8-K
ECOLAB INC. (ECL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 24, 2020
ECOLAB INC.
(Exact name of registrant as specified in its charter)
| | | | | |
|---|---|---|---|---|
| Delaware | | 1-9328 | | 41-0231510 |
| (State or other jurisdiction<br>of incorporation) | | (Commission<br>File No.) | | (IRS Employer<br>Identification No.) |
| | | | | |
|---|---|---|---|---|
| 1 Ecolab Place , Saint Paul , Minnesota | | | | 55102 |
| (Address of principal executive offices) | | | | (Zip Code) |
| | | |
|---|---|---|
| Registrant’s telephone number, including area code 1- 800 - 232-6522 |
(Not applicable)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| <br><br><br><br> | | | | |
|---|---|---|---|---|
| Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
| Common Stock, $1.00 par value | | ECL | | New York Stock Exchange |
| 2.625% Euro Notes due 2025 | | ECL 25 | | New York Stock Exchange |
| 1.000% Euro Notes due 2024 | | ECL 24 | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On June 3, 2020, Ecolab Inc. (“Ecolab” or “the Company”) completed the previously announced separation of its Upstream Energy business (the “ChampionX Business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger of ChampionX (the “Merger”) with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”). As a result of the Transaction, the ChampionX business, which includes the direct revenues, operating expenses and certain other expenses directly attributable to the ChampionX business, is reflected in the Company’s historical financial statements as discontinued operations. The ChampionX business met the criteria to be reported as discontinued operations because it is a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the Company is reporting the historical results of ChampionX as discontinued operations for the periods presented.
The Company is providing as an exhibit to this Current Report on Form 8-K a table (Exhibit 99.1) with the unaudited revised consolidated statement of income for the years ended December 31, 2019 and December 31, 2018 reflecting the ChampionX business as discontinued operations.
The Company is also providing a table (Exhibit 99.2) with supplemental unaudited revised consolidated statement of income for each of the three months ended March 31, 2019, June 30, 2019, September 30, 2019, and December 31, 2019, the twelve months ended December 31, 2019 and the three months ended March 31, 2020 reflecting the ChampionX business as discontinued operations.
The Company is also providing a table (Exhibit 99.3) with supplemental unaudited reportable segment net sales and operating income information for the twelve months ended December 31, 2019 and 2018, reflecting the changes noted above.
The Company is also providing a table (Exhibit 99.4) with supplemental unaudited reportable segment net sales and operating income information for each of the three months ended March 31, 2019, June 30, 2019, September 30, 2019, and December 31, 2019, the twelve months ended December 31, 2019, and the three ended March 31, 2020 reflecting the changes noted above.
The Company is also providing certain supplemental unaudited revised adjusted financial measures that have not been calculated in accordance with accounting principles generally accepted in the United States (“non-GAAP measures”), including fixed currency sales, adjusted cost of sales, adjusted gross margin, fixed currency operating income, adjusted fixed currency operating income, adjusted fixed currency operating income margin, adjusted net income, and adjusted diluted EPS (Exhibit 99.5) which reflects the ChampionX business as discontinued operations. These non-GAAP measures are provided as additional information regarding operating results and are used internally to evaluate performance and in making financial and operational decisions, including with respect to incentive compensation. These measures provide investors with greater transparency with respect to the results of operations and are useful for period-to-period comparison of results.
Ecolab also will publish the attached exhibits on its website located at www.ecolab.com.
The tables represent a supplemental presentation of certain of Ecolab’s 2019 and 2018 information as explained in this Current Report on Form 8-K and the tables and are not intended to replace the presentation of such information in Ecolab’s Quarterly Reports on Form 10-Q filed with respect to the first, second and third quarters of 2019 and Ecolab’s Annual Reports on Form 10-K filed with respect to the fiscal years ended December 31, 2019 and December 31, 2018.
The information in this Current Report on Form 8-K, including the exhibits attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in such a filing.
2
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
|---|
The following exhibits are furnished pursuant to Item 2.02 of Form 8-K and should not be deemed to be “filed” under the Securities Exchange Act of 1934.
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | |
|---|---|---|
| | ECOLAB INC. | |
| | | |
| | | |
| Date: July 24, 2020 | By: | /s/ David F. Duvick |
| | | David F. Duvick |
| | | Assistant Secretary |
4
Exhibit 99.1
ECOLAB INC.
SUPPLEMENTAL REVISED CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(unaudited)
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year ended December 31 (millions, except per share amounts) | | 2019 | | 2018 | ||||||||
| | | | | | | | | | | | | |
| | **** | Historical Ecolab | Discontinued Operations | Revised Ecolab | Historical Ecolab | **** | Discontinued Operations | Revised Ecolab | ||||
| Product and equipment sales | | $12,238.9 | | $(2,109.9) | | $10,129.0 | | $12,128.6 | | $(2,225.0) | | $9,903.6 |
| Service and lease sales | **** | 2,667.4 | | (234.4) | | 2,433.0 | | 2,539.6 | | (221.1) | | 2,318.5 |
| Net sales | **** | 14,906.3 | | (2,344.3) | | 12,562.0 | | 14,668.2 | | (2,446.1) | | 12,222.1 |
| Product and equipment cost of sales | | 7,106.4 | | (1,488.9) | | 5,617.5 | | 7,078.5 | | (1,567.9) | | 5,510.6 |
| Service and lease sales | **** | 1,617.0 | | (188.7) | | 1,428.3 | | 1,547.4 | | (182.7) | | 1,364.7 |
| Cost of sales (including special charges (a)) | **** | 8,723.4 | | (1,677.6) | | 7,045.8 | | 8,625.9 | | (1,750.6) | | 6,875.3 |
| Selling, general, and administrative expenses | **** | 3,957.5 | | (406.7) | | 3,550.8 | | 3,968.6 | | (462.8) | | 3,505.8 |
| Special (gains) and charges | **** | 211.6 | | (91.4) | | 120.2 | | 126.7 | | (14.0) | | 112.7 |
| Operating income | **** | 2,013.8 | | (168.6) | | 1,845.2 | | 1,947.0 | | (218.7) | | 1,728.3 |
| Other (income) expense (including special charges (b)) | **** | (76.3) | | (0.7) | | (77.0) | | (79.9) | | - | | (79.9) |
| Interest expense, net (including special charges (c)) | | 191.2 | | (0.5) | | 190.7 | | 222.3 | | (1.2) | | 221.1 |
| Income before income taxes | **** | 1,898.9 | | (167.4) | | 1,731.5 | | 1,804.6 | | (217.5) | | 1,587.1 |
| Provision for income taxes | | 322.7 | | (34.1) | | 288.6 | | 364.3 | | (43.1) | | 321.2 |
| Net income from continuing operations, including noncontrolling interest | | 1,576.2 | | (133.3) | | 1,442.9 | | 1,440.3 | | (174.4) | | 1,265.9 |
| Net income from continuing operations attributable to noncontrolling interest | | 17.3 | | - | | 17.3 | | 11.2 | | 4.4 | | 15.6 |
| Net income from continuing operations attributable to Ecolab | | 1,558.9 | | (133.3) | | 1,425.6 | | 1,429.1 | | (178.8) | | 1,250.3 |
| Net income from discontinued operations, net of tax | | - | | 133.3 | | 133.3 | | - | | 178.8 | | 178.8 |
| Net income attributable to Ecolab | | $1,558.9 | | $- | | $1,558.9 | | $1,429.1 | | $- | | $1,429.1 |
| | | | | | | | | | | | | |
| Earnings attributable to Ecolab per common share | | | | | | | | | | | | |
| Basic | | | | | | | | | | | | |
| Continuing operations | | | | | | $4.95 | | | | | | $4.33 |
| Discontinued operations | | | | | | $0.46 | | | | | | $0.62 |
| Earnings attributable to Ecolab | | $5.41 | | | | $5.41 | | $4.95 | | | | $4.95 |
| | | | | | | | | | | | | |
| Diluted | | | | | | | | | | | | |
| Continuing operations | | | | | | $4.87 | | | | | | $4.27 |
| Discontinued operations | | | | | | $0.46 | | | | | | $0.61 |
| Earnings attributable to Ecolab | | $5.33 | | | | $5.33 | | $4.88 | | | | $4.88 |
| | | | | | | | | | | | | |
| Weighted-average common shares outstanding | | | | | | | | | | | | |
| Basic | | 288.1 | | | | 288.1 | | 288.6 | | | | 288.6 |
| Diluted | | 292.5 | | | | 292.5 | | 292.8 | | | | 292.8 |
| (a) | For 2019, both historical Ecolab and revised Ecolab cost of sales includes $38.5 of special (gains) and charges, net recorded in product and equipment cost of sales. No special charges are recorded in cost of sales from discontinued operations. For 2018, historical Ecolab reported cost of sales includes special (gains) and charges, net of $9.3 recorded in product and equipment cost of sales. For revised Ecolab, cost of sales includes special (gains) and charges, net of $4.8 recorded in product and equipment cost of sales. Discontinued operations includes special (gains) and charges, net of $4.5 recorded in cost of sales. |
|---|---|
| (b) | For 2019 both historical and revised Ecolab, other (income) expense includes special charges of $9.5. No special charges are recorded in other (income) expense from discontinued operations. |
| --- | --- |
| (c) | Both historical and revised Ecolab interest expense, net includes special charges of $0.2 and $0.3 in 2019 and 2018, respectively. No special charges are recorded in interest expense, net from discontinued operations. |
| --- | --- |
Notes:
On June 3, 2020, the Company completed the previously announced separation of its Upstream Energy business (the “ChampionX Business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger of ChampionX (the “Merger”) with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”). The ChampionX business met the criteria to be reported as discontinued operations because it is a strategic shift in business that has a major effect on the Company's operations and financial results. Therefore, the Company is reporting the historical results of ChampionX as discontinued operations for the periods presented.
Exhibit 99.2
ECOLAB INC.
SUPPLEMENTAL REVISED CONSOLIDATED STATEMENT OF INCOME FOR EACH OF THE THREE MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, 2019, THE TWELVE MONTHS ENDED DECEMBER 31, 2019 AND THE THREE MONTH PERIOD ENDED MARCH 31, 2020
(unaudited)
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (millions) | | 2019 | | 2020 | | ||||||||
| | | | | | | | | | | | | | |
| | | Three Months Ended <br>March 31 | | Three Months Ended <br>June 30 | | Three Months Ended <br>September 30 | | Three Months Ended<br>December 31 | | Twelve Months Ended<br>December 31 | | Three Months Ended <br>March 31 | |
| Product and equipment sales | | $2,359.8 | | $2,560.0 | | $2,591.8 | | $2,617.4 | | $10,129.0 | | $2,424.0 | |
| Service and lease sales | | 564.9 | | 609.1 | | 632.2 | | 626.8 | | 2,433.0 | | 596.6 | |
| Net sales | | 2,924.7 | | 3,169.1 | 3,224.0 | | 3,244.2 | | 12,562.0 | | 3,020.6 | | |
| Product and equipment cost of sales | | 1,340.6 | | 1,422.1 | | 1,413.0 | | 1,441.8 | | 5,617.5 | | 1,364.7 | |
| Service and lease sales | | 334.9 | | 358.2 | | 367.9 | | 367.3 | | 1,428.3 | | 355.5 | |
| Cost of sales (including special charges (a)) | | 1,675.5 | | 1,780.3 | 1,780.9 | | 1,809.1 | | 7,045.8 | | 1,720.2 | | |
| Selling, general, and administrative expenses | | 896.1 | | 900.0 | | 869.2 | | 885.5 | | 3,550.8 | | 908.3 | |
| Special (gains) and charges | | 39.5 | | 24.4 | | 24.9 | | 31.4 | | 120.2 | | 15.9 | |
| Operating income | | 313.6 | | 464.4 | | 549.0 | | 518.2 | | 1,845.2 | | 376.2 | |
| Other (income) expense (including special charges (b)) | | (21.2) | | (20.9) | | (20.8) | | (14.1) | | (77.0) | | (15.4) | |
| Interest expense, net (including special charges (c)) | | 49.3 | | 49.2 | | 46.1 | | 46.1 | | 190.7 | | 48.3 | |
| Income before income taxes | | 285.5 | | 436.1 | | 523.7 | | 486.2 | | 1,731.5 | | 343.3 | |
| Provision for income taxes | | 29.9 | | 88.8 | | 83.4 | | 86.5 | | 288.6 | | 47.0 | |
| Net income from continuing operations, including noncontrolling interest | | 255.6 | | 347.3 | | 440.3 | | 399.7 | | 1,442.9 | | 296.3 | |
| Net income from continuing operations attributable to noncontrolling interest | | 4.0 | | 3.9 | | 4.4 | | 5.0 | | 17.3 | | 4.3 | |
| Net income from continuing operations attributable to Ecolab | | 251.6 | | 343.4 | | 435.9 | | 394.7 | | 1,425.6 | | 292.0 | |
| Net income from discontinued operations, net of tax | | 44.9 | | 25.2 | | 28.3 | | 34.9 | | 133.3 | | (8.6) | |
| Net income attributable to Ecolab | | $296.5 | | $368.6 | | $464.2 | | $429.6 | | $1,558.9 | | $283.4 | |
| | | | | | | | | | | | | | |
| Earnings attributable to Ecolab per common share | | | | | | | | | | | | | |
| Basic | | | | | | | | | | | | | |
| Continuing operations | | $0.87 | | $1.19 | | $1.51 | | $1.37 | | $4.95 | | $1.01 | |
| Discontinued operations | | $0.16 | | $0.09 | | $0.10 | | $0.12 | | $0.46 | | ($0.03) | |
| Earnings attributable to Ecolab | | $1.03 | | $1.28 | | $1.61 | | $1.49 | | $5.41 | | $0.98 | |
| | | | | | | | | | | | | | |
| Diluted | | | | | | | | | | | | | |
| Continuing operations | | $0.86 | | $1.18 | | $1.49 | | $1.35 | | $4.87 | | $1.00 | |
| Discontinued operations | | $0.15 | | $0.08 | | $0.10 | | $0.12 | | $0.46 | | ($0.03) | |
| Earnings attributable to Ecolab | | $1.01 | | $1.26 | | $1.59 | | $1.47 | | $5.33 | | $0.97 | |
| | | | | | | | | | | | | | |
| Weighted-average common shares outstanding | | | | | | | | | | | | | |
| Basic | | 288.2 | | 287.6 | | 288.1 | | 288.3 | | 288.1 | | 288.8 | |
| Diluted | | 292.3 | | 292.1 | | 292.8 | | 292.6 | | 292.5 | | 292.6 | |
| | | | | | | | | | | | | | |
| Diluted Earnings per Share from continuing operations attributable to Ecolab | | | | | | | | | | | | | |
| GAAP diluted EPS from continuing operations | | $0.86 | | $1.18 | | $1.49 | | $1.35 | | $4.87 | | $1.00 | |
| Special (gains) and charges, after tax | | 0.11 | | 0.09 | | 0.08 | | 0.16 | | 0.44 | | 0.06 | |
| Discrete tax net expense (benefit) | | (0.09) | | - | | (0.05) | | (0.06) | | (0.20) | | (0.07) | |
| Non-GAAP adjusted diluted EPS from continuing operations | | $0.88 | | $1.27 | | $1.52 | | $1.45 | | $5.12 | | $0.99 | |
| | | | | | | | | | | | | | |
| (a) | Total cost of sales includes special charges of $3.6, $7.9, $11.3, and $15.7 in the three months ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019, respectively, and $9.1 in the three months ended March 31, 2020 which are recorded in Product and equipment cost of sales. |
|---|---|
| (b) | Other (income) expense includes special charges of $9.5 in the three months ended December 31, 2019. |
| --- | --- |
| (c) | Net interest expense includes special charges of $0.2 in the three months ended March 31, 2019. |
| --- | --- |
Notes:
Per share amounts do not necessarily sum due to rounding.
The revised Consolidated Statement of Income for each of the three months ended March 31, 2019, June 30, 2019, September 30, 2019, and December 31, 2019, the twelve months ended December 31, 2019 and the three months ended March 31, 2020 reflect the historical results of ChampionX as discontinued operations for the periods presented.
The revised diluted earnings per share (“EPS”) table includes financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”), including revised non-GAAP adjusted diluted EPS. The table above provides a reconciliation of diluted earnings per share, as revised, to the non-GAAP measure of adjusted diluted earnings per share. We use this non-GAAP measure internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of this measure provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results. This non-GAAP financial measure is not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view this measure in conjunction with the GAAP measure included in the table.
Exhibit 99.3
ECOLAB INC.
SUPPLEMENTAL REPORTABLE SEGMENT INFORMATION
AND NON-GAAP RECONCILIATION
(unaudited)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| (millions) | Three Months Ended March 31, 2020 | | |||||
| | | 2020 Reported Valued at 2020 Management Rates | | Discontinued Operations and Related Allocation Changes | | 2020 Continuing Operations Valued at 2020 Management Rates | |
| Net Sales | | | | | | | |
| Global Industrial | | $1,444.0 | | $(0.4) | | $1,443.6 | |
| Global Institutional | | 1,072.3 | (0.2) | | 1,072.1 | | |
| Global Healthcare and Life Sciences | | 246.2 | 0.3 | | 246.5 | | |
| Upstream Energy | | 562.7 | | (562.7) | | - | |
| Other | | 277.8 | (0.2) | | 277.6 | | |
| Subtotal at fixed currency | | 3,603.0 | | (563.2) | | 3,039.8 | |
| Effect of foreign currency translation | | (21.6) | | 2.4 | | (19.2) | |
| Total reported GAAP net sales | | $3,581.4 | | $(560.8) | | $3,020.6 | |
| Operating Income | | | | | | | |
| Global Industrial | | $226.9 | | $(20.3) | | $206.6 | |
| Global Institutional | | 183.5 | | (1.1) | | 182.4 | |
| Global Healthcare and Life Sciences | | 25.6 | | (2.7) | | 22.9 | |
| Upstream Energy | | 39.0 | | (39.0) | | - | |
| Other | | 25.3 | | (3.7) | | 21.6 | |
| Corporate | | (100.2) | | 45.6 | | (54.6) | |
| Subtotal at fixed currency | | 400.1 | | (21.2) | | 378.9 | |
| Effect of foreign currency translation | | (2.9) | | 0.2 | | (2.7) | |
| Total reported GAAP operating income | | $397.2 | | $(21.0) | | $376.2 | |
| | | | | | | | |
| | | Twelve Months Ended December 31, 2019 | | ||||
| | | 2019 Reported Valued at 2020 Management Rates | | Discontinued Operations and Related Allocation Changes | | 2019 Continuing Operations Valued at 2020 Management Rates | |
| Net Sales | | | | | | | |
| Global Industrial | | $5,996.4 | | $(1.8) | | $5,994.6 | |
| Global Institutional | | 4,412.1 | - | | 4,412.1 | | |
| Global Healthcare and Life Sciences | | 979.0 | - | | 979.0 | | |
| Upstream Energy | | 2,352.9 | | (2,352.9) | | - | |
| Other | | 1,211.7 | - | | 1,211.7 | | |
| Subtotal at fixed currency | | 14,952.1 | | (2,354.7) | | 12,597.4 | |
| Effect of foreign currency translation | | (45.8) | | 10.4 | | (35.4) | |
| Total reported GAAP net sales | | $14,906.3 | | $(2,344.3) | | $12,562.0 | |
| Operating Income | | | | | | | |
| Global Industrial | | $980.6 | | $(77.9) | | $902.7 | |
| Global Institutional | | 947.3 | | (7.5) | | 939.8 | |
| Global Healthcare and Life Sciences | | 135.1 | | (10.6) | | 124.5 | |
| Upstream Energy | | 187.9 | | (187.9) | | - | |
| Other | | 180.6 | | (13.6) | | 167.0 | |
| Corporate | | (407.9) | | 128.2 | | (279.7) | |
| Subtotal at fixed currency | | 2,023.6 | | (169.3) | | 1,854.3 | |
| Effect of foreign currency translation | | (9.8) | | 0.7 | | (9.1) | |
| Total reported GAAP operating income | | $2,013.8 | | $(168.6) | | $1,845.2 | |
| | | | | | | | |
| | Twelve Months Ended December 31, 2018 | | |||||
| | | 2018 Reported Valued at 2020 Management Rates | | Discontinued Operations and Related Allocation Changes | | 2018 Continuing Operations Valued at 2020 Management Rates | |
| Net Sales | | | | | | | |
| Global Industrial | | $5,690.3 | | $(1.8) | | $5,688.5 | |
| Global Institutional | | 4,255.2 | - | | 4,255.2 | | |
| Global Healthcare and Life Sciences | | 915.7 | - | | 915.7 | | |
| Upstream Energy | | 2,422.3 | | (2,422.3) | | - | |
| Other | | 1,155.3 | - | | 1,155.3 | | |
| Subtotal at fixed currency | | 14,438.8 | | (2,424.1) | | 12,014.7 | |
| Effect of foreign currency translation | | 229.4 | | (22.0) | | 207.4 | |
| Total reported GAAP net sales | | $14,668.2 | | $(2,446.1) | | $12,222.1 | |
| Operating Income | | | | | | | |
| Global Industrial | | $834.0 | | $(80.3) | | $753.7 | |
| Global Institutional | | 905.0 | | (3.5) | | 901.5 | |
| Global Healthcare and Life Sciences | | 135.1 | | (10.7) | | 124.4 | |
| Upstream Energy | | 172.3 | | (172.3) | | - | |
| Other | | 174.6 | | (10.6) | | 164.0 | |
| Corporate | | (302.7) | | 60.9 | | (241.8) | |
| Subtotal at fixed currency | | 1,918.3 | | (216.5) | | 1,701.8 | |
| Effect of foreign currency translation | | 28.7 | | (2.2) | | 26.5 | |
| Total reported GAAP operating income | | $1,947.0 | | $(218.7) | | $1,728.3 | |
Notes:
On June 3, 2020, Ecolab Inc. (“Ecolab” or “the Company”) completed the previously announced separation of its Upstream Energy business (the “ChampionX Business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger of ChampionX (the “Merger”) with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”). As a result of the Transaction, the ChampionX business, which includes the direct revenues, operating expenses and certain other expenses directly attributable to the ChampionX business, is reflected in the Company’s historical financial statements as discontinued operations. Allocations of Ecolab’s overhead expenses included in historical Upstream Energy segment results are reallocated to the remaining segments.
Consistent with internal management reporting, Corporate expense amounts include intangible asset amortization specifically from the Nalco merger and special (gains) and charges that are not allocated to our reportable segments.
We evaluate the performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency rates are generally based on existing market rates at the time they are established.
The above table includes financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”), including fixed currency sales and fixed currency operating income. We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results. These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in the table.
Exhibit 99.4
ECOLAB INC.
SUPPLEMENTAL REPORTABLE SEGMENT INFORMATION AND NON-GAAP RECONCILIATION
2020 AND 2019 REVISED SEGMENT DATA AT 2020 FIXED CURRENCY EXCHANGE RATES
(unaudited)
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (millions) | | 2019 | | 2020 | | ||||||||
| | | | | | | | | | | | | | |
| | **** | Three Months Ended <br>March 31 | | Three Months Ended <br>June 30 | | Three Months Ended September 30 | | Three Months Ended December 31 | | Twelve Months Ended <br>December 31 | | Three Months Ended <br>March 31 | |
| Net Sales | | | | | | | | | | | | | |
| Global Industrial | | $1,397.0 | | $1,500.7 | | $1,517.1 | | $1,579.8 | | $5,994.6 | | $1,443.6 | |
| Global Institutional | **** | 1,020.2 | | 1,112.5 | | 1,150.6 | | 1,128.8 | | 4,412.1 | | 1,072.1 | |
| Global Healthcare and Life Sciences | **** | 227.0 | | 252.8 | | 243.9 | | 255.3 | | 979.0 | | 246.5 | |
| Other | **** | 274.7 | | 306.2 | | 323.1 | | 307.7 | | 1,211.7 | | 277.6 | |
| Subtotal at fixed currency | **** | 2,918.9 | | 3,172.2 | | 3,234.7 | 3,271.6 | | 12,597.4 | | 3,039.8 | | |
| Effect of foreign currency translation | **** | 5.8 | | (3.1) | | (10.7) | (27.4) | | (35.4) | | (19.2) | | |
| Total reported GAAP net sales | **** | $2,924.7 | | $3,169.1 | | $3,224.0 | | $3,244.2 | | $12,562.0 | | $3,020.6 | |
| | **** | | | | | | | | | | | | |
| Operating Income | | | | | | | | | | | | | |
| Global Industrial | | $161.4 | | $220.9 | | $249.8 | | $270.6 | | 902.7 | | $206.6 | |
| Global Institutional | **** | 174.8 | | 234.4 | | 280.9 | 249.7 | | 939.8 | | 182.4 | | |
| Global Healthcare and Life Sciences | **** | 24.8 | | 31.2 | | 36.3 | 32.2 | | 124.5 | | 22.9 | | |
| Other | **** | 25.7 | | 41.9 | | 51.4 | 48.0 | | 167.0 | | 21.6 | | |
| Corporate | **** | (73.4) | | (62.7) | | (66.5) | (77.1) | | (279.7) | | (54.6) | | |
| Subtotal at fixed currency | **** | 313.3 | | 465.7 | | 551.9 | 523.4 | | 1,854.3 | | 378.9 | | |
| Effect of foreign currency translation | **** | 0.3 | | (1.2) | | (3.0) | (5.2) | | (9.1) | | (2.7) | | |
| Total reported GAAP operating income | **** | $313.6 | | $464.5 | | $548.9 | | $518.2 | | $1,845.2 | | $376.2 | |
Notes:
We evaluate the performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Fixed currency rates are generally based on existing market rates at the time they are established.
The revised segment net sales and operating income for each of the three months ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019, the twelve months ended December 31, 2019 and the three months ended March 31, 2020 reflect the ChampionX business as discontinued operations.
The above table includes financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”), including fixed currency sales and fixed currency operating income. We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results. These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in the table.
Exhibit 99.5
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS FOR THE THREE MONTHS ENDEDMARCH 31, 2020 AND FOR EACH OF THE TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(unaudited)
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| (millions, except percent and per share) | Three Months Ended | | Twelve Months Ended | | Twelve Months Ended | ||||
| | | March 31, 2020 | **** | December 31, 2019 | December 31, 2018 | ||||
| Net sales | | | | | | | | | |
| GAAP net sales from continuing operations | | $3,020.6 | | | $12,562.0 | | | $12,222.1 | |
| Effect of foreign currency translation | | 19.2 | | | 35.4 | | | (207.4) | |
| Non-GAAP fixed currency sales from continuing operations | | $3,039.8 | | | $12,597.4 | | | $12,014.7 | |
| | | | | | | | | | |
| Cost of sales | | | | | | | | | |
| GAAP cost of sales from continuing operations | | $1,720.2 | | | $7,045.8 | | | $6,875.3 | |
| Special (gains) and charges | | 9.1 | | | 38.5 | | | 4.8 | |
| Non-GAAP cost of sales from continuing operations | | $1,711.1 | | | $7,007.3 | | | $6,870.5 | |
| | | | | | | | | | |
| Gross margin | | | | | | | | | |
| GAAP gross margin from continuing operations | | 43.1 | % | | 43.9 | % | | 43.7 | % |
| Non-GAAP adjusted gross margin from continuing operations | | 43.4 | % | | 44.2 | % | | 43.8 | % |
| | | | | | | | | | |
| Operating income | | | | | | | | | |
| GAAP operating income from continuing operations | | $376.2 | | | $1,845.2 | | | $1,728.3 | |
| Effect of foreign currency translation | | 2.7 | | | 9.1 | | | (26.5) | |
| Non-GAAP fixed currency operating income from continuing operations | | $378.9 | | | $1,854.3 | | | $1,701.8 | |
| | | | | | | | | | |
| GAAP operating income from continuing operations | | $376.2 | | | $1,845.2 | | | $1,728.3 | |
| Special (gains) and charges | | 25.0 | | | 158.7 | | | 117.5 | |
| Non-GAAP adjusted operating income from continuing operations | | 401.2 | | | 2,003.9 | | | 1,845.8 | |
| Effect of foreign currency translation | | 2.7 | | | 9.1 | | | (26.5) | |
| Non-GAAP adjusted fixed currency operating income from continuing operations | | $403.9 | | | $2,013.0 | | | $1,819.3 | |
| | | | | | | | | | |
| Operating income margin | | | | | | | | | |
| GAAP operating income margin from continuing operations | | 12.5 | % | | 14.7 | % | | 14.1 | % |
| Non-GAAP adjusted fixed currency operating income margin from continuing operations | | 13.3 | % | | 16.0 | % | | 15.1 | % |
| | | | | | | | | | |
| Net Income attributable to Ecolab | | | | | | | | | |
| GAAP net income from continuing operations attributable to Ecolab | | $292.0 | | | $1,425.6 | | | $1,250.3 | |
| Special (gains) and charges, after tax | | 18.5 | | | 128.3 | | | 88.8 | |
| Discrete tax net expense (benefit) | | (21.9) | | | (57.7) | | | 2.1 | |
| Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $288.6 | | | $1,496.2 | | | $1,341.2 | |
| | | | | | | | | | |
| Diluted Earnings per Share from continuing operations attributable to Ecolab | | | | | | | | | |
| GAAP diluted EPS from continuing operations | | $1.00 | | | $4.87 | | | $4.27 | |
| Special (gains) and charges, after tax | | 0.06 | | | 0.44 | | | 0.30 | |
| Discrete tax net expense (benefit) | | (0.07) | | | (0.20) | | | 0.01 | |
| Non-GAAP adjusted diluted EPS from continuing operations | | $0.99 | | | $5.12 | | | $4.58 | |
| | | | | | | | | | |
Note:
Per share amounts do not necessarily sum due to rounding.
The revised supplemental non-GAAP reconciliations reflect the ChampionX business as discontinued operations.
The above table includes financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive
compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
The non-GAAP adjusted financial measures for cost of sales, gross margin and operating income exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs associated with the historical trends and future results. After tax special (gains) and charges are derived by applying the applicable local jurisdictional tax rate to the corresponding pre-tax special (gains) and charges.
These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measure included in the table.