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nexeo:interest_rate_swap iso4217:USD xbrli:shares iso4217:USD xbrli:pure nexeo:vote nexeo:segment nexeo:country

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM	10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30~~December 31, 2018

o 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: 001-36477

NEXEO SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)



Delaware		46-5188282
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Waterway Square Place, Suite 1000 The Woodlands, Texas		77380
(Address of principal executive offices)		(Zip Code)

(281) 297-0700

(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
		Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of ~~August~~February 31, ~~2018~~2019, there were 89,~~734~~698,~~146~~331 shares of the Company’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Forward-Looking Statements		56
Item 1. Financial Statements (unaudited)		67
	Condensed Consolidated Balance Sheets	67
	Condensed Consolidated Statements of Operations	78
	Condensed Consolidated Statements of Comprehensive Income (Loss)	8
	Condensed Consolidated Statements of Comprehensive Income	9
	Condensed Consolidated Statements of Equity	910
	Condensed Consolidated Statements of Cash Flows	1011
	Notes to Condensed Consolidated Financial Statements	1112
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3836
Item 3. Quantitative and Qualitative Disclosures About Market Risk		5549
Item 4. Controls and Procedures		5751
PART II—OTHER INFORMATION		5852
Item 1. Legal Proceedings		5852
Item 1A. Risk Factors		5953
Item 2. Unregistered Sales of Equity Securities And Use of Proceeds		5953
Item 3. Defaults Upon Senior Securities		5953
Item 4. Mine Safety Disclosures		5953
Item 5. Other Information		5953
Item 6. Exhibits		6054

Table of Contents

Glossary

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.

2016 LTIP	The Nexeo Solutions, Inc. 2016 Long Term Incentive Plan
ABL Borrowers	Holdings, Sub Holding and Solutions together with Nexeo Solutions Canada Corporation
ABL Facility	The asset-based credit facility pursuant to that certain asset-based credit agreement by and among the ABL Borrowers, Bank of America, N.A., as administrative agent and the lenders party thereto and the other parties thereto
ASC	The FASB Accounting Standards Codification
ASU	Accounting Standards Update issued by the FASB
Blocker	TPG Accolade Delaware, L.P.
Blocker Merger	The merger of Blocker Merger Sub into Blocker on June 9, 2016, immediately following the Company Merger, with Blocker continuing as the surviving entity
Blocker Merger Sub	Neon Acquisition Company LLC, which was a wholly-owned subsidiary of WLRH at the time of the Blocker Merger
Business Combination	The business combination between WLRH and Holdings pursuant to the Merger Agreement, which was consummated on the Closing Date
CAD	Canadian dollar
Canadian Tranche	Canadian tranche of the ABL Facility
Closing Date	June 9, 2016
Company	Nexeo Solutions, Inc. (f/k/a WL Ross Holding Corp.) and its consolidated subsidiaries
Company / Nexeo	Nexeo Solutions, Inc. (f/k/a WL Ross Holding Corp.) and its consolidated subsidiaries
Company Merger	The merger of Company Merger Sub with and into Holdings consummated on June 9, 2016, with Holdings continuing as the surviving entity
Company Merger Sub	Neon Holding Company LLC, which was a wholly-owned subsidiary of WLRH at the time of the Company Merger
Credit Facilities	The ABL Facility and the Term Loan Facility, collectively
Deferred Cash Consideration	The deferred payment to be made in cash to the Selling Equityholders pursuant to the Merger Agreement, where such deferred cash payments will generally be in an amount equal to the Company’s prevailing stock price at the time that the Company pays such deferred cash payments multiplied by the number of Excess Shares or as otherwise set forth in the Merger Agreement
DTSC	California Department of Toxic Substances Control
EBITDA	Earnings before interest, tax, depreciation and amortization
EMEA	Europe, Middle East and Africa
ERP	Enterprise resource planning
Excess Shares	The 5,178,642 shares of Company common stock used to calculate the Deferred Cash Consideration payable to the Selling Equityholders pursuant to the Merger Agreement
Exchange Act	U.S. Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FILO Tranche	$30.0 million tranche within the ABL Facility for non-Canadian foreign subsidiaries to issue loans and letters of credit
Founder Shares	The 12,506,250 shares of Company common stock issued to the Sponsor at the time of the IPO
GDP	Gross domestic product
Holdings	Nexeo Solutions Holdings, LLC
HSR Act	Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
IPO	The initial public offering of WLRH, consummated on June 11, 2014
Merger Agreement	Agreement and Plan of Merger, as amended, by and among WLRH, Blocker Merger Sub, Company Merger Sub, Holdings, Blocker, and Nexeo Holdco, LLC dated as of March 21, 2016
Mergers	The Company Merger and the Blocker Merger, collectively

Table of Contents

Merger Sub I	Pilates Merger Sub I Corp, a Delaware corporation and direct wholly owned Subsidiary of Univar
Merger Sub II	Pilates Merger Sub II Corp, a Delaware corporation and direct wholly owned Subsidiary of Univar
Montgomery Lease	The Company’s leased facility in Montgomery, Illinois commencing in the first fiscal quarter of 2017
NASDAQ	NASDAQ Stock Market
NYSE	New York Stock Exchange
Peso	Mexican peso
Predecessor	Holdings and its subsidiaries for the periods prior to the Closing Date
PSLRA	U.S. Private Securities Litigation Reform Act of 1995
PSU	Performance share unit issued under the 2016 LTIP
RCRA	U.S. Resource Conservation and Recovery Act
RMB	Chinese renminbi
RSU	Restricted stock unit issued under the 2016 LTIP
Ryder	Ryder Truck Rental, Inc.
Ryder Lease	Lease agreement entered into by and between the Predecessor and Ryder in May 2015 for certain transportation equipment
SAFE	People’s Republic of China State Administration of Foreign Exchange
SEC	U.S. Securities and Exchange Commission
Secured Net Leverage Ratio	The ratio of Consolidated Total Indebtedness divided by EBITDA (terms as defined in the Term Loan Facility agreement)
Securities Act	U.S. Securities Act of 1933, as amended
Selling Equityholders	The holders of equity interests in Holdings (other than Blocker) and the holders of equity interests in Blocker, in each case, as of the time immediately prior to the Business Combination
Solutions	Nexeo Solutions, LLC
Sponsor	WL Ross Sponsor LLC, the sponsor entity of WLRH prior to the Business Combination.
Sub Holding	Nexeo Solutions Sub Holding Corp.
Tax Act	The comprehensive tax legislation enacted by the U.S. government on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act.
Term Loan Facility	Term loan credit facility pursuant to that certain credit agreement by and among Holdings, Solutions, Sub Holding, Bank of America, N.A., as administrative and collateral agent, the other agents party thereto and the lenders party thereto
TLB Amendment No. 1	The amendment to the Term Loan Facility dated March 22, 2017
TLB Amendment No. 2	The amendment to the Term Loan Facility dated December 19, 2017
TPG	TPG Capital, L.P. together with its affiliates, including TPG Accolade
TPG Accolade	TPG Accolade, L.P.
TPG Restricted Stock Grants	Restricted stock agreements entered into between TPG and certain of the Company’s officers and employees
TRA	The Tax Receivable Agreement entered into in connection with the Business Combination, by and between the Company and the Selling Equityholders, dated as of June 9, 2016
TRA Holders	Nexeo Holdco, LLC, TPG VI, Nexeo I, LP., TPG VI Nexeo II, L.P. and TPG VI FOF Nexeo L.P.
TRA Termination Agreement	The TRA Termination Agreement included as Exhibit 10.1 to the Form 8-K filed with the SEC on September 18, 2018.
Ultra Chem Acquisition	The April 3, 2017 acquisition of the equity interests of the Mexico City, Mexico based chemicals distribution business of the Ultra Chem Group pursuant to the Ultra Chem Stock Purchase Agreement
Ultra Chem Closing Date	April 3, 2017
Ultra Chem Group	The Mexico City, Mexico based chemicals distribution business of Ultra Chem, S. de R.L. de C.V. and its related entities
Ultra Chem Stock Purchase Agreement	The Stock Purchase Agreement dated March 9, 2017 related to the purchase of the equity interests of Ultra Chem Group
U.S.	United States of America
USD	U.S. Dollar
U.S. GAAP	U.S. Generally accepted accounting principles
U.S. Tranche	U.S. Tranche of the ABL Facility
WLRH	WL Ross Holding Corp.

Table of Contents

Forward-Looking Statements



Ultra Chem Stock Purchase Agreement	The Stock Purchase Agreement dated March 9, 2017 related to the purchase of the equity interests of Ultra Chem Group
Univar	Univar, Inc.
Univar Merger Agreement	Agreement and Plan of Merger by and among Nexeo, Univar, Merger Sub I and Merger Sub II dated as of September 17, 2018 providing for the acquisition of Nexeo by Univar.
U.S.	United States of America
USD	U.S. Dollar
U.S. GAAP	U.S. Generally accepted accounting principles
U.S. Tranche	U.S. Tranche of the ABL Facility
WLRH	WL Ross Holding Corp.

Certain information and statements contained in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the PSLRA codified at Section 27A of the Securities Act, and Section 21E of the Exchange Act. This statement is included for purposes of complying with the safe harbor provisions of the PSLRA. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “may,” “will,” “could,” “would” and similar expressions. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks, including cybersecurity risks, or uncertainties, and we urge you not to place undue reliance on any forward-looking statements, which reflect management’s current expectations and assumptions about future events, and which are based on currently available information as to the timing and outcome of future events. Certain forward-looking statements are included in this Quarterly Report on Form 10-Q, principally in the section captioned “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 filed with the SEC on December 7, 2017.

These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Unless otherwise indicated or the context otherwise requires, comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. Our future results will depend upon various other risks and uncertainties, including those described in the section captioned “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 filed with the SEC on December 7, 2017. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.

Table of Contents

Forward-Looking Statements

Our future results will depend upon various other risks and uncertainties, including those described in the section captioned “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 filed with the SEC on December 6, 2018. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.

Table of Contents

PART I

Item 1. Financial Statements

Nexeo Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited, in millions, except share amounts and par value)

	June 30, 2018			September 30, 2017
	December 31, 2018			September 30, 2018
Current Assets
Cash and cash equivalents	$	4354.86		$	5358.9
Accounts and notes receivable (net of allowance for doubtful accounts of $3.8 million and $2.2 million, respectively)	625.8			597.4
Accounts and notes receivable (net of allowance for doubtful accounts of $3.9 million and $4.2 million, respectively)	549.5			607.8
Inventories	360.95			~~315~~338.58
Income taxes receivable	56.74			35.49
Other current assets	1716.49			1917.83
Total current assets	~~1,053~~987.69			~~990~~1,028.07
Non-Current Assets
Property, plant and equipment, net	~~288~~279.01			~~316~~284.19
Goodwill	~~700~~697.6			~~703~~699.09
Other intangible assets, net of amortization	~~218~~204.90			~~231~~211.56
Deferred income taxes	21.25			2.3
Other non-current assets	159.40			1016.62
Total non-current assets	1,~~225~~191.12			1,~~263~~214.59
Total Assets	$	2,~~278~~179.71		$	2,~~253~~243.56
Current Liabilities
Short-term borrowings, current portion of long-term debt and capital lease obligations	$	4749.53		$	5147.17
Accounts payable	~~374~~308.71			~~384~~380.21
Accrued expenses and other liabilities	5638.18			5867.42
Due to related party pursuant to contingent consideration obligations	914.25			1214.57
Income taxes payable	32.07			3.2.9
Total current liabilities	~~490~~413.54			~~509~~512.46
Non-Current Liabilities
Long-term debt and capital lease obligations, less current portion, net	~~806~~805.71			~~794~~752.04
Deferred income taxes	3329.40			3430.97
Due to related party pursuant to contingent consideration obligations	~~112~~100.1			~~127~~122.78
Other non-current liabilities	1012.10			910.96
Total non-current liabilities	~~962~~946.32			~~966~~916.5
Total Liabilities	1,~~452~~359.86			1,~~475~~429.91
Commitments and Contingencies (see Note 13)
Commitments and Contingencies (see Note 14)
Equity
Preferred stock, $0.0001 par value (1,000,000 shares authorized, none issued and outstanding as of June 30, 2018 and September 30, 2017)	—			—
Preferred stock, $0.0001 par value (1,000,000 shares authorized, none issued and outstanding as of December 31, 2018 and September 30, 2018)	—			—
Common stock, $0.0001 par value (300,000,000 shares authorized; 89,753,662 shares issued and 89,734,146 shares outstanding as of June 30, 2018 and 89,353,641 shares issued and 89,344,065 shares outstanding as of September 30, 2017)	—			—
Common stock, $0.0001 par value (300,000,000 shares authorized; 89,755,231 shares issued and 89,698,331 shares outstanding as of December 31, 2018 and 89,747,062 shares issued and 89,727,546 shares outstanding as of September 30, 2018)	—			—
Additional paid-in capital	~~769~~773.73			~~764~~771.45
Retained earnings	4950.24			434.82
Accumulated other comprehensive income	7.2			8.5
Accumulated other comprehensive income (loss)	(3.6		)	9.0
Treasury stock, at cost: 19,516 and 9,576 shares as of June 30, 2018 and September 30, 2017	(0.2		)	(0.1		)
Treasury stock, at cost: 56,900 and 19,516 shares as of December 31, 2018 and September 30, 2018	(0.6		)	(0.2		)
Total equity	~~825~~819.95			~~777~~814.65
Total Liabilities and Equity	$	2,~~278~~179.71		$	2,~~253~~243.56

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

Nexeo Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited, in millions, except share amounts and per share data)

	Three Months Ended June 30,						Nine Months Ended June 30,
	Three Months Ended December 31,
	2018			2017			~~2018~~			~~2017~~
Sales and operating revenues	$	~~1,046~~935.48		$	~~942~~929.76		$	~~3,017.0~~		$	~~2,655.2~~
Cost of sales and operating expenses	~~926~~837.21			~~840~~822.07			~~2,674.2~~			~~2,365.9~~
Gross profit	~~120~~98.27			~~102~~106.79			~~342.8~~			~~289.3~~
Selling, general and administrative expenses	8879.8			7984.48			~~259.5~~			~~233.9~~
Transaction related costs	—8.2			0.21			~~0.1~~			~~1.3~~
Change in fair value of contingent consideration obligations	(822.79		)	(018.86		)	~~(14.7~~		)	~~19.8~~
Operating income	4033.16			2340.96			~~97.9~~			~~34.3~~
Other income, net	0.41			50.71			~~0.9~~			~~8.3~~
Interest income (expense)
Interest income	0.2			—0.1			~~0.4~~			~~0.2~~
Interest expense	(13.5		)	(13.50		)	~~(39.2~~		)	~~(38.0~~		)
Net income before income taxes	2720.24			1627.18			~~60.0~~			~~4.8~~
Income tax expense	94.72			51.93			~~15.6~~			~~4.0~~
Net income attributable to Nexeo Solutions, Inc.	$	17.5		$	10.2		$	44.4		$	0.8
Net income	$	16.2		$	26.5
Net income per share available to common stockholders
Basic	$	0.2321		$	0.1335		$	~~0.58~~		$	~~0.01~~
Diluted	$	0.2321		$	0.1334		$	~~0.58~~		$	~~0.01~~
Weighted average number of common shares outstanding
Basic	76,~~797~~945,~~414~~078			76,~~743~~793,~~853~~518			~~76,795,551~~			~~76,745,396~~
Diluted	7677,~~983~~094,~~350~~430			7677,~~828~~139,~~868~~236			~~76,952,758~~			~~76,830,296~~

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

Nexeo Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, in millions)

	Three Months Ended June 30,						Nine Months Ended June 30,
	Three Months Ended December 31,
	2018			2017			~~2018~~			~~2017~~
Net income	$	1716.52		$	1026.25		$	~~44.4~~		$	~~0.8~~
Unrealized foreign currency translation gain (loss), net of tax (1)	(126.89		)	111.91			~~(7.5~~		)	~~4.9~~
Unrealized gain (loss) on interest rate hedges, net of tax	2.1			(0.7		)	6.2			(0.4		)
Unrealized gain (loss) on interest rate hedges, net of tax (2)	(5.7		)	1.9
Other comprehensive income (loss), net of tax	(1012.76		)	113.20			~~(1.3~~		)	~~4.5~~
Total comprehensive income, net of tax attributable to Nexeo Solutions, Inc.	$	6.8		$	21.4		$	43.1		$	5.3
Total comprehensive income, net of tax	$	3.6		$	29.5


⁽¹⁾	Tax effects are not material.


⁽²⁾	Tax impact of the unrealized gains and losses related to the interest rate swaps was $2.0 million and $0.6 million for the three months ended December 31, 2018 and 2017, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

Nexeo Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited, in millions, except share amounts)

	Common Stock				Treasury Stock				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount		Shares	Amount
Balance at September 30, 2017	89,344,065		$	—	9,576	$	(0.1	)	$	764.4	$	4.8	$	8.5		$	777.6
Balance at September 30, 2018	89,727,546		$	—	19,516	$	(0.2	)	$	771.5	$	34.2	$	9.0		$	814.5
Issuance of restricted stock	415,867		—		—	—			—		—		—			—
Vesting of restricted stock units	8,169		—		—	—			—		—		—			—
Vesting of restricted stock units	8,162		—		—	—			—		—		—			—
Shares associated with employee tax withholding for vesting of certain equity awards	(37,384	)	—		37,384	(0.4		)	—		—		—			(0.4		)
Forfeiture of restricted stock award	(24,008	)	—		—	—			—		—		—			—
Equity-based compensation	—		—		—	—			1.8		—		—			1.8
Shares associated with employee tax withholding for vesting of certain equity awards	(9,940	)	—		9,940	(0.1		)	—		—		—			(0.1		)
Comprehensive income (loss):
Equity-based compensation	—		—		—	—			5.3		—		—			5.3
Net income	—		—		—	—			—		16.2		—			16.2
Comprehensive income:
Other comprehensive loss	—		—		—	—			—		—		(12.6		)	(12.6		)
Net income	—		—		—	—			—		44.4		—			44.4
Balance at December 31, 2018	89,698,331		$	—	56,900	$	(0.6	)	$	773.3	$	50.4	$	(3.6	)	$	819.5
Other comprehensive loss	—		—		—	—			—		—		(1.3		)	(1.3		)
Balance at June 30, 2018	89,734,146		$	—	19,516	$	(0.2	)	$	769.7	$	49.2	$	7.2		$	825.9

	Common Stock				Treasury Stock				Additional Paid-in Capital		~~Accumulated~~Retained ~~Deficit~~Earnings			Accumulated Other Comprehensive Income			Total
	Shares		Amount		Shares	Amount
Balance at September 30, 2016	89,286,936		$	—	—	$	—		$	758.9	$	(9.6	)	$	(4.5	)	$	744.8
Balance at September 30, 2017	89,344,065		$	—	9,576	$	(0.1	)	$	764.4	$	4.8		$	8.5		$	777.6
Issuance of restricted stock	5415,~~434~~867		—		—	—			—		—			—			—
Forfeiture of restricted stock award	(10,753	)	—		—	—			—		—			—			—
Vesting of restricted stock units	8,162		—		—	—			—		—			—			—
Shares associated with employee tax withholding for vesting of certain equity awards	(9,576	)	—		9,576	(0.1		)	—		—			—			(0.1		)
Forfeiture of restricted stock award	(24,008	)	—		—	—			—		—			—			—
Equity-based compensation	—		—		—	—			4.2		—			—			4.2
Shares associated with employee tax withholding for vesting of certain equity awards	(2,777	)	—		2,777	—			—		—			—			—
Equity-based compensation	—		—		—	—			1.7		—			—			1.7
Comprehensive income:
Net income	—		—		—	—			—		026.85			—			026.85
Other comprehensive income	—		—		—	—			—		—			43.50			43.50
Balance at June 30, 2017	89,272,041		$	—	9,576	$	(0.1	)	$	763.1	$	(8.8	)	$	—		$	754.2
Balance at December 31, 2017	89,741,309		$	—	12,353	$	(0.1	)	$	766.1	$	31.3		$	11.5		$	808.8

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Nexeo Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, in millions)

	Nine Months Ended June 30,
	Three Months Ended December 31,
	2018			2017
Cash flows from operations
Net income	$	4416.42		$	026.85
Adjustments to reconcile to cash flows from operations:
Depreciation and amortization	5717.62			5319.5
Debt issuance costs amortization, debt issuance costs write-offs and original issue discount amortization	31.32			31.1
Provision for bad debt	1(0.52		)	(0.13		)
Deferred income taxes	(41.56		)	(01.8		)
Equity-based compensation expense	51.38			41.27
Change in fair value of contingent consideration obligations	(1422.79		)	19(18.86		)
Gain from sales of property and equipment	(0.6		)	—
Gain related to reimbursements of certain capital expenditures incurred	—			(8.1		)
Changes in assets and liabilities:
Accounts and notes receivable	~~(32~~55.98		)	~~(63~~36.89		)
Inventories	(4623.91		)	(3450.95		)
Other current assets	(0.13		)	3.(1.6		)
Accounts payable	(870.17		)	11(60.78		)
Accrued expenses and other liabilities	0(26.84		)	(112.16		)
Changes in other operating assets and liabilities, net	2(0.74		)	0.67
Net cash provided by (used in) operating activities	7.8			(12.0		)
Net cash used in operating activities	(50.2		)	(59.2		)
Cash flows from investing activities
Additions to property and equipment	(114.8		)	(204.71		)
Proceeds from the disposal of property and equipment	~~3.3~~—			0.46
Proceeds from reimbursement of certain capital expenditures incurred	—			8.4
Cash paid for asset acquisitions	(1.7		)	—
Cash paid for asset acquisitions	(11.0		)	(63.5		)
Net cash used in investing activities	(6.5		)	(3.5		)
Net cash used in investing activities	(19.5		)	(75.4		)
Cash flows from financing activities
Cash paid to TPG related to TRA	~~(4.2~~—		)	—(4.2		)
Proceeds from short-term debt	4229.76			3027.19
Repayments of short-term debt	(4528.90		)	(2931.6		)
Proceeds from issuance of long-term debt	~~524~~252.7			~~611~~231.67
Repayments of long-term debt and capital lease obligations	(~~514~~200.37		)	(~~536~~172.79		)
Payment of debt issuance costs	~~(0.8~~—		)	(10.38		)
Net cash provided by financing activities	253.26			7450.1
Effect of exchange rate changes on cash and cash equivalents	(01.62		)	(0.1		)
Decrease in cash and cash equivalents	(104.13		)	(1312.45		)
Cash and cash equivalents at the beginning of the period	5358.9			4753.59
Cash and cash equivalents at the end of the period	$	4354.86		$	3441.14
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	3612.04		$	3314.90
Cash paid during the period for taxes (net of refunds)	$	153.90		$	41.36
Supplemental disclosure of non-cash investing activities:
Non-cash capital expenditures	$	1.49		$	161.04
Non-cash intangible assets acquired	$	—		$	3.7
Supplemental disclosure of non-cash financing activities:
Non-cash capital lease obligations, net	$	0.2		$	13.6

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Nexeo Solutions, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited, in millions, except per share amounts)

1. Basis of Presentation and Nature of Operations

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. As such, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as disclosed herein) considered necessary for a fair statement have been included. Results of operations for the three ~~and nine~~ months ended ~~June~~December 3031, 2018 are not necessarily indicative of results to be expected for the fiscal year ending September 30, ~~2018~~2019. Quarterly financial data should be read in conjunction with the consolidated financial statements and accompanying notes for the fiscal year ended September 30, ~~2017~~2018 included in the Company's Annual Report on Form 10-K filed with the SEC on December 76, ~~2017~~2018.

The ~~Company~~consolidated ~~recorded~~financial ~~out-of-period~~data ~~adjustments~~as ~~during~~of ~~the three and nine months ended June~~ September 30, 2018 topresented ~~correct errors~~ in ~~the tax provision and accrued costs. The net impact of~~ these ~~adjustments~~unaudited ~~for~~condensed ~~the~~consolidated ~~nine~~financial ~~months~~statements ~~ended~~were ~~June~~derived ~~30,~~from ~~2018 was an increase to revenue of $0.4 million, a decrease to gross profit of $0.9 million and a decrease to net income $2.0 million. The net impact of~~ the ~~adjustment~~Company’s ~~for~~audited ~~the~~consolidated ~~three~~financial ~~months ended June 30~~statements, ~~2018~~but ~~was~~do annot ~~increase~~include toall ~~revenue~~disclosures ofrequired ~~$1.0~~by ~~million, a decrease to gross profit of $1~~U.~~8 million and a decrease to net income of $2~~S.8 ~~million~~GAAP. The Company does not believe these adjustments are material, individually or in the aggregate, to its unaudited Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2018, nor does it believe such items are material to any of its previously issued annual or quarterly financial statements, or its expected 2018 annual financial statements.

The consolidated financial data as of September 30, 2017 presented in these unaudited condensed consolidated financial statements were derived from the Company’s audited consolidated financial statements, but do not include all disclosures required by U.S. GAAP.

Nature of Operations

The Company is a global materials distributor offor chemicals products in North America and Asia and afor ~~global distributor of~~ plastics products in North America, EMEA and Asia. In North America, primarily in the U.S., the Company provides on-site and off-site hazardous and non-hazardous environmental services, including waste collection, transportation, recovery, disposal arrangement and recycling services. The Company offers its customers products used in a broad cross-section of end markets including household, industrial and institutional, lubricants, performance coatings (including architectural coatings, adhesives, sealants and elastomers), automotive, healthcare, personal care, oil and gas and construction. In connection with the distribution of chemicals products, the Company provides value-added services such as custom blending, packaging and re-packaging, private-label manufacturing and product testing in the form of chemical analysis, product performance analysis and product development.

2. Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In ~~July~~May ~~2015~~2014, the FASB issued ASU ~~2015~~2014-1109, ~~Inventory~~Revenue ~~(Topic~~from ~~330): Simplifying~~Contracts ~~the~~with ~~Measurement~~Customers of(Topic ~~Inventory~~606). The amendments in this ASU supersede the revenue recognition requirements in Topic 605, Revenue Recognition and require anthat ~~entity~~revenue tobe ~~measure~~recognized ~~inventory~~to atdepict the ~~lower~~transfer of ~~cost~~promised goods or ~~net~~services ~~realizable~~to ~~value,~~customers ~~whereas~~in ~~guidance~~an ~~previously~~amount ~~required~~that anreflects ~~assessment~~the ofconsideration ~~market~~to ~~value~~which ofthe ~~inventory,~~entity ~~with~~expects ~~different~~to ~~possibilities~~be entitled in exchange for ~~determining~~those ~~market~~goods ~~value~~or services. ~~This~~These ~~ASU~~amendments isare effective for ~~fiscal~~annual ~~years~~reporting periods beginning after December 15, ~~2016~~2017 ~~and~~including interim reporting periods within ~~those~~that ~~years~~reporting ~~and early adoption is permitted~~period. The Company adopted this standard ason of October 1, ~~2017,~~2018. For ~~and~~disclosures itrelated ~~did~~to ~~not have a material effect on~~ the ~~Company’s~~adoption ~~financial~~of ~~position~~this orguidance, ~~results~~see ofNote ~~operations~~3.

11In August 2016 the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017. The Company adopted this standard as of October 1, 2018 and it did not have a material effect on the Company’s financial position or results of operations.

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In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated guidance simplifies several aspects of accounting for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. The Company adopted this standard as of October 1, 2017 and it did not have a material effect on the Company’s financial position or results of operations.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): This ASU clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modified award. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. The amendments in this ASU will be applied prospectively to awards modified on or after the adoption date. The Company adopted this standard as of October 1, 2017 and it did not have a material effect on the Company’s financial position or results of operations.

New Accounting Pronouncements Not Yet Adopted

The Company continues the evaluation of the potential effects on its financial position or results of operations of the accounting pronouncements disclosed in its consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017 filed with the SEC on December 7, 2017, including ASU 2014-09, Revenue from Contracts with Customers and ASU 2016-02, Leases. With regards to ASU 2014-09, the Company continues to work on the identification, design and implementation of changes to its accounting systems, policies and internal controls to support the recognition and disclosure requirements under the new revenue recognition standard. However, the Company does not anticipate the adoption of the guidance will have a material effect on the amount or the timing of revenue recognition associated with the majority of its customer contracts given their general terms and duration. The Company expects to utilize the modified retrospective method of adoption by recognizing the cumulative effect of the adoption change as an adjustment to beginning of period retained earnings for the first quarter of fiscal 2019.

The Company is in the process of evaluating the potential effects of ASU 2016-02 and is formulating its implementation plan, including potential changes to accounting systems, policies and internal controls to support the adoption of the new guidance.

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3.New ~~Acquisitions~~Accounting Pronouncements Not Yet Adopted

~~Ultra~~The ~~Chem~~Company ~~Acquisition~~continues the evaluation of the potential effects on its financial position or results of operations of the accounting pronouncements disclosed in its consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 filed with the SEC on December 6, 2018, including ASU 2016-02, Leases. The Company is in the process of evaluating the potential effects of ASU 2016-02 and is formulating its implementation plan, including potential changes to accounting systems, policies and internal controls to support the adoption of the new guidance.

~~On April~~ 3~~, 2017, the Company completed the Ultra Chem Acquisition for $56~~.7 million, net of cash acquired of $0.5 million, pursuant to the Ultra Chem Stock Purchase Agreement. As of June 30, 2018, $9.3 million of the purchase price may remain in escrow for a period of up to five years from the closing of the acquisition and relates to indemnification obligations under the Ultra Chem Stock Purchase Agreement. The escrow amount will be released pursuant to the terms of the Ultra Chem Stock Purchase Agreement and related documentation. The Ultra Chem Acquisition was financed with approximately $58.0 million of borrowings under the ABL Facility. There is no contingent consideration related to the Ultra Chem Acquisition.Revenue

~~Purchase~~On ~~Price~~October ~~Allocation~~1, 2018, the Company adopted the new revenue standard and there were no adjustments recorded in connection with the adoption.

The ~~Ultra~~Company ~~Chem~~generally ~~Acquisition~~disaggregates isrevenues ~~accounted~~from ~~for~~contracts ~~under~~with ~~the~~customers ~~acquisition~~by ~~method,~~its ~~which~~operating ~~requires~~segments. Reportable ~~the~~segmentation ~~Company~~reflects tohow ~~perform an allocation of~~ the ~~purchase~~Company ~~consideration~~reviews to the ~~assets~~financial ~~acquired~~performance ~~and liabilities assumed based on their estimated fair values at the date~~ of ~~acquisition~~its operations. The ~~excess~~Company ofalso ~~the~~disaggregates ~~purchase~~revenues ~~consideration~~by ~~over~~geography ~~the~~and ~~estimated~~for ~~fair~~its ~~values~~Chemicals isand ~~recorded~~Plastics asoperating ~~goodwill. The~~segments, ~~following~~by ~~table~~product ~~summarizes~~type. Disaggregation ~~the~~by ~~Company’s~~geography ~~allocation~~and ofproduct ~~the~~type ~~purchase~~provides ~~consideration~~information relevant to ~~assets~~understanding ~~acquired~~underlying economic and ~~liabilities~~regional ~~assumed at the Ultra Chem Closing Date:~~ trends.

	Purchase ConsiderationAllocation
Accounts receivable	$	13.7
Inventory	9.1
Other current assets	2.4
Property and equipment	0.5
Customer-related intangible	24.0
Trade name	0.3
Non-compete agreements	3.9
Other non-current assets	2.5
Goodwill	28.0
Total assets acquired	84.4
Short-term borrowings	0.9
Accounts payable	12.1
Other current liabilities	4.1
Deferred tax liability — non-current	8.4
Other non-current liabilities	2.2
Total liabilities assumed	27.7
Net assets acquired	$	56.7

The following table disaggregates external customer net sales by geography:

During the three months ended March 31, 2018, the Company completed its assessment of the fair values of the assets acquired and liabilities assumed in the Ultra Chem Acquisition. The Company recorded no material adjustments to the fair value estimates of assets and liabilities during the current period.



	Three Months Ended December 31, 2018
	Chemicals		Plastics		Other		Consolidated
U.S.	$	393.4	$	262.4	$	41.0	$	696.8
Canada	23.0		21.9		0.2		45.1
Other North America	17.5		12.3		—		29.8
EMEA	—		120.0		—		120.0
Asia	4.6		39.5		—		44.1
Total external customer net sales	$	438.5	$	456.1	$	41.2	$	935.8

~~There~~The ~~were~~following notable ~~transaction~~disaggregates ~~costs~~external ~~incurred~~customer bynet ~~the~~sales ~~Company associated with the Ultra Chem Acquisition during the three months ended June 30, 2018. Transaction costs incurred~~ by ~~the Company associated with the Ultra Chem Acquisition were $0.1 million during the nine months ended June 30~~specialties, ~~2018~~non-specialties and ~~$0.3~~environmental ~~million and $1.2 million during the three and nine months ended June 30, 2017, respectively.~~services:

A summary and description of the acquired assets and assumed liabilities fair valued in conjunction with applying the acquisition method of accounting follows:



	Three Months Ended December 31, 2018
	Chemicals		Plastics		Other		Consolidated
Specialty	$	136.5	$	218.9	$	—	$	355.4
Non-Specialty	302.0		237.2		—		539.2
Environmental Services	—		—		41.2		41.2
Total external customer net sales	$	438.5	$	456.1	$	41.2	$	935.8

Revenue is recognized when performance obligations are satisfied, which generally occurs when goods or services are transferred to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Payment terms and conditions may vary by regions where the Company operates; however, the term between invoicing and when payment is due is less than one year. As of December 31, 2018, none of the Company’s contracts contained a significant financing component.

The Company is generally the primary obligor in sales transactions with its customers and recognizes revenue primarily based on the gross amount billed to the customer. In sales transactions where the Company is not the primary obligor, it recognizes revenue on a net basis by recognizing only the commission retained from such sales and including that commission in sales and operating revenues in the condensed consolidated statements of operations.

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~~Accounts~~Consistent ~~Receivable~~with industry standards, the Company may offer volume-based rebates to large customers if the customer purchases a specified volume with the Company over a specified time period. The Company utilizes its experience and access to relevant information to reasonably estimate the amounts of such deductions from gross revenues and regularly reviews the estimates and adjusts accordingly if and when actual experience differs from estimates.

~~Accounts~~Sales ~~and~~are ~~notes~~reported ~~receivable~~net ~~consisted~~ of ~~receivables~~tax ~~related~~assessed toby ~~the~~governmental ~~customers of the acquired business, as well as various other miscellaneous receivables~~authorities. ~~The~~Shipping ~~accounts receivable~~ and ~~other~~handling ~~miscellaneous~~activities ~~receivables~~are ~~were~~considered ~~recorded~~fulfillment atcosts, ~~their~~and ~~approximate fair value based on expected collections of~~ the ~~Ultra~~related ~~Chem~~amounts ~~Group. Accordingly,~~billed ~~accounts receivable included an adjustment of $1.5 million~~ to ~~reduce~~customers ~~gross~~are ~~receivables~~included toin ~~their net value after consideration of expected uncollectable amounts at the Ultra Chem Closing Date~~revenues.

~~Inventory~~Specialty

~~Inventory consisted primarily of finished products to be distributed to the acquired business’s customers.~~ The ~~fair~~Company ~~value~~classifies ~~of inventory was established through application of~~ the ~~income~~products ~~approach,~~it ~~using~~sells ~~estimates of selling prices and costs such~~ as ~~selling~~specialty ~~and~~products ~~marketing~~when ~~expenses to be incurred in order to dispose of~~ the ~~finished~~ products ~~and~~have ~~arriving~~specified atapplications, ~~the~~are ~~future~~not ~~profitability~~easily ~~expected~~duplicated toand beinnovation ~~generated~~is ~~once~~ the ~~inventory~~main iscatalyst ~~sold~~for ~~(net~~product ~~realizable value)~~change. ~~The~~These ~~inventory~~products ~~fair~~present ~~value~~higher ~~step~~costs upto ofcustomers ~~$1.0~~to ~~million~~make ~~was~~a ~~recognized~~change, inhave ~~Cost~~longer of sales cycles and ~~operating~~may ~~expenses~~include ~~during~~value ~~the~~added ~~fiscal~~services ~~year~~that ~~ended~~are ~~September~~critical ~~30,~~to ~~2017.~~customer purchasing decisions.

~~Other Current Assets~~Non-Specialty

~~Other~~Products ~~current~~which ~~assets~~are ~~consisted primarily of prepaid expenses and did~~ not ~~have~~specifically aclassified ~~fair value adjustment~~ as ~~part~~specialty ofproducts ~~acquisition~~by ~~accounting~~the ~~since~~Company ~~their~~are ~~carrying~~classified ~~value~~as ~~approximated~~non-specialty ~~fair value~~products. ~~Other~~Typically, ~~current~~attributes ~~assets~~of ~~also~~non-specialty products include ~~indemnification assets~~ease ~~recorded~~of inproduct ~~connection~~change, ~~with~~shorter ~~the~~sales ~~recognition~~cycles ofand ~~tax-related~~increased ~~contingent~~market ~~liabilities~~availability ~~assumed~~of substitute products. ~~The~~With ~~indemnification assets~~some ~~represent~~exceptions ~~the~~in ~~reimbursement~~ the ~~Company~~Plastics ~~would~~line ~~reasonably~~of ~~expect~~business, tothese ~~receive~~attributes ~~from~~generally ~~funds~~cause ~~initially~~customers ~~held~~of innon-specialty ~~escrow~~products ~~pursuant~~ to ~~the~~be ~~purchase~~more ~~agreement~~price ~~if the liabilities were asserted by the relevant tax authority~~sensitive.

~~Property~~Environmental ~~and Equipment~~Services

~~Property~~The ~~and~~Company ~~equipment~~generates ~~acquired~~revenue ~~consists~~from ~~primarily~~environmental ofservices ~~leasehold~~as ~~improvements,~~they ~~computer~~are performed and ~~office~~the ~~equipment~~underlying aseconomic ~~well~~value asis ~~furniture~~transferred ~~and~~to ~~fixtures~~customers. The ~~purchase~~Company’s ~~price~~environmental ~~allocation~~services ~~for~~provided ~~property~~to ~~and~~customers ~~equipment~~are ~~was~~related ~~based~~to waste management services, including on-site services on customer premises and offsite. These services include the ~~carrying~~collection, ~~value~~recycling ofand ~~such~~arrangement ~~assets~~for asdisposal itof ~~was~~both ~~determined~~hazardous toand ~~approximate~~non-hazardous ~~fair~~waste ~~value~~products.

~~Customer-Related~~Costs ~~Intangible~~to Obtain or Fulfill Contracts with Customers

~~Customer~~The ~~relationships~~Company ~~were~~does ~~valued~~not ~~through~~incur ~~the~~significant ~~application of the income approach. Under this approach, revenue, operating expenses and other~~ costs ~~associated with existing customers were estimated in order~~ to ~~derive~~obtain ~~cash~~contracts ~~flows~~and ~~attributable~~therefore tonone ~~the~~have ~~existing~~been ~~customer relationships~~capitalized. The resulting estimated cash flows were then discounted to present value to arrive at the fair value of existing customer relationships as of the valuation date. The value associated with customer relationships will be amortized on a straight-line basis over a ten-year period, which represents the approximate point in the projection period in which a majority of the asset’s cash flows are expected to be realized based on assumed attrition rates. The Company recognized $24.0 million for these intangible assets as part of the allocation of the purchase consideration.

~~Trade~~Deferred ~~Name~~Revenue

~~The~~While ~~"Ultra Chem" trade name was valued through application of~~ the ~~income~~Company ~~approach,~~typically ~~involving~~bills the ~~estimation~~customer ofwhen ~~likely~~products ~~future~~are ~~sales~~transferred ~~and~~into anthe ~~estimated~~control ~~royalty rate reflective~~ of the ~~rate~~customer, ~~that a market participant would pay to use~~ the ~~"Ultra~~Company ~~Chem"~~occasionally ~~name. The~~collects ~~fair~~revenues ~~value~~from ofcustomers ~~this~~in ~~asset~~bill ~~will~~and behold ~~amortized~~or onother asimilar ~~straight-line~~arrangements ~~basis~~or ~~over~~when acustomers ~~two-year~~have ~~period,~~provided ~~estimated~~the ~~based~~Company onwith ~~the~~consideration ~~period~~prior into ~~which~~ the Company ~~would~~satisfying ~~expect~~ a ~~market~~performance ~~participant~~obligation. The toCompany ~~use~~recognizes ~~the~~these ~~name~~prepayments ~~prior~~as todeferred ~~rebranding. The~~revenues ~~Company~~and ~~recognized~~the ~~$0.3~~balances ~~million~~as ~~for~~of ~~this~~December ~~intangible~~31, ~~asset~~2018 asand ~~part~~September of30, ~~the~~2018 ~~allocation~~were ofnot ~~the purchase consideration~~material.

4. Acquisitions

Merger Agreement with Univar

On September 17, 2018, Nexeo and Univar entered into the Univar Merger Agreement providing for the acquisition of Nexeo by Univar.

Subject to the terms and conditions set forth in the Univar Merger Agreement, holders of Nexeo’s common stock will receive (A) the Cash Consideration, described below, and (B) 0.305 of a share of Univar common stock (referred to as the "Stock Consideration").

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~~Non-Compete~~The ~~Agreements~~“Cash Consideration” will be $3.29 per share, subject to reduction by up to $0.41 per share based on the closing price of Univar common stock on the day prior to the closing of the proposed transaction. The Cash Consideration will be reduced on a linear basis between $3.29 per share and $2.88 per share to the extent that the closing price of Univar common stock is between $25.34 and $22.18. If the closing price of Univar common stock is $22.18 per share or lower, the Cash Consideration will be $2.88 per share. If the closing price of Univar common stock on is $25.34 per share or higher, the Cash Consideration will be $3.29 per share.

InThe ~~connection~~Univar ~~with~~Merger Agreement and the ~~Ultra~~proposed ~~Chem~~transaction ~~Acquisition,~~were approved unanimously by the ~~former~~Board ~~equityholders~~of Directors of ~~the~~both ~~Ultra~~Nexeo ~~Chem~~and ~~Group~~Univar ~~agreed~~and are subject to ~~non-compete~~review ~~agreements~~by the SEC and regulatory agencies in the U.S. and other jurisdictions. The ~~terms~~Univar Merger Agreement is also subject to a number of conditions, including, among other things and as further described in the ~~non-compete~~Univar ~~agreements~~Merger ~~prohibit~~Agreement: (i) the ~~equityholders~~adoption ~~from~~by ~~competing~~Nexeo’s stockholders of the Univar Merger Agreement, (ii) the approval by Univar’s stockholders of the issuance of the shares of Univar common stock in connection with the ~~chemical~~proposed ~~distribution~~transaction ~~space~~contemplated ~~for three years~~by ~~after~~the Univar Merger Agreement, (iii) the ~~Ultra~~receipt ~~Chem~~of ~~Closing~~other ~~Date.~~required regulatory approvals, (iv) the absence of any law or governmental order prohibiting the proposed transaction, (v) the effectiveness of Univar's registration statement (which occurred on January 29, 2019) ~~The~~and ~~income~~the ~~approach~~approval ~~was~~for ~~used~~listing toon ~~value~~the NYSE of the ~~non-compete~~shares ~~agreements~~of ~~through~~Univar acommon ~~comparative~~stock ~~discounted~~in ~~cash~~connection ~~flow~~with ~~analysis~~the ~~based~~proposed transaction contemplated by the Univar Merger Agreement, (vi) no material adverse effect on Nexeo's and Univar's operations having occurred since the ~~impact~~signing of ~~competition~~the ~~absent~~Univar ~~these~~Merger ~~agreements~~Agreement and (vii) the termination of the TRA. ~~The~~There ~~Company~~can ~~recognized~~be ~~$3.9~~no ~~million~~assurance ~~for~~that ~~this~~the ~~intangible~~conditions ~~asset~~to asthe ~~part~~completion of the ~~allocation~~proposed oftransaction will be satisfied or waived or that the ~~purchase~~proposed ~~consideration~~transaction will be completed. ~~This~~On ~~intangible~~November is16, ~~amortized~~2018, onUnivar aand ~~straight-line~~Nexeo ~~basis~~announced ~~over~~that athe ~~three-year~~waiting period under the HSR Act expired. Additional required filings have been made with other regulatory agencies in certain foreign jurisdictions and the process is ongoing.

~~Other~~The ~~Non~~Univar Merger Agreement contains customary representations and warranties made by each of Univar and Nexeo, and also contains customary pre-~~Current~~closing ~~Assets~~covenants, including covenants, among others, by each of Univar and Nexeo to operate its respective businesses in the ordinary course consistent with past practice and to refrain from taking certain actions without the other party’s consent during the period prior to closing.

~~Other~~The ~~non-current~~proposed ~~assets~~transaction ~~acquired~~is ~~represented~~expected ~~certain~~to ~~long-term~~close deposits and other assets, which did not have a fair value adjustment as part of acquisition accounting since their carrying value approximated fair value. Other non-current assets also included indemnification assets recorded in ~~connection with~~ the ~~recognition~~first ofquarter ~~tax-related contingent liabilities assumed, and the expected value~~ of ~~certain assets pledged as a guarantee to the Ultra Chem Group in connection with transactions with a particular customer~~2019. ~~The indemnification assets~~Transaction ~~represent~~costs ~~the~~incurred ~~reimbursement~~by the Company ~~reasonably~~associated ~~expects~~with tothe ~~receive~~Univar ~~from~~Merger ~~funds~~Agreement ~~initially~~were ~~held~~$8.2 inmillion ~~escrow~~during ~~pursuant to~~ the ~~purchase~~three ~~agreement~~months ifended ~~the~~December 31, ~~related liabilities were asserted by the relevant tax authority~~2018.

Goodwill

Goodwill represents the excess of the total purchase price over the fair value of the underlying net assets, largely arising from synergies expected as a result of the Ultra Chem Acquisition. Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, absent any indicators of impairment. The Company does not expect any goodwill from the Ultra Chem Acquisition to be deductible for tax purposes.

Short-Term Borrowings

Short-term borrowings included short-term borrowings of the Ultra Chem Group prior to the Ultra Chem Acquisition, which did not have a fair value adjustment as part of acquisition accounting as their carrying value approximated fair value. The balance was paid off immediately after the closing of the Ultra Chem Acquisition.

Accounts Payable

Accounts payable represented short-term obligations owed to the vendors of the acquired business, which were assumed in the Ultra Chem Acquisition. These obligations did not have a fair value adjustment as part of acquisition accounting as their carrying value approximated fair value.

Other Current Liabilities

Other current liabilities represented primarily accrued expenses, including accrued payroll, certain accrued taxes, the current portion of assumed tax-related contingent liabilities and various other liabilities arising out of the normal operations of the acquired business. The majority of these liabilities did not have a fair value adjustment as their carrying value approximated fair value.

Other Non-Current Liabilities

Other non-current liabilities represent assumed tax-related contingent liabilities, and the expected value of certain assets pledged as a guarantee to the Ultra Chem Group which would have to be returned to the third party under certain circumstances.

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Deferred Taxes

Deferred tax assets and liabilities are attributable to the difference between the estimated fair values allocated to inventory, property and equipment and identified intangibles acquired for financial reporting purposes and the amounts determined for tax reporting purposes and give rise to temporary differences. The deferred tax assets and liabilities will reverse in future periods or have reversed as the related tangible and intangible assets are amortized, acquired inventory is sold, or if goodwill is impaired.

Impact of the Ultra Chem Acquisition on the Company’s Condensed Consolidated Financial Information

For the three and six months ended March 31, 2018, the Company’s consolidated sales and operating revenues include $19.8 million and $40.4 million, respectively, related to the operations of the acquired business. For the three and six months ended March 31, 2018, the Company’s consolidated net income includes less than $0.1 million and $0.3 million, respectively, related to the operations of the acquired business. Beginning on April 1, 2018, the operations of Ultra Chem were fully integrated into the Company’s operations and ERP system.

Unaudited Consolidated Pro Forma Financial Information

The unaudited consolidated pro forma results presented below include the effects of the Ultra Chem Acquisition as if it had occurred as of October 1, 2015, the beginning of the fiscal year prior to the date the Ultra Chem Acquisition occurred. The unaudited consolidated pro forma results reflect certain adjustments related to this acquisition, primarily reflecting a full period of Ultra Chem Group’s results of operations for each period presented, amortization expense associated with estimates for the acquired intangible assets, the effects of inventory step up from the acquisition, transaction costs, interest expense and income taxes.

The unaudited consolidated pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the Ultra Chem Acquisition occurred on October 1, 2015.

	Three Months Ended June 30,				Nine Months Ended June 30,
	2018		2017		2018		2017
Sales and operating revenues	$	1,046.4	$	942.7	$	3,017.0	$	2,690.4
Operating income	$	40.1	$	26.1	97.9		38.4
Net income from continuing operations	$	17.5	$	11.7	44.4		3.1
Net income	$	17.5	$	11.7	44.4		3.1
Basic net income per share	$	0.23	$	0.15	0.58		0.04
Diluted net income per share	$	0.23	$	0.15	0.58		0.04
Pro forma weighted average number of common shares outstanding
Basic	76,797,414		76,743,853		76,795,551		76,745,396
Diluted	76,983,350		76,828,868		76,952,758		76,830,296

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Asset Acquisitions

In December 2016, the Company acquired customer contracts and a customer list. Additionally, in connection with this transaction, the Company entered into a supply agreement and a licensing agreement granting the Company the non-exclusive use of a certain trademark. The total consideration associated with this transaction was $8.5 million, of which $5.1 million was paid at closing~~. Of~~ ~~the remaining consideration, the Company paid $1.7 million in January 2018~~ and ~~the remaining~~ $1.7 million ~~will~~was be paid in January ~~2019. At June 30,~~ 2018, ~~this amount is included in Accrued expenses~~ and ~~other~~December ~~liabilities on the Company’s condensed consolidated balance sheets~~2018. InThe ~~connection with this transaction, the~~ Company recognized intangible assets totaling $8.5 million in December 2016 which are included in Other intangible assets, net of amortization on the Company’s condensed consolidated balance sheets. The acquired intangible assets will be fully amortized over estimated useful lives ranging between 10 and 13 years.

~~In April 2017, the Company completed an asset acquisition whereby it obtained certain customer contracts, a customer list and inventory~~5. ~~The~~ ~~total~~Certain ~~consideration~~Balance ~~associated~~Sheet with this transaction was approximately $1.9 million, with $1.6 million paid at closing. The remaining consideration was paid in April 2018. In connection with this transaction, the Company recognized an intangible asset related to the customer list of approximately $1.1 million which is included in Other intangible assets, net of amortization on the Company’s condensed consolidated balance sheet. The customer list will be amortized over an estimated useful life of five years.Information

In February 2018, the Company acquired customer contracts and a customer list. As part of this transaction, the Company entered into a supply agreement and agreements granting the Company the non-exclusive use of certain trademarks and patents for the products covered by the supply agreement. The total consideration associated with this transaction was $9.0 million, and the Company recognized intangible assets of the same amount, which are included in Other intangible assets, net of amortization on the Company's condensed consolidated balance sheet. The Company paid $6.0 million of the consideration during the three months ended March 31, 2018, and paid the remaining $3.0 million in April 2018. The acquired intangible assets will be fully amortized over estimated useful lives ranging between 5 and 13 years.

4. Certain Balance Sheet Information

Cash and Cash Equivalents

Cash and cash equivalents were $4354.86 million as of ~~June~~December 3031, 2018 and $5358.9 million as of September 30, ~~2017~~2018. These amounts included the following:

	June 30, 2018		September 30, 2017
	December 31, 2018		September 30, 2018
Cash held by foreign subsidiaries	$	3945.87	$	3652.89
Non-USD denominated currency held by foreign subsidiaries	$	3544.63	$	3148.18
Currency denominated in RMB	$	43.05	$	86.5

Non-USD denominated currency held by foreign subsidiaries was primarily in euros and CAD. While the RMB is convertible into USD, foreign exchange transactions are subject to approvals from SAFE. The Company does not anticipate any significant adverse impact to overall liquidity from potential limitations on the transfer or conversion of cash and cash equivalents.

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Inventories

Inventories at ~~June~~December 3031, 2018 and September 30, ~~2017~~2018 consisted of the following:

	June 30, 2018		September 30, 2017
	December 31, 2018		September 30, 2018
Finished products	$	~~356~~355.46	$	~~310~~334.60
Supplies	4.59		4.98
Total	$	360.95	$	~~315~~338.58

The Company’s inventories in the U.S. and Canada are collateral under the Credit Facilities.

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Other Non-Current Assets

Other non-current assets at ~~June~~December 3031, 2018 and September 30, ~~2017~~2018 consisted of the following:

	June 30, 2018		September 30, 2017
	December 31, 2018		September 30, 2018
Debt issuance costs of the ABL Facility	$	43.15	$	53.18
Indemnification receivable	1.2		1.4
Deposits	2.0		2.5
Deposits	2.7		2.8
Interest rate swap (1)	1.8		8.0
Interest rate swap	6.7		0.3
Other	1.7		1.9
Other	0.7		1.0
Total	$	9.0	$	16.2
Total	$	15.4	$	10.6

~~Amortization of debt issuance costs related to the ABL Facility recorded in Interest expense in the condensed consolidated statements of operations was $0.4 million and $~~(1.0) ~~million~~See ~~for~~Note ~~the~~9 ~~three and nine months ended June 30, 2018, respectively, and $0.7 million and $1.0 million~~ for ~~the~~additional ~~three and nine months ended June 30, 2017, respectively~~information.

Amortization of debt issuance costs related to the ABL Facility recorded in Interest expense in the condensed consolidated statements of operations was $0.3 million for the three months ended December 31, 2018 and 2017.

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Due to Related Party Pursuant to Contingent Consideration Obligations

Contingent Consideration - Deferred Cash Consideration

The contingent consideration associated with the Deferred Cash Consideration will be an amount in cash equal to the prevailing price of the Company’s common stock at the time that the Company pays such deferred cash payment multiplied by the number of Excess Shares (5,178,642 Excess Shares as of ~~June~~December 3031, 2018). Based on the terms of the Excess Shares, certain circumstances require the Company to pay all or a portion of the Deferred Cash Consideration to the Selling Equityholders, where such cash amount is calculated as set forth in the Merger Agreement, including (i) where the volume weighted average trading price of the Company’s common stock for any period of 20 trading days in any 30 trading day period exceeds $15.00 per share, and (ii) if any Excess Shares remain on June 30, 2021. If any Excess Shares remain on June 30, 2021, the Company must elect to either (i) within five business days of such date, pay the Selling Equityholders an amount in cash equal to the product of the number of remaining Excess Shares multiplied by the volume weighted-average trading price for the 20 trading day period immediately preceding such date or (ii) use reasonable best efforts to sell such shares to a third party in a primary offering and pay the gross proceeds thereof (less any underwriting discounts and commissions) to the Selling Equityholders. However, to the extent the number of shares issued in such offerings does not equal the full amount of Excess Shares remaining at the time of the offering, the Company’s obligations with respect to any remaining Excess Shares, including the obligation to continue to complete any necessary additional offerings, shall continue.

In order to estimate the fair value of the Deferred Cash Consideration, the Company estimates the value of the Excess Shares using a Monte Carlo simulation model. The estimated fair value of the Deferred Cash Consideration liability was $4643.35 million and $3562.17 million as of ~~June~~December 3031, 2018 and September 30, ~~2017~~2018, respectively. See Note 910.

18Upon consummation of the Univar Merger Agreement, the obligation to pay the Deferred Cash Consideration will be accelerated. The Deferred Cash Consideration will be calculated as an amount in cash equal to the Excess Shares multiplied by an amount equal to the Cash Consideration plus the implied value of the Stock Consideration based on the closing trading price of Univar's common stock on the day prior to the completion of the proposed transaction.

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Contingent Consideration - TRA

Concurrent with the completion of the Business Combination, the Company incurred the liability for contingent consideration related to the TRA, which reflects amounts owed to the Selling Equityholders. This liability generally provides for the payment by the Company to the Selling Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income taxes that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the Closing Date as a result of (i) certain increases in tax basis resulting from the Company Merger, (ii) certain tax attributes of Holdings existing prior to the Mergers, (iii) net operating losses and certain other tax attributes of Blocker available to the Company as a result of the Blocker Merger and (iv) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, payments the Company makes under the TRA. The Company will retain the benefit of the remaining 15% of the net cash savings, if any. The Company estimated the fair value of the TRA liability based on a discounted cash flow model which incorporates assumptions of projected taxable income, projected income tax liabilities and an estimate of tax benefits expected to be realized as a result of the Business Combination. The current undiscounted cash flows associated with the TRA liability were estimated to be approximately $~~134~~125.58 million over the time period during which the tax benefits are expected to be realized, currently estimated at over 20 years. The estimated fair value of the TRA liability is $7571.01 million and $~~105~~74.18 million as of ~~June~~December 3031, 2018 and September 30, ~~2017~~2018, respectively. See Note 910. The decrease in the liability is reflective of the provisional impact associated with the Tax Act enacted in December 2017 (see Note 15), which lowers the Company’s projected income tax liabilities, the estimate of tax benefits expected to be realized as a result of the Business Combination and the ultimate amount expected to be paid by the Company to the Selling Equityholders.

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The amount and timing of any payments due under the TRA will vary depending upon a number of factors, including the amount and timing of the taxable income the Company generates in the future and the U.S. federal, state and local income tax rates then applicable. In addition, payments made under the TRA will give rise to additional tax benefits for the Company and therefore additional potential payments due under the TRA. The term of the TRA commenced upon the consummation of the Mergers and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless the Company exercises its right to terminate the TRA early. If the Company elects to terminate the TRA early, its obligations under the TRA would accelerate and it generally would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by it under the TRA, calculated in accordance with certain valuation assumptions set forth in the TRA.

5.In ~~Property~~connection with the Univar Merger Agreement, ~~Plant~~Nexeo and ~~Equipment~~the TRA Holders entered into a TRA Termination Agreement under which the parties agreed to terminate the TRA, upon consummation of the proposed transaction. Upon termination of the TRA, a cash payment to the TRA Holders will be made in an amount equal to $60.0 million. In the event the Univar Merger Agreement is terminated, the TRA Termination Agreement will no longer be in force.

~~Property,~~The ~~plant~~liabilities ~~and~~related ~~equipment~~to atthe ~~June 30,~~Deferred ~~2018~~Cash Consideration and ~~September 30,~~the ~~2017~~TRA ~~consisted~~are ofincluded in Due to related party pursuant to contingent consideration obligations on the ~~following:~~Company’s condensed consolidated balance sheets.

	June 30, 2018			September 30, 2017
Land	$	50.7		$	51.0
Plants and buildings(1)	107.2			106.5
Machinery and equipment (2)	151.6			152.8
Software and computer equipment	65.7			63.3
Construction in progress	8.1			5.0
Total	383.3			378.6
Less accumulated depreciation (3)	(95.3		)	(62.5		)
Property, plant and equipment, net	$	288.0		$	316.1

6. Property, Plant and Equipment

~~(1)~~Property, ~~Includes~~plant ~~$13.7~~and ~~million~~equipment ~~related~~at toDecember 31, ~~facilities~~2018 ~~acquired~~and ~~under capital leases for the periods ended June~~ September 30, 2018 ~~and~~consisted ~~September~~of ~~30,~~the ~~2017.~~following:

(2) Includes $26.5 million and $27.2 million, respectively, related to equipment acquired under capital leases.



	December 31, 2018			September 30, 2018
Land	$	50.5		$	50.8
Plants and buildings⁽¹⁾	109.7			109.7
Machinery and equipment ⁽²⁾	154.6			153.4
Software and computer equipment	70.7			70.5
Construction in progress	8.3			5.4
Total	393.8			389.8
Less accumulated depreciation ⁽³⁾	(114.7		)	(104.9		)
Property, plant and equipment, net	$	279.1		$	284.9

(31) Includes $613.67 million ~~and $4.9 million, respectively,~~ related to facilities ~~and equipment~~ acquired under capital leases for the periods ended December 31, 2018 and September 30, 2018.

⁽²⁾ Includes $26.5 million related to equipment acquired under capital leases for the periods ended December 31, 2018 and September 30, 2018.

⁽³⁾ Includes $8.3 million and $7.4 million, respectively, related to facilities and equipment acquired under capital leases.

Depreciation expense recognized on the property, plant and equipment described above was as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	Three Months Ended December 31,
	2018		2017		~~2018~~		~~2017~~
Depreciation expense	$	1110.41	$	12.26	$	~~36.6~~	$	~~35.5~~

19Included in the carrying value of property, plant and equipment in the Company’s condensed consolidated balance sheets are certain closed facilities located in the U.S., which collectively have a carrying value of $1.1 million as of December 31, 2018 and September 30, 2018. The facilities do not currently meet the criteria for held-for-sale classification; accordingly, they remain classified as held and used.

During the fourth quarter of fiscal year 2017, the Company entered into a purchase agreement to buy land currently leased at one of the Company's distribution centers. The purchase is expected to be finalized during fiscal year 2019 for approximately $10.8 million.

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~~Included in the carrying value of property, plant and equipment in the Company’s condensed consolidated balance sheets are certain closed facilities located in the U~~7.~~S.,~~ ~~which~~Goodwill ~~collectively have a carrying value of $1.1 million as of June 30, 2018~~ and ~~September 30,~~Other ~~2017. The facilities do not currently meet the criteria for held-for-sale classification; accordingly, they remain classified as held and used.~~Intangibles

Facility Lease

As a result of the sale in September 2016 of the Company’s Franklin Park facility to the Illinois Tollway Authority under an eminent domain proceeding, the Company relocated operations to a new leased facility in Montgomery, Illinois. During the three and nine months ended June 30, 2017, the Company recorded a gain of $5.4 million and $8.1 million, respectively, related to capital expenditures incurred in connection with the relocation and reimbursed by the Illinois Tollway Authority, which is included in Other Income on the condensed consolidated statements of operations.

6. Goodwill and Other Intangibles

Goodwill

The following is a progression of goodwill by reportable segment:

	Chemicals			Plastics			Other		Total
Balance at September 30, 2017	$	362.8		$	276.7		$	63.5	$	703.0
Balance at September 30, 2018	$	362.4		$	274.0		$	63.5	$	699.9
Foreign currency translation	(0.45		)	(21.08		)	—		(2.43		)
Balance at June 30, 2018	$	362.4		$	274.7		$	63.5	$	700.6
Balance at December 31, 2018	$	361.9		$	272.2		$	63.5	$	697.6

Goodwill amounts by reportable segment at June 30, 2018 include the allocation of the purchase consideration of the Ultra Chem Acquisition as of the Ultra Chem Closing Date. See Note 3.

Goodwill Impairment Test

Goodwill is tested for impairment annually as of March 31 and whenever events or circumstances make it more likely than not that an impairment may have occurred. Goodwill is reviewed for impairment at the reporting unit level, or operating segment, for the Company. The Company performed an impairment test as of March 31, 2018 and concluded that goodwill was not impaired. For purposes of the impairment testing of the Company's recognized goodwill, fair value measurements are determined using the income approach, based largely on inputs that are not observable to active markets, which would be deemed Level 3 fair value measurements as defined in Note 910.

The evaluation of goodwill requires the use of estimates about future operating results of each reporting unit to determine its estimated fair value. Changes in forecasted operations can materially affect these estimates, which could materially affect the Company’s results of operations. The estimate of fair value requires significant judgment and is based on management’s fair value estimates on assumptions that are believed to be reasonable but that are unpredictable and inherently uncertain, including: estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment for the reporting units. There can be no assurance that these estimates and assumptions made for purposes of the goodwill testing as of the time of testing will prove to be accurate. If assumptions regarding business plans, competitive environments or anticipated growth rates are not correct, the Company may be required to record goodwill impairment charges in future periods, whether in connection with future annual impairment testing, or earlier, if an indicator of an impairment is present prior to the next annual evaluation.

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Other Intangible Assets

Definite-lived intangible assets at ~~June~~December 3031, 2018 and September 30, ~~2017~~2018 consisted of the following:

		June 30, 2018							September 30, 2017
		December 31, 2018							September 30, 2018
	EstimatedUseful Life(years)	GrossCarryingAmount		AccumulatedAmortization			NetCarryingAmount		GrossCarryingAmount		AccumulatedAmortization			NetCarryingAmount
Customer-related	5-13	$	239.80	$	(3949.01	)	$	~~200~~189.89	$	~~234~~239.6	$	(2344.71	)	$	~~210~~195.95
Supplier-related	6-10	3.21		(0.35		)	2.96		13.51		(0.14		)	12.47
Trade name	2-10	23.3		(1114.21		)	129.12		2223.3		(712.07		)	1510.36
Below-market leases	1-7	0.7		(0.56		)	0.21		0.7		(0.35		)	0.42
Non-compete agreements	3-10	4.6		(12.74		)	2.92		4.26		(02.70		)	32.56
Total		$	~~271~~270.67	$	(5266.7	)	$	~~218~~204.90	$	~~263~~271.3	$	(3159.87	)	$	~~231~~211.56

Amortization expense recognized on the intangible assets described above was as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	Three Months Ended December 31,
	2018		2017		~~2018~~		~~2017~~
Amortization expense	$	7.1	$	6.79	$	~~21.0~~	$	~~18.0~~

~~7. Debt~~19

~~Short-term~~Table ~~borrowings outstanding and the current portion~~ of ~~long-term~~Contents ~~debt and capital lease obligations at June 30, 2018 and September 30, 2017 are summarized below:~~

	June 30, 2018		September 30, 2017
Short-term borrowings	$	37.7	$	40.8
Current portion of long-term debt and capital lease obligations	9.8		10.3
Total short-term borrowings and current portion of long-term debt and capital lease obligations, net	$	47.5	$	51.1

8. Debt

~~Long~~Short-term ~~debt~~borrowings outstanding and the current portion of long-term debt and capital lease obligations at ~~June~~December 3031, 2018 and September 30, ~~2017~~2018 isare summarized below:

	June 30, 2018			September 30, 2017
	December 31, 2018			September 30, 2018
ABL Facility	$	157.4		$	139.3
Short-term borrowings	$	39.6		$	38.1
Term Loan Facility	642.0			646.9
Current portion of long-term debt and capital lease obligations	9.7			9.6
Capital lease obligations (1)	34.9			37.5
Total short-term borrowings and current portion of long-term debt and capital lease obligations, net	$	49.3		$	47.7
Total long-term debt	834.3			823.7
Less: unamortized debt discount (2)	(2.4		)	(2.7		)
Less: debt issuance costs (3)	(15.4		)	(16.7		)
Less: current portion of long-term debt and capital lease obligations	(9.8		)	(10.3		)
Long-term debt and capital lease obligations, less current portion, net	$	806.7		$	794.0

Long-term debt outstanding at December 31, 2018 and September 30, 2018 is summarized below:



	December 31, 2018			September 30, 2018
ABL Facility	$	159.0		$	104.6
Term Loan Facility	638.8			640.4
Capital lease obligations ⁽¹⁾	33.2			34.0
Total long-term debt	831.0			779.0
Less: unamortized debt discount ⁽²⁾	(2.2		)	(2.3		)
Less: debt issuance costs ⁽³⁾	(14.0		)	(14.7		)
Less: current portion of long-term debt and capital lease obligations	(9.7		)	(9.6		)
Long-term debt and capital lease obligations, less current portion, net	$	805.1		$	752.4


⁽¹⁾	Capital lease obligations exclude executory costs and interest payments associated with the underlying leases. See “Capital Lease Obligations” below.


⁽²⁾	The unamortized debt discount is related to the Term Loan Facility and amortized to interest expense over the life of the instrument using the effective interest rate method.


⁽³⁾	See discussion below under Term Loan Facility and Debt Issuance Cost Amortization.

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Short-Term Borrowings

The Company’s short-term borrowings are associated with the Company’s operations in China and are summarized below:

	Facility Limit		Outstanding Borrowings Balance		Weighted Average Interest Rate on Borrowings		Outstanding LOC and Bankers’ Acceptance Bills		Remaining Availability
June 30, 2018
December 31, 2018
Bank of America - China (1)	$	24.3	$	2322.01	4.46	%	$	—	$	12.32
Bank of Communications - China (2)	2221.78		1417.75		5.4	%	63.54		10.59
Total	$	4746.01	$	3739.76			$	63.54	$	23.81
September 30, 2017
September 30, 2018
Bank of America - China (1)	$	24.3	$	2322.82	4.36	%	$	—	$	02.51
Bank of Communications - China (2)	2221.58		1715.09		5.34	%	5.31		0.28
Total	$	46.81	$	4038.81			$	5.31	$	02.79

⁽¹⁾

The borrowing limit of this facility is denominated in USD. This line of credit is secured by a standby letter of credit drawn on the ABL Facility covering at least 110% of the facility’s borrowing limit amount. Borrowings under the line of credit are payable in full within 12 months of the date of the advance. The Company has the ability to provide additional capacity under these lines of credit, if needed.


⁽²⁾	The borrowing limit of this facility is denominated in RMB. This line of credit is secured by a standby letter of credit drawn on the ABL Facility covering at least 100% of the facility’s borrowing limit amount. Borrowings under the line of credit are payable in full within 12 months of the date of the advance.

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Long-Term Debt

ABL Facility

The ABL Facility provides for committed revolving credit financing including a U.S. Tranche of up to $505.0 million, a Canadian Tranche of up to the USD equivalent of $40.0 million and a FILO Tranche up to $30.0 million. Provided no default or event of default, the ABL Borrowers have the option to request that the ABL Facility be increased by an aggregate amount, when included with any incremental borrowings issued under the Term Loan Facility, not to exceed $175.0 million.

The weighted average interest rate on borrowings under the ABL Facility was 3.6898% at ~~June~~December 3031, 2018. The Company had the USD equivalent of $7269.95 million in outstanding letters of credit under the ABL Facility at ~~June~~December 3031, 2018. The collective credit availability under the U.S. and Canadian Tranches of the ABL Facility was the U.S. equivalent of $~~300~~258.51 million at ~~June~~December 3031, 2018. There was $5.0 million availability under the FILO Tranche at ~~June~~December 3031, 2018. The ABL Facility matures on June 9, 2021.

Obligations under the ABL Facility are secured by a first priority lien on all ABL Facility first lien collateral, including eligible inventory and accounts receivable of the ABL Borrowers, and a second priority lien on all Term Loan Facility first lien collateral including outstanding equity interests of the Borrower and certain of the other subsidiaries of Holdings, in each case, subject to certain limitations; provided, that no ABL Facility first lien collateral or Term Loan Facility first lien collateral owned by the Canadian Borrower secure the obligations owing under the U.S. ~~tranche~~Tranche of the ABL Facility. These accounts receivable and inventory totaled $~~722~~669.96 million in the aggregate as of ~~June~~December 3031, 2018.

As of ~~June~~December 3031, 2018, the ABL Borrowers were in compliance with the covenants of the ABL Facility.

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Term Loan Facility

The Term Loan Facility provides secured debt financing in an aggregate principal amount of up to $655.0 million and the right, at the Company’s option, to request additional tranches of term loans in an aggregate principal amount, when included with any incremental borrowings issued under the ABL Facility, of up to $175.0 million, plus unlimited additional amounts such that the aggregate principal amount of indebtedness outstanding at the time of incurrence does not cause the Secured Net Leverage Ratio, calculated on a pro forma basis, to exceed 4.1 to 1.0. Availability of such additional tranches of term loans is subject to the absence of any default and, among other things, the receipt of commitments by existing or additional financial institutions.

OnThe ~~December~~Company ~~19,~~is ~~2017,~~required ~~the~~to ~~Company~~make ~~completed~~scheduled ~~TLB~~quarterly ~~Amendment~~payments ~~No.~~in 2an ~~amending~~aggregate ~~the~~annual ~~Term~~amount ~~Loan~~equal ~~Facility. TLB~~to ~~Amendment No~~1.0% 2of ~~reduced~~ the ~~interest~~aggregate ~~rate~~principal ~~margin~~amount ~~applicable~~of tothe outstanding term loans byas 50of ~~basis~~the ~~points~~Closing ~~from~~Date ~~3.75%~~of tothe ~~3.25% for LIBOR loans and from 2.75% to 2.25% for base rate loans.~~ TLB Amendment No. 2, ~~also~~with ~~provides~~the ~~for~~balance adue ~~soft~~at ~~call~~maturity. The ~~premium~~weighted ~~equal~~average tointerest 1%rate offor the ~~amount~~Term ofLoan ~~the~~Facility ~~term~~was ~~loans~~5.69% at ~~that~~December 31, ~~are~~2018. The ~~subject~~Company toamortized ~~certain~~$0.1 ~~repricing~~million ~~transactions~~of ~~occurring~~debt ondiscount ~~or prior~~ to ~~twelve~~interest ~~months~~expense ~~from~~during the ~~effective~~three ~~date~~months ofended ~~TLB~~December 31, ~~Amendment~~2018 ~~No.~~and 22017. AsThe aTerm ~~result~~Loan ofFacility ~~TLB~~matures ~~Amendment~~on ~~No. 2~~June 9, ~~the Company paid debt issuance costs of $0~~2023.~~8 million, which will be amortized throughout the remaining life of the Term Loan Facility.~~

Additionally, ~~The~~the ~~Company~~Term isLoan ~~required~~Facility requires the Company to make ~~scheduled~~mandatory ~~quarterly~~principal payments inon an ~~aggregate~~ annual ~~amount~~basis, ~~equal~~if tocash ~~1.0%~~flows offor the ~~aggregate~~year, ~~principal amount of the outstanding term loans~~ as ofdefined ~~the~~in ~~Closing Date of~~ the ~~TLB~~Term ~~Amendment~~Loan ~~No. 2~~Facility, ~~with~~exceed ~~the~~certain ~~balance~~levels ~~due~~specified atin ~~maturity. The weighted average interest rate for~~ the Term Loan Facility ~~was 5~~.~~44% at June 30, 2018.~~ The Company ~~amortized~~was ~~$0.1~~not ~~million~~required ~~and~~to ~~$0.3~~make ~~million~~such ofmandatory ~~debt~~principal ~~discount~~payment tofor ~~interest expense during~~ the ~~three~~fiscal ~~and~~year ~~nine months~~ ended ~~June~~September 30, 2018~~, respectively and $0~~.1 The ~~million~~Company ~~and~~generally ~~$0.4~~has ~~million~~the ofright ~~debt discount~~ to ~~interest~~prepay ~~expense~~loans ~~during~~in ~~the~~whole ~~three~~or ~~and~~in ~~nine months ended June 30~~part, ~~2017,~~without ~~respectively. The~~incurring ~~Term~~any ~~Loan~~penalties ~~Facility~~for ~~matures~~early ~~on June 9, 2023~~payment.

Additionally, the Term Loan Facility requires the Company to make mandatory principal payments on an annual basis, commencing with the fiscal year ending September 30, 2017, if cash flows for the year, as defined in the Term Loan Facility, exceed certain levels specified in the Term Loan Facility. The Company was not required to make such mandatory principal payment for the fiscal year ended September 30, 2017. The Company generally has the right to prepay loans in whole or in part, without incurring any penalties for early payment.

Obligations under the Term Loan Facility are secured by a first priority lien on all Term Loan Facility first lien collateral, including outstanding equity interests of the Borrower and certain of the other subsidiaries of Holdings, and a second priority lien on all ABL Facility first lien collateral, including accounts receivable and inventory of the loan parties under the Term Loan Facility, subject to certain limitations.

As of ~~June~~December 3031, 2018, the Company was in compliance with the covenants of the Term Loan Facility.

Debt Issuance Cost Amortization

Amortization expense included in interest expense related to debt issuance costs of the Term Loan Facility was $0.7 million ~~and $2.1 million~~ for the three ~~and nine~~ months ended ~~June~~December 3031, 2018, ~~respectively,~~ and ~~$0.7 million and $1.8 million for the three and nine months ended June 30,~~ 2017~~, respectively~~.

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Capital Lease Obligations

The capital lease obligation balance of $3433.92 million as of ~~June~~December 3031, 2018 is primarily associated with the Ryder Lease and the Montgomery Lease. The Ryder Lease obligation excludes decreasing annual interest payments ranging from $0.98 million to less than $0.1 million, for aggregate interest payments totaling $32.05 million. The Montgomery Lease obligation excludes decreasing annual interest payments ranging from $1.0 million to $0.1 million, for aggregate interest payments of $12.94 million.

239. Derivatives

The Company is a party to interest rate swap agreements of varying expiration dates ranging from February 2020 through February 2023, to help mitigate interest rate risk related to the variable rate Term Loan Facility. As of December 31, 2018, the notional amount of the seven outstanding interest rate swap agreements was $599.1 million. The swap agreements are accounted for as cash flow hedges. Gains or losses resulting from changes in the fair value of the swaps are recorded in other comprehensive income. Gains and losses recorded in other comprehensive income are reclassified into and recognized in income when the interest expense on the Term Loan Facility is recognized.

Derivative assets and liabilities at December 31, 2018 and September 30, 2018 consisted of the following:



	Recorded to	December 31, 2018		September 30, 2018
Short-term derivative asset	Other current assets	$	2.1	$	2.2
Long-term derivative asset	Other non-current assets	$	1.8	$	8.0
Short-term derivative liability ⁽¹⁾	Accrued expenses and other liabilities	$	—	$	—
Long-term derivative liability	Other non-current liabilities	$	1.2	$	—
Other Comprehensive Income	Accumulated other comprehensive income	$	2.4	$	8.1

⁽¹⁾ Short-term derivative liability for the three months ended December 31, 2018 and the fiscal year ended September 30, 2018 was less than $0.1 million.

Gains and losses (net of reclassifications into income, including any ineffective portion) related to the interest rate swaps were as follows:



		Three Months Ended December 31,
	Recorded to	2018			2017
Realized loss	Interest expense	$	0.1		$	0.4
Unrealized gain (loss), net of tax	Other comprehensive income	$	(5.7	)	$	1.9

The tax impact of the unrealized gains and losses related to the interest rate swaps was $2.0 million and $0.6 million for the three months ended December 31, 2018 and 2017, respectively. At December 31, 2018, $2.5 million in unrealized gains were expected to be realized and recognized in income within the next twelve months.

See Note 10 for additional information on the Company’s fair value of the derivative instruments.

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810. ~~Derivatives~~Fair Value Measurements

During the three months ended March 31, 2018, the Company entered into three additional interest rate swap agreements with a combined notional amount of $300.0 million to help mitigate interest rate risk related to the variable rate Term Loan Facility. During the three months ended March 31, 2017, the Company entered into four interest rate swap agreements with a combined notional amount of $300.0 million to help mitigate interest rate risk related to the variable rate Term Loan Facility. The swap agreements expire at various dates from February 2020 through February 2023 and are accounted for as cash flow hedges. Gains or losses resulting from changes in the fair value of the swaps are recorded in other comprehensive income. Gains and losses recorded in other comprehensive income are reclassified into and recognized in income when the interest expense on the Term Loan Facility is recognized.

	Recorded to	June 30, 2018		September 30, 2017
Short-term derivative asset	Other current assets	$	1.6	$	—
Long-term derivative asset	Other non-current assets	$	6.7	$	0.3
Short-term derivative liability	Accrued expenses and other liabilities	$	0.4	$	1.1
Long-term derivative liability	Other non-current liabilities	$	—	$	0.2
Other Comprehensive Income(1)	Accumulated other comprehensive income	$	6.2	$	—

(1) Other Comprehensive Income for the fiscal year ended September 30, 2017 was less than $0.1 million

		Three Months Ended June 30,					Nine Months Ended June 30,
	Recorded to	2018		2017			2018		2017
Realized loss	Interest expense	$	0.3	$	1.2		$	1.0	$	1.5
Unrealized gain (loss), net of tax	Other comprehensive income (loss)	$	2.1	$	(0.7	)	$	6.2	$	(0.4	)

The tax impact of the unrealized gains and losses related to the interest-rate swaps was $0.9 million and $2.5 million for the three and nine months ended June 30, 2018, respectively, and $0.3 million for the three and nine months ended June 30, 2017. At June 30, 2018, $1.7 million in unrealized gains were expected to be realized and recognized in income within the next twelve months.

See Note 9 for additional information on the Company’s fair value of the derivative instruments.

9. Fair Value Measurements

The accounting standard for fair value measurements establishes a framework for measuring fair value that is based on the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is as follows:


•	Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.


•	Level 2—Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.


•	Level 3—Prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity).

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The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Fair value of financial instruments

The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and short-term borrowings approximate their fair value due to the short-term maturity of those instruments.

The carrying values of borrowings outstanding under the Credit Facilities approximate fair value at ~~June~~December 3031, 2018 and September 30, ~~2017~~2018, primarily due to their variable interest rate. The estimated fair value of these instruments is classified by the Company as a Level 3 measurement within the fair value hierarchy due to the varying interest rate parameters as outlined in the respective loan agreements.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

In addition to the financial instruments that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a non-recurring basis as required by U.S. GAAP. Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges or as part of a business combination. As discussed in Note 3, during the fiscal year ended September 30, 2017, the Company recorded non-recurring fair value measurements related to the Ultra Chem Acquisition and its asset acquisitions. These fair value measurements were classified as Level 3 within the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Contingent Consideration

The fair value of the contingent consideration related to the Deferred Cash Consideration as discussed in Note 45 was $4643.35 million and $3562.17 million as of ~~June~~December 3031, 2018 and September 30, ~~2017~~2018, respectively. The ~~increase~~decrease in the liability was largely driven by the ~~increase~~decrease in the Company’s stock price. The measurement of the contingent consideration related to the Deferred Cash Consideration is classified by the Company as a Level 3 measurement within the fair value hierarchy. In order to estimate the fair value of the Deferred Cash Consideration, the Company estimates the value of the Excess Shares using a Monte Carlo simulation model with the market price of the Company’s common stock at each valuation date being a significant input to this model. Unobservable inputs to the valuation are the expected volatility during the applicable period as well as a marketability discount to reflect the illiquidity of the Excess Shares given their terms. An increase in the market price of the Company’s common stock has the same directional effect on the value of the liability related to the Deferred Cash Consideration. An increase in the volatility and marketability discount will lower the value of the liability related to the Deferred Cash Consideration.

2523

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The fair value of the liability for the contingent consideration related to the TRA as discussed in Note 45 was $7571.01 million and $~~105~~74.18 million as of ~~June~~December 3031, 2018 and September 30, ~~2017~~2018, respectively. The ~~decrease in the~~ liability is reflective of the provisional impact associated with the Tax Act enacted in December 2017 (see Note 15), which lowers the Company’s projected income tax liabilities, the estimate of tax benefits expected to be realized as a result of the Business Combination and the ultimate amount expected to be paid by the Company to the Selling Equityholders. The liability for the contingent consideration related to the TRA is classified by the Company as a Level 3 measurement within the fair value hierarchy. The Company estimates the fair value of the liability for the contingent consideration related to the TRA based on a discounted cash flow model which incorporates assumptions of projected taxable income, projected income tax liabilities and an estimate of tax benefits expected to be realized as a result of the Business Combination. Key inputs to the valuation are prevailing tax rates and market interest rates impacting the discount rate. A 100 basis point increase in the discount rate compared to the discount rate used at the ~~June~~December 3031, 2018 valuation would have resulted in a decrease of approximately $0.14 million in the value of the liability for the contingent consideration related to the TRA. Additionally, this cash flow model is sensitive to changes in prevailing tax rates. A 100 basis point increase in the tax rate compared to the tax rate used at the ~~June~~December 3031, 2018 valuation would have resulted in an increase of approximately $2.34 million in the value of the liability for the contingent consideration related to the TRA.

Changes in the fair value of the contingent consideration obligations for the ~~nine~~three months ended ~~June~~December 3031, 2018 were as follows:

	TRA			Deferred Cash Consideration			Total Fair Value
Contingent consideration as of September 30, 2017	$	105.1		$	35.1		$	140.2
Contingent consideration as of September 30, 2018	$	74.8		$	62.7		$	137.5
Cash paid to TPG	(4.2		)	—			(4.2		)
Change in fair value of contingent consideration(1)	(3.7		)	(19.2		)	(22.9		)
Change in fair value of contingent consideration(1)	(25.9		)	11.2			(14.7		)
Contingent consideration as of December 31, 2018	$	71.1		$	43.5		$	114.6
Contingent consideration as of June 30, 2018	$	75.0		$	46.3		$	121.3

⁽¹⁾ Included in Operating income in the condensed consolidated statements of operations.

Significant changes in the estimates and inputs used in determining the fair value of the contingent consideration could have a material impact on the amounts recognized as a component of Operating income in future periods.

Interest Rate Swaps

The Company classifies interest rate swaps within Level 2. ~~During~~The ~~the~~Company ~~three~~is ~~months~~a ~~ended~~party ~~March~~to ~~31,~~interest ~~2018,~~rate ~~the~~swap ~~Company~~agreements ~~entered~~of ~~into~~varying ~~three~~expiration ~~additional~~dates ~~interest~~ranging ~~rate~~from ~~swap~~February ~~agreements~~2020 through February 2023, to help mitigate interest rate risk related to the variable rate Term Loan Facility. ~~During~~As ~~the~~of ~~three months ended March~~December 31, ~~2017~~2018, the ~~Company~~notional ~~entered~~amount ~~into~~of ~~four~~the ~~interest~~seven ~~rate~~outstanding ~~swap agreements to help mitigate~~ interest rate ~~risk related to the variable rate Term Loan Facility. The~~ swap agreements ~~expire~~was at$599.1 ~~various dates through February 2023~~million. At ~~June~~December 3031, 2018, the Company recorded $12.61 million toin Other current assets, $61.78 million in Other non-current assets, ~~and~~less than $0.41 million in Accrued expenses and other liabilities and $1.2 million in Other non-current liabilities in the condensed consolidated balance sheets related to these instruments.

During the ~~nine~~three months ended ~~June~~December 3031, 2018 and 2017, the Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements.

1011. Share-based Compensation and Employee Benefit Plans

On June 8, 2016, the Company’s stockholders approved the 2016 LTIP, with an effective date of March 30, 2016, covering approximately a ten-year period. No awards may be granted under the 2016 LTIP after March 20, 2026. The 2016 LTIP permits the grant of up to 9,000,000 shares of the Company's common stock for various types of awards to employees, directors and consultants of the Company or its subsidiaries, including incentive and non-incentive stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, stock awards, conversion awards and performance awards.

During the fiscal year ended September 30, 2018, the Company granted 193,667 PSUs to employees under the 2016 LTIP. These awards will vest on September 30, 2020, entitling the recipient to receive a certain number of shares of the Company’s common stock, based on the Company’s achievement of the performance goals included in the PSUs, which are based on a return on invested capital calculation over a three-year performance period. Depending on the calculation as of the vesting date, a recipient is entitled to receive between 0% and 200% of the initial award. The awards are accounted for as equity instruments, and the fair value of these awards was determined by the closing price of the Company's common stock on the date of grant.

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During the fiscal years ended September 30, 2017 and 2016, the Company granted 212,000 and 1,557,500 PSU awards to employees, respectively, under the 2016 LTIP. The recipient can receive between 0% and 200% of the initial award, based on the Company’s total stockholder return during approximate three-year performance period, or a cumulative Adjusted EBITDA target if a specified total stockholder return is not met. These awards are accounted for as equity instruments. The Company used the Monte Carlo simulation model to estimate the fair value of the PSU awards at the grant date, factoring in the market-based vesting condition and considering the probability of satisfying the various performance criteria. The resulting grant date fair value is recognized as expense on a straight-line basis from the grant date through the end of the performance period. The assumptions used in the Monte Carlo simulation model for PSUs included an expected stock price volatility between 35% and 40% based on a peer group of similar companies, an expected dividend yield of 0%, an expected term of two to three years, and a risk-free interest rate of between 0.9% and 1.3%.

The following table summarizes all PSU activity during the three months ended December 31, 2018:



	PSUs	Average Grant Date Fair Value Per Unit
Unvested PSUs at September 30, 2018	1,695,167	$	8.76
Granted	—	—
Vested	—	—
Forfeited/Canceled	—	—
Unvested PSUs at December 31, 2018	1,695,167	$	8.76

As of December 31, 2018, the Company may issue up to 3,390,334 shares of common stock related to the outstanding PSU awards described above under the 2016 LTIP.

In November 2017, the Company granted 415,867 shares of restricted stock to employees under the 2016 LTIP. The restricted stock awards vest equally on the anniversary of the grant date over a three-year period provided that the recipients of such grants continue their employment with the Company. The awards are accounted for as equity instruments, and the fair value of the restricted stock awards was determined by the closing price of the Company's common stock on the date of grant. During the fiscal year ended September 30, 2017, the Company granted restricted stock awards to certain of the Company’s non-employee directors under the 2016 LTIP that vested one year from the date of grant.

The following table summarizes all restricted stock activity during the three months ended December 31, 2018:



	Shares of Restricted Stock		Average Grant Date Fair Value Per Unit
Restricted stock at September 30, 2018	409,267		$	7.50
Granted	—		—
Vested	(136,291	)	7.50
Forfeited/Canceled	—		—
Restricted stock at December 31, 2018	272,976		$	7.50

During the fiscal year ended September 30, 2016, the TPG Restricted Stock Grants were awarded with respect to 100,000 shares of Company common stock owned by TPG. These awards vest in equal amounts over a three-year period provided that the recipients of such grants continue their employment with the Company. During the fiscal year ended September 30, 2018, 27,471 shares of these awards vested, and 7,163 shares were transferred to the Company (reflected as treasury stock) to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting. During the fiscal year ended September 30, 2017, 33,297 shares of these awards vested, 9,576 shares were transferred to the Company (reflected as treasury stock) to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting, and 11,673 shares were transferred back to TPG due to forfeiture. There were 27,559 unvested shares of these awards at December 31, 2018. While these awards were not made pursuant to the 2016 LTIP, they constitute equity-based compensation and therefore will count against the 2016 LTIP's share reserve to the extent the awards vest.

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During the fiscal year ended September 30, 2018, the Company granted 999,492 stock options to employees under the 2016 LTIP. The awards vest in equal amounts over a three-year period provided that the recipients of such grants continue their employment with the Company. The awards are accounted for as equity instruments. The Company used the Black-Scholes Merton model to estimate the fair value of the option awards at the grant date. The resulting grant date fair value is recognized as expense on a straight-line basis over the vesting period. The assumptions used in the Black-Scholes Merton model for the options included an expected term of six years, an expected stock price volatility of 35.0% based on a peer group of similar companies, an expected dividend yield of 0.0% and a risk-free interest rate of 2.1%.

The following table summarizes stock option activity during the three months ended December 31, 2018:



	Stock Options	Average Grant Date Fair Value Per Unit		Weighted Average Exercise Price
Stock Options at September 30, 2018	992,892	$	2.84	$	7.42
Granted	—	—		—
Exercised	—	—		—
Forfeited/Canceled	—	—		—
Stock Options at December 31, 2018	992,892	$	2.84	$	7.42

The outstanding stock options as of December 31, 2018 had an aggregate intrinsic value of $1.2 million. No stock options were exercisable as of December 31, 2018.

During the three months ended December 31, 2016, the Company granted certain employees a total of 28,000 RSUs under the 2016 LTIP that vest equally over a three-year period on the anniversary of the grant date provided the employee remains employed by the Company. The awards are accounted for as equity instruments. Upon vesting, the recipients will receive a share of common stock in the Company for each RSU awarded. The fair value of these RSUs was determined based on the closing price of the Company’s stock on the grant date.

The following table summarizes RSU award activity during the three months ended December 31, 2018:



	RSUs		Average Grant Date Fair Value Per Unit
Unvested RSUs at September 30, 2018	16,338		$	7.28
Granted	—		—
Vested	(8,169	)	7.28
Forfeited/Canceled	—		—
Unvested RSUs at December 31, 2018	8,169		$	7.28

During the three months ended December 31, 2016, the Company also awarded 10,500 phantom RSUs and 10,000 phantom PSUs to certain non-U.S. employees under the 2016 LTIP. The phantom RSUs vest equally over a three-year period on the anniversary of the grant date while the phantom PSUs vest under the same conditions as the PSU awards described above. During the fiscal year ended September 30, 2017, 3,500 of the phantom RSUs were forfeited and all of the phantom PSUs were forfeited. Upon vesting and provided the employee remains employed by the Company at that time, the awards will be settled in cash. In accordance with ASC 718, the remaining phantom RSU awards are accounted for as a liability, with the awards re-measured at the end of each reporting period based on the closing price of the Company’s common stock or using a Monte Carlo simulation model, as applicable. Compensation expense is recognized ratably on a straight-line basis over the requisite service period. An immaterial amount of compensation expense was recognized during the three months ended December 31, 2018 and 2017 related to these awards.

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~~During~~The ~~the~~following ~~nine~~table ~~months~~summarizes ~~ended June 30, 2018,~~ the ~~Company~~amount ~~granted~~of ~~193,667~~compensation ~~PSUs~~expense torecognized ~~employees~~as ~~under the 2016 LTIP. These awards will vest on September 30, 2020, entitling the recipient to receive~~ a ~~certain~~component ~~number~~ of ~~shares of the Company’s common stock~~Selling, ~~based~~general onand ~~the~~administrative ~~Company’s~~expenses ~~achievement of the performance goals included in the PSUs, which are based~~ on ~~a return on invested capital calculation over a three-year performance period. Depending on~~ the ~~calculation~~condensed asconsolidated ofstatements ~~the vesting date, a recipient is entitled to receive between 0% and 200%~~ of ~~the~~operations ~~initial~~by award~~. The~~ ~~awards are accounted for as equity instruments, and the fair value of these awards was determined by the closing price of the Company's common stock on the date of grant.~~ type:

During the fiscal years ended September 30, 2017 and 2016, the Company granted 212,000 and 1,557,500 PSU awards to employees, respectively, under the 2016 LTIP. The recipient can receive between 0% and 200% of the initial award, based on the Company’s total stockholder return during approximate three-year performance period, or a cumulative Adjusted EBITDA target if a specified total stockholder return is not met. The Company used the Monte Carlo simulation model to estimate the fair value of the PSU awards at the grant date, factoring in the market-based vesting condition and considering the probability of satisfying the various performance criteria. The resulting grant date fair value is recognized as expense on a straight-line basis from the grant date through the end of the performance period. The assumptions used in the Monte Carlo simulation model for PSUs included an expected stock price volatility between 35% and 40% based on a peer group of similar companies, an expected dividend yield of 0%, an expected term of two to three years, and a risk-free interest rate of between 0.9% and 1.3%.



	Three Months Ended December 31,
	2018		2017
PSUs	$	1.2	$	1.2
Restricted Stock	$	0.3	$	0.3
TPG restricted stock grants	$	0.1	$	0.1
Stock options	$	0.2	$	0.1
RSUs ⁽¹⁾	$	—	$	—

~~The~~(1) ~~following~~Compensation ~~table~~expense ~~summarizes~~recognized ~~all~~as ~~PSU~~a ~~activity~~component ~~during~~of Selling, general and administrative expenses for RSUs for the ~~nine~~three months ended ~~June~~December 3031, 2018: and 2017 is less than $0.1 million.

	PSUs		Average GrantDate Fair ValuePer Unit
Unvested PSUs at September 30, 2017	1,524,000		$	8.92
Granted	193,667		7.50
Vested	—		—
Forfeited/Canceled	(22,500	)	9.13
Unvested PSUs at June 30, 2018	1,695,167		$	8.76

The following table summarizes unrecognized compensation expense and weighted average remaining life as of the three months ended December 31, 2018 by award type:

As of June 30, 2018, the Company may issue up to 3,390,334 shares of common stock related to the outstanding PSU awards described above under the 2016 LTIP. The PSU awards are accounted for as equity instruments, and the Company recognized compensation expense of $1.2 million and $3.5 million as a component of Selling, general and administrative expenses on the condensed consolidated statements of operations for the three and nine months ended June 30, 2018, respectively, and $1.3 million and $3.5 million for the three and nine months ended June 30, 2017, respectively, related to the PSUs. As of June 30, 2018, the outstanding PSUs had a weighted-average remaining contract life of 1.1 years. As of June 30, 2018, there was $5.3 million of total unrecognized compensation expense related to unvested PSUs.



	Unrecognized Compensation Expense		Weighted Average Remaining Life (in years)
PSUs	$	2.9	0.5
Restricted Stock	$	1.7	1.8
TPG restricted stock grants	$	0.4	0.4
Stock options	$	1.6	8.8
RSUs ⁽¹⁾	$	—	0.9

In(1) ~~November~~Unrecognized ~~2017,~~compensation ~~the~~expense ~~Company~~for ~~granted~~RSUs ~~415,867~~as ~~shares~~ of ~~restricted stock to employees under~~ the ~~2016 LTIP. The restricted stock awards vest equally on the anniversary of the grant date over a~~ three~~-year~~ ~~period~~months provided that the recipients of such grants continue their employment with the Company. The awards are accounted for as equity instruments, and the fair value of the restricted stock awards was determined by the closing price of the Company's common stock on the date of grant. During the fiscal years ended ~~September~~December 3031, ~~2017~~2018 ~~and~~is ~~2016,~~less ~~the~~than ~~Company granted restricted stock awards to certain of the Company’s non-employee directors under the 2016 LTIP that vest one year from the date of grant~~$0.1 million.

~~The~~As ~~following~~of ~~table~~December 31, ~~summarizes~~2018, ~~all~~there ~~restricted~~were ~~stock~~3,980,465 ~~activity~~shares ~~during~~of the ~~nine~~ ~~months~~Company’s ~~ended~~common ~~June 30~~stock available for issuance under the 2016 LTIP, ~~2018:~~assuming the PSU awards vest at their maximum target.

	Shares of Restricted Stock		Average GrantDate Fair ValuePer Unit
Restricted stock at September 30, 2017	77,458		$	8.26
Granted	415,867		7.50
Vested	—		—
Forfeited/Canceled	(24,008	)	8.20
Restricted stock at June 30, 2018	469,317		$	7.59

Pursuant to the terms of the Univar Merger Agreement and upon the closing of the transactions contemplated by the Univar Merger Agreement, each outstanding award granted, including unvested awards, under the 2016 LTIP will be cancelled in exchange for the consideration set forth in the Univar Merger Agreement. Each outstanding stock option, not including options out of the money, will be cancelled and converted into the right to receive the merger consideration received by the Company's stockholders in respect of each "net share" covered by such stock option. The number of "net shares" covered by each stock option is equivalent to the number of shares of the Company's common stock with a value equal to the intrinsic value of such stock option. Each outstanding option that is out of the money will be cancelled for no consideration. Each outstanding share of restricted stock, including unvested shares, will be cancelled and converted into the right to receive the merger consideration received by the Company's stockholders. Each outstanding PSU award, including unvested PSU awards, will be cancelled and converted into the right to receive the merger consideration received by the Company's stockholders with respect to the number of shares of the Company's common stock subject to such PSU award (determined based on actual performance through the latest practicable date prior to the closing of the transactions contemplated by the Univar Merger Agreement). For purposes of the Univar Merger Agreement, the recipients of 2016 PSU awards will receive between 70% and 200% of the initial award, based on the Company’s actual level of performance at the time of the change in control. Each outstanding RSU award, including unvested RSU awards, will be cancelled and converted into the right to receive the merger consideration received by the Company's stockholders with respect to the number of shares of the Company's common stock subject to such RSU award. Each outstanding phantom RSU, including unvested phantom RSUs, will be cancelled and converted into the right to receive an amount in cash equal to the value of the merger consideration received by the Company's stockholders with respect to the number of shares of the Company's common stock subject to such phantom RSU award. The Company is restricted from granting any additional share-based compensation pursuant to a covenant contained in the Univar Merger Agreement.

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The restricted stock awards are accounted for as equity instruments, and the Company recognized compensation expense of $0.3 million and $1.0 million as a component of Selling, general and administrative expenses on the condensed consolidated statements of operations during the three and nine months ended June 30, 2018, respectively, and $0.1 million and $0.4 million during the three and nine months ended June 30, 2017, respectively, related to the restricted stock. As of June 30, 2018, there was $2.3 million of total unrecognized compensation expense related to restricted stock, and a weighted average remaining life of 2.1 years.

During the fiscal year ended September 30, 2016, the TPG Restricted Stock Grants were awarded with respect to 100,000 shares of Company common stock owned by TPG. These awards vest in equal amounts over a three-year period provided that the recipients of such grants continue their employment with the Company. During the three months ended June 30, 2018, 27,471 shares of these awards vested, and 7,163 shares were transferred to the Company (reflected as treasury stock) to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting. During the fiscal year ended September 30, 2017, 33,297 shares of these awards vested, 9,576 shares were transferred to the Company (reflected as treasury stock) to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting, and 11,673 shares were transferred back to TPG due to forfeiture. The Company recognized compensation expense of $0.1 million and $0.2 million as a component of Selling, general and administrative expenses on the condensed consolidated statements of operations for the three and nine months ended June 30, 2018, respectively, and $0.1 million and $0.3 million for the three and nine months ended June 30, 2017, respectively, related to these awards. As of June 30, 2018, there was $0.4 million of total unrecognized compensation expense related to these awards and a weighted average remaining life of 0.9 years. While these awards were not made pursuant to the 2016 LTIP, they constitute equity-based compensation and therefore will count against the 2016 LTIP's share reserve to the extent the awards vest.

During the nine months ended June 30, 2018, the Company granted 999,492 stock options to employees under the 2016 LTIP. The awards vest in equal amounts over a three-year period provided that the recipients of such grants continue their employment with the Company. The Company used the Black-Scholes Merton model to estimate the fair value of the option awards at the grant date. The resulting grant date fair value is recognized as expense on a straight-line basis over the vesting period. The assumptions used in the Black-Scholes Merton model for the options included an expected term of six years, an expected stock price volatility of 35.0% based on a peer group of similar companies, an expected dividend yield of 0.0% and a risk-free interest rate of 2.1%.

The following table summarizes stock option activity during the nine months ended June 30, 2018:

	Stock Options	Average GrantDate Fair ValuePer Unit		Weighted Average Exercise Price
Stock Options at September 30, 2017	—	$	—	$	—
Granted	999,492	2.84		7.42
Exercised	—	—		—
Forfeited/Canceled	—	—		—
Stock Options at June 30, 2018	999,492	$	2.84	$	7.42

The stock options are accounted for as equity instruments, and the Company recognized compensation expense of $0.2 million and $0.6 million as a component of Selling, general and administrative expenses on the condensed consolidated statements of operations during the three and nine months ended June 30, 2018, respectively, related to the stock options. As of June 30, 2018, there was $2.1 million of total unrecognized compensation expense related to stock options, and a weighted average remaining contractual life of 9.3 years. The outstanding stock options as of June 30, 2018 had an aggregate intrinsic value of $1.7 million. No stock options were exercisable as of June 30, 2018.

During the three months ended December 31, 2016, the Company granted certain employees a total of 28,000 RSUs under the 2016 LTIP that vest equally over a three-year period on the anniversary of the grant date provided the employee remains employed by the Company. Upon vesting, the recipients will receive a share of common stock in the Company for each RSU awarded. The fair value of these RSUs was determined based on the closing price of the Company’s stock on the grant date.

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The following table summarizes RSU award activity during the nine months ended June 30, 2018:

	RSUs		Average GrantDate Fair ValuePer Unit
Unvested RSUs at September 30, 2017	24,500		$	7.28
Granted	—		—
Vested	(8,162	)	7.28
Forfeited/Canceled	—		—
Unvested RSUs at June 30, 2018	16,338		$	7.28

The RSUs are accounted for as equity instruments, and the Company recognized compensation expense of less than $0.1 million as a component of Selling, general and administrative expenses on the condensed consolidated statements of operations during the three and nine months ended June 30, 2018 and 2017 related to the RSUs. During the nine months ended June 30, 2018, 8,162 RSUs vested, and 2,777 shares were transferred to the Company (reflected as treasury stock) to satisfy the employees’ tax withholding obligations in connection with the vesting. As of June 30, 2018, there was $0.1 million of total unrecognized compensation expense related to the RSUs, and a weighted average remaining life of 1.4 years.

During the three months ended December 31, 2016, the Company also awarded 10,500 phantom RSUs and 10,000 phantom PSUs to certain non-U.S. employees under the 2016 LTIP. The phantom RSUs vest equally over a three-year period on the anniversary of the grant date while the phantom PSUs vest under the same conditions as the PSU awards described above. During the fiscal year ended September 30, 2017, 3,500 of the phantom RSUs were forfeited and all of the phantom PSUs were forfeited. Upon vesting and provided the employee remains employed by the Company at that time, the awards will be settled in cash. In accordance with ASC 718, the remaining phantom RSU awards are accounted for as a liability, with the awards re-measured at the end of each reporting period based on the closing price of the Company’s common stock or using a Monte Carlo simulation model, as applicable. Compensation expense is recognized ratably on a straight-line basis over the requisite service period. An immaterial amount of compensation expense was recognized during the three and nine months ended June 30, 2018 and 2017 related to these awards.

As of June 30, 2018, there were 3,967,265 shares of the Company’s common stock available for issuance under the 2016 LTIP, assuming the PSU awards vest at their maximum target.

Defined Contribution Plans

Qualifying employees of the Company are eligible to participate in the Company’s 401(k) Plan. The 401(k) Plan is a defined contribution plan which allows employees to make tax deferred contributions as well as company contributions, designed to assist employees of the Company and its affiliates in providing for their retirement. The Company matches 100% of employee contributions up to 4.0%. The Company makes an additional contribution to the 401(k) Plan of 1.5%, 3.0%, or 4.5%, based upon years of service of one to ten years, eleven to twenty years and twenty-one years or more, respectively. A version of the 401(k) Plan is also available for qualifying employees of the Company’s ~~in its~~ foreign subsidiaries.

The following summarizes contributions to the plans described above:

	Three Months Ended June 30,				Nine Months Ended June 30,
	Three Months Ended December 31,
	2018		2017		~~2018~~		~~2017~~
Contributions recorded as a component of cost of sales and operating expenses	$	1.1	$	1.0	$	~~3.1~~	$	~~3.0~~
Contributions recorded as a component of selling, general and administrative expenses	1.6		1.65		~~4.8~~		~~4.8~~
Total contributions	$	2.7	$	2.65	$	~~7.9~~	$	~~7.8~~

2912. Equity

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11. Equity

Common Stock

The authorized common stock of the Company consists of 300,000,000 shares. Holders of the Company’s common stock are entitled to one vote for each share of common stock. As of ~~June~~December 3031, 2018, there were 89,~~753~~755,~~662~~231 shares of common stock issued and 89,~~734~~698,~~146~~331 shares of common stock outstanding, which includes the 12,476,250 Founder Shares. The Company has units outstanding which consist of one share of common stock and one warrant which are included in the respective totals.

Founder Shares

As of ~~June~~December 3031, 2018, there were 12,476,250 Founder Shares. These Founder Shares are subject to forfeiture on the tenth anniversary of the Closing Date unless:


•	with respect to 50% of such Founder Shares, the last sale price of the Company’s common stock as quoted on NASDAQ equals or exceeds $12.50 per share (as adjusted for stock splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period; and


•	with respect to the remaining 50% of such Founder Shares, the last sale price of the Company’s common stock equals or exceeds $15.00 per share (as adjusted for stock splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period; or

• the ~~post-combination~~Company ~~company~~ completes a liquidation, merger, stock exchange or other similar transaction that results in all or substantially all of its stockholders having the right to exchange their shares of common stock for consideration in cash, securities or other property or any transaction involving a consolidation, merger, proxy contest, tender offer or similar transaction in which the post-combination company is the surviving entity which results in a change in the majority of the Company’s board of directors or management team or the Company’s post-combination stockholders immediately prior to such transaction ceasing to own a majority of the surviving entity immediately after such transaction.

The Founder Shares will not participate in dividends or other distributions with respect to the shares prior to these targets being met, whereupon the Founder Shares shall be entitled to all dividends and distributions paid on the common stock after the Business Combination as if they had been holders of record entitled to receive distributions on the applicable record date.

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Warrants

As of ~~June~~December 3031, 2018, there were 50,025,000 warrants outstanding to purchase 25,012,500 shares of common stock at an exercise price of $11.50 per share.

In the case of any reclassification, reorganization, merger or consolidation, or upon a dissolution following such sale or transfer, the holders of the warrants share thereafter have the right to purchase and receive the kind and amount of shares of stock or other securities or property (including cash) receivable upon reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holders of the warrants have received if such holders had exercised their warrants immediately prior to such event.

Preferred Stock

The authorized preferred stock of the Company consists of 1,000,000 shares. As of ~~June~~December 3031, 2018, there were no shares of preferred stock issued and outstanding.

Treasury Stock

During the three months ended ~~June~~December 3031, 2018, in connection with the vesting of ~~one~~restricted ~~third of the TPG Restricted Stock Grants, 7,163 shares of common~~ stock ~~were~~and ~~transferred to the Company to satisfy the employees’ tax withholding obligations in connection with the vesting. During the nine months ended June 30~~RSUs, ~~2018~~34,461 inand ~~connection with the vesting of RSUs,~~ 2,~~777~~923 shares of common stock, respectively, were transferred to the Company to satisfy the employees’ tax withholding obligations in connection with the vesting. Following the transfers, these shares were not canceled and are therefore classified as treasury stock. Total treasury stock as of ~~June~~December 3031, 2018 iswas 1956,~~516~~900 shares.

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1213. Earnings per Share

A reconciliation of the numerators and denominators of the basic and diluted per share computation follows.

	Three Months Ended June 30,				Nine Months Ended June 30,
	Three Months Ended December 31,
	2018		2017		~~2018~~		~~2017~~
Basic:
Net income	$	1716.52	$	1026.25	$	~~44.4~~	$	~~0.8~~
Weighted average number of common shares outstanding during the period	76,~~797~~945,~~414~~078		76,~~743~~793,~~853~~518		~~76,795,551~~		~~76,745,396~~
Net income per common share - basic	$	0.2321	$	0.1335	$	~~0.58~~	$	~~0.01~~
Diluted:
Net income	$	1716.52	$	1026.25	$	~~44.4~~	$	~~0.8~~
Denominator for diluted earnings per share:
Weighted average number of common shares outstanding during the period	76,797,414		76,743,853		76,795,551		76,745,396
Weighted average number of common shares attributable to the period	76,945,078		76,793,518
Incremental common shares attributable to outstanding unvested restricted stock and unvested restricted stock units	185,936		85,015		157,207		84,900
Incremental common shares attributable to outstanding diluted options and unvested restricted shares	149,352		345,718
Denominator for diluted earnings per common share	7677,~~983~~094,~~350~~430		7677,~~828~~139,~~868~~236		~~76,952,758~~		~~76,830,296~~
Net income per common share - diluted	$	0.2321	$	0.1334	$	~~0.58~~	$	~~0.01~~

Dilutive computations during the current period contain additional incremental common shares which are attributable to the outstanding unvested restricted stock awards issued to directors and employees, ~~and~~ restricted stock units ~~awards~~awarded to employees; ~~the~~and unvested outstanding stock options ~~were~~awarded ~~not~~to ~~included as the result would have been anti-dilutive~~employees. During the three ~~and nine~~ months ended ~~June~~December 3031, 2017, the outstanding unvested restricted stock awards issued to directors and employees and restricted stock ~~unit~~units awards to employees were included in the dilutive share calculation; the outstanding stock options were not included as the result would have been anti-dilutive. For the three ~~and nine~~ months ended ~~June~~December 3031, 2018 and 2017, there were 12,476,250 Founder Shares excluded from the basic and diluted computations because such shares were subject to forfeiture, and PSU awards, which were not included in the computation of diluted shares outstanding because performance targets and/or market conditions were not yet met for these awards. Diluted shares outstanding also did not include 25,012,500 shares of common stock issuable on the exercise of 50,025,000 warrants because the warrants were out-of-the-money for the three ~~and nine~~ months ended ~~June~~December 3031, 2018 and 2017.

1314. Commitments, Contingencies and Litigation

Operating Leases

The Company is a lessee of office buildings, transportation equipment, warehouses and storage facilities, other equipment, facilities and properties under operating lease agreements that expire at various dates. Rent expense (including rentals under short-term leases) was $6.47 million and $186.95 million for the three ~~and nine~~ months ended ~~June~~December 3031, 2018, ~~respectively,~~ and ~~$6.1 million and $19.2 million for the three and nine months ended June 30,~~ 2017, respectively.

Future minimum non-cancellable rental payments as of ~~June~~December 3031, 2018 are as follows:

2018	$	14.0
2019	$	14.2
2019	8.9
2020	9.6
2020	6.7
2021	8.1
2021	5.4
2022	5.0
2022	3.8
2023	1.8
Thereafter	0.42
Total	$	3938.29

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Capital Leases

The Company leases certain equipment and facilities under capital lease agreements. As of ~~June~~December 3031, 2018, future minimum lease payments under capital leases were as follows:

2018	$	7.7
2019	$	7.5
2019	7.4
2020	7.1
2020	7.0
2021	7.0
2021	6.9
2022	13.7
2022	11.7
2023	2.4
Thereafter	25.90
Total minimum capital lease payments	6662.67
Less amount representing executory costs	(1514.75		)
Less amount representing interest	(1615.0		)
Present value of net minimum capital lease payments	$	3433.92

Environmental Remediation

Due to the nature of its business, the Company is subject to various laws and regulations pertaining to the environment and to the sale, handling, transportation and disposal of chemicals and hazardous materials. These laws pertain to air and water, the management of solid and hazardous wastes, transportation and human health and safety.

The Company’s reserves will be subject to numerous uncertainties that affect its ability to accurately estimate its costs, or its share of costs if multiple parties are responsible. These uncertainties involve the legal, regulatory and enforcement parameters governing environmental assessment and remediation, the nature and extent of contamination, the extent of required remediation efforts, the choice of remediation methodology, availability of insurance coverage and, in the case of sites with multiple responsible parties, the number and financial strength of any other potentially responsible parties.

Other Legal Proceedings

The Company is subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities, including product liability claims. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.

Other Contingencies

In June 2014, the Predecessor self-disclosed to the DTSC that an inventory of its Fairfield facility had revealed potential violations of RCRA and the California Health and Safety Code. Although no formal proceeding has been initiated, the Company expects the DTSC to seek payment of fines or other penalties for non-compliance. The Company does not expect the amount of any such fine or other penalty to have a material adverse effect on its business, financial position or results of operations.

~~14. Related Party Transactions~~ 31

On February 28, 2018, the Company entered into a Transportation Logistics Management Services Agreement with Transplace Texas, LP (“Transplace”), pursuant to which Transplace, a portfolio company of TPG and affiliate of the Company, agrees to provide certain transportation logistics management services to the Company over a minimum period of three years. The agreement was entered into on arms’ length terms following a competitive bid process. The Company subsequently signed an addendum to this agreement whereby Transplace will provide additional services for certain foreign operations. The estimated annual fee for services to be performed by Transplace is $1.4 million.

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	Three Months Ended June 30,				Nine Months Ended June 30,
	2018		2017		2018		2017
Sales to related entities:
TPG portfolio entities	$	0.7	$	0.8	$	3.2	$	2.3
Entities related to members of the Board of Directors	$	—	$	0.1	$	—	$	0.1
Purchases from related entities:
TPG portfolio entities	$	0.1	$	—	$	0.1	$	—
Entities related to members of the Board of Directors	$	3.4	$	0.5	$	9.6	$	1.5

15. Related Party Transactions

The tables below summarize activity recorded during the respective periods for related party transactions:

	June 30, 2018		September 30, 2017
	Three Months Ended December 31,
Accounts receivable from related entities:
	2018		2017
TPG portfolio entities	$	0.5	$	0.7
Sales to related entities:
Accounts payable to related entities:
TPG portfolio entities	$	0.7	$	1.6
TPG portfolio entities	$	0.4	$	—
Entities related to members of the Board of Directors	$	0.2	$	—
Entities related to members of the Board of Directors	$	0.4	$	0.1
Purchases from related entities:
TPG portfolio entities	$	0.5	$	—
Entities related to members of the Board of Directors	$	2.6	$	3.4



	December 31, 2018		September 30, 2018
Accounts receivable from related entities:
TPG portfolio entities	$	0.7	$	1.0
Entities related to members of the Board of Directors	$	0.2	$	0.2
Accounts payable to related entities:
TPG portfolio entities	$	0.2	$	0.5
Entities related to members of the Board of Directors	$	0.1	$	0.6

Contingent Consideration Obligations Pursuant to the TRA and the Merger Agreement

Subsequent to the Business Combination, TPG beneficially owns approximately 35% of the Company’s common stock, including Founder Shares, and is considered a related party of the Company. In connection with the Business Combination, TPG became a party to the TRA and obtained the right to receive the Deferred Cash Consideration pursuant to the Merger Agreement. The fair value of these contingent consideration liabilities was as follows:

	June 30, 2018		September 30, 2017
	December 31, 2018		September 30, 2018
Due to related party pursuant to contingent consideration obligations:
Current liability	$	914.25	$	1214.57
Non-current liability	~~112~~100.1		~~127~~122.78
Total fair value	$	~~121~~114.36	$	~~140~~137.25

During the ~~nine~~three months ended ~~June 30~~December 31, 2018, the Company made no payments to TPG related to the TRA, and the Company paid $4.2 million to TPG related to the TRA~~. See~~ ~~Note~~during 9the three months ended December 31, 2017.

1516. Income Taxes

For all periods, the Company computed the provision for income taxes based on the actual year-to-date effective tax rate by applying the discrete method. Use of the annual effective tax rate, which relies on accurate projections by legal entity of income earned and taxed in foreign jurisdictions, as well as accurate projections by legal entity of permanent and temporary differences, was not considered a reliable estimate for purposes of calculating year-to-date income tax expense.

The Tax Act ~~significantly~~effective ~~revises~~date ~~future~~combined ~~U.S.~~with ~~corporate income taxes by, among other things, lowering U.S. corporate income tax rates and implementing a modified territorial tax system. Because~~ the Company’s ~~has a September 30~~ fiscal year end, ~~the~~resulted ~~lower corporate income tax rate will be phased~~ in, ~~resulting in~~ a U.S. statutory federal rate of approximately 24.5% for the Company’s fiscal year ~~ending~~ended September 30, 2018 ~~and 21~~.0% Beginning ~~for~~in ~~subsequent~~ fiscal ~~years. The~~year ~~Tax Act also provided for certain transition impacts. As part of the transition to the new modified territorial tax system~~2019, the ~~Tax Act imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries~~U. ~~The~~S. ~~Company~~statutory ~~does~~federal ~~not~~rate ~~currently~~is ~~anticipate an impact from the repatriation tax charge~~21.0%.

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~~For~~Income tax expense for the ~~nine~~three months ended ~~June 30~~December 31, 2018, ~~the~~was ~~impact~~$4.2 million on pre-tax income of $20.4 million compared to the ~~Tax~~income ~~Act~~tax ~~resulted~~expense inof a$1.3 ~~net~~million on pre-tax ~~benefit~~income of ~~approximately~~ $427.58 million for the three months ended December 31, ~~related~~2017. The ~~solely~~current tax expense was largely attributable to ~~the~~income ~~remeasurement~~on ofprofitable U.S. operations. The prior period tax expense was attributable to prior period income partially offset by the ~~Company’s~~benefit ~~net~~on deferred tax liabilities atdue to the ~~lower~~impact ~~enacted~~of ~~corporate~~the Tax Act, which resulted in a decrease in income tax ~~rates~~expense of $4.5 million.

InAt ~~accordance~~December 31, ~~with~~2018 ~~recently~~and ~~issued~~September 30, ~~SEC guidance~~2018, the ~~estimated~~valuation ~~net~~allowance ~~income~~was ~~tax benefit of~~ $4.51 million isand ~~considered~~$3.6 ~~provisional~~million, ~~representing the Company’s current best estimate based on interpretation of the provisions of the Tax Act~~respectively, asprimarily ~~data~~related ~~continues~~ to beoperations ~~accumulated~~ in ~~order~~Asia. In toassessing ~~finalize~~ the ~~underlying~~realizability ~~calculations. In~~of ~~addition,~~deferred ~~due~~tax toassets, ~~the~~management ~~broad~~considers ~~and~~whether ~~complex~~it ~~changes~~is ~~contained~~more inlikely ~~the~~than ~~Tax~~not ~~Act,~~that ~~the~~some ~~Company’s~~portion ~~current~~or ~~estimate~~all of the ~~impact~~deferred ~~may~~tax beassets ~~influenced~~will ~~by,~~not ~~among~~be ~~other~~realized. The ~~things,~~ultimate ~~changes~~realization ~~in interpretations~~ of ~~the~~deferred ~~Tax~~tax ~~Act,~~assets ~~any~~is ~~legislative~~dependent ~~action~~upon tothe ~~address~~generation ~~questions~~of ~~that~~future ~~arise~~taxable ~~because~~income ofduring the ~~Tax~~periods ~~Act and any changes~~ in ~~accounting~~which ~~standards~~those ~~for~~temporary ~~income~~differences ~~taxes~~become ordeductible. Based ~~related~~upon ~~interpretations~~management’s ~~issued~~expectations inat ~~response~~December 31, to2018, ~~the~~management ~~Tax~~believes ~~Act. The~~it ~~Company~~is ~~anticipates~~more ~~finalizing~~likely ~~and~~than ~~recording~~not ~~any~~that ~~resulting~~it ~~adjustments~~will byrealize the ~~end~~majority of its ~~current~~deferred ~~fiscal~~tax ~~year ending September 30, 2018~~assets.

Income tax expense for the three months ended June 30, 2018 was $9.7 million on pre-tax income of $27.2 million compared to the income tax expense of $5.9 million on pre-tax income of $16.1 million for the three months ended June 30, 2017. The current tax expense was largely attributable to income on profitable U.S. operations. The prior period tax expense was largely attributable to deferred taxes on profitable U.S. operations.

Income tax expense for the nine months ended June 30, 2018 was $15.6 million on pre-tax income of $60.0 million compared to the income tax expense of $4.0 million on pre-tax income of $4.8 million for the nine months ended June 30, 2017. The current period tax expense was attributable to profitable U.S. and foreign operations. The expense generated in the U.S. was offset by a current period benefit on deferred tax liabilities as a result of the impact of the Tax Act. The prior period tax expense was largely attributed to foreign income tax expense on profitable foreign operations.

At June 30, 2018 and September 30, 2017, the valuation allowance was $3.2 million and $3.1 million, respectively, primarily related to operations in Asia. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon management’s expectations at June 30, 2018, management believes it is more likely than not that it will realize the majority of its deferred tax assets.

Uncertain Tax Positions

InThe ~~connection~~Company ~~with~~recognizes ~~the~~interest ~~Ultra~~and ~~Chem~~penalties ~~Acquisition,~~related ~~the~~to ~~Company~~uncertain ~~recorded income~~ tax~~-related~~ ~~uncertainties~~positions, ~~totaling~~if ~~$1.4 million~~any, ~~inclusive~~as ofa ~~interest~~component ~~and~~of ~~penalties. Additionally,~~Income ~~the~~tax ~~Company~~expense ~~also~~in ~~recognized~~the ~~indemnification~~condensed ~~assets~~consolidated ~~related~~statements ~~to certain~~ of ~~these income tax-related uncertainties~~operations. ~~The~~There ~~indemnification~~was ~~assets~~an ~~were~~insignificant ~~included~~amount inof ~~Other~~interest ~~current assets~~ and ~~Other~~penalties ~~non-current~~recognized ~~assets~~during inall ~~the~~periods. The ~~condensed~~Company ~~consolidated~~had ~~balance~~$4.1 ~~sheets,~~million ~~representing~~and ~~the~~$4.0 ~~reimbursement~~million ~~the~~related ~~Company~~to ~~reasonably~~uncertain ~~expected~~tax topositions, ~~receive~~including ~~from~~related ~~funds~~accrued ~~held~~interest inand ~~escrow~~penalties ~~pursuant~~as toof ~~the~~December 31, ~~purchase~~2018 ~~agreement. See~~and ~~Note~~September 30, 32018, respectively.

~~The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of Income tax expense in the condensed consolidated statements of operations~~17. ~~There~~ ~~was~~Segment ~~an insignificant amount of interest~~ and ~~penalties~~Geographic ~~recognized~~Data during all periods. The Company had $3.8 million and $1.8 million related to uncertain tax positions, including related accrued interest and penalties as of June 30, 2018 and September 30, 2017, respectively. Between the time of the initial recording of the uncertain tax provisions associated with the Ultra Chem Acquisition and the nine months ended June 30, 2018, the Company reduced the reserve by approximately $0.4 million due to the lapse of the applicable statute of limitations. During the third fiscal quarter of 2018, the Company recorded certain newly identified tax contingencies totaling $2.3 million, primarily related to the Company’s foreign operations. Separately, the Company also recognized $1.8 million of deferred tax assets, representing the reduction in income taxes the Company reasonably expects to recognize related to these foreign operations’ income tax-related uncertainties.

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16. Segment and Geographic Data

The Company operates through three lines of business, or operating segments: Chemicals, Plastics and Environmental Services, which market to different sets of customers operating in an array of industries, with various end markets and customer segments within those industries. For segment presentation and disclosure purposes, the Chemicals and Plastics lines of business constitute separate reportable segments, while the Environmental Services line of business, which does not meet the materiality threshold for separate disclosure, is included in an "Other" segment.

Each line of business represents unique products and suppliers, and each line of business focuses on specific end markets within its industry based on a variety of factors, including supplier or customer opportunities, expected growth and prevailing economic conditions. Across the Chemicals and Plastics lines of business there are numerous industry segments, end markets and sub markets that the Company may choose to focus on. These end markets may change from year to year depending on the underlying market economics, supplier focus, expected profitability and the Company’s strategic agenda.

The Chemicals, Plastics and Environmental Services lines of business compete with national, regional and local companies throughout North America. Additionally, the Chemicals and Plastics lines of business compete with other distribution companies in Asia. The Plastics line of business also competes with other distribution companies in EMEA. Competition within each line of business is based primarily on the diversity of the product portfolio, service offerings, reliability of services and supply, technical support, price and delivery capabilities. The accounting policies used to account for transactions in each of the lines of business are the same as those used to account for transactions at the corporate level.

The Chemicals and Plastics lines of business are distribution businesses, while the Environmental Services line of business provides hazardous and non-hazardous waste collection, recovery, recycling and disposal services.

~~A brief description of each segment follows:~~33

Chemicals. The Chemicals line of business distributes specialty and industrial chemicals, additives and solvents to industrial users via railcars, barges, bulk tanker trucks and as packaged goods in trucks. The Company’s chemical products are distributed in more than 50 countries worldwide, primarily in North America and Asia. In connection with the distribution of chemicals products, the Company provides value-added services such as custom blending, packaging and re-packaging, private-label manufacturing and product testing in the form of chemical analysis, product performance analysis and product development. While the Chemicals line of business serves multiple end markets, key end markets within the industrial space are household, industrial and institutional, performance coatings (including architectural coatings, adhesives, sealants and elastomers), lubricants, oil and gas and personal care.

Plastics. The Plastics line of business distributes a broad product line consisting of commodity polymer products and prime engineering resins to plastics processors engaged in blow molding, extrusion, injection molding and rotation molding via railcars, bulk trucks, truckload boxes and mixed truckloads or less-than-truckload quantities. The Company's plastics products are distributed in more than 50 countries worldwide, primarily in North America, EMEA and Asia. While the Plastics line of business serves a broad cross section of industrial segments, key end markets are automotive and healthcare.

Other. The Environmental Services line of business, in connection with certain waste disposal service companies, provides customers with comprehensive on-site and off-site hazardous and non-hazardous waste collection, transportation, recovery, disposal arrangement, and recycling services in North America, primarily in the U.S. These environmental services are offered through the Company’s network of distribution facilities used as transfer facilities and through a staff of dedicated on-site waste professionals. The Environmental Services line of business serves multiple end markets such as aerospace and defense, automotive, chemical manufacturing, industrial manufacturing and oil and gas.

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A brief description of each segment follows:

Chemicals. The Chemicals line of business distributes specialty and industrial chemicals, additives and solvents to industrial users via railcars, barges, bulk tanker trucks and as packaged goods in trucks. The Company’s chemical products are distributed in approximately 50 countries worldwide, primarily in North America and Asia. In connection with the distribution of chemicals products, the Company provides value-added services such as custom blending, packaging and re-packaging, private-label manufacturing and product testing in the form of chemical analysis, product performance analysis and product development. While the Chemicals line of business serves multiple end markets, the key end markets within the industrial space are household, industrial and institutional, performance coatings (including architectural coatings, adhesives, sealants and elastomers), lubricants, oil and gas and personal care.

Plastics. The Plastics line of business distributes a broad product line consisting of commodity polymer products and prime engineering resins to plastics processors engaged in blow molding, extrusion, injection molding and rotation molding via railcars, bulk trucks, truckload boxes and mixed truckloads, or less-than-truckload quantities. The Company's plastics products are distributed in more than 60 countries worldwide, primarily in North America, EMEA and Asia. The Plastics line of business serves a broad cross section of industrial segments, including key automotive and healthcare end markets.

Other. The Environmental Services line of business, in connection with certain waste disposal service companies, provides customers with comprehensive on-site and off-site hazardous and non-hazardous waste collection, transportation, recovery, disposal arrangement and recycling services in North America, primarily in the U.S. These environmental services are offered through the Company’s network of distribution facilities used as transfer facilities and through a staff of dedicated on-site waste professionals. The Environmental Services line of business serves multiple end markets such as aerospace and defense, automotive, chemical manufacturing, industrial manufacturing and oil and gas.

The Chief Executive Officer is the Chief Operating Decision Maker. The Chief Operating Decision Maker reviews operating results in order to make decisions, assess performance and allocate resources to each line of business. In order to maintain the focus on line of business performance, certain expenses are excluded from the line of business results utilized by the Company’s Chief Operating Decision Maker in evaluating line of business performance. These expenses include depreciation and amortization, selling, general and administrative expense and corporate items including transaction related costs, interest and income tax expense. These items are separately delineated to reconcile to reported net income. No single customer accounted for more than 10% of revenues for any line of business for each of the periods reported. Intersegment revenues were insignificant.

Certain assets are aggregated at the line of business level. The assets attributable to the Company’s lines of business, that are reviewed by the Chief Operating Decision Maker, consist of trade accounts receivable, inventories, goodwill and any specific assets that are otherwise directly associated with a line of business. The Company’s inventory of packaging materials and containers, as well as property, plant and equipment, are generally not allocated to a line of business and are included in unallocated assets.

~~Summarized financial information relating to the Company’s lines of business is as follows:~~34

	Three Months Ended June 30,						Nine Months Ended June 30,
	2018			2017			2018			2017
Sales and operating revenues
Chemicals	$	494.9		$	443.9		$	1,414.6		$	1,211.3
Plastics	512.6			466.2			1,491.7			1,350.4
Other	38.9			32.6			110.7			93.5
Total sales and operating revenues	1,046.4			942.7			3,017.0			2,655.2
Gross profit
Chemicals	64.9			54.3			185.3			147.6
Plastics	49.6			43.1			138.5			124.9
Other	5.7			5.3			19.0			16.8
Total gross profit	120.2			102.7			342.8			289.3
Selling, general & administrative expenses	88.8			79.4			259.5			233.9
Transaction related costs	—			0.2			0.1			1.3
Change in fair value related to contingent consideration obligations	(8.7		)	(0.8		)	(14.7		)	19.8
Operating income	40.1			23.9			97.9			34.3
Other income, net	0.4			5.7			0.9			8.3
Interest income (expense)
Interest income	0.2			—			0.4			0.2
Interest expense	(13.5		)	(13.5		)	(39.2		)	(38.0		)
Net income before income taxes	$	27.2		$	16.1		$	60.0		$	4.8

	June 30, 2018		September 30, 2017
IDENTIFIABLE ASSETS
Chemicals	$	845.1	$	793.6
Plastics	782.8		762.7
Other	95.5		91.0
Total identifiable assets by reportable segment	1,723.4		1,647.3
Unallocated assets	555.3		606.2
Total assets	$	2,278.7	$	2,253.5

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Summarized financial information relating to the Company’s lines of business is as follows:



	Three Months Ended December 31,
	2018			2017
Sales and operating revenues
Chemicals	$	438.5		$	431.9
Plastics	456.1			462.2
Other	41.2			35.5
Total sales and operating revenues	935.8			929.6
Gross profit
Chemicals	53.5			58.4
Plastics	38.7			41.9
Other	6.5			6.6
Total gross profit	98.7			106.9
Selling, general & administrative expenses	79.8			84.8
Transaction related costs	8.2			0.1
Change in fair value related to contingent consideration obligations	(22.9		)	(18.6		)
Operating income	33.6			40.6
Other income, net	0.1			0.1
Interest income (expense)
Interest income	0.2			0.1
Interest expense	(13.5		)	(13.0		)
Net income before income taxes	$	20.4		$	27.8



	December 31, 2018		September 30, 2018
IDENTIFIABLE ASSETS
Chemicals	$	795.8	$	826.2
Plastics	743.1		758.2
Other	100.1		95.7
Total identifiable assets by reportable segment	1,639.0		1,680.1
Unallocated assets	540.1		563.5
Total assets	$	2,179.1	$	2,243.6

Revenues by geographic location, based on the jurisdiction of the subsidiary entity receiving revenue credit for the sale, are presented below:

Three Months Ended June 30,

Nine Months Ended June 30,

Three Months Ended December 31,

2018

2017

~~2018~~

~~2017~~

U.S.

~~772~~696.98

~~699~~668.1

~~2,195.9~~

~~1,970.7~~

Canada

4845.71

4342.35

~~142.5~~

~~126.9~~

Other North America

3329.38

2933.70

~~99.9~~

~~54.9~~

Total North America Operations

~~854~~771.97

~~772~~743.16

~~2,438.3~~

~~2,152.5~~

EMEA

~~139~~120.0

~~120~~127.92

~~415.9~~

~~342.2~~

Asia

5244.51

4958.78

~~162.8~~

~~160.5~~

Total

~~1,046~~935.48

~~942~~929.76

~~3,017.0~~

~~2,655.2~~

3735

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company’s financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2018 filed with the SEC on December 76, ~~2017~~2018. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q.

The terms “the Company,” “us,” “our,” “we” and similar terms in this report refer to Nexeo Solutions, Inc. and its consolidated subsidiaries.

Overview

We are a global materials distributor offor chemicals products in North America and Asia and afor ~~global distributor of~~ plastics products in North America, EMEA and Asia. In connection with the distribution of chemicals products, we provide value-added services such as custom blending, packaging and re-packaging, private-label manufacturing and product testing in the form of chemical analysis, product performance analysis and product development. We also provide on-site and off-site hazardous and non-hazardous environmental services, including waste collection, transportation, recovery, disposal arrangement and recycling services in North America, primarily in the U.S.

We have long-standing relationships with major chemicals and plastics producers and suppliers, a strong geographic presence and supply chain network and a balanced customer base that benefits from the service and distribution value we provide. The products we distribute are used in various end markets and customer segments within a broad cross section of manufacturing industries, including household, industrial and institutional, lubricants, performance coatings (including architectural coatings, adhesives, sealants and elastomers), automotive, healthcare, personal care, oil and gas and construction end markets.

We distribute our product portfolio through a global supply chain consisting of owned, leased or third-party warehouses, rail terminals and tank terminals. We have a private fleet of tractors and trailers, primarily in North America.

Univar Merger Agreement

On September 17, 2018, Nexeo and Univar entered into the Univar Merger Agreement providing for the acquisition of Nexeo by Univar. The Univar Merger Agreement and the proposed transaction were approved unanimously by the Board of Directors of both Nexeo and Univar and are subject to review by the SEC and regulatory agencies in the U.S. and other jurisdictions. The Univar Merger Agreement is also subject to a number of conditions, including, among other things and as further described in the Univar Merger Agreement: (i) the adoption by Nexeo’s stockholders of the Univar Merger Agreement, (ii) the approval by Univar’s stockholders of the issuance of the shares of Univar common stock in connection with the proposed transaction contemplated by the Univar Merger Agreement, (iii) the receipt of other required regulatory approvals, (iv) the absence of any law or governmental order prohibiting the proposed transaction, (v) the effectiveness of Univar's registration statement (which occurred on January 29, 2019) and the approval for listing on the NYSE of the shares of Univar common stock in connection with the proposed transaction contemplated by the Univar Merger Agreement, (vi) no material adverse effect on Nexeo's and Univar's operations having occurred since the signing of the Univar Merger Agreement and (vii) the termination of the TRA. There can be no assurance that the conditions to the completion of the proposed transaction will be satisfied or waived or that the proposed transaction will be completed. On November 16, 2018, Univar and Nexeo announced that the waiting period under the HSR Act expired. Additional required filings have been made with other regulatory agencies in certain foreign jurisdictions and the process is ongoing. For further information about the Univar Merger Agreement, see Note 4 to our condensed consolidated financial statements.

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Segment Overview

We operate through three lines of business, or operating segments: Chemicals, Plastics and Environmental Services. Our lines of business market to different sets of customers operating in an array of different industries, with various end markets and customer segments within those industries. For segment presentation and disclosure purposes, our Chemicals and Plastics lines of business constitute separate reportable segments, while our Environmental Services line of business, which does not meet the materiality threshold for separate disclosure, is included in an "Other" segment.

A brief description of each of our lines of business follows:

Chemicals. Our Chemicals line of business distributes specialty and industrial chemicals, additives and solvents to industrial users via railcars, barges, and bulk tanker trucks and as packaged goods in trucks. Our chemicals products are distributed in ~~more~~approximately ~~than~~ 50 countries worldwide, primarily in North America and Asia. In connection with the distribution of chemicals products, we provide value-added services such as custom blending, packaging and re-packaging, private-label manufacturing and product testing in the form of chemical analysis, product performance analysis and product development. While our Chemicals line of business serves multiple end markets, the key end markets within the industrial space are household, industrial and institutional, performance coatings (including architectural coatings, adhesives, sealants and elastomers), lubricants, oil and gas and personal care.

38Plastics. Our Plastics line of business distributes a broad product line consisting of commodity polymer products and prime engineering resins to plastics processors engaged in blow molding, extrusion, injection molding and rotation molding via railcars, bulk trucks, truckload boxes and mixed truckloads, or less-than-truckload quantities. We distribute plastics products in more than 60 countries worldwide, primarily in North America, EMEA and Asia. Our Plastics line of business serves a broad cross section of industrial segments, including key automotive and healthcare end markets.

~~Table~~Other. Our Environmental Services line of ~~Contents~~business, in connection with certain waste disposal service companies, provides customers with comprehensive on-site and off-site hazardous and non-hazardous waste collection, transportation, recovery, disposal arrangement and recycling services in North America, primarily in the U.S. These environmental services are offered through our network of distribution facilities used as transfer facilities and through a staff of dedicated on-site waste professionals. Our Environmental Services line of business serves multiple end markets such as aerospace and defense, automotive, chemical manufacturing, industrial manufacturing and oil and gas.

Plastics. Our Plastics line of business distributes a broad product line consisting of commodity polymer products and prime engineering resins to plastics processors engaged in blow molding, extrusion, injection molding and rotation molding via railcars, bulk trucks, truckload boxes and mixed truckloads or less-than-truckload quantities. We distribute plastics products in more than 50 countries worldwide, primarily in North America, EMEA and Asia. Our Plastics line of business serves a broad cross section of industrial segments; key end markets are automotive and healthcare.

Other. Our Environmental Services line of business, in connection with certain waste disposal service companies, provides customers with comprehensive on-site and off-site hazardous and non-hazardous waste collection, transportation, recovery, disposal arrangement, and recycling services in North America, primarily in the U.S. These environmental services are offered through our network of distribution facilities used as transfer facilities and through a staff of dedicated on-site waste professionals. Our Environmental Services line of business serves multiple end markets such as aerospace and defense, automotive, chemical manufacturing, industrial manufacturing and oil and gas.

Key Factors Affecting our Results of Operations and Financial Condition

General and regional economic conditions. Consumption of chemicals and plastics in the industries and markets we serve are generally affected by the global economy and amplified by regional conditions. Although we manage our cost structure in line with general economic conditions, our volumes and profitability are ultimately correlated with the underlying demand for the end-products of the industries we serve. WeIn ~~have~~the current period we experienced ~~improved~~lower industrial market demand ~~through~~due to the ~~third~~deflationary ~~quarter~~environment, oflower ~~fiscal~~oil ~~year~~and ~~2018~~gas prices, political uncertainty in EMEA and economic slowdown in Asia.

Price fluctuations. Selling prices of the products we distribute within our Chemicals and Plastics lines of business fluctuate with changes in the prices we pay for products. Product costs are largely driven by global and regional economic conditions affecting the prices of two primary raw materials of production: crude oil (primarily naphtha) and natural gas (primarily ethane). These two raw materials are used in the production of propylene and ethylene, the key feedstocks used in over 90% of organic-based commodity and specialty chemicals, as well as in the subsequent production of the intermediate plastics products we distribute. The prices of these feedstocks are also affected by other factors, including choices made by producers for uses of feedstocks (e.g., as an ingredient in gasoline versus a feedstock to the chemical industry) and the capacity devoted to production for market supply and other macroeconomic factors that impact the producers. As a distributor, the prices of these feedstocks are not in our control. We are generally able to adjust finished good prices in accordance with fluctuations of our product costs and transportation-related costs (e.g., fuel costs). As a result, movements in our sales revenue and cost of sales tend to correspond with changes in our product prices. ~~Through~~We ~~the~~continue ~~third quarter of fiscal year 2018, we continued~~ to execute on effective pricing initiatives ~~and managed supply constraints through efficient inventory management~~.

As supply or demand patterns change, there can be a corresponding volatility in the selling prices of the products we distribute. Gross profit margins generally decrease in deflationary price environments and increase during inflationary pricing environments, although the extent to which profitability increases or decreases depends on the rate at which selling prices adjust relative to inventory costs. As a logistics provider, oil prices affect our transportation and delivery costs, along with changes in driver regulations, supply of drivers and common carrier rates. 37

Volume-based pricing. We generally procure chemicals and plastics raw materials through purchase orders rather than under long-term contracts with firm commitments. Our arrangements with key producers and suppliers are typically embodied in agreements that we refer to as framework supply agreements. We work to develop strong relationships with a select group of producers and suppliers that complement our strategy based on a number of factors, including price, breadth of product offering, quality, market recognition, delivery terms and schedules, continuity of supply and each producer’s strategic positioning. Our framework supply agreements with producers and suppliers typically renew annually and, while they generally do not provide for specific product pricing, some, primarily those related to our Chemicals line of business, include volume-based financial incentives through supplier rebates, which we earn by meeting or exceeding target purchase volumes.

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~~Inflation. Our~~As ~~average~~supply ~~selling~~or ~~prices~~demand ~~generally~~patterns ~~rise~~change, inthere ~~inflationary~~can ~~price~~be ~~environments~~corresponding asvolatility ~~producers~~in ~~and suppliers raise~~ the ~~market~~selling prices of the products ~~that~~ we distribute. ~~During~~ Gross ~~inflationary~~profit ~~periods~~margins ~~our~~generally ~~customers~~decrease ~~typically maximize the amount of inventory they carry~~ in ~~anticipation~~deflationary ofprice ~~even~~environments ~~higher~~and ~~prices. Consequently,~~increase ~~this~~during ~~environment~~inflationary ofpricing ~~excess demand favorably impacts our volumes sold~~environments, ~~revenues~~although ~~and~~the ~~gross~~extent ~~profit due~~ to ~~the~~which ~~lag~~profitability ~~between~~increases ~~rising~~or ~~prices~~decreases ~~and~~depends ~~our~~on ~~cost~~the ofrate ~~goods~~at ~~sold. The~~which ~~reverse~~selling isprices ~~true~~adjust inrelative ~~deflationary~~to ~~price~~inventory ~~environments~~costs. ~~Deflationary~~ As ~~forces~~a ~~create~~logistics ~~an environment of oversupply~~provider, ~~driving~~oil ~~market~~ prices ofaffect ~~products~~our ~~downward,~~transportation and wedelivery ~~must~~costs, ~~quickly~~along ~~adjust~~with ~~inventories~~changes ~~and~~in ~~buying~~driver ~~patterns~~regulations, tosupply ~~respond~~of todrivers ~~price~~and ~~declines. Our~~common ~~primary~~carrier ~~objective is to replace inventories at lower costs while maintaining or enhancing unit profitability~~rates.

~~Some~~Volume-based pricing. We generally procure chemicals and plastics raw materials through purchase orders rather than under long-term contracts with firm commitments. Our arrangements with key producers and suppliers are typically embodied in agreements that we refer to as framework supply agreements. We work to develop strong relationships with a select group of producers and suppliers that complement our ~~assets~~strategy ~~and~~based ~~liabilities~~on a number of factors, ~~primarily~~including ~~cash~~price, ~~receivables~~breadth of product offering, ~~inventories~~quality, market recognition, delivery terms and ~~accounts~~schedules, ~~payable~~continuity of supply and each producer’s strategic positioning. Our framework supply agreements with producers and suppliers typically renew annually. They generally do not provide for specific product pricing, ~~are~~some, ~~impacted~~primarily those related to our Chemicals line of business, include volume-based financial incentives through supplier rebates, which we earn by ~~commodity~~meeting ~~price~~or ~~inflation~~exceeding ~~because~~target ~~they~~purchase volumes. Supplier rebates are ~~indirectly~~recorded ~~affected~~as bya ~~market~~reduction ~~prices~~of inventory costs and accrued as part of ~~the~~cost ~~raw~~of ~~materials~~sales ~~that~~for ~~are~~products ~~used~~sold based on its purchases to ~~manufacture~~date ~~our~~and ~~products~~estimates of purchases for the remainder of the calendar year.

Inflation. Our average selling prices generally rise in inflationary environments as producers and suppliers raise the market prices of the products that we distribute. During inflationary periods our customers typically maximize the amount of inventory they carry in anticipation of price increases. Consequently, this environment of excess demand favorably impacts our volumes sold, revenues and gross profit due to the lag between rising prices and our cost of goods sold. The reverse is true in deflationary price environments. Deflationary forces create an environment of oversupply, driving market prices of products downward, and we must quickly adjust inventories and buying patterns to respond to price declines. Our primary objective is to replace inventories at lower costs while maintaining or enhancing unit profitability. The environment turned to a deflationary environment at the end of the first quarter of fiscal year 2019.

Some of our assets and liabilities, primarily cash, receivables, inventories and accounts payable, are impacted by commodity price inflation because they are indirectly affected by market prices of the raw materials that are used to manufacture our products. We manage our working capital during periods of changing prices, so the overall impact of inflation on our net working capital is generally not significant.

Currency exchange rate fluctuations. We conduct our business on an international basis, in multiple currencies. A portion of our sales and costs of sales transactions are denominated in currencies other than the functional currency of our subsidiaries. Further, we have exposure to foreign exchange fluctuations arising from the remeasurement of certain foreign operations where the USD is the functional currency but accounting records are maintained in local currency. Strengthening/weakening of our subsidiaries’ functional currency relative to the other currencies in which some transactions are denominated or recorded creates foreign currency gains/losses, which we include in Selling, general and administrative expenses. Additionally, we report our consolidated results in USD and the results of operations and the financial position of our local international operations are translated into USD at the applicable exchange rates for inclusion in our condensed consolidated financial statements. Strengthening of the USD relative to our subsidiaries’ functional currencies causes a negative impact on sales but a positive impact on costs.

Outlook

General. We have operations in North America, EMEA and Asia and are subject to broad, global and regional macroeconomic factors. These factors include:


•	the general state of the economy, specifically inflationary or deflationary trends, GDP growth rates and commodity/feedstock price movements;


•	unemployment levels;


•	government regulation and geopolitical changes;


•	fiscal and monetary policies of governments, including import and export tariffs, duties and other taxes;

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•	general income growth and the consumption rates of products;


•	increases in transportation related costs and changes in our relationship with common carriers; and


•	technological change in the industries we serve.

We monitor these factors routinely for both strategic and operational impacts.

Our operations are most impacted by regional market price fluctuations of the primary feedstock materials, including crude oil and natural gas, and the downstream derivatives of these primary raw materials. Market price fluctuations of these primary raw materials directly impact the decisions of our suppliers, specifically the manufacturing capacity and market supply made available for production of the products we distribute. As supply or demand patterns change, we may experience a corresponding change in the average selling prices of the products we distribute.

The global markets showed slower growth ~~through~~in the ~~third~~first quarter of fiscal year ~~2018~~2019 reflected by ~~increases~~decreases in ~~GDP,~~ oil prices and U.S. Industrial Production Index.

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The following is a summary of GDP, oil price and U.S. Industrial Production Index fluctuations in our various regions of operations by fiscal quarter:

	Q3 18 v Q3 17		Q2 18 v Q2 17		Q1 18 v Q1 17		Q4 17 v Q4 16
	Q1 19 v Q1 18		Q4 18 v Q4 17		Q3 18 v Q3 17		Q2 18 v Q2 17
North America
U.S. GDP Growth	~~2.8~~*	%	23.60	%	2.59	%	2.36	%
U.S. Industrial Production Index	34.61	%	35.40	%	3.04	%	1.3.4	%
West Texas Intermediate Crude Oil Average Price Increase	417.03	%	2144.51	%	1241.20	%	721.25	%
EMEA
Euro Area GDP Growth	2.1.2	%	21.56	%	2.82	%	2.84	%
Brent Crude Oil Average Price Increase	4711.6	%	2345.14	%	2047.36	%	1123.01	%
Asia
China GDP Growth (1)	6.86	%	6.87	%	6.98	%	6.98	%

⁽¹⁾ As reported by the Chinese government.

~~Overall~~* Release ~~GDP~~date growth has increased in many of the countries in which we operate. As a result we have experienced an increase in sales volumes. In terms of currency, the USD has weakened over the prior comparable period against most other currencies in which we transact. As a result of these factors, reported dollar revenues and gross profit have been positively impacted in many of our regional operations.delayed

Overall GDP growth has slowed in many of the countries in which we operate. As a result we have experienced a decrease in sales volumes. In terms of currency, the USD has strengthened over the prior comparable period against most other currencies in which we transact. As a result of these factors, reported dollar revenues and gross profit have been negatively impacted in many of our regional operations.

North America

The North American economic environment ~~continued~~modestly toimproved ~~improve~~ through the ~~third~~first quarter of fiscal year ~~2018~~2019. ~~U.S.~~ ~~GDP~~The ~~increased in the third fiscal quarter of 2018 as compared to third fiscal quarter of 2017, and the~~ inflation rate ~~rose~~fell 2to 1.9% in the ~~third~~first fiscal quarter of ~~2018~~2019 compared to the same period in the prior year due primarily to ~~rising~~falling oil and gas prices.

In terms of currency, the CAD ~~strengthened~~weakened against the USD through the ~~third~~first quarter of fiscal year ~~2018~~2019, which ~~positively~~negatively affected, among other items, the reported dollar revenues and gross profit from our operations in Canada. Additionally, the Peso ~~strengthened~~weakened in value against the USD through the ~~third~~first quarter of fiscal year ~~2018~~2019.

EMEA

In Europe, we conduct business primarily in the Western European countries. As evidenced by their ~~increases~~slight decreases in GDP growth through fiscal year 2018, the economic environment in the countries in which we operate in Europe has continued to improve.

In terms of currency, the euro and other European currencies strengthened versus the USD through the third quarter of fiscal year 2018, which positively affected, among other items, the reported dollar revenues and gross profit from our European operations.39

The market price for the products we sell in Europe typically correlate to the market price of Brent Crude as these operations are primarily based on the distribution of commodity plastics products which are sourced in Europe. Consistent with the increase in oil prices through the third quarter of fiscal year 2018, we have experienced an increase in average selling price for the products we distribute in Europe.

Asia

Our operations in Asia are concentrated mainly in China. GDP growth in China, as reported by the Chinese government, has remained steady through the past several fiscal quarters.

In terms of currency, the RMB strengthened against the USD through the third quarter of fiscal year 2018 following declines during fiscal year 2017, which positively affected, among other items, the reported dollar revenues and gross profit from our operations in China.

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~~Certain~~In ~~Factors~~terms ~~Affecting~~of ~~Comparability~~currency, tothe ~~Prior~~euro ~~Period~~and ~~Financial~~other ~~Results~~European currencies weakened versus the USD through the first quarter of fiscal year 2019, which negatively affected, among other items, the reported dollar revenues and gross profit from our European operations.

InThe ~~April~~market ~~2017,~~price for the products we ~~completed~~sell ~~the~~in ~~Ultra~~Europe ~~Chem~~typically ~~Acquisition. Accordingly,~~correlate to the ~~results~~market price of ~~the~~Brent ~~acquired~~Crude as these operations ~~since~~are ~~the~~primarily ~~Ultra~~based ~~Chem~~on ~~Closing~~the ~~Date~~distribution ~~are~~of ~~included~~commodity inplastics ~~our~~products ~~condensed~~which ~~consolidated~~are ~~results~~sourced ofin ~~operations,~~Europe. Consistent ~~including~~with the ~~results~~decrease ~~for~~in oil prices through the first ~~nine~~quarter ~~months~~ of fiscal year ~~2018. The~~2019, ~~acquired~~we ~~operations~~have ~~are~~experienced ~~primarily~~a ~~included~~slight decrease in ~~our~~average ~~Chemicals~~selling ~~line~~price offor ~~business. See~~the ~~Note~~products 3we todistribute ~~our~~in ~~condensed consolidated financial statements~~Europe.

Asia

Our operations in Asia are concentrated mainly in China. GDP growth in China, as reported by the Chinese government, decreased in the current quarter.

In terms of currency, the RMB weakened against the USD through the first quarter of fiscal year 2019, which negatively affected, among other items, the reported dollar revenues and gross profit from our operations in China.

Results of Operations

Three Months Ended ~~June~~December 3031, 2018 compared with Three Months Ended ~~June~~December 3031, 2017

												Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,						Difference					Three Months EndedJune 30,
	Three Months Ended December 31,						Difference					Three Months EndedDecember 31,
(in millions)	2018			2017			$ Change			% Change		2018		2017
Sales and operating revenues
Chemicals	$	~~494~~438.95		$	~~443~~431.9		$	516.06		111.5	%	4746.39	%	4746.15	%
Plastics	~~512~~456.61			~~466~~462.2			46(6.41		)	10(1.03	)%	4948.07	%	49.47	%
Other	3841.92			3235.65			65.37			1916.31	%	34.74	%	3.58	%
Total sales and operating revenues	$	~~1,046~~935.48		$	~~942~~929.76		$	~~103~~6.72		~~11.~~0.7	%	100.0	%	100.0	%
Gross profit
Chemicals	$	6453.95		$	5458.34		$	10(4.69	)	19(8.54	)%	1312.12	%	1213.25	%
Plastics	4938.67			4341.19			6(3.52		)	15(7.16	)%	98.75	%	9.21	%
Other	56.75			56.36			(0.41		)	7(1.5	)%	1415.78	%	1618.36	%
Total gross profit	$	~~120~~98.27		$	~~102~~106.79		$	17(8.52	)	17(7.07	)%	1110.5	%	1011.95	%
Selling, general and administrative expenses	8879.8			7984.48			9(5.40		)	11(5.89	)%	8.5	%	89.41	%
Transaction related costs	—8.2			0.21			(08.21		)	~~(100.0~~**	)%	—0.9	%	—	%
Change in fair value of contingent consideration obligations	(822.79		)	(018.86		)	(74.93		)	(~~987~~23.51	)%	(02.84	)%	(02.10	)%
Operating income	4033.16			2340.96			16(7.20		)	67(17.82	)%	3.86	%	24.54	%
Other income, net	0.41			50.71			~~(5.3~~—		)	~~(93.0~~—	)%	—	%	~~0.6~~—	%
Interest expense, net	(13.3		)	(1312.59		)	(0.24		)	1(3.51	)%	(1.34	)%	(1.4	)%
Net income before income taxes	2720.24			1627.18			11(7.14		)	68(26.96	)%	2.62	%	13.70	%
Income tax expense	94.72			51.93			32.89			64223.41	%	0.94	%	0.61	%
Net income	$	1716.52		$	1026.25		$	7(10.3	)	71(38.69	)%	1.7	%	12.19	%

~~Sales~~ ** ~~and~~Not ~~operating revenues~~meaningful

Sales and operating revenues for the three months ended June 30, 2018 increased $103.7 million, or 11.0%, compared to the three months ended June 30, 2017. The increase in revenues was primarily attributable to an increase in average selling prices of 10.2% across all segments in all regions largely due to an inflationary pricing environment and a shift in portfolio mix to products with higher average selling prices. Approximately $14.4 million of the increase was a result of strengthening exchange rates of various currencies versus the USD as compared to the same period in the prior fiscal year. 40

Chemicals

Sales and operating revenues for the Chemicals line of business for the three months ended June 30, 2018 increased $51.0 million, or 11.5%, compared to the three months ended June 30, 2017. The revenue increase was primarily attributable to a 12.9% increase in average selling prices largely as a result of an inflationary pricing environment and increased specialty mix. This increase was partially offset by a decrease in volumes of 1.2% due to specialty product supply constraints. Disciplined commercial execution to balance price and volume resulted in the lower volumes, but yielded higher average selling prices.

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Plastics

Sales and operating revenues for the Plastics line of business for the three months ended June 30, 2018 increased $46.4 million, or 10.0%, compared to the three months ended June 30, 2017. The revenue increase was primarily attributable to a 7.1% increase in average selling prices in an inflationary pricing environment and an increase in volumes of 2.7% resulting from higher demand in North America and continued market share gain in EMEA. Approximately $13.0 million of the increase above was a result of strengthening exchange rates of various currencies versus the USD compared to the same period in the prior fiscal year.

Other

Sales and operating revenues for the Other segment for the three months ended June 30, 2018 increased $6.3 million, or 19.3%, compared to the three months ended June 30, 2017. The increase in revenues was primarily due to growth in waste services to existing customers.

Gross profit

Gross profit increased $17.5 million, or 17.0%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. Gross profit increased primarily due to a favorable shift in product mix and continued specialty supplier growth in the Chemicals line of business. Additionally, our centralized platform allowed us to effectively manage supply chain logistics to mitigate freight cost increases and facilitate strong price execution. Approximately $1.1 million of the increase in gross profit was due to the strengthening of exchange rates of various currencies versus the USD compared to the same period in the prior fiscal year.

Chemicals

Gross profit for the Chemicals line of business increased $10.6 million, or 19.5%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. Gross profit increased primarily due to a favorable shift in product mix and strong commercial execution. Additionally, the increase in gross profit was primarily due to the addition of new specialty suppliers.

Plastics

Gross profit for the Plastics line of business increased $6.5 million, or 15.1%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. Gross profit increased primarily due to a favorable shift in product mix and strong commercial execution. Approximately $1.0 million of the increase in gross profit was due to the strengthening of exchange rates of various currencies versus the USD compared to the same period in the prior fiscal year.

Other

Gross profit for the Other segment increased $0.4 million, or 7.5%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. The increase was primarily due to the increase in revenues as discussed above as well as certain management cost savings initiatives.

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Selling, general and administrative expenses

									Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,				Difference				Three Months EndedJune 30,
(in millions)	2018		2017		$ Change		% Change		2018		2017
Selling, general and administrative expenses	$	88.8	$	79.4	$	9.4	11.8	%	8.5	%	8.4	%

Selling, general and administrative expenses for the three months ended June 30, 2018 increased $9.4 million, or 11.8%, compared to the three months ended June 30, 2017. This increase was driven by number of factors, including variable incentives, reflecting our continued outperformance, as well as foreign exchange, professional fees and assorted other variable expenses.

Transaction related costs

										Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,				Difference					Three Months EndedJune 30,
(in millions)	2018		2017		$ Change			% Change		2018		2017
Transaction related costs	$	—	$	0.2	$	(0.2	)	(100.0	)%	—	%	—	%

There were no transaction related costs in the three months ended June 30, 2018 and $0.2 million in the three months ended June 30, 2017 primarily related to the Ultra Chem Acquisition.

Changes in fair value of contingent consideration

												Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,						Difference					Three Months EndedJune 30,
(in millions)	2018			2017			$ Change			% Change		2018		2017
Change in fair value of contingent consideration obligations	$	(8.7	)	$	(0.8	)	$	(7.9	)	(987.5	)%	(0.8	)%	(0.1	)%

We incurred a gain of $8.7 million and $0.8 million in the three months ended June 30, 2018 and 2017, respectively. The gain in the current fiscal quarter was primarily due the gain in Deferred Cash Consideration driven primarily by the decrease in our stock price during the three months ended June 30, 2018 and the gain on the TRA which was driven by changes in various inputs to the calculation including the estimated discount rate, expected interest rates and assumptions surrounding certain tax benefits associated with the Business Combination (see Note 15 to our condensed consolidated financial statements). The gain for the three months ended June 30, 2017 was related to the change in the fair value of both the TRA and Deferred Cash Consideration. See Notes 4 and 9 to our condensed consolidated financial statements.

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Other income, net

										Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,				Difference					Three Months EndedJune 30,
(in millions)	2018		2017		$ Change			% Change		2018		2017
Other income, net	$	0.4	$	5.7	$	(5.3	)	(93.0	)%	—	%	0.6	%

Other income, net for the three months ended June 30, 2018 was $0.4 million primarily related to proceeds from the sale of fleet vehicles. Other income, net for the three months ended June 30, 2017 was $5.7 million primarily due to the gain related to reimbursements received for certain capital expenditures incurred in connection with the relocation of certain operations.

Interest expense, net

										Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,				Difference					Three Months EndedJune 30,
(in millions)	2018		2017		$ Change			% Change		2018		2017
Interest expense, net	$	13.3	$	13.5	$	(0.2	)	(1.5	)%	1.3	%	1.4	%

Interest expense, net was $13.3 million and $13.5 million for the three months ended June 30, 2018 and 2017, respectively, related to the Credit Facilities, along with the amortization of debt issuance costs. Interest expense, net decreased primarily due to a smaller realized loss on the interest rate swaps.

Income tax expense

									Percentage of Sales and Operating Revenues For the
	Three Months Ended June 30,				Difference				Three Months EndedJune 30,
(in millions)	2018		2017		$ Change		% Change		2018		2017
Income tax expense	$	9.7	$	5.9	$	3.8	64.4	%	0.9	%	0.6	%

Income tax expense was $9.7 million and $5.9 million for the three months ended June 30, 2018 and 2017, respectively. The current period expense was primarily attributable to income on profitable U.S. operations. Additionally, the current period expense includes certain newly identified tax contingencies. The prior period tax expense was largely attributable to deferred taxes on profitable U.S. operations.

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Nine Months Ended June 30, 2018 compared with Nine Months Ended June 30, 2017

												Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,						Difference					Nine Months EndedJune 30,
(in millions)	2018			2017			$ Change			% Change		2018		2017
Sales and operating revenues
Chemicals	$	1,414.6		$	1,211.3		$	203.3		16.8	%	46.9	%	45.6	%
Plastics	1,491.7			1,350.4			141.3			10.5	%	49.4	%	50.9	%
Other	110.7			93.5			17.2			18.4	%	3.7	%	3.5	%
Total sales and operating revenues	$	3,017.0		$	2,655.2		$	361.8		13.6	%	100.0	%	100.0	%
Gross profit
Chemicals	$	185.3		$	147.6		$	37.7		25.5	%	13.1	%	12.2	%
Plastics	138.5			124.9			13.6			10.9	%	9.3	%	9.2	%
Other	19.0			16.8			2.2			13.1	%	17.2	%	18.0	%
Total gross profit	342.8			$	289.3		$	53.5		18.5	%	11.4	%	10.9	%
Selling, general and administrative expenses	259.5			233.9			25.6			10.9	%	8.6	%	8.8	%
Transaction related costs	0.1			1.3			(1.2		)	(92.3	)%	—	%	—	%
Change in fair value of contingent consideration obligations	(14.7		)	19.8			(34.5		)	(174.2	)%	(0.5	)%	0.7	%
Operating income	97.9			34.3			63.6			185.4	%	3.2	%	1.3	%
Other income, net	0.9			8.3			(7.4		)	(89.2	)%	—	%	0.3	%
Interest expense, net	(38.8		)	(37.8		)	(1.0		)	(2.6	)%	(1.3	)%	(1.4	)%
Net income before income taxes	60.0			4.8			55.2			1,150.0	%	2.0	%	0.2	%
Income tax expense	15.6			4.0			11.6			290.0	%	0.5	%	0.2	%
Net income	$	44.4		$	0.8		$	43.6		5,450.0	%	1.5	%	—	%

Sales and operating revenues

Sales and operating revenues for the ~~nine~~three months ended ~~June~~December 3031, 2018 increased $~~361~~6.82 million, or 130.67%, compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. The increase in revenues was ~~primarily~~ attributable to an ~~11.8%~~ increase in average selling prices ~~across~~of ~~most~~4.0% ~~product~~primarily ~~categories in all regions largely~~ due to anincreased ~~inflationary~~specialty ~~pricing~~products ~~environment,~~sales ~~the~~in ~~strengthening~~North ofAmerica. The ~~the~~increase ~~oil~~was ~~and~~partially ~~gas~~offset ~~market~~by ~~and~~ a ~~shift in portfolio mix to products with higher average selling prices~~3. ~~Volumes~~8% ~~were~~volume updecrease, ~~1.5%~~as ~~for~~well ~~the~~as, ~~period. Approximately~~approximately $518.98 million ofwhich ~~the increase~~ was ~~due~~a toresult ~~strengthening~~of weakening exchange rates of various currencies versus the USD as compared to the same period in the prior fiscal year.

Chemicals

Sales and operating revenues for the Chemicals line of business for the ~~nine~~three months ended ~~June~~December 3031, 2018 increased $~~203~~6.36 million, or 161.85%, compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. The revenue increase was ~~primarily~~ attributable to a 135.21% increase in average selling prices aslargely ~~well~~due asto anstronger ~~increase~~product inmix ~~volumes~~and ofincreased 3specialty demand.~~1%.~~ ~~Volume~~This ~~and~~increase ~~average~~was ~~selling~~partially ~~price~~offset ~~performance~~by ~~was~~a ~~primarily~~decrease ~~the~~in ~~result~~volumes of ~~the~~3.4% ~~continued~~due ~~recovery~~to lower demand in the oil and gas ~~industry,~~end ~~increased~~market ~~specialty mix~~ and ~~increased~~lower ~~industrial~~consumer demand, ~~partially~~caused ~~offset~~ by ~~volume~~the ~~decreases~~rapid indeflationary ~~Asia~~environment experienced at the end of the current period.

Plastics

Sales and operating revenues for the Plastics line of business for the ~~nine~~three months ended ~~June~~December 3031, 2018 ~~increased~~decreased $~~141~~6.31 million, or 101.53%, compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. The ~~revenue~~decrease ~~increase~~is ~~was~~driven ~~primarily~~by ~~attributable~~$7.6 tomillion anassociated ~~increase~~with inthe ~~average~~weakening ~~selling~~exchange ~~prices~~rates of ~~11.1%~~various ~~across~~currencies ~~all~~versus ~~regions. Volumes~~USD ~~were~~compared ~~essentially~~to ~~flat~~the ~~for~~same period in the ~~period. Approximately~~prior fiscal year, ~~$48.0~~as ~~million~~well ofas ~~the~~a ~~increase~~decrease ~~above~~in ~~was~~volumes of 4.3% due to ~~strengthening~~lower ~~exchange~~demand ~~rates~~in ofEMEA ~~various~~and ~~currencies~~Asia. The ~~versus~~decrease ~~the~~in ~~USD~~revenues ~~compared~~was topartially ~~the~~offset ~~same~~by ~~period~~an increase in ~~the~~average ~~prior~~selling ~~fiscal~~prices ~~year~~of 3.1% resulting from stronger product mix in North America.

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Other

Sales and operating revenues for the Other segment for the ~~nine~~three months ended ~~June~~December 3031, 2018 increased $175.27 million, or 1816.41%, compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. The increase in revenues was ~~primarily~~ due to growth in ~~the~~on-site ~~waste~~ services ~~business~~and toan ~~existing~~increase ~~customers~~in ~~due~~waste services to ~~increased~~existing ~~industrial production~~customers.

Gross profit

Gross profit ~~increased~~declined $538.52 million, or 187.57%, for the ~~nine~~three months ended ~~June~~December 3031, 2018 compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. Gross profit ~~increased~~decreased ~~primarily~~ due to ~~the~~lower ~~shift~~volumes inas ~~product~~discussed ~~mix~~above and ~~continued~~a ~~specialty~~deflationary ~~supplier~~environment ~~growth. Additionally,~~at ~~our~~the ~~centralized~~end ~~platform~~of ~~allowed~~the uscurrent toperiod, ~~effectively~~which ~~manage~~caused ~~supply~~margin ~~chain~~compression ~~logistics~~and contributed to ~~mitigate~~lower ~~supply~~demand ~~constraints,~~as ~~freight~~customers ~~cost~~actively ~~increases~~reduced ~~and~~inventory ~~facilitate~~levels ~~strong~~in ~~commercial~~anticipation ~~execution~~of lower product prices. Approximately $40.38 million of ~~this~~the ~~increase~~decrease in gross profit was ~~attributable~~due to ~~strengthening~~the weakening of exchange rates of various currencies versus the USD as compared to the same period in the prior fiscal year.

Chemicals

Gross profit ~~increased~~for the Chemicals line of business declined $374.79 million, or 258.54%, for the ~~nine~~three months ended ~~June~~December 3031, 2018 compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. ~~The~~Gross ~~increase in gross~~ profit ~~was~~decreased ~~driven~~due ~~primarily by improved specialty mix compared~~ to the ~~same~~loosening ~~period~~of ~~in the~~ prior ~~fiscal~~product ~~year. Additionally,~~supply ~~gross~~constraints ~~profit~~leading ~~increased~~to ~~due~~lower tocustomer ~~our~~demand ~~strong~~and ~~commercial~~the ~~execution~~deflationary ~~strengthened~~environment, bywhich ~~leveraging~~caused ~~our~~margin ~~centralized~~compression ~~technology~~and ~~platform~~contributed to ~~effectively~~customers ~~manage~~actively ~~supply~~reducing ~~shortages~~inventory ~~for~~levels ~~certain specialty products globally as well as supply constraints~~ in ~~North~~anticipation ~~America~~of ~~predominately~~lower ~~caused~~product ~~by adverse weather conditions earlier in the period~~prices.

Plastics

Gross profit ~~increased~~for the Plastics line of business declined $133.62 million, or 107.96%, for the ~~nine~~three months ended ~~June~~December 3031, 2018 compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. ~~The~~Gross ~~increase~~profit indecreased ~~gross~~primarily ~~profit~~due to a deflationary environment at the end of the current period, which caused price compression. This was ~~primarily~~partially ~~attributable~~offset toby a favorable shift in product mix in North America. Approximately $4.0.7 million of the ~~increase~~decrease in gross profit was due to ~~strengthening~~the weakening of exchange rates of various currencies versus the USD compared to the same period in the prior fiscal year.

~~Other~~41

Gross profit increased $2.2 million, or 13.1%, for the nine months ended June 30, 2018 compared to the nine months ended June 30, 2017. The increase was primarily due to management cost savings initiatives.

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Other

Gross profit for the Other segment declined $0.1 million, or 1.5%, for the three months ended December 31, 2018 compared to the three months ended December 31, 2017. The decrease was primarily due to the shift in product mix for the current period.

Selling, general and administrative expenses

										Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,				Difference					Nine Months EndedJune 30,
	Three Months Ended December 31,				Difference					Three Months EndedDecember 31,
(in millions)	2018		2017		$ Change			% Change		2018		2017
Selling, general and administrative expenses	$	~~259~~79.58	$	~~233~~84.98	$	25(5.60	)	10(5.9	)%	8.65	%	89.81	%

Selling, general and administrative expenses for the ~~nine~~three months ended ~~June~~December 3031, 2018 ~~increased~~decreased $255.60 million, or 105.9%, compared to the ~~nine~~three months ended ~~June~~December 3031, 2017. This ~~increase~~decrease was primarily driven by ~~a number of factors, including~~ variable incentives, ~~reflecting our continued outperformance, as well as foreign exchange, professional fees~~ and ~~assorted~~consulting ~~other variable expenses~~services.

Transaction related costs

										Percentage of Sales and Operating Revenues For the	~~Percentage of Sales and Operating Revenues For the~~
	Nine Months EndedJune 30,				Difference						Nine Months EndedJune 30,
	Three Months Ended December 31,				Difference					Three Months EndedDecember 31,
(in millions)	2018		2017		$ Change			% Change		2018	~~2018~~		2017	~~2017~~
Transaction related costs	$	08.12	$	10.31	$	(18.21	)	~~(92.3~~**	)%	0.9	—%	%	—	—%	%

We** ~~incurred~~Not ~~transaction related costs of $0.1 million and $1.3 million in the nine months ended June~~meaningful 30, 2018 and 2017, respectively. Current period transaction costs are primarily related to the Ultra Chem Acquisition and the prior period was primarily related to the Ultra Chem Acquisition and the Business Combination.

There were $8.2 million of transaction related costs in the three months ended December 31, 2018 related to the Univar Merger Agreement and $0.1 million in the three months ended December 31, 2017 related to the Ultra Chem Acquisition.

Changes in fair value of contingent consideration

												Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,						Difference					Nine Months EndedJune 30,
	Three Months Ended December 31,						Difference					Three Months EndedDecember 31,
(in millions)	2018			2017			$ Change			% Change		2018		2017
Change in fair value of contingent consideration obligations	$	(1422.79	)	$	19(18.86	)	$	(344.53	)	(~~174~~23.21	)%	(02.54	)%	0(2.70	)%

We incurred a gain of $1422.79 million and ~~a loss of~~ $1918.86 million in the ~~nine~~three months ended ~~June~~December 3031, 2018 and 2017, respectively~~, related to the contingent consideration associated with the Deferred Cash Consideration and TRA~~. The gain in the current ~~period~~fiscal quarter was ~~primarily~~ due to the ~~TRA liability~~ gain ofin ~~$25.9~~Deferred ~~million~~Cash ~~which~~Consideration driven primarily ~~reflects~~by the ~~provisional~~decrease ~~impact~~in ofour ~~the~~stock ~~Tax~~price ~~Act~~ during the ~~first~~three ~~fiscal~~months ~~quarter~~ended ofDecember 31, 2018 and the gain on the TRA which was driven by changes in various inputs to the calculation including the estimated discount rate, and expected interest rates ~~and assumptions surrounding certain tax benefits associated with the Business Combination (see Note 15 to our condensed consolidated financial statements), partially offset by the loss of $11~~.~~2 million in the Deferred Cash Consideration driven primarily by the increase in our stock price during the nine months ended June 30, 2018.~~ The ~~loss~~gain for the ~~nine~~three months ended ~~June 30~~December 31, 2017 was ~~primarily~~related ~~due~~ to the ~~change~~TRA inliability ~~the~~gain ~~fair~~partially ~~value~~offset ofby ~~both~~ the ~~TRA~~loss ~~and~~in Deferred Cash Consideration. See Notes 45 and 910 to our condensed consolidated financial statements.

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Other income, net

										Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,				Difference					Nine Months EndedJune 30,
	Three Months Ended December 31,				Difference					Three Months EndedDecember 31,
(in millions)	2018		2017		$ Change			% Change		2018		2017
Other income, net	$	0.91	$	80.31	$	~~(7.4~~—	)	~~(89.2~~—	)%	—	%	~~0.3~~—	%

Other income, net for the ~~nine~~three months ended ~~June~~December 3031, 2018 and 2017 was $0.91 million ~~primarily~~ related to proceeds from the sale of fleet vehicles. Other income, net for the nine months ended June 30, 2017 was $8.3 million primarily due to the gain related to reimbursements received for certain capital expenditures incurred in connection with the relocation of certain operations.

Interest expense, net

									Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,				Difference				Nine Months EndedJune 30,
	Three Months Ended December 31,				Difference				Three Months EndedDecember 31,
(in millions)	2018		2017		$ Change		% Change		2018		2017
Interest expense, net	$	3813.83	$	3712.89	$	1.0.4	23.61	%	1.34	%	1.4	%

Interest expense, net was $3813.83 million and $3712.89 million for the ~~nine~~three months ended ~~June~~December 3031, 2018 and 2017, respectively, related to the Credit Facilities, along with the amortization of debt issuance costs. Interest expense, net increased ~~primarily~~ due to the ~~increased~~higher ~~weighted~~ average interest rate on the ~~ABL~~term ~~Facility~~loan facility in the current period.

Income tax expense

									Percentage of Sales and Operating Revenues For the
	Nine Months EndedJune 30,				Difference				Nine Months EndedJune 30,
	Three Months Ended December 31,				Difference				Three Months EndedDecember 31,
(in millions)	2018		2017		$ Change		% Change		2018		2017
Income tax expense	$	154.62	$	41.03	$	112.69	~~290~~223.01	%	0.54	%	0.21	%

Income tax expense was $4.2 million and $1.3 million for the ~~nine~~three months ended ~~June~~December 3031, 2018 ~~was~~and ~~$15~~2017, respectively.6 The ~~million~~current ~~and~~period expense was ~~largely~~primarily attributable to ~~current year~~ income on profitable U.S. ~~and foreign~~ operations. ~~Additionally,~~The ~~the~~prior ~~current~~ period ~~expense includes certain newly identified~~ tax ~~contingencies. The current period~~ expense ~~generated~~was inattributable ~~the~~to ~~U.S.~~prior ~~was~~period income partially offset by athe benefit ~~of $4.5 million~~ on deferred tax liabilities asdue ato ~~result~~the impact of the Tax Act~~. Income tax expense for the nine months ended June 30~~, ~~2017~~which ~~was~~resulted ~~$4.0~~in ~~million~~a ~~and~~decrease ~~primarily~~in ~~attributable to foreign~~ income tax expense onof $4.5 ~~profitable foreign operations~~million.

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Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash flows generated from our operations and borrowing availability under the ABL Facility. Cash flows generated from operations are influenced by seasonal patterns of our business and other timing circumstances that can result in increases or decreases in working capital requirements for any given period during the course of our fiscal year. Our ability to generate sufficient cash flows from operating activities will continue to be primarily dependent on purchasing and distributing chemical and plastic materials. Additionally, our ability to generate cash flows in the normal course of business can be significantly influenced by changing global and regional macroeconomic conditions. Borrowing availability under the ABL Facility is subject to a borrowing base generally comprised of eligible inventory, accounts receivable and cash and cash equivalents held in certain accounts and certain subsidiaries. Our availability under the ABL Facility is, therefore, potentially subject to fluctuations, depending on the value of the eligible assets in the borrowing base on a given valuation date. An inability to borrow under the ABL Facility may adversely affect our liquidity, results of operations and financial condition.

Our operating cash requirements consist principally of inventory purchases, trade credit extended to customers, labor, occupancy costs and transportation and delivery costs. Non-operating cash requirements include debt service requirements, acquisition-related costs and capital expenditures.

Capital Expenditures

Cash capital expenditures for the ~~nine~~three months ended ~~June~~December 3031, 2018 were $114.8 million and related primarily to facility improvements, equipment purchases, and additional information technology investments. We expect our aggregate capital expenditures for fiscal year ~~2018~~2019 (excluding acquisitions and any assets acquired via capital leases) to be approximately $2539.05 million, including $10.8 million for a planned land acquisition at one of our facilities expected to close during fiscal year 2019. Capital expenditures are expected to be primarily related to fixed asset ~~and equipment~~ replacements, ~~and~~ improvements to our information technology infrastructure and equipment.

Credit Facilities

ABL Facility

The ABL Facility provides for committed revolving credit financing including a U.S. Tranche of up to $505.0 million, a Canadian Tranche of up to the USD equivalent of $40.0 million and a FILO Tranche up to $30.0 million. The ABL Facility matures on June 9, 2021. Provided no default or event of default then exists or would arise therefrom, the ABL Borrowers have the option, at the beginning of each quarter, to request that the ABL Facility be increased by an aggregate amount, when included with any incremental borrowings issued under the Term Loan Facility, not to exceed $175.0 million.

The ABL Facility includes a letter of credit sub-facility, which permits up to $200.0 million of letters of credit under the U.S. Tranche (which may be denominated in USD, euros or other currencies approved by the administrative agent and the issuing bank) and up to the USD equivalent of $10.0 million of letters of credit under the Canadian Tranche (which may be denominated in CAD only). The ABL Facility also contains a FILO Tranche which can be used by any non-Canadian foreign subsidiary for loans or letters of credit up to an aggregate amount not to exceed $30.0 million.

At ~~June~~December 3031, 2018, we had $~~157~~159.40 million in borrowings outstanding under the ABL Facility. Interest expense related to the ABL Facility, excluding amortization of debt issuance costs, was $2.1 ~~million and $6~~.19 million for the three ~~and nine~~ months ended ~~June~~December 3031, 2018, ~~respectively,~~ and ~~$2.0 million and $4.8 million for the three and nine months ended June 30,~~ 2017~~, respectively~~.

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As of ~~June~~December 3031, 2018, we were in compliance with the covenants of the ABL Facility.

Term Loan Facility

The Term Loan Facility provides secured debt financing in an aggregate principal amount of up to $655.0 million and the right, at our option, to request additional tranches of term loans in an aggregate principal amount, when included with any incremental borrowings issued under the ABL Facility, amount up to $175.0 million, plus unlimited additional amounts such that the aggregate principal amount of indebtedness outstanding at the time of incurrence does not cause the consolidated Secured Net Leverage Ratio, calculated on a pro forma basis, to exceed 4.1 to 1.0. Availability of such additional tranches of term loans is subject to the absence of any default, and among other things, the receipt of commitments by existing or additional financial institutions. The Term Loan Facility matures on June 9, 2023.

On December 19, 2017, we completed TLB Amendment No. 2 amending the Term Loan Facility. TLB Amendment No. 2 reduced the interest rate margin applicable to outstanding term loans by 50 basis points from 3.75% to 3.25% for LIBOR loans and from 2.75% to 2.25% for base rate loans. TLB Amendment No. 2 also provides for a soft call premium equal to 1% of the amount of the term loans that are subject to certain repricing transactions occurring on or prior to twelve months from the effective date of TLB Amendment No. 2. As a result of TLB Amendment No. 2, we paid debt issuance costs of $0.8 million, which will be amortized throughout the remaining life of the Term Loan Facility. TLB Amendment No. 2 will result in an estimated $3.2 million reduction to our annual cash interest expense for each of the next five years, while all other terms of the Term Loan Facility remain unchanged.

At ~~June~~December 3031, 2018, we had $~~642~~638.08 million in borrowings outstanding under the Term Loan Facility. We are required to make mandatory principal payments on an annual basis, ~~commencing with the fiscal year ending September 30, 2017,~~ if cash flows for the year, as defined in the agreement, exceed certain levels specified in the agreement. We were not required to make such principal payment for fiscal year ~~2017~~2018. Interest expense related to the Term Loan Facility, excluding original issue discount amortization and amortization of debt issuance costs, was $8.9.3 million and $258.13 million for the three ~~and nine~~ months ended ~~June~~December 3031, 2018, ~~respectively~~ and ~~$8.0 million and $25.3 million for the three and nine months ended June 30,~~ 2017, respectively.

As of ~~June~~December 3031, 2018, we were in compliance with the covenants of the Term Loan Facility.

Working Capital

Our Chemicals and Plastics lines of business generally require significant working capital to purchase products from suppliers and sell those materials to our customers. The primary components of our working capital accounts are accounts receivable, inventories, accounts payable, accrued expenses and other liabilities and current portion due to related party pursuant to contingent consideration obligations.

We generally manage working capital by utilizing our ERP system, which enables us to forecast rolling weekly volumes, anticipate demand shift fluctuations and quickly respond to rapidly changing customer needs for the majority of our operations. This platform, combined with our product line management department, enables us to efficiently manage working capital. We further manage working capital by focusing on terms of purchase and sale, evaluating the creditworthiness of customers when extending trade credit, utilizing systematic collection efforts and managing inventory to closely match demand and meet required customer service levels.

Liquidity

The following table summarizes our liquidity position as of ~~June~~December 3031, 2018 and September 30, ~~2017~~2018:

	June 30, 2018		September 30, 2017
	December 31, 2018		September 30, 2018
Cash and cash equivalents	$	4354.86	$	5358.9
ABL Facility availability	~~300~~258.51		~~277~~344.82
Total liquidity	$	~~344~~312.37	$	~~331~~403.71

Cash and Cash Equivalents

At ~~June~~December 3031, 2018, we had $4354.86 million in cash and cash equivalents of which $3945.87 million was held by foreign subsidiaries, $3544.63 million of which was denominated in currencies other than the USD, primarily in euros and CAD, and $43.05 million in China denominated in RMB. While the RMB is convertible into USD, foreign exchange transactions are subject to approvals from the SAFE. We do not anticipate any significant adverse impact to overall liquidity from potential limitations on the transfer or conversion of cash and cash equivalents.

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ABL Facility

Under the ABL Facility, if as of any date of determination when Trigger Event Excess Availability (as defined in the ABL Facility) is below certain thresholds or upon certain defaults, we will be required to deposit cash on a daily basis from certain depository accounts in a collection account maintained with the administrative agent, which will be used to repay outstanding loans and cash collateralized letters of credit. Such requirement will be deemed continuing until the Trigger Event Excess Availability exceeds such threshold amount for 20 consecutive days. At ~~June~~December 3031, 2018, Trigger Event Excess Availability under the ABL Facility was $~~300~~258.51 million, which was $~~249~~46.92 million in excess of the $50211.69 million threshold that would trigger the foregoing requirements.

~~Based~~As onpreviously ~~current~~described, ~~and~~the ~~anticipated~~Univar ~~levels~~Merger ofAgreement ~~operations,~~contains ~~capital~~customary ~~spending~~covenants ~~projections~~which ~~and~~restrict ~~conditions~~us inwithout ~~our~~Univar's ~~markets~~consent, wefrom ~~believe~~taking ~~that~~certain ~~cash~~specified onactions ~~hand,~~until ~~together~~the ~~with~~proposed ~~cash~~transaction ~~flows~~closes or the Univar Merger Agreement terminates. One such restriction limits us from ~~operations~~incurring ~~and~~any ~~borrowings~~additional ~~available~~indebtedness ~~under~~(as defined in the ~~ABL~~Univar ~~Facility,~~Merger ~~are~~Agreement) ~~adequate~~in toexcess ~~meet~~of ~~our~~$150.0 ~~working~~million ~~capital~~in ~~and~~aggregate ~~capital~~principal ~~expenditure~~amount ~~needs~~over asthe ~~well~~amount outstanding under the Credit Facilities as ~~any~~in ~~debt~~effect ~~service~~as ~~and~~of ~~other~~the ~~cash~~date ~~requirements~~of ~~for~~execution atof ~~least~~the ~~twelve~~Univar ~~months~~Merger Agreement.

Based on current and anticipated levels of operations, capital spending projections and conditions in our markets, we believe that cash on hand, together with cash flows from operations and borrowings available under the ABL Facility (after taking into account the limitation noted above), are adequate to meet our working capital and capital expenditure needs as well as any debt service and other cash requirements for at least twelve months.

In addition to operating and non-operating cash requirements previously described, our longer-term liquidity needs are primarily related to our final maturity debt payments due in 2021 and 2023. Depending on market conditions and other factors, we may also consider alternative financing options, including, but not limited to, issuance of equity, issuance of debt or refinancing of our existing debt obligations.

Cash Flows

The following table sets forth the major categories of our cash flows for the ~~nine~~three months ended ~~June~~December 3031, 2018 and 2017:

Major Categories of Cash Flows
(in millions)	~~Nine~~Three Months Ended ~~June~~December 3031, 2018			~~Nine~~Three Months Ended ~~June~~December 3031, 2017
Net cash provided by (used in) operating activities	$	7.8		$	(12.0	)
Net cash used in operating activities	$	(50.2	)	$	(59.2	)
Net cash used in investing activities	(196.5		)	(753.45		)
Net cash provided by financing activities	253.26			7450.1
Effect of exchange rate changes on cash and cash equivalents	(01.62		)	(0.1		)
Decrease in cash and cash equivalents	(104.13		)	(1312.45		)
Cash and cash equivalents at the beginning of period	5358.9			4753.59
Cash and cash equivalents at the end of period	$	4354.86		$	3441.14

~~Nine~~Three Months Ended ~~June~~December 3031, 2018 compared to ~~Nine~~Three Months Ended ~~June~~December 3031, 2017

Cash flows from operating activities

Net cash ~~provided~~used in operating activities for the ~~nine~~three months ended ~~June~~December 3031, 2018 was $750.82 million. Net income of $4416.42 million, adjusted for significant non-cash items such as depreciation and amortization expenses, amortization of debt issuance costs, provision for bad debt, deferred income taxes, equity-based compensation expense, and changes relating to contingent consideration liabilities, ~~and gain from sales of property and equipment~~ collectively totaling $471.93 million, resulted in cash inflows of $9214.39 million during the ~~nine~~three months ended ~~June~~December 3031, 2018. Net cash ~~provided~~used by operating activities was impacted by the items specified below:

• Accounts and notes receivable ~~increased~~decreased $3255.98 million primarily driven by ~~higher~~lower ~~average~~volumes ~~selling price~~ due to ana ~~inflationary~~deflationary pricing environment in the current period. There were no significant changes in billing terms during the ~~nine~~three months ended ~~June~~December 3031, 2018.

~~• Inventories increased $~~46~~.9 million primarily due to the inflationary environment, replenishment of inventory and higher costs associated with increased specialty mix.~~

• Accounts payable decreased $8.1 million primarily driven by the timing of payments during the nine months ended June 30, 2018.

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• ~~Accrued~~Inventories ~~expenses and other liabilities~~ increased $023.81 million ~~which~~ primarily ~~reflects~~due ~~the~~to ~~accrual of~~ the ~~annual~~deflationary ~~employee~~environment ~~incentive~~which ~~compensation~~resulted ~~for the current fiscal year offset by the payment~~ in ~~the~~customer ~~first~~inventory ~~quarter~~level ~~of fiscal year 2018 of the annual employee incentive compensation related to prior fiscal year~~reduction.

• ~~Other~~Accounts ~~current~~payable ~~assets~~decreased ~~and~~$70.7 ~~other~~million ~~assets~~primarily ~~and~~driven ~~liabilities~~by ~~contributed~~the ~~$2.6~~timing ~~million~~of payments during the three months ended December 31, 2018.

~~Net~~• ~~cash~~Accrued ~~used~~expenses inand ~~operating~~other ~~activities~~liabilities ~~for~~decreased ~~the nine months ended June 30, 2017 was~~ $1226.04 million~~. Net~~ ~~income~~which ofprimarily ~~$0.8~~reflects ~~million,~~the ~~adjusted~~accrual ~~for~~of the ~~gain~~annual ~~related~~employee toincentive ~~reimbursement~~compensation for ~~certain~~the ~~capital~~current ~~expenditures~~fiscal ~~incurred~~year inoffset ~~connection~~by ~~with~~ the ~~relocation~~payment ofin ~~certain~~the ~~operations,~~first ~~and~~quarter ~~significant~~of ~~non-cash~~fiscal ~~items~~year ~~such~~2019 ~~as depreciation and amortization expenses, amortization~~ of ~~debt~~the ~~issuance~~annual ~~costs,~~employee ~~provision~~incentive ~~for bad debt, deferred income taxes, equity based~~ compensation ~~expense,~~related ~~and changes relating~~ to ~~contingent~~prior ~~consideration~~fiscal ~~liabilities collectively totaling $71~~year.~~6 million, resulted in cash inflows of $72.4 million during the nine months ended June 30, 2017. Net cash used by operating activities was impacted by the items specified below:~~

• ~~Accounts~~Other ~~and~~current ~~notes~~assets ~~receivable~~and ~~increased~~other ~~$63.8~~assets ~~million driven primarily by higher sales volumes~~ and ~~rising~~liabilities ~~average~~were ~~selling~~impacted ~~prices~~by ~~experienced during the nine months ended June 30, 2017 as well as timing of collections at period end~~$0.7 ~~There were no significant changes in billing terms or collection processes during the current period~~million.

•Net ~~Accounts~~cash ~~payable~~used ~~increased~~in operating activities for the three months ended December 31, 2017 was $1159.72 million. Net ~~The~~income ~~increase~~of in$26.5 ~~accounts~~million, ~~payable~~adjusted ~~was~~for ~~primarily~~significant ~~driven~~non-cash byitems ~~higher~~such ~~volumes~~as depreciation and ~~purchase~~amortization ~~prices~~expenses, amortization of debt issuance costs, provision for bad debt, deferred income taxes, equity based compensation expense, and changes relating to contingent consideration liabilities collectively totaling $2.2 million, resulted in cash inflows of $28.7 million during the ~~nine~~three months ended ~~June 30~~December 31, 2017. Net cash used by operating activities was impacted by the items specified below:

• ~~There~~Accounts ~~was~~and annotes ~~increase~~receivable indecreased ~~inventories of~~ $3436.9 million primarily driven by lower sales volumes experienced during the ~~nine~~period. ~~months~~There ~~ended~~were ~~June~~no ~~30,~~significant ~~2017~~changes ~~largely~~in ~~driven~~billing byterms ~~overall~~during ~~increased~~the ~~sales~~current ~~and volumes~~period.

• ~~Accrued~~Inventories ~~expenses~~increased ~~and other liabilities decreased~~ $150.15 million ~~which~~primarily ~~included~~due ~~the~~to ~~payment~~replenishment of inventory and supply becoming available in the ~~annual~~Plastics ~~employee~~line ~~incentive~~of ~~compensation~~business.

• ~~Other~~Accounts ~~current~~payable ~~assets~~ decreased $360.18 million primarily driven by ~~amortization~~timing of ~~prepaid~~payments ~~expenses~~during the three months ended December 31, 2017.

• ~~Other~~Accrued ~~assets~~expenses and other liabilities ~~contributed~~decreased $012.6 million which included the payment of the annual employee incentive compensation.


•	Other current assets and other assets and liabilities were impacted by $0.9 million.

Cash flows from investing activities

Investing activities used $196.5 million of cash during the ~~nine~~three months ended ~~June~~December 3031, 2018, primarily due to the additions of property and equipment of $114.8 million mainly related to facility improvements, equipment purchases, and additional information technology investments. The ~~and the~~ cash paid for asset acquisitions ofwas $111.07 million~~, partially offset by $3~~.~~3 million of proceeds from the disposal of property and equipment.~~

Investing activities used $753.45 million of cash during the ~~nine~~three months ended ~~June~~December 3031, 2017, ~~primarily~~ due to ~~$63.5 million paid to effect asset and business acquisitions, and~~ the additions of property and equipment of $204.71 million mainly related to facility improvements and additional information technology investments, partially offset by $80.46 million of ~~cash~~ proceeds ~~related~~from to the ~~reimbursement~~disposal ~~for certain capital expenditures incurred in connection with the relocation~~ of ~~certain~~property ~~operations~~and equipment.

Cash flows from financing activities

Financing activities provided $253.26 million of cash during the ~~nine~~three months ended ~~June~~December 3031, 2018, primarily as a result of net borrowings on the ABL Facility of $1854.14 million partially offset by net payments on short-term debt of $31.26 million, payments on the Term Loan Facility of $41.96 million, and capital lease payments of $~~2.8 million, and the payment of debt issuance costs of $~~0.8 million ~~related to TLB Amendment No~~. ~~2. In addition, $4.2 million was paid to TPG related to the TRA liability.~~

Financing activities provided $7450.1 million of cash during the ~~nine~~three months ended ~~June~~December 3031, 2017, primarily as a result of net borrowings on the ABL Facility of $8160.9 million ~~and~~partially offset by net ~~borrowings~~payments on short-term debt of $03.57 million, ~~partially offset by~~ payments on the Term Loan Facility of $41.96 million, capital lease payments of $20.15 million, and the payment of debt issuance costs of $10.38 million related to TLB Amendment No. 12. ~~Net~~In ~~borrowings~~addition, onin ~~the~~October ~~ABL~~2017, ~~Facility included approximately~~ $584.02 million ~~drawn~~was ~~for~~paid ~~the~~to ~~closing~~TPG ofrelated to the ~~Ultra~~TRA ~~Chem Acquisition on April 3, 2017~~liability.

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Contractual Obligations and Commitments

As of ~~June~~December 3031, 2018, amounts due under our contractual commitments were as follows:

	Payments Due by Period (in millions)
	Less than 1 Year		1-3 Years		4-5 Years		More than5 Years		Total
Short-term and long-term debt obligations (1)	$	4446.21	$	~~170~~171.39	$	~~622~~619.64	$	—	$	837.14
Estimated interest payments on long-term debt obligations (2)	4446.92		8885.23		7156.84		—		~~204~~187.9
Capital lease obligations (3)	7.75		14.41		1816.61		25.90		6662.67
Operating lease obligations (4)	14.02		1517.67		96.28		0.42		3938.29
Employee benefit obligations	—		—		—		3.24		3.24
Contingent consideration (5)	915.28		8173.68		1817.16		7263.91		~~181~~170.83
Other obligations (6)	9.7.8		2.54		1.4		~~1.4~~—		1511.06
Total	$	~~129~~137.76	$	~~372~~365.62	$	~~741~~717.7	$	~~103~~91.87	$	1,~~347~~312.82

(1) Short-term obligations primarily include the payment of $3739.76 million outstanding under credit facilities available to our operations in China and $6.5 million in principal installment payments under our Term Loan Facility. Long-term debt obligations include ~~(i)~~ the payment of $~~157~~159.40 million in outstanding principal under our ABL Facility and ~~(ii)~~ the payment of $~~635~~632.53 million in outstanding principal under our Term Loan Facility. See Note 78 to our condensed consolidated financial statements.

(2) Estimated interest payments include cash interest payments and estimated commitment fees on long-term debt obligations. Variable interest rate payments were estimated using interest rates as of ~~June~~December 3031, 2018 held constant to maturity.

(3) Capital lease obligations represent future payments on capital lease agreements, including lease payments on all tractors under the Ryder Lease and the Montgomery Lease. The amounts above include executory costs of approximately $2.4 million per year, for aggregate executory costs totaling $1514.75 million. Additionally, the amounts include decreasing annual interest payments ranging from $21.09 million to $0.1 million, for aggregate interest payments totaling $1615.0 million on all capital leases. We are permitted to terminate the lease of an individual tractor under the Ryder Lease on the anniversary of its delivery date, provided that certain conditions are met. In the event we terminate the lease of an individual tractor in accordance with the terms of the Ryder Lease, we may elect to purchase the individual tractor at a predetermined residual value or return the tractor to Ryder, subject to an adjustment based on the then-current market value of the individual tractor. See Note 78 to our condensed consolidated financial statements.


⁽⁴⁾	Operating lease obligations represent payments for a variety of facilities and equipment under non-cancellable operating lease agreements, including office buildings, transportation equipment, warehouses and storage facilities and other equipment.

(5) Liabilities for contingent consideration are related (i) to the TRA that we entered into in connection with the Business Combination and (ii) the Deferred Cash Consideration that will be paid to Selling Equityholders pursuant to the Merger Agreement. The amount included in the table above for the Deferred Cash Consideration is based on the undiscounted expected value of the payment and is currently included in the 1-3 Years column based on the final payment date of June 9, 2021 as defined in the Merger Agreement. However, as further defined in the Merger Agreement, payments could be required to be made by us prior to June 9, 2021. The timing of payments associated with the liability for the contingent consideration related to the TRA is based on expected undiscounted cash flows in future periods, and may change based on actual results. See Notes 45 and 910 to our condensed consolidated financial statements.

(6) Other obligations are related to ~~(i)~~ non-cancellable equipment orders, ~~(ii)~~and certain IT-related contracts ~~and (iii) remaining payments related to asset acquisitions~~. ~~(See Note 3 to our condensed consolidated financial statements).~~

Not included in the table above is $10.8 million for a planned land acquisition expected to be finalized during ~~the first half of~~ fiscal year 2019. The consummation of this purchase agreement is subject to customary closing conditions.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements, as defined in Item 303(a) (4) (ii) of Regulation S-K at ~~June~~December 3031, 2018.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Commodity and Product Price Risk

Our business model is to buy and sell products at current market prices in quantities approximately equal to estimated customer demand. Energy costs are a significant component of raw materials that are included in our product costs. Rising or volatile raw material prices for our suppliers, especially those of hydrocarbon derivatives, may cause our costs to increase or may result in volatility in our profitability. Although we do not speculate on changes in the prices of the products we sell, because we maintain inventories in order to serve the needs of our customers, we are subject to the risk of reductions in market prices for products we hold in inventory. We do not use derivatives to manage our commodity price risk because of the large number of products we sell and the large variety of raw materials used in the production of those products. Inventory management practices are focused on managing product price risk by generally purchasing our inventories via our ERP system which helps us forecast customer demand based on historical practices. Global inventory balances can fluctuate based on variations in regional customer demand forecasts. We collaborate directly with customers in all regions to enhance the ongoing accuracy of these forecasts in order to reduce the number of days sales held in inventories, as well as lower the amount of any slow moving and older inventories. In addition, we are generally able to pass on price increases to our customers, subject to market conditions, such as declining or otherwise volatile market prices for feedstocks, the presence of competitors in particular geographic and product markets and prevailing pricing mechanisms in customer contracts. We believe that these risk management practices reduce our exposure to changes in product selling prices or costs; however, significant unanticipated changes in market conditions or commodity prices could adversely affect our results of operations, financial condition and cash flows, as the prices of the products we purchase and sell are volatile.

Credit Risk

We are subject to the risk of loss arising from the credit risk related to the possible inability of our customers to pay for the products we resell and distribute to them. We attempt to limit our credit risk by monitoring the creditworthiness of our customers to whom we extend credit and establish credit limits in accordance with our credit policy. We perform credit evaluations on substantially all customers requesting credit and we will not extend credit to customers for whom we have substantial concerns and will deal with those customers on a cash basis. With the exception of our operations in China, we generally do not require collateral with respect to credit extended to customers. Our operations in China offer billing terms that allow certain customers to remit payment during a period of time ranging from 30 days to nine months. These notes receivable ($96.39 million at ~~June~~December 3031, 2018) are supported by banknotes issued by large banks in China on behalf of their customers.

At ~~June~~December 3031, 2018, no individual customer represented greater than 5.0% of the outstanding accounts receivable balance.

Interest Rate Risk

Interest rate risks can occur due to changes in market interest rates. This risk results from changes in the fair values of fixed-interest rate financial instruments or from changes in the cash flows of variable interest rate financial instruments. The optimal structure of variable and fixed interest rates is determined as part of interest rate risk management. It is not possible to simultaneously minimize both kinds of interest rate risk. We take steps to mitigate interest rate risk in part by entering into interest rate swap agreements as described under “Fair Value Measurements” below. Also, see Note 89 to our condensed consolidated financial statements.

Borrowings under our ABL Facility bear a variable interest rate, which was a weighted average rate of 3.6898% for the three months ended ~~June~~December 3031, 2018. For each $100.0 million drawn on the ABL Facility, a 100 basis point increase in the interest rate would result in a $1.0 million increase in annual interest expense.

OnChanges ~~December~~in ~~19,~~market ~~2017,~~interest werates ~~completed~~will ~~TLB~~have ~~Amendment~~an ~~No.~~effect 2on ~~amending~~ the Term Loan Facility~~. TLB~~ ~~Amendment~~interest Noexpense. A 2100 ~~reduced the interest rate margin applicable to outstanding term loans by 50~~ basis ~~points~~point ~~from~~increase/decrease ~~3.75%~~in tothe ~~3.25%~~interest ~~for LIBOR loans and from 2.75% to 2.25% for base~~ rate ~~loans. TLB~~would ~~Amendment~~result ~~No.~~in 2an ~~also~~increase/decrease ~~provides for a soft call premium equal to 1%~~ of ~~the~~$6.4 ~~amount~~million ofin ~~the~~annual ~~term~~interest ~~loans~~expense ~~that~~based ~~are subject to certain repricing transactions occurring~~ on ~~or prior to twelve months from~~ the ~~effective~~Term ~~date~~Loan ofFacility ~~TLB~~balance ~~Amendment~~at ~~No.~~December 31, 22018.

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Changes in market interest rates will have an effect on the Term Loan Facility interest expense. A 100 basis point increase/decrease in the interest rate would result in an increase/decrease of $6.4 million in annual interest expense based on the Term Loan Facility balance.

Fair Value Measurements

Contingent Consideration

As a result of the Business Combination, we incurred liabilities related to contingent consideration payable to the Selling Equityholders, which are required to be adjusted to fair value at each reporting period. These measurements are considered Level 3 measurements within the fair value hierarchy. Projected taxable income, current interest rates, current tax rates and the market price of our common stock are key inputs used to estimate the fair value of these liabilities. As a result, any changes in these inputs will impact the fair value of these liabilities and could materially impact the amount of income or expense recorded each reporting period.

The fair value of the liability for the contingent consideration related to the TRA was $7571.01 million as of ~~June~~December 3031, 2018. The calculation of the liability for the contingent consideration related to the TRA uses a cash flow model which incorporates current interest rates in the discount rate used to discount the obligation to present value. A 100 basis point increase in the discount rate compared to the discount rate used at the ~~June~~December 3031, 2018 valuation would have resulted in a decrease of approximately $0.14 million in the value of the liability for the contingent consideration related to the TRA. Additionally, this cash flow model is sensitive to changes in applicable tax rates. A 100 basis point increase in the tax rate compared to the tax rate used at the ~~June~~December 3031, 2018 valuation would have resulted in an increase of approximately $2.34 million in the value of the liability for the contingent consideration related to the TRA.

The fair value of the liability for the contingent consideration related to Deferred Cash Consideration was $4643.35 million as of ~~June~~December 3031, 2018. The liability for the contingent consideration related to the Deferred Cash Consideration is highly sensitive to the price of our common stock at each valuation date. A $1.00 increase/decrease in the price of our common stock from its ~~June~~December 3031, 2018 price would have increased/decreased the fair value of the liability for the Deferred Cash Consideration by approximately $5.1 million.

Derivatives

~~During~~We ~~the~~are ~~three~~a ~~months~~party ~~ended~~to ~~March 31, 2018, we entered into three additional~~ interest rate swap agreements ~~with~~of avarying ~~combined~~expiration ~~notional~~dates ~~amount~~ranging offrom ~~$300.0~~February ~~million~~2020 through February 2023, to help mitigate interest rate risk related to the variable rate Term Loan Facility. ~~During~~As ~~the~~of ~~three months ended March~~December 31, ~~2017~~2018, wethe ~~entered into four interest rate swap agreements with a combined~~ notional amount of ~~$300.0~~the ~~million~~seven tooutstanding ~~help mitigate~~ interest rate ~~risk~~swap ~~related~~agreements towas ~~the~~$599.1 ~~variable rate Term Loan Facility~~million. The swap agreements ~~expire at various dates from February 2020 through February 2023 and~~ are accounted for as cash flow hedges. Gains or losses resulting from changes in the fair value of the swaps are recorded in other comprehensive income. Gains and losses recorded in other comprehensive income are reclassified into and recognized in income when the interest expense on the Term Loan Facility is recognized. At ~~June~~December 3031, 2018, we recorded a net asset of $72.97 million in the condensed consolidated balance sheet related to these instruments.

During the ~~nine~~three months ended ~~June~~December 3031, 2018, we reclassified into income and recognized a realized loss on the interest rate swaps of $1.0.1 million, which was recorded in interest expense. During the ~~nine~~three months ended ~~June~~December 3031, 2018, we recorded an unrealized ~~gain~~loss on the interest rate swaps (net of taxes and reclassifications into income, including any ineffective portion) of $65.27 million, which was recorded in other comprehensive income. As of ~~June~~December 3031, 2018, $12.75 million in unrealized gains were expected to be realized and recognized in income within the next twelve months.

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Foreign Currency Risk

We may be adversely affected by foreign exchange rate fluctuations since we conduct our business on an international basis in multiple currencies. A portion of our sales and costs of sales are denominated in currencies other than the functional currency of our subsidiaries, exposing us to currency transaction risk. Additionally, because we report our consolidated results in USD, the results of operations and the financial position of our local international operations, which are generally reported in the relevant local currencies, are translated into USD at the applicable exchange rates for inclusion in our condensed consolidated financial statements, exposing us to currency translation risk. Further, we have exposure to foreign exchange fluctuations arising from the remeasurement of certain foreign operations where the USD is the functional currency but accounting records are kept in local currency. In this respect, we are vulnerable to currency remeasurement gains and losses to the extent that monetary assets and liabilities denominated in local currency do not offset each other when remeasured into USD.

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We currently do not utilize financial derivatives to manage our foreign currency risk, but we continue to monitor our exposure to foreign currency risk, employ operational strategies where practical and may consider utilizing financial derivatives in the future to mitigate losses associated with these foreign currency risks.

Included in our condensed consolidated ~~statements~~statement of operations for the ~~nine~~three months ended ~~June~~December 3031, 2018 is a ~~less than~~ $0.12 million net gain related to foreign exchange rate fluctuations. The most significant currency exposures during this period were to the RMB and CAD versus the USD. Assuming the same directional fluctuations as occurred during the ~~nine~~three months ended ~~June~~December 3031, 2018, a hypothetical 10.0% weakening/strengthening in the average exchange rates of these currencies from that date would have generated a net loss/gain of ~~less than~~ $1.03 million in our condensed consolidated ~~statements~~statement of operations for the ~~nine~~three months ended ~~June~~December 3031, 2018.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on the evaluation performed, our management, including the principal executive officer and principal financial officer, concluded that the disclosure controls and procedures were effective as of ~~June~~December 3031, 2018.

Changes in Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer evaluated the changes in our internal control over financial reporting that occurred during the quarterly period covered by this Quarterly Report on Form 10-Q. Based on their evaluation, it is concluded that there had been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June~~December 3031, 2018 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

We are not currently a party to any legal proceedings that, if determined adversely against us, individually or in the aggregate, would have a material adverse effect on our financial position, results of operations or cash flows.

In June 2014, we self-disclosed to the DTSC that an inventory of our Fairfield facility had revealed potential violations of RCRA and the California Health and Safety Code. Although no formal proceeding has been initiated, we expect the DTSC to seek payment of fines or other penalties for non-compliance. We do not expect the amount of any such fine or penalty to have a material adverse effect on our business, financial position or results of operations.

From time to time, we are party to ongoing legal proceedings in the ordinary course of business. While the outcome of these proceedings cannot be predicted with certainty, we do not believe the results of these proceedings, other than as is disclosed elsewhere in this Quarterly Report on Form 10-Q, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operation or liquidity.

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Item 1A. Risk Factors

We are subject to certain risks and hazards due to the nature of the business activities we conduct. For a discussion of these risks, see “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2018 filed with the SEC on December 76, ~~2017~~2018. These risks could materially and adversely affect our business, financial condition, cash flows and result of operations. There have been no material changes to the risk factors described in the Form 10-K described above. We may experience additional risks and uncertainties not currently known to us or, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below provides information concerning our repurchase of shares of our common stock during the three months ended ~~June~~December 3031, 2018:

	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchase as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchase as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
June 9, 2018	7,163	$	9.66	—	—
November 2, 2018 (1)	34,461	$	10.82	—	—
Total	7,163	$	9.66	—	—
November 8, 2018 (2)	2,923	$	10.01	—	—
Total	37,384	$	10.42	—	—

(1) Shares transferred to the Company to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting of the ~~TPG~~restricted ~~Restricted Stock Grants~~stock.

⁽²⁾Shares transferred to the Company to satisfy the officers’ and employees’ tax withholding obligations in connection with the vesting of the RSUs.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Exhibit Index

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated September 17, 2018, by and among Nexeo Solutions, Inc, Univar, Inc, Pilates Merger Sub I Corp and Pilates Merger Sub II (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated September 18, 2018)
3.1		Second Amended and Restated Certificate of Incorporation of Nexeo Solutions, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated June 9, 2016)
3.2		Amended and Restated Bylaws of Nexeo Solutions, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated June 9, 2016)
4.1		Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Company's S-1 Registration Statement (Commission File No. 333-195854)
4.2		Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company's S-1 Registration Statement (Commission File No. 333-195854)
4.3		Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Company's S-1 Registration Statement (Commission File No. 333-195854)
4.4		Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant (incorporated by reference to Exhibit 4.4 to the Company's S-1 Registration Statement (Commission File No. 333-195854)
4.5		Shareholders' and Registration Rights Agreement, dated as of March 21, 2016, by and among TPG Capital LLC, WL Ross Sponsor LLC and WL Ross Holding Corp. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 21, 2016)
4.6		Amendment No. 1 to Shareholders' and Registration Rights Agreement, dated June 6, 2016, by and among WL Ross Holding Corp., WL Ross Sponsor LLC and Nexeo Holdco, LLC (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K dated June 6, 2016)
4.7		Form of Joinder to Shareholders' and Registration Rights Agreement (incorporated by reference to Exhibit 10.10 to the Company's Current Report on Form 8-K dated June 9, 2016)
4.8		Waiver and Consent Agreement made as of September 13, 2017 by and among Nexeo Solutions, Inc. and Nexeo Holdco, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated September 13, 2017)
23.1†		Consent of PricewaterhouseCoopers LLP
31.1†		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1††		Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive data files pursuant to Rule 405 of Regulation S-T.

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32.1††		Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		Interactive data files pursuant to Rule 405 of Regulation S-T.

† Filed herewith.

†† Furnished herewith.

* Pursuant to Rule 406T of Regulation S-T, the interactive data files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURE

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.

	Nexeo Solutions, Inc.
August 7, 2018	By:	/s/ Ross J. Crane
February 7, 2019	By:	/s/ Ross J. Crane
		Ross J. Crane
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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