This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is based on financial data derived from the financial statements prepared in accordance withthe United States ("US") generally accepted accounting principles ("GAAP") and certain other financial data that is prepared using non-GAAP measures. For a reconciliation of each non-GAAP financial measure to its most comparable GAAP measure, see "Analysis of Segment Results" within this Item and "Note 23: Segments" to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. Refer to "Non-GAAP Financial Measures" within this Item for more information about our use of Non-GAAP financial measures. Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flow. This section of this Annual Report on Form 10-K discusses year-to-year comparisons between 2019 and 2018. Discussions of year-to-year comparisons between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of 20 -------------------------------------------------------------------------------- Table of Contents Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2018 , filed onFebruary 21, 2019 . OverviewUnivar Solutions Inc. is a leading global chemical and ingredient distributor and provider of value-added services to customers across a wide range of diverse industries. We purchase chemicals from thousands of chemical producers worldwide and warehouse, repackage, blend, dilute, transport and sell those chemicals to more than 100,000 customer locations across approximately 130 countries. Our operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. These segments areUnivar Solutions USA ("USA"), Univar Solutions Canada ("Canada"),Univar Solutions Europe and theMiddle East andAfrica ("EMEA"), andUnivar Solutions Latin America ("LATAM"), which includes developing businesses inLatin America (includingBrazil andMexico ) and theAsia-Pacific region . Prior to its renaming in 2019, LATAM was previously referred to as "Rest of World." Recent Developments and Items Impacting Comparability OnFebruary 28, 2019 , we completed the acquisition of 100% of the equity interest of Nexeo, a leading global chemicals and plastics distributor. The acquisition expands and strengthensUnivar Solutions' presence inNorth America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution and the broadest product offering. OnMarch 29, 2019 , the Company completed the sale of the Nexeo plastics distribution business which is presented as a discontinued operation in the Company's results of operations for the year endedDecember 31, 2019 . OnDecember 31, 2019 , we sold our Environmental Sciences business. The sale of the business did not meet the criteria to be classified as a discontinued operations in the Company's financial statements. Market Conditions and Outlook We sell chemicals that are used in manufacturing processes and as components of or ingredients in other products. Our sales are correlated with and affected by fluctuations in the levels of industrial production, manufacturing output, and general economic activity. The level of industrial production, which tends to decline in the fourth quarter of each year, can impact our sales. Certain of our end markets experience seasonal fluctuations, which also affect our net sales and results of operations. For example, our sales to the agricultural end market, particularly inCanada , tend to peak in the second quarter in each year, depending in part on weather-related variations in demand for agricultural chemicals. Sales to other end markets such as paints and coatings may also be affected by changing seasonal weather conditions, the construction industry and automotive production. Demand for our oil, gas and mining products and services is affected by factors such as the level of exploration, drilling, development and production activity of, and the corresponding capital spending by, oil, gas and mining companies and oilfield service providers, and trends in oil, gas and mineral prices. Executive Summary Management is focused, in the near and long term, on the following priorities: •growth through our sales force, utilizing our realigned sales territories; •delivering technical and application development excellence through our global network of Solutions Centers; •investing in, and continued advancement, of our digital capabilities, bringing value to customers and suppliers as we work to attain our goal of being the easiest to do business with; •network optimization, as we progress with the integration of Nexeo, continuing to realize synergy cost savings; •continuing to successfully achieve important ERP migration milestones; •delivering on our commitment to focus on our core chemical and ingredient businesses through strategic divestitures and acquisitions globally; and •strengthening our balance sheet and pursuing ways to deleverage. 21 -------------------------------------------------------------------------------- Table of Contents Constant Currency Currency impacts on consolidated and segment results have been derived by translating current period financial results in local currency using the average exchange rate for the prior period to which the financial information is being compared. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. Results of Operations Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Year Ended Favorable Impact of (in millions)December 31, 2019 December 31, 2018 (unfavorable) % Change currency* Net sales$ 9,286.9 100.0 %$ 8,632.5 100.0 %$ 654.4 7.6 % (1.7) % Cost of goods sold (exclusive of depreciation) 7,146.1 76.9 % 6,732.4 78.0 % (413.7) 6.1 % 1.7 % Operating expenses: Outbound freight and handling 364.8 3.9 % 328.3 3.8 % (36.5) 11.1 % 1.4 % Warehousing, selling and administrative 1,068.8 11.5 % 931.4 10.8 % (137.4) 14.8 % 14.5 % Other operating expenses, net 298.2 3.2 % 73.5 0.9 % (224.7) 305.7 % 1.0 % Depreciation 155.0 1.7 % 125.2 1.5 % (29.8) 23.8 % 1.3 % Amortization 59.7 0.6 % 54.3 0.6 % (5.4) 9.9 % 1.3 % Impairment charges 7.0 0.1 % - - % (7.0) N/M - % Total operating expenses$ 1,953.5 21.0 %$ 1,512.7 17.5 %$ (440.8) 29.1 % 1.6 % Operating income $ 187.3 2.0 %$ 387.4 4.5 %$ (200.1) (51.7) % (2.6) % Other (expense) income: Interest income 7.7 0.1 % 3.2 - % 4.5 140.6 % (12.5) % Interest expense (147.2) (1.6) % (135.6) (1.6) % (11.6) 8.6 % 0.4 % Gain on sale of business 41.4 0.4 % - - % 41.4 N/M - % Loss on extinguishment of debt (19.8) (0.2) % (0.1) - % (19.7) N/M - % Other expense, net (70.5) (0.8) % (32.7) (0.4) % (37.8) 115.6 % 2.1 % Total other expense$ (188.4) (2.0) %$ (165.2) (1.9) %$ (23.2) 14.0 % 0.5 % (Loss) income from continuing operations before income taxes (1.1) - % 222.2 2.6 % (223.3) (100.5) % (4.1) % Income tax expense from continuing operations 104.5 1.1 % 49.9 0.6 % (54.6) 109.4 % 4.4 % Net (loss) income from continuing operations$ (105.6) (1.1) %$ 172.3 2.0 %$ (277.9) (161.3) % (4.0) % Net income from discontinued operations 5.4 0.1 % - - % 5.4 N/M - % Net (loss) income$ (100.2) (1.1) %$ 172.3 2.0 %$ (272.5) (158.2) % (4.1) % * Foreign currency translation is included in the percentage change. Unfavorable impacts from foreign currency translation are designated with parentheses. Net sales Net sales were$9,286.9 million in the year endedDecember 31, 2019 , an increase of$654.4 million , or 7.6%, from the year endedDecember 31, 2018 . On a constant currency basis, net sales increased from theFebruary 2019 Nexeo acquisition in USA,Canada and LATAM and theMay 2018 Earthoil acquisition in EMEA. The increase was partially offset by lower sales volumes primarily due to lower global demand and by unfavorable changes in sales pricing due to chemical price deflation in USA,Canada and LATAM. Refer to the "Analysis of Segment Results" for additional information. 22 -------------------------------------------------------------------------------- Table of Contents Gross profit (exclusive of depreciation) Gross profit (exclusive of depreciation) increased$240.7 million , or 12.7%, to$2,140.8 million for the year endedDecember 31, 2019 . The increase in gross profit (exclusive of depreciation) is attributable to changes in market and product mix and sales force execution. The increase in gross profit (exclusive of depreciation) from acquisitions was attributable to theFebruary 2019 Nexeo acquisition in USA,Canada and LATAM segments and theMay 2018 Earthoil acquisition in EMEA. Included in gross profit (exclusive of depreciation) is a$5.3 million charge in USA related to the inventory fair value step-up adjustment resulting from ourFebruary 2019 Nexeo acquisition and a$9.7 million benefit in LATAM related to the Brazil VAT recovery. Excluding these impacts, gross profit (exclusive of depreciation) increased$236.3 million , or 12.4%, to$2,136.4 million for the year endedDecember 31, 2019 . Refer to the "Analysis of Segment Results" for additional information. Outbound freight and handling Outbound freight and handling expenses increased$36.5 million , or 11.1%, to$364.8 million for the year endedDecember 31, 2019 . On a constant currency basis, outbound freight and handling expenses increased$40.9 million , or 12.5%, primarily due to theFebruary 2019 Nexeo acquisition partially offset by lower sales volumes. Refer to the "Analysis of Segment Results" for additional information. Warehousing, selling and administrative Warehousing, selling and administrative expenses increased$137.4 million , or 14.8%, to$1,068.8 million for the year endedDecember 31, 2019 . On a constant currency basis, the$153.9 million increase is primarily due to incremental expenses from theFebruary 2019 Nexeo acquisition. These costs were partially offset by cost containment efforts across all of our segments. Refer to the "Analysis of Segment Results" for additional information. Other operating expenses, net Other operating expenses, net increased$224.7 million , or 305.7%, to$298.2 million for the year endedDecember 31, 2019 . The increase was primarily due to higher acquisition and integration related expenses, expenses related to the saccharin legal settlement, higher other facility exit costs and higher other employee termination costs in connection with theFebruary 2019 Nexeo acquisition. Refer to "Note 6: Other operating expenses, net" in Item 8 of this Annual Report on Form 10-K for additional information. Depreciation and amortization Depreciation expense increased$29.8 million , or 23.8%, to$155.0 million for the year endedDecember 31, 2019 . On a constant currency basis, the increase of$31.4 million , or 25.1%, was primarily due to theFebruary 2019 Nexeo acquisition and accelerated depreciation of legacy software. Amortization expense increased$5.4 million , or 9.9%, to$59.7 million for the year endedDecember 31, 2019 . On a constant currency basis, the increase of$6.1 million was primarily attributable to theFebruary 2019 Nexeo acquisition. Impairment charges Impairment charges of$7.0 million were recorded in the year endedDecember 31, 2019 related to property, plant and equipment in connection with the announced closure of certain production facilities. Refer to "Note 16: Impairment charges" in Item 8 of this Annual Report on Form 10-K for additional information. Interest expense Interest expense increased$11.6 million , or 8.6%, to$147.2 million for the year endedDecember 31, 2019 primarily due to higher average outstanding borrowings in connection with theFebruary 2019 Nexeo acquisition. Refer to "Note 18: Debt" in Item 8 of this Annual Report on Form 10-K for additional information. Gain on sale of business A gain of$41.4 million was recorded in the year endedDecember 31, 2019 related to the sale of the Environmental Sciences business. Refer to "Note 4: Discontinued operations and dispositions" in Item 8 of this Annual Report on Form 10-K for additional information. 23 -------------------------------------------------------------------------------- Table of Contents Loss on extinguishment of debt Loss on extinguishment of debt of$19.8 million for the year endedDecember 31, 2019 was due to the February andNovember 2019 debt refinancing and repayment activities. Other expense, net Other expense, net increased$37.8 million , or 115.6%, to$70.5 million for the year endedDecember 31, 2019 . The change was primarily related to the increase in pension mark to market loss, losses on undesignated foreign currency derivative instruments, losses on interest rate swaps as well as the reduction in non-operating pension income. The change was partially offset by foreign currency denominated loan revaluation gains. Refer to "Note 8: Other expense, net" in Item 8 of this Annual Report on Form 10-K for additional information. Income tax expense from continuing operations Income tax expense was$104.5 million for the year endedDecember 31, 2019 , resulting in an effective income tax rate of (9500.0)%, compared to the US federal statutory rate of 21.0%. The Company's effective income tax rate for the year endedDecember 31, 2019 was primarily driven by increased international tax impacts, including those related to US tax reform and transactions with foreign subsidiaries, tax gain in excess of book gain on the sale of the Environmental Sciences business, nondeductible expenses, including the Saccharin legal settlement, the Nexeo shareholder settlement and state taxes. These increases to the effective income tax rate are partially offset by the release of valuation allowances on certain tax attributes. Income tax expense was$49.9 million for the year endedDecember 31, 2018 , resulting in an effective income tax rate of 22.5%. The Company's effective income tax rate for the year endedDecember 31, 2018 was higher than the US federal statutory rate of 21.0%, primarily due to international tax impacts, including those related to US tax reform and state income taxes. These increases to the effective income tax rate are partially offset by the release of valuation allowances on certain tax attributes. Net income from discontinued operations Net income from discontinued operations was$5.4 million for the year endedDecember 31, 2019 . Discontinued operations for 2019 represents one month of the Nexeo plastics distribution business. Refer to "Note 4: Discontinued operations and dispositions" in Item 8 of this Annual Report on Form 10-K for additional information. Results of Reportable Business Segments The Company's operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. Management believes Adjusted EBITDA is an important measure of operating performance, which is used as the primary basis for the chief operating decision maker to evaluate the performance of each of our reportable segments. We believe certain other financial measures that are not calculated in accordance with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin. Such non-GAAP financial measures are used from time to time herein but should not be viewed as a substitute for GAAP measures of performance. See "Note 23: Segments" in Item 8 of this Annual Report on Form 10-K and "Analysis of Segment Results" within this Item for additional information. Analysis of Segment Results USA Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Net sales: External customers$ 5,828.5 $ 4,961.0 $ 867.5 17.5 % Inter-segment 100.2 126.6 (26.4) (20.9) % Total net sales$ 5,928.7 $ 5,087.6 $ 841.1 16.5 % Cost of goods sold (exclusive of depreciation) 4,550.9 3,959.3 (591.6) 14.9 % Inventory step-up adjustment (1) 5.3 - (5.3) N/M Outbound freight and handling 254.6 215.6 (39.0) 18.1 % Warehousing, selling and administrative 673.8 536.3 (137.5) 25.6 % Adjusted EBITDA$ 454.7 $ 376.4 $ 78.3 20.8 % 24
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Table of Contents Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Gross profit (exclusive of depreciation): Net sales$ 5,928.7 $ 5,087.6 $ 841.1 16.5 % Cost of goods sold (exclusive of depreciation) 4,550.9 3,959.3 (591.6) 14.9 %
Gross profit (exclusive of depreciation)
22.1 % Inventory step-up adjustment (1) 5.3 - (5.3) N/M Adjusted gross profit (exclusive of depreciation) (1)$ 1,383.1 $ 1,128.3 $ 254.8 22.6 % (1)See definition of adjusted gross profit (exclusive of depreciation) at the end of this Item under "Non-GAAP Financial Measures." Adjusted gross profit (exclusive of depreciation) excludes the inventory fair value step-up adjustment resulting from ourFebruary 2019 Nexeo acquisition. External sales in theUSA segment were$5,828.5 million , an increase of$867.5 million , or 17.5%, in the year endedDecember 31, 2019 . External sales increased primarily due to theFebruary 2019 Nexeo acquisition, partially offset by lower sales volumes attributable to soft demand. Gross profit (exclusive of depreciation) increased$249.5 million , or 22.1%, to$1,377.8 million in the year endedDecember 31, 2019 . Gross profit (exclusive of depreciation) increased due to theFebruary 2019 Nexeo acquisition and due to favorable changes in pricing and product mix, partially offset by lower sales volumes. Excluding the$5.3 million impact related to the inventory fair value step-up adjustment from the Nexeo acquisition, adjusted gross profit (exclusive of depreciation) increased$254.8 million , or 22.6%, to$1,383.1 million . Both gross margin and adjusted gross margin increased during the year endedDecember 31, 2019 due to the beneficial impact of product mix, sales force execution and margin management efforts. Outbound freight and handling expenses increased$39.0 million , or 18.1%, to$254.6 million in the year endedDecember 31, 2019 primarily due to theFebruary 2019 Nexeo acquisition partially offset by lower sales volumes. Warehousing, selling and administrative expenses increased$137.5 million , or 25.6%, to$673.8 million in the year endedDecember 31, 2019 primarily due to incremental expenses from theFebruary 2019 Nexeo acquisition. The increase was also attributable to higher environmental remediation expense partially offset by strong cost containment. Warehousing, selling and administrative expenses as a percentage of external sales increased from 10.8% in the year endedDecember 31, 2018 to 11.6% in the year endedDecember 31, 2019 . Adjusted EBITDA increased by$78.3 million , or 20.8%, to$454.7 million in the year endedDecember 31, 2019 primarily as a result of higher gross profit (exclusive of depreciation). Adjusted EBITDA margin increased from 7.6% in the year endedDecember 31, 2018 to 7.8% in the year endedDecember 31, 2019 primarily as a result of higher gross margin, partially offset by increased operating expenses as a percentage of sales.Canada Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Net sales: External customers$ 1,217.8 $ 1,302.3 $ (84.5) (6.5) % Inter-segment 6.2 9.3 (3.1) (33.3) % Total net sales$ 1,224.0 $ 1,311.6 $ (87.6) (6.7) % Cost of goods sold (exclusive of depreciation) 990.3 1,080.1 89.8 (8.3) % Outbound freight and handling 41.9 42.5 0.6 (1.4) % Warehousing, selling and administrative 91.6 84.3 (7.3) 8.7 % Adjusted EBITDA$ 100.2 $ 104.7 $ (4.5) (4.3) % Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Gross profit (exclusive of depreciation): Net sales$ 1,224.0 $ 1,311.6 $ (87.6) (6.7) % Cost of goods sold (exclusive of depreciation) 990.3 1,080.1 89.8 (8.3) %
Gross profit (exclusive of depreciation)
1.0 % 25 -------------------------------------------------------------------------------- Table of Contents External sales in theCanada segment were$1,217.8 million , a decrease of$84.5 million , or 6.5%, in the year endedDecember 31, 2019 . On a constant currency basis, external sales decreased$55.6 million , or 4.3%, primarily due to lower sales volumes attributable to the weather-impacted agriculture market as well as lower demand fromCanada's energy sector. The decrease also resulted from lower average selling prices due to chemical price deflation and changes in market and product mix, partially offset by the increase due to theFebruary 2019 Nexeo acquisition. Gross profit (exclusive of depreciation) increased$2.2 million , or 1.0%, to$233.7 million in the year endedDecember 31, 2019 . On a constant currency basis, gross profit (exclusive of depreciation) increased$7.7 million , or 3.3%, due to contributions from theFebruary 2019 Nexeo acquisition, partially offset by lower sales volumes in agriculture. Gross margin increased from 17.8% in the year endedDecember 31, 2018 to 19.2% in the year endedDecember 31, 2019 as a result of higher margins on certain commodity chemicals. Outbound freight and handling expenses decreased$0.6 million , or 1.4%, to$41.9 million in the year endedDecember 31, 2019 due to lower sales volumes. Warehousing, selling and administrative expenses increased by$7.3 million , or 8.7%, to$91.6 million in the year endedDecember 31, 2019 primarily due to incremental expenses from theFebruary 2019 Nexeo acquisition. Warehousing, selling and administrative expenses as a percentage of external sales increased from 6.5% in the year endedDecember 31, 2018 to 7.5% in the year endedDecember 31, 2019 due to higher bad debt charges and higher maintenance and repair expenses. On a constant currency basis, warehousing, selling and administrative expenses increased$9.4 million , or 11.2%. Adjusted EBITDA decreased by$4.5 million , or 4.3%, to$100.2 million in the year endedDecember 31, 2019 . On a constant currency basis, Adjusted EBITDA decreased$2.1 million , or 2.0%, primarily due to lower demand in the agriculture and energy sector. Adjusted EBITDA margin increased from 8.0% in the year endedDecember 31, 2018 to 8.2% in the year endedDecember 31, 2019 , primarily as a result of higher margins on certain commodity chemicals. EMEA Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Net sales: External customers$ 1,785.5 $ 1,975.7 $ (190.2) (9.6) % Inter-segment 3.3 4.0 (0.7) (17.5) % Total net sales$ 1,788.8 $ 1,979.7 $ (190.9) (9.6) % Cost of goods sold (exclusive of depreciation) 1,363.9 1,525.6 161.7 (10.6) % Outbound freight and handling 59.1 62.4 3.3 (5.3) % Warehousing, selling and administrative 222.5 240.5 18.0 (7.5) % Adjusted EBITDA$ 143.3 $ 151.2 $ (7.9) (5.2) % Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Gross profit (exclusive of depreciation): Net sales$ 1,788.8 $ 1,979.7 $ (190.9) (9.6) % Cost of goods sold (exclusive of depreciation) 1,363.9 1,525.6 161.7 (10.6) %
Gross profit (exclusive of depreciation)
(6.4) % External sales in the EMEA segment were$1,785.5 million , a decrease of$190.2 million , or 9.6%, in the year endedDecember 31, 2019 . On a constant currency basis, external sales decreased$88.5 million , or 4.5%, primarily due to lower sales volumes attributable to soft demand, partially offset by incremental sales from theMay 2018 Earthoil acquisition. Gross profit (exclusive of depreciation) decreased$29.2 million , or 6.4%, to$424.9 million in the year endedDecember 31, 2019 . On a constant currency basis, gross profit (exclusive of depreciation) decreased$5.5 million , or 1.2%, due to lower sales volumes and increased market pressure in the pharmaceutical finished goods product line. Gross margin increased from 23.0% in the year endedDecember 31, 2018 to 23.8% in the year endedDecember 31, 2019 primarily due to the favorable change in product mix and margin management initiatives. Outbound freight and handling expenses decreased$3.3 million , or 5.3%, to$59.1 million . On a constant currency basis, outbound freight and handling expenses remained flat. 26 -------------------------------------------------------------------------------- Table of Contents Warehousing, selling and administrative expenses decreased$18.0 million , or 7.5%, to$222.5 million in the year endedDecember 31, 2019 , and increased as a percentage of external sales from 12.2% in the year endedDecember 31, 2018 to 12.5% in the year endedDecember 31, 2019 . On a constant currency basis, operating expenses decreased$5.7 million , or 2.4%. Adjusted EBITDA decreased by$7.9 million , or 5.2%, to$143.3 million in the year endedDecember 31, 2019 . On a constant currency basis, Adjusted EBITDA increased$0.2 million , or 0.1%, primarily due effective cost containment partially offset by soft demand. In the year endedDecember 31, 2019 , the pharmaceutical finished goods product line represented approximately 27% of Adjusted EBITDA in the EMEA segment, declining from approximately 30% in prior year due to increased market pressures. Adjusted EBITDA margin increased from 7.7% in the year endedDecember 31, 2018 to 8.0% in the year endedDecember 31, 2019 . LATAM Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Net sales: External customers$ 455.1 $ 393.5 $ 61.6 15.7 % Inter-segment - 0.2 (0.2) (100.0) % Total net sales (1)$ 455.1 $ 393.7 $ 61.4 15.6 % Cost of goods sold (exclusive of depreciation) 350.7 307.5 (43.2) 14.0 % Outbound freight and handling 9.2 7.8 (1.4) 17.9 % Warehousing, selling and administrative 50.8 45.1 (5.7) 12.6 % Brazil VAT recovery (1) (8.3) - 8.3 N/M Adjusted EBITDA (1)$ 36.1 $ 33.3 $ 2.8 8.4 % Year ended December 31, Favorable (in millions) 2019 2018 (unfavorable) % Change Gross profit (exclusive of depreciation): Net sales$ 455.1 $ 393.7 $ 61.4 15.6 % Cost of goods sold (exclusive of depreciation) 350.7 307.5 (43.2) 14.0 % Gross profit (exclusive of depreciation) (1)$ 104.4 $ 86.2 $ 18.2 21.1 % Brazil VAT recovery (1) (9.7) - 9.7 N/M Adjusted gross profit (exclusive of depreciation)$ 94.7 $ 86.2 $ 8.5 9.9 % (1)Included in net sales and gross profit (exclusive of depreciation) is a$9.7 million benefit related to a Brazil VAT recovery. The benefit of$8.3 million , net of associated fees, is excluded from Adjusted EBITDA. See "Note 21: Commitments and contingencies" in Item 8 of this Annual Report on Form 10-K for further information regarding the Brazil VAT recovery for the year endedDecember 31, 2019 . External sales in the LATAM segment were$455.1 million , an increase of$61.6 million , or 15.7%, in the year endedDecember 31, 2019 . On a constant currency basis, external sales increased$75.6 million , or 19.2%, which includes$9.7 million related to the Brazil VAT recovery. The increase was also due to theFebruary 2019 Nexeo acquisition along with contributions from the Brazilian agriculture sector. Gross profit (exclusive of depreciation) increased$18.2 million , or 21.1%, to$104.4 million in the year endedDecember 31, 2019 . On a constant currency basis, gross profit (exclusive of depreciation) increased$22.5 million , or 26.1%, primarily due to the Brazil VAT recovery impact of$9.7 million and theFebruary 2019 Nexeo acquisition. Excluding the$9.7 million impact related to the Brazil VAT recovery, adjusted gross profit (exclusive of depreciation) increased$8.5 million , or 9.9%, to$94.7 million . Gross margin inclusive of the Brazil VAT recovery increased from 21.9% to 22.9% and excluding the Brazil VAT recovery decreased from 21.9% to 21.3% in the year endedDecember 31, 2018 when compared toDecember 31, 2019 . Outbound freight and handling expenses increased$1.4 million , or 17.9%, to$9.2 million in the year endedDecember 31, 2019 primarily due to incremental expenses from theFebruary 2019 Nexeo acquisition and higher sales volumes. Warehousing, selling and administrative expenses increased$5.7 million , or 12.6%, to$50.8 million in the year endedDecember 31, 2019 and decreased as a percentage of external sales from 11.5% in the year endedDecember 31, 2018 to 11.2% in the year endedDecember 31, 2019 . On constant currency basis, warehousing, selling and administrative expenses increased 27 -------------------------------------------------------------------------------- Table of Contents$7.6 million , or 16.9%, primarily due to incremental expenses from theFebruary 2019 Nexeo acquisition as well as from associated fees related to the Brazil VAT recovery, partially offset by strong cost control. Adjusted EBITDA increased by$2.8 million , or 8.4%, to$36.1 million in the year endedDecember 31, 2019 . On a constant currency basis, Adjusted EBITDA increased$5.0 million , or 15.0%, primarily as a result of higher gross profit (exclusive of depreciation). Adjusted EBITDA margin inclusive of the Brazil VAT recovery decreased from 8.5% to 7.9% and excluding the Brazil VAT recovery decreased from 8.5% to 8.1% in the year endedDecember 31, 2018 when compared toDecember 31, 2019 . Liquidity and Capital Resources Our primary source of liquidity is cash generated from our operations as well as borrowings under our committed credit facilities. As ofDecember 31, 2019 , our total liquidity was approximately$931.2 million , comprised of$600.9 million available under our credit facilities and$330.3 million of cash and cash equivalents. Our primary liquidity and capital resource needs are to service our debt and to finance working capital, capital expenditures, other liabilities and general corporate purposes. We have significant working capital needs, although we have implemented several initiatives to improve our working capital and reduce the related financing requirements. The nature of our business, however, requires that we maintain inventories that enable us to deliver products to fill customer orders. As ofDecember 31, 2019 , we maintained inventories of$796.0 million , equivalent to approximately 43.6 days of sales. Total debt as ofDecember 31, 2019 was$2,714.5 million , consisting of senior term loans, asset backed loans, senior unsecured notes, finance lease obligations and short-term financing. We may from time to time repurchase our debt or take other steps to reduce our debt or interest cost. These actions may include open market repurchases, negotiated repurchases or opportunistic refinancing of debt. The amount of debt, if any, that may be repurchased or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Refer to "Note 18: Debt" in Item 8 of this Annual Report on Form 10-K for further information. Our defined benefit pension plans had an underfunded status of$234.4 million and$212.4 million as ofDecember 31, 2019 and 2018, respectively. Based on current projections of minimum funding requirements, we expect to make cash contributions of$22.9 million to our defined benefit pension plans in 2020. The timing for any such requirement in future years is uncertain given the implicit uncertainty regarding the future developments of factors described in "Risk Factors" in Item 1A of this Annual Report on Form 10-K. As a result of the 2017 US Tax Act, the Company recorded in 2017 a one-time Section 965 repatriation tax of$76.5 million . After offsetting allowable tax credits, we elected to pay the remaining balance of$14.9 million over eight years, of which$9.2 remains atDecember 31, 2019 . We expect our 2020 capital expenditures for maintenance, safety and cost improvements and investments in our digital capabilities to be approximately$120 million to$130 million . Interest payments for 2020 are expected to be$115 million to$130 million . We expect to fund our capital expenditures and our interest payments with cash from operations or cash on hand. We believe funds provided by our primary sources of liquidity will be adequate to meet our liquidity and capital resource needs for at least the next 12 months under current operating conditions. Cash Flows The following table presents a summary of our cash flow activity: Year Ended December 31, (in millions) 2019 2018
2017
Net cash provided by operating activities$ 363.9 $ 289.9 $ 282.6 Net cash used by investing activities (433.1) (99.0)
(79.1)
Net cash provided (used) by financing activities 295.2 (518.3)
(112.4)
Year EndedDecember 31, 2019 Compared to Year EndedDecember 31, 2018 Cash Provided by Operating Activities Cash provided by operating activities increased$74.0 million to$363.9 million for the year endedDecember 31, 2019 from$289.9 million for the year endedDecember 31, 2018 . The increase is primarily due to changes in trade working capital and prepaid expenses and other current assets, partially offset by changes in net income, exclusive of non-cash items. The change in net income, exclusive of non-cash items, provided net cash outflows of$238.4 million related to reduced cash inflows when compared to the change in the prior year. Net income, exclusive of non-cash items, provided net cash inflows of$150.0 million and$388.4 million for the years endedDecember 31, 2019 andDecember 31, 2018 , respectively. 28 -------------------------------------------------------------------------------- Table of Contents The change in trade working capital, which includes trade accounts receivable, net, inventories, and trade accounts payable, provided net cash inflows of$233.5 million when compared to the change in the prior year. Trade working capital provided cash inflows of$195.1 million for the year endDecember 31, 2019 compared to cash outflows of$38.4 million for the year endedDecember 31, 2018 . Cash inflows from trade accounts receivable, net is attributable to improvements in the timing of customer payments and reduced sales volumes, excluding acquisitions, during the current year. Inventory cash inflows on a year-over-year basis are primarily related to reductions in theUSA segment inventories due to reduced sales volumes and favorable supplier partner pricing. The year-over-year cash outflows related to trade accounts payable are primarily attributable to decreased inventory purchases in the current year. The change in prepaid expenses and other current assets is primarily due to payment timing differences and favorable changes in expected product returns from customers. The change in pension and other postretirement benefit liabilities is primarily due to unfavorable changes in actuarial valuations, partially offset by favorable changes in expected returns on plan assets. Cash Used by Investing Activities Cash used by investing activities increased$334.1 million to$433.1 million for the year endedDecember 31, 2019 from$99.0 million for the year endedDecember 31, 2018 . The increase is primarily related to the acquisition of the Nexeo business in 2019, net of the proceeds received for the sale and dispositions of Nexeo Plastics and the Environmental Sciences business. In 2018, the Company acquired Earthoil andKemetyl . Refer to "Note 3: Business combinations" and "Note 4: Discontinued operations and dispositions" in Item 8 of this Annual Report on Form 10-K for additional information related to the Company's acquisitions and dispositions. Cash Provided (Used) by Financing Activities Cash provided (used) by financing activities increased$813.5 million to cash provided of$295.2 million for the year endedDecember 31, 2019 from cash used of$518.3 million for the year endedDecember 31, 2018 . The increase in financing cash flows is primarily due to raising additional debt to finance theFebruary 2019 Nexeo acquisition and debt refinancing activities that occurred during the fourth quarter of 2019. The increase in financing activities were partially offset by increased debt repayments primarily due to the sale of Nexeo Plastics, where proceeds were used to pay down debt, and 2019 fourth quarter refinancing activities. Refer to "Note 18: Debt" in Item 8 of this Annual Report on Form 10-K for additional information related to the Company's debt. Contractual Obligations and Commitments Our contractual obligations and commitments as ofDecember 31, 2019 are as follows: Payment Due by Period (in millions) Total 2020
2021 - 2022 2023 - 2024 Thereafter Short-term financing (1)
$ 0.7 $ 0.7
$ - $ - $ - Finance leases
74.6 22.6 34.6 11.1 6.3 Long-term debt, including current maturities (1) 2,668.9 4.0 138.9 1,646.0 880.0 Interest (2) 560.4 111.7 204.5 159.9 84.3 Minimum operating lease payments 185.2 53.6 73.1 33.8 24.7 Estimated environmental liability payments (3) 84.3 25.0 19.1 12.9 27.3 2017 US repatriation tax 9.2 - 2.5 6.7 - Other (4) 112.6 54.6 28.0 30.0 - Total (5)$ 3,695.9 $ 272.2 $ 500.7 $ 1,900.4 $ 1,022.6 (1)See "Note 18: Debt" in Item 8 of this Annual Report on Form 10-K for additional information. (2)Interest payments on debt are calculated for future periods using interest rates in effect as ofDecember 31, 2019 and obligations on that date. Projected interest payments include the related effects of interest rate swap agreements. Certain of these projected interest payments may differ in the future based on changes in floating interest rates, foreign currency fluctuations or other factors or events. (3)Included in the less than one year category is$11.7 million related to environmental liabilities for which the timing is uncertain. The timing of payments is unknown and could differ based on future events. For more information see "Note 21: Commitments and contingencies" in Item 8 of this Annual Report on Form 10-K. (4)Commitments related to capital expenditures and other contractual obligations. (5)This table excludes our pension and postretirement medical benefit obligations. Based on current projections of minimum funding requirements, we expect to make cash contributions of$22.9 million to our defined benefit pension plans in the year endedDecember 31, 2020 . The timing for any such requirement in future years is uncertain given the implicit uncertainty regarding the future developments of factors described in "Risk Factors" in Item 1A of this Annual Report on Form 10-K and "Note 11: Employee benefit plans" in Item 8 of this Annual Report on Form 10-K. 29 -------------------------------------------------------------------------------- Table of Contents We expect that we will be able to fund our remaining obligations and commitments with cash flow from operations. To the extent we are unable to fund these obligations and commitments with cash flow from operations; we intend to fund these obligations and commitments with proceeds from available borrowing capacity under our New SeniorABL Facility or under future financings. Off-Balance Sheet Arrangements With the exception of letters of credit, we had no material off-balance sheet arrangements as ofDecember 31, 2019 . Critical Accounting Estimates Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in "Note 2: Significant accounting policies" in Item 8 of this Annual Report on Form 10-K. We consider an accounting estimate to be critical if that estimate requires that we make assumptions about matters that are highly uncertain at the time we make that estimate and if different estimates that we could reasonably have used or changes in accounting estimates that are reasonably likely to occur could materially affect our consolidated financial statements. Our critical accounting estimates are as follows: Goodwill We perform an annual impairment assessment of goodwill at the reporting unit level as ofOctober 1 of each year, or more frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. The reporting unit's carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit's fair value. Our quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit's fair value. Significant estimates include forecasted EBITDA, market segment growth rates, estimated costs, and discount rates based on a reporting unit's weighted average cost of capital ("WACC"). The use of different assumptions, estimates or judgments could significantly impact the estimated fair value of a reporting unit, and therefore, impact the excess fair value above carrying value of the reporting unit. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available market data. In the current year, the fair value of theCanada reporting unit, exceeded the carrying value by 11 percent. Key assumptions in our goodwill impairment test include an 11 percent estimated WACC for theCanada business and a residual growth rate of 2.5 percent. A 100 basis point change in the discount rate and a terminal growth assumption of zero would not have reduced the fair values of theCanada reporting unit below carrying value. The fair value for all other reporting units substantially exceeds their carrying value. Business Combinations We allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions based on their estimated fair values at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments in determining the fair value, as of the acquisition date, of the following: •intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, recurring revenues attributed to customer relationships, and our assumed market segment share, as well as the estimated useful life of intangible assets; •deferred tax assets and liabilities, uncertain tax positions, and tax-related valuation allowances; •inventory; property, plant and equipment; pre-existing liabilities or legal claims; and •goodwill as measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Our assumptions and estimates are based upon comparable market data and information obtained from our management and the management of the acquired companies. We allocate goodwill to the reporting units of the business that are expected to benefit from the business combination. 30 -------------------------------------------------------------------------------- Table of Contents Purchase Accounting for the Nexeo Solutions Acquisition Our acquisition of Nexeo Solutions in 2019 was accounted for with ASC Topic 805, Business Combinations, as amended. As ofDecember 31, 2019 , the allocation of the purchase price to the acquired assets and assumed liabilities was considered preliminary. See "Note 3: Business combinations" in Item 8 of this Annual Report on Form 10-K for additional information. Determining the fair value of assets acquired and liabilities assumed requires management's judgment, and we utilized an independent valuation expert in the valuation of the tangible and intangible assets. Critical estimates used in valuing tangible and intangible assets include, but are not limited to, future expected cash flows, discount rates, market prices and asset lives. The valuation of customer relationships utilized an income approach, using an excess earnings methodology. Additionally, the total recurring revenue attributable to the customer relationship was based upon the relative split between specialty and commodity chemicals. Key assumptions used in the business enterprise valuation include the forecasted cash flows discounted using the WACC, which reflects the macroeconomic, industry and geographic factors of the risk of achieving the forecasted cash flows, and ranged from 10.5 percent to 19.0 percent, depending on the country. Environmental Liabilities We recognize environmental liabilities for probable and reasonably estimable losses associated with environmental remediation. The estimated environmental liability includes incremental direct costs of investigations, remediation efforts and post-remediation monitoring. The total environmental reserve atDecember 31, 2019 and 2018 was$78.7 million and$83.5 million , respectively. See "Note 21: Commitments and contingencies" in Item 8 of this Annual Report on Form 10-K. Our environmental reserves are subject to numerous uncertainties that affect our ability to estimate our costs, or our 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 at these sites, the extent and cost of assessment and remediation efforts required, our insurance coverage for these sites and, in the case of sites with multiple responsible parties, the number and financial strength of those parties. In addition, our determination as to whether a loss is probable may change, particularly as new facts emerge as to the causes of contamination. We evaluate each environmental site as new information and facts become available and make adjustments to reserves based upon our assessment of these factors, using technical experts, legal counsel and other specialists. Defined Benefit Pension and Other Postretirement Obligations We sponsor defined benefit pension plans in the US and other countries. The accounting for these plans depends on assumptions made by management, which are used by actuaries we engage to calculate the projected and accumulated benefit obligations and the annual expense recognized for these plans. These assumptions include discount rates, expected return on assets, mortality and retirement rates and for certain plans, rates for compensation increases. Actual experience different from those estimated assumptions can result in the recognition of gains and losses in earnings as our accounting policy is to recognize changes in the fair value of plan assets and each plan's projected benefit obligation in the fourth quarter of each year (the "mark to market" adjustment), unless an earlier remeasurement is required. For the year endedDecember 31, 2019 and 2018, we recorded a mark to market loss of$50.9 million and$34.9 million , respectively. See "Note 11: Employee benefit plans" in Item 8 of this Annual Report on Form 10-K for additional information. Due to the phasing out of benefits under our postretirement plans, changes in assumptions have an immaterial effect on that obligation. A change in the assumed discount rate and return on plan asset rate would have the following effects: Increase (decrease) in 2020 Net Benefit 2019 Pension Benefit (in millions) Percentage Change Cost Obligation Discount rate 25 bps decrease$ (2.0) $ 51.4 Discount rate 25 bps increase 1.8 (48.4) Expected return on plan assets 100 bps decrease 10.4 N/A Expected return on plan assets 100 bps increase (10.4) N/A Income Taxes The Company is subject to income taxes in the jurisdictions in which it sells products and earn revenues. We record income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the future tax consequences to temporary differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to 31 -------------------------------------------------------------------------------- Table of Contents apply in the years in which the temporary differences are expected to be recovered or paid. A reduction of the carrying values of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. In evaluating the Company's ability to realize its deferred tax assets, in full or in part, the Company considered all available positive and negative evidence, including its past operating results, forecasted and appropriate character of future taxable income, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and feasible tax strategies. The Company has a valuation allowance on certain deferred tax assets, primarily related to foreign tax credits, net operating loss carry forwards and deferred interest. Effective in 2018, the Company is subject to global intangible low tax income ("GILTI"), which is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We elect to treat taxes due on future US inclusions in taxable income related to GILTI as a current-period expense when incurred and during the year endedDecember 31, 2019 and 2018, we recorded$22.8 million and$19.9 million , respectively, due to the impact of GILTI. Recently Issued Accounting Pronouncements See "Note 2: Significant accounting policies" in Item 8 of this Annual Report on Form 10-K. Non-GAAP Financial Measures We monitor the results of our reportable segments separately for the purposes of making decisions about resource allocation and performance assessment. We evaluate performance using Adjusted EBITDA. We define Adjusted EBITDA as consolidated net (loss) income, plus the sum of net income from discontinued operations, net interest expense, income tax expense, depreciation, amortization, impairment charges, loss on extinguishment of debt, other operating expenses, net, and other expense, net (see "Note 6: Other operating expenses, net" and "Note 8: Other expense, net" in Item 8 of this Annual Report on Form 10-K for additional information), and in 2019, inventory step-up adjustment and Brazil VAT recovery. For a reconciliation of the non-GAAP financial measures to its most comparable GAAP measure, see below and "Analysis of Segment Results" within this Item and for a reconciliation of net (loss) income to Adjusted EBITDA, the most comparable measure calculated in accordance with GAAP, see "Note 23: Segments" to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. We believe that other financial measures that do not comply with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin, adjusted gross margin and Adjusted EBITDA margin. We define these financial measures as follows: •Gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation); •Adjusted gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation) plus inventory step-up adjustment andBrazil VAT recovery; •Gross margin: gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales on a consolidated level; •Adjusted gross margin: adjusted gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales on a consolidated level; and •Adjusted EBITDA margin: Adjusted EBITDA divided by external sales on a segment level and by net sales on a consolidated level. Management believes Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are important measures in assessing operating performance. The non-GAAP financial measures are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help investors' ability to analyze underlying trends in the Company's business, evaluate its performance relative to other companies in its industry and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company's core operating results. Additionally, the Company uses Adjusted EBITDA in setting performance incentive targets to align management compensation measurement with operational performance. Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are not measures calculated in accordance with GAAP and should not be considered a substitute for net income or any other measure of financial performance presented in accordance with GAAP. Additionally, other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. 32 -------------------------------------------------------------------------------- Table of Contents The following is a quantitative reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net (loss) income: Year ended December 31, (in millions) 2019 2018 2017 2016 2015 Net (loss) income$ (100.2) $ 172.3 $ 119.8 $ (68.4) $ 16.5 Net (income) loss from discontinued operations (5.4) - - - - Depreciation and amortization 214.7 179.5 200.4 237.9 225.0 Interest expense, net 139.5 132.4 148.0 159.9 207.0 Income tax expense (benefit) from continuing operations 104.5 49.9 49.0 (11.2) 10.2 EBITDA$ 353.1 $ 534.1 $ 517.2 $ 318.2 $ 458.7 Acquisition and integration related expenses 152.1 22.0 3.1 5.5 7.1 Saccharin legal settlement 62.5 - - - - (Gain) loss on sale of business, property, plant and equipment and other assets (1) (51.3) 2.0 (11.3) (0.7) (2.8) Pension mark to market loss (2) 50.4 34.2 3.8 68.6 21.1 Pension curtailment and settlement gains (2) (1.3) - (9.7) (1.3) (4.0) Non-operating retirement benefits (2) (2.2) (11.0) (9.9) (15.3) (26.8) Restructuring, employee severance and other facility closure costs (3) 40.9 21.2 13.6 8.0 33.8 Stock-based compensation expense 25.1 20.7 19.7 10.4 7.5 Loss (gain) on undesignated derivative contracts (6) 26.7 (1.1) 1.9 (8.3) 10.7 Loss on extinguishment of debt and debt refinancing costs (4) 21.0 0.1 9.1 - 28.6 Brazil VAT recovery (8.3) - - - - Foreign currency (gains) losses (6) (7.4) 7.5 22.5 14.3 (8.1) Impairment charges (5) 7.0 - - 133.9 - Inventory step-up adjustment 5.3 - - - - Other operating and non-operating expenses (3)(6) 30.6 10.7 10.4 8.7 18.5 Business transformation costs - - 23.4 5.4 - Contract termination and advisory fees to CVC & CD&R - - - - 29.0 Adjusted EBITDA$ 704.2 $ 640.4 $ 593.8 $ 547.4 $ 573.3 (1)Refer to the consolidated statement of operations and "Note 6: Other operating expenses, net" in Item 8 of this Annual Report on Form 10-K for more information. (2)Represents charges or gains recorded for both the defined benefit pension and other postretirement benefit plans ("The Plans"). The Plans' mark to market loss is measured and recognized in its entirety within the statement of operations annually onDecember 31 and results from changes in actuarial assumptions and plan experience between the prior and current measurement dates, as well as the difference between the expected return on plan assets and the actual return on plan assets. For 2019, the pension mark to market loss of$50.4 million reflects a measurement loss of$169.1 million resulting from changes since the prior measurement date in actuarial assumptions and plan experience, offset by the difference between the expected and actual return on plan assets of$118.7 million attributable to the performance of plan assets during 2019. See "Note 11: Employee benefit plans" in Item 8 of this Annual Report on Form 10-K for additional information on pension mark to market loss, pension curtailment and settlement gains and non-operating retirement benefits. (3)Refer to "Note 6: Other operating expenses, net" in Item 8 of this Annual Report on Form 10-K for more information. (4)Refer to the consolidated statement of operations and "Note 8: Other expense, net" in Item 8 of this Annual Report on Form 10-K for more information. (5)The 2016 impairment charges primarily related to the impairment of intangible assets and property, plant and equipment. See "Note 16: Impairment charges" in Item 8 on this Annual Report on Form 10-K for further information regarding the year endedDecember 31, 2019 . (6)Refer to "Note 8: Other expense, net" in Item 8 of this Annual Report on Form 10-K for more information.
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