Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 2.41M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 25K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 25K
11: R1 Cover Page HTML 77K
12: R2 Condensed Consolidated Statements of Operations HTML 108K
13: R3 Condensed Consolidated Statements of Comprehensive HTML 54K
Income
14: R4 Condensed Consolidated Statements of Comprehensive HTML 29K
Income (Parenthetical)
15: R5 Condensed Consolidated Balance Sheets HTML 132K
16: R6 Condensed Consolidated Balance Sheets HTML 47K
(Parenthetical)
17: R7 Condensed Consolidated Statements of Cash Flows HTML 140K
18: R8 Condensed Consolidated Statements of Changes in HTML 102K
Stockholders' Equity
19: R9 Significant accounting policies HTML 30K
20: R10 Dispositions HTML 27K
21: R11 Business combinations HTML 50K
22: R12 Goodwill and intangibles, net HTML 62K
23: R13 Revenue HTML 74K
24: R14 Supplemental financial information HTML 79K
25: R15 Employee benefit plans HTML 58K
26: R16 Income taxes HTML 37K
27: R17 Earnings per share HTML 54K
28: R18 Accumulated other comprehensive income (Loss) HTML 113K
29: R19 Debt HTML 56K
30: R20 Equity and stock-based compensation HTML 31K
31: R21 Derivatives HTML 95K
32: R22 Commitments and contingencies HTML 44K
33: R23 Leasing HTML 247K
34: R24 Segments HTML 132K
35: R25 Subsequent events HTML 27K
36: R26 Significant accounting policies (Policies) HTML 33K
37: R27 Business combinations (Tables) HTML 48K
38: R28 Goodwill and intangibles, net (Tables) HTML 69K
39: R29 Revenue (Tables) HTML 70K
40: R30 Supplemental financial information (Tables) HTML 82K
41: R31 Employee benefit plans (Tables) HTML 56K
42: R32 Income taxes (Tables) HTML 35K
43: R33 Earnings per share (Tables) HTML 54K
44: R34 Accumulated other comprehensive income (Loss) HTML 114K
(Tables)
45: R35 Debt (Tables) HTML 53K
46: R36 Derivatives (Tables) HTML 95K
47: R37 Commitments and contingencies (Tables) HTML 37K
48: R38 Leasing (Tables) HTML 157K
49: R39 Segments (Tables) HTML 129K
50: R40 Dispositions (Details) HTML 43K
51: R41 Business combinations - Narrative (Details) HTML 40K
52: R42 Business combinations - Preliminary Purchase Price HTML 67K
Allocation (Details)
53: R43 Goodwill and intangibles, net - Narrative HTML 44K
(Details)
54: R44 Goodwill and intangibles, net - Schedule of HTML 37K
Intangible Assets, Net (Details)
55: R45 Goodwill and intangibles, net - Schedule of HTML 35K
Finite-Lived Intangible Assets, Future
Amortization Expense (Details)
56: R46 Revenue - Schedule of External Net Sales HTML 53K
Disaggregated by Major Stream Type (Details)
57: R47 Revenue - Narrative (Details) HTML 29K
58: R48 Supplemental financial information - Other HTML 38K
Operating Expenses, Net (Details)
59: R49 Supplemental financial information - Other Income, HTML 44K
Net (Details)
60: R50 Supplemental financial information - Cash and Cash HTML 29K
Equivalents (Details)
61: R51 Supplemental financial information - Allowance for HTML 33K
Doubtful Accounts (Details)
62: R52 Supplemental financial information - Property, HTML 32K
Plant and Equipment, Net (Details)
63: R53 Employee benefit plans - Components of Net HTML 48K
Periodic Benefit Cost (Details)
64: R54 Employee benefit plans - Multi-Employer Pension HTML 33K
Plan Exit Liability (Details)
65: R55 Income taxes (Details) HTML 30K
66: R56 Earnings Per Share - Summary of Computations of HTML 62K
Basic and Diluted Earnings Per Share (Details)
67: R57 Earnings Per Share - Summary of Computations of HTML 30K
Basic and Diluted Earnings Per Share Footnote
(Details)
68: R58 Accumulated other comprehensive income (loss) - HTML 76K
Schedule of Changes in Accumulated Other
Comprehensive Loss by Component Net of Tax
(Details)
69: R59 Accumulated other comprehensive income (loss) - HTML 75K
Summary of Amounts Reclassified From Accumulated
Other Comprehensive Income (Loss) (Details)
70: R60 Debt - Narrative (Details) HTML 54K
71: R61 Debt - Schedule of Long Term Debt (Details) HTML 53K
72: R62 Debt - Fair Value of Debt (Details) HTML 31K
73: R63 Equity and stock-based compensation (Details) HTML 56K
74: R64 Derivatives - Narrative (Details) HTML 49K
75: R65 Derivatives - Schedule of Notional Amounts HTML 37K
(Details)
76: R66 Derivatives - Pre-Tax Effects of Derivative HTML 39K
Instruments (Details)
77: R67 Derivatives - Assets and Liabilities (Details) HTML 65K
78: R68 Commitments and contingencies - Narrative HTML 39K
(Details)
79: R69 Commitments and contingencies - Changes in Total HTML 35K
Environmental Liabilities (Details)
80: R70 Commitments and contingencies - Environmental HTML 30K
Liabilities Balance Sheet Information (Details)
81: R71 Leasing - Assets and Liabilities, Lessee (Details) HTML 59K
82: R72 Leasing - Lease Cost in Income Statement (Details) HTML 56K
83: R73 Leasing - Maturity of Lease Obligations (Details) HTML 82K
84: R74 Leasing - Lease Term and Discount Rate (Details) HTML 35K
85: R75 Leasing - Other Information (Details) HTML 31K
86: R76 Segments - Narrative (Details) HTML 26K
87: R77 Segments - Financial Information for Company's HTML 57K
Segments (Details)
88: R78 Segments - Reconciliation of Net Income (Loss) to HTML 58K
Adjusted EBITDA (Details)
89: R79 Subsequent events (Details) HTML 29K
92: XML IDEA XML File -- Filing Summary XML 169K
90: XML XBRL Instance -- unvr-20220630_htm XML 3.28M
91: EXCEL IDEA Workbook of Financial Reports XLSX 150K
7: EX-101.CAL XBRL Calculations -- unvr-20220630_cal XML 273K
8: EX-101.DEF XBRL Definitions -- unvr-20220630_def XML 511K
9: EX-101.LAB XBRL Labels -- unvr-20220630_lab XML 1.67M
10: EX-101.PRE XBRL Presentations -- unvr-20220630_pre XML 1.00M
6: EX-101.SCH XBRL Schema -- unvr-20220630 XSD 169K
93: JSON XBRL Instance as JSON Data -- MetaLinks 453± 671K
94: ZIP XBRL Zipped Folder -- 0001494319-22-000030-xbrl Zip 437K
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading symbol(s)
Name of each exchange on which registered
iCommon Stock ($0.01 par value)
iUNVR
iNew
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. iYes☒
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). ☒iYes☐ 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.
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
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 i☐ No ☒
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended June 30,
Six months ended
June 30,
(in millions)
2022
2021
2022
2021
Net income
$
i162.9
$
i153.2
$
i343.7
$
i219.4
Other
comprehensive (loss) income, net of tax:
Foreign currency translation
$
(i55.3)
$
i38.1
$
(i38.1)
$
i38.9
Pension
and other postretirement benefits adjustment, net of tax of $i0.1 for the three months ended and $i0.1
for the six months ended June 30, 2022 and $i0.0 for the three months ended and $i0.5
for the six months ended June 30, 2021
(i0.2)
(i0.2)
(i0.3)
(i2.6)
Derivative
financial instruments, net of tax of $(i6.7) for the three months ended and $(i19.2)
for the six months ended June 30, 2022 and $(i0.5) for the three months ended and $(i2.7)
for the six months ended June 30, 2021
i19.3
i1.5
i55.7
i8.1
Total
other comprehensive (loss) income, net of tax
$
(i36.2)
$
i39.4
$
i17.3
$
i44.4
Comprehensive
income
$
i126.7
$
i192.6
$
i361.0
$
i263.8
The
accompanying notes are an integral part of these condensed consolidated financial statements.
Trade
accounts receivable, net of allowance for doubtful accounts of $i13.5 and $i15.8 at June 30, 2022 and December 31,
2021, respectively
i1,824.6
i1,539.5
Inventories
i1,205.7
i932.2
Prepaid
expenses and other current assets
i223.0
i169.1
Total
current assets
$
i3,488.1
$
i2,892.3
Property,
plant and equipment, net
$
i1,018.0
$
i1,031.0
Goodwill
i2,303.3
i2,310.4
Intangible
assets, net
i188.4
i211.7
Deferred
tax assets
i25.3
i29.4
Other
assets
i353.5
i303.0
Total
assets
$
i7,376.6
$
i6,777.8
Liabilities
and stockholders’ equity
Current liabilities:
Short-term financing
$
i3.3
$
i—
Trade
accounts payable
i1,145.3
i1,009.3
Current
portion of long-term debt
i38.7
i41.5
Accrued
compensation
i132.3
i196.4
Other
accrued expenses
i394.4
i420.4
Total
current liabilities
$
i1,714.0
$
i1,667.6
Long-term
debt
$
i2,484.2
$
i2,223.5
Pension
and other postretirement benefit liabilities
i200.1
i211.7
Deferred
tax liabilities
i83.7
i56.1
Other
long-term liabilities
i315.6
i326.4
Total
liabilities
$
i4,797.6
$
i4,485.3
Commitments
and contingencies
Stockholders’ equity:
Preferred stock, $ii0.01/
par value, ii200,000,000/ shares
authorized, iiiino///
shares issued or outstanding at June 30, 2022 and December 31, 2021
$
i—
$
i—
Common
stock, $ii0.01/ par value, ii2,000,000,000/
shares authorized, ii172,453,073/ and ii171,199,938/
shares issued at June 30, 2022 and December 31, 2021, respectively
Notes to Condensed Consolidated Financial Statements (Unaudited)
i
1. Significant
accounting policies
i
Basis of presentation
The unaudited interim condensed consolidated financial statements of Univar Solutions Inc. (the “Company,”“we,”“our” and “us”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) have been condensed
or omitted. These unaudited interim 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, 2021.
In the opinion of management, the unaudited interim condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for the full year.
iProceeds
and repayments under the revolving credit facilities for 2021, previously reported net in our interim condensed consolidated statement of cash flows, are now presented separately to conform to the current period presentation. Additionally, certain other immaterial amounts in the prior period interim condensed consolidated financial statements and notes have been reclassified to conform to the current period presentation.
i
Accounting pronouncements issued and not yet adopted
In
October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-08 “Business Combinations” (Topic 805) – “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 (Revenue from Contracts with Customers).
The Company expects to adopt this guidance effective January 1, 2023 and it is not expected to have a material impact upon the Company's consolidated financial statements.
/
In November 2021, the FASB issued ASU 2021-10 “Government Assistance” (Topic 832) – “Disclosures by Business Entities about Government Assistance,” which aims to increase the transparency of government assistance and grants. The ASU requires additional annual disclosures pertaining to the types of received government assistance, accounting for the transactions and the related
impacts on the reported financial results. The Company expects to adopt this guidance effective December 31, 2022 and is currently determining the impacts of the guidance on its consolidated financial statements and disclosures.
Sweetmix Distribuidora de Materias Primas Industriais Ltda (“Sweetmix”)
On December 1, 2021, the Company acquired Sweetmix, a food ingredients and coatings, adhesives, sealants and elastomers (“CASE”) specialty chemical distribution company in Brazil. The acquisition price, including 2022 measurement period adjustments, was $i53.0 million,
with $i32.5 million of which was paid in cash (net of cash acquired of $i1.2 million) upon closing, with the remaining
$i19.3 million to be paid over the next ifive years. The
Company believes that the acquisition of Sweetmix significantly enhances the Company’s specialty food ingredients product offering in Latin America and also enhances the Company's position in the local CASE market.
During the first six months of 2022, the Company updated the purchase price allocation to reflect intangible asset fair value adjustments, purchase price adjustments and the deferred tax impacts of the recognized adjustments. iThe
preliminary values and measurement period adjustments related to the significant assets and liabilities are shown below:
The
goodwill is included in the Latin America (“LATAM”) segment and is not deductible for income tax purposes. The identified intangible assets relate to customer relationships and will be amortized over a period of ieight years. The initial accounting for this acquisition is preliminary and subject to additional measurement period adjustments related to taxes.
/
i3. Dispositions
On April 1, 2021, the Company completed the sale of its Distrupol business within the Europe and the Middle East and Africa (“EMEA”) segment for total cash proceeds of $i136.7 million. In the second quarter of 2021, the Company recorded a $i87.6 million
pre-tax gain on sale of business in the condensed consolidated statement of operations, net of a release of cumulative foreign currency translation losses of $i18.1 million. The Company recorded $i3.9 million
income before income taxes for the six months ended June 30, 2021 attributable to Distrupol.
i
4. Goodwill and intangibles, net
Goodwill
iThe
following is a summary of the activity in goodwill by segment.
Other
intangible assets consist of intellectual property trademarks, trade names, producer relationships and contracts, non-compete agreements and exclusive distribution rights.
i
The estimated annual amortization expense in each of the next five years is as follows:
(in
millions)
2022
$
i47.4
2023
i42.3
2024
i32.3
2025
i28.9
2026
i24.0
/i
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 the Company's revenues, as it aligns to how the Company reviews the financial performance of its operations. Revenue contract types are differentiated by the type of good or service the
Company offers customers, since the contractual terms necessary for revenue recognition are unique to each of the identified revenue contract types.
The following tables disaggregate external customer net sales by major
stream:
Three months ended June 30,
Six months ended June 30,
(in millions)
2022
2021
2022
2021
USA
Chemical
distribution
$
i1,900.2
$
i1,428.7
$
i3,677.3
$
i2,650.9
Services
i70.0
i71.5
i136.1
i142.3
Total
external customer net sales
$
i1,970.2
$
i1,500.2
$
i3,813.4
$
i2,793.2
EMEA
Chemical
distribution
$
i547.1
$
i504.0
$
i1,109.3
$
i1,009.7
Services
i0.1
i—
i0.1
i0.2
Total
external customer net sales
$
i547.2
$
i504.0
$
i1,109.4
$
i1,009.9
Canada
Chemical
distribution
$
i298.2
$
i233.9
$
i591.6
$
i452.6
Services
i—
i4.7
i—
i8.7
Total
external customer net sales
$
i298.2
$
i238.6
$
i591.6
$
i461.3
LATAM
Chemical
distribution
$
i196.8
$
i148.8
$
i377.5
$
i280.8
Services
i4.2
i2.5
i7.3
i4.3
Total
external customer net sales
$
i201.0
$
i151.3
$
i384.8
$
i285.1
Consolidated
Chemical
distribution
$
i2,942.3
$
i2,315.4
$
i5,755.7
$
i4,394.0
Services
i74.3
i78.7
i143.5
i155.5
Total
external customer net sales
$
i3,016.6
$
i2,394.1
$
i5,899.2
$
i4,549.5
/
Deferred
revenue
Deferred revenues are recognized as contract liabilities when customers provide the Company with consideration prior to the Company satisfying the performance obligations and are recognized in revenue when the performance obligations are met. Deferred revenues relate to revenues that are expected to be recognized within one year and are recorded within the other accrued expenses line items of the condensed consolidated balance sheets. Deferred revenues as of June 30, 2022 and December 31, 2021 were $i5.7
million and $i17.6 million, respectively.
Revenue recognized through the six months ended June 30, 2022 and 2021 from amounts included in contract liabilities at the beginning of the period were $i16.4 million
and $i4.6 million, respectively.
Undesignated
interest rate and cross currency swap contracts
i2.5
(i0.3)
i6.6
i1.0
Non-operating
retirement benefits
i2.9
i4.0
i5.5
i10.7
Debt
refinancing costs
i—
(i6.9)
i—
(i6.9)
Fair
value adjustment for warrants
i—
i8.2
i—
i33.8
Other
i0.7
i1.9
i0.3
i0.6
Total
other income, net
$
i2.7
$
i3.3
$
i10.4
$
i32.0
/
Cash
and cash equivalents
Certain of the Company’s subsidiaries participate in a multi-currency, notional cash pooling arrangement with a third-party bank provider to manage global liquidity requirements (the “Notional Cash Pool”). Under the Notional Cash Pool, cash deposited by participating subsidiaries is pledged as security against the overdraft balances of other participating subsidiaries, providing legal rights of offset. As a result, the balances are presented on a net basis within cash and cash equivalents in the condensed consolidated balance sheets. As of
June 30, 2022, the net cash position of the Notional Cash Pool was $i48.3 million, which consisted of a gross cash balance of $i86.5 million
less a bank overdraft balance of $i38.2 million. As of December 31, 2021, the net cash position of the Notional Cash Pool was $i43.2 million,
which consisted of a gross cash balance of $i146.0 million less a bank overdraft balance of $i102.8 million.
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. iThe
change in the allowance for doubtful accounts is as follows:
As of June 30, 2022 and December 31, 2021, there were no components within other accrued expenses that were greater than five percent of total current liabilities.
i
7. Employee benefit plans
i
The
following table summarizes the components of net periodic benefit (income) cost recognized in the condensed consolidated statements of operations related to defined benefit plans:
Domestic
Foreign
Three
months ended June 30,
Six months ended June 30,
Three months ended June 30,
Six months ended June 30,
(in millions)
2022
2021
2022
2021
2022
2021
2022
2021
Service
cost (1)
$
i—
$
i—
$
i—
$
i—
$
i0.4
$
i0.4
$
i0.7
$
i0.9
Interest
cost (2)
i5.1
i4.8
i10.3
i9.6
i2.7
i2.5
i5.6
i5.0
Expected
return on plan assets (2)
(i7.6)
(i7.3)
(i15.2)
(i14.6)
(i2.8)
(i3.8)
(i5.8)
(i7.6)
Prior
service credit (2)
i—
i—
i—
i—
(i0.3)
(i0.2)
(i0.4)
(i3.1)
Net
periodic benefit (income) cost
$
(i2.5)
$
(i2.5)
$
(i4.9)
$
(i5.0)
$
i—
$
(i1.1)
$
i0.1
$
(i4.8)
(1)Service
cost is included in warehouse, selling and administrative expenses.
(2)These amounts are included in other income, net, and represent non-operating retirement benefits.
/
Multi-employer pension plan withdrawal liability
As of December 31, 2021, the Company recognized its best estimate of a withdrawal liability of $i31.2 million,
related to triggering events at all ieight sites of the Central States, Southeast and Southwest Areas Pension Plan (“Central States Pension Fund”), culminating in the Company ceasing to participate in the Central States Pension Fund. Upon an agreed final funding assessment with the Central States Pension Fund, the Company will recognize any differences between the estimated and actual withdrawal liability. As of June
30, 2022 this balance is unchanged.
The Company estimates its cash obligation to be approximately $i1.9 million annually for each of the next i20
years. The net present value of the withdrawal liability was determined using a risk-free interest rate. Amounts associated with the withdrawal liability are included in other operating expenses, net in the condensed consolidated statements of operations and other accrued expenses and other long-term liabilities in the condensed consolidated balance sheets.
/
i8. Income
taxes
i
The income tax expense and effective income tax rate for the three and six months ended June 30, 2022 and 2021 were as follows:
Three
months ended June 30,
Six months ended June 30,
(dollars in millions)
2022
2021
2022
2021
Income tax expense
$
i58.6
$
i27.0
$
i123.3
$
i44.6
Effective
income tax rate
i26.5
%
i15.0
%
i26.4
%
i16.9
%
/
The
Company’s 2022 effective income tax rate was higher than the US federal statutory rate of 21.0%, primarily due to higher rates on foreign earnings, US tax on foreign earnings, US state income taxes and non-deductible employee costs. The Company’s 2021 effective income tax rate was also impacted by these items but offset by the impact of other discrete tax items.
The following table presents the basic and diluted earnings per share computations:
Three
months ended June 30,
Six months ended June 30,
(in millions, except per share data)
2022
2021
2022
2021
Net
income
$
i162.9
$
i153.2
$
i343.7
$
i219.4
Weighted
average common shares outstanding
Basic
i168.4
i169.9
i169.0
i169.6
Effect
of dilutive securities: stock compensation plans
i1.3
i1.0
i1.5
i0.8
Diluted
i169.7
i170.9
i170.5
i170.4
Income
per common share
Basic
$
i0.97
$
i0.90
$
i2.03
$
i1.29
Diluted
$
i0.96
$
i0.90
$
i2.02
$
i1.29
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:
Less:
unamortized debt issuance costs and discount on debt
(i19.5)
(i21.8)
Total
long-term debt
$
i2,522.9
$
i2,265.0
Less:
current maturities
(i38.7)
(i41.5)
Total
long-term debt, excluding current maturities
$
i2,484.2
$
i2,223.5
/
The
weighted average interest rate on long-term debt, including the effect of designated and undesignated derivative instruments (refer to “Note 13: Derivatives” for more information), was i3.35% and i3.25%
as of June 30, 2022 and December 31, 2021, respectively.
Senior Unsecured Notes
During the second quarter of 2022, the Company repaid $i46.0 million of its Senior Unsecured Notes due 2027, resulting in a gain on extinguishment of debt of $i1.5 million
which is included in other income, net in the condensed consolidated statements of operations.
Senior Term Loan Facilities
During the second quarter of 2021, the Company entered into the Sixth Amendment (“Sixth Amendment”) to its Credit Agreement, dated July 1, 2015, which provided a new Term B-6 Loan facility in an aggregate principal amount of $i1.0 billion
that matures on June 3, 2028 (“Term B-6 Loan”). The proceeds from the new Term B-6 Loan and an incremental borrowing of $i274.2 million under the Company's existing North American ABL facility were used to repay in full the outstanding Term B-3 Loan facility and satisfy related lending and refinancing fees.
As a result of the issuance of the Term B-6 Loan and
the Sixth Amendment, and the repayment of the Term B-3 Loan, the Company recognized a loss on extinguishment of debt of $i2.0 million and debt refinancing costs of $i6.9 million
during the three and six months ended June 30, 2021, both of which are included in other income, net in the condensed consolidated statements of operations.
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.
i
12. Equity and stock-based compensation
Share repurchase program
In November 2021, the
Company announced that the Board of Directors had approved a share repurchase program of up to $i500.0 million of our outstanding common stock, which expires on October 27, 2026. The program does not require the repurchase of any minimum number of shares and can be suspended, modified or discontinued at any time at the Company’s discretion. Under the share repurchase program, the
Company may purchase shares from time-to-time at the discretion of management through open market purchases, privately negotiated transactions, block trades, accelerated or other structured share repurchase programs, or other means.
The Company repurchased i3,487,485 shares for $i104.6
million during the six months ended June 30, 2022, which includes the repurchase of i2,756,421 shares of its common stock for $i80.6
million during the three months ended June 30, 2022. The Company’s remaining stock repurchase authorization under this program was approximately $i345.4 million as of June 30, 2022.
Stock-based compensation
The
Company grants stock-based compensation to employees and non-employee directors under the Univar Solutions Inc. 2020 Omnibus Incentive Plan. Most of the Company’s stock-based compensation awards to employees are granted in the first quarter of each year.
During the second quarter of 2022, the Company granted the following stock-based awards to employees:
•i57,034
of restricted stock units (“RSUs”) with a weighted-average fair value of $i30.30 per share; and
•i19,526
of restricted stock awards (“RSAs”) with a weighted-average fair value of $i29.96 per share.
During the first quarter of 2022, the Company granted the following stock-based awards to employees:
•i704,466
of RSUs with a weighted-average fair value of $i28.36 per share; and
•i243,750
of performance-based restricted stock units (“PRSUs”) with a weighted-average fair value of $i27.94 per share.
As of June 30, 2022, the Company has unrecognized
stock-based compensation expense related to non-vested RSUs of $i21.7 million, which will be recognized over a weighted-average period of i1.3
years, and non-vested PRSUs of $i11.1 million, which will be recognized over a weighted-average period of i1.8
years.
/i
13. Derivatives
Foreign currency derivatives
The
Company uses forward currency contracts to hedge earnings from the effects of foreign exchange rates relating to certain of the Company’s intercompany and third-party receivables and payables denominated in foreign currencies. These derivative instruments are not formally designated as cash flow hedges by the Company and the terms of these instruments range from one to ithree
months.
The objective of the Company’s 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-6 Loan and a portion of debt outstanding under the North American ABL Facility.
On June 4, 2021, the Company executed itwo
interest rate swap contracts, both effective June 30, 2023, to replace existing interest rate swap contracts with maturities occurring between June 2023 and June 2024. These interest rate swap contracts contain an initial aggregate notional value of $i250.0 million
from June 2023 to June 2024 that increases to an aggregate notional value of $i500.0 million from June 2024 to May 2028.
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. The cross currency swap contracts mature in November 2024. As of June 30, 2022, approximately i95%
of the cross currency swap contracts are designated as a cash flow hedge.
The Company also uses undesignated cross currency swap contracts to manage interest rate variability and mitigate foreign exchange exposure.
Notional amounts and fair value of derivative instruments
i
The
following table presents the notional amounts of the Company’s outstanding derivative instruments by type:
The
following are the pre-tax effects of derivative instruments on the condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2022 and 2021:
Statement
of Operations Classification
Amount of (loss) gain reclassified from other comprehensive loss into income
Amount of (loss) gain to be reclassified to consolidated statement of operations within the next 12 months
The following table presents the
Company’s gross assets and liabilities measured on a recurring basis and classified as Level 2 within the fair value hierarchy:
The
net amounts by legal entity related to forward currency contracts included in prepaid and other current assets were $i0.1 million and $i1.7
million as of June 30, 2022 and December 31, 2021, respectively. The net amounts related to forward currency contracts included in other accrued expenses were $i1.1 million and $i0.7
million as of June 30, 2022 and December 31, 2021, 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 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.
i
14. 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 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.
Asbestos Claims
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 obligated to pay because of its obligation to defend and indemnify McKesson. As of June 30, 2022, there were approximately i220
asbestos-related cases for which Univar has the obligation to defend and indemnify; however, this number tends to fluctuate up and down over time. Historically, the vast majority of these asbestos cases have been dismissed without payment or with a nominal payment. 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.
Unclaimed Property Audit
The Company and its subsidiaries were the subject of
an unclaimed property audit request issued by the State of Delaware in 2015. On June 29, 2022, the State of Delaware notified the Company that it was closing its examination with a $i0 finding.
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 a “potentially responsible 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 at various sites. As a PRP, the Company may be required to pay a share of the costs of investigation and cleanup of certain sites. The Company is currently
engaged in environmental remediation work at approximately i125 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 i104 current or formerly Company-owned/occupied sites. In addition, the
Company may be liable as a PRP for a share of the clean-up of approximately i21 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; the scope of remediation (including any changes over time); 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 i2 to i30 years, depending on the specific site and type of remediation project.
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.
i
Changes in total environmental liabilities are as follows:
(1)Finance
lease right-of-use assets are recorded net of accumulated depreciation of $i82.9 million and $i75.8 million
as of June 30, 2022 and December 31, 2021, respectively.
Cash paid for amounts included in the measurement of lease liabilities
Operating
cash flows from operating leases
$
i28.5
$
i28.1
Operating
cash flows from finance leases
i1.8
i1.9
Financing
cash flows from finance leases
i15.1
i13.6
i
16. Segments
The
Company’s operations are structured into ifour reportable segments that represent the geographic areas under which it operates and manages the business. Management, including the Chief Operating Decision Maker, monitors the operating results of its reportable segments separately for the purpose of making decisions about resource allocation and performance assessment. Management evaluates performance of its reportable segments on the basis of Adjusted EBITDA. Adjusted EBITDA is defined as the sum of consolidated net income; depreciation; amortization; net interest
expense; income tax expense; impairment charges; gain on sale of business; other operating expenses, net and other income, net (for both, see “Note 6: Supplemental financial information”).
Transfer prices between reportable 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 reportable segments. Allocable operating expenses are identified through a review process by management. The allocable operating expenses are assigned to the reportable segments on a basis that reasonably approximates the use of services, which is generally measured based on a weighted distribution of margin, asset, headcount or time spent.
(1)Other/Eliminations
represents the elimination of intersegment transactions.
Three months ended June 30,
Six months ended June 30,
(in millions)
2022
2021
2022
2021
Adjusted
EBITDA
USA
$
i198.6
$
i125.6
$
i407.8
$
i227.4
EMEA
i50.4
i47.8
i114.2
i98.4
Canada
i32.0
i25.0
i68.7
i51.3
LATAM
i16.2
i13.3
i32.4
i28.9
Other/Eliminations
(1)
(i5.6)
(i14.2)
(i12.2)
(i26.3)
Consolidated
$
i291.6
$
i197.5
$
i610.9
$
i379.7
(1)Other/Eliminations
represents unallocated corporate costs consisting of items specifically related to parent company operations that do not directly benefit segments, either individually or collectively.
The
following is a reconciliation of net income to Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021:
Three months ended June 30,
Six
months ended June 30,
(in millions)
2022
2021
2022
2021
Net income
$
i162.9
$
i153.2
$
i343.7
$
i219.4
Depreciation
i32.2
i37.3
i65.1
i81.1
Amortization
i12.0
i13.2
i23.8
i26.3
Interest
expense, net
i23.3
i25.7
i44.4
i52.3
Income
tax expense
i58.6
i27.0
i123.3
i44.6
EBITDA
$
i289.0
$
i256.4
$
i600.3
$
i423.7
Other
operating expenses, net
i5.3
i29.9
i21.0
i74.1
Other
income, net
(i2.7)
(i3.3)
(i10.4)
(i32.0)
Impairment
charges
i—
i2.1
i—
i2.1
Gain
on sale of business
i—
(i87.6)
i—
(i88.2)
Adjusted
EBITDA
$
i291.6
$
i197.5
$
i610.9
$
i379.7
/
i
17. Subsequent
events
On July 29, 2022, the Company acquired Vicom Distribución Productos Quimicos, S.L., a leading regional specialty chemicals distributor in Spain and Portugal, for approximately $i14 million.
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 US 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 16: 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. The MD&A should be read in conjunction with both the unaudited consolidated financial information and related notes included in this Form 10-Q and the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
Univar Solutions is a leading global solutions provider to users of specialty ingredients and chemicals and provider of value-added services to customers across a wide range of diverse industries. We purchase chemicals and ingredients from thousands of producers worldwide and warehouse, repackage, blend, dilute, transport and sell them to more than 100,000 customer locations across approximately 115 countries.
Our
operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. These segments are USA, EMEA, Canada and LATAM, which includes developing businesses in Latin America and the Asia-Pacific region.
Comparability of Results
Acquisitions and Divestitures
On April 1, 2021, we sold our Distrupol business within the EMEA segment. The sale of this business did not meet the criteria to be classified as discontinued operations in our condensed consolidated financial statements.
In December 2021, we acquired Sweetmix, a food ingredients and coatings, adhesives, sealants and elastomers (“CASE”) specialty chemical distribution company in Brazil.
Constant
Currency
We believe providing non-GAAP constant currency basis offers valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. 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.
Market Conditions
We sell commodity and specialty chemicals and ingredients that are used in manufacturing processes and as components in other products. Our sales are correlated with and affected by seasonal fluctuations and cycles in the levels of industrial production, manufacturing output and general economic activity. The current business environment in the markets in which we operate consists of complex dynamics.
A combination of global factors such as supplier shut-downs, port congestion, acute COVID-19 pandemic recovery demand and the Russia-Ukraine conflict has stressed already existing sustained supply chain constraints, product shortages and our pricing discipline in inflationary markets that continue to be atypical in magnitude and unknown in duration.
These market factors have also impacted the transportation market and coupled with continued energy price pressure, driver shortages and inflation, have resulted in higher operating costs. Additionally, shortages across a range of chemicals and ingredients have generally led to fluctuations in chemical prices globally, with corresponding impacts to sales and interim profits.
In such a dynamic environment, we believe remaining connected with our customers to understand demand and supply impacts on their operations is critical to our success.
We believe our value as a distributor is heightened in the current environment as we work to meet demand requirements through our extensive network, installed asset base, transportation and digital assets, and supplier partnerships, supported by our network of Solutions Centers and technically trained professionals with deep industry knowledge.
A summary of our sales channel and underlying end market performance as of June 30, 2022, with corresponding impacts from the current environment are as follows (percentages represent 2022 second quarter Consolidated Net Sales):
Chemicals
and Services (65%) - We are leveraging our owned distribution assets to provide continuous supply to our customers in especially vital industries such as Chemical Manufacturing, Energy and Water Treatment. We have seen increased opportunities and growth in demand within traditional energy and clean energy technologies as higher oil prices have accelerated production and increased demand for sustainable solutions. Our ability to work with the largest global customers to de-risk their supply chain issues has driven especially strong results in the US and Canadian segments. Our industrial end markets are winning new business and better servicing existing business through our integrated supply chain, enhancing our value proposition of having the right material available in the right location for whenever our customers need it.
Ingredients and Specialties (35%) - Our global Consumer
Solutions business has benefited new authorizations and effective our pricing discipline in inflationary markets. With our numerous new supplier authorizations, we are leveraging our technically trained salesforce to formulate new solutions for our customers in Personal Care and Pharmaceuticals. In Food, we repositioned in the market as Foodology and recently opened a new super innovation kitchen to help our customers innovate recipes to meet and create the latest trends in the marketplace. Within Industrial Solutions, we have seen tremendous growth in our Lubricants and Metalworking business as we combine our solvents capabilities with our technical formulations to service this market. Our CASE products have seen ongoing supply shortages; however, we are encouraged by the loyalty of many of our customers who have come to rely on our supply position to ensure they have the product they need. Household & Industrial Cleaning has seen ongoing growth from our specialty
surfactants and enzymes portfolio.
Results of Operations
The following tables set forth, for the periods indicated, certain statements of operations data, on the basis of reported data for the relevant period.
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Net sales
$
3,016.6
$
2,394.1
26.0
%
$
5,899.2
$
4,549.5
29.7
%
Cost
of goods sold (exclusive of depreciation)
2,280.6
1,791.6
27.3
%
4,433.7
3,404.6
30.2
%
Operating expenses:
Outbound
freight and handling
$
125.7
$
97.8
28.5
%
$
241.6
$
189.2
27.7
%
Warehousing,
selling and administrative
318.7
307.2
3.7
%
613.0
576.0
6.4
%
Other operating expenses, net
5.3
29.9
(82.3)
%
21.0
74.1
(71.7)
%
Depreciation
32.2
37.3
(13.7)
%
65.1
81.1
(19.7)
%
Amortization
12.0
13.2
(9.1)
%
23.8
26.3
(9.5)
%
Impairment
charges
—
2.1
(100.0)
%
—
2.1
(100.0)
%
Total operating expenses
$
493.9
$
487.5
1.3
%
$
964.5
$
948.8
1.7
%
Operating
income
$
242.1
$
115.0
110.5
%
$
501.0
$
196.1
155.5
%
Other
(expense) income:
Interest income
$
1.0
$
0.7
42.9
%
$
2.1
$
1.1
90.9
%
Interest
expense
(24.3)
(26.4)
(8.0)
%
(46.5)
(53.4)
(12.9)
%
Gain on sale of business
—
87.6
(100.0)
%
—
88.2
(100.0)
%
Other
income, net
2.7
3.3
(18.2)
%
10.4
32.0
(67.5)
%
Total other (expense) income
$
(20.6)
$
65.2
N/M
$
(34.0)
$
67.9
N/M
Income
before income taxes
$
221.5
$
180.2
22.9
%
$
467.0
$
264.0
76.9
%
Income
tax expense
58.6
27.0
117.0
%
123.3
44.6
176.5
%
Net income
$
162.9
$
153.2
6.3
%
$
343.7
$
219.4
56.7
%
Net
sales
Net sales increased $622.5 million, or 26.0%, and increased $1,349.7 million, or 29.7%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, net sales increased $722.4 million, or 30.2%, and increased $1,511.4 million, or 33.2%, for the three and six months ended June 30, 2022, respectively. The increase is primarily due to our pricing
discipline in inflationary markets and market share gains. Refer to the “Analysis of Segment Results” for the three and six months
ended June 30, 2022 for additional information.
Gross profit (exclusive of depreciation)
Gross profit (exclusive of depreciation) increased $133.5 million, or 22.2%, to $736.0 million and increased $320.6 million, or 28.0%, to $1,465.5 million for the three and six months ended June 30, 2022, respectively. On a constant currency basis, gross profit (exclusive of depreciation) increased $156.4 million, or 26.0%, and increased $358.4 million, or 31.3%, for the three and six months ended June 30, 2022, respectively. The increase in gross profit (exclusive of depreciation) was primarily attributable to our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by higher input costs. Refer to the
“Analysis of Segment Results” for the three and six months ended June 30, 2022 and “Non-GAAP Financial Measures” for additional information.
Operating Expenses
Outbound freight and handling
Outbound freight and handling expenses increased $27.9 million, or 28.5%, and increased $52.4 million, or 27.7%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, outbound freight and handling expenses increased $30.7 million, or 31.4%, and increased $56.6 million, or 29.9%, for the three and six months ended June 30, 2022. Refer to the “Analysis of Segment Results” for the three and six months ended June 30,
2022 for additional information.
Warehousing, selling and administrative
Warehousing, selling and administrative expenses (“WS&A”) increased $11.5 million, or 3.7%, and increased $37.0 million, or 6.4%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, WS&A increased $21.5 million, or 7.0%, and increased $52.6 million, or 9.1%, for the three and six months ended June 30, 2022, respectively, primarily attributable to higher operating costs and variable compensation, partially offset by net synergies. Additionally, the six months ended June 30, 2022 was further offset by an environmental recovery. Refer to the “Analysis of Segment Results” for the three and six months
ended June 30, 2022 for additional information.
Other operating expenses, net
Other operating expenses, net decreased $24.6 million for the three months ended June 30, 2022 and decreased $53.1 million for the six months ended June 30, 2022. Refer to “Note 6: Supplemental financial information” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Depreciation and amortization
Depreciation expense decreased $5.1 million, or 13.7%, and decreased $16.0 million, or 19.7%, for the three and six months ended June 30, 2022, respectively, primarily due to certain assets reaching
the end of their depreciable lives. On a constant currency basis, depreciation expense decreased $4.3 million, or 11.5%, and $14.8 million, or 18.2%, for the three and six months ended June 30, 2022, respectively, due to certain assets reaching the end of their depreciable lives.
Amortization expense decreased $1.2 million, or 9.1%, and decreased $2.5 million, or 9.5%, for the three and six months ended June 30, 2022, respectively, primarily due to certain intangibles reaching the end of their amortizable lives.
Interest expense
Interest expense decreased $2.1 million, or 8.0%, and decreased $6.9 million, or 12.9%, for the three and six months ended June 30, 2022, respectively, primarily due
to lower average outstanding borrowings as well as lower interest rates on fixed debt. Refer to “Note 11: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Gain on sale of business
Gain on sale of business was $87.6 million and $88.2 million for the three and six months ended June 30, 2021, respectively, related to the sale of the Distrupol business. The six months ended June 30, 2021 also included adjustments to the sale price of the Canadian Agriculture services business
Other income, net
Other income, net decreased $0.6 million, or 18.2%, and increased $21.6 million, or 67.5%, for the three and six months ended June 30,
2022, respectively. Refer to “Note 6: Supplemental financial information” in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Income tax expense
Income tax expense was $58.6 million and $27.0 million for the three months ended June 30, 2022 and 2021, respectively, resulting in effective income tax rates of 26.5% and 15.0% for the respective periods. Income tax expense was $123.3 million
and $44.6 million for the six months ended June 30,
2022 and 2021, respectively, resulting in effective income tax rates of 26.4% and 16.9% for the respective periods.
Our 2022 effective income tax rate was higher than the US federal statutory rate of 21.0%, primarily due to higher rates on foreign earnings, US tax on foreign earnings, US state income taxes and non-deductible employee costs. Our 2021 effective income tax rate was also impacted by these items but offset by other discrete tax items.
Results of Reportable Business Segments
Our operations are structured into four reportable 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), gross margin and Adjusted EBITDA margin. Such non-GAAP financial measures are referred to from time to time in this report, but should not be viewed as a substitute for GAAP measures of performance and should be considered along with the comparable US GAAP measures. See “Note 16: Segments” to our condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q, “Analysis of Segment Results” within this Item and “Non-GAAP Financial Measures” within this Item for
additional information.
Analysis of Segment Results
USA
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Net sales:
External
customers
$
1,970.2
$
1,500.2
31.3
%
$
3,813.4
$
2,793.2
36.5
%
Inter-segment
43.8
19.5
124.6
%
72.3
36.9
95.9
%
Total
net sales
$
2,014.0
$
1,519.7
32.5
%
$
3,885.7
$
2,830.1
37.3
%
Cost of goods sold (exclusive of depreciation)
1,518.8
1,137.8
33.5
%
2,917.6
2,122.5
37.5
%
Outbound
freight and handling
94.4
68.8
37.2
%
180.2
132.1
36.4
%
Warehousing, selling and administrative
202.2
187.5
7.8
%
380.1
348.1
9.2
%
Adjusted
EBITDA
$
198.6
$
125.6
58.1
%
$
407.8
$
227.4
79.3
%
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Gross profit (exclusive of depreciation):
Net
sales
$
2,014.0
$
1,519.7
32.5
%
$
3,885.7
$
2,830.1
37.3
%
Cost of goods sold (exclusive of depreciation)
1,518.8
1,137.8
33.5
%
2,917.6
2,122.5
37.5
%
Gross
profit (exclusive of depreciation)
$
495.2
$
381.9
29.7
%
$
968.1
$
707.6
36.8
%
External
sales increased $470.0 million, or 31.3%, and increased $1,020.2 million, or 36.5%, for the three and six months ended June 30, 2022, respectively, primarily due to our pricing discipline in inflationary markets and market share gains.
Gross profit (exclusive of depreciation) increased $113.3 million, or 29.7%, and increased $260.5 million, or 36.8%, for the three and six months ended June 30, 2022, respectively, primarily due to our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased from 25.5% for the three months ended June 30, 2021 to 25.1% for the three months ended June 30, 2022 and increased from 25.3% for the six months
ended June 30, 2021 to 25.4% for the six months ended June 30, 2022, with both comparable periods impacted by our pricing discipline in inflationary markets and input cost inflation.
Outbound freight and handling expenses increased $25.6 million, or 37.2%, and increased $48.1 million, or 36.4%, for the three and six months ended June 30, 2022, respectively, primarily due to higher costs to deliver caused by supply chain constraints.
WS&A increased $14.7 million, or 7.8%, and increased $32.0 million, or 9.2%, for the three and six months ended June 30, 2022, respectively, primarily due to higher operating costs and variable compensation, partially offset by net synergies. An environmental
recovery in 2022 also favorably impacted the six month comparable periods. As a percentage of external sales,
WS&A decreased from 12.5% for the three months ended June 30, 2021 to 10.3% for the three months ended June 30, 2022 and decreased from 12.5% for the six months ended June 30, 2021 to 10.0% for the six months ended June 30, 2022.
Adjusted EBITDA increased $73.0 million, or 58.1%, and increased $180.4 million,
or 79.3%, for the three and six months ended June 30, 2022, respectively, primarily driven by higher gross profit (exclusive of depreciation), partially offset by higher outbound freight and handling expenses as well as higher WS&A. Adjusted EBITDA margin increased from 8.4% in the three months ended June 30, 2021 to 10.1% for the three months ended June 30, 2022 and increased from 8.1% in the six months ended June 30, 2021 to 10.7% for the six months ended June 30, 2022, reflecting the business operating leverage.
EMEA
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Net sales:
External
customers
$
547.2
$
504.0
8.6
%
$
1,109.4
$
1,009.9
9.9
%
Inter-segment
3.0
1.9
57.9
%
3.7
2.7
37.0
%
Total
net sales
$
550.2
$
505.9
8.8
%
$
1,113.1
$
1,012.6
9.9
%
Cost of goods sold (exclusive of depreciation)
419.7
377.8
11.1
%
841.0
756.3
11.2
%
Outbound
freight and handling
17.8
16.1
10.6
%
34.8
32.0
8.8
%
Warehousing, selling and administrative
62.3
64.2
(3.0)
%
123.1
125.9
(2.2)
%
Adjusted
EBITDA
$
50.4
$
47.8
5.4
%
$
114.2
$
98.4
16.1
%
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Gross profit (exclusive of depreciation):
Net
sales
$
550.2
$
505.9
8.8
%
$
1,113.1
$
1,012.6
9.9
%
Cost of goods sold (exclusive of depreciation)
419.7
377.8
11.1
%
841.0
756.3
11.2
%
Gross
profit (exclusive of depreciation)
$
130.5
$
128.1
1.9
%
$
272.1
$
256.3
6.2
%
External sales increased
$43.2 million, or 8.6%, and increased $99.5 million, or 9.9%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, external sales increased $135.7 million, or 26.9%, and increased $256.1 million, or 25.4%, for the three and six months ended June 30, 2022, respectively.The increase was primarily due to our pricing discipline in inflationary markets and market share gains, with the six month comparison period partially offset by the effects of the Distrupol divestiture.
Gross profit (exclusive of depreciation) increased $2.4 million, or 1.9%, and increased $15.8 million, or 6.2%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, gross profit (exclusive
of depreciation) increased $23.7 million, or 18.5%, and increased $52.7 million, or 20.6%, for the three and six months ended June 30, 2022, respectively. The increase was primarily due to our pricing discipline in inflationary markets, operational execution and market share gains, with the six month comparison period partially offset by the effects of the Distrupol divestiture. Gross margin decreased from 25.4% for the three months ended June 30, 2021 to 23.8% for the three months ended June 30, 2022 and decreased from 25.4% for the six months ended June 30, 2021 to 24.5% for the six months ended June 30, 2022, with both comparable periods negatively impacted by input cost inflation, partially offset by our pricing discipline
in inflationary markets.
Outbound freight and handling expenses increased $1.7 million, or 10.6%, and increased $2.8 million, or 8.8%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, outbound freight and handling expenses increased $4.2 million, or 26.1%, and increased $6.7 million, or 20.9%, for the three and six months ended June 30, 2022, respectively, primarily due to higher costs to deliver caused by supply chain constraints.
WS&A decreased $1.9 million, or 3.0%, and decreased $2.8 million, or 2.2%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, WS&A increased $7.7 million, or 12.0% and increased $12.8 million, or 10.2%, for the
three and six months ended June 30, 2022, respectively, primarily due to higher operating costs and variable compensation. As a percentage of external sales, WS&A decreased from 12.7% for the three months ended June 30, 2021 to 11.4% for the three months ended June 30, 2022 and decreased from 12.5% for the six months ended June 30, 2021 to 11.1% for the six months ended June 30, 2022.
Adjusted EBITDA increased
$2.6 million, or 5.4%, and increased $15.8 million, or 16.1%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, adjusted EBITDA increased $11.8 million, or 24.7%, and increased $33.3 million, or 33.8%, for the three and six months ended June 30, 2022, respectively, primarily due to higher gross profit (exclusive of depreciation), partially offset by increased WS&A and by the effects of the Distrupol divestiture for the six month comparable periods. Adjusted EBITDA margin decreased from 9.5% for the three months ended June 30, 2021 to 9.2% for the three months ended June 30, 2022 primarily due to lower gross margin, partially offset by the business operating leverage. Adjusted EBITDA margin increased from 9.7% for the six months
ended June 30, 2021 to 10.3% for the six months ended June 30, 2022, reflecting the business operating leverage for the full six month period.
Canada
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Net sales:
External
customers
$
298.2
$
238.6
25.0
%
$
591.6
$
461.3
28.2
%
Inter-segment
2.5
1.3
92.3
%
4.3
2.0
115.0
%
Total
net sales
$
300.7
$
239.9
25.3
%
$
595.9
$
463.3
28.6
%
Cost of goods sold (exclusive of depreciation)
231.2
181.0
27.7
%
451.9
348.1
29.8
%
Outbound
freight and handling
10.2
9.9
3.0
%
20.1
19.1
5.2
%
Warehousing, selling and administrative
27.3
24.0
13.8
%
55.2
44.8
23.2
%
Adjusted
EBITDA
$
32.0
$
25.0
28.0
%
$
68.7
$
51.3
33.9
%
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Gross profit (exclusive of depreciation):
Net
sales
$
300.7
$
239.9
25.3
%
$
595.9
$
463.3
28.6
%
Cost of goods sold (exclusive of depreciation)
231.2
181.0
27.7
%
451.9
348.1
29.8
%
Gross
profit (exclusive of depreciation)
$
69.5
$
58.9
18.0
%
$
144.0
$
115.2
25.0
%
External sales increased
$59.6 million, or 25.0%, and increased $130.3 million, or 28.2%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, external sales increased $71.2 million, or 29.8%, and increased $142.0 million, or 30.8%, for the three and six months ended June 30, 2022, respectively. The increase was primarily due to our pricing discipline in inflationary markets and market share gains.
Gross profit (exclusive of depreciation) increased $10.6 million, or 18.0%, and increased $28.8 million, or 25.0%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, gross profit (exclusive of depreciation) increased $13.5 million, or 22.9%, and increased $31.7 million, or 27.5%, for the three and six months ended June 30,
2022, respectively.The increase is primarily due to our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased from 24.7% for the three months ended June 30, 2021 to 23.3% for the three months ended June 30, 2022 and decreased from 25.0% for the six months ended June 30, 2021 to 24.3% for the six months ended June 30, 2022, with both comparable periods impacted by our pricing discipline in inflationary markets and input cost inflation.
Outbound freight and handling expenses increased $0.3 million, or 3.0%, and increased $1.0 million, or 5.2%, for the three and six months ended June 30,
2022, respectively. On a constant currency basis, outbound freight and handling expenses increased $0.7 million, or 7.1%, and increased $1.4 million, or 7.3%, for the three and six months ended June 30, 2022, respectively.
WS&A increased $3.3 million, or 13.8%, and increased $10.4 million, or 23.2%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, WS&A increased by $4.4 million, or 18.3%, and increased $11.5 million, or 25.7%, for the three and six months ended June 30, 2022, respectively. The increase is primarily due to higher operating costs and variable compensation. As a percentage of external sales, WS&A decreased from 10.1% for the three months ended June 30, 2021
to 9.2% for the three months ended June 30, 2022 and decreased from 9.7% for the six months ended June 30, 2021 to 9.3% for the six months ended June 30, 2022.
Adjusted EBITDA increased $7.0 million, or 28.0%, and increased $17.4 million, or 33.9%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, Adjusted EBITDA increased $8.4 million, or 33.6%, and increased $18.8 million, or 36.6%, for the three and six months ended
June 30, 2022, respectively. The increase is primarily due to higher gross profit (exclusive of depreciation), partially offset by increased WS&A. Adjusted EBITDA margin increased from 10.5% for the three months ended June 30, 2021 to 10.7% for the three months ended June 30, 2022 and increased from 11.1% for the six months ended June 30, 2021 to 11.6% for the six months ended June 30, 2022, reflecting the business operating leverage.
LATAM
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Net sales:
External
customers
$
201.0
$
151.3
32.8
%
$
384.8
$
285.1
35.0
%
Inter-segment
0.1
—
0.1
—
Total
net sales
$
201.1
$
151.3
32.9
%
$
384.9
$
285.1
35.0
%
Cost of goods sold (exclusive of depreciation)
160.3
117.7
36.2
%
303.6
219.3
38.4
%
Outbound
freight and handling
3.3
3.0
10.0
%
6.5
6.0
8.3
%
Warehousing, selling and administrative
21.3
17.3
23.1
%
42.4
30.9
37.2
%
Adjusted
EBITDA
$
16.2
$
13.3
21.8
%
$
32.4
$
28.9
12.1
%
Three
months ended June 30,
% Change
Six months ended June 30,
% Change
(in millions)
2022
2021
2022
2021
Gross profit (exclusive of depreciation):
Net
sales
$
201.1
$
151.3
32.9
%
$
384.9
$
285.1
35.0
%
Cost of goods sold (exclusive of depreciation)
160.3
117.7
36.2
%
303.6
219.3
38.4
%
Gross
profit (exclusive of depreciation)
$
40.8
$
33.6
21.4
%
$
81.3
$
65.8
23.6
%
External
sales increased $49.7 million, or 32.8%, and increased $99.7 million, or 35.0%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, external net sales increased $45.6 million, or 30.1%, and increased $93.0 million, or 32.6%, for the three and six months ended June 30, 2022, respectively, primarily due to our pricing discipline in inflationary markets and the Sweetmix acquisition, which contributed 10.4% and 10.9% of the increase for the three and six months ended June 30, 2022, respectively.
Gross profit (exclusive of depreciation) increased $7.2 million, or 21.4%, and increased $15.5 million, or 23.6%, for the three and six months ended June 30, 2022, respectively. On a constant currency
basis, gross profit (exclusive of depreciation) increased $6.0 million, or 17.9%, and increased $13.5 million, or 20.5%, for the three and six months ended June 30, 2022, respectively, primarily due to our pricing discipline in inflationary markets and the Sweetmix acquisition, which contributed 8.6% and 10.2% of the increase for the three and six months ended June 30, 2022, respectively. Both comparable periods were also negatively impacted by input cost inflation. Gross margin decreased from 22.2% for the three months ended June 30, 2021 to 20.3% for the three months ended June 30, 2022 and decreased from 23.1% for the six months ended June 30, 2021 to 21.1% for the six months ended June 30,
2022, with both comparable periods impacted by our pricing discipline in inflationary markets and input cost inflation.
Outbound freight and handling expenses increased $0.3 million, or 10.0%, and increased $0.5 million, or 8.3%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, outbound freight and handling expenses increased $0.3 million, or 10.0%, and increased $0.4 million, or 6.7%, for the three and six months ended June 30, 2022, respectively.
WS&A increased $4.0 million, or 23.1%, and increased $11.5 million, or 37.2%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, WS&A increased $3.3 million, or 19.1%, and increased $10.5 million,
or 34.0%, for the three and six months ended June 30, 2022, respectively, primarily due to increased corporate cost allocation as a result of the SAP implementation and higher operating costs. As a percentage of external sales, WS&A decreased from 11.4% for the three months ended June 30, 2021 to 10.6% for the three months ended June 30, 2022 and increased from 10.8% for the six months ended June 30, 2021 to 11.0% for the six months ended June 30, 2022.
Adjusted
EBITDA increased $2.9 million, or 21.8%, and increased $3.5 million, or 12.1%, for the three and six months ended June 30, 2022, respectively. On a constant currency basis, Adjusted EBITDA increased $2.4 million, or 18.0%, and increased $2.6 million, or 9.0%, for the three and six months ended June 30, 2022. Adjusted EBITDA margin decreased from 8.8% for the three months ended June 30, 2021 to 8.1% for the three months ended June 30, 2022 and decreased from 10.1% for the six months ended June 30, 2021 to 8.4% for the six months ended June 30, 2022, primarily from lower gross margin, partially offset by the business operating leverage.
The Company’s primary sources of liquidity are cash generated from its operations and borrowings under its committed North American and European credit facilities (“credit facilities”). As of June 30, 2022, liquidity for the Company was $1,011.8 million, comprised of $234.8 million of cash and cash equivalents and $777.0 million of available borrowings under our credit facilities. These credit 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. Significant reductions in our trade receivables and inventory would reduce our availability to access liquidity under these credit facilities. We have no active financial maintenance covenants in our credit 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 7.4x as of June 30, 2022.
Our primary short-term liquidity and capital resource needs are to finance operating expenses, working capital, capital expenditures, other liabilities including environmental remediation and interest, possible business acquisitions, share repurchases and general
corporate purposes. The majority of our debt obligations mature in 2026 and beyond. To the extent that our cash balances from time to time exceed amounts that are needed to fund our immediate liquidity requirements, we will consider alternative uses of some or all of such excess cash. Such alternatives may include, among others, the redemption or repurchase of debt securities or other borrowings through open market purchases, privately negotiated transactions or otherwise. Refer to “Note 11: Debt” in Item 1 of this Quarterly Report on Form 10-Q for additional information related to our debt obligations. Management continues to balance its focus on sales and earnings growth with continuing efforts in cost control and working capital management.
Access to debt capital markets has historically provided the Company with sources of liquidity,
beyond normal operating cash flows. 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, 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.
We expect our 2022 capital expenditures to be approximately $135 million to $145 million for maintenance and growth, including safety, cost improvements and ESG investments. Interest payments for 2022 are expected to be $85 million to $95 million. We expect to fund our capital expenditures and our interest payments with cash from operations or cash on hand.
We believe funds provided by our primary sources
of liquidity will be adequate to meet our liquidity, debt repayment obligations and capital resource needs for at least the next 12 months under current operating conditions.
Cash Flows
The following table presents a summary of our cash flows:
Six months ended June 30,
Change
(in
millions)
2022
2021
Net cash used by operating activities
$
(86.2)
$
(8.6)
$
(77.6)
Net cash (used) provided by investing activities
(65.4)
103.6
(169.0)
Net
cash provided (used) by financing activities
154.7
(269.7)
424.4
Cash Used by Operating Activities
Cash used by operating activities increased $77.6 million for the six months ended June 30, 2022. The increase in operating cash usage is primarily due to changes in trade working capital and other, net, partially offset by higher net income, exclusive of non-cash items.
Cash used by trade working capital, which includes trade accounts receivable, net, inventories and trade
accounts payable, increased $212.1 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The year-over-year increase in cash used by trade working capital is due to increased inventory purchase costs and higher trade accounts payable primarily attributable to increased inventory purchases in the current year.
The change in net income, exclusive of non-cash items, increased $252.5 million from $215.8 million for the six months ended June 30, 2021 to $468.3 million for the six months ended June 30, 2022. Cash used by other, net increased $123.3 million for the six months ended June 30, 2022 as compared to the six months ended June 30,
2021, primarily attributable to accrued compensation and tax payments and timing differences related to other assets and liabilities.
Investing cash flows for the six months ended June 30, 2022 included capital expenditures of $64.8 million, cash paid of $3.8 million for Sweetmix acquisition purchase price adjustments and proceeds of $3.2 million from the sale of property, plant and equipment. Investing cash flows for the six months ended June 30, 2021 included proceeds
of $136.3 million from the sale of Distrupol business, capital expenditures of $38.9 million and proceeds of $8.5 million from the sale of property, plant and equipment.
Cash Provided (Used) by Financing Activities
Financing cash flows for the six months ended June 30, 2022 included proceeds under revolving credit facilities of $925.6 million, payments under revolving credit facilities of $609.5 million, long-term debt repayments of $68.0 million and share repurchases of $104.6 million. Financing cash flows for the six months ended June 30, 2021 included proceeds under revolving credit facilities of $1,352.2 million, payments under revolving credit facilities of $1,326.7 million, long term debt issuances of $995.0 million and long-term debt repayments of $1,330.0 million.
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, 2021.
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 year ended December 31,
2021, other than as disclosed in “Note 11: Debt” to the interim condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as the “Liquidity and Capital Resources” included in Item 2 of this Quarterly Report on Form 10-Q.
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, 2021.
Recently Issued Accounting Pronouncements
See “Note 1: Significant accounting policies”
to the interim condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
Forward Looking Statements and Information
Certain parts of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally accompanied by words such as “believes,”“expects,”“may,”“will,”“should,”“could,”“seeks,”“intends,”“plans,”“estimates,”“anticipates” or other comparable terms. All forward-looking statements made in 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 should not be relied upon as
representing our views as of any subsequent date, and we undertake no obligation, other than as may be 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 performance may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Forward-looking statements include, but are not limited to, statements about:
•the impact of general economic conditions, supplier shut-downs, port congestion, acute COVID-19 pandemic recovery demand, the Russia-Ukraine conflict and weather events on our end markets, operations, financial condition and operating results;
•our expense control and cost reduction plans and other strategic plans and initiatives;
•demand
for products, systems and services that meet growing customer sustainability standards, expectations and preferences and our ability to provide such products, systems and services to maintain our competitive position;
•our ability to sell specialty products at higher profit;
•our liquidity outlook and the funding thereof, and cash requirements and adequacy of resources to fund them;
•significant factors that may adversely affect us and our industry;
•the outcome and effect of ongoing and future legal proceedings;
•market conditions and outlook;
•return of capital to
shareholders;
•future contributions to, and withdrawal liability in connection with, our pension plans and cash payments for postretirement benefits; and
Potential factors that could affect such forward-looking statements include, among others:
•general economic conditions, particularly fluctuations in industrial production and consumption and the timing and extent of economic downturns;
•significant
changes in the business strategies of producers or in the operations of our customers;
•increased competitive pressures, including as a result of competitor consolidation;
•potential supply chain disruptions;
•significant changes in the pricing, demand and availability of chemicals;
•our indebtedness, the restrictions imposed by, and costs associated with, our debt instruments, and our ability to obtain additional financing;
•the broad spectrum of laws and regulations that we are subject to, including extensive environmental, health and safety laws and regulations and changes in tax laws;
•potential
cybersecurity incidents, including security breaches;
•an inability to generate sufficient working capital;
•transportation related challenges, including increases in transportation and fuel costs, changes in our relationship with third party transportation providers, and ability to attract and retain qualified drivers;
•accidents, safety failures, environmental damage, product quality issues, delivery failures or hazards and risks related to our operations and the hazardous materials we handle;
•potential inability to obtain adequate insurance coverage;
•ongoing litigation, potential product liability claims and recalls, and other
environmental, legal and regulatory risks;
•challenges associated with international operations;
•exposure to interest rate and currency fluctuations;
•possible impairment of goodwill and intangible assets;
•the ongoing and evolving COVID-19 pandemic, including impacts on the global economy, our employees, customers, vendors and suppliers, and our business, results of operations and financial condition;
•an inability to integrate the business and systems of companies we acquire, including failure to realize the anticipated benefits of such acquisitions;
•negative
developments affecting our pension plans and multi-employer pensions;
•labor disruptions associated with the unionized portion of our workforce;
•our ability to attract or retain a qualified and diverse workforce; and
•our ability to execute on our strategies related to environmental, social, and governance matters, and achieve related expectations may be impacted as a result of evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and the availability of requisite financing and changes in carbon markets; and
•the other factors described in the
Company’s filings with the Securities and Exchange Commission.
The 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, 2021 should be read in full and with the understanding that actual future results may be materially different from 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 reportable segments separately for the purposes of making decisions about resource allocation and performance assessment, and evaluate performance using Adjusted EBITDA. Additionally, the Company uses Adjusted EBITDA in setting performance incentive targets to align management compensation measurement with operational performance.
We define Adjusted EBITDA as the sum of consolidated net income;
depreciation; amortization; net interest expense; income tax expense; impairment charges; (gain) loss on sale of business; other operating expenses, net and other income, net (for both, see “Note 6: Supplemental financial information” in Item 1 of this Quarterly Report on Form 10-Q for additional information). 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 to Adjusted EBITDA, the most comparable measure calculated
in accordance with GAAP, see “Note 16: Segments” to our condensed consolidated financial
statements in Item 1 of this Quarterly Report on Form 10-Q.
We believe other financial measures, as defined below, that do not comply with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company.
•Gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation);
•Gross margin: gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales on a consolidated level; and
•Adjusted EBITDA margin: Adjusted EBITDA divided by external sales on a segment level and by net sales on a consolidated level.
We
evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing information on a constant currency basis provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages and other information by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.
The non-GAAP financial measures noted above are not 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. They 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, 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, 2021.
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 June 30, 2022 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 June 30, 2022.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Information pertaining to legal proceedings can be found in Note 14 to the interim condensed consolidated financial statements included in Part
I, Financial Statements of this report.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information on our common stock share repurchases during the second quarter of 2022 is provided below:
Period
Total
Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program(1)
Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Plan or Program (millions)(1)
April 1-30, 2022
454,637
$
31.36
454,637
$
411.7
May
1-31, 2022
1,749,226
28.66
1,749,226
361.6
June 1-30, 2022
552,558
29.31
552,558
345.4
Total
2,756,421
29.24
2,756,421
(1)As
announced on November 1, 2021, our Board of Directors authorized the repurchase of up to $500.0 million of our outstanding common stock, which expires on October 27, 2026.
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 Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline 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
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.
