Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Nexeo Solutions, Inc. (1604416) 10-Q published on May 10, 2018 at 1:38 pm
Reporting Period: Mar 30, 2018
In February 2018, the Company acquired customer contracts and a customer list. As part of this transaction, the Company entered into a supply agreement and agreements granting the Company the non-exclusive use of certain trademarks and patents for the products covered by the supply agreement. The total consideration associated with this transaction was $9.0 million, and the Company recognized intangible assets of the same amount, which are included in Other intangible assets, net of amortization on the Company's condensed consolidated balance sheet. The Company paid $6.0 million of the consideration during the three months ended March 31, 2018, and paid the remaining $3.0 million in April 2018. The acquired intangible assets will be fully amortized over estimated useful lives ranging between 5 and 13 years.
The Company recognizes interest and penalties related to uncertain tax positions, if any, as a component of Income tax expense in the condensed consolidated statements of operations. There was an insignificant amount of interest and penalties recognized during all periods. The Company had $1.5 million and $1.8 million related to uncertain tax positions, including related accrued interest and penalties as of March 31, 2018 and September 30, 2017, respectively. Between the time of the initial recording of the uncertain tax provisions associated with the Ultra Chem Acquisition and the three months ended March 31, 2018, the Company reduced the reserve by approximately $0.4 million due to the lapse of the applicable statute of limitations.
Gross profit for the Chemicals line of business increased $11.4 million, or 22.5%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. Gross profit increased due to our strong commercial execution strengthened by leveraging our centralized technology platform to effectively manage supply shortages for certain specialty products globally as well as supply constraints in North America predominately caused by adverse weather conditions during the quarter.
Gross profit for the Plastics line of business increased $1.2 million, or 2.6%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The increase is due to approximately $2.1 million in gross profit due to the strengthening of exchange rates of various currencies versus the USD compared to the same period in the prior fiscal year, partially offset by volume declines as discussed above. However, in North America, we continued to leverage our centralized platform to effectively manage pricing due to supply constraints and volume declines.
Gross profit increased $27.1 million, or 29.0%, for the six months ended March 31, 2018 compared to the six months ended March 31, 2017. The increase in gross profit was primarily attributable to the increase in average selling prices and volumes during the current period. The increase was driven primarily by improved specialty mix compared to the same period in the prior fiscal year. Additionally, gross profit increased due to our strong commercial execution strengthened by leveraging our centralized technology platform to effectively manage supply shortages for certain specialty products globally as well as supply constraints in North America predominately caused by adverse weather conditions during the period.
Selling, general and administrative expenses for the six months ended March 31, 2018 increased $16.2 million, or 10.5%, compared to the six months ended March 31, 2017. This increase was primarily driven by increased incentive compensation cost of $8.0 million, stock-based compensation cost of $0.8 million and costs of $1.1 million associated with the Ultra Chem Acquisition employee base. Included in selling, general and administrative expenses for the current period were $2.0 million of costs related to the integration of the Ultra Chem Group into our ERP system. Additionally, depreciation and amortization expense increased $3.6 million mainly as a result of the amortization of intangible assets acquired in the Ultra Chem Acquisition. The increase was partially offset by a foreign exchange gain of approximately $2.6 million in the current period, driven primarily by fluctuations in the RMB compared to the USD.