Document
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
__________________________________________________________ 
Form 10-Q
__________________________________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
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 Inc.
(Exact name of registrant as specified in its charter)
__________________________________________________________ 
Delaware
 
26-1251958
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
3075 Highland Parkway, Suite 200 Downers Grove, Illinois
 
60515
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (331) 777-6000
__________________________________________________________ 
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  ý     No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
ý
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
At October 25, 2016, 138,300,104 shares of the registrant’s common stock, $0.01 par value, were outstanding.

Table of Contents

Univar Inc.
Form 10-Q
For the quarterly period ended September 30, 2016
TABLE OF CONTENTS
 
Part I. FINANCIAL INFORMATION
 
Item 1. Financial Statements (unaudited)
 
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive (Loss) Income
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Statements
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. OTHER INFORMATION
 
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures

 

Table of Contents

PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements

Univar Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except per share data)
 
Note  
 
2016

2015
 
2016

2015
Net sales
 
 
 
$
1,999.7


$
2,206.3

 
$
6,261.2


$
7,015.5

Cost of goods sold (exclusive of depreciation)
 
 
 
1,561.6


1,755.8

 
4,947.4


5,636.2

Gross profit
 
 
 
438.1

 
450.5

 
1,313.8

 
1,379.3

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Outbound freight and handling
 
 
 
76.2


81.4


220.8


247.4

Warehousing, selling and administrative
 
 
 
216.0


212.9


664.8


661.4

Other operating expenses, net
 
5
 
12.1


10.2


29.1


57.3

Depreciation
 
 
 
42.4


34.3


113.9


104.0

Amortization
 
 
 
22.5


22.0


67.8


66.3

Impairment charges
 
13
 
133.9


—


133.9


—

Total operating expenses
 
 
 
503.1

 
360.8

 
1,230.3

 
1,136.4

Operating (loss) income
 
 
 
(65.0
)
 
89.7

 
83.5

 
242.9

Other (expense) income:
 
 
 
 
 
 
 
 
 
 
Interest income
 
 
 
1.1


1.2


3.0


3.9

Interest expense
 
 
 
(40.6
)

(40.8
)

(123.5
)

(169.8
)
Loss on extinguishment of debt
 
 
 
—


(4.8
)

—


(12.1
)
Other expense, net
 
7
 
(3.1
)

(25.6
)

(10.8
)

(30.9
)
Total other expense
 
 
 
(42.6
)
 
(70.0
)
 
(131.3
)
 
(208.9
)
(Loss) income before income taxes
 
 
 
(107.6
)
 
19.7

 
(47.8
)
 
34.0

Income tax (benefit) expense
 
8
 
(44.6
)

7.6


(38.6
)

14.6

Net (loss) income
 
 
 
$
(63.0
)

$
12.1


$
(9.2
)

$
19.4

(Loss) income per common share:
 
 
 
 
 
 
 
 
 
 
Basic
 
9
 
$
(0.46
)

$
0.09


$
(0.07
)

$
0.17

Diluted
 
9
 
(0.46
)

0.09


(0.07
)

0.17

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
9
 
137.7


137.6


137.7


113.6

Diluted
 
9
 
137.7


138.4


137.7


114.2

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


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Univar Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
 
 
 
 
 
Three months ended
September 30,

Nine months ended
September 30,
(in millions)
 
Note  
 
2016

2015

2016

2015
Net (loss) income
 
 
 
$
(63.0
)

$
12.1


$
(9.2
)

$
19.4

Other comprehensive income (loss), net of tax:
 
 
 







Foreign currency translation
 
10
 
(20.3
)

(82.5
)

46.4


(178.8
)
Pension and other postretirement benefit adjustment
 
10
 
—


(1.8
)

(3.0
)

(5.5
)
Derivative financial instruments
 
10
 
—


—


—


3.7

Total other comprehensive (loss) income, net of tax
 
 
 
(20.3
)
 
(84.3
)
 
43.4

 
(180.6
)
Comprehensive (loss) income
 
 
 
$
(83.3
)
 
$
(72.2
)
 
$
34.2

 
$
(161.2
)


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

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Univar Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
(in millions, except per share data)
 
Note  
 
September 30,
2016

December 31,
2015
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
$
267.1

 
$
188.1

Trade accounts receivable, net
 
 
 
1,127.6

 
1,026.2

Inventories
 
 
 
753.6

 
803.4

Prepaid expenses and other current assets
 
 
 
152.3

 
178.6

Total current assets
 
 
 
2,300.6

 
2,196.3

Property, plant and equipment, net
 
12
 
1,030.6

 
1,082.5

Goodwill
 
 
 
1,795.9

 
1,745.1

Intangible assets, net
 
12
 
361.8

 
518.9

Deferred tax assets
 
 
 
28.1

 
3.5

Other assets
 
 
 
79.9

 
66.1

Total assets
 
 
 
$
5,596.9

 
$
5,612.4

Liabilities and stockholders’ equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Short-term financing
 
11
 
$
26.1

 
$
33.5

Trade accounts payable
 
 
 
890.3

 
836.0

Current portion of long-term debt
 
11
 
108.0

 
59.9

Accrued compensation
 
 
 
67.1

 
62.8

Other accrued expenses
 
 
 
244.5

 
301.3

Total current liabilities
 
 
 
1,336.0

 
1,293.5

Long-term debt
 
11
 
2,993.6

 
3,057.4

Pension and other postretirement benefit liabilities
 
 
 
246.5

 
251.8

Deferred tax liabilities
 
 
 
24.8

 
58.0

Other long-term liabilities
 
 
 
133.2

 
135.0

Commitment and contingencies
 
17
 
—

 
—

Stockholders’ equity:
 
 
 
 
 
 
Preferred stock, 200.0 million shares authorized at $0.01 par value with no shares issued or outstanding as of September 30, 2016 and December 31, 2015
 
 
 
—

 
—

Common stock, 2.0 billion shares authorized at $0.01 par value with 138.1 million and 138.0 million shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
 
 
 
1.4

 
1.4

Additional paid-in capital
 
 
 
2,236.6

 
2,224.7

Accumulated deficit
 
 
 
(994.2
)
 
(985.0
)
Accumulated other comprehensive loss
 
10
 
(381.0
)
 
(424.4
)
Total stockholders’ equity
 
 
 
862.8

 
816.7

Total liabilities and stockholders’ equity
 
 
 
$
5,596.9

 
$
5,612.4


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


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Univar Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
 
Nine months ended September 30,
(in millions)
 
Note   
 
2016
 
2015
Operating activities:
 
 
 
 
 
 
Net (loss) income
 
 
 
$
(9.2
)
 
$
19.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
 
 
181.7

 
170.3

Impairment charges
 
13
 
133.9

 
—

Amortization of deferred financing fees and debt discount
 
 
 
6.0

 
10.2

Amortization of pension credit from accumulated other comprehensive loss
 
10
 
(4.5
)
 
(9.0
)
Loss on extinguishment of debt
 
 
 
—

 
12.1

Deferred income taxes
 
 
 
(57.2
)
 
(7.0
)
Stock-based compensation expense
 
5
 
7.1

 
5.5

Other
 
 
 
(1.0
)
 
(1.1
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
Trade accounts receivable, net
 
 
 
(83.2
)
 
(22.0
)
Inventories
 
 
 
60.2

 
35.9

Prepaid expenses and other current assets
 
 
 
30.2

 
1.2

Trade accounts payable
 
 
 
40.8

 
35.8

Pensions and other postretirement benefit liabilities
 
 
 
(30.8
)
 
(50.3
)
Other, net
 
 
 
(49.8
)
 
(9.8
)
Net cash provided by operating activities
 
 
 
224.2

 
191.2

Investing activities:
 
 
 
 
 
 
Purchases of property, plant and equipment
 
 
 
(65.9
)
 
(103.3
)
Purchases of businesses, net of cash acquired
 
16
 
(54.8
)
 
(50.6
)
Proceeds from sale of property, plant and equipment
 
 
 
4.1

 
6.3

Other
 
 
 
(1.6
)
 
(5.5
)
Net cash used by investing activities
 
 
 
(118.2
)
 
(153.1
)
Financing activities:
 
 
 
 
 
 
Proceeds from sale of common stock
 
 
 
—

 
765.3

Proceeds from issuance of long-term debt
 
11
 
(14.0
)
 
2,806.6

Payments on long-term debt and capital lease obligations
 
11
 
(26.6
)
 
(3,537.9
)
Short-term financing, net
 
11
 
(11.0
)
 
(15.9
)
Financing fees paid
 
 
 
—

 
(28.7
)
Other
 
 
 
5.0

 
(3.6
)
Net cash used by financing activities
 
 
 
(46.6
)
 
(14.2
)
Effect of exchange rate changes on cash and cash equivalents
 
 
 
19.6

 
(42.5
)
Net increase (decrease) in cash and cash equivalents
 
 
 
79.0

 
(18.6
)
Cash and cash equivalents at beginning of period
 
 
 
188.1

 
206.0

Cash and cash equivalents at end of period
 
 
 
$
267.1

 
$
187.4

Supplemental disclosure of cash flow information
 
 
 
 
 
 
Non-cash activities:
 
 
 
 
 
 
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses
 
 
 
$
2.7

 
$
9.2

Additions of property, plant and equipment under a capital lease obligation
 
 
 
18.5

 
42.6

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

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Table of Contents

Univar Inc.
Notes to Condensed Consolidated Financial Statements
As of September 30, 2016 and
For the Three and Nine Month Periods Ended September 30, 2016 and 2015
(Unaudited)

1.
Nature of operations
Headquartered in Downers Grove, Illinois, Univar Inc. (“the Company” or “Univar”) is a leading global distributor of commodity and specialty chemicals. The Company’s operations are structured into four operating segments that represent the geographic areas under which the Company manages its business:
•
Univar USA (“USA”)
•
Univar Canada (“Canada”)
•
Univar Europe, the Middle East and Africa (“EMEA”)
•
Rest of World (“Rest of World”)
Rest of World includes certain developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.

2.
Basis of presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) as applicable to interim financial reporting. Unless otherwise indicated, all financial data presented in these condensed consolidated financial statements are expressed in US dollars. These condensed consolidated financial statements, in the Company’s opinion, include all adjustments, consisting of normal recurring accruals necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, comprehensive loss, cash flows and changes in stockholders’ equity. The results of operations for the periods presented are not necessarily indicative of the operating results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are consolidated if the Company has a controlling financial interest, which may exist based on ownership of a majority of the voting interest, or based on the Company’s determination that it is the primary beneficiary of a variable interest entity (“VIE”) or if otherwise required by US GAAP. The Company did not have any material interests in variable interest entities during the periods presented in these condensed consolidated financial statements. All intercompany balances and transactions are eliminated in consolidation.
The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ materially from these estimates.
 
3.
Recent accounting pronouncements
Accounting pronouncements issued and adopted
In August 2014, the FASB issued ASU 2014-15 “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The core principle of the guidance is that an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events that will alleviate the substantial doubt are adequately disclosed in the footnotes to the financial statements. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted and the Company has elected to adopt the ASU as of January 1, 2016. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02 “Amendments to the Consolidation Analysis” (Topic 810). The core principle of the guidance is to provide amendments to the current consolidation guidance. The revised consolidation guidance, among other things, modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. This guidance

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is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company has elected to adopt the ASU as of January 1, 2016 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In April 2015, the FASB issued ASU 2015-04 “Compensation-Retirement Benefits (Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets)” (Topic 715). The core principle of the guidance is that it provides a practical expedient for companies to measure interim remeasurements for significant events that occur on other than a month-end date. The guidance permits entities to remeasure defined benefit plan assets and obligations using the month-end date that is closest to the date of the significant event. The decision to apply the practical expedient to interim remeasurements for significant events can be made for each significant event. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company has elected to adopt the ASU as of January 1, 2016 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In April 2015, the FASB issued ASU 2015-05 “Intangibles-Goodwill and Other-Internal-use software (Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (Subtopic 350-40). The ASU provides customers with guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company has elected to adopt the ASU as of January 1, 2016 and the ASU is applied prospectively to all arrangements entered that occur after the effective date. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11 "Simplifying the Measurement of Inventory" (Topic 330). The core principle of the guidance is that an entity should measure inventory at the "lower of cost and net realizable value" and options that currently exist for "market value" will be eliminated. The ASU defines net realizable value as the "estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation." This guidance is effective for the fiscal years beginning after December 15, 2016, including interim periods within those financial years. Early adoption is permitted and the Company has elected to adopt the ASU as of June 30, 2016. The ASU is applied prospectively and the adoption of the ASU did not have a significant impact on the Company's consolidated financial statements.
Accounting pronouncements issued and not yet adopted
In March 2016, the FASB issued ASU 2016-09 “Compensation – Stock Compensation” (Topic 718) – “Improvement to Employee Share-Based Payment Accounting.” The core principal of the guidance is to simplify several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within such fiscal years. Early adoption is permitted. The guidance is to be applied using a modified retrospective method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company does not expect a significant impact to its consolidated financial statements when it adopts this ASU.
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments - Credit Losses" (Topic 326) - "Measurement of Credit Losses on Financial Instruments." The ASU requires entities to use a Current Expected Credit Loss model which is a new impairment model based on expected losses rather than incurred losses. Under the model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity's estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon initial recognition of the related assets. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within such fiscal years. The Company is currently evaluating the impact of the adoption of this ASU on its internal processes, operating results and financial reporting. The impact is currently not known or reasonably estimable.
In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows” (Topic 230) - “Classification of Certain Cash Receipts and Cash Payments.” The ASU clarifies and provides specific guidance on eight cash flow classification issues that are not currently addressed by current guidance; and therefore, reduces the current diversity in practice. The standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within such fiscal years. Early adoption is permitted. The guidance is to be applied using a retrospective transition method to each period presented. The Company does not expect any impact to its consolidated statement of operations or consolidated balance sheet since the ASU only addresses classification items within the statement of cash flows.
In October 2016, the FASB issued ASU 2016-16 "Income Taxes" (Topic 740) - "Intra-Entity Transfers of Assets Other Than Inventory." The ASU eliminates the exception that prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party for assets other than inventory. The standard will be effective

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for fiscal years beginning after December 15, 2017, including interim periods within such fiscal years. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not yet been issued. The Company does not expect a significant impact to its consolidated financial statements when it adopts this ASU.
 
4.
Employee benefit plans
The following table summarizes the components of net periodic benefit recognized in the condensed consolidated statements of operations:
 
 

Domestic - Defined Benefit Pension Plans
 

Three months ended
September 30,

Nine months ended
September 30,
(in millions)

2016

2015

2016

2015
Interest cost

$
8.0


$
7.7


$
24.0


$
23.1

Expected return on plan assets

(8.2
)

(9.0
)

(24.4
)

(26.9
)
Net periodic benefit

$
(0.2
)

$
(1.3
)

$
(0.4
)

$
(3.8
)


 
 
Foreign - Defined Benefit Pension Plans
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2016
 
2015
 
2016
 
2015
Service cost
 
$
0.6

 
$
0.6

 
$
1.9

 
$
4.7

Interest cost
 
4.6

 
5.1

 
14.0

 
15.3

Expected return on plan assets
 
(7.1
)
 
(7.8
)
 
(22.0
)
 
(23.1
)
Net periodic benefit
 
$
(1.9
)
 
$
(2.1
)
 
$
(6.1
)
 
$
(3.1
)

 
 
Other Postretirement Benefits    
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2016
 
2015
 
2016
 
2015
Service cost
 
$
—

 
$
—

 
$
—

 
$
0.1

Interest cost
 
—

 
0.1

 
0.2

 
0.2

Prior service credits
 
—

 
(3.0
)
 
(4.5
)
 
(9.0
)
Net periodic benefit
 
$
—

 
$
(2.9
)
 
$
(4.3
)
 
$
(8.7
)

5.
Other operating expenses, net
Other operating expenses, net consisted of the following activity:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
2016
 
2015
 
2016
 
2015
Acquisition and integration related expenses
 
$
1.2

 
$
2.4

 
$
5.5

 
$
3.8

Stock-based compensation expense
 
3.6

 
2.1

 
7.1

 
5.5

Restructuring charges
 
1.8

 
4.4

 
8.3

 
20.6

Advisory fees paid to CVC and CD&R(1)
 
—

 
—

 
—

 
2.6

Other (2)
 
5.5

 
1.3

 
8.2

 
24.8

Total other operating expenses, net
 
$
12.1

 
$
10.2

 
$
29.1

 
$
57.3

 
(1)
Significant stockholders CVC Capital Partners (“CVC”) and Clayton, Dubilier & Rice, LLC (“CD&R”).
(2)
In the three and nine months ended September 30, 2015, other is inclusive of a contract termination fee of $26.2 million related to the conclusion of consulting agreements between the Company and CVC and CD&R related to the initial public offering.


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6.
Restructuring charges
Restructuring charges relate to the implementation of several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. These actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. The following table presents cost information related to restructuring plans that have not been completed as of September 30, 2016 and does not contain any estimates for plans that may be developed and implemented in future periods.
(in millions)
 
USA
 
Canada
 
EMEA
 
ROW
 
Other
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Anticipated total costs
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
17.0

 
$
4.9

 
$
24.4

 
$
3.4

 
$
5.8

 
$
55.5

Facility exit costs
 
24.2

 
—

 
3.3

 
0.2

 
—

 
27.7

Other exit costs
 
1.7

 
—

 
6.7

 
0.7

 
0.8

 
9.9

Total
 
$
42.9

 
$
4.9

 
$
34.4

 
$
4.3

 
$
6.6

 
$
93.1

 
 
 
 
 
 
 
 
 
 
 
 
 
Incurred to date costs
 
 
 
 
 
 
 
 
 
 
 
 
Inception of plans through September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
17.0

 
$
4.9

 
$
24.4

 
$
3.4

 
$
5.8

 
$
55.5

Facility exit costs
 
19.3

 
—

 
3.3

 
0.2

 
—

 
22.8

Other exit costs
 
1.7

 
—

 
6.7

 
0.7

 
0.8

 
9.9

Total
 
$
38.0

 
$
4.9

 
$
34.4

 
$
4.3

 
$
6.6

 
$
88.2

 
 
 
 
 
 
 
 
 
 
 
 
 
Inception of plans through December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
Employee termination costs
 
$
16.4

 
$
4.1

 
$
25.6

 
$
2.0

 
$
5.3

 
$
53.4

Facility exit costs
 
14.0

 
—

 
3.1

 
0.2

 
—

 
17.3

Other exit costs
 
1.7

 
—

 
6.7

 
—

 
0.8

 
9.2

Total
 
$
32.1

 
$
4.1

 
$
35.4

 
$
2.2

 
$
6.1

 
$
79.9

The following table summarizes activity related to accrued liabilities associated with redundancy and restructuring:
(in millions)
 
January 1, 2016
 
Charge to  
earnings
 
Cash    
paid
 
Non-cash    
and other
 
September 30, 2016
Employee termination costs
 
$
31.0

 
$
2.1

 
$
(17.1
)
 
$
0.7

 
$
16.7

Facility exit costs
 
15.5

 
5.5

 
(6.5
)
 
—

 
14.5

Other exit costs
 
0.1

 
0.7

 
(0.8
)
 
—

 
—

Total
 
$
46.6

 
$
8.3

 
$
(24.4
)
 
$
0.7

 
$
31.2


(in millions)
 
January 1, 2015
 
Charge to  
earnings
 
Cash    
paid
 
Non-cash    
and other
 
December 31, 2015
Employee termination costs
 
$
27.8

 
$
28.3

 
$
(22.9
)
 
$
(2.2
)
 
$
31.0

Facility exit costs
 
20.4

 
2.4

 
(7.2
)
 
(0.1
)
 
15.5

Other exit costs
 
0.3

 
3.0

 
(3.2
)
 
—

 
0.1

Total
 
$
48.5

 
$
33.7

 
$
(33.3
)
 
$
(2.3
)
 
$
46.6


Restructuring liabilities of $18.8 million and $34.5 million were classified as current in other accrued expenses in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, respectively. The long-term portion of restructuring liabilities of $12.4 million and $12.1 million were recorded in other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, respectively, and primarily consists of facility exit costs that are expected to be paid within the next eight years.
While the Company believes the recorded restructuring liabilities are adequate, revisions to current estimates may be recorded in future periods based on new information as it becomes available.

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7.
Other expense, net
Other expense, net consisted of the following gains (losses):
 
Three months ended September 30,

Nine months ended September 30,
(in millions)
2016

2015

2016

2015
Foreign currency transactions
$
(0.3
)

$
(2.8
)

$
(2.7
)

$
(1.0
)
Foreign currency denominated loans revaluation
(4.4
)

(5.2
)

(13.7
)

1.8

Undesignated foreign currency derivative instruments (1)
(0.2
)

0.1


0.8


(4.0
)
  Undesignated interest rate swap contracts (1)
2.0


(0.2
)

4.2


(0.2
)
Ineffective portion of cash flow hedges (1)
—


—


—


(0.4
)
Loss due to discontinuance of cash flow hedges (1)
—


—


—


(7.5
)
Debt refinancing costs
—


(16.5
)

—


(16.5
)
Other
(0.2
)

(1.0
)

0.6


(3.1
)
Total other expense, net
$
(3.1
)
 
$
(25.6
)
 
$
(10.8
)
 
$
(30.9
)
 
(1)
Refer to “Note 14: Derivatives” for more information.

8.
Income taxes
The Company’s tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, an estimate of the annual effective 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 tax rate, a cumulative adjustment is made. The quarterly tax provision and forecast estimate of the annual effective tax rate may be subject to volatility due to several factors, including the complexity in forecasting jurisdictional earnings before tax, the rate of realization of forecasting earnings or losses by quarter, acquisitions, divestitures, foreign currency gains and losses, pension gains and losses, etc.
The income tax benefit for the three and nine months ended September 30, 2016 was $44.6 million and $38.6 million, resulting in an effective tax rate of 41.4% and 80.8%, respectively. The Company’s effective tax rate for the three months ended September 30, 2016 was higher than the US federal statutory rate of 35.0% primarily due to the mix of earnings in multiple jurisdictions, non-taxable interest income and the release of a valuation allowance on certain foreign tax attributes. The Company’s effective tax rate for the nine months ended September 30, 2016 was higher than the US federal statutory rate primarily due to the mix of earnings in multiple jurisdictions, non-taxable interest income and the release of a valuation allowance on certain foreign tax attributes.
The income tax expense for the three and nine months ended September 30, 2015 was $7.6 million and $14.6 million, resulting in an effective tax rate of 38.6% and 42.9%, respectively. The Company’s effective tax rate for three months ended September 30, 2015 was higher than the US federal statutory rate primarily due to the rate of realization of actual to forecasted earnings and losses, the interim accounting treatment of year to date losses incurred in foreign jurisdictions for which a tax benefit may not be recognized, and the mix of earnings in multiple jurisdictions. The Company’s effective tax rate for the nine months ended September 30, 2015 was higher than the US federal statutory rate primarily due to the rate of realization of actual to forecasted earnings and losses and losses incurred in certain foreign jurisdictions for which tax benefit may not be recognized offset by the mix of earnings in multiple jurisdictions and non-taxable interest income.
The Company believes it likely triggered an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, during the three months ended September, 2016. The ownership change will subject the Company's U.S. net operating loss carryforwards to an annual limitation, which may limit the ability to use them to offset taxable income in periods following the ownership change. The Company's analysis of the impact of the change in ownership is in process, however the Company does not currently believe the impact of the limitation is material to the consolidated financial statements.
Canadian General Anti-Avoidance Rule matters
In 2007, the outstanding shares of Univar N.V., the ultimate public company parent of the Univar group at that time, were acquired by investment funds advised by CVC. To facilitate the acquisition and leveraged financing of Univar N.V. by CVC, a restructuring of some of the companies in the Univar group, including its Canadian operating company, was completed (the “Restructuring”). In February 2013, the Canada Revenue Agency (“CRA”) issued a Notice of Assessment, asserting the General Anti-Avoidance Rule (“GAAR”) against the Company’s subsidiary Univar Holdco Canada ULC (“Univar Holdco”) for withholding tax of $29.4 million (Canadian), relating to this Restructuring. Univar Holdco appealed the assessment, and the matter was litigated

9
Table of Contents

in the Tax Court of Canada in June 2015. On June 22, 2016, the Tax Court of Canada issued its judgment in favor of the CRA. The Company strongly disagrees with the decision of the Tax Court of Canada and filed its appeal to the Canadian Court of Appeal on June 30, 2016.  The Company filed its Memorandum of Fact and Law with the Canadian Court of Appeal on October 6, 2016. A $44.7 million (Canadian) Letter of Credit, covering the initial assessment of $29.4 million (Canadian) and interest of $15.3 million (Canadian), has been issued with respect to this assessment.
In September 2014, also relating to the Restructuring, the CRA issued the 2008 and 2009 Notice of Reassessments for federal corporate income tax liabilities of $11.9 million (Canadian) and $11.0 million (Canadian), respectively, and a departure tax liability of $9.0 million (Canadian). Likewise, in April 2015, the Company’s subsidiary received the 2008 and 2009 Alberta Notice of Reassessments of $6.0 million (Canadian) and $5.8 million (Canadian), respectively. These Reassessments reflect the additional tax liability and interest relating to those tax years should the CRA be successful in its assertion of the GAAR relating to the Restructuring described above. In September 2016, the CRA notified the Company that it agreed to accept security on the above reassessed federal amounts in the form of a Letter of Credit and subsequently the Company requested that it refrain from further collection efforts related to this assessment until the outcome of the appeal of the GAAR matter is concluded.
At September 30, 2016, the total Canadian federal and provincial tax liability assessed related to these matters, inclusive of interest of $37.4 million (Canadian), is $110.5 million (Canadian).   The Company has not recorded any liabilities for these matters in its financial statements, as it believes it is more likely than not that the ruling will be reversed on appeal and the Company’s position will be sustained.

9.
Earnings per share
The following table presents the basic and diluted earnings per share computations:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions, except per share data)
 
2016
 
2015
 
2016
 
2015
Basic:
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(63.0
)
 
$
12.1

 
$
(9.2
)
 
$
19.4

Weighted average common shares outstanding
 
137.7

 
137.6

 
137.7

 
113.6

Basic (loss) income per common share
 
$
(0.46
)
 
$
0.09

 
$
(0.07
)
 
$
0.17

Diluted:
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(63.0
)
 
$
12.1

 
$
(9.2
)
 
$
19.4

Weighted average common shares outstanding
 
137.7

 
137.6

 
137.7

 
113.6

Effect of dilutive securities: Stock compensation plans (1)
 
—

 
0.8

 
—

 
0.6

Weighted average common shares outstanding – diluted
 
137.7

 
138.4

 
137.7

 
114.2

Diluted (loss) income per common share
 
$
(0.46
)
 
$
0.09

 
$
(0.07
)
 
$
0.17

 
  
(1)
Stock options to purchase 3.2 million and 1.7 million shares of common stock and restricted stock of 0.0 million and 0.1 million were outstanding during the three months ended September 30, 2016 and 2015, respectively, but were not included in the calculation of diluted income per share as the impact of these stock options would have been anti-dilutive. Stock options to purchase 4.0 million and 1.7 million shares of common stock and restricted stock of 0.0 million and 0.0 million were outstanding during the nine months ended September 30, 2016 and 2015, respectively, but were not included in the calculation of diluted income per share as the impact of these stock options would have been anti-dilutive.


10
Table of Contents

10.
Accumulated other comprehensive loss
The following tables present the changes in accumulated other comprehensive loss by component, net of tax:
(in millions)
 
Cash flow
hedges
 
Defined
benefit
pension items
 
Currency
translation
items
 
Total
Balance as of December 31, 2015
 
$
—

 
$
3.0

 
$
(427.4
)
 
$
(424.4
)
Other comprehensive income before reclassifications
 
—

 
—

 
46.4

 
46.4

Amounts reclassified from accumulated other comprehensive loss
 
—

 
(3.0
)
 
—

 
(3.0
)
Net current period other comprehensive income (loss)
 
—

 
(3.0
)
 
46.4

 
43.4

Balance as of September 30, 2016
 
$
—

 
$
—

 
$
(381.0
)
 
$
(381.0
)
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
 
$
(3.7
)
 
$
10.3

 
$
(214.8
)
 
$
(208.2
)
Other comprehensive loss before reclassifications
 
(3.0
)
 
—

 
(178.8
)
 
(181.8
)
Amounts reclassified from accumulated other comprehensive loss
 
6.7

 
(5.5
)
 
—

 
1.2

Net current period other comprehensive losses
 
3.7

 
(5.5
)
 
(178.8
)
 
(180.6
)
Balance as of September 30, 2015
 
$
—

 
$
4.8

 
$
(393.6
)
 
$
(388.8
)

The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net income:
(in millions)
 
Three months ended September 30, 2016 (1)
 
Three months ended September 30, 2015 (1)
 
Location of impact on
  statement of operations  
Amortization of defined benefit pension items:
 
 
 
 
 
 
Prior service credits
 
$
—

 
$
(3.0
)
 
Warehousing, selling and administrative
Tax expense
 
—

 
1.2

 
Income tax (benefit) expense
Net of tax
 
—

 
(1.8
)
 
 
Total reclassifications for the period
 
$
—

 
$
(1.8
)
 
 

(in millions)
 
Nine months ended September 30, 2016 (1)
 
Nine months ended September 30, 2015 (1)
 
Location of impact on
  statement of operations  
Amortization of defined benefit pension items:
 
 
 
 
 
 
Prior service credits
 
$
(4.5
)
 
$
(9.0
)
 
Warehousing, selling and administrative
Tax expense
 
1.5

 
3.5

 
Income tax (benefit) expense
Net of tax
 
(3.0
)
 
(5.5
)
 
 
Cash flow hedges:
 
 
 
 
 
 
Interest rate swap contracts
 
—

 
3.1

 
Interest expense
Interest rate swap contracts - loss on due to discontinuance of hedge accounting
 
—

 
7.5

 
Other expense, net
Tax benefit
 
—

 
(3.9
)
 
Income tax (benefit) expense
Net of tax
 
—

 
6.7

 
 
Total reclassifications for the period
 
$
(3.0
)
 
$
1.2

 
 
 
 
(1)
Amounts in parentheses indicate credits to net income in the consolidated statement of operations.
Refer to “Note 4: Employee benefit plans” for additional information regarding the amortization of defined benefit pension items and “Note 15: Derivatives” for cash flow hedging activity.
Foreign currency gains and losses relating to intercompany borrowings that are considered a part of the Company’s investment in a foreign subsidiary are reflected in accumulated other comprehensive loss. Total foreign currency (losses) gains related to such intercompany borrowings were $(4.4) million and $7.8 million for the three month periods ended September 30, 2016 and 2015, respectively. Total foreign currency losses related to such intercompany borrowing were $24.4 million and $6.4 million for the nine months periods ended September 30, 2016 and 2015, respectively.

11
Table of Contents


11.
Debt
Short-term financing
Short-term financing consisted of the following:
(in millions)
 
September 30, 2016
 
December 31, 2015
Amounts drawn under credit facilities
 
$
11.1

 
$
13.4

Bank overdrafts
 
15.0

 
20.1

Total short-term financing
 
$
26.1

 
$
33.5

The weighted average interest rate on short-term financing was 2.2% and 2.4% as of September 30, 2016 and December 31, 2015, respectively.
As of September 30, 2016 and December 31, 2015, the Company had $178.1 million and $172.4 million in outstanding letters of credit and guarantees, respectively.
Long-term debt
Long-term debt consisted of the following:
(in millions)
 
September 30, 2016

December 31, 2015
Senior Term Loan Facilities:




Term B Loan Due 2022, variable interest rate of 4.25% at September 30, 2016 and December 31, 2015

$
2,029.5


$
2,044.9

Euro Tranche Term Loan Due 2022, variable interest rate of 4.25% at September 30, 2016 and December 31, 2015

278.2


270.8

Asset Backed Loan (ABL) Facilities:




North American ABL Facility Due 2020, variable interest rate of 2.27% and 2.13% at September 30, 2016 and December 31, 2015, respectively

264.0


278.0

North American ABL Term Loan Due 2018, variable interest rate of 3.59% and 3.36% at September 30, 2016 and December 31, 2015, respectively

100.0


100.0

Unsecured Notes:




Unsecured Notes due 2023, fixed interest rate of 6.75% at September 30, 2016 and December 31, 2015

399.5


400.0

Capital lease obligations

60.2


57.3

Total long-term debt before discount

3,131.4


3,151.0

Less: unamortized debt issuance costs and discount on debt

(29.8
)

(33.7
)
Total long-term debt

3,101.6


3,117.3

Less: current maturities

(108.0
)

(59.9
)
Total long-term debt, excluding current maturities

$
2,993.6


$
3,057.4

 

12
Table of Contents

12.
Supplemental balance sheet information
Property, plant and equipment, net
(in millions)
 
September 30, 2016
 
December 31, 2015
Property, plant and equipment, at cost
 
$
1,846.0

 
$
1,806.0

Less: accumulated depreciation
 
(815.4
)
 
(723.5
)
Property, plant and equipment, net
 
$
1,030.6

 
$
1,082.5

 
As of September 30, 2016, property, plant and equipment amounts are net of impairment losses of $16.5 million. Refer to "Note 13: Impairment charges" for further information.
Capital lease assets, net
Included within property, plant and equipment, net are assets related to capital leases where the Company is the lessee. The below table summarizes the cost and accumulated depreciation related to these assets:
(in millions)
 
September 30, 2016
 
December 31, 2015
Capital lease assets, at cost
 
$
68.9

 
$
63.5

Less: accumulated depreciation
 
(11.5
)
 
(7.5
)
Capital lease assets, net
 
$
57.4

 
$
56.0

Intangible assets, net
The gross carrying amounts and accumulated amortization of the Company’s intangible assets were as follows:
 
 
September 30, 2016
 
December 31, 2015
(in millions)
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships(1)
 
$
835.6

 
$
(506.7
)
 
$
328.9

 
$
930.1

 
$
(446.6
)
 
$
483.5

Other(2)
 
180.7

 
(147.8
)
 
32.9

 
170.5

 
(135.1
)
 
35.4

Total intangible assets
 
$
1,016.3

 
$
(654.5
)
 
$
361.8

 
$
1,100.6

 
$
(581.7
)
 
$
518.9

 
(1)
Net of impairment losses of $110.2 million recorded during nine months ended September 30, 2016. Refer to "Note 13: Impairment charges" for further information.
(2)
Net of impairment losses of $3.5 million recorded during nine months ended September 30, 2016. Refer to "Note 13: Impairment charges" for further information.
Other intangible assets consist of intellectual property trademarks, trade names, supplier relationships, non-compete agreements and exclusive distribution rights.
 
13.
Impairment charges
During the quarter ended September 30, 2016, the Company revised its business operating plan for servicing upstream oil and gas customers in its USA operating segment. In light of the current prolonged drop in oil prices, and consequential decrease in demand for certain products including high-value specialized blended products used in hydraulic fracking operations, the Company has narrowed its product line and service offering by curtailing certain highly specialized products and services that were being produced and sold to oil and gas customers. As a result, the Company has ceased operations at three production facilities. The Company determined that these decisions have resulted in a triggering event with respect to long lived assets in an asset group, resulting in the assessment of recoverability of these long lived assets. The Company performed step one of the impairment test and determined the carrying amount of the asset group exceeded the sum of the expected undiscounted future cash flows. Thus, the Company proceeded to step two of the impairment test where it was required to determine the fair value of the asset group and recognize an impairment loss if the carrying value exceeded the fair value. As a result of the impairment test, the Company recorded a non-cash, pretax long-lived asset impairment charge of $113.7 million related to intangible assets and $16.5 million related to property, plant and equipment within its condensed consolidated statements of operations. The Company also recorded a non-cash, pre-tax long-lived asset impairment charge of $0.3 million related to assets held-for-sale.

13
Table of Contents

The fair value of the asset group was determined using an income approach, which was comprised of multiple significant unobservable inputs including: (1) the estimate of future cash flows; (2) the amount of capital expenditures required to maintain the existing cash flows; and (3) a terminal period growth rate equal to the expected rate of inflation. Accordingly, estimated fair value of the asset group is considered to be a Level 3 measurement in the fair value hierarchy.
In addition to the charges discussed above, the Company also impaired $3.4 million of inventory deemed to be unsaleable in connection with the facility closures.

14.
Fair value measurements
Items measured at fair value on a recurring basis
The following table presents the Company’s assets and liabilities measured on a recurring basis on a gross basis:
 
 
Level 2
 
Level 3
(in millions)
 
September 30, 2016
 
December 31, 2015
 
September 30, 2016
 
December 31, 2015
Current assets:
 
 
 
 
 
 
 
 
Forward currency contracts
 
$
0.3

 
$
0.2

 
$
—

 
$
—

Current liabilities:
 
 
 
 
 
 
 
 
Forward currency contracts
 
0.1

 
0.2

 
—

 
—

Interest rate swap contracts
 
1.7

 
5.3

 
—

 
—

Contingent consideration
 
—

 
—

 
1.8

 
—

Noncurrent liabilities:
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
—

 
0.5

 
—

 
—

Contingent consideration
 
—

 
—

 
5.8

 
8.7

The net amounts relating to forward currency contracts included in prepaid and other current assets were $0.3 million and $0.2 million and included in other accrued expenses were $0.1 million and $0.2 million as of September 30, 2016 and December 31, 2015, respectively.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swaps is determined by estimating the net present value of amounts to be paid under the agreement offset by the net present value of the expected cash inflows based on market rates and associated yield curves. Based on these valuation methodologies, these derivative contracts are classified as level 2 in the fair value hierarchy.
The fair value of the contingent consideration is based on a real options approach, which took into account management’s best estimate of the acquiree’s performance, as well as achievement risk. Based on the valuation methodology, contingent consideration is classified as level 3 in the fair value hierarchy.
The following table is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3), which consists of contingent consideration related to prior acquisitions.
(in millions)
 
Contingent
  consideration  
Fair value as of December 31, 2015
 
$
8.7

Fair value adjustments
 
(1.1
)
Foreign currency
 
—

Fair value as of September 30, 2016
 
$
7.6

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, 2016
 
December 31, 2015
(in millions)
 
Carrying    
Amount
 
Fair
Value    
 
Carrying    
Amount
 
Fair
Value    
Financial liabilities:
 
 
 
 
 
 
 
 
Long-term debt including current portion (Level 2)
 
$
3,101.6

 
$
3,153.7

 
$
3,117.3

 
$
3,056.5


14
Table of Contents

The fair values of the long-term debt, including the current portions, were based on current market quotes for similar borrowings and credit risk adjusted for liquidity, margins and amortization, as necessary.
Fair value of other financial instruments
The carrying value of cash and cash equivalents, trade accounts receivable, net, trade accounts payable and short-term financing included in the condensed consolidated balance sheets approximate fair value due to their short-term nature.

15.
Derivatives
Interest rate swaps
At September 30, 2016 and December 31, 2015, the Company had interest rate swap contracts in place with a total notional amount of $1.0 billion and $2.0 billion, respectively, whereby a fixed rate of interest (weighted average of 1.64%) is paid and a variable rate of interest (greater of 1.25% or three-month LIBOR) is received on the notional amount. The decrease in notional amount is due to certain swaps maturing during the second quarter of 2016.
The objective of the interest rate swap contracts is to offset the variability of cash flows in LIBOR indexed debt interest payments, subject to a 1.00% floor, attributable to changes in the aforementioned benchmark interest rate related to the Term B Loan due 2022.
The fair value of interest rate swaps is recorded either in prepaids and other current assets, other assets, other accrued expenses or other long-term liabilities in the condensed consolidated balance sheets. As of September 30, 2016 and December 31, 2015, the current liability of $1.7 million and $5.3 million was included in other accrued expenses, respectively. As of September 30, 2016 and December 31, 2015, the noncurrent liability of $0.0 million and $0.5 million was included in other long-term liabilities, respectively.
Interest rate caps
At September 30, 2016, the Company had interest rate caps with a notional amount of $800 million, to the extent the quarterly LIBOR exceeded 1.00%; the Company would receive payment based on the notional amount and the spread of three month LIBOR above the strike price of 1.00%. The Company does not apply hedge accounting for the interest rate caps, which expire on June 30, 2017.
As of September 30, 2016, upfront premium paid for these interest rate caps of $0.2 million are recorded in prepaids and other current assets within the condensed consolidated balance sheets. The interest rate cap premiums will be amortized through interest expense over the life of the contracts within the condensed consolidated statements of operations.
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 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 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 7: Other (expense) income, net” for more information. The total notional amount of undesignated forward currency contracts were $106.6 million and $107.5 million as of September 30, 2016 and December 31, 2015, respectively.
Cash flows associated with derivative financial instruments are recognized in the operating section of the consolidated statement of cash flows.

16.
Business combinations
Acquisition of Bodine Services
On March 2, 2016, the Company completed an acquisition of 100% of the equity interest in Bodine Services of Decatur, Inc.; Bodine Environmental Services, Inc.; and affiliated entities, operating as Bodine Services of the Midwest (“Bodine”), a regional provider of environmental and facilities maintenance services. This acquisition expands the Company’s footprint with additional service centers in key geographic markets since Bodine has expertise that is critical to helping customers effectively manage compliance with their operations by preventing waste and environmental concerns.

15
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Acquisition of Nexus Ag
On March 22, 2016, the Company completed a definitive asset purchase agreement with Nexus Ag Business Inc. (“Nexus Ag”), a wholesale fertilizer distributor to the Western Canada agriculture market that offers a broad range of products, including micronutrients, specialty fertilizers, potash, phosphates, and liquid and soluble nutrients from leading North American producers.
The preliminary purchase price of these acquisitions was $53.3 million. The preliminary purchase price allocation includes goodwill of $23.2 million and intangibles $19.4 million. The operating results subsequent to the acquisition dates did not have a significant impact on the consolidated financial statement of the Company. The initial accounting for these acquisitions has only been preliminary determined subject to final working capital adjustments and valuations of intangible assets and property, plant and equipment.
The purchase price allocation for the Key Chemical, Inc., Chemical Associates, Inc., Arrow Chemical, Inc., and Polymer Technologies Ltd. 2015 acquisitions are now final. Purchase price adjustments on prior acquisitions resulted in additional cash payments of $1.5 million during the nine months ended September 30, 2016.
 
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 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 claims or litigation or the potential for future claims or litigation.
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 USA Inc.’s 1986 purchase of McKesson Chemical Company from McKesson Corporation (“McKesson”). Univar USA is also a defendant in a small number of asbestos claims. As of September 30, 2016, there were fewer than 275 asbestos-related claims for which the Company has liability for defense and indemnity pursuant to the indemnification obligation. The volume of such cases has increased in recent quarters. Historically, the vast majority of the claims against both McKesson and Univar USA have been dismissed without payment. The Company does incur costs in defending these claims. While the Company is unable to predict 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.
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”) at approximately 131 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, while the Company, with appropriate state or federal agency oversight and approval, is conducting the environmental remediation work at other sites 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 103 current or formerly Company-owned/occupied sites. In addition, the Company may be liable for a share of the clean-up of approximately 28 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. 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 existing activities are changed. Project lives, and therefore cash flows, range from 2 to 30 years, depending on the specific site and type of remediation project.

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On December 9, 2014, the Company was issued a violation notice from the Pollution Control Services Department of Harris County, Texas (“PCS”). The notice relates to claims that the Company’s facility on Luthe Road in Houston, Texas operated with inadequate air emissions controls and improperly discharged certain waste without authorization. On March 6, 2015, PCS notified the Company that the matter was forwarded to the Harris County District Attorney’s Office with a request for an enforcement action. No such action has commenced.
As of September 30, 2016, the Company has not recorded a liability related to the PCS investigation described above as any potential loss is neither probable nor estimable at this stage of the investigation.
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 flows in a particular period. This additional loss or range of losses cannot be recorded at this time, as it is not reasonably estimable.
Changes in total environmental liabilities are as follows:
 
 
Nine months ended September 30,
(in millions)
 
2016
 
2015
Environmental liabilities at beginning of period
 
$
113.2

 
$
120.3

Revised obligation estimates
 
9.2

 
6.2

Environmental payments
 
(15.4
)
 
(11.7
)
Foreign exchange
 
(0.2
)
 
(0.4
)
Environmental liabilities at end of period
 
$
106.8

 
$
114.4

Environmental liabilities of $23.6 million and $35.5 million were classified as current in other accrued expenses in the condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015, 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
In April 2012, the US Department of Justice (“DOJ”) issued a civil investigative demand to the Company in connection with an investigation into the Company’s compliance with applicable customs and international trade laws and regulations relating to the importation of saccharin from 2002 through 2012. The Company also became aware in 2010 of an investigation being conducted by US Customs and Border Patrol (“CBP”) into the Company’s importation of saccharin. Finally, the Company learned that a civil plaintiff had sued the Company and two other defendants in a Qui Tam proceeding, such filing having been made under seal in 2012, and this plaintiff had requested that the DOJ intervene in its lawsuit.
The US government, through the DOJ, declined to intervene in the Qui Tam proceeding in November 2013 and, as a result, the DOJ’s inquiry related to the Qui Tam lawsuit and its initial investigation demand are now finished. On February 26, 2014, the Qui Tam plaintiff also voluntarily dismissed its lawsuit against the Company.
CBP, however, continued its investigation on the importation of saccharin by the Company’s subsidiary, Univar USA Inc. On July 21, 2014, CBP sent the Company a “Pre-Penalty Notice” indicating the imposition of a penalty against Univar USA Inc. in the amount of approximately $84.0 million. Univar USA Inc. responded to CBP that the proposed penalty was not justified. On October 1, 2014, the CBP issued a penalty notice to Univar USA Inc. for $84.0 million and has reaffirmed this penalty notice. On August 6, 2015, the DOJ filed a complaint on CBP’s behalf against Univar USA Inc. in the Court of International Trade seeking approximately $84.0 million in allegedly unpaid duties, penalties, interest, costs and attorneys’ fees. Discovery is underway in this matter. The Company continues to defend this matter vigorously. Univar USA Inc. has not recorded a liability related to this investigation as the Company believes a loss is not probable. Although the Company believes its position is strong it cannot guarantee the outcome of this or other litigation.

18.     Segments
Management monitors the operating results of its operating 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, plus the sum of: interest expense, net of interest income; income tax expense; depreciation; amortization; impairment charges; other operating expenses, net; and other income (expense), net.
Transfer prices between operating 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 operating segments. Allocable operating expenses are identified through a review process by management. These costs are allocated to the operating segments

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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.
Other/Eliminations represents the elimination of inter-segment 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.

Financial information for the Company’s segments is as follows:
(in millions)

USA

Canada

EMEA

Rest of
World

Other/
Eliminations

Consolidated
Three Months Ended September 30, 2016












Net sales:












External customers

$
1,222.1


$
260.8


$
412.5


$
104.3


$
—

 
$
1,999.7

Inter-segment

21.2


2.1


1.1


—


(24.4
)
 
—

Total net sales

1,243.3


262.9


413.6


104.3


(24.4
)
 
1,999.7

Cost of goods sold (exclusive of depreciation)

974.0


207.3


320.8


83.9


(24.4
)
 
1,561.6

Gross profit

269.3


55.6


92.8


20.4


—

 
438.1

Outbound freight and handling

52.3


9.0


13.1


1.8


—

 
76.2

Warehousing, selling and administrative

126.9


20.6


51.2


11.7


5.6

 
216.0

Adjusted EBITDA

$
90.1


$
26.0


$
28.5


$
6.9


$
(5.6
)
 
$
145.9

Other operating expenses, net

 
 
 
 
 
 
 
 
 
 
12.1

Depreciation

 
 
 
 
 
 
 
 
 
 
42.4

Amortization

 
 
 
 
 
 
 
 
 
 
22.5

Impairment charges
 
 
 
 
 
 
 
 
 
 
 
133.9

Interest expense, net

 
 
 
 
 
 
 
 
 
 
39.5

Other expense, net

 
 
 
 
 
 
 
 
 
 
3.1

Income tax benefit

 
 
 
 
 
 
 
 
 
 
(44.6
)
Net loss

 
 
 
 
 
 
 
 
 
 
$
(63.0
)
Total assets

$
3,824.4

 
$
1,824.3

 
$
971.9

 
$
232.5

 
$
(1,256.2
)
 
$
5,596.9



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(in millions)

USA

Canada

EMEA

Rest of
World

Other/
Eliminations

Consolidated
Three Months Ended September 30, 2015












Net sales:












External customers

$
1,364.6


$
290.7


$
433.2


$
117.8


$
—


$
2,206.3

Inter-segment

34.4


2.2


1.1


0.1


(37.8
)

—

Total net sales

1,399.0


292.9


434.3


117.9


(37.8
)

2,206.3

Cost of goods sold (exclusive of depreciation)

1,118.3


240.0


341.7


93.6


(37.8
)

1,755.8

Gross profit

280.7


52.9


92.6


24.3


—


450.5

Outbound freight and handling

55.6


9.0


14.6


2.2


—


81.4

Warehousing, selling and administrative

121.7


20.3


56.7


12.3


1.9


212.9

Adjusted EBITDA

$
103.4


$
23.6


$
21.3


$
9.8


$
(1.9
)

$
156.2

Other operating expenses, net











10.2