019
 Nine months ended September 30,Favorable
(unfavorable)		% Change
(in millions)20202019
Net sales$6,229.6 $7,131.9 $(902.3)(12.7)%
Cost of goods sold (exclusive of depreciation)4,711.9 5,513.3 801.4 (14.5)%
Operating expenses:
Outbound freight and handling258.1 275.1 17.0 (6.2)%
Warehousing, selling and administrative770.5 803.4 32.9 (4.1)%
Other operating expenses, net69.1 258.8 189.7 (73.3)%
Depreciation123.7 114.5 (9.2)8.0 %
Amortization45.3 45.1 (0.2)0.4 %
Impairment charges37.6 7.0 (30.6)437.1 %
Total operating expenses$1,304.3 $1,503.9 $199.6 (13.3)%
Operating income$213.4 $114.7 $98.7 86.1 %
Other (expense) income:
Interest income1.7 2.3 (0.6)(26.1)%
Interest expense(87.4)(111.2)23.8 (21.4)%
Loss on sale of business(17.9)— (17.9)100.0 %
Loss on extinguishment of debt(1.8)(0.7)(1.1)157.1 %
Other expense, net(7.4)(17.2)9.8 (57.0)%
Total other expense$(112.8)$(126.8)$14.0 (11.0)%
Income (loss) from continuing operations before income taxes100.6 (12.1)112.7 N/M
Income tax expense from continuing operations14.0 38.4 24.4 (63.5)%
Net income (loss) from continuing operations$86.6 $(50.5)$137.1 N/M
Net income from discontinued operations$— $5.4 $(5.4)(100.0)%
Net income (loss)$86.6 $(45.1)$131.7 N/M
  Nine Months Ended 
Favorable
(unfavorable)
 % Change 
Impact of
currency (1)
(in millions) September 30, 2019 September 30, 2018 
Net sales $7,131.9
 100.0 % $6,661.3
 100.0 % $470.6
 7.1 % (2.0)%
Cost of goods sold (exclusive of depreciation) 5,513.3
 77.3 % 5,205.5
 78.1 % (307.8) 5.9 % 2.0 %
Operating expenses:              
Outbound freight and handling 275.1
 3.9 % 248.5
 3.7 % (26.6) 10.7 % 1.7 %
Warehousing, selling and administrative 803.4
 11.3 % 710.9
 10.7 % (92.5) 13.0 % 12.7 %
Other operating expenses, net 258.8
 3.6 % 37.0
 0.6 % (221.8) 599.5 % 0.8 %
Depreciation 114.5
 1.6 % 93.8
 1.4 % (20.7) 22.1 % 1.6 %
Amortization 45.1
 0.6 % 40.7
 0.6 % (4.4) 10.8 % 1.5 %
Impairment charges 7.0
 0.1 % —
 — % (7.0) 100.0 % — %
Total operating expenses $1,503.9
 21.1 % $1,130.9
 17.0 % $(373.0) 33.0 % 1.8 %
Operating income $114.7
 1.6 % $324.9
 4.9 % $(210.2) (64.7)% (2.7)%
Other (expense) income:  ��           
Interest income 2.3
 — % 2.7
 — % (0.4) (14.8)% (7.4)%
Interest expense (111.2) (1.6)% (101.8) (1.5)% (9.4) 9.2 % 0.5 %
Loss on extinguishment of debt (0.7) — % —
 — % (0.7) 100.0 % — %
Other (expense) income, net (17.2) (0.2)% 3.0
 — % (20.2) N/M
 16.7 %
Total other expense $(126.8) (1.8)% $(96.1) (1.4)% $(30.7) 31.9 % 0.9 %
(Loss) income from continuing operations before income taxes (12.1) (0.2)% 228.8
 3.4 % (240.9) N/M
 (3.5)%
Income tax expense from continuing operations 38.4
 0.5 % 57.7
 0.9 % 19.3
 (33.4)% 2.7 %
Net (loss) income from continuing operations $(50.5) (0.7)% $171.1
 2.6 % $(221.6) N/M
 (3.7)%
Net income from discontinued operations $5.4
 0.1 % $—
 — % $5.4
 100.0 % — %
Net (loss) income $(45.1) (0.6)% $171.1
 2.6 % $(216.2) N/M
 (3.8)%
(1)Foreign currency translation is included in the percentage change. Unfavorable impacts from foreign currency translation are designated with parentheses.
Net sales
Net sales were $7,131.9$6,229.6 million for the nine months ended September 30, 2019, an increase2020, a decrease of $470.6$902.3 million, or 7.1%12.7%, from the nine months ended September 30, 2018. On a constant currency basis, net2019. Net sales increased fromdecreased due to lower demand in the February 2019 Nexeo acquisition in USA, Canadaglobal industrial end markets, the Environmental Sciences divestiture and LATAM and the May 2018 Earthoil acquisition in EMEA.price deflation. The increasedecrease was partially offset by lower sales volumeshigher demand for our products in USA, Canadacertain essential end markets and EMEA and by unfavorable changes in sales pricing and product mix in USA, Canada and LATAM for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Refer to the “Analysis of Segment Results” for the nine months ended September 30, 2019 discussion for additional information.
Gross profit (exclusive of depreciation)
Gross profit (exclusive of depreciation) increased $162.8 million, or 11.2%, to $1,618.6 million for the nine months ended September 30, 2019. The increase in gross profit (exclusive of depreciation) is attributable to changes in market and product mix and sales force execution. The increase in gross profit (exclusive of depreciation) from acquisitions was attributable to the February 2019 Nexeo acquisition in USA, Canada and LATAM segments andfor the May 2018 Earthoil acquisition in EMEA. Included in gross profit (exclusive of depreciation) is a $5.3 million charge in USA relatednine months ended September 30, 2020 compared to the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition. Excluding this impact gross profit (exclusive of depreciation) increased

$168.1 million, or 11.5%, to 1,623.9 million for the nine months ended September 30, 2019. Refer to the “Analysis of Segment Results” for the nine months ended September 30, 2019 discussion2020 for additional information.
Outbound freight and handlingGross profit (exclusive of depreciation)
Outbound freight and handling expenses increased $26.6Gross profit (exclusive of depreciation) decreased $100.9 million, or 10.7%6.2%, to $275.1$1,517.7 million for the nine months ended September 30, 2019. On a constant currency basis, outbound freight2020. The decrease in gross profit (exclusive of depreciation) was attributable to lower sales volumes in USA, Canada and handling expenses increased $30.7 million, or 12.4%, primarilyEMEA segments due to soft demand across most industrial end markets and the February 2019 Nexeo acquisition as well as overall higher costs to deliver,Environmental Sciences divestiture. The decrease was partially offset by lower sales volumes. favorable changes in product mix from essential end markets.Refer to the “Analysis of Segment Results” for the nine months ended September 30, 2019 discussion2020 for additional information.
Warehousing, sellingOutbound freight and administrativehandling
Warehousing, sellingOutbound freight and administrativehandling expenses increased $92.5decreased $17.0 million, or 13.0%6.2%, to $803.4$258.1 million for the nine months ended September 30, 2019.2020, primarily due to lower sales volumes. On a constant currency basis, the $107.1outbound freight and handling expenses decreased $15.3 million, increase is primarily due to incremental expenses from the February 2019 Nexeo acquisition and higher environmental remediation expenses. These costs were partially offset by cost containment efforts across all of our segments.or 5.6%. Refer to the “Analysis of Segment Results” for the nine months ended September 30, 2019 discussion2020 for additional information.
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Table of Contents
Warehousing, selling and administrative
Warehousing, selling and administrative expenses decreased $32.9 million, or 4.1%, to $770.5 million for the nine months ended September 30, 2020. On a constant currency basis, warehousing, selling and administrative expenses decreased $25.1 million, or 3.1%, attributable to cost reduction measures across all of our segments. The decrease was partially offset by higher bad debt charges. Refer to the “Analysis of Segment Results” for the nine months ended September 30, 2020 for additional information.
Other operating expenses, net
Other operating expenses, net increased $221.8decreased $189.7 million from $37.0 million for the nine months ended September 30, 2018 to $258.8 million for the nine months ended September 30, 2019.2019 to $69.1 million for the nine months ended September 30, 2020. The increasedecrease was primarily due to higherlower acquisition and integration related expenses, expenses related tothe absence of the saccharin legal settlement, higher other facility exitlower employee severance costs and higher other employee termination costs in connection withstock-based compensation expense as well as the February 2019 Nexeo acquisition.gain on sale of property, plant and equipment. Refer to “Note 6: Other operating expenses, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information. 
Depreciation and amortization
Depreciation expense increased $20.7$9.2 million, or 22.1%8.0%, to $114.5$123.7 million for the nine months ended September 30, 2019. On a constant currency basis, the $22.2 million increase was2020 primarily due to the February 2019 Nexeo acquisition.
Amortization expense increased $4.4$0.2 million, or 10.8%0.4%, to $45.1$45.3 million for the nine months ended September 30, 2019. On a constant currency basis, the increase of $5.0 million was2020 primarily attributabledue to the February 2019 Nexeo acquisition.
Impairment charges
Impairment charges of $7.0$37.6 million were recorded in the nine months ended September 30, 20192020 related to property, plant and equipment in connection with the Company’s decision to cease further investment in, and seek to restructure or exit a contract related to, certain technology assets within the Other segment as well as intangibles and property, plant and equipment in connection with the sale of the industrial spill and emergency response businesses within the USA segment and the announced closure of certain production facilities. Refer to “Note 14: Supplemental balance sheet information” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Interest expense
Interest expense increased $9.4decreased $23.8 million, or 9.2%21.4%, to $111.2$87.4 million for the nine months ended September 30, 20192020 due to higherlower average outstanding borrowings in connection with the February 2019 Nexeo acquisition and increases inas well as lower interest rates. Refer to “Note 13: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Loss on sale of business
A loss of $17.9 million was recorded in the nine months ended September 30, 2020 primarily related to the sale of the industrial spill and emergency response businesses, which was completed on September 1, 2020 and the first quarter working capital adjustment on the sale of the Environmental Sciences business, which was completed on December 31, 2019. Refer to “Note 4: Discontinued operations and dispositions” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Loss on extinguishment of debt
Loss on extinguishment of debt of $1.8 million during the nine months ended September 30, 2020 was driven by the partial prepayment of the Term B-3 Loan due 2024. The prior year period included a $0.7 million loss for the nine months ended September 30, 2019 due to the February 2019 amendment resulting inof the New Senior ABL Facility. Refer to “Note 13: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Other (expense) income,expense, net
Other (expense) income,expense, net changed $20.2decreased $9.8 million, from an income of $3.0or 57.0%, to $7.4 million for the nine months ended September 30, 2018 to an expense of $17.2 million for the nine months ended September 30, 2019.2020. The changedecrease was primarily related to lossesgains on undesignated foreign currency derivative instruments mark-to-market losses on interest rate swaps as well as the reductionincrease in non-operating pension income. The change wasincome, partially offset by foreign currency denominated loan revaluation gains.losses. Refer to “Note 8: Other income (expense) income,, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Income tax expense from continuing operations
Income tax expense was $14.0 million for the nine months ended September 30, 2020, resulting in an effective income tax rate of 13.9%. A discrete tax benefit of $27.5 million was included in the $14.0 million tax expense, primarily attributable to 2019 return to provision adjustments, impairment of unrealizable assets and benefits from provisions under the 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 the higher tax rates in foreign jurisdictions, non-deductible expenses and US state income taxes.
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Income tax expense was $38.4 million for the nine months ended September 30, 2019, resulting in an effective income tax rate of (317.4)%. A discrete tax benefit of $4.9 million, substantially attributable to the indirect effects of the Nexeo plastics sale, was included in the $38.4 million tax expense. The Company’s effective income tax rate for the nine months ended September 30, 2019, without the discrete items was 68.4%, higher than the US federal statutory rate of 21.0%. This is primarily due to the impact of the 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 tax attributes. The nine months ended September 30, 2019 discrete tax benefit of $4.9 million is attributable to the indirect effects of the Nexeo Plastics sale offset by the US return to provision adjustment, an increase in valuation allowance on tax attributes and various other items.
Income tax expense was $57.7 million for the nine months ended September 30, 2018, resulting in an effective income tax rate of 25.2%. The Company’s effective income tax rate for the nine months ended September 30, 2018 was higher than the US federal statutory rate of 21.0%, primarily due to the addition of state taxes and the higher tax rates incurred on the Company’s earnings outside the US, including the net impact of the 2017 US Tax Cuts and Jobs Act on foreign net earnings. These increases in the effective tax rate were partially offset by the release of valuation allowances on certain tax attributes. Included in the $57.7 million of tax expense for September 30, 2018 was a $7.4 million benefit related to the release of valuation allowance on a foreign tax attribute, a $2.7 million benefit in recognition of previously unrecognized tax benefits due to the statute of limitation expiration and a $6.3 million expense related to return to provision adjustments.
Net income from discontinued operations
Net income from discontinued operations was $5.4 million during the nine months ended September 30, 2019. Discontinued operations for 2019 represents the Nexeo plastics distribution business.
Analysis of Segment Results
Our financial results by operating segment and in aggregate is summarized in the following tables:USA
Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$3,781.3 $4,474.6 $(693.3)(15.5)%
Inter-segment63.3 77.8 (14.5)(18.6)%
Total net sales$3,844.6 $4,552.4 $(707.8)(15.5)%
Cost of goods sold (exclusive of depreciation)2,888.4 3,504.9 616.5 (17.6)%
Inventory step-up adjustment (1)
— 5.3 5.3 (100.0)%
Outbound freight and handling178.9 191.7 12.8 (6.7)%
Warehousing, selling and administrative475.2 508.8 33.6 (6.6)%
Adjusted EBITDA$302.1 $352.3 $(50.2)(14.2)%
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Nine months ended September 30, 2019
Net sales:            
External customers $4,474.6
 $961.6
 $1,366.6
 $329.1
 $—
 $7,131.9
Inter-segment 77.8
 4.5
 2.6
 —
 (84.9) —
Total net sales $4,552.4
 $966.1
 $1,369.2
 $329.1
 $(84.9) $7,131.9
Cost of goods sold (exclusive of depreciation) $3,504.9
 $788.3
 $1,044.6
 $260.4
 $(84.9) $5,513.3
Inventory step-up adjustment (2)
 5.3
 —
 —
 —
 —
 5.3
Outbound freight and handling 191.7
 31.8
 44.8
 6.8
 —
 275.1
Warehousing, selling and administrative 508.8
 68.3
 167.6
 36.6
 22.1
 803.4
Adjusted EBITDA (3)
 $352.3
 $77.7
 $112.2
 $25.3
 $(22.1) $545.4


Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$3,844.6 $4,552.4 $(707.8)(15.5)%
Cost of goods sold (exclusive of depreciation)2,888.4 3,504.9 616.5 (17.6)%
Gross profit (exclusive of depreciation)$956.2 $1,047.5 $(91.3)(8.7)%
Inventory step-up adjustment (1)
— 5.3 5.3 (100.0)%
Adjusted gross profit (exclusive of depreciation) (1)
$956.2 $1,052.8 $(96.6)(9.2)%
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Nine months ended September 30, 2019
Gross profit (exclusive of depreciation):            
Net sales $4,552.4
 $966.1
 $1,369.2
 $329.1
 $(84.9) $7,131.9
Cost of goods sold (exclusive of depreciation) 3,504.9
 788.3
 1,044.6
 260.4
 (84.9) 5,513.3
Gross profit (exclusive of depreciation) $1,047.5
 $177.8
 $324.6
 $68.7
 $—
 $1,618.6
Inventory step-up adjustment (2)
 5.3
 —
 —
 —
 —
 5.3
Adjusted gross profit (exclusive of depreciation) (2)
 $1,052.8
 $177.8
 $324.6
 $68.7
 $—
 $1,623.9

(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Nine months ended September 30, 2018
Net sales:            
External customers $3,799.5
 $1,037.8
 $1,522.9
 $301.1
 $—
 $6,661.3
Inter-segment 101.6
 7.2
 3.5
 0.2
 (112.5) —
Total net sales $3,901.1
 $1,045.0
 $1,526.4
 $301.3
 $(112.5) $6,661.3
Cost of goods sold (exclusive of depreciation) $3,041.0
 $865.0
 $1,176.3
 $235.7
 $(112.5) $5,205.5
Inventory step-up adjustment —
 —
 —
 —
 —
 —
Outbound freight and handling 162.7
 32.5
 47.4
 5.9
 —
 248.5
Warehousing, selling and administrative 409.6
 64.2
 182.3
 33.7
 21.1
 710.9
Adjusted EBITDA (3)
 $287.8
 $83.3
 $120.4
 $26.0
 $(21.1) $496.4
(in millions) USA Canada EMEA LATAM 
Other/
Eliminations (1) 
 Consolidated    
  Nine months ended September 30, 2018
Gross profit (exclusive of depreciation):            
Net sales $3,901.1
 $1,045.0
 $1,526.4
 $301.3
 $(112.5) $6,661.3
Cost of goods sold (exclusive of depreciation) 3,041.0
 865.0
 1,176.3
 235.7
 (112.5) 5,205.5
Gross profit (exclusive of depreciation) $860.1
 $180.0
 $350.1
 $65.6
 $—
 $1,455.8
Inventory step-up adjustment —
 —
 —
 —
 —
 —
Adjusted gross profit (exclusive of depreciation) $860.1
 $180.0
 $350.1
 $65.6
 $—
 $1,455.8
(1)
(1)Other/Eliminations represents the elimination of intersegment transactions as well as unallocated corporate costs consisting of costs specifically related to parent company operations that do not directly benefit segments, either individually or collectively.
(2)See definition of adjusted gross profit (exclusive of depreciation) at the end of this Item under “Non-GAAP Financial Measures.” Adjusted gross profit (exclusive of depreciation) excludes the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition in the USA segment. Adjusted gross profit (exclusive of depreciation) is equal to gross profit (exclusive of depreciation) for EMEA, Canada and LATAM segments.
(3)See “Note 20: Segments” in our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for the definition of Adjusted EBITDA and a reconciliation of consolidated net (loss) income to Adjusted EBITDA.
USA
External sales in the USA segment were $4,474.6 million, an increase of $675.1 million, or 17.8%, for the nine months ended September 30, 2019. External sales increased primarily due to the February 2019 Nexeo acquisition, partially offset by lower sales volumes attributable to soft demand.
For the nine months ended September 30, 2019, gross profit (exclusive of depreciation) increased $187.4 million, or 21.8%, to $1,047.5 million. Gross profit (exclusive of depreciation) increased due to the February 2019 Nexeo acquisition and due to favorable changes in pricing and product mix, partially offset by lower sales volumes. Excluding the $5.3 million impact related to the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition, adjusted gross profit (exclusive of depreciation) increased $192.7 million, or 22.4%, to $1,052.8 million. Both gross margin and adjusted gross margin increased during the nine months ended September 30, 2019 due to the beneficial impact of product mix, sales force execution and margin management efforts.
Outbound freight and handling expenses increased $29.0 million, or 17.8%, to $191.7 million for the nine months ended September 30, 2019 primarily due to the February 2019 Nexeo acquisition as well as overall higher costs to deliver, partially offset by lower sales volumes.

Warehousing, selling and administrative expenses increased $99.2 million, or 24.2%, to $508.8 million for the nine months ended September 30, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition. The increase was also attributable to higher environmental remediation expense partially offset by strong cost containment. Warehousing, selling and administrative expenses as a percentage of external sales increased from 10.8% for the nine months ended September 30, 2018 to 11.4% for the nine months ended September 30, 2019.
Adjusted EBITDA increased by $64.5 million, or 22.4%, to $352.3 million for the nine months ended September 30, 2019 primarily as a result of higher gross profit (exclusive of depreciation) which offset the effect of higher outbound freight and handling expenses and higher operating expenses. Adjusted EBITDA margin increased from 7.6% in the nine months ended September 30, 2018 to 7.9% for the nine months ended September 30, 2019 primarily as a result of higher gross margin.
Canada
External sales in the CanadaUSA segment were $961.6$3,781.3 million, a decrease of $76.2$693.3 million, or 7.3%15.5%, for the nine months ended September 30, 2019. On a constant currency basis,2020. The decrease in external net sales decreased $45.0 million, or 4.3%,was primarily due to lower sales volumes attributablerelated to the weather-impacted agricultureEnvironmental Sciences divestiture, lower energy and industrial end market as well as lower demand from Canada's energy sector. The decrease also resulted from lower average selling prices due to changes in market and product mixprice deflation on certain products partially offset by the increase due tohigher demand for our products in certain essential end markets and the February 2019 Nexeo acquisition.
Gross profit (exclusive of depreciation) decreased $2.2$91.3 million, or 1.2%8.7%, to $177.8$956.2 million for the nine months ended September 30, 2019.2020, primarily due to lower sales volumes due to soft demand across most industrial end markets and the Environmental Sciences divestiture. Gross margin increased from 23.4% for the nine months ended September 30, 2019 to 25.3% for the nine months ended September 30, 2020. The increase was primarily related to favorable changes in product mix from essential end markets.
Outbound freight and handling expenses decreased $12.8 million, or 6.7%, to $178.9 million for the nine months ended September 30, 2020, primarily due to lower sales volumes.
Warehousing, selling and administrative expenses decreased $33.6 million, or 6.6%, to $475.2 million for the nine months ended September 30, 2020, primarily due to the Environmental Sciences divestiture and cost reduction measures, partially offset by higher bad debt charges and incremental expenses related to the February 2019 Nexeo acquisition. As a percentage of external sales, warehousing, selling and administrative expenses increased from 11.4% for the nine months ended September 30, 2019 to 12.6% for the nine months ended September 30, 2020.
Adjusted EBITDA decreased by $50.2 million, or 14.2%, to $302.1 million for the nine months ended September 30, 2020, primarily as a result of lower demand for chemicals and ingredients in most industrial end markets and the Environmental
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Sciences divestiture. Adjusted EBITDA margin increased from 7.9% in the nine months ended September 30, 2019 to 8.0% for the nine months ended September 30, 2020, primarily as a result of higher gross margin.
EMEA
Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$1,269.3 $1,366.6 $(97.3)(7.1)%
Inter-segment2.3 2.6 (0.3)(11.5)%
Total net sales$1,271.6 $1,369.2 $(97.6)(7.1)%
Cost of goods sold (exclusive of depreciation)950.6 1,044.6 94.0 (9.0)%
Outbound freight and handling42.8 44.8 2.0 (4.5)%
Warehousing, selling and administrative164.9 167.6 2.7 (1.6)%
Adjusted EBITDA$113.3 $112.2 $1.1 1.0 %

Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$1,271.6 $1,369.2 $(97.6)(7.1)%
Cost of goods sold (exclusive of depreciation)950.6 1,044.6 94.0 (9.0)%
Gross profit (exclusive of depreciation)$321.0 $324.6 $(3.6)(1.1)%
External sales in the EMEA segment were $1,269.3 million, a decrease of $97.3 million, or 7.1%, for the nine months ended September 30, 2020.On a constant currency basis, external net sales decreased $87.1 million, or 6.4%, primarily due to lower volumes in most end markets, partially offset by strong demand for our products in certain essential end markets.
Gross profit (exclusive of depreciation) decreased $3.6 million, or 1.1%, to $321.0 million in the nine months ended September 30, 2020. On a constant currency basis, gross profit (exclusive of depreciation) decreased $1.6 million, or 0.5%, primarily due to lower sales volumes. Gross margin increased from 23.8% for the nine months ended September 30, 2019 to 25.3% for the nine months ended September 30, 2020, primarily due to favorable changes in product mix.
Outbound freight and handling expenses decreased $2.0 million, or 4.5%, to $42.8 million for the nine months ended September 30, 2020, driven by lower sales volumes.
Warehousing, selling and administrative expenses decreased $2.7 million, or 1.6%, to $164.9 million for the nine months ended September 30, 2020. On a constant currency basis, warehousing, selling and administrative expenses decreased $2.1 million, or 1.3%, primarily due to cost reduction measures, partially offset by higher variable compensation costs and environmental remediation. As a percentage of external sales, warehousing, selling and administrative expenses increased from 12.3% for the nine months ended September 30, 2019 to 13.0% for the nine months ended September 30, 2020.
Adjusted EBITDA increased by $1.1 million, or 1.0%, to $113.3 million for the nine months ended September 30, 2020. On a constant currency basis, Adjusted EBITDA increased $2.6 million, or 2.3%, attributable to the positive impact from demand for our products in certain essential end markets, partially offset by increased market pressures in the pharmaceutical finished goods product line. Adjusted EBITDA margin increased from 8.2% for the nine months ended September 30, 2019 to 8.9% for the nine months ended September 30, 2020.
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Canada
Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$852.2 $961.6 $(109.4)(11.4)%
Inter-segment2.0 4.5 (2.5)(55.6)%
Total net sales$854.2 $966.1 $(111.9)(11.6)%
Cost of goods sold (exclusive of depreciation)689.6 788.3 98.7 (12.5)%
Outbound freight and handling29.4 31.8 2.4 (7.5)%
Warehousing, selling and administrative66.1 68.3 2.2 (3.2)%
Adjusted EBITDA$69.1 $77.7 $(8.6)(11.1)%

Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$854.2 $966.1 $(111.9)(11.6)%
Cost of goods sold (exclusive of depreciation)689.6 788.3 98.7 (12.5)%
Gross profit (exclusive of depreciation)$164.6 $177.8 $(13.2)(7.4)%
External sales in the Canada segment were $852.2 million, a decrease of $109.4 million, or 11.4%, for the nine months ended September 30, 2020. On a constant currency basis, external net sales decreased $93.7 million, or 9.7%, primarily related to lower demand from Canada’s energy sector, the Environmental Sciences divestiture and price deflation on certain products. The decrease was partially offset by higher demand for our products in certain essential end markets and the February 2019 Nexeo acquisition.
Gross profit (exclusive of depreciation) decreased $13.2 million, or 7.4%, to $164.6 million for the nine months ended September 30, 2020. On a constant currency basis, gross profit (exclusive of depreciation) decreased $10.2 million, or 5.7%, primarily due to lower demand from Canada's energy sector, the Environmental Sciences divestiture and the write-down of inventory related to a component of the agriculture business, partially offset by favorable changes in product mix from essential end markets. Gross margin increased from 18.5% for the nine months ended September 30, 2019 to 19.3% for the nine months ended September 30, 2020, primarily due to favorable changes in product mix.
Outbound freight and handling expenses decreased $2.4 million, or 7.5%, to $29.4 million for the nine months ended September 30, 2020, primarily due to lower sales volumes.
Warehousing, selling and administrative expenses decreased by $2.2 million, or 3.2%, to $66.1 million for the nine months ended September 30, 2020. On a constant currency basis, warehousing, selling and administrative expenses decreased $1.0 million, or 1.5%, primarily due to cost reduction measures. As a percentage of external sales, warehousing, selling and administrative expenses increased from 7.1% for the nine months ended September 30, 2019 to 7.8% for the nine months ended September 30, 2020.
Adjusted EBITDA decreased by $8.6 million, or 11.1%, to $69.1 million for the nine months ended September 30, 2020. On a constant currency basis, Adjusted EBITDA decreased $7.3 million, or 9.4% primarily as a result of the lower demand from Canada's energy sector, the Environmental Sciences divestiture and the write-down of inventory related to a component of the agriculture business, partially offset by favorable changes in product mix from essential end markets. Adjusted EBITDA margin remained flat at 8.1% for the nine months ended September 30, 2019 to the nine months ended September 30, 2020.
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LATAM
Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Net sales:
External customers$326.8 $329.1 $(2.3)(0.7)%
Total net sales(1)
$326.8 $329.1 $(2.3)(0.7)%
Cost of goods sold (exclusive of depreciation)250.9 260.4 9.5 (3.6)%
Outbound freight and handling7.0 6.8 (0.2)2.9 %
Warehousing, selling and administrative36.8 36.6 (0.2)0.5 %
Brazil VAT charge (1)
0.3 — 0.3 100.0 %
Adjusted EBITDA (1)
$32.4 $25.3 $7.1 28.1 %

Nine months ended September 30,Favorable (unfavorable)% Change
(in millions)20202019
Gross profit (exclusive of depreciation):
Net sales$326.8 $329.1 $(2.3)(0.7)%
Cost of goods sold (exclusive of depreciation)250.9 260.4 9.5 (3.6)%
Gross profit (exclusive of depreciation) (1)
$75.9 $68.7 $7.2 10.5 %
Brazil VAT charge (1)
0.4 — 0.4 100.0 %
Adjusted gross profit (exclusive of depreciation)$76.3 $68.7 $7.6 11.1 %
(1)Included in net sales and gross profit (exclusive of depreciation) is a $0.4 million Brazil VAT charge recorded during the nine months ended September 30, 2020. The charge of $0.3 million, net of associated fees, is excluded from Adjusted EBITDA. See “Note 17: Commitments and contingencies” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
External sales in the LATAM segment were $326.8 million, a decrease of $2.3 million, or 0.7%, for the nine months ended September 30, 2020. On a constant currency basis, external net sales increased $46.8 million, or 14.2%, primarily due to higher demand for our products in certain essential end markets, the February 2019 Nexeo acquisition and from contributions from the energy sector and Brazilian agriculture sector.
Gross profit (exclusive of depreciation) increased $7.2 million, or 10.5%, to $75.9 million in the nine months ended September 30, 2020. On a constant currency basis, gross profit (exclusive of depreciation) increased $3.5$20.7 million, or 1.9%30.1%, due to contributions from the February 2019 Nexeo acquisition partially offset by lower sales volumesfavorable changes in agriculture.product and end market mix. Gross margin increased 1.1% to 18.5%from 20.9% for the nine months ended September 30, 2019 as a result of higher margins on certain commodity chemicals.to 23.2% for the nine months ended September 30, 2020.
Outbound freight and handling expenses decreased $0.7increased $0.2 million, or 2.2%2.9%, to $31.8$7.0 million for the nine months ended September 30, 20192020, primarily due to lowerhigher sales volumes.
Warehousing, selling and administrative expenses increased by $4.1$0.2 million, or 6.4%0.5%, to $68.3$36.8 million for the nine months ended September 30, 2019. Warehousing, selling and administrative expenses as a percentage of external sales increased from 6.2% for the nine months ended September 30, 2018 to 7.1% for the nine months ended September 30, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition.2020. On a constant currency basis, warehousing, selling and administrative expenses increased $6.4$6.3 million, or 10.0%.17.2%, primarily due to higher variable compensation costs and higher bad debt charges. As a percentage of external sales, warehousing, selling and administrative expenses increased from 11.1% for the nine months ended September 30, 2019 to 11.3% for the nine months ended September 30, 2020.
Adjusted EBITDA decreasedincreased by $5.6$7.1 million, or 6.7%28.1%, to $77.7$32.4 million for the nine months ended September 30, 2019.2020. On a constant currency basis, Adjusted EBITDA decreased $3.3increased $13.4 million, or 4.0%53.0%, primarily due to lowerincreased gross profit (exclusive of depreciation) due to higher demand for our products in certain essential end markets, the agricultureenergy sector and energythe Brazilian agriculture sector. Adjusted EBITDA margin increased from 8.0% for the nine months ended September 30, 2018 to 8.1%7.7% for the nine months ended September 30, 2019 primarily as a result of higher margins on certain commodity chemicals.
EMEA
External sales in the EMEA segment were $1,366.6 million, a decrease of $156.3 million, or 10.3%,to 9.9% for the nine months ended September 30, 2019.2020.
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On a constant currency basis, external net sales decreased $64.7 million, or 4.2%, primarily due to lower sales volumes attributable to soft demand, partially offset by higher average selling prices due to favorable mix improvement as well as incremental sales from the May 2018 Earthoil acquisition.Table of Contents
Gross profit (exclusive of depreciation) decreased $25.5 million, or 7.3%, to $324.6 million in the nine months ended September 30, 2019. On a constant currency basis, gross profit (exclusive of depreciation) increased $4.3 million, or 1.2%, from higher average selling prices attributable to favorable product mix as well as from the May 2018 Earthoil acquisition partially offset by lower sales volumes. Gross margin increased from 23.0% for the nine months ended September 30, 2018 to 23.8% for the nine months ended September 30, 2019 primarily due to the favorable change in product mix and margin management initiatives.
Outbound freight and handling expenses decreased $2.6 million, or 5.5%, to $44.8 million. On a constant currency basis, outbound freight and handling expenses remained flat.
Warehousing, selling and administrative expenses decreased $14.7 million, or 8.1%, to $167.6 million for the nine months ended September 30, 2019, and increased as a percentage of external sales by 0.3% to 12.3% for the nine months ended September 30, 2019. On a constant currency basis, warehousing, selling and administrative expenses decreased $3.8 million, or 2.1%.
Adjusted EBITDA decreased by $8.2 million, or 6.8%, to $112.2 million for the nine months ended September 30, 2019. On a constant currency basis, Adjusted EBITDA decreased $0.7 million, or 0.6%, primarily due to soft demand partially offset

by effective cost containment. For the nine months ended September 30, 2019, the pharmaceutical finished goods product line represented approximately 27% of Adjusted EBITDA in the EMEA segment declining from prior year due to increased market pressures. Adjusted EBITDA margin increased from 7.9% for the nine months ended September 30, 2018 to 8.2% for the nine months ended September 30, 2019.
LATAM
External sales in the LATAM segment were $329.1 million, an increase of $28.0 million, or 9.3%, for the nine months ended September 30, 2019. On a constant currency basis, external sales increased $39.6 million, or 13.2%, primarily due to the February 2019 Nexeo acquisition along with contributions from Mexico’s energy markets and the Brazilian agriculture sector.
Gross profit (exclusive of depreciation) increased $3.1 million, or 4.7%, to $68.7 million in the nine months ended September 30, 2019. On a constant currency basis, gross profit (exclusive of depreciation) increased $6.0 million, or 9.1%, primarily due to the February 2019 Nexeo acquisition partially offset by lower average selling prices resulting from a highly competitive market due to lower demand. Gross margin decreased from 21.8% for the nine months ended September 30, 2018 to 20.9% for the nine months ended September 30, 2019.
Outbound freight and handling expenses increased $0.9 million, or 15.3%, to $6.8 million for the nine months ended September 30, 2019 compared to September 30, 2018 primarily due to incremental expenses from the February 2019 Nexeo acquisition and higher sales volumes.
Warehousing, selling and administrative expenses increased $2.9 million, or 8.6%, to $36.6 million for the nine months ended September 30, 2019 and decreased as a percentage of external sales from 11.2% when comparing the nine months ended September 30, 2018 to 11.1% for the nine months ended September 30, 2019. On a constant currency basis, warehousing, selling and administrative expenses increased $4.4 million, or 13.1%, primarily due to incremental expenses from the February 2019 Nexeo acquisition partially offset by strong cost control.
Adjusted EBITDA decreased by $0.7 million, or 2.7%, to $25.3 million for the nine months ended September 30, 2019. On a constant currency basis, Adjusted EBITDA increased $0.5 million, or 1.9%, primarily as a result of higher gross profit (exclusive of depreciation). Adjusted EBITDA margin decreased from 8.6% for the nine months ended September 30, 2018 to 7.7% for the nine months ended September 30, 2019.

Liquidity and Capital Resources
The Company’s primary sources of liquidity are cash generated from its operations and borrowings under itsour committed North American and European credit facilities.facilities (“facilities”). As of September 30, 2019,2020, liquidity for the Company had $134.6was $730.4 million, comprised of $273.7 million of cash and cash equivalents and $731.1$456.7 million availableof availability under the facilities. These facilities are guaranteed by certain significant subsidiaries and secured by such parties’ eligible trade receivables and inventory with the maximum borrowing capacity under these credit facilities of $1.5 billion and €200 million, respectively. Significant reductions in the Company’s trade receivables and inventory would reduce our availability to access liquidity under these facilities. The Company has no active financial maintenance covenants in its credit facilities.agreements, however, there is a springing fixed charge coverage ratio (“FCCR”) under the revolving credit facilities of 1.0x, applicable only if availability is less than or equal to 10% of the borrowing capacity. If the FCCR was applicable, the calculation would have been 4.1x as of September 30, 2020.
The Company’s primary liquidity and capital resource needs are to service its debt and to finance operating expenses, working capital, capital expenditures, other liabilities, costs of integration and general corporate purposes. The majority of the Company's debt obligations mature in 2024 and beyond. Management continues to balance its focus on sales and earnings growth with continuing efforts in cost control and working capital management. In anticipation of ongoing, challenging macroeconomic headwinds, including the impact of the COVID-19 pandemic, the Company is carefully managing its working capital and implementing operating cost reductions to maintain our financial health while continuing to help serve supplier and customer needs.
The Company's access to debt capital markets has historically provided the Company with sources of liquidity. We do not anticipate having difficulty in obtaining financing from those markets in the future with our history of favorable results in the debt capital markets and strong relationships with global financial institutions. However, the COVID-19 pandemic has caused disruption in the capital markets and could make financing more difficult and/or expensive to obtain in the short term. Additionally, our ability to continue to access the debt capital markets with favorable interest rates and other terms will depend, to a significant degree, on maintaining our current ratings assigned by the credit rating agencies.
On February 28, 2019,January 7, 2020, using the proceeds from the sale of the Environmental Sciences business, the Company completedrepaid $174.0 million of the Nexeo acquisition which was funded using proceeds from incremental Term B Loans, borrowings under the New Senior ABL Facility and borrowings under the ABL Term Loan.B-3 Loan due 2024. Refer to “Note 13: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
On April 3, 2019, using the proceeds from the saleWe expect our 2020 capital expenditures for maintenance, safety and cost improvements and investments in our digital capabilities to be approximately $110 million to $120 million.
We believe funds provided by our primary sources of Nexeo Plastics, the Company repaid $448.8 million of its outstanding Euro and USD Term Loans due 2024. The remaining proceeds were usedliquidity will be adequate to pay down revolvingmeet our liquidity, debt and fund working capital and general corporate purposes. In addition, on April 8, 2019, the Company paid the saccharin legal settlement. Refer to “Note 13: Debt” and “Note 17: Commitments and contingencies” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
The Company is in compliance with its debt covenants. The Company’s primary liquidityrepayment obligations and capital resource needs are to service its debt and to finance working capital, capital expenditures, other liabilities and cost of acquisitions. The Company expects to have sufficient liquidity and financial flexibility to meet all of its business obligations and capital resources needs. The Company will continue to balance its focus on sales and earnings growth with continuing efforts in cost control and working capital management.for at least the next 12 months under current operating conditions.
Cash Flows
The following table presents a summary of our cash flow activity for the periods set forth below:flows:
 Nine months ended September 30, Nine months ended September 30,
(in millions) 2019 2018(in millions)20202019
Net cash provided (used) by operating activities $34.2
 $(2.6)
Net cash provided by operating activitiesNet cash provided by operating activities$81.6 $34.2 
Net cash used by investing activities (606.5) (71.3)Net cash used by investing activities(74.2)(606.5)
Net cash provided (used) by financing activities 611.3
 (290.1)
Net cash (used) provided by financing activitiesNet cash (used) provided by financing activities(58.9)611.3 
Effect of exchange rate changes on cash and cash equivalents (26.0) (17.1)Effect of exchange rate changes on cash and cash equivalents(5.1)(26.0)
Net increase (decrease) in cash and cash equivalents $13.0
 $(381.1)
Net (decrease) increase in cash and cash equivalentsNet (decrease) increase in cash and cash equivalents$(56.6)$13.0 
Cash Provided (Used) by Operating Activities
Cash provided (used) by operating activities increased $36.8$47.4 million to cash provided of$81.6 million for the nine months ended September 30, 2020 from $34.2 million for the nine months ended September 30, 2019, from cash used of $2.6 million for the nine months ended September 30, 2018, primarily due to changes in trade working capital partially offset by changes in net income, exclusive of non-cash items.items and other, net, partially offset by changes in trade working capital and prepaid expenses and other current assets. The change in net income, exclusive of non-cash items provided net cash outflowsinflows of $172.8$163.6 million from cash inflows of $164.5$328.1 million and $337.3$164.5 million for the nine months ended September 30, 20192020 and September 30, 2018,2019, respectively. Refer to “Results of Operations” above for additional information.
The change in trade working capital, which includes trade accounts receivable, net, inventories and trade accounts payable, was a cash inflowoutflow of $226.1$150.6 million for the nine months ended September 30, 20192020 compared to the nine months ended September 30, 2018.2019. Cash inflowsoutflows year-over-year from trade accounts receivable, net is primarily attributable to improvements in the timing of customer payments and reduced sales volumes, excluding acquisitions, during the current year. Inventory cash inflows on a year-over-year basis are primarily due to the prior year buildup of inventory within the USA segment in anticipation of transportation constraints during the summer months.year-over-year. The year-over-year cash outflows related to trade accounts payable are primarily
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attributable to decreased inventory purchasesthe timing of vendor payments. Inventory cash inflows on a year-over-year basis were primarily related to reductions in the current year.USA segment inventories due to reduced sales volumes.
The remaining cash outflowsinflows primarily represent payment timing differences for other assets and liabilities.
Cash Used by Investing Activities
Cash used by investing activities increased $535.2decreased $532.3 million to $74.2 million for the nine months ended September 30, 2020 from $606.5 million for the nine months ended September 30, 2019 from $71.3 million for the nine months ended September 30, 2018.2019. The increasedecrease is primarily related to the acquisition of the Nexeo business in 2019, net of the proceeds received for the sale and disposition of Nexeo Plastics. In 2018, the Company acquired Earthoil and Kemetyl. Refer to “Note 3: Business combinations” and “Note 4: Discontinued operations”operations and dispositions” in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company's acquisitions and dispositions.

The decrease in cash used by investing activities was partially offset by a current year purchase of an operating site.
Cash (Used) Provided (Used) by Financing Activities
Cash (used) provided (used) by financing activities increased $901.4decreased $670.2 million to cash used of $58.9 million for the nine months ended September 30, 2020 from cash provided of $611.3 million for the nine months ended September 30, 2019 from cash used of $290.1 million for the nine months ended September 30, 2018.2019. The increasedecrease in financing cash flows for the nine months ended September 30, 2019 wasis primarily due to anthe prior year increase in debt used to finance the February 2019 Nexeo acquisition. The decrease was partially offset by cash flow increase is alsoinflows attributable to lower repaymentrepayments of long-term debt during the nine months ended September 30, 20192020 compared to the nine months ended September 30, 2018.2019. Refer to “Note 13: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Off-Balance Sheet Arrangements
There were no material changes in the Company’s off-balance sheet arrangements since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 except2019.
Contractual Obligations and Commitments
There were no material changes in the Company’s contractual obligations and commitments since the filing of the Company’s Annual Report on Form 10-K for the Company’s operating leases, which are recorded on the condensed consolidated balance sheetyear ended December 31, 2019, other than as a result of the adoption of ASU 2016-02 “Leases” on January 1, 2019. Seedisclosed in “Note 2: Significant accounting policies” in the notes13: Debt” to the condensed consolidated financial statements.
Contractual Obligationsstatements as of and Commitments
See “Note 13: Debt”for the three and “Note 18: Leasing” in the notes to the condensed consolidated financial statements.nine-month periods ended September 30, 2020.
Critical Accounting Estimates
There were no material changes in the Company’s critical accounting estimates since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Recently Issued Accounting Pronouncements
See “Note 2: Significant accounting policies” in the notes to the condensed consolidated financial statements.
Forward Looking Statements and Information
ThisCertain parts of this Quarterly Report on Form 10-Q containscontain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-lookingForward-looking statements can be identifiedare generally accompanied by the use of forward-looking termswords such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. TheseAll forward-looking statements include all matters that are not historical facts. They appearmade in a number of places throughout this Quarterly Report on Form 10-Q are qualified by these cautionary statements.
Any forward-looking statements represent our views only as of the date of this report and include statements regardingshould not be relied upon as representing our intentions, beliefs or current expectations concerning, amongviews as of any subsequent date, and we undertake no obligation, other things, our results of operations, financial condition, macro-economic conditions, liquidity, prospects, business trends, currency trends, competition, markets, growth strategies and the industries in which we operate and including, without limitation, statements relating to our estimated or anticipated financial performance or results. Forward-looking statements are subject to known and unknown risks and uncertainties, many of whichthan as may be beyond our control.required by law, to update any forward-looking statement. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operateperformance may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even ifForward-looking statements include, but are not limited to, statements about:
•the impact of the COVID-19 pandemic and economic conditions on our results ofend markets, operations, financial condition and operating results;
•our expense control and cost reduction plans and other strategic plans and initiatives;
•our ability to solve customer technical challenges and accelerate product development cycles;
•demand for new products that meet regulatory and customer sustainability standards and preferences and our ability to provide such products and systems to maintain our competitive position;
•our ability to sell specialty products at higher profit;
•the cyclicality of our Agricultural business;
•the continuation of the trend of outsourcing of chemical distribution by chemical manufacturers;
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•significant factors that may adversely affect us and our industry;
•the outcome and effect of ongoing and future legal proceedings;
•market conditions and outlook;
•our liquidity outlook and the developmentfunding thereof, and cash requirements and adequacy of resources to fund them;
•future contributions to our pension plans and cash payments for postretirement benefits; and
•the impact of ongoing tax guidance and interpretations.
Potential factors that could affect such forward-looking statements include, among others:
•the sustained geographic spread of the industries in which we operate are consistent withCOVID-19 pandemic, the forward-looking statements contained in this Quarterly Reportduration and severity of the COVID-19 pandemic, current and new actions that may be taken by governmental authorities to address or otherwise mitigate the impact of the COVID-19 pandemic, the potential negative impacts of COVID-19 on Form 10-Q, thosethe global economy and our customers and suppliers, and the overall impact of the COVID-19 pandemic on our business, results or developments may not be indicative of results, conditions or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including those reflected in forward-looking statements relating to our operations and business and the risks and uncertainties discussedfinancial condition;
•other fluctuations in “Risk Factors.” Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:
general economic conditions, particularly fluctuations in industrial production and the demands of our customers;customers and the timing and extent of an economic recovery;
disruptions•significant changes in the supplybusiness strategies of chemicals we distributeproducers or in the operations of our customers’ or producers’ operations;customers;
termination or change•increased competitive pressures, including as a result of contracts or relationships with customers or producers on short notice;competitor consolidation;
•significant changes in the pricepricing, demand and availability of chemicals, or a decline in the demand for chemicals;
our ability to pass through cost increases to our customers;
our ability to meet customer demand for a product;
•trends in oil and gas demand and prices;
competitive pressures in•our indebtedness, the chemical distribution industry;
consolidation ofrestrictions imposed by our competitors;
debt instruments, and our ability to execute strategic investments,obtain additional financing;
•the broad spectrum of laws and regulations that we are subject to, including pursuing acquisitions and/extensive environmental, health and safety laws and regulations;
•an inability to integrate the business and systems of companies we acquire or dispositions,to realize the anticipated benefits of such acquisitions;
•potential business disruptions and successfully integrating and operating acquired companies;security breaches, including cybersecurity incidents;
liabilities associated with acquisitions, dispositions and ventures;

potential impairment of goodwill;
•an inability to generate sufficient working capital;
our ability to sustain profitability;
our ability to implement and efficiently operate the systems needed to manage our operations;
the risks associated with security threats, including cybersecurity threats;
•increases in transportation and fuel costs and changes in our relationship with third party carriers;providers;
the risks associated with hazardous materials and related activities;
•accidents, safety failures, environmental damage, product quality and liability issues and recalls;
•major or systemic delivery failures involving our distribution network or the products we carry or adverse health effects or other harm related to the materials we blend, manage, handle, store, sell or transport;carry;
challenges associated with international operations, including securing producers and personnel, import/export requirements, compliance with foreign laws and international business laws and changes in economic or political conditions;
our ability to effectively implement our strategies or achieve our business goals;
exposure to interest rate and currency fluctuations;
evolving laws and regulations relating to hydraulic fracturing and risks associated with chemicals used in hydraulic fracturing;
losses due to potential product liability claims and recalls and asbestos claims;
compliance with extensive environmental, health and safety laws, including laws relating to our environmental services businesses and the investigation and remediation of contamination, that could require material expenditures or changes in our operations;
general regulatory and tax requirements;
operational risks for which we may not be adequately insured;
•ongoing litigation and other legal and regulatory actions and risks, including asbestos claims;risks;
loss of key personnel;
labor disruptions and other costs•challenges associated with the unionized portion of our workforce;international operations;
•exposure to interest rate and currency fluctuations;
•negative developments affecting our pension plans and multi-employer pensions;
changes•labor disruptions associated with the unionized portion of our workforce; and
•the other factors described in legislation, regulationthe Company's filings with the Securities and government policy;
our substantial indebtedness and the restrictions imposed by our debt instruments and indenture;
our inability to integrate the business of Nexeo; and
the risk that the benefits of the Nexeo acquisition, including synergies, may not be fully realized or may take longer to realize than expected.Exchange Commission.
You should read this Quarterly Report on Form 10-Q, including the uncertainties and factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 completely2019 in full and with the understanding that actual future results may be materially different from expectations.expectations expressed or implied by any forward-looking statement. All forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise and changes in future operating results over time or otherwise.
Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Non-GAAP Financial Measures
We monitor the results of our operatingreportable segments separately for the purposes of making decisions about resource allocation and performance assessment. We evaluate performance using Adjusted EBITDA. We define Adjusted EBITDA as consolidated net income (loss), plus the sum of net (loss) income from discontinued operations, inventory step-up adjustment, net interest expense, income tax expense (benefit), depreciation, amortization, impairment charges, loss on extinguishment of debt, other operating expenses, net (see “Note 6: Other operating expenses, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information) and other income (expense) income,, net (see “Note 8: Other income (expense) income,, net” in Item 1 of this Quarterly Report on Form 10-Q for additional information). Adjusted EBITDA also includes an adjustment to remove a Brazil VAT charge for 2020 and an inventory step-up adjustment for 2019. For a reconciliation of the non-GAAP financial measures to its most comparable GAAP measure, see “Analysis of Segment Results” within this Item and for a reconciliation of net income (loss) to Adjusted EBITDA, the most directly comparable measure calculated in accordance with GAAP, see “Note 20:19: Segments” to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
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We believe that othernon-GAAP financial measures that do not comply with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation),

adjusted gross profit (exclusive of depreciation), gross margin, adjusted gross margin and Adjusted EBITDA margin. We define these financial measures as follows:
•Gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation);
•Adjusted gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation) plus Brazil VAT charge and inventory step-up adjustment;
•Gross margin: gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales;sales on a consolidated level; and
Adjusted gross margin: adjusted gross profit (exclusive of depreciation) divided by external net sales; and
•Adjusted EBITDA margin: Adjusted EBITDA divided by external sales on a segment level and by net sales.sales on a consolidated level.
Management believes Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are important measures in assessing operating performance. The non-GAAP financial measures are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help investors’ ability to analyze underlying trends in the Company’s business, evaluate its performance relative to other companies in its industry and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. Additionally, the Company uses Adjusted EBITDA in setting performance incentive targets to align management compensation measurement with operational performance. Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are not measures calculated in accordance with GAAP and should not be considered a substitute for net income or any other measure of financial performance presented in accordance with GAAP. Additionally, other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Item 3.        Quantitative and Qualitative Disclosures about Market Risk
There were no material changes from the “Quantitative and Qualitative Disclosure about Market Risk” disclosed in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Item 4.        Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the principal executive officer and principal financial officer, the Company conducted an evaluation as of September 30, 20192020 of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the principal executive officer and principal financial officer concluded the Company’s disclosure controls and procedures were effective as of September 30, 2019.2020.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
Item 1.        Legal Proceedings
Information pertaining to legal proceedings can be found in Note 17 to the interim condensed consolidated financial statements included in Part I, Financial Statements of this report.
Item 1A.     Risk Factors
In addition toThere have been no material changes from the other information set forth in this report, readers should carefully consider therisk factors discussed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect our business, financial condition, results of operations, or cash flows. The risks describedpreviously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 are not the only risks we face. Additional risks2019 and uncertainties not currently known to us or that we currently consider immaterial may also materially adversely affect our business, financial condition, results of operations, or cash flows. Except for the updated risk factors appearing below, there have been no material changes in the risk factors contained in our AnnualQuarterly Report on Form 10-K10-Q for the yearquarters ended DecemberMarch 31, 2018.2020 and June 30, 2020.

The risk factor under the heading “Risks Related to Our Business—Business and Economic Risks—In connection with acquisitions, ventures or divestitures, we may become subject to liabilities” in our Annual Report on Form 10-K for the year ended December 31, 2018 is updated and restated as follows:
In connection with acquisitions, ventures or divestitures, we may become subject to liabilities.
In connection with any acquisitions or ventures, we may acquire liabilities or defects such as legal claims, including but not limited to third party liability and other tort claims; claims for breach of contract; employment-related claims; environmental liabilities, conditions or damage; permitting, regulatory or other compliance with law issues; hazardous materials or liability for hazardous materials; or tax liabilities. If we acquire any of these liabilities, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty, we may be responsible for significant out-of-pocket expenditures. In connection with any divestitures, we may incur liabilities for breaches of representations, and warranties or failure to comply with operating covenants under any agreement for a divestiture. In addition, we may indemnify a counterparty in a divestiture for certain liabilities of the subsidiary or operations subject to the divestiture transaction. These liabilities if they materialize, could have a material adverse effect on our business, financial condition and results of operations. Following the acquisition of Nexeo, we launched a strategic review of our portfolio of businesses, with focus on smaller businesses we operate that are outside our core chemical distribution business. The outcome of this review could include a decision to sell certain of these businesses, which could expose us any of the risks associated with divestitures described above.
The risk factor under the heading “Risks Related to the Nexeo Acquisition—In connection with the Nexeo Acquisition, we will incur additional indebtedness and may also assume certain of Nexeo’s outstanding indebtedness. Additional indebtedness would amplify the risks associated with our current indebtedness by increasing our interest expense and potentially reducing our flexibility to respond to changing business and economic conditions, which could have a material adverse effect on our results of operations, cash flows and financial position” in our Annual Report on Form 10-K for the year ended December 31, 2018 is updated and restated as follows:
In connection with the Nexeo Acquisition, we incurred additional indebtedness, and we may incur additional indebtedness in the future. Additional indebtedness could amplify the risks associated with our current indebtedness by increasing our interest expense and potentially reducing our flexibility to respond to changing business and economic conditions which could have a material adverse effect on our results of operations, cash flows and financial position.
Our increased indebtedness has the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions. The amount of cash required to pay interest on our increased indebtedness levels following completion of the Nexeo Acquisition and thus the demands on our cash resources has increased as a result of the Nexeo Acquisition. Our increased levels of indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages for us relative to other companies with lower debt levels. If we do not achieve the expected benefits and cost savings from the Nexeo Acquisition, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
We continuously monitor the capital markets and may seek to opportunistically refinance some or all of our existing indebtedness incurred in connection with the Nexeo acquisition, subject to market conditions. There can be no assurance, however, that we will complete any such refinancing. If we or our subsidiaries incur additional indebtedness in connection with a refinancing, it could increase the risks described above and lead to other risks. See “Risks Related to Our Indebtedness” in our Annual Report on Form 10-K for the year ended December 31, 2018.
Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.         Defaults upon Senior Securities
None.
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Item 4.         Mine Safety Disclosures
None.
Item 5.         Other Information
As previously disclosed, on August 21, 2019,On or about November 2, 2020, Univar Solutions entered into new severance and change in control agreements (the “Severance Agreements”) with certain of its executive officers (the “Officers”), including the boardfollowing named executive officers of directors (the “Board”the Company: David C. Jukes, President and Chief Executive Officer and Carl J. Lukach Executive Vice President, Corporate Development.
The Severance Agreements, which replace and supersede their prior agreements, generally provide that, if the Officer’s employment is terminated by the Company without Cause or the Officer terminates his employment with the Company for Good Reason, the Officer will generally receive a severance payment equal to (i) for the Chief Executive Officer, eighteen (18) months of the Officer’s annual base salary, and; twelve (12) months for the other Officers; plus (ii) the Officer’s target bonus for the year of termination, plus (iii) a pro rata portion of the Officer’s actual bonus for the year of termination. If during a Protection Window (i.e., upon or within three (3) months prior to, or twenty-four (24) months after, a Change in Control), the Officer’s employment is terminated by the Company without Cause or the Officer terminates his employment with the Company for Good Reason, the Officer will generally receive a severance payment equal to (i) for the Chief Executive Officer, thirty (30) months of the Officer’s annual base salary, and; twenty four (24) months for the other Officers; plus (ii) for the Chief Executive Officer, two hundred and fifty percent (250%) of the target bonus for the year of termination, and; two hundred percent (200%) for the other Officers, plus (iii) a pro rata portion of the Officer’s target bonus for the year of termination. In addition, under each of the termination scenarios described above, the Officer will be entitled to continue to receive the medical and dental coverage provided by the Company approved amended and restated bylaws (as amended,as of the “Third Amended and Restated Bylaws”)Officer’s termination date for eighteen months following termination, with monthly premium payments for such coverage paid for by the Officer. The Officer must also sign a release of claims in favor of the Company effective September 1, 2019, to receive the severance benefits described above. Each Officer is also subject to non-competition and non-solicitation requirements for eighteen (18) months following his termination of employment.
The terms and conditions are described in more detail in the standard form severance and change in control agreement, which is attached as Exhibit 10.1 and incorporated by reference. Capitalized terms used herein and not otherwise defined have the meaning given in the Severance Agreement.
On October 28, 2020, the Board approved a standard form of Indemnification Agreement for executive officers of the Company, which indemnification agreement, among other things:
require enhanced disclosure in stockholder proposals and nominations by both the proposing stockholder and the nominee, including director and officer questionnaires, disclosures of voting commitments and “golden

leash” compensation arrangements, and representations that any nominee intendsmatters, is intended to serve as a director for the full term and will comply with all Board policies and enhanced disclosure of derivative interests; and
consolidate a previously-approved proxy access provision into the bylaws and amending the provision to align the information requirements with the advance notice provision and provide that the maximum number of stockholder nominees be reduced by any directors or nominees serving or nominated pursuant to an agreement with an investor.
The foregoing description of the amendments contained in the Third Amended and Restated Bylaws is qualified in its entirety by referenceindemnification rights to the complete textfullest extent permitted under applicable law. The Company’s form of the Third Amended and Restated Bylaws, whichindemnification agreement is filedattached as Exhibit 3.4 to this Quarterly Report on Form 10-Q.10.2 and incorporated by reference.
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Item 6.         Exhibits
Exhibit NumberExhibit Description
Exhibit NumberExhibit DescriptionForm of Severance and Change in Control Agreement by and Between Univar Solutions Inc. and Certain Executives.
Third AmendedForm of Indemnification Agreement by and Restated CertificateBetween Univar Solutions Inc. and Certain Executives.
Alternative Release and Amendment to Severance and Change in Control Agreement, dated as of Incorporation,August 5, 2020, by and between the Company and Mark Fisher, incorporated by reference to Exhibit 3.110.1 to the Company's Registration Statement on Form S-8, filed on June 23, 2015
3.2
Certificate of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 23, 2018
3.3
Certificate of Amendment of the Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on August 22, 2019
3.4
Third Amended and Restated Bylaws of Univar Solutions Inc., incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, filed on August 22, 20196, 2020.
Form of Amended and Restated Employee Performance-Based Restricted Stock Unit Agreement for awards granted on or after February 6, 2019, 2017 Omnibus Equity Incentive Plan
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_______________________
†Identifies each management compensation plan or arrangement
*Filed herewith
**Furnished herewith


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Univar Solutions Inc.

(Registrant)
By:/s/ David C. Jukes
David C. Jukes

President and Chief Executive Officer
Date: November 5, 20192020
 
By:/s/ Carl J. LukachNicholas W. Alexos
Carl J. Lukach
Nicholas W. Alexos
Executive Vice President and Chief Financial Officer
Date: November 5, 20192020

By:/s/ Jeanette A. Press
Jeanette A. Press
Vice President, Corporate Controller and Principal Accounting Officer
Date: November 5, 2019


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