Univar Solutions (UNVR) 10-K2022 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 10-K

In this Annual Report on Form 10-K, “Univar Solutions,” “Company,” “we,” “our” and “us” refer to Univar Solutions Inc., a Delaware corporation, and its subsidiaries included in the consolidated financial statements, except as otherwise indicated or as the context otherwise requires. Our fiscal year ends on December 31, and references to “fiscal” when used in reference to any twelve-month period ended December 31 refer to our fiscal years ended December 31. The term “GAAP” refers to accounting principles generally accepted in the United States of America.

Forward-looking statements and information

Certain parts of this Annual Report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally accompanied by words such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. All forward-looking statements made in this Annual Report on Form 10-K are qualified by these cautionary statements.

Any forward-looking statements represent our views only as of the date of this report and should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation, other than as may be required by law, to update any forward-looking statement. We caution you that forward-looking statements are not guarantees of future performance and that our actual performance may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. Forward-looking statements include, but are not limited to, statements about:

Potential factors that could affect such forward-looking statements include, among others:

In 1924, George Van Waters and Nat Rogers opened a brokerage business in Seattle, Washington, buying and selling naval supplies, paint, raw materials and cotton linters. Nearly 100 years later, and after many different incarnations of the business, we closed our initial public offering in 2015. In 2019, we acquired Nexeo Solutions, Inc. (“Nexeo”), a leading global chemicals distributor. The acquisition expanded and strengthened our presence in North America and provided the opportunity to create the largest North American sales force in chemical and ingredients distribution.

Today we are a leading global distributor of commodity and specialty chemicals and ingredients, as well as a provider of value-added services, to customers across a wide range of diverse industries. We purchase chemicals and ingredients from producers worldwide to warehouse, repackage, blend, dilute, transport and sell those materials safely to nearly 100,000 customer locations across approximately 120 countries. We provide application development and technical advice to customers formulating new products and have a network of Solution Centers to support customer development activities. We operate an extensive worldwide chemical and ingredient distribution network, including approximately 9,700 employees and approximately 600 facilities, serviced by the following: approximately 4,900 tractors, tankers and trailers; and approximately 2,500 railcars, 120 rail and barge terminals and 20 deep sea terminals, focused on timely and safe delivery to a spectrum of customers, large and small. Our purpose is to help keep our communities healthy, fed, clean and safe.

Chemical and ingredient producers rely on us to safely warehouse, repackage, transport, market and sell their products as a way to expand their market access, enhance their geographic reach and lower their cost to serve and grow their business. Customers who purchase products and services from us benefit from a lower total cost of ownership, as they are able to simplify their sourcing process by outsourcing functions to us, such as “just-in-time delivery,” product availability and selection, packaging, mixing and blending. They also rely on us for safe and secure delivery and the off-loading of chemicals, compliant with increasing local and federal regulations. Additionally, customers and suppliers depend on our deep end market knowledge and technical expertise to provide formulation and recipe development services to help meet the latest market trends and adhere to regulatory requirements across our global network of Solution Centers.

The effects of market conditions on our operations are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In July 2022, we acquired Vicom Distribución Productos Quimicos, S.L. ("Vicom"), a leading regional specialty chemical distributor in Spain and Portugal.

In December 2021, we acquired Sweetmix Distribuidora de Materias Primas Industriais Ltda (“Sweetmix”), a food ingredients and coatings, adhesives, sealants and elastomers (“CASE”) specialty chemical distribution company in Brazil.

In April 2021, we sold the Distrupol business within our EMEA segment.

In December 2020, we acquired the business of Zhuhai Techi Chem Silicone Industry Corporation (“Techi Chem”), a leading distributor of specialty silicone solutions used primarily for the CASE market within the China marketplace.

At the beginning of the fourth quarter of 2020, we decided to wind down our Canadian Agriculture wholesale distribution business, which was operationally completed by December 31, 2020.

In November 2020, we sold our Canadian Agriculture services business and in September 2020, we sold our industrial spill and emergency response businesses.

See “Note 3: Business combinations” and “Note 4: Dispositions” in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisitions and dispositions noted above.

Our business is organized and managed in four geographical segments: Univar Solutions USA (“USA”), Univar Solutions Europe and the Middle East and Africa (“EMEA”), Univar Solutions Canada (“Canada”) and Univar Solutions Latin America (“LATAM”), which includes developing businesses in Latin America and the Asia-Pacific region. For additional information on our geographical segments, see “Note 20: Segments” in Item 8 of this Annual Report on Form 10-K.

The following charts reflect the breakdown by segment of 2022 net sales of $11.5 billion and gross profit (exclusive of depreciation) of $2.8 billion.

In addition to our broad commodity and specialties and services offerings, we distribute ingredients and provide specialized expertise. Leveraging our Solution Centers, we seek to provide value-added technical services such as formulation and recipe development, benchmark prototyping, product performance testing, chemical analysis, custom blending and other technical services.

Our offerings service a majority of the Life Sciences (formerly Consumer Solutions) and Industrial sectors in the US and specific end markets, which are discussed further below. Our sales force is organized through a combination of geographic and end market factors. Our bulk and local chemical distribution customers are serviced primarily by regional teams and our ingredients and specialties customers are serviced primarily by our end market and product-technically focused teams.

We believe our close proximity to customers, installed asset base, transportation and digital assets, and our extensive product knowledge and end market expertise, all serve as competitive advantages and provide sustainable value to our suppliers and customers.

We maintain a strong presence in the United Kingdom and continental Europe with sales offices in 18 countries. This segment also includes two sales offices in the Middle East and Africa. Within this segment and where possible globally, we leverage centralized or shared information technology systems, raw materials procurement, logistics, route operations and producer relationships management to benefit from economies of scale and improve cost efficiency.

We support commodity and specialty chemical and ingredient distribution to customers primarily in our Industrial Solutions, Life Sciences and General Industrial end markets, with the heaviest focus in the CASE, food ingredients, beauty and personal care, pharmaceutical, and homecare and industrial cleaning submarkets. These strategies and customers are supported by Solution Centers throughout the EMEA region, with key centers of excellence locations in Paris, France and a state-of-the-art formulation laboratory opened in Essen, Germany in 2022.

Our technical sales force supports customers at a country level through strong end market expertise and key account management capabilities. We believe our scale and focused regional, industry and product expertise provide competitive advantages and sustainable value to our suppliers and customers.

We have distribution sites and Solution Centers located in all key geographies throughout Canada supporting commodity and specialty chemical and ingredient distribution across customers in our General Industrial, Industrial Solutions, Refining & Chemical Processing and Life Sciences end markets.

More specifically, in Eastern Canada, we have deep product knowledge in submarkets such as food ingredients, beauty and personal care, pharmaceutical ingredients & finished products, CASE, chemical manufacturing, homecare and industrial cleaning and mining. In Western Canada, our submarket expertise in forestry and energy (e.g., midstream gas pipeline, oil sands processing and oil refining) further complements our broad offerings within the country.

Our sales force is deployed through specialized account management across Canada to serve our focused customer end markets within ingredients and specialties, and through a geographic sales district model to support the bulk and local chemical distribution end markets. We leverage shared information systems and technology within Canada.

Our LATAM operations are regionally focused with distribution sites and Solution Centers located principally in Brazil, Mexico and Colombia. We work to meet the needs of our customers through a team of chemical sales, product management and supply chain professionals. As previously noted, our presence in Brazil grew in December 2021 with the acquisition of Sweetmix.

Our offerings support commodity and specialty chemical and ingredient distribution customers primarily in our General Industrial, Industrial Solutions and Life Sciences end markets, with submarkets largely focused on CASE, beauty and personal care, chemical manufacturing and food ingredients. We also provide formulation services for crop protection manufacturers in Brazil.

We source and inventory commodity and specialty chemicals and ingredients in large quantities such as barge loads, railcars or full truck loads directly from producers and break down the bulk quantities to repackage, market, sell and distribute smaller quantities to our customers.

In addition to selling and distributing commodity and specialty chemicals and ingredients, we use our transportation and warehousing infrastructure, along with our broad knowledge of chemicals and hazardous materials handling to provide important distribution and specialized services for our producers and our customers. We also have state-of-the-art Solution Centers at locations across the globe, consisting of formulation labs, development and research centers, and taste kitchens, with specialized industry expertise and innovative technical capabilities to help our customers address their technical challenges and accelerate product development cycles. At the heart of our business model are our technically trained professionals with deep industry experience.

Chemicals and Services represent the largest portion of our business by sales, volume and gross profit (exclusive of depreciation). Our product portfolio principally includes a wide range of organic and inorganic chemistries, surfactants, inorganic compounds and general chemicals which are used extensively throughout most end markets. Investments in salesforce effectiveness systems are focused on a customer centric selling model, which coupled with our facility, transportation and digital asset bases, and our extensive supplier partnerships, all support growth within the chemicals distribution landscape.

Ingredients and Specialties represent a more value added, higher-growth portion of the market tailored to specific end market requirements. For each Ingredients and Specialties market, we have dedicated sales, marketing, product management and technical professionals with deep industry knowledge of individual submarkets like food ingredients or pharmaceuticals, serving approximately 500 strategic specialty chemical suppliers and approximately 42,000 customer locations. These specialty products are typically sold in lower volumes, but at a higher gross profit (exclusive of depreciation) than commodity products. We believe growth can be achieved by leveraging salesforce effectiveness, delivering solutions through industry expertise, technical capabilities, formulation support and our comprehensive supply chain infrastructure.

The following charts reflect the breakdown of 2022 net sales and gross profit (exclusive of depreciation) for Chemicals and Services as compared to Ingredients and Specialties.

Our collective product portfolio serves the following end markets: Industrial Solutions, Life Sciences, General Industrial, Services & Other Markets and Refining & Chemical Processing. A further description of these end markets, and the respective submarkets, is as follows:

We source materials from approximately 1,800 producers around the globe and we typically maintain relationships with multiple producers in order to protect against disruption in supply and distribution logistics, as well as to ensure competitive pricing of our supply. For the year ended December 31, 2022, our ten largest producers accounted for approximately 41% of our total chemical purchases.

We have multiple channels to market, including both warehouse delivery and direct-to-consumer delivery. The principal determinants of the way a customer is serviced include the size, scale and level of customization of a particular order, the nature of the product and the customer, and the location of the product inventories. Our logistics and supply chain expertise allows us to service a wide range of customers by offering multiple package sizes and assistance with unique special handling requirements, safety and quality specifications.

Our warehouse distribution infrastructure is the core of our operations and connects large producers with smaller volume customers whose consumption patterns tend to make them uneconomical to be served directly by producers. As a result, the core customer serviced via our warehouses is a small or medium-volume consumer of chemicals and ingredients. We purchase chemicals and ingredients in truck load or larger quantities from producers based on contracted demands of our customers and our estimates of anticipated customer purchases. Once received, products are stored in one or more of our distribution facilities for sale and distribution in smaller, less-than-truckload quantities to our customers. Our warehouses have various facilities for services such as repackaging, blending and mixing to create specialized solutions needed by our customers in ready-to-use formulations.

In direct distribution, we sell and service large quantity purchases that are shipped directly from producers through our logistics infrastructure, which provides our customers with sourcing and logistics support services for inventory management and delivery.

The chemical and ingredient distribution and service markets are highly competitive. Most of the products that we distribute are made to standard specifications and are either produced by or available from multiple sources. Furthermore, chemical and ingredient distribution itself is a fragmented market in which only a small number of competitors have substantial international operations. Our principal international competitors are Brenntag SE, IMCD NV, Barentz International NV and Azelis Group NV, each of which have differentiating strengths across regions and not all of whom have the ability to serve all of the end markets in which we operate. Many other chemical and ingredient distributors focus on a more limited geographic region or smaller subset of products, building strong relationships with local producers and customers that may give them a competitive advantage in their local market.

Chemical and ingredient producers may also sell their products through a direct sales force, digital marketplace or multiple chemical distributors, limiting their use of third party distributors, particularly with respect to higher margin products, or partnering with other chemical and ingredient producers for distribution, each of which could impact our competitive position.

We compete on the basis of service, on-time delivery, packaging type, product breadth and availability, product and market knowledge and insights, safety and environmental compliance, global reach, product price, as well as our ability to provide certain additional value-added services through our comprehensive suite of solution-based offerings.

We recognize that our people represent our most important asset. As part of our effort to drive continued growth and increased profitability, we are intently focused on building a place that attracts and retains top talent and develops the skills necessary to drive differentiation for our business. The below data provides a snapshot of our employee and management demographics as of December 31, 2022:

We have developed key recruitment and retention strategies that guide our human capital management approach as part of the overall management of our business. These strategies are advanced through a number of programs and initiatives as outlined below:

Our total rewards programs are designed to align the compensation of our employees with their performance and to provide appropriate incentives to attract, retain and motivate employees to achieve superior results. We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. Full-time US employees are eligible for health, dental and vision insurance, paid and unpaid leaves, a 401(k) plan and life and disability/accident insurance coverage. Employees outside of the US are eligible for a variety of supplemental benefits based on local market practices and all employees worldwide are eligible for an employee assistance program and other well-being programs. We periodically benchmark our total rewards offerings externally to ensure we remain competitive.

All employees have access to on-demand learning resources for their own professional development on a range of diverse topics such as digital transformation skills, professional effectiveness, diversity, equity and inclusion, business skills, productivity, collaboration tools and leadership development. Our internal program offerings range from multi-day, instructor-

led trainings to short, on-demand eLearning programs. As appropriate, additional training hours are delivered and monitored locally, often focusing on material handling and safety for specific roles. The Company's guiding principles and cultural values are incorporated into our Code Handbook, to which all employees certify annually.

We regularly conduct confidential employee engagement surveys and focus groups. The feedback gathered from these surveys and focus groups helps guide our decision-making and strategic initiatives. In 2022, at least 85% of our global employee population participated in one or more of these feedback channels, sharing their sentiments on key aspects of working at the Company. The engagement survey results are shared in aggregate with managers, who are then tasked with taking action based on employee feedback. In doing so, our goal is to drive year-over-year improvement in employee engagement, which we believe will deliver qualitative and quantitative benefits for our Company.

We are serious about safety, which is a key area of focus across our global operations. Specific initiatives include, among others, data driven and causality-based accident prevention work, improved process and facility controls, mandatory general education and role specific safety training, joint management-worker health and safety committees, safety audits, incident investigation and improvement measures. 2022 was our safest year on record with a Total Case Incident Rate (TCIR), the rate of recordable injuries per 200,000 hours worked, of 0.33, compared with 0.40 in 2021 and ahead of our 2025 target of 0.38.

We are committed to fostering a safe, collaborative, supportive and respectful environment that values diverse perspectives, mitigates unconscious bias and enables a culture where employees are able to bring their authentic self to work. In the past year we maintained our score of 100 on the Human Rights Campaign Corporate Equality Index, increased the favorability rating of our inclusive culture amongst our salaried employee population, increased the number of female people managers globally and increased the number of ethnically diverse people managers in the USA. We use our global inclusion councils to help hold ourselves accountable for progress and drive decision-making for the unique needs of our diverse employee groups. Additionally, we seek to drive greater employee engagement, create education opportunities, and instill a greater sense of community through the efforts of our eight Employee Resource Networks.

We operate in a number of jurisdictions and are subject to numerous international, federal, state and local laws and regulations covering a wide variety of subject matters. We are subject to extensive environmental, health and safety laws and regulations in multiple jurisdictions because we blend, manage, handle, store, sell, transport and arrange for the disposal of chemicals, hazardous materials and hazardous waste. These include, without limitation, laws regulating discharges of hazardous substances into the soil, air and water, blending, managing, handling, storing, selling, transporting and disposing of hazardous substances, investigation and remediation of contaminated properties and protecting the safety of our employees and others. Some of these laws and regulations include the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" or "Superfund"), the Toxic Substances Control Act ("TSCA"), the Resource Conservation and Recovery Act ("RCRA") and Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), among others. Some of our operations are required to hold environmental permits and licenses to be compliant and certain of our services businesses are also impacted by these laws.

In addition to environmental laws and regulations, we are subject to various other laws and regulations around the world. For example, our business is subject to competition laws in the various jurisdictions where we operate, including the Sherman Antitrust Act and related federal and state antitrust laws in the US, as well as similar foreign laws and regulations. These laws and regulations generally prohibit competitors from fixing prices, boycotting competitors or engaging in other conduct that unreasonably restrains competition, and such laws and regulations may impact potential business relationships or transactions with third parties in the future. We are also required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data in Europe, the US and other jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, use, transmission and protection of personal information and other consumer, customer, vendor or employee data. Further, an increasing number of laws and regulations focused on hazardous products and substances could also impact our ability to distribute and sell certain products or require significant capital expenditures to meet regulatory requirements. With respect to the laws and regulations noted above, as well as other

applicable laws and regulations, our compliance programs may under certain circumstances involve material investments in the form of additional processes, training, personnel, information technology and capital.

Information related to government regulation applicable to our business is included in this Annual Report on Form 10-K, including: (i) Part I, Item 1A, "Risk Factors"; (ii) Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (iii) “Note 2: Significant accounting policies” and “Note 18: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K.

We expect that there will be a continued increase in demand for products, systems and services that meet growing customer and societal sustainability standards, expectations and preferences. We recognize that our ability to continue to provide these products and services requires our business to further advance environmentally and socially responsible means of operating, reflecting the challenges and opportunities presented through increased legal requirements, climate parameters and market developments.

We are focused on demonstrating our commitment to these expectations through our global sustainability goals, which help us focus on reducing our contribution to global climate change while addressing remediation, reducing resource use, progressing responsible sourcing and bringing more sustainable solutions to market. In 2018, we became a signatory to the United Nations Global Compact, reaffirming our ongoing commitments to responsible business, and in 2019 adopted ‘Advancing a Circular Economy’ as a goal to 2021. In 2021, we developed and shared longer term Environmental, Social and Governance (“ESG”) goals to 2025, 2030 and 2050. Throughout 2022 we continued to implement our strategies to drive progress on these goals.

We incorporate ESG initiatives into our business values and priorities of safety, sustainability and value creation. We continually strive to improve our industry leading safety record, reduce our environmental impact and increase transparency. In 2022, we demonstrated our ongoing commitment to ESG practices and our purpose to help keep our communities healthy, fed, clean and safe with net sales of 8% related to food ingredients, 7% related to homecare and industrial cleaning, 5% related to pharmaceutical ingredients and finished products, 4% related to industrial and municipal water treatment and 2% related to chemical waste removal. In 2022, we dedicated resources to supporting our customers on their sustainability journeys, enhanced our sustainable and natural products portfolio and focused on developing sustainable formulations and services.

We consider intellectual property, particularly trade secrets and know-how, as important to our success. We hold some patents and own numerous trademarks in multiple jurisdictions. Further, we have various patent and trademark applications pending in jurisdictions worldwide. Although we consider our patents, trademarks, copyrights and trade secrets to constitute valuable assets, we do not regard any of our businesses as being materially dependent upon an individual patent, trademark, copyright or trade secret.

No single customer accounted for 10% or more of net sales in any of the years presented.

No material part of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of any government.

See Part III, Item 10, "Directors, Executive Officers and Corporate Governance".

We maintain a website at www.univarsolutions.com and make available free of charge at this website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our Corporate Governance Guidelines, our Code Handbook, our Officers Code of Ethics and the charters of the Audit, Compensation and Governance & Corporate Responsibility Committees of our Board of Directors also are available on our website, where they can be printed free of charge. The information on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K, or incorporated into any of our other filings with the SEC, except where we expressly incorporated such information. If you wish to receive a paper copy of any exhibit to our reports filed with or furnished to the SEC, the exhibit may be obtained by writing to: Corporate Secretary, Univar Solutions Inc., 3075 Highland Parkway Suite 200, Downers Grove, Illinois 60515.

We intend to make future announcements regarding Company developments and financial performance through our website, www.univarsolutions.com, as well as through press releases, filings with the Securities and Exchange Commission, conference calls and webcasts.

The following are certain risk factors that could affect our business, financial condition and results of operations. These risk factors should be considered along with the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause our actual results or financial condition to differ materially from those projected in forward-looking statements. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. The following discussion is not an all-inclusive listing of risks, although we believe these are the more material risks that we face. If any of the following occur, our business, financial condition and results of operations could be adversely affected.

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. Producers of commodity and specialty chemicals are likely to reduce their output in periods of significant contraction in industrial and consumer demand, while demand for the products we distribute depends largely on trends in demand in the end markets our customers serve. A majority of our sales are in North America and Europe and our business is therefore susceptible to downturns in those economies, as well as, to a lesser extent, the economies in the rest of the world.

Our profit margins, as well as overall demand for our products and services, could decline as a result of a large number of factors outside our control, including the impact of pandemics and other public-health emergencies, economic recessions, reduced customer demand (whether due to changes in production processes, consumer preferences, the industries in which the customer operates, laws and regulations affecting the chemicals industry and the manner in which they are enforced, or other factors), inflation, fluctuations in interest and currency exchange rates, and changes in the fiscal or monetary policies of governments in the regions in which we operate. For example, the COVID-19 pandemic caused growth in certain of our end markets, such as in homecare and industrial cleaning and pharmaceuticals, while other end markets, such as the upstream refining market, were materially and adversely affected.

General economic conditions and macroeconomic trends, as well as the creditworthiness of our customers, could affect overall demand for chemicals. Any overall decline in the demand for chemicals could significantly reduce our sales and profitability. If the creditworthiness of our customers declines, we would face increased credit risk. In addition, volatility and disruption in financial markets could adversely affect our sales and results of operations by limiting our customers’ ability to obtain financing necessary to maintain or expand their own operations.

A historical feature of past economic weakness has been significant destocking of inventories, including inventories of chemicals used in industrial and manufacturing processes. It is possible that an improvement in our net sales in a particular period may be attributable in part to restocking of inventories by our customers and represent a level of sales or sales growth that will not be sustainable over the longer term. Further economic weakness could lead to insolvencies among our customers or producers, as well as among financial institutions that are counterparties on financial instruments or accounts that we hold. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.

Significant changes in the business strategies of producers could disrupt our supply. Large chemical manufacturers may elect to sell certain products (or products in certain regions) directly to customers or utilize digital marketplaces, bypassing distributors such as us. While we do not believe that our results depend materially on access to any individual producer’s products, a reversal of the trend toward more active use of distributors would likely result in increasing margin pressure or products becoming unavailable to us.

In addition, unpredictable events may have a significant impact on the industries in which many of our customers operate, reducing demand for products that we normally distribute in significant volumes. Significant disruptions of supply and disruptions in customer industries could have a material adverse effect on our business, financial condition and results of operations.

The chemical and ingredient distribution and services market is highly competitive. Chemicals can be purchased from a variety of sources, including traders, brokers, wholesalers and other distributors, as well as directly from producers. Many of the products we distribute or finish are essentially fungible with products offered by our competitors, including emerging competitors. The competitive pressure we face is particularly strong in sectors and markets where local competitors have strong positions or where new competitors can easily enter. Increased competition from distributors of products similar to or competitive with ours could result in price reductions, reduced margins and a loss of market share.

We expect to continue to experience significant and increasing levels of competition in the future. We must also compete with smaller companies that have been able to develop strong local or regional customer bases. In certain countries, some of our competitors are more established, benefit from greater name recognition and have greater resources within those countries than we do.

We operate in an industry that is highly fragmented on a global scale, but in which there has been a trend toward consolidation in recent years. Consolidation of our competitors may also further enhance their financial position, provide them with the ability to offer more competitive prices to customers for whom we compete and allow them to achieve increased efficiencies in their consolidated operations that enable them to more effectively compete for customers. This may jeopardize the strength of our positions in one or more of the markets in which we operate and any advantages we currently enjoy due to the comparative scale of our operations. Losing some of those advantages could adversely affect our business, financial condition and results of operations, as well as our growth potential.

In coordination with our suppliers, our ability to move and sell products is critical to our success. Damage or disruption to our collective supply or distribution capabilities resulting directly or indirectly from pandemics and other public-health emergencies, labor shortages, border closures, natural disasters, weather and physical climate change related events, lack of transportation capacity, increased fuel expenses, global trade flow disruption, increased airport and shipping port congestion, climate change, plant downtime (whether our own or others’), power outages, explosions, information technology system and/or network disruptions, terrorism, strikes or other labor unrest, or other reasons could seriously harm our operations, as well as the operations of our customers and suppliers. Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of any of these events, or to effectively manage such events if they occur, could have a negative impact on our business, results of operations, financial condition and cash flows.

Some of the foregoing examples are hypothetical, but others have been or are being experienced by the Company. For example, during 2020 and 2021, the COVID-19 pandemic, weather events and supply constraints impacted, and we expect will continue to impact, our operations. The combination of supplier shut-downs, port congestion, acute pandemic recovery demand and the Russia-Ukraine conflict have resulted in sustained supply chain constraints, product shortages and chemical price inflation. In some instances, we have placed certain of our products on allocation due to limited supplies.

We purchase and sell a wide variety of chemicals, the price and availability of which may fluctuate, and may be subject to large and significant price increases. For example, ongoing shortages across a range of chemicals and ingredients have generally led to fluctuations in chemical prices globally. Many of our contracts with producers include chemical prices that are not fixed or are tied to an index, which allows our producers to change the prices of the chemicals we purchase as the price of the chemicals fluctuates in the market. Changes in chemical prices affect our net sales and cost of goods sold, as well as our working capital requirements, levels of debt and financing costs. We might not always be able to reflect increases in our chemical costs, transportation costs and other costs in our own pricing. Any inability to pass cost increases onto customers may adversely affect our business, financial condition and results of operations.

In order to meet customer demand, we typically maintain significant inventories, and we are therefore subject to a number of risks associated with our inventory levels, including the following:

In order to manage our inventories successfully, we must estimate demand from our customers and purchase chemicals that substantially correspond to that demand. If we overestimate demand and purchase too much of a particular chemical, we face a risk that the price of that chemical will fall, leaving us with inventory that we cannot sell profitably or have to write down such inventory from its recorded value. If we underestimate demand and purchase insufficient quantities of a particular chemical and prices of that chemical rise, we could be forced to purchase that chemical at a higher price and forego profitability in order to meet customer demand. Our business, financial condition and results of operations could suffer a material adverse effect if either or both of these situations occur frequently or in large volumes.

We require significant working capital to purchase chemicals from chemical producers and distributors and sell those chemicals efficiently and profitably to our customers. Our working capital needs may increase if the price of products we purchase and inventory increase. Our working capital needs also increase at certain times of the year, as our customers’ requirements for chemicals increase. We need inventory on hand to have product available to ensure timely delivery to our customers. If our working capital requirements increase and we are unable to finance our working capital on terms and conditions acceptable to us, we may not be able to obtain chemicals to respond to customer demand, which could result in a loss of sales.

In addition, the amount of working capital we require to run our business is expected to increase in the future due to expansions in our business activities. Disruptions in our supply chain could also create the need to invest additional working capital in on-hand inventory than in prior years. If our working capital needs increase, the amount of free cash we have at our disposal to devote to other uses will decrease. A decrease in free cash could, among other things, limit our flexibility, including our ability to make capital expenditures and to acquire suitable acquisition targets that we have identified. If increases in our working capital occur and have the effect of decreasing our free cash, it could have a material adverse effect on our business, financial condition and results of operations.

Although we maintain a significant portfolio of owned and leased transportation assets, including trucks, trailers and rail cars, we also rely on transportation and warehousing provided by third parties (including common carriers and rail companies) to deliver products to our customers. Our access to third party transportation is not guaranteed, and we may be unable to transport chemicals at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure. In addition, we could face a challenge with attracting and retaining qualified drivers primarily due to intense market competition, which may subject us to increased payments for driver compensation. If we are unable to continue to attract and retain a sufficient number of drivers, we could face difficulty meeting customer orders or be forced to forego business that would otherwise be available to us, which could adversely affect our profitability and ability to maintain or grow our business. We are also subject to increased costs that we may not always be able to recover from our customers, including fuel prices, as well as charges imposed by common carriers, leasing companies and other third parties involved in transportation.

Our business depends to a significant extent on our customers’ and producers’ trust in our reputation for reliability, quality, safety and environmental responsibility. Actual or alleged instances of safety deficiencies, mistaken or incorrect deliveries, inferior product quality, exposure to hazardous materials resulting in illness, injury or other harm to persons, property or natural resources, or of damage caused by us or our products, could damage our reputation and lead to customers and producers curtailing the volume of business they do with us. Also, there may be safety, personal injury or other environmental risks related to our products which are not known today. Any of these events, outcomes or allegations could also subject us to substantial legal claims, and we could incur substantial expenses, including legal fees and other costs, in defending such legal claims, which could materially impact our financial position and results of operations.

Actual or alleged accidents or other incidents at our facilities or that otherwise involve our personnel or operations could also subject us to claims for damages by third parties. Because many of the chemicals that we handle are dangerous, we are subject to the ongoing risk of hazards, including leaks, spills, releases, explosions and fires, which may cause property damage, illness, physical injury or death. We sell products used in hydraulic fracturing, a process that involves injecting water, sand and chemicals into subsurface rock formations to release and capture oil and natural gas. The use of such hydraulic fracturing fluids

by our customers may result in releases that could impact the environment and third parties. Several of our distribution facilities are located near, and our transportation routes could take us through, high-density population centers. If any such events occur, whether through our own fault, through preexisting conditions at our facilities, through the fault of a third party or through a natural disaster, terrorist incident or other event outside our control, our reputation could be damaged significantly. We could also become responsible, as a result of environmental or other laws or by court order, for substantial monetary damages or expensive investigative or remedial obligations related to such events, including but not limited to those resulting from third party lawsuits or environmental investigation and cleanup obligations on and off-site. The amount of any costs, including fines, damages and/or investigative and remedial obligations, that we may become obligated to pay under such circumstances could substantially exceed any insurance we have to cover such losses.

Any of these risks, if they materialize, could have a material adverse effect on our business, financial condition and results of operations.

Because we are engaged in the blending, managing, handling, storing, selling, transporting and disposing of chemicals, chemical waste products and other hazardous materials, product liability, health impacts, fire damage, safety, cyber security and environmental risks are significant concerns for us. We are also exposed to present and future chemical exposure claims by employees, contractors on our premises and other persons located nearby, as well as related workers' compensation claims. Although we carry insurance to protect us against many risks involved in the conduct of our business, we do not insure against all such risks and the insurance we carry is subject to limitations, including exclusions, deductibles and coverage limits. Due to the variable condition of the insurance market, we have experienced and may experience in the future, increased deductible retention levels and increased premiums. We also may be unable to obtain at commercially reasonable rates in the future adequate insurance coverage for the risks we currently insure against, and certain risks are or could become completely uninsurable or eligible for coverage only to a reduced extent. Increased insurance premiums or the occurrence of significant uncovered losses could have a material adverse effect on our business, financial condition and results of operations.

New income, sales, use, product or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business, financial condition and results of operations. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. Recently enacted changes to the US federal tax regime could impact our tax liability and cash tax payments. Most notably, in July 2022 excise taxes were imposed on a number of commodity chemical products impacting our overall costs.

Our businesses are subject to income taxation in the US as well as internationally. The Company’s operations are subject to multiple, and sometimes conflicting tax laws and regulations. Recently, many countries have adopted, or are considering revisions to their existing tax laws based on recommendations issued by the Organization for Economic Co-operation and Development/G20 Base Erosion and Profit Shifting Project. These changes could materially impact our tax liability because of our organizational structure and significant international operations.

Acquisitions or investments have involved in the past and will likely involve in the future various risks, such as:

Future acquisitions and investments may need to be financed in part through additional financing from banks, through public offerings or private placements of debt or equity securities or through other arrangements, and could result in substantial cash expenditures. The necessary acquisition financing may not be available to us on acceptable terms if and when required, particularly if our debt leverage levels make it difficult or impossible for us to secure additional financing for acquisitions.

We carry significant goodwill and intangible assets on our balance sheet. As of December 31, 2022, our goodwill and intangible assets totaled $2,288.2 million and $167.0 million, respectively. At least annually, the Company assesses goodwill for impairment. If testing indicates that goodwill is impaired, the carrying value is written down based on fair value with a charge against earnings. Weakened demand for a specific product line or business could result in an impairment. Intangible assets are amortized for book purposes over their respective useful lives and are tested for impairment if any event occurs or circumstances change that indicates that carrying value may not be recoverable. Accordingly, any determination requiring the write-off of a significant portion of goodwill or intangible assets could negatively impact the Company's financial condition and results of operations. See “Note 2: Significant accounting policies” in Item 8 of this Annual Report on Form 10-K for a discussion of our 2022 impairment review.

Cyber-attacks or security breaches could compromise confidential, business critical information, private information including without limitation the personally identifiable information ("PII") of our employees or business partners, cause a disruption in the Company’s operations or harm the Company’s reputation. During the normal course of business, we have experienced and expect to continue to experience attempts to compromise our information technology and control systems, network infrastructure and other assets. To date, no cybersecurity incident or attack has had a material impact on our business or results of operations. Additionally, the increase in remote working as a result of the COVID-19 pandemic has resulted in increased cyber-security and fraud risks. There can be no assurance that the Company's cyber-security programs, procedures, controls and intelligence will be sufficient to prevent security breaches from occurring. Moreover such programs are costly to maintain and it is expected that such costs will increase over time. If any security breaches were to occur, they could lead to losses of sensitive information (including without limitation PII), critical infrastructure or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations or cash flows, and could result in claims being brought against us.

As of December 31, 2022, we had $2,465.8 million of total debt. Our level of indebtedness, as well as any additional debt or other obligations that we may incur in the future, may have material adverse effects on our business, financial condition and results of operations, and could have important consequences for holders of our common stock. Examples of potential issues associated with our level of indebtedness that could materially and adversely affect our business or financial condition include:

The agreements governing our indebtedness contain certain operating covenants and other restrictions relating to, among other things, limitations on indebtedness (including guarantees of additional indebtedness) and liens, mergers, consolidations and dissolutions, sales of assets, investments and acquisitions, dividends and other restricted payments, repurchase of shares of capital stock and options to purchase shares of capital stock and certain transactions with affiliates. In addition, our Senior ABL Facility includes a springing financial covenant as set forth in the governing agreement.

Failure to comply with these financial and operating covenants could result from, among other things, changes in our results of operations, the incurrence of additional indebtedness, the pricing of our products, our success at implementing cost reduction initiatives, our ability to successfully implement our overall business strategy or changes in general economic conditions, many of which may be beyond our control. The breach of any of these financial and operating covenants could result in a default under the agreements that govern these facilities that would permit the lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay such amounts, lenders having secured obligations could proceed against the collateral securing these obligations. This could have serious consequences on our business, financial condition and results of operations and could require us to engage in restructuring activities. In addition, these covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our business and stockholders. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.

Certain of our outstanding debt bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. As of December 31, 2022, approximately 78% of our debt is indexed to the London Inter-Bank Offered Rate ("LIBOR") or the Secured Overnight Financing Rate ("SOFR") as benchmarks for establishing rates and we hold other operational contracts, including leases, that are also indexed to LIBOR or SOFR.

The potential consequences to our current or future debt obligations and hedging instruments from the reform of LIBOR as it converts and is replaced with the SOFR implementation of alternative reference rates, and any interest rate transition process may adversely affect the cost of servicing our debt. For additional information on our indebtedness, debt service obligations and sensitivity to interest rate fluctuations, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of this Annual Report on Form 10-K.

We have historically relied on debt financing to fund our operations, capital expenditures and expansion. The macroeconomic conditions that affect the markets in which we operate, and our credit ratings, could have a material adverse effect on our ability to secure financing on acceptable terms, if at all. The terms of additional financing may limit our financial and operating flexibility, and if financing is not available when needed, or is not available on acceptable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations.

If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

We are subject to extensive environmental, health and safety laws and regulations in multiple jurisdictions because we blend, manage, handle, store, sell, transport and arrange for the disposal of chemicals, hazardous materials and hazardous waste. These include laws and regulations governing our management, storage, transportation and disposal of chemicals; product regulation; air, water and soil contamination; activities related to climate change; and the investigation and cleanup of contaminated sites, including any spills or releases that may result from our management, handling, storage, sale, or transportation of chemicals and other products. Compliance with these laws and regulations, and with the permits and licenses we hold, requires that we expend significant amounts for ongoing compliance, investigation and remediation. If we fail to comply with such laws, regulations, permits or licenses, we may be subject to fines, damages and other civil, administrative or criminal sanctions and investigations, including the revocation of permits and licenses necessary to continue our business activities. In addition, future changes in laws and regulations, or the interpretation of existing laws and regulations, could have an adverse effect on us by adding restrictions, reducing our ability to do business, increasing our costs of doing business, reducing our profitability or reducing the demand for our products.

Previous operations, including those of acquired companies, have resulted in contamination at a number of current and former sites, which must be investigated and remediated. We have ongoing investigations and remediation activities, or are contributing to cleanup costs, at approximately 128 currently or formerly owned, operated or used sites or other sites impacted by our operations. We have spent substantial sums on such investigation and remediation and we expect to continue to incur such expenditures in the future. We may incur losses in connection with investigation and remediation obligations that exceed our environmental liabilities. There is no guarantee that our estimates will be accurate, that new contamination will not be

discovered or that new environmental laws or regulations will not require us to incur additional costs. Any such inaccuracies, discoveries or new laws or regulations, or the interpretation of existing laws and regulations, could have a material adverse effect on our business, financial condition and results of operations.

We could be held liable for the costs to investigate, remediate or otherwise address contamination at any real property we have ever owned, leased, operated or used or other sites impacted by our operations. Some environmental laws could impose on us the entire cost of cleanup of contamination present at a site even though we did not cause all of the contamination. These laws often identify parties who can be strictly and jointly and severally liable for remediation. The discovery of previously unknown contamination at current or former sites or the imposition of other environmental liabilities or obligations in the future, including additional investigation or remediation obligations with respect to contamination that has impacted other properties, could lead to additional costs or the need for additional accruals that have a material adverse effect on our business, financial condition and results of operations. In addition, we may be required to pay damages or civil judgments related to third party claims, including those relating to personal injury (including exposure to hazardous materials or chemicals we blend, handle, store, sell, transport or dispose of), product quality issues, property damage or contribution to remedial obligations. We have been identified as a potentially responsible party at certain third party sites at which we have arranged for the disposal of our hazardous wastes. We may be identified as a potentially responsible party at additional sites beyond those for which we currently have financial obligations. Such developments could have a material adverse effect on our business, financial condition and results of operations.

Societal concerns regarding the safety of chemicals in commerce and their potential impact on the environment have resulted in a growing trend towards increasing levels of product safety and environmental protection regulations. These concerns could influence public perceptions, impact the commercial viability of the products we sell and increase the costs to comply with increasingly complex regulations, which could have a negative impact on our business, financial condition and results of operations. Additional findings by government agencies that chemicals pose significant environmental, health or safety risks may lead to their prohibition in some or all of the jurisdictions in which we operate.

The repackaging, blending, mixing, manufacturing, sale and distribution of chemical products by us, including products used for food, pharmaceutical and nutritional supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity and reputational harm. A product liability claim, judgment or recall against our customers could also result in substantial and unexpected expenditures for us, affect confidence in our products or services and divert management’s attention from other responsibilities. Although we maintain product liability insurance, there can be no assurance that the type or level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured judgment against us could have a material adverse effect on our business, financial condition and results of operations.

Many of the products we sell have “long-tail” exposures, giving rise to liabilities many years after their sale and use. Insurance purchased at the time of sale may not be available when costs arise in the future and producers may no longer be available to provide indemnification.

Our profitability and longer-term success may be adversely affected if we fail to continue to expand our penetration in certain foreign markets and to enter new and emerging foreign markets. The profitability of our international operations will largely depend on our continued success in the following areas:

In addition, we are subject to risks associated with operating in foreign countries, including:

We have sizable sales and operations in Canada, Europe, Middle East, Africa, Asia and Latin America. We report our consolidated results in US dollars and the results of operations and the financial position of our local operations are generally reported in the relevant local currencies and then translated into US dollars at the applicable exchange rates. As a result, our financial performance is impacted by currency fluctuations. For additional details on our currency exposure and risk management practices, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of this Annual Report on Form 10-K.

We depend upon the ability and experience of a number of our executive management and other key personnel who have substantial experience with our operations, the chemicals and chemical distribution industries and the selected markets in which we operate. The loss of the services of one or a combination of our senior executives or key employees could have a material adverse effect on our results of operations. We also might suffer an additional impact on our business if one of our senior executives or key employees is hired by a competitor.

In addition, our ability to achieve our operating goals depends upon our ability to recruit, hire, retain and develop qualified and diverse personnel to operate and expand our businesses. We compete with other companies both within and outside of our industry for talented personnel. If we fail to hire, retain and develop a sufficient number of qualified and diverse employees to operate and expand our businesses, our businesses, financial condition, results of operations and cash flows could be harmed. The COVID-19 pandemic and its aftermath contributed to fewer workers participating in the workforce than in February 2020. We expect we will continue to experience labor shortages, which has negatively impacted, and we expect will continue to negatively impact, our businesses, financial condition, results of operations and cash flows.

We operate a number of pension plans for our employees and have obligations with respect to several multi-employer pension plans sponsored by labor unions in the US. The terms of these plans vary from country to country. The recognition of costs and liabilities associated with the Company's pension plans are affected by assumptions made by management and used by actuaries engaged by us to calculate the benefit obligations and the expenses recognized for these plans. The inputs used in developing the required estimates are calculated using a number of assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on costs and liabilities are the discount rate, the expected long-term return on plan assets for the funded plans, retirement rates and mortality rates. Changes to the funded status of our pension plans as a result of updates to actuarial assumptions and actual experience that differs from our estimates are recognized as gains or losses in the period incurred under our “mark to market” accounting policy, and could result in a requirement for additional funding.

As of December 31, 2022, our pension plans were underfunded by $82.7 million. Rising interest rates have positively impacted the funded status of our pension plans. When interest rates decline, funding requirements for our pension plans may become more significant. If our cash flows and capital resources are insufficient to fund our obligations under these pension plans, we

could be forced to reduce or delay investments and capital expenditures, seek additional capital, or incur indebtedness. The Central States, Southeast and Southwest Areas Pension Plan ("Central States Pension Fund") union sponsored multi-employer pension plan in which we participated until 2021 is also underfunded. While we have recorded an estimated withdrawal liability associated with leaving this plan, changes to that estimate could force us to reduce or delay investments and capital expenditures, seek additional capital or incur indebtedness.

As of December 31, 2022, approximately 24% of our labor force is covered by a collective bargaining agreement, including approximately 12%, 46% and 24% of our labor force in the US, Europe and Canada, respectively. Approximately 1% of our labor force is covered by a collective bargaining agreement that will expire within one year. These arrangements grant certain protections to employees. We cannot guarantee that we will be able to negotiate these or other collective bargaining agreements or arrangements with works councils on the same or more favorable terms as the current agreements or arrangements, or at all, and without interruptions, including labor stoppages at the facility or facilities subject to any particular agreement or arrangement. A prolonged labor dispute, which could include a work stoppage, could have a material adverse effect on our business, financial condition and results of operations.

US and international regulators, investors and other stakeholders are increasingly focused on ESG matters and new domestic and international laws and regulations relating to ESG matters are under consideration. Such laws and regulations could affect the output of producers of commodity and specialty chemicals as well as demand in the end markets our customers serve. Responding to any such laws and regulations could require us to incur additional expenditures to either purchase new, or modify existing, equipment or processes, and the implementation of new practices and reporting processes could introduce additional compliance risk. In addition, any such laws and regulations could expose us to fines, litigation and increased tax responsibilities, and negatively impact our ability to compete with companies situated in geographies not subject to such limitations. A failure to meet the increasing ESG expectations of our investors and customers could also lead to market share loss.

Our Certificate of Incorporation and Bylaws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. For example, our Certificate of Incorporation and By-laws currently:

These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future. These provisions may also facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.

Our general business operations are subject to a broad spectrum of international, federal, state and local laws and regulations, including, without limitation, those relating to antitrust, environmental, food and drug, labor and human resources, tax, trade compliance, unclaimed property, transportation, anti-bribery, banking and treasury, privacy and data protection (including the European Union's General Data Protection Regulation), among others. These laws and regulations add cost to our conduct of business and could, in some instances, result in claims or enforcement actions or could reduce our ability to pursue business opportunities. Any changes in the laws and regulations applicable to us, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement activity of, such laws and regulations, could significantly impact our products and services and have a material adverse effect on our business, financial condition and results of operations. Additionally, governmental agencies may refuse to grant or renew our operating licenses and permits.

Especially because of the nature of our business, we are subject to the risk of litigation, other legal claims and proceedings, and regulatory enforcement actions in the ordinary course of our business. Also, there may be safety or personal injury risks related to our products which are not known today. The results of legal proceedings cannot be predicted with certainty. We cannot guarantee that the results of current or future legal proceedings will not materially harm our business, reputation or brand, nor can we guarantee that we will not incur losses in connection with current or future legal proceedings that exceed any provisions we may have set aside in respect of such proceedings or that exceed any applicable insurance coverage. The occurrence of any of these events could have a material adverse effect on our business, financial condition or results of operations.

None.

Our principal executive office is located in Downers Grove, Illinois under a lease expiring in June 2024. As of December 31, 2022, we had 292 locations in the US in 45 states and one territory and 287 locations outside of the US in 31 countries. Our warehouse facilities are comprised of owned, leased and third party warehouses and our office space is generally leased. Our facilities focus on the storing, repackaging and blending of chemicals and ingredients for distribution. Such facilities do not require substantial investments in equipment, can be opened fairly quickly and are replaceable with little disruption. As such, we believe that none of our facilities on an individual basis is material to the operation of our business.

See “Note 18: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K for information regarding legal proceedings, the content of which is incorporated by reference to this Item 3.

Not applicable.

Our common stock is listed on the New York Stock Exchange under the symbol UNVR.

As of December 31, 2022, based on the number of participants reflected in a security position listing provided to us by the Equiniti Trust Company (“EQ”), there were nine holders of record of our common stock. Because such EQ participants include banks, brokers and other institutions holding shares of our common stock on behalf of their customers, we do not know the actual number of unique stockholders represented by these record holders.

Information on our common stock purchases during the fourth quarter of 2022 is provided below:

The following graph shows a comparison of cumulative total stockholder return, calculated on a dividend reinvested basis, for the Company, the S&P 500 and the S&P 500 Chemical Index from December 31, 2017 through December 31, 2022. The graph assumes $100 was invested in each of the Company's common stock, the S&P 500 and the S&P 500 Chemical Index as of the market close on December 31, 2017. Note that historic stock price performance is not necessarily indicative of future stock price performance.

We did not pay a cash dividend on our common stock in 2022, 2021 or 2020. Our Board of Directors may consider declaring and paying dividends in the future; however, there can be no assurance that our Board of Directors will determine to do so. Additionally, our credit facilities contain certain limitations on our ability to pay dividends on our common stock.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is based on financial data derived from the financial statements prepared in accordance with US GAAP and certain other financial data that is prepared using non-GAAP measures. For a reconciliation of each non-GAAP financial measure to its most comparable GAAP measure, see the “Analysis of Segment Results” and “Non-GAAP Financial Measures” sections within this Item. 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 flows. This section of this Annual Report on Form 10-K discusses year-to-year comparisons between 2022 and 2021. For discussions of year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K, please refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Univar Solutions Inc. is a leading global solutions provider to users of specialty ingredients and chemicals and provider of value-added services to customers across a wide range of diverse industries. We purchase chemicals and ingredients from thousands of producers worldwide and warehouse, repackage, blend, dilute, transport and sell them to nearly 100,000 customer locations across approximately 120 countries.

Our operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. As previously defined within Item 1 of this Annual Report on Form 10-K, our segments are USA, EMEA, Canada and LATAM, which includes developing businesses in Latin America and the Asia-Pacific region.

In July 2022, we acquired Vicom, a leading regional specialty chemicals distributor in Spain and Portugal.

In December 2021, we acquired Sweetmix, a food ingredients and CASE specialty chemical distribution company in Brazil.

In April 2021, we sold the Distrupol business within our EMEA segment. The sale of this business did not meet the criteria to be classified as discontinued operations in our consolidated financial statements.

See "Note 3: Business combinations" and "Note 4: Dispositions" in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisitions and divestiture noted above.

We believe providing information on a non-GAAP constant currency basis offers valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. Currency impacts on consolidated and segment results have been derived by translating current period financial results in local currency using the average exchange rate for the prior period to which the financial information is being compared.

On August 16, 2022, the Inflation Reduction Act ("IRA") was enacted into US law. Effective for tax years beginning after December 31, 2022, the IRA imposes a 15% corporate minimum tax, a 1% excise tax on share repurchases, and creates and extends certain tax-related energy incentives. Management does not expect the tax-related provisions of the IRA to have a material impact on the Company's consolidated financial statements.

We sell commodity and specialty chemicals and ingredients that are used in manufacturing processes and as components in other products. Our sales are correlated with and affected by seasonal fluctuations and cycles in the levels of industrial production, manufacturing output and general economic activity. The current business environment in the markets in which we operate consists of complex dynamics. A combination of factors has impacted and disrupted global trade flows, which has resulted in differing pricing conditions, in different end markets, in different geographies. The duration of these dislocated and imbalanced conditions is unknown.

These market factors have also impacted the transportation market and, coupled with continued energy price pressure, driver shortages and inflation, have resulted in higher operating costs. Additionally, shortages across a range of chemicals and ingredients have generally led to fluctuations in chemical prices globally, with corresponding impacts to sales and profits.

Investments in working capital to bridge supply disruption and account for higher chemical prices may impact our ability to achieve forecasted cash flows in the short-term.

In such a dynamic environment, we believe remaining connected with our customers to understand demand and supply impacts on their operations is critical to our success. We believe our value as a distributor is heightened in the current environment as we work to meet demand requirements through our extensive network, installed asset base, transportation and digital assets, and supplier partnerships, supported by our network of Solution Centers and technically-trained professionals with deep industry knowledge.

A summary of our sales channel and underlying end market performance as of December 31, 2022, with corresponding impacts from the current environment are as follows (percentages represent 2022 Consolidated Net sales):

See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for further information on our Business and Economic Risks.

Driven by agile commercial execution, chemical price inflation and growing customer demand, Univar Solutions delivered strong year-over-year growth despite constrained inventory and supply and transportation challenges. With the Nexeo acquisition integration and system migration completed, we look to continue to leverage our digital investments to drive organic growth through market share capture and margin gains through leverage of our cost structure.

Management is focused on the following financial objectives:

Achievement of these objectives is expected through the following operational initiatives:

Net sales increased $1,939.8 million, or 20.3%, for the year ended December 31, 2022. On a constant currency basis, net sales increased by $2,302.2 million, or 24.1%. The increase was primarily due to our pricing discipline in inflationary markets and market share gains. Refer to the “Analysis of Segment Results” for additional information.

Gross profit (exclusive of depreciation) increased $378.0 million, or 15.8%, to $2,771.2 million for the year ended December 31, 2022. On a constant currency basis, gross profit (exclusive of depreciation) increased $459.2 million or 19.2%. The increase in gross profit (exclusive of depreciation) was primarily attributable to our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by higher input cost inflation. Gross margin decreased from 25.1% for the year ended December 31, 2021 to 24.1% for the year ended December 31, 2022. Refer to the “Analysis of Segment Results” and “Non-GAAP Financial Measures” for additional information.

Outbound freight and handling expenses increased $73.1 million, or 18.1%, for the year ended December 31, 2022. On a constant currency basis, outbound freight and handling expenses increased $83.1 million, or 20.6%. Refer to the “Analysis of Segment Results” for additional information.

Warehousing, selling and administrative expenses ("WS&A") increased $56.7 million, or 4.8%, for the year ended December 31, 2022. On a constant currency basis, WS&A increased $94.6 million, or 7.9%. The increase is primarily attributable to higher operating costs and variable compensation, partially offset by an environmental recovery, net synergies and higher environmental remediation costs in the prior year. Refer to the “Analysis of Segment Results” for additional information.

Other operating expenses, net decreased $74.7 million, or 69.5%, for the year ended December 31, 2022. Refer to “Note 8: Supplemental financial information” in Item 8 of this Annual Report on Form 10-K for additional information.

Depreciation expense decreased $19.2 million, or 12.7%, for the year ended December 31, 2022, primarily due to certain assets reaching the end of their depreciable lives. On a constant currency basis, depreciation expense decreased $16.0 million, or 10.6%, for the year ended December 31, 2022, primarily due to certain assets reaching the end of their depreciable lives.

Amortization expense decreased $4.3 million, or 8.2%, for the year ended December 31, 2022, primarily due to certain intangible assets reaching the end of their amortizable lives.

Interest expense increased $5.7 million, or 5.6%, for the year ended December 31, 2022, primarily due to higher average interest rates on floating rate debt. Refer to “Note 11: Debt” in Item 8 of this Annual Report on Form 10-K for additional information.

Gain on sale of business was $88.2 million for the year ended December 31, 2021, primarily due to the sale of our Distrupol business and also included adjustments to the sale price of the Canadian Agriculture services business. Refer to “Note 4: Dispositions” in Item 8 of this Annual Report on Form 10-K for additional information.

Other income, net decreased $83.9 million, or 76.0%, for the year ended December 31, 2022, primarily due to a lower pension mark to market gain in the current year and a fair value adjustment on warrants in the prior year. Refer to “Note 8: Supplemental financial information” in Item 8 of this Annual Report on Form 10-K for additional information.

Income tax expense was $210.9 million for the year ended December 31, 2022, resulting in an effective income tax rate of 27.9%. Our effective income tax rate was higher than the US federal statutory rate of 21.0%, primarily due to higher rates on foreign earnings, US tax on foreign earnings, US state income taxes and non-deductible employee costs.

Income tax expense was $124.6 million for the year ended December 31, 2021, resulting in an effective income tax rate of 21.3%. Our effective income tax rate was higher than the US federal statutory rate of 21.0% primarily due to higher rates on foreign earnings, US tax on foreign earnings, US state income taxes and non-deductible employee costs offset by the favorable impact of the Distrupol divestiture.

Our operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. These segments are USA, EMEA, Canada and LATAM, which includes developing businesses in Latin America and the Asia-Pacific region. 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 our ongoing operating results. These financial measures include gross profit (exclusive of depreciation), gross margin and Adjusted EBITDA margin. Such non-GAAP financial measures are referred to from time to time in this report but should not be viewed as a substitute for GAAP measures of performance and should be considered along with the comparable US GAAP measures. See “Note 20: Segments” in Item 8 of this Annual Report on Form 10-K, “Analysis of Segment Results” within this Item and "Non-GAAP Financial Measures" within this Item for additional information.

External sales increased $1,509.5 million, or 25.1%, for the year ended December 31, 2022, primarily due to our pricing discipline in inflationary markets and market share gains.

Gross profit (exclusive of depreciation) increased $325.6 million, or 21.2%, for the year ended December 31, 2022, primarily due to pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased from 25.5% for the year ended December 31, 2021 to 24.7% for the year ended December 31, 2022, primarily impacted by input cost inflation, partially offset by our pricing discipline in inflationary markets.

Outbound freight and handling expenses increased $68.4 million, or 23.5%, for the year ended December 31, 2022, primarily due to higher delivery costs caused by supply chain constraints.

WS&A increased $46.1 million, or 6.2%, for the year ended December 31, 2022, primarily due to higher operating costs and variable compensation, partially offset by higher environmental remediation costs in the prior year. Net synergies and an environmental recovery also favorably impacted the current year. As a percentage of external sales, WS&A decreased from 12.4% for the year ended December 31, 2021 to 10.5% for the year ended December 31, 2022 primarily due to the increase in sales.

Adjusted EBITDA increased $211.1 million, or 42.4%, for the year ended December 31, 2022, driven by higher gross profit (exclusive of depreciation), partially offset by higher outbound freight and handling expenses as well as higher WS&A. Adjusted EBITDA margin increased from 8.3% for the year ended December 31, 2021 to 9.4% for the year ended December 31, 2022, reflecting the business operating leverage.

External sales increased $93.6 million, or 4.7%, for the year ended December 31, 2022. On a constant currency basis, external sales increased $422.2 million, or 21.4%, primarily due to our pricing discipline in inflationary markets and market share gains, partially offset by the effects of the Distrupol divestiture in the prior year.

Gross profit (exclusive of depreciation) decreased $6.3 million, or 1.3%, for the year ended December 31, 2022. On a constant currency basis, gross profit (exclusive of depreciation) increased $67.6 million, or 13.9%, primarily due to pricing discipline in inflationary markets, operational execution and market share gains, partially offset by the effects of the Distrupol divestiture in the prior year. Gross margin decreased from 24.7% for the year ended December 31, 2021 to 23.3% for the year ended December 31, 2022 primarily due to input cost inflation, partially offset by our pricing discipline in inflationary markets.

Outbound freight and handling expenses increased $1.9 million, or 3.0%, for the year ended December 31, 2022. On a constant currency basis, outbound freight and handling expenses increased $10.7 million, or 16.7%, primarily due to higher delivery costs caused by supply chain constraints.

WS&A decreased $14.2 million, or 5.6%, for the year ended December 31, 2022. On a constant currency basis, WS&A increased $20.9 million, or 8.3%, primarily due to higher variable compensation and operating costs. As a percentage of external sales, WS&A decreased from 12.8% for the year ended December 31, 2021 to 11.5% for the year ended December 31, 2022 due to the impact of fluctuations in foreign currency exchange rates, partially offset by higher variable compensation and operating costs.

Adjusted EBITDA increased $6.0 million, or 3.5%, for the year ended December 31, 2022. On a constant currency basis, Adjusted EBITDA increased $36.0 million, or 21.1%, primarily due to higher gross profit (exclusive of depreciation), partially offset by higher WS&A as well as higher outbound freight and handling expenses. Adjusted EBITDA margin decreased from 8.7% for the year ended December 31, 2021 to 8.6% for the year ended December 31, 2022 primarily due to lower gross margin, partially offset by business operating leverage.

External sales increased $190.5 million, or 20.5%, for the year ended December 31, 2022. On a constant currency basis, external sales increased $233.6 million, or 25.1%, primarily due to our pricing discipline in inflationary markets and market share gain.

Gross profit (exclusive of depreciation) increased $33.2 million, or 14.2%, for the year ended December 31, 2022. On a constant currency basis, gross profit (exclusive of depreciation) increased $43.4 million, or 18.6%, primarily due to our pricing discipline in inflationary markets, operational execution and market share gains, partially offset by input cost inflation. Gross margin decreased from 25.1% for the year ended December 31, 2021 to 23.8% for the year ended December 31, 2022, driven by input cost inflation, partially offset by our pricing discipline in inflationary markets.

Outbound freight and handling expenses increased $2.2 million, or 6.1%, for the year ended December 31, 2022. On a constant currency basis, outbound freight and handling expenses increased $3.7 million, or 10.2%, primarily due to higher delivery costs caused by supply chain constraints.

WS&A increased $15.5 million, or 16.7%, for the year ended December 31, 2022. On a constant currency basis, WS&A increased $19.6 million, or 21.1%. The increase was primarily due to higher operating costs and variable compensation. WS&A as a percentage of external sales decreased from 10.0% for the year ended December 31, 2021 to 9.7% for the year ended December 31, 2022 primarily due to the increase in sales.

Adjusted EBITDA increased $15.5 million, or 14.9%, for the year ended December 31, 2022. On a constant currency basis, Adjusted EBITDA increased $20.1 million, or 19.3%, primarily due to higher gross profit (exclusive of depreciation), partially offset by increased WS&A. Adjusted EBITDA margin decreased from 11.2% for the year ended December 31, 2021 to 10.7% for the year ended December 31, 2022 due to lower gross margin, partially offset by business operating leverage.

Outbound freight and handling expenses increased $0.5 million, or 4.0%, for the year ended December 31, 2022. On a constant currency basis, outbound freight and handling expenses increased $0.3 million, or 2.4%.

WS&A increased $18.9 million, or 28.5%, for the year ended December 31, 2022. On constant currency basis, WS&A increased $17.4 million, or 26.2%, primarily due to increased corporate cost allocation as a result of a SAP implementation and higher operating costs. As a percentage of external sales, WS&A increased from 10.9% for the year ended December 31, 2021 to 11.3% for the year ended December 31, 2022, primarily due to increased corporate cost allocation as a result of a SAP implementation and higher operating costs.

Adjusted EBITDA increased $6.1 million, or 10.7%, for the year ended December 31, 2022. On a constant currency basis, Adjusted EBITDA increased $4.8 million, or 8.4%, primarily due to higher gross profit (exclusive of depreciation), partially offset by increased WS&A. Adjusted EBITDA margin decreased from 9.3% for the year ended December 31, 2021 to 8.3% for the year ended December 31, 2022, primarily due to lower gross margin and increased WS&A.

The Company's primary sources of liquidity are cash generated from operations and borrowings under its committed Senior ABL Credit Facility. As of December 31, 2022, liquidity for the Company was $1,060.5 million, comprised of $385.3 million of cash and cash equivalents and $675.2 million of available borrowings under our credit facility. The credit facility is guaranteed by certain significant subsidiaries and secured by such parties’ eligible accounts receivable, inventory and cash with a maximum borrowing capacity of $1.6 billion. Significant reductions in our accounts receivable, inventory and cash would reduce our availability to access liquidity under the credit facility. We have no active financial maintenance covenants in our credit agreements; however, there is a springing fixed charge coverage ratio (“FCCR”) under the revolving credit facility of 1.0x, applicable only if availability is less than or equal to 10% of the borrowing capacity. If the FCCR was applicable, the calculation would have been 6.5x as of December 31, 2022.

Our primary short-term liquidity and capital resource needs are to finance operating expenses, working capital, capital expenditures, other liabilities including environmental remediation and interest, possible business acquisitions, share repurchases and general corporate purposes. The majority of our debt obligations mature in 2026 and beyond. To the extent that our cash balances from time to time exceed amounts that are needed to fund our immediate liquidity requirements, we will consider alternative uses of some or all of such excess cash. Such alternatives may include, among others, the redemption or repurchase of debt securities or other borrowings through open market purchases, privately negotiated transactions or otherwise. Refer to “Note 11: Debt” in Item 8 of this Annual Report on Form 10-K for additional information related to our debt obligations. Management continues to balance its focus on sales and earnings growth with continuing efforts in cost control and working capital management.

Access to debt capital markets has historically provided the Company with sources of liquidity beyond normal operating cash flows. We do not anticipate having difficulty in obtaining financing from those markets in the future with our history of favorable results in the debt capital markets and strong relationships with global financial institutions. However, our ability to continue to access the debt capital markets with favorable interest rates and other terms will depend, to a significant degree, on maintaining our current ratings assigned by the credit rating agencies.

We may from time to time refinance or take steps to reduce debt or interest costs. The amount of debt, if any, that may be reduced or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. On October 27, 2022, we entered into the Second Amended and Restated ABL Credit Agreement ("Senior ABL Facility"), which provided a five-year senior secured ABL credit facility in an aggregate principal amount of $1.6 billion and a five-year senior secured term loan facility in an aggregate principal amount of $200 million. The Senior ABL Facility amends and restates in full the amended and restated ABL facility entered into by the Company on February 28, 2019. In connection with the entry into the Senior ABL Facility, the Company terminated its existing European ABL Credit Agreement and the Euro ABL Facility thereunder.

Our defined benefit pension plans had an underfunded status of $82.7 million and $122.3 million as of December 31, 2022 and 2021, respectively. Based on current projections and minimum funding requirements, we expect to make cash contributions of $16.0 million to our defined benefit pension plans in 2023. The amount and timing of 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.

We expect our 2023 capital expenditures to be approximately $150 million to $160 million for maintenance and growth, including safety, cost improvements and ESG investments. Interest payments for 2023 are expected to be $120 million to $130 million. We expect to fund our capital expenditures and interest payments with cash from operations or cash on hand.

We believe funds provided by our primary sources of liquidity will be adequate to meet our liquidity, debt repayment obligation and capital resource needs for at least the next 12 months under current operating conditions.

Cash provided by operating activities increased $256.1 million for the year ended December 31, 2022. The increase was primarily due to higher net income, exclusive of non-cash items, and the timing of changes in trade working capital, partially offset by the other, net cash flow item.

The change in net income, exclusive of non-cash items, increased $274.7 million from $500.4 million for the year ended December 31, 2021 to $775.1 million for the year ended December 31, 2022. Cash used by other, net increased $180.2 million as compared to the prior year, primarily attributable to tax payments, accrued compensation and timing differences related to other assets and liabilities.

Cash used by trade working capital, which includes trade accounts receivable, net, inventories and trade accounts payable, decreased $139.3 million as compared to the prior year. The year-over-year decrease in cash used by trade working capital was due to a favorable change in trade accounts receivable, net related to the timing of sales and cash collections, partially offset by an unfavorable change in trade accounts payable primarily attributable to the timing of inventory purchases and payments.

Investing cash flows for the year ended December 31, 2022 included capital expenditures of $153.8 million, cash paid for the Vicom acquisition of $12.9 million, cash paid for the Sweetmix acquisition of $3.8 million and proceeds of $7.8 million from the sale of property, plant and equipment. Investing cash flows for the year ended December 31, 2021 included proceeds of $136.7 million from the sale of the Distrupol business, proceeds of $29.0 million from the sale of property, plant and equipment, capital expenditures of $110.9 million and cash paid for the Sweetmix acquisition of $28.7 million (net of cash acquired of $1.2 million).

Financing cash flows for the year ended December 31, 2022 included share repurchases of $409.1 million, long-term debt repayments of $87.7 million, long-term debt issuances of $199.6 million and net proceeds under revolving credit facilities of $51.8 million. Financing cash flows for the year ended December 31, 2021 included long-term debt repayments of $1,440.5 million, share repurchases of $50.0 million, long-term debt issuances of $995.0 million, net proceeds under revolving credit facilities of $32.4 million and proceeds from the exercise of warrants of $27.1 million.

Our significant contractual obligations and commitments as of December 31, 2022 were as follows:

We enter into certain unconditional purchase commitments in the normal course of business. These commitments do not exceed our projected operational requirements and generally do not extend past one year.

We expect that we will be able to fund our obligations and commitments with cash flows from operations. To the extent we are unable to fund these obligations and commitments with cash flows from operations, we intend to fund them with proceeds from available borrowing capacity under our credit facility or future financings. With the exception of outstanding letters of credit of $127.7 million, we had no material off-balance sheet arrangements as of December 31, 2022.

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. 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. The accounting assumptions and estimates discussed below are those that we consider most critical to an understanding of our financial statements because they inherently involve significant judgments and estimates. By their nature, these judgments and estimates are subject to an inherent degree of uncertainty. Actual results could differ from our estimates.

Total goodwill as of December 31, 2022 and 2021 was $2,288.2 million and $2,310.4 million, respectively. We perform an annual goodwill impairment assessment at the reporting unit level each year as of October 1, or more frequently if potential impairment indicators exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. A reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, including corporate allocations, based on the enterprise approach.

Qualitative factors include industry and market considerations, overall financial performance and other relevant events and factors affecting the reporting units. 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 assumptions include forecasted EBITDA, market segment growth rates and discount rates based on a reporting unit's weighted average cost of capital. The use of different assumptions, estimates or judgments could significantly impact the estimated fair value of a reporting unit, and therefore impact a reporting unit's fair value in excess of carrying value assessment.

Through qualitative assessments performed on the USA, EMEA, Canada, Latin America and Asia-Pacific reporting units, we concluded that it was more likely than not that each reporting unit’s fair value exceeded its carrying value. As such, a quantitative assessment was not performed for any of our reporting units. No goodwill impairment losses were recorded during the years ended December 31, 2022, 2021, or 2020.

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. Total environmental liabilities at December 31, 2022 and 2021 were $90.9 million and $88.1 million, respectively. See “Note 18: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K for additional information.

Our environmental liabilities 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 the sites, the extent and cost of assessment and remediation efforts required, our insurance coverage for the 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 accruals based upon our assessment of these factors, using technical experts, legal counsel and other specialists.

We sponsor defined benefit pension plans in the US and other countries. The valuation 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 the plans. Significant assumptions include discount rates and expected rate of return on plan assets. Changes in assumptions and plan experience 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 projected benefit obligation in the fourth quarter of each year (the “mark to market” adjustment), unless an earlier remeasurement is required. For the years ended December 31, 2022 and 2021, we recorded mark to market gains of $17.2 million and $75.9 million, respectively. See “Note 12: Employee benefit plans” in Item 8 of this Annual Report on Form 10-K for additional information.

Changes in the assumed discount rate and expected rate of return on plan assets would have the following effects:

We are subject to income taxes in the jurisdictions in which we sell 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 of 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 the enacted tax rates expected to apply in the years in which the temporary differences are expected to reverse. 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 our ability to realize deferred tax assets, in full or in part, we consider all available positive and negative evidence, including 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. We have a valuation allowance on certain deferred tax assets, primarily related to foreign tax credits and net operating loss carry forwards. We account for unrecognized tax benefits through an assessment of whether a position is more likely than not to be sustained upon examination by taxing authorities based on its technical merits. We record liabilities for uncertain tax positions taken or expected to be taken in a tax return.

See “Note 2: Significant accounting policies” in Item 8 of this Annual Report on Form 10-K.

We monitor the results of our reportable segments separately for the purposes of making decisions about resource allocation and performance assessment, and evaluate performance using Adjusted EBITDA. Additionally, the Company uses Adjusted EBITDA in setting performance incentive targets to align management compensation measurement with operational performance.

We define Adjusted EBITDA as the sum of consolidated net income; depreciation; amortization; net interest expense; income tax expense; impairment charges; (gain) loss on sale of business; other operating expenses, net and other income (expense), net (for both, see “Note 8: Supplemental financial information” in Item 8 of this Annual Report on Form 10-K for additional information). For 2020, Adjusted EBITDA also included an adjustment to remove a Brazil VAT charge. See below for a reconciliation of net income, the most comparable measure calculated in accordance with GAAP, to Adjusted EBITDA.

We believe other financial measures, as defined below, that do not comply with US GAAP provide relevant and meaningful information concerning the ongoing and future operating results of the Company.

We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing information on a constant currency basis provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages and other information by converting our financial results in local currency for a period using the average exchange rate for the prior period to which we are comparing.

The non-GAAP financial measures noted above are not calculated in accordance with GAAP and should not be considered a substitute for net income or any other measure of financial performance presented in accordance with GAAP. They are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help investors’ ability to analyze underlying trends in the Company’s business, evaluate its performance relative to other companies in its industry and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. Additionally, other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

The following table is a reconciliation of net income to Adjusted EBITDA:

The following table is a reconciliation of gross profit (exclusive of depreciation):

The principal risks arising from our financial instruments are interest rate and foreign currency risk. We use derivative financial instruments to reduce exposure to fluctuations in foreign exchange rates and interest rates in certain limited circumstances described below. We follow a strict policy that prohibits trading in financial instruments other than to acquire and manage these hedging positions. We do not hold or issue derivative or other financial instruments for speculative purposes, or to hedge translation risk.

Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. Under our hedging policy, we seek to maintain an appropriate amount of fixed-rate debt obligations, either directly or effectively through interest rate derivative contracts that fix the interest rate payable on all or a portion of our floating rate debt obligations. We assess the anticipated mix of fixed versus floating amount of debt once a year, in connection with our annual budgeting process, with the purpose of hedging variability of interest expense and interest payments on our variable rate bank debt and maintaining a mix of both fixed and floating rate debt. As of December 31, 2022, approximately 68% of our debt was fixed rate after consideration of interest rate swap contracts. An increase in interest rates of 100 basis points on our floating rate debt as of December 31, 2022 would increase our annual interest expense by approximately $7.9 million, including the impact of derivatives.

Because we conduct our business on an international basis in multiple currencies, we may be adversely affected by foreign exchange rate fluctuations. Although we report financial results in US dollars, a substantial portion of our net sales and expenses are denominated in currencies other than the US dollar, particularly the euro, Canadian dollar and European currencies other than the euro, including the British pound sterling. Fluctuations in exchange rates could significantly affect our reported results from period to period as we translate results in local currencies into US dollars. We have not used derivative instruments to hedge the translation risk related to earnings of foreign subsidiaries.

Additionally, our investments in EMEA, Canada and LATAM are subject to foreign currency risk. Currency fluctuations result in non-cash gains and losses that do not impact income before income taxes, but instead are recorded as accumulated other comprehensive loss in equity in our consolidated balance sheet. We do not hedge our investments in non-US entities because these investments are viewed as long-term in nature.

The majority of our foreign currency risk arising on cash, accounts receivable, accounts payable and loan balances denominated in currencies other than those in which we record the financial results for a business operation relates to exposures to the US dollar, euro or British pound sterling. The approximate change in our income before income taxes resulting from a 10% increase in the value of the US dollar, euro and British pound sterling with all other variables held constant, including the impact of foreign currency derivative instruments and based on our balances as of December 31, 2022, would be an increase of $2.1 million, an increase of $2.2 million and a decrease of $1.2 million, respectively.

We have audited the accompanying consolidated balance sheets of Univar Solutions Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2023 expressed an unqualified opinion thereon.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

We have audited Univar Solutions Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Univar Solutions Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 22, 2023 expressed an unqualified opinion thereon.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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