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SEC Filings

10-Q
NEXEO SOLUTIONS, INC. filed this Form 10-Q on 05/10/2018
Entire Document
 

 
March 31, 2018
 
September 30, 2017
Accounts receivable from related entities:
 
 
 
TPG
$
0.6

 
$
0.7

Accounts payable to related entities:
 
 
 
Entities related to members of the Board of Directors
$
0.5

 
$
0.1


Contingent Consideration Obligations Pursuant to the TRA and the Merger Agreement

Subsequent to the Business Combination, TPG beneficially owns approximately 35% of the Company’s common stock, including Founder Shares, and is considered a related party of the Company. In connection with the Business Combination, TPG became a party to the TRA and obtained the right to receive the Deferred Cash Consideration pursuant to the Merger Agreement. The fair value of these contingent consideration liabilities was as follows:
 
March 31, 2018
 
September 30, 2017
Due to related party pursuant to contingent consideration obligations:
 
 
 
Current liability
$
8.8

 
$
12.5

Non-current liability
121.2

 
127.7

Total fair value
$
130.0

 
$
140.2

    
During the six months ended March 31, 2018 the Company paid $4.2 million to TPG related to the TRA. See Note 9.

15. Income Taxes

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

The Tax Act significantly revises future U.S. corporate income taxes by, among other things, lowering U.S. corporate income tax rates and implementing a modified territorial tax system. Because the Company has a September 30 fiscal year end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 24.3% for the Company’s fiscal year ending September 30, 2018 and 21.0% for subsequent fiscal years. The Tax Act also provided for certain transition impacts. As part of the transition to the new modified territorial tax system, the Tax Act imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. The Company does not currently anticipate an impact from the repatriation tax charge.

For the six months ended March 31, 2018, the impact of the Tax Act resulted in a net tax benefit of approximately $4.5 million, related solely to the remeasurement of the Company’s net deferred tax liabilities at the lower enacted corporate tax rates.

In accordance with recently issued SEC guidance, the estimated net income tax benefit of $4.5 million is considered provisional representing the Company’s current best estimate based on interpretation of the provisions of the Tax Act, as data continues to be accumulated in order to finalize the underlying calculations. In addition, due to the broad and complex changes contained in the Tax Act, the Company’s current estimate of the impact may be influenced by, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act and any changes in accounting standards for income taxes or related interpretations issued in response to the Tax Act. The Company anticipates finalizing and recording any resulting adjustments by the end of its current fiscal year ending September 30, 2018.


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