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) February 15, 2022
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 February 15, 2022, Ecolab Inc. (“Ecolab”) announced earnings for the fourth quarter ended December 31, 2021. A copy of the (i) News Release issued by Ecolab in connection with this report under Item 2.02 is furnished and attached as Exhibit (99.1), (ii) Supplemental Data to be used in connection with the conference call to be held discussing the fourth quarter results is furnished and attached as Exhibit (99.2), and (iii) Supplemental Discussion and related materials to be used in such conference call is furnished and attached as Exhibit (99.3), each of which is incorporated by reference herein. Ecolab also will publish the attached exhibits on its website located at www.ecolab.com.
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.
| | | | | | |
|---|---|---|---|---|---|
| Exhibit No. | | Description | | Method Of Filing | |
| | | | | | |
| (99.1) | | Ecolab Inc. News Release dated February 15, 2022. | | Filed herewith electronically. | |
| | | | | | |
| (99.2) | | Supplemental Data for Fourth Quarter dated February 15, 2022. | | Filed herewith electronically. | |
| | | | | | |
| (99.3) | | Supplemental Discussion for Fourth Quarter dated February 15, 2022. | | Filed herewith electronically. | |
| | | | | | |
| (104) | | Cover Page Interactive Data File. | | Embedded within the Inline XBRL document. | |
2
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: February 15, 2022 | By: | /s/ David F. Duvick |
| | | David F. Duvick |
| | | Assistant Secretary |
3
Exhibit 99.1
News Release
| | | |
|---|---|---|
| | | |
| | | |
| | Michael Monahan (651) 250-2809<br><br>Andrew Hedberg (651) 250-2185 |
ECOLAB FOURTH QUARTER REPORTED DILUTED CONTINUING OPERATIONS EPS $1.04;
ADJUSTED DILUTED CONTINUING OPERATIONS EPS $1.28, +4%;
FULL YEAR 2022 OUTLOOK UNCHANGED WITH STRONG SALES AND ADJUSTED DILUTED EPS GROWTH REACHING LOW-TEENS
FOURTH QUARTER HIGHLIGHTS :
| ● | Continued strong fourth quarter sales growth was partially offset by increased COVID-related effects on broad business activity and a near doubling of delivered product cost inflation (which includes raw materials and freight) and supply constraints compared to the third quarter. |
|---|---|
| ● | Reported sales from continuing operations +10% versus last year. Acquisition adjusted fixed currency sales +9%. |
| --- | --- |
| ● | Reported diluted EPS from continuing operations $1.04, flat versus last year. |
| --- | --- |
| ● | Adjusted diluted EPS from continuing operations, excluding special gains and charges, discrete tax items and the impact of the Purolite transaction, were $1.28, +4% versus last year**.** |
| --- | --- |
| ● | The earnings increase reflects accelerated pricing and volume growth, along with lower pension and interest expense, which were partially offset by substantially higher delivered product costs and the comparison to lower variable compensation last year. |
| --- | --- |
| ● | As previously disclosed, unfavorable delivered product costs and supply constraints resulted in an additional estimated unfavorable $0.10 per share in the fourth quarter versus our initial expectations. |
| --- | --- |
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Fourth Quarter Ended December 31 | ||||||||||||||||
| | | Reported | | | | | Adjusted | | | | ||||||||
| (unaudited) | | Public Currency Rates | | % | | Public Currency Rates | | % | ||||||||||
| (millions, except per share) | | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
| Net sales | | $3,364.6 | | | $3,065.3 | | | 10 | % | | $3,352.6 | | | $3,065.3 | | | 9 | % |
| Operating income | | 387.7 | | | 416.1 | | | (7) | % | | 475.1 | | | 478.0 | | | (1) | % |
| Net income from continuing operations attributable to Ecolab | | 301.0 | | | 300.3 | | | 0 | % | | 369.3 | | | 355.1 | | | 4 | % |
| | | | | | | | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations attributable to Ecolab | | $1.04 | | | $1.04 | | | 0 | % | | $1.28 | | | $1.23 | | | 4 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Adjusted | | | | ||||
| | | Fixed Currency Rates | | % | | Fixed Currency Rates | | % | ||||||||||
| | | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
| Net sales | | $3,425.4 | | | $3,121.1 | | | 10 | % | | $3,413.4 | | | $3,121.1 | | | 9 | % |
| Operating income | | 398.3 | | | 426.4 | | | (7) | % | | 485.7 | | | 488.3 | | | (1) | % |
1
ST. PAUL, Minn., February 15, 2022: The fourth quarter results reflected strong sales growth, driven by accelerated pricing and further robust new business wins in an uneven market recovery, that was partially offset by increased COVID-related effects on broad business activity and a near doubling of delivered product cost inflation and supply constraints compared to the third quarter.
CEO comment
Commenting on the quarter, Christophe Beck, Ecolab’s president and chief executive officer, said, “We are very pleased with the strong topline growth we delivered in the fourth quarter, led by double-digit gains in our Institutional and Specialty and Other segments and continued strong growth in our Industrial segment. Strong volume and pricing momentum was largely offset by significant raw materials and freight cost increases, which grew an estimated 20% year-on-year in the fourth quarter, leading to an estimated 10% overall impact on our total cost of sales, almost double the rate of increase we saw in the third quarter.
“I am proud of what our team accomplished in 2021 as our business fundamentals continued to improve in a very unique environment. We delivered record new business wins, continued to accelerate pricing to 4% as we exited the fourth quarter, launched a strong innovation pipeline, and further improved our productivity as we leveraged our digital investments. Together, these actions enabled us to mitigate an estimated $1.00 per share of substantial delivered product cost inflation and other supply constraints as we grew 2021 adjusted diluted earnings per share by 17%. Further, our recent acquisition of Purolite is progressing well and we are excited about the increased customer value and incremental growth opportunities this unique and high growth platform brings to Ecolab.
“We now move into 2022 with strong business momentum. With very healthy sales growth, robust new business wins, new innovation and increased pricing, we expect to progressively compensate for higher delivered product costs and to drive strong earnings growth. While we expect a decent global economy, we also expect the COVID impacts to remain significant during the first half of the year, and we expect inflation to remain high before it progressively eases during the second half of the year.
“We expect these cost impacts to remain especially strong in the first quarter of 2022, even slightly higher than those experienced in the fourth quarter. We look for the first quarter to show healthy 2
sales growth and a flattish year-over-year earnings per share comparison impacted by continued high raw material and freight costs. We also believe that our accelerating pricing and continued strong volume growth will progressively outpace higher expected delivered product costs over the following quarters. For the full year 2022, we believe our sales, pricing and cost efficiency actions will enable us to deliver continued strong sales gains with adjusted diluted earnings per share growth reaching low-teens levels, assuming once again that inflation and supply constraints ease as the year progresses.
“While the external environment remains dynamic, we are confident in our fundamental positioning and our proven ability to leverage our opportunities to improve our long-term margins further and to continue to deliver superior long-term results for our customers and shareholders.”
Fourth Quarter 2021 Consolidated Results
Ecolab’s fourth quarter reported and fixed currency sales increased 10% and acquisition adjusted fixed currency sales increased 9% when compared to the prior year.
Fourth quarter 2021 reported operating income decreased 7% and includes the impact of COVID-related special charges and the impact of the Purolite acquisition. Adjusted operating income and adjusted fixed currency operating income both decreased 1%. The operating income decrease reflects the accelerated pricing and volume growth which were offset by significantly higher delivered product costs and the comparison to lower variable compensation last year. As previously disclosed, unfavorable supply constraints resulted in an additional estimated unfavorable $0.10 per share in the fourth quarter versus our initial expectations.
Reported interest expense decreased 8% reflecting lower average debt levels and lower average interest rates from debt refinancing transactions, though this benefit was partially offset by new debt issued to fund the December 1, 2021 Purolite acquisition.
The reported income tax rate for the fourth quarter of 2021 was 12.6% compared with the reported rate of 19.3% in the fourth quarter of 2020. Excluding special gains and charges, discrete tax items and the impact of the Purolite transaction, the adjusted tax rate for the fourth quarter of 2021 was 17.3% compared with the adjusted tax rate of 18.3% in the fourth quarter of 2020. The lower tax rate in the fourth quarter of 2021 reflected tax planning benefits. 3
Fourth quarter 2021 reported net income from continuing operations attributable to Ecolab was flat versus the prior year. Excluding the impact of special gains and charges, discrete tax items and the impact of the Purolite transaction, adjusted net income from continuing operations attributable to Ecolab increased 4% versus the prior year.
Reported diluted earnings per share from continuing operations was flat versus the prior year. As expected, the impact of Purolite (excluding acquisition-related special charges) was $0.02 per share dilutive to reported earnings per share from continuing operations as strong sales growth since its December 1, 2021 acquisition was more than offset by acquisition-related amortization and interest expense. Adjusted diluted earnings per share from continuing operations increased 4% when compared against the fourth quarter 2020. Currency translation did not have a material impact on fourth quarter 2021 earnings per share.
Fourth Quarter 2021 Segment Review
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Industrial | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | Fourth Quarter Ended December 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2021 | | 2020 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $1,695.2 | | | $1,571.8 | | | 8 | % | | 7 | % |
| Operating income | | 280.2 | | | 323.4 | | | (13) | % | | (14) | % |
| Operating income margin | | 16.5 | % | | 20.6 | % | | | | | | |
| Acq. adj. operating income margin | | 16.5 | % | | 20.6 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $1,659.2 | | | $1,540.4 | | | 8 | % | | | |
| Operating income | | 272.5 | | | 316.5 | | | (14) | % | | | |
The Industrial segment includes Water, Food & Beverage, Downstream and Paper
Acquisition adjusted fixed currency sales increased 7%. Strong growth in Water, Paper and Downstream, led by new business wins and accelerated pricing, along with good gains in Food & Beverage, yielded the increase. Acquisition adjusted fixed currency operating income decreased 14% compared to a very strong 17% increase last year as accelerated pricing and higher volume were more than offset by significantly higher delivered product costs, unfavorable supply constraints, and the comparison to lower variable compensation last year. 4
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Institutional & Specialty | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | Fourth Quarter Ended December 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2021 | | 2020 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $1,064.2 | | | $894.4 | | | 19 | % | | 19 | % |
| Operating income (loss) | | 158.7 | | | 94.6 | | | 68 | % | | 68 | % |
| Operating income margin | | 14.9 | % | | 10.6 | % | | | | | | |
| Acq. adj. operating income margin | | 15.0 | % | | 10.6 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $1,051.9 | | | $883.9 | | | 19 | % | | | |
| Operating income (loss) | | 157.2 | | | 94.0 | | | 67 | % | | | |
The Institutional & Specialty segment includes Institutional and Specialty
Acquisition adjusted fixed currency sales increased 19%. Strong growth in the Institutional division reflected improved volume, further good new business wins, further gains from Ecolab Science Certified programs, new innovation and pricing despite a stalled recovery in restaurant and lodging activity versus the third quarter due to COVID-related impacts. Specialty sales increased modestly as strong quickservice sales more than offset lower food retail sales, in part due to customer staffing shortages. Acquisition adjusted fixed currency operating income increased 68% reflecting increased volume and accelerated pricing that more than offset higher delivered product costs and the comparison to lower variable compensation last year.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Healthcare & Life Sciences | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | Fourth Quarter Ended December 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2021 | | 2020 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $308.0 | | | $327.8 | | | (6) | % | | (13) | % |
| Operating income | | 29.7 | | | 56.3 | | | (47) | % | | (33) | % |
| Operating income margin | | 9.6 | % | | 17.2 | % | | | | | | |
| Acq. adj. operating income margin | | 13.2 | % | | 17.2 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $300.2 | | | $319.1 | | | (6) | % | | | |
| Operating income | | 28.7 | | | 54.2 | | | (47) | % | | | |
The Healthcare & Life Sciences segment includes Healthcare and Life Sciences
5
Acquisition adjusted fixed currency sales decreased 13% compared to a 22% increase last year when sales benefited from strong COVID-related demand. Acquisition adjusted fixed currency operating income decreased 33%, primarily reflecting the comparison to the very strong sales volume last year (when operating income grew 65%) as well as the impact of fourth quarter 2021’s unfavorable supply constraints; these were partially offset by favorable pricing and lower variable compensation.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | Fourth Quarter Ended December 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2021 | | 2020 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $322.7 | | | $286.0 | | | 13 | % | | 13 | % |
| Operating income | | 43.9 | | | 44.4 | | | (1) | % | | (1) | % |
| Operating income margin | | 13.6 | % | | 15.5 | % | | | | | | |
| Acq. adj. operating income margin | | 13.6 | % | | 15.5 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $318.2 | | | $281.1 | | | 13 | % | | | |
| Operating income | | 43.2 | | | 43.4 | | | 0 | % | | | |
The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies
Acquisition adjusted fixed currency sales increased 13%. Growth was strong across all divisions. Acquisition adjusted fixed currency operating income decreased 1% as accelerated pricing and volume growth was more than offset by the comparison to lower variable compensation last year and higher delivered product costs.
Corporate
Fourth quarter of 2021 corporate segment includes:
| ● | sales of $35 million to ChampionX under the Master Cross Supply and Product Transfer agreements we entered into as part of the ChampionX separation |
|---|---|
| ● | amortization expense of $31 million related to the Nalco merger intangible assets |
| --- | --- |
| ● | net special charges of $84 million that primarily reflected COVID-related charges and Purolite acquisition costs |
| --- | --- |
Special gains and charges for the fourth quarter of 2020 were a net charge of $62 million and primarily include restructuring charges and COVID-related charges.
6
2022 Business Outlook
We move into 2022 with strong business momentum. With very healthy sales growth, robust new business wins, new innovation and increased pricing, we expect to progressively compensate for higher delivered product costs and to drive strong earnings growth. While we expect a decent global economy, we also expect the COVID impacts to remain significant during the first half of the year, and we expect inflation to remain high before it progressively eases during the second half of the year.
We expect these cost impacts to remain especially strong in the first quarter of 2022, even slightly higher than those experienced in the fourth quarter. We look for the first quarter to show healthy
sales growth and a flattish year-over-year earnings per share comparison impacted by continued high raw material and freight costs.
For the full year 2022, we believe our sales, pricing and cost efficiency actions will enable us to deliver continued strong sales gains with adjusted diluted earnings per share growth reaching low-teens levels, assuming once again that inflation and supply constraints ease as the year progresses. We continue to expect the impact of Purolite, including $0.26 per share of transaction-related amortization, will be neutral to 2022 adjusted diluted earnings per share.
We remain confident in our long-term outlook as our value proposition to help solve the world’s people, planet and business health needs is more important than ever. With our strong pricing and an inflationary environment that will ease ultimately and lead to higher margins, we expect to continue to leverage our robust growth opportunities to drive superior results for our customers and shareholders.
About Ecolab
A trusted partner at nearly three million customer locations, Ecolab (ECL) is a global leader in water, hygiene and infection prevention solutions and services that protect people, planet and business health. With annual sales of $13 billion and more than 47,000 associates, Ecolab delivers comprehensive science-based solutions, data-driven insights and world-class service to advance food safety, maintain clean and safe environments, optimize water and energy use, and improve operational efficiencies and sustainability for customers in the food, healthcare, hospitality and industrial markets in more than 170 countries around the world. www.ecolab.com 7
Ecolab will host a live webcast to review the fourth quarter earnings announcement today at 1:00 p.m. Eastern Time. The webcast, along with related materials, will be available to the public on Ecolab's website at www.ecolab.com/investor. A replay of the webcast and related materials will be available at that site.
Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding COVID-19 pandemic trends, the U.S. and global economic recovery, inflation and supply chain challenges, and our financial and business performance and prospects, including sales, earnings, pricing, innovation and new business. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. With respect to the COVID-19 pandemic, numerous factors will determine the extent of the impact on our business, including the severity of the disease, the duration of the outbreak, the distribution, acceptance and efficacy of vaccines, the likelihood of a resurgence of the outbreak, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy and other unintended consequences.
Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; difficulty in procuring raw materials or fluctuations in raw material costs; the vitality of the markets we serve; the impact of economic factors such as the worldwide economy, capital flows, interest rates, foreign currency 8
risk, and reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar; information technology infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; exposure to global economic, political and legal risks related to our international operations; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; realization of anticipated benefits of the Purolite acquisition; our ability to acquire complementary businesses and to effectively integrate such businesses; the costs and effects of complying with laws and regulations, including those relating to the environment and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; potential chemical spill or release; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; the occurrence of litigation or claims, including class action lawsuits; the loss or insolvency of a major customer or distributor; repeated or prolonged government and/or business shutdowns or similar events; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any failure to comply with covenants that apply to our indebtedness; potential losses arising from the impairment of goodwill or other assets; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.
Non-GAAP Financial Information
This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
These non-GAAP financial measures (including with respect to continuing operations) include: 9
•fixed currency sales
•adjusted net sales
•adjusted fixed currency sales
•acquisition adjusted fixed currency sales
•adjusted cost of sales
•adjusted gross margin
•fixed currency operating income
•fixed currency operating income margin
•adjusted operating income
•adjusted fixed currency operating income
•adjusted fixed currency operating income margin
•acquisition adjusted fixed currency operating income
•acquisition adjusted fixed currency operating income margin
•adjusted other (income) expense
•adjusted interest expense
•adjusted tax rate
•adjusted net income attributable to Ecolab
•adjusted diluted earnings per share
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.
Our non-GAAP adjusted financial measures for net sales excludes Purolite net sales. Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income, other (income) expense and interest expense exclude the impact of special (gains) and charges and (with the exception of other (income) expense) the impact of the Purolite transaction, 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 historical trends and future 10
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.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange, which eliminate the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2021. We also provide our segment results based on public currency rates for informational purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco merger or the impact of special (gains) and charges as these are not allocated to the Company’s reportable segments.
Acquisition adjusted growth rates exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude sales to our Venezuelan deconsolidated subsidiaries from both the current period and comparable period of the prior year. In addition, as part of the separation, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
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 this news release. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in this news release.
11
We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this report) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of various items that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact reported earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.
| |
|---|
| (ECL-E) |
12
ECOLAB INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Fourth Quarter Ended | | | | Twelve Months Ended | | |||||||
| | | December 31 | | % | | December 31 | | % | ||||||
| (millions, except per share) | | 2021 | 2020 | | Change | 2021 | 2020 | Change | ||||||
| | | | | | | | | | | | | | | |
| Product and equipment sales | | $2,691.7 | | $2,449.1 | | | | | $10,153.3 | | $9,466.6 | | | |
| Service and lease sales | | 672.9 | | 616.2 | | | | | 2,579.8 | | 2,323.6 | | | |
| Net sales | | 3,364.6 | | 3,065.3 | | 10 | % | | 12,733.1 | | 11,790.2 | | 8 | % |
| Product and equipment cost of sales | | 1,648.0 | | 1,409.7 | | | | | 6,100.9 | | 5,481.3 | | | |
| Service and lease cost of sales | | 395.1 | | 370.6 | | | | | 1,514.9 | | 1,424.5 | | | |
| Cost of sales ^(2)^ | | 2,043.1 | | 1,780.3 | | 15 | % | | 7,615.8 | | 6,905.8 | | 10 | % |
| Selling, general and administrative expenses | | 867.9 | | 809.6 | | 7 | % | | 3,416.1 | | 3,309.1 | | 3 | % |
| Special (gains) and charges ^(2)^ | | 65.9 | | 59.3 | | | | | 102.6 | | 179.6 | | | |
| Operating income | | 387.7 | | 416.1 | | (7) | % | | 1,598.6 | | 1,395.7 | | 15 | % |
| Other (income) expense ^(2)^ | | (6.4) | | (10.3) | | (38) | % | | (33.9) | | (55.9) | | (39) | % |
| Interest expense, net ^(2)^ | | 44.6 | | 48.4 | | (8) | % | | 218.3 | | 290.2 | | (25) | % |
| Income before income taxes | | 349.5 | | 378.0 | | (8) | % | | 1,414.2 | | 1,161.4 | | 22 | % |
| Provision for income taxes | | 44.2 | | 73.1 | | (40) | % | | 270.2 | | 176.6 | | 53 | % |
| Net income including noncontrolling interest | | 305.3 | | 304.9 | | 0 | % | | 1,144.0 | | 984.8 | | 16 | % |
| Net income attributable to noncontrolling interest | | 4.3 | | 4.6 | | | | | 14.1 | | 17.4 | | | |
| Net income from continuing operations attributable to Ecolab | | 301.0 | | 300.3 | | 0 | % | | 1,129.9 | | 967.4 | | 17 | % |
| Net income (loss) from discontinued operations, net of tax ^(1)^ | | - | | - | | | | | - | | (2,172.5) | | | |
| Net income (loss) attributable to Ecolab | | $301.0 | | $300.3 | | 0 | % | | $1,129.9 | | ($1,205.1) | | | |
| | | | | | | | | | | | | | | |
| Earnings attributable to Ecolab per common share | | | | | | | | | | | | | ||
| Basic | | | | | | | | | | | | | | |
| Continuing operations | | $1.05 | | $1.05 | | 0 | % | | $3.95 | | $3.37 | | 17 | % |
| Discontinued operations | | - | | - | | | | | - | | ($7.57) | | | |
| Earnings attributable to Ecolab | | $1.05 | | $1.05 | | 0 | % | | $3.95 | | ($4.20) | | | |
| Diluted | | | | | | | | | | | | | | |
| Continuing operations | | $1.04 | | $1.04 | | 0 | % | | $3.91 | | $3.33 | | 17 | % |
| Discontinued operations | | - | | - | | | | | - | | ($7.48) | | | |
| Earnings attributable to Ecolab | | $1.04 | | $1.04 | | 0 | % | | $3.91 | | ($4.15) | | | |
| | | | | | | | | | | | | | | |
| Weighted-average common shares outstanding | | | | | | | | | | | | | ||
| Basic | | 286.7 | | 285.6 | | 0 | % | | 286.3 | | 287.0 | | 0 | % |
| Diluted | | 289.5 | | 288.7 | | 0 | % | | 289.1 | | 290.3 | | 0 | % |
| | | | | | | | | | | | | | | |
| (1) Net Income (loss) attributable to discontinued operations, net of tax, relates to the separation of ChampionX. | ||||||||||||||
| (2) Cost of sales, Special (gains) and charges, Other (income) expense and Interest expense, net in the Consolidated Statement of Income above include the following: | ||||||||||||||
| | | | | | | | | | | | | | | |
| | | Fourth Quarter Ended | | | | Twelve Months Ended | | |||||||
| | | December 31 | | | | | December 31 | | | | ||||
| (millions) | | 2021 | | 2020 | | | | | 2021 | | 2020 | | | |
| | | | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | | |
| Restructuring activities | | $0.6 | | $0.8 | | | | | $24.7 | | $7.4 | | | |
| Acquisition and integration activities | | 4.2 | | (0.2) | | | | | 4.2 | | 3.9 | | | |
| COVID-19 activities, net | | 12.9 | | 3.8 | | | | | 64.7 | | 12.5 | | | |
| Other | | - | | (1.8) | | | | | 0.3 | | 24.4 | | | |
| Subtotal ^(a)^ | | 17.7 | | 2.6 | | | | | 93.9 | | 48.2 | | | |
| | | | | | | | | | | | | | | |
| Special (gains) and charges | | | | | | | | | | | | | | |
| Restructuring activities | | 5.4 | | 40.0 | | | | | 11.9 | | 71.4 | | | |
| Acquisition and integration activities | | 26.6 | | 3.0 | | | | | 29.9 | | 8.5 | | | |
| Disposal and impairment charges | | - | | (4.5) | | | | | - | | 41.4 | | | |
| COVID-19 activities, net | | 26.2 | | 16.4 | | | | | 42.4 | | 23.6 | | | |
| Other | | 7.7 | | 4.4 | | | | | 18.4 | | 34.7 | | | |
| Subtotal | | 65.9 | | 59.3 | | | | | 102.6 | | 179.6 | | | |
| | | | | | | | | | | | | | | |
| Interest expense, net | | 0.8 | | - | | | | | 33.1 | | 83.8 | | | |
| Pension Settlements/Curtailments | | 10.6 | | 0.4 | | | | | 37.2 | | 0.4 | | | |
| | | | | | | | | | | | | | | |
| Total special (gains) and charges | | $95.0 | | $62.3 | | | | | $266.8 | | $312.0 | | | |
13
(a) Special charges of $17.6 million and $1.2 million in the fourth quarter of 2021 and 2020, respectively, and $91.9 million and $39.3 million for the twelve months ended December 31, 2021 and 2020, respectively, were recorded in product and equipment cost of sales. Special charges of $0.1 million and $1.4 million in the fourth quarter of 2021 and 2020, respectively, and $2.0 million and $8.9 million for the twelve months ended December 31, 2021 and 2020, respectively, were recorded in service and lease cost of sales. 14
ECOLAB INC.
REPORTABLE SEGMENT INFORMATION
(unaudited)
| | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Fourth Quarter Ended December 31 | ||||||||||||
| | | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | | % | | | | | | % | ||
| (millions) | | 2021 | 2020 | **** | Change | 2021 | 2020 | Change | ||||||
| Net Sales | | | | | | | | | | | | | | |
| Global Industrial | | $1,695.2 | | $1,571.8 | | 8 | % | | $1,659.2 | | $1,540.4 | | 8 | % |
| Global Institutional & Specialty | | 1,064.2 | | 894.4 | | 19 | % | | 1,051.9 | | 883.9 | | 19 | % |
| Global Healthcare & Life Sciences | | 308.0 | | 327.8 | | (6) | % | | 300.2 | | 319.1 | | (6) | % |
| Other | | 322.7 | | 286.0 | | 13 | % | | 318.2 | | 281.1 | | 13 | % |
| Corporate | | 35.3 | | 41.1 | | (14) | % | | 35.1 | | 40.8 | | (14) | % |
| Subtotal at fixed currency rates | | 3,425.4 | | 3,121.1 | | 10 | % | | 3,364.6 | | 3,065.3 | | 10 | % |
| Currency impact | | (60.8) | | (55.8) | | * | | | - | | - | | * | |
| Consolidated reported GAAP net sales | | $3,364.6 | | $3,065.3 | | 10 | % | | $3,364.6 | | $3,065.3 | | 10 | % |
| | | | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | | | |
| Global Industrial | | $280.2 | | $323.4 | | (13) | % | | $272.5 | | $316.5 | | (14) | % |
| Global Institutional & Specialty | | 158.7 | | 94.6 | | 68 | % | | 157.2 | | 94.0 | | 67 | % |
| Global Healthcare & Life Sciences | | 29.7 | | 56.3 | | (47) | % | | 28.7 | | 54.2 | | (47) | % |
| Other | | 43.9 | | 44.4 | | (1) | % | | 43.2 | | 43.4 | | 0 | % |
| Corporate | | (114.2) | | (92.3) | | * | | | (113.9) | | (92.0) | | * | |
| Subtotal at fixed currency rates | | 398.3 | | 426.4 | | (7) | % | | 387.7 | | 416.1 | | (7) | % |
| Currency impact | | (10.6) | | (10.3) | | * | | | - | | - | | * | |
| Consolidated reported GAAP operating income | | $387.7 | | $416.1 | | (7) | % | | $387.7 | | $416.1 | | (7) | % |
| | | | | | | | | | | | | | | |
| | | Year Ended December 31 | ||||||||||||
| | | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | | % | | | | | | % | ||
| (millions) | | 2021 | 2020 | **** | Change | 2021 | 2020 | Change | ||||||
| Net Sales | | | | | | | | | | | | | | |
| Global Industrial | | $6,304.9 | | $6,048.2 | | 4 | % | | $6,237.8 | | $5,867.1 | | 6 | % |
| Global Institutional & Specialty | | 3,978.2 | | 3,629.0 | | 10 | % | | 3,955.9 | | 3,562.5 | | 11 | % |
| Global Healthcare & Life Sciences | | 1,195.4 | | 1,241.1 | | (4) | % | | 1,181.6 | | 1,185.5 | | 0 | % |
| Other | | 1,226.9 | | 1,103.4 | | 11 | % | | 1,218.6 | | 1,075.1 | | 13 | % |
| Corporate | | 139.4 | | 100.6 | | 39 | % | | 139.2 | | 100.0 | | 39 | % |
| Subtotal at fixed currency rates | | 12,844.8 | | 12,122.3 | | 6 | % | | 12,733.1 | | 11,790.2 | | 8 | % |
| Currency impact | | (111.7) | | (332.1) | | * | | | - | | - | | * | |
| Consolidated reported GAAP net sales | | $12,733.1 | | $11,790.2 | | 8 | % | | $12,733.1 | | $11,790.2 | | 8 | % |
| | | | | | | | | | | | | | | |
| Operating Income | | | | | | | | | | | | | | |
| Global Industrial | | $1,031.0 | | $1,123.1 | | (8) | % | | $1,016.3 | | $1,086.8 | | (6) | % |
| Global Institutional & Specialty | | 556.9 | | 324.0 | | 72 | % | | 554.7 | | 320.1 | | 73 | % |
| Global Healthcare & Life Sciences | | 160.9 | | 218.3 | | (26) | % | | 159.2 | | 205.7 | | (23) | % |
| Other | | 187.3 | | 132.8 | | 41 | % | | 186.2 | | 130.2 | | 43 | % |
| Corporate | | (318.6) | | (349.7) | | * | | | (317.8) | | (347.1) | | * | |
| Subtotal at fixed currency rates | | 1,617.5 | | 1,448.5 | | 12 | % | | 1,598.6 | | 1,395.7 | | 15 | % |
| Currency impact | | (18.9) | | (52.8) | | * | | | - | | - | | * | |
| Consolidated reported GAAP operating income | | $1,598.6 | | $1,395.7 | | 15 | % | | $1,598.6 | | $1,395.7 | | 15 | % |
* Not meaningful.
As shown in the “Fixed Currency Rates” tables above, we evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Amounts shown in the “Public Currency Rates” tables above reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period, and are provided for informational purposes. The difference between the fixed currency exchange rates and the public currency exchange rates is reported as “Currency impact” in the “Fixed Currency Rates” tables above.
The Corporate segment includes amortization from the Nalco merger intangible assets. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income.
15
ECOLAB INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | December 31 | | December 31 | ||
| (millions) | | 2021 | | 2020 | ||
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $359.9 | | | $1,260.2 | |
| Accounts receivable, net | | 2,478.4 | | | 2,273.8 | |
| Inventories | | 1,491.8 | | | 1,285.2 | |
| Other current assets | | 357.0 | | | 298.2 | |
| Total current assets | | 4,687.1 | | | 5,117.4 | |
| | | | | | | |
| Property, plant and equipment, net | | 3,288.5 | | | 3,124.9 | |
| Goodwill | | 8,063.9 | | | 6,006.9 | |
| Other intangible assets, net | | 4,224.1 | | | 2,977.0 | |
| Operating lease assets | | 396.8 | | | 423.8 | |
| Other assets | | 546.0 | | | 476.0 | |
| Total assets | | $21,206.4 | | | $18,126.0 | |
| | | | | | | |
| Liabilities and Equity | | | | | | |
| Current liabilities | | | | | | |
| Short-term debt | | $411.0 | | | $17.3 | |
| Accounts payable | | 1,384.2 | | | 1,160.6 | |
| Compensation and benefits | | 509.5 | | | 469.3 | |
| Income taxes | | 104.3 | | | 96.1 | |
| Other current liabilities | | 1,144.2 | | | 1,188.9 | |
| Total current liabilities | | 3,553.2 | | | 2,932.2 | |
| | | | | | | |
| Long-term debt | | 8,347.2 | | | 6,669.3 | |
| Postretirement health care and pension benefits | | 894.2 | | | 1,226.2 | |
| Deferred income taxes | | 622.0 | | | 483.9 | |
| Operating lease liabilities | | 282.6 | | | 300.5 | |
| Other liabilities | | 254.1 | | | 312.4 | |
| Total liabilities | | 13,953.3 | | | 11,924.5 | |
| | | | | | | |
| Equity | | | | | | |
| Common stock | | 364.1 | | | 362.6 | |
| Additional paid-in capital | | 6,464.6 | | | 6,235.0 | |
| Retained earnings | | 8,814.5 | | | 8,243.0 | |
| Accumulated other comprehensive loss | | (1,634.8) | | | (1,994.4) | |
| Treasury stock | | (6,784.2) | | | (6,679.7) | |
| Total Ecolab shareholders’ equity | | 7,224.2 | | | 6,166.5 | |
| Noncontrolling interest | | 28.9 | | | 35.0 | |
| Total equity | | 7,253.1 | | | 6,201.5 | |
| Total liabilities and equity | | $21,206.4 | | | $18,126.0 | |
16
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Fourth Quarter Ended | **** | Twelve Months Ended | **** | ||||||||
| | | December 31 | | December 31 | | ||||||||
| (millions, except percent and per share) | | 2021 | 2020 | | 2021 | 2020 | | ||||||
| | | | | | | | | | | | | | |
| Net sales | | | | | | | | | | | | | |
| Reported GAAP net sales | | $3,364.6 | | | $3,065.3 | | | $12,733.1 | | | $11,790.2 | | |
| Impact of Purolite on net sales | | 12.0 | | | | | | 12.0 | | | | | |
| Non-GAAP adjusted net sales | | 3,352.6 | | | 3,065.3 | | | 12,721.1 | | | 11,790.2 | | |
| Effect of foreign currency translation | | 60.8 | | | 55.8 | | | 111.7 | | | 332.1 | | |
| Non-GAAP adjusted fixed currency sales | | 3,413.4 | | | 3,121.1 | | | 12,832.8 | | | 12,122.3 | | |
| Effect of acquisitions and divestitures | | (57.6) | | | (41.4) | | | (252.0) | | | (138.9) | | |
| Non-GAAP acquisition adjusted fixed currency sales | | $3,355.8 | | | $3,079.7 | | | $12,580.8 | | | $11,983.4 | | |
| | | | | | | | | | | | | | |
| Cost of sales | | | | | | | | | | | | | |
| Reported GAAP cost of sales | | $2,043.1 | | | $1,780.3 | | | $7,615.8 | | | $6,905.8 | | |
| Special (gains) and charges | | 17.7 | | | 2.6 | | | 93.9 | | | 48.2 | | |
| Impact of Purolite on cost of sales | | 7.6 | | | | | | 7.6 | | | | | |
| Non-GAAP adjusted cost of sales | | $2,017.8 | | | $1,777.7 | | | $7,514.3 | | | $6,857.6 | | |
| | | | | | | | | | | | | | |
| Gross margin | | | | | | | | | | | | | |
| Reported GAAP gross margin | | 39.3 | % | | 41.9 | % | | 40.2 | % | | 41.4 | % | |
| Non-GAAP adjusted gross margin | | 39.8 | % | | 42.0 | % | | 40.9 | % | | 41.8 | % | |
| | | | | | | | | | | | | | |
| Operating income | | | | | | | | | | | | | |
| Reported GAAP operating income | | $387.7 | | | $416.1 | | | $1,598.6 | | | $1,395.7 | | |
| Effect of foreign currency translation | | 10.6 | | | 10.3 | | | 18.9 | | | 52.8 | | |
| Non-GAAP fixed currency operating income | | 398.3 | | | 426.4 | | | 1,617.5 | | | 1,448.5 | | |
| Special (gains) and charges | | 83.6 | | | 61.9 | | | 196.5 | | | 227.8 | | |
| Impact of Purolite on operating income | | 3.8 | | | | | | 3.8 | | | | | |
| Non-GAAP adjusted fixed currency operating income | | 485.7 | | | 488.3 | | | 1,817.8 | | | 1,676.3 | | |
| Effect of acquisitions and divestitures | | 3.6 | | | (0.1) | | | 5.2 | | | (2.8) | | |
| Non-GAAP acquisition adjusted fixed currency operating income | | $489.3 | | | $488.2 | | | $1,823.0 | | | $1,673.5 | | |
| | | | | | | | | | | | | | |
| Operating income margin | | | | | | | | | | | | | |
| Reported GAAP operating income margin | | 11.5 | % | | 13.6 | % | | 12.6 | % | | 11.8 | % | |
| Non-GAAP adjusted fixed currency operating income margin | | 14.2 | % | | 15.6 | % | | 14.2 | % | | 13.8 | % | |
| Non-GAAP acquisition adjusted fixed currency operating income margin | | 14.6 | % | | 15.9 | % | | 14.5 | % | | 14.0 | % | |
| | | | | | | | | | | | | | |
| Other (income) expense | | | | | | | | | | | | | |
| Reported GAAP other (income) expense | | ($6.4) | | | ($10.3) | | | ($33.9) | | | ($55.9) | | |
| Special (gains) and charges | | 10.6 | | | 0.4 | | | 37.2 | | | 0.4 | | |
| Non-GAAP adjusted other (income) expense | | ($17.0) | | | ($10.7) | | | ($71.1) | | | ($56.3) | | |
| | | | | | | | | | | | | | |
| Interest expense, net | | | | | | | | | | | | | |
| Reported GAAP interest expense, net | | $44.6 | | | $48.4 | | | $218.3 | | | $290.2 | | |
| Special (gains) and charges | | 0.8 | | | 0.0 | | | 33.1 | | | 83.8 | | |
| Impact of Purolite on interest expense | | 3.5 | | | | | | 3.5 | | | | | |
| Non-GAAP adjusted interest expense, net | | $40.3 | | | $48.4 | | | $181.7 | | | $206.4 | | |
17
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
| | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Fourth Quarter Ended | **** | Twelve Months Ended | | ||||||||
| | | December 31 | | December 31 | | ||||||||
| (millions, except percent and per share) | | 2021 | 2020 | | 2021 | 2020 | | ||||||
| Net Income from continuing operations attributable to Ecolab | | | | | | | | | | | | | |
| Reported GAAP net income from continuing operations attributable to Ecolab | | $301.0 | | | $300.3 | | | $1,129.9 | | | $967.4 | | |
| Special (gains) and charges, after tax | | 74.4 | | | 53.8 | | | 213.5 | | | 254.1 | | |
| Discrete tax net expense (benefit) | | (11.7) | | | 1.0 | | | 5.8 | | | (55.8) | | |
| Impact of Purolite on net income | | 5.6 | | | | | | 5.6 | | | | | |
| Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $369.3 | | | $355.1 | | | $1,354.8 | | | $1,165.7 | | |
| | | | | | | | | | | | | | |
| Diluted EPS from continuing operations attributable to Ecolab | | | | | | | | | | | | | |
| Reported GAAP diluted EPS from continuing operations | | $1.04 | | | $1.04 | | | $3.91 | | | $3.33 | | |
| Special (gains) and charges, after tax | | 0.26 | | | 0.19 | | | 0.74 | | | 0.88 | | |
| Discrete tax net expense (benefit) | | (0.04) | | | 0.00 | | | 0.02 | | | (0.19) | | |
| Impact of Purolite on diluted EPS | | 0.02 | | | | | | 0.02 | | | | | |
| Non-GAAP adjusted diluted EPS from continuing operations | | $1.28 | | | $1.23 | | | $4.69 | | | $4.02 | | |
| | | | | | | | | | | | | | |
| Provision for Income Taxes | | | | | | | | | | | | | |
| Reported GAAP tax rate | | 12.6 | % | | 19.3 | % | | 19.1 | % | | 15.2 | % | |
| Special gains and charges | | 2.0 | | | (0.8) | | | 0.1 | | | 0.7 | | |
| Discrete tax items | | 2.6 | | | (0.2) | | | (0.3) | | | 3.8 | | |
| Purolite tax impacts | | 0.1 | | | | | | 0.0 | | | | | |
| Non-GAAP adjusted tax rate | | 17.3 | % | | 18.3 | % | | 18.9 | % | | 19.7 | % | |
18
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Fourth Quarter Ended December 31 | ||||||||||
| (unaudited) | | 2021 | | 2020 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $1,695.2 | | (6.5) | | $1,688.7 | | $1,571.8 | | - | | $1,571.8 |
| Global Institutional & Specialty | | 1,064.2 | | (4.1) | | 1,060.1 | | 894.4 | | - | | 894.4 |
| Global Healthcare & Life Sciences | | 308.0 | | (23.7) | | 284.3 | | 327.8 | | (0.3) | | 327.5 |
| Other | | 322.7 | | - | | 322.7 | | 286.0 | | - | | 286.0 |
| Corporate | | 35.3 | | (35.3) | | - | | 41.1 | | (41.1) | | - |
| Subtotal at fixed currency rates | | 3,425.4 | | (69.6) | | 3,355.8 | | 3,121.1 | | (41.4) | | 3,079.7 |
| Currency impact | | (60.8) | | | | | | (55.8) | | | | |
| Consolidated reported GAAP net sales | | $3,364.6 | | | | | | $3,065.3 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $280.2 | | (0.9) | | $279.3 | | $323.4 | | - | | $323.4 |
| Global Institutional & Specialty | | 158.7 | | 0.4 | | 159.1 | | 94.6 | | - | | 94.6 |
| Global Healthcare & Life Sciences | | 29.7 | | 7.9 | | 37.6 | | 56.3 | | (0.1) | | 56.2 |
| Other | | 43.9 | | - | | 43.9 | | 44.4 | | - | | 44.4 |
| Corporate | | (30.6) | | - | | (30.6) | | (30.4) | | - | | (30.4) |
| Subtotal at fixed currency rates | | 481.9 | | 7.4 | | 489.3 | | 488.3 | | (0.1) | | 488.2 |
| Special (gains) and charges | | 83.6 | | | | | | 61.9 | | | | |
| Reported OI at fixed currency rates | | 398.3 | | | | | | 426.4 | | | | |
| Currency impact | | (10.6) | | | | | | (10.3) | | | | |
| Consolidated reported GAAP operating income | | $387.7 | | | | | | $416.1 | | | | |
| | | | | | | | | | | | | |
| | | Year Ended December 31 | ||||||||||
| | | 2021 | | 2020 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $6,304.9 | | ($65.9) | | $6,239.0 | | $6,048.2 | | ($37.1) | | $6,011.1 |
| Global Institutional & Specialty | | 3,978.2 | | (14.2) | | 3,964.0 | | 3,629.0 | | - | | 3,629.0 |
| Global Healthcare & Life Sciences | | 1,195.4 | | (44.5) | | 1,150.9 | | 1,241.1 | | (1.2) | | 1,239.9 |
| Other | | 1,226.9 | | - | | 1,226.9 | | 1,103.4 | | - | | 1,103.4 |
| Corporate | | 139.4 | | (139.4) | | - | | 100.6 | | (100.6) | | - |
| Subtotal at fixed currency rates | | 12,844.8 | | (264.0) | | 12,580.8 | | 12,122.3 | | (138.9) | | 11,983.4 |
| Currency impact | | (111.7) | | | | | | (332.1) | | | | |
| Consolidated reported GAAP net sales | | $12,733.1 | | | | | | $11,790.2 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $1,031.0 | | ($3.4) | | $1,027.6 | | $1,123.1 | | ($2.6) | | $1,120.5 |
| Global Institutional & Specialty | | 556.9 | | 2.2 | | 559.1 | | 324.0 | | - | | 324.0 |
| Global Healthcare & Life Sciences | | 160.9 | | 10.2 | | 171.1 | | 218.3 | | (0.2) | | 218.1 |
| Other | | 187.3 | | - | | 187.3 | | 132.8 | | - | | 132.8 |
| Corporate | | (122.1) | | - | | (122.1) | | (121.9) | | - | | (121.9) |
| Subtotal at fixed currency rates | | 1,814.0 | | 9.0 | | 1,823.0 | | 1,676.3 | | (2.8) | | 1,673.5 |
| Special (gains) and charges | | 196.5 | | | | | | 227.8 | | | | |
| Reported OI at fixed currency rates | | 1,617.5 | | | | | | 1,448.5 | | | | |
| Currency impact | | (18.9) | | | | | | (52.8) | | | | |
| Consolidated reported GAAP operating income | | $1,598.6 | | | | | | $1,395.7 | | | | |
19
ECOLAB INC.
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share from continuing operations, as reported, to the non-GAAP measure of adjusted diluted earnings per share from continuing operations.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | First | Second | Six | Third | Nine | Fourth | | |||||||
| | | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | |
| | | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | |
| | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | |
| Diluted earnings per share, as reported (U.S. GAAP) | | $1.00 | | $0.44 | | $1.44 | | $0.85 | | $2.29 | | $1.04 | | $3.33 | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(1)^ | | 0.06 | | 0.29 | | 0.35 | | 0.34 | | 0.69 | | 0.19 | | 0.88 | |
| Discrete tax expense (benefits) ^(2)^ | | (0.07) | | (0.08) | | (0.15) | | (0.04) | | (0.20) | | 0.00 | | (0.19) | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.99 | | $0.65 | | $1.64 | | $1.15 | | $2.79 | | $1.23 | | $4.02 | |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | First | Second | Six | Third | Nine | Fourth | **** | |||||||
| | | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | **** |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | **** |
| | | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | **** |
| | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | **** |
| Diluted earnings per share, as reported (U.S. GAAP) | | $0.67 | | $1.08 | | $1.75 | | $1.12 | | $2.87 | | $1.04 | | $3.91 | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(3)^ | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
| Discrete tax expense (benefits) ^(4)^ | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | (0.04) | | 0.02 | |
| Impact of Purolite on diluted earnings per share | | | | | | | | | | | | 0.02 | | 0.02 | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | $1.28 | | $4.69 | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2020 includes charges of $18.5 million, $83.3 million, $98.5 million and $53.8 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include debt refinancing charges, restructuring charges, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, employee-related COVID-19 costs (net of government subsidies), and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2020 includes ($21.9) million, ($22.5) million, ($12.4) million and $1.0 million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits, offset by other discrete tax expense.
(3) Special (gains) and charges for 2021 includes charges of $24.2 million, $34.1 million, $80.8 million and $74.4 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include covid related inventory write downs, employee-related COVID-19 costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million, ($6.3) million and ($11.7) million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense. 20
Exhibit 99.2
| Please see Ecolab<br>’<br>s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>Fourth Quarter 2021<br>Teleconference<br>Supplemental Data |
|---|
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>Cautionary Statement<br>2<br>Forward<br>-<br>Looking Information<br>This communication contains forward looking statements as that term is defined in the Private<br>Securities Litigation Reform Act of 1995. These forward<br>-<br>looking statements include, but are not limited to, statements<br>regarding COVID<br>-<br>19 pandemic trends, global economic recovery, delivered product and supply chain costs and supply chain<br>disruptions, and our financial and business performance and prospects, including sales, earnings, pricing, innovation and new<br>business. These statements are based on the current expectations of management. There are a number of risks and<br>uncertainties that could cause actual results to differ materially from the forward<br>-<br>looking statements. In particular, with resp<br>ect<br>to the pandemic, numerous factors will determine the extent of the impact on our business, including the severity of the<br>disease, the duration of the outbreak, the acceptance, distribution and efficacy of vaccines, the likelihood of a resurgence<br>of<br>the outbreak, including as a result of emerging variants, actions that may be taken by governmental authorities intended to<br>minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy, and other unintended<br>consequences.<br>Additional risks and uncertainties are set forth under Item 1A of our most recent Form 10<br>-<br>K, and our other public filings with<br>the Securities and Exchange Commission (“SEC”), and include the effects and duration of the COVID<br>-<br>19 pandemic, including<br>the impact of vaccination mandates; the vitality of the markets we serve; the impact of economic factors such as the worldwid<br>e<br>economy; our ability to execute key business initiatives; information technology infrastructure failures or breaches in data<br>security; our ability to attract, retain and develop high caliber management talent to lead our business; our ability to inno<br>vat<br>e<br>and to commercialize digital solutions; exposure to global economic, political and legal risks; difficulty in procuring raw<br>materials or fluctuations in raw material costs; and other uncertainties or risks reported from time to time in our reports t<br>o t<br>he<br>SEC. In light of these risks, uncertainties and factors, the forward<br>-<br>looking events discussed in this communication may not<br>occur. We caution that undue reliance should not be placed on forward<br>-<br>looking statements, which speak only as of the date<br>made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward<br>-<br>looking statement, except as<br>required by law.<br>Non<br>-<br>GAAP Financial Information<br>This communication includes Company information that does not conform to generally<br>accepted accounting principles (GAAP). Management believes that a presentation of this information is meaningful to<br>investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better<br>evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of<br>performance. Furthermore, these measures may not be consistent with similar measures provided by other companies.<br>Reconciliations of our non<br>-<br>GAAP measures included within this presentation are included in the “Non<br>-<br>GAAP Financial<br>Measures” section of this presentation. |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>3<br><br>Overview<br>▪<br>Continued strong sales growth, driven by new business wins, new products and accelerated pricing in an uneven<br>market recovery, were partially offset by increased COVID<br>-<br>related effects on broad business activity and a near<br>doubling of delivered product cost inflation and supply constraints compared to the third quarter.<br><br>Sales:<br>▪<br>Reported sales from continuing operations +10%. Acquisition adjusted fixed currency sales +9%.<br>▪<br>Double<br>-<br>digit growth in the Institutional & Specialty and Other segments, along with strong gains in the Industrial<br>segment, more than offset the Healthcare & Life Sciences segment’s decline versus a very strong increase last year.<br><br>Earnings:<br>▪<br>Reported diluted EPS from continuing operations $1.04, flat versus last year.<br>▪<br>Adjusted diluted EPS from continuing operations, excluding special gains and charges, discrete tax items and the<br>impact of the<br>Purolite<br>transaction, were $1.28, +4%.<br>▪<br>The modest adjusted EPS increase reflects accelerated pricing and volume growth, along with favorable pension and<br>interest expense, which were partially offset by substantially higher delivered product costs and comparison to lower<br>variable compensation last year. As previously disclosed, unfavorable delivered product costs and supply constraints<br>during the quarter resulted in an additional estimated unfavorable $0.10 per share in the fourth quarter versus our initial<br>expectations.<br><br>Outlook:<br>▪<br>For the full year 2022, we expect further strong sales growth, robust new business wins,<br>new innovation<br>and increased<br>pricing to compensate for the much higher supply costs and deliver low<br>-<br>teens adjusted EPS growth.<br>▪<br>For the first quarter, we look for healthy sales growth and a flattish year<br>-<br>over<br>-<br>year earnings per share comparison<br>impacted by continued high raw material and freight costs.<br>4<br>Q<br>2021 Overview |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>-100%<br>-80%<br>-60%<br>-40%<br>-20%<br>0%<br>20%<br>Jan-20<br>Feb-20<br>Mar-20<br>Apr-20<br>May-20<br>Jun-20<br>Jul-20<br>Aug-20<br>Sep-20<br>Oct-20<br>Nov-20<br>Dec-20<br>Jan-21<br>Feb-21<br>Mar-21<br>Apr-21<br>May-21<br>Jun-21<br>Jul-21<br>Aug-21<br>Sep-21<br>Oct-21<br>Nov-21<br>Dec-21<br>US<br>EU<br>China<br>4<br><br>Restaurants and lodging:<br>The recovery in U.S. and Europe restaurant and hotel traffic<br>stalled versus the third quarter reflecting the increase in COVID variant infections.<br>▪<br>U.S. full<br>-<br>service in<br>-<br>unit traffic averaged 70% of 2019 levels in 4Q, down slightly from 3Q<br>levels.<br>▪<br>U.S. quickservice traffic nearing 2019 levels.<br>▪<br>Europe foodservice trends softened.<br>▪<br>U.S. lodging room demand is approaching 2019 levels while demand in Europe has been<br>slower to recover, though the mix for both is heavily leisure.<br>4<br>Q 2021 Environment<br>Sources: NPD/Crest, Smith Travel. QSR foot traffic includes take<br>-<br>out.<br>US Full Service Restaurant<br>In<br>-<br>unit Foot Traffic vs 2019<br>Industry data<br>US Quickservice Restaurant<br>Traffic vs 2019<br>Lodging Rooms Sold vs 2019<br>-30%<br>-20%<br>-10%<br>0%<br>10%<br>Jan-20<br>Feb-20<br>Mar-20<br>Apr-20<br>May-20<br>Jun-20<br>Jul-20<br>Aug-20<br>Sep-20<br>Oct-20<br>Nov-20<br>Dec-20<br>Jan-21<br>Feb-21<br>Mar-21<br>Apr-21<br>May-21<br>Jun-21<br>Jul-21<br>Aug-21<br>Sep-21<br>Oct-21<br>Nov-21<br>Dec-21<br>-100%<br>-80%<br>-60%<br>-40%<br>-20%<br>0%<br>20%<br>Jan-20<br>Feb-20<br>Mar-20<br>Apr-20<br>May-20<br>Jun-20<br>Jul-20<br>Aug-20<br>Sep-20<br>Oct-20<br>Nov-20<br>Dec-20<br>Jan-21<br>Feb-21<br>Mar-21<br>Apr-21<br>May-21<br>Jun-21<br>Jul-21<br>Aug-21<br>Sep-21<br>Oct-21<br>Nov-21<br>Dec-21 |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>5<br>2022<br>Outlook<br><br>We move into 2022 with strong business momentum. With very healthy sales growth, robust<br>new business wins, new innovation and increased pricing, we expect to progressively<br>compensate for higher delivered product costs and to drive strong earnings growth. While<br>we expect a decent global economy, we also expect the COVID impacts to remain<br>significant during the first half of the year, and we expect inflation to remain high before it<br>progressively eases during the second half of the year.<br>▪<br>1Q 2022:<br>We expect the COVID and inflation impacts to remain especially strong in the<br>first quarter of 2022, even slightly higher than those experienced in the fourth quarter. We<br>look for the first quarter<br>to show healthy<br>sales growth and a flattish year<br>-<br>over<br>-<br>year<br>earnings per share comparison impacted by continued high raw material and freight<br>costs.<br>▪<br>Full year 2022:<br>We believe our sales, pricing and cost efficiency actions will enable us to<br>deliver continued strong sales gains with adjusted diluted earnings per share growth<br>reaching low<br>-<br>teens levels, assuming once again that inflation and supply constraints ease<br>as the year progresses. We continue to expect the impact of Purolite, including its $0.26<br>per share of transaction<br>-<br>related amortization, will be neutral to 2022 adjusted diluted<br>earnings per share. |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>6<br>4Q 2021 Results<br>*See “Non<br>-<br>GAAP Financial Measures” section of this presentation for corresponding reconciliations.<br>(unaudited)<br>(millions, except per share)<br>2021<br>Net sales<br>$3,364.6<br>$3,065.3<br>10<br>%<br>$3,352.6<br>$3,065.3<br>9<br>%<br>Operating income<br>387.7<br>416.1<br>-7<br>%<br>475.1<br>478.0<br>-1<br>%<br>NI from cont. ops. attributable to Ecolab<br>301.0<br>300.3<br>0<br>%<br>369.3<br>355.1<br>4<br>%<br>Diluted earnings per share<br>NI from cont. ops. attributable to Ecolab<br>$1.04<br>$1.04<br>0<br>%<br>$1.28<br>$1.23<br>4<br>%<br>2021<br>Net sales<br>$3,425.4<br>$3,121.1<br>10<br>%<br>$3,413.4<br>$3,121.1<br>9<br>%<br>Operating income<br>398.3<br>426.4<br>-7<br>%<br>485.7<br>488.3<br>-1<br>%<br>Fixed Currency Rates *<br>% <br>Fixed Currency Rates<br>% <br>2021<br>2020<br>Change<br>2020<br>Change<br>Adjusted *<br>Fourth Quarter Ended December 31<br>Reported<br>Adjusted *<br>Public Currency Rates<br>% <br>Public Currency Rates<br>% <br>2021<br>2020<br>Change<br>2020<br>Change |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>7<br>4Q 2021 Sales Growth Detail<br>Amounts in the tables above may reflect rounding. Acq./Div. Adj. excludes sales to ChampionX<br>post<br>-<br>separation and Venezuela results.<br> <br>Fixed Rate<br> <br>Acq./Div. Adj.<br> <br> <br>Global Industrial<br>% Change<br>% Change<br>Consolidated<br>% Change<br>Water<br> <br>9%<br><br><br>8%<br><br><br>Volume & mix<br> <br>6%<br><br><br>Food & Beverage<br> <br>4%<br><br><br>4%<br><br><br>Pricing<br> <br>3%<br><br><br>Downstream<br> <br>9%<br><br><br>9%<br><br><br>Subtotal<br> <br>9%<br><br><br>Paper<br>15%<br><br><br>15%<br><br><br>Acq./Div.<br> <br>1%<br><br><br>Total Global Industrial<br> <br>8%<br><br><br>7%<br><br><br>Fixed currency growth<br> <br>10%<br><br><br>Currency impact<br> <br>0%<br><br><br>Global Institutional & Specialty<br>Total<br> <br>10%<br><br><br>Institutional<br> <br>26%<br><br><br>25%<br><br><br>Specialty<br> <br>4%<br><br><br>4%<br><br><br>Total Global Institutional & Specialty<br> <br>19%<br><br><br>19%<br><br><br>Global Healthcare & Life Sciences<br>Healthcare<br> <br> -11% <br> -15% <br>Life Sciences<br> <br> -3% <br> -3% <br>Total Global Healthcare & Life Sciences<br> -6% <br> -13% <br>Other<br>Pest Elimination<br> <br>10%<br><br><br>10%<br><br><br>Textile Care<br> <br>18%<br><br><br>18%<br><br><br>Colloidal Technologies<br> <br>27%<br><br><br>27%<br><br><br>Total Other<br> <br>13%<br><br><br>13%<br><br><br>Total<br>10%<br><br><br>9% |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>8<br>4Q 2021 Income<br>Statement / Margins<br>(cont. ops.)<br>* Public rates of exchange, except where noted.<br>**See “Non<br>-<br>GAAP Financial Measures” section of this presentation for corresponding reconciliations.<br>($ millions, unaudited)*<br>2021<br>% sales<br>2020<br>% sales<br> Comments**<br>Gross Profit<br>$1,321.5<br>39.3%<br>$1,285.0<br>41.9%<br>3<br>%<br>Adjusted gross margins of 39.8% in 2021 and 42.0% in 2020 primarily<br>reflected accelerated pricing that was more than offset by significantly higher<br>delivered product costs and supply constraints.<br>SG&A<br>867.9<br><br><br>25.8%<br>809.6<br><br><br>26.4%<br>7<br>%<br>The ratio decreased 60 basis points as volume leverage and cost savings<br>more than offset the comparison to lower variable compensation last year and<br>investments in the business.<br>Op. Income at fixed FX<br>Global Industrial<br>280.2<br><br><br>16.5%<br>323.4<br><br><br>20.6%<br>-13<br>%<br>Margins declined as accelerated pricing and higher volume were more than<br>offset by significantly higher delivered product costs, unfavorable supply<br>constraints and comparison to lower variable compensation last year.<br>Global Institutional & Specialty<br>158.7<br><br><br>14.9%<br>94.6<br><br><br>10.6%<br>68<br>%<br>The margin increase reflected increased volume and accelerated pricing that<br>more than offset higher delivered product costs and the comparison to lower<br>variable compensation last year.<br>Global Healthcare & Life Sciences<br>29.7<br><br><br>9.6%<br>56.3<br><br><br>17.2%<br>-47<br>%<br>Acquisition adjusted margins were 13.2% in 2021 and 17.2% in 2020. The<br>margin decrease primarily refelcted the comparison to the very strong sales<br>volume last year (when operating income grew 65%) as well as the impact of<br>fourth quarter 2021’s unfavorable supply constraints; these were partially offset<br>by favorable pricing and lower variable compensation.<br>Other<br>43.9<br><br><br>13.6%<br>44.4<br><br><br>15.5%<br>-1<br>%<br>Margins decreased reflecting accelerated pricing and volume growth that was<br>more than offset by the comparison to lower variable compensation last year<br>and higher delivered product costs.<br>Subtotal at fixed FX<br>512.5<br><br><br>15.1%<br>518.7<br><br><br>16.6%<br>-1<br>%<br>FX<br>(10.6)<br><br><br>(10.3)<br><br><br>Corporate<br>Corp. Expense<br>(30.6)<br><br><br>(30.4)<br><br><br>Nalco intangible amortization.<br>Special Gains/(Ch.)<br>(83.6)<br><br><br>(61.9)<br><br><br>2021: Primarily reflected COVID-19 related charges and Purolite acquisition<br>costs.<br>Total Corporate Exp.<br>(114.2)<br><br><br>(92.3)<br><br><br>Consolidated Op. Inc.<br>$387.7<br>11.5%<br>$416.1<br>13.6%<br>-7<br>%<br>2021 acquisition adjusted fixed currency operating margins were 14.6% vs.<br>15.9%. The decrease reflects the accelerated pricing and volume growth,<br>which were offset by significantly higher delivered product costs, unfavorable<br>supply constraints and comparison to lower variable compensation last year.<br>% change |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>9<br>4Q 2021 Balance Sheet / Cash Flow<br>EBITDA and Adjusted EBITDA are non<br>-<br>GAAP measures. EBITDA is defined as the sum of earnings<br>before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the sum of<br>EBITDA and the impacts of Purolite transaction and special (gains) and charges impacting EBITDA.<br>The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. See “Non<br>-<br>GAAP Financial Measures” section of this presentation corresponding reconciliations.<br>*<br>Summary Balance Sheet<br>(millions, unaudited)<br>2021<br>2020<br>(millions, unaudited)<br>2021<br>2020<br>Cash and cash eq.<br> <br>$359.9<br> <br>$1,260.2<br> <br>Short-term debt<br> <br>$411.0<br> <br>$17.3<br>Accounts receivable, net<br>2,478.4<br>2,273.8<br> <br>Accounts payable<br>1,384.2<br>1,160.6<br>Inventories<br>1,491.8<br>1,285.2<br> <br>Other current liabilities<br>1,758.0<br>1,754.3<br>Other current assets<br>357.0<br>298.2<br> <br>Long-term debt<br>8,347.2<br>6,669.3<br>PP&E, net<br>3,288.5<br>3,124.9<br>Pension/Postretirement<br>894.2<br>1,226.2<br>Goodwill and intangibles<br>12,288.0<br>8,983.9<br> <br>Other liabilities<br>1,158.7<br>1,096.8<br>Other assets<br>942.8<br>899.8<br> <br>Total equity<br>7,253.1<br>6,201.5<br>Total assets<br>$21,206.4<br>$18,126.0<br>Total liab. and equity<br>$21,206.4<br>$18,126.0<br>Selected Cash Flow items<br>(millions, unaudited)<br> <br>2021<br>2020<br> <br>(unaudited)<br> <br>2021<br>2020<br>Cash from op. activities<br>$2,061.9<br>$1,741.8<br> <br>Total Debt/Total Capital<br> <br>54.7%<br><br><br>51.9%<br><br><br>Depreciation<br>604.4<br>594.3<br> <br>Net Debt/Total Capital<br> <br>53.7%<br><br><br>46.7%<br><br><br>Amortization<br>238.7<br>218.4<br> <br>Net Debt/EBITDA(*)<br> <br>3.4<br><br><br>2.4<br><br><br>Capital expenditures<br>643.0<br>489.0<br> <br>Net Debt/Adjusted EBITDA(*)<br> <br>3.1<br><br><br>2.2<br><br><br>December 31<br>December 31<br>Twelve Months Ended<br>Selected Balance Sheet measures<br>December 31<br>December 31 |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>10<br>Non<br>-<br>GAAP Financial Measures<br> <br> <br>(unaudited)<br>(millions, except percent)<br> <br> <br>Net sales<br>Reported GAAP net sales<br>$3,364.6<br>$3,065.3<br>$12,733.1<br>$11,790.2<br>Impact of Purolite on net sales<br>12.0<br><br><br>-<br><br><br>12.0<br><br><br>-<br><br><br>Non-GAAP adjusted net sales<br>3,352.6<br><br><br>3,065.3<br><br><br>12,721.1<br><br><br>11,790.2<br><br><br>Effect of foreign currency translation<br>60.8<br><br><br>55.8<br><br><br>111.7<br><br><br>332.1<br><br><br>Non-GAAP adjusted fixed currency sales<br>3,413.4<br><br><br>3,121.1<br><br><br>12,832.8<br><br><br>12,122.3<br><br><br>Effect of acquisitions and divestitures<br>(57.6)<br><br><br>(41.4)<br><br><br>(252.0)<br><br><br>(138.9)<br><br><br>Non-GAAP acquisition adjusted fixed currency sales<br>$3,355.8<br>$3,079.7<br>$12,580.8<br>$11,983.4<br>Cost of Sales<br>Reported GAAP cost of sales<br>$2,043.1<br>$1,780.3<br>$7,615.8<br>$6,905.8<br>Special (gains) and charges<br>17.7<br><br><br>2.6<br><br><br>93.9<br><br><br>48.2<br><br><br>Impact of Purolite on cost of sales<br>7.6<br><br><br>-<br><br><br>7.6<br><br><br>-<br><br><br>Non-GAAP adjusted cost of sales<br>$2,017.8<br>$1,777.7<br>$7,514.3<br>$6,857.6<br>Gross Margin<br>Reported GAAP gross margin<br>39.3<br><br><br>%<br>41.9<br><br><br>%<br>40.2<br>%<br>41.4<br>%<br>Non-GAAP adjusted gross margin<br>39.8<br><br><br>%<br>42.0<br><br><br>%<br>40.9<br>%<br>41.8<br>%<br>Operating income<br>Reported GAAP operating income<br>$387.7<br>$416.1<br>$1,598.6<br>$1,395.7<br>Effect of foreign currency translation<br>10.6<br><br><br>10.3<br><br><br>18.9<br><br><br>52.8<br><br><br>Non-GAAP fixed currency operating income<br>398.3<br><br><br>426.4<br><br><br>1,617.5<br><br><br>1,448.5<br><br><br>Special (gains) and charges<br>83.6<br><br><br>61.9<br><br><br>196.5<br><br><br>227.8<br><br><br>Impact of Purolite on operating income<br>3.8<br><br><br>-<br><br><br>3.8<br><br><br>-<br><br><br>Non-GAAP adjusted fixed currency operating income<br>485.7<br><br><br>488.3<br><br><br>1,817.8<br><br><br>1,676.3<br><br><br>Effect of acquisitions and divestitures<br>3.6<br><br><br>(0.1)<br><br><br>5.2<br><br><br>(2.8)<br><br><br>Non-GAAP acquisition adjusted fixed currency operating income<br>$489.3<br>$488.2<br>$1,823.0<br>$1,673.5<br>Operating Income Margin<br>Reported GAAP operating income margin<br>11.5<br><br><br>%<br>13.6<br><br><br>%<br>12.6<br>%<br>11.8<br>%<br>Non-GAAP adjusted fixed currency operating income margin<br>14.2<br><br><br>%<br>15.6<br><br><br>%<br>14.2<br>%<br>13.8<br>%<br>Non-GAAP acquisition adjusted fixed currency operating income margin<br>14.6<br><br><br>%<br>15.9<br><br><br>%<br>14.5<br>%<br>14.0<br>%<br>Fourth Quarter Ended<br>December 31<br>Twelve Months Ended<br>December 31<br>2021<br>2020<br>2021<br>2020 |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>11<br>Non<br>-<br>GAAP Financial Measures<br>(unaudited)<br> <br> <br>(millions, except percent and per share)<br> <br> <br>Interest expense, net<br>Reported GAAP interest expense, net<br>$44.6<br>$48.4<br>$218.3<br>$290.2<br>Special (gains) and charges<br>0.8<br><br><br>-<br><br><br>33.1<br><br><br>83.8<br><br><br>Impact of Purolite on interest expense<br>3.5<br><br><br>-<br><br><br>3.5<br><br><br>-<br><br><br>Non-GAAP adjusted interest expense, net<br>$40.3<br>$48.4<br>$181.7<br>$206.4<br>Other (income) expense<br>Reported GAAP other (income) expense<br>($6.4)<br>($10.3)<br>($33.9)<br>($55.9)<br>Special (gains) and charges<br>10.6<br><br><br>0.4<br><br><br>37.2<br><br><br>0.4<br><br><br>Non-GAAP adjusted other (income) expense<br>($17.0)<br>($10.7)<br>($71.1)<br>($56.3)<br>Net Income from continuing operations attributable to Ecolab<br>Reported GAAP net income from continuing operations attributable to Ecolab<br>$301.0<br>$300.3<br>$1,129.9<br>$967.4<br>Special (gains) and charges, after tax<br>74.4<br><br><br>53.8<br><br><br>213.5<br><br><br>254.1<br><br><br>Discrete tax net expense (benefit)<br>(11.7)<br><br><br>1.0<br><br><br>5.8<br><br><br>(55.8)<br><br><br>Impact of Purolite on net income<br>5.6<br><br><br>-<br><br><br>5.6<br><br><br>-<br><br><br>Non-GAAP adjusted net income from continuing operations attributable to Ecolab<br>$369.3<br>$355.1<br>$1,354.8<br>$1,165.7<br>Diluted EPS from continuing operations attributable to Ecolab<br>Reported GAAP diluted EPS from continuing operations<br>$1.04<br>$1.04<br>$3.91<br>$3.33<br>Special (gains) and charges, after tax<br>0.26<br><br><br>0.19<br><br><br>0.74<br><br><br>0.88<br><br><br>Discrete tax net expense (benefit)<br>(0.04)<br><br><br>-<br><br><br>0.02<br><br><br>(0.19)<br><br><br>Impact of Purolite on diluted EPS<br>0.02<br><br><br>-<br><br><br>0.02<br><br><br>-<br><br><br>Non-GAAP adjusted diluted EPS from continuing operations<br>$1.28<br>$1.23<br>$4.69<br>$4.02<br>Provision for Income Taxes<br>Reported GAAP tax rate<br>12.6<br>%<br>19.3<br><br><br>%<br>19.1<br>%<br>15.2<br>%<br>Special gains and charges<br>2.0<br>(0.8)<br><br><br>0.1<br>0.7<br>Discrete tax items<br>2.6<br>(0.2)<br><br><br>(0.3)<br>3.8<br>Purolite tax impacts<br>0.1<br>-<br><br><br>0.0<br>-<br><br><br>Non-GAAP adjusted tax rate<br>17.3<br>%<br>18.3<br>%<br>18.9<br>%<br>19.7<br>%<br>EBITDA (trailing twelve months ended)<br>Net income including non-controlling interest<br>$1,144.0<br>$984.8<br>Provision for income taxes<br>270.2<br><br><br>176.6<br><br><br>Interest expense, net<br>218.3<br><br><br>290.2<br><br><br>Depreciation<br>604.4<br><br><br>594.3<br><br><br>Amortization<br>238.7<br><br><br>218.4<br><br><br>EBITDA<br>$2,475.6<br>$2,264.3<br>Special (gains) and charges impacting EBITDA<br>233.7<br><br><br>228.2<br><br><br>Impact of Purolite on EBITDA<br>(3.3)<br><br><br>-<br><br><br>Adjusted EBITDA<br>$2,706.0<br>$2,492.5<br>Fourth Quarter Ended<br>Twelve Months Ended<br>2021<br>2020<br>2021<br>2020<br>December 31<br>December 31 |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>12<br>Non<br>-<br>GAAP Financial Measures<br>(unaudited)<br>(millions)<br>Fixed<br>Currency<br>Impact of<br>Acquisitions and<br>Divestitures<br>Acquisition<br>Adjusted<br>Fixed<br>Currency<br>Impact of<br>Acquisitions and<br>Divestitures<br>Acquisition<br>Adjusted<br>Net Sales<br>Global Industrial<br>$1,695.2<br>($6.5)<br>$1,688.7<br>$1,571.8<br>$0.0<br>$1,571.8<br>Global Institutional & Specialty<br>1,064.2<br><br><br>(4.1)<br><br><br>1,060.1<br><br><br>894.4<br><br><br>-<br><br><br>894.4<br><br><br>Global Healthcare & Life Sciences<br>308.0<br><br><br>(23.7)<br><br><br>284.3<br><br><br>327.8<br><br><br>(0.3)<br><br><br>327.5<br><br><br>Other<br>322.7<br><br><br>-<br><br><br>322.7<br><br><br>286.0<br><br><br>-<br><br><br>286.0<br><br><br>Corporate<br>35.3<br><br><br>(35.3)<br><br><br>-<br><br><br>41.1<br><br><br>(41.1)<br><br><br>-<br><br><br>Subtotal at fixed currency rates<br>3,425.4<br><br><br>(69.6)<br><br><br>3,355.8<br><br><br>3,121.1<br><br><br>(41.4)<br><br><br>3,079.7<br><br><br>Currency impact<br>(60.8)<br><br><br>(55.8)<br><br><br>Consolidated reported GAAP net sales<br>$3,364.6<br>$3,065.3<br>Operating Income<br>Global Industrial<br>$280.2<br>($0.9)<br>$279.3<br>$323.4<br>$0.0<br>$323.4<br>Global Institutional & Specialty<br>158.7<br><br><br>0.4<br><br><br>159.1<br><br><br>94.6<br><br><br>-<br><br><br>94.6<br><br><br>Global Healthcare & Life Sciences<br>29.7<br><br><br>7.9<br><br><br>37.6<br><br><br>56.3<br><br><br>(0.1)<br><br><br>56.2<br><br><br>Other<br>43.9<br><br><br>-<br><br><br>43.9<br><br><br>44.4<br><br><br>-<br><br><br>44.4<br><br><br>Corporate<br>(30.6)<br><br><br>-<br><br><br>(30.6)<br><br><br>(30.4)<br><br><br>-<br><br><br>(30.4)<br><br><br>Subtotal at fixed currency rates<br>481.9<br><br><br>7.4<br><br><br>489.3<br><br><br>488.3<br><br><br>(0.1)<br><br><br>488.2<br><br><br>Special (gains) and charges<br>83.6<br><br><br>61.9<br><br><br>Reported OI at fixed currency rates<br>398.3<br><br><br>426.4<br><br><br>Currency impact<br>(10.6)<br><br><br>(10.3)<br><br><br>Consolidated reported GAAP operating income<br>$387.7<br>$416.1<br>Fourth Quarter Ended December 31<br>2021<br>2020 |
| --- |
| Please see Ecolab’s news release dated February 15, 2022 for additional information, including<br>discussion on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>13<br>Non<br>-<br>GAAP Financial Measures<br>(unaudited)<br>(millions)<br>Fixed<br>Currency<br>Impact of<br>Acquisitions and<br>Divestitures<br>Acquisition<br>Adjusted<br>Fixed<br>Currency<br>Impact of<br>Acquisitions and<br>Divestitures<br>Acquisition<br>Adjusted<br>Net Sales<br>Global Industrial<br>$6,304.9<br>($65.9)<br>$6,239.0<br>$6,048.2<br>($37.1)<br>$6,011.1<br>Global Institutional & Specialty<br>3,978.2<br><br><br>(14.2)<br><br><br>3,964.0<br><br><br>3,629.0<br><br><br>-<br><br><br>3,629.0<br><br><br>Global Healthcare & Life Sciences<br>1,195.4<br><br><br>(44.5)<br><br><br>1,150.9<br><br><br>1,241.1<br><br><br>(1.2)<br><br><br>1,239.9<br><br><br>Other<br>1,226.9<br><br><br>-<br><br><br>1,226.9<br><br><br>1,103.4<br><br><br>-<br><br><br>1,103.4<br><br><br>Corporate<br>139.4<br><br><br>(139.4)<br><br><br>-<br><br><br>100.6<br><br><br>(100.6)<br><br><br>-<br><br><br>Subtotal at fixed currency rates<br>12,844.8<br><br><br>(264.0)<br><br><br>12,580.8<br><br><br>12,122.3<br><br><br>(138.9)<br><br><br>11,983.4<br><br><br>Currency impact<br>(111.7)<br><br><br>(332.1)<br><br><br>Consolidated reported GAAP net sales<br>$12,733.1<br>$11,790.2<br>Operating Income<br>Global Industrial<br>$1,031.0<br>($3.4)<br>$1,027.6<br>$1,123.1<br>($2.6)<br>$1,120.5<br>Global Institutional & Specialty<br>556.9<br><br><br>2.2<br><br><br>559.1<br><br><br>324.0<br><br><br>-<br><br><br>324.0<br><br><br>Global Healthcare & Life Sciences<br>160.9<br><br><br>10.2<br><br><br>171.1<br><br><br>218.3<br><br><br>(0.2)<br><br><br>218.1<br><br><br>Other<br>187.3<br><br><br>-<br><br><br>187.3<br><br><br>132.8<br><br><br>-<br><br><br>132.8<br><br><br>Corporate<br>(122.1)<br><br><br>-<br><br><br>(122.1)<br><br><br>(121.9)<br><br><br>-<br><br><br>(121.9)<br><br><br>Subtotal at fixed currency rates<br>1,814.0<br><br><br>9.0<br><br><br>1,823.0<br><br><br>1,676.3<br><br><br>(2.8)<br><br><br>1,673.5<br><br><br>Special (gains) and charges<br>196.5<br><br><br>227.8<br><br><br>Reported OI at fixed currency rates<br>1,617.5<br><br><br>1,448.5<br><br><br>Currency impact<br>(18.9)<br><br><br>(52.8)<br><br><br>Consolidated reported GAAP operating income<br>$1,598.6<br>$1,395.7<br>Twelve Months Ended December 31<br>2021<br>2020 |
| --- |
Exhibit 99.3
****
ECOLAB FOURTH QUARTER 2021
Overview
Continued strong sales growth, driven by accelerated pricing and further robust new business wins in an uneven market recovery, were partially offset by increased COVID-related effects on broad business activity and a near doubling of delivered product cost (which includes raw materials and freight) inflation and unfavorable supply constraints compared to the third quarter.
| ◢ | Sales: |
|---|---|
| ◾ | Reported sales +10%, with acquisition adjusted fixed currency sales from continuing operations +9% from the year-ago period. |
| --- | --- |
| ◾ | Double-digit growth in the Institutional & Specialty and Other segments, along with strong gains in the Industrial segment, more than offset the Healthcare & Life Sciences segment’s decline versus a very strong increase last year. |
| --- | --- |
| ◢ | Earnings: |
| --- | --- |
| ◾ | Reported diluted EPS from continuing operations $1.04, flat versus last year. |
| --- | --- |
| ◾ | Adjusted diluted EPS from continuing operations excluding special gains and charges, discrete tax items and the impact of the Purolite transaction $1.28, +4%. |
| --- | --- |
| ◾ | The earnings increase reflects accelerated pricing and volume growth, along with lower pension and interest expense, which were partially offset by substantially higher delivered product costs and the comparison to lower variable compensation last year. |
| --- | --- |
| ◾ | As previously disclosed, unfavorable supply constraints resulted in an additional estimated unfavorable $0.10 per share in the fourth quarter versus our initial expectations. |
| --- | --- |
| ◢ | Outlook: |
| --- | --- |
| ◾ | For the full year 2022, we believe our sales, pricing and cost efficiency actions will enable us to deliver continued strong sales gains with adjusted diluted earnings per share growth reaching low-teens levels, assuming that inflation and supply constraints ease as the year progresses. |
| --- | --- |
| ◾ | For the first quarter, we expect healthy sales growth and a flattish year-over-year earnings per share comparison impacted by continued high raw material and freight costs. |
| --- | --- |
2
SUMMARY
Strong fourth quarter sales were driven by new business wins, product innovation and accelerating pricing in an uneven market recovery. We enjoyed robust double-digit sales growth in our Institutional & Specialty and Other segments, along with further strong gains in the Industrial segment. The Healthcare & Life Sciences segment results declined as they compared to very strong year-ago sales. Regionally, we enjoyed strong sales gains in North America, Asia Pacific and Latin America, with modest growth in Europe. Our team drove this robust performance in an environment where the rapid rise in new COVID infections slowed the global recovery and further disrupted global supply chains. Headwinds from delivered product cost inflation and other supply constraints increased significantly, with costs rising an estimated 20% in the fourth quarter, approximately double the rate of increase of what we saw in the third quarter. We also undertook extraordinary measures and significantly increased costs to assure supply to our customers that impacted our margins over the short-term; these supply constraints are estimated to have been an unfavorable $0.10 per share versus our initial expectations, but we believe were critical to assuring our long-term relationships and ongoing success with our customers.
Looking ahead at the full year 2022, we assume the global economy remains strong, if uneven, as COVID impacts move behind us, and that inflation keeps rising in the first half before progressively easing in the second half of the year. We expect to achieve further strong sales growth, robust new business wins, and increased pricing to capture the incremental value we create for our customers and to compensate for the significantly higher delivered product 3
cost inflation and supply constraints we expect this year. At the same time, we will continue to leverage digital automation to drive our performance in ways that improve both our customers’ results as well as our overall cost efficiency. We believe these continued actions will enable us to deliver strong full year 2022 sales growth with adjusted diluted earnings per share growth reaching low-teens levels.
Our unique value proposition that helps solve the world’s people, planet and business health needs is more important than ever, and we have further strengthened our business portfolio, competitive position and unique capabilities to best serve our customers. Our advanced products and services enable us to help create better customer outcomes with a reduced environmental impact while simultaneously reducing their costs, as reflected by recent programs including Ecolab Science Certified and Net Zero, which have further differentiated Ecolab’s value proposition. Our new business and innovation pipelines are at record levels; new focus areas, including life sciences, data centers and animal health, are well-positioned to drive growth and global leadership; and our leading digital capabilities continue to develop and add competitive advantages. Our strong new business momentum, along with our enhanced value proposition, favorable macro trends and expanding margins, positions us well to leverage the global recovery and deliver further superior long term shareholder returns.
HIGHLIGHTS
| ● | Strong fourth quarter sales were driven by accelerated pricing, business wins and product innovation in an uneven market recovery that were |
|---|
4
| continue to expect the impact of Purolite, including its $0.26 per share of amortization, will be neutral to 2022 adjusted diluted earnings per share. | |
|---|---|
| ● | We enter 2022 with very strong sales momentum, record new business wins, pricing near 4% and increasing, a strengthened business portfolio and improved productivity, all of which we will utilize to drive continued strong topline momentum for the full year. We expect these drivers will enable us to more than offset the significantly higher delivered product costs. We expect these will enable us to deliver an attractive year with adjusted diluted earnings per share rising low-teens, as our accelerating pricing and continued strong volume growth outpace the currently expected higher delivered product cost inflation and supply constraints over the balance of the year. |
| --- | --- |
| ● | In summary, our value proposition to help solve the world’s people, planet and business health needs is more important than ever. Our underlying business continues to improve and we are working aggressively to more than offset the external impacts from COVID and supply chain disruption to produce another year of double-digit earnings per share growth in the low-teens in 2022. We remain confident in our long-term sales growth and our proven ability to leverage our opportunities to improve our long-term margins further, and we expect to continue to leverage our robust growth opportunities to drive superior results for our customers and shareholders. |
| --- | --- |
6
CONSOLIDATED SALES
| | | |
|---|---|---|
| Consolidated sales | % Change | |
| Volume & mix | 6% | |
| Pricing | 3% | |
| Subtotal | 9% | |
| Acq./Div. | 1% | |
| Fixed currency growth | 10% | |
| Currency impact | 0% | |
| Total | 10% | |
| | | |
Ecolab’s fourth quarter reported sales increased 10% when compared to the year ago period. Fixed currency acquisition adjusted sales increased 9%. Looking at the components, consolidated volume and mix increased 6%, pricing increased 3% and acquisitions added 1% to sales growth.
GLOBAL INDUSTRIAL SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Industrial | % Change | % Change | ||
| Water | 9% | | 8% | |
| Food & Beverage | 4% | | 4% | |
| Downstream | 9% | | 9% | |
| Paper | 15% | | 15% | |
| Total Global Industrial | 8% | | 7% | |
WATER
Fixed currency Water sales increased 9%; acquisition adjusted sales increased 8% as new business wins and accelerating pricing leveraged recovering markets. Light industry water treatment sales enjoyed strong growth, led by strong gains in technology and food & beverage. Heavy industry sales also recorded a strong increase led by chemicals and power. Mining showed very strong growth benefiting from our strategic shift toward high-value metals and fertilizers and away from coal. Regionally, Latin 7
America grew double-digits and North America, Asia Pacific and Europe all showed strong growth.
The impact of increasing water demand, its growing quality and availability issues and the resulting rising costs continue to be a critical issue for our customers, and one that Ecolab is uniquely positioned to help them solve. Our new business wins remain strong as we utilize our unique ability to provide innovative solutions and integrated digital technologies and service expertise that help customers reduce water consumption toward net zero and meet their sustainability objectives. Further, we remain aggressive on pricing to offset increasing delivered product costs. We expect further strong sales growth in the first quarter driven by increased pricing, business wins and improving markets.
FOOD & BEVERAGE
Fixed currency Food & Beverage sales rose 4%, reflecting accelerated pricing, new business wins and stabilized end markets. Globally we realized strong growth in beverage/brewing and protein, with modest growth in dairy plant, food and animal health. Fixed currency sales showed strong gains in Latin America and moderate growth in North America, Asia Pacific and Europe.
With accelerating pricing and more favorable end market trends, we anticipate strong sales growth in the first quarter.
8
DOWNSTREAM
Downstream fixed currency sales grew 9%, driven by good new business wins, accelerated pricing and increased refinery operating rates. Fixed currency sales showed strong growth in Asia Pacific, Latin America and Europe, but declined in North America where strong petrochemical sales growth and recovering refining and additive sales were more than offset by prior low-margin business exits.
We expect continued strong growth in the first quarter driven by further new business wins, improved pricing and recovering refinery production.
PAPER
Paper fixed currency acquisition adjusted sales recorded another strong gain, rising 15%, driven by strong new business wins, pricing and improved market growth. Board & packaging sales remained strong, with tissue also showing strong growth reflecting new business and the continued recovery of production rates. Graphic paper sales were stable as new business wins were offset by the rise in COVID-variants, which softened demand. Fixed currency sales growth remained strong in all regions.
We expect Paper to show further above-trend sales growth in the first quarter of 2022 with continued growth in board & packaging and improving tissue demand.
9
GLOBAL INDUSTRIAL SEGMENT MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Global Industrial Op. Inc. | $280.2 | | 16.5% | | $323.4 | | 20.6% | | (13)% | |
| Acq./Div. Adj. Op. Inc. | $279.3 | | 16.5% | | $323.4 | | 20.6% | | (14)% | |
Acquisition adjusted fixed currency operating income decreased 14% compared to a very strong 17% increase last year as accelerated pricing and higher volume were more than offset by significantly higher delivered product costs, unfavorable supply constraints and comparison to lower variable compensation last year.
GLOBAL INSTITUTIONAL & SPECIALTY SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Institutional & Specialty | % Change | % Change | ||
| Institutional | 26% | | 25% | |
| Specialty | 4% | | 4% | |
| Total Global Institutional & Specialty | 19% | | 19% | |
INSTITUTIONAL
Fixed currency sales for the global Institutional business increased 26%. The strong growth was driven by improved volume, good new business wins, further gains from Ecolab Science Certified programs, new innovation and pricing, which more than offset a stalled recovery in restaurant, lodging and entertainment facility activity versus the third quarter due to COVID-related impacts. Our North American business continued its very strong growth driven by further new account gains as it outpaced still-recovering in-unit restaurant dining and lodging trends. Europe and Latin America also showed very strong growth benefiting from increased consumer traffic and in-unit dining relative to last year, along with new business wins. Asia Pacific sales grew moderately despite increased COVID restrictions in that region.
10
We have continued to work aggressively to support our customers through this difficult environment, as well as assure our long-term value drivers remain robust. Our advanced products and programs, including hospital-grade disinfectants, our expert service to help solve customer problems and our extraordinary efforts to assure customer supply have continued to be significant differentiators for us and remain important factors in our strong new business wins. These products and programs, many of which offer faster and more efficient cleaning processes and thereby reduce the labor required, are helping customers manage more effectively in the current labor shortages. Further, our Ecolab Science Certified program continues to expand as the program assists our customers in meeting the public’s heightened expectations for cleaner and safer consumer locations.
We expect continued strong results in the first quarter. The rapid increase in COVID infections led to increased social restrictions in most regions early in the quarter, and customer labor availability issues continue to significantly impact our customers’ operating capacity, further delaying the full recovery in the global restaurant and hospitality markets. Nonetheless, we are continuing to win new business, as well as our aggressive efforts to assure product supply and service support for our customers through this difficult time with industry-leading solutions that measurably improve their results and maximize the efficiency of their employees. We expect these efforts will serve customers well and drive our continued business growth, and with further pricing and new products, more than offset the market challenges and lead to another strong performance by Institutional in the first quarter.
11
SPECIALTY
Fourth quarter Specialty acquisition adjusted fixed currency sales increased 4%, as strong quickservice sales more than offset lower food retail sales. Quickservice sales showed a strong gain as new business wins and improved sanitizer sales leveraged stable end market traffic. Food retail sales declined slightly versus the strong sanitizer demand in 2020 and due to customer labor shortages that resulted in reduced in-store services and associated product usage.
We expect Specialty sales to improve sequentially, showing strong growth in the first quarter, led by quickservice sales as we benefit from new customer wins, our broad range of innovative products and service expertise and further normalization of demand.
INSTITUTIONAL & SPECIALTY SEGMENT MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Global Institutional & Specialty Op. Inc. | $158.7 | | 14.9% | | $94.6 | | 10.6% | | 68% | |
| Acq./Div. Adj. Op. Inc. | $159.1 | | 15.0% | | $94.6 | | 10.6% | | 68% | |
Acquisition adjusted fixed currency operating income increased 68% reflecting increased volume and accelerated pricing that more than offset higher delivered product costs and the comparison to lower variable compensation last year.
12
GLOBAL HEALTHCARE & LIFE SCIENCES SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Healthcare & Life Sciences | % Change | % Change | ||
| Healthcare | (11)% | | (15)% | |
| Life Sciences | (3)% | | (3)% | |
| Total Global Healthcare & Life Sciences | (6)% | | (13)% | |
HEALTHCARE
Fourth quarter global Healthcare fixed currency sales declined 11%; acquisition adjusted sales declined 15%, reflecting the comparison against large 2020 COVID-related hand and surface disinfection sales, higher customer inventory levels from earlier surge buying and softer elective surgical procedure activity due to the rise in COVID infections.
First quarter 2022 sales will also reflect the impact of customer sanitizer inventory reductions from the buying surge last year; as such, we expect lower first quarter 2022 sales. However, we believe the normalization of hospital inventories, surgical procedures and normalizing in-patient activity, along with our broadened product line, ongoing product innovation, digital tools and proven service value, will drive increased sales for the full year 2022, and that the business remains well-positioned for attractive long-term growth.
LIFE SCIENCES
Life Sciences’ fourth quarter acquisition adjusted fixed currency sales declined 3% reflecting the comparison against a very strong 2020 period as well as COVID-related new business start-up delays by customers in 2021’s fourth 13
quarter. Our recent acquisition of Purolite, which closed in December 2021, is progressing well and showed strong sales growth.
We expect continued fundamental market growth for our specialized products and services that help ensure safe, efficient and effective manufacturing facilities for our pharmaceutical and personal care customers. The addition of Purolite deepens Ecolab’s core customer relationships in life sciences by adding product safety expertise to our environmental safety programs, leveraging corporate accounts, field service, R&D and combined geographic footprint while also offering a strong growth outlook. We look for first quarter sales to show moderately improved growth as COVID-related delays are expected to ease, and for comparisons to further strengthen toward historic levels as customer operations normalize as the year progresses.
HEALTHCARE & LIFE SCIENCES SEGMENT MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Global Healthcare & Life Sciences Op. Inc. | $29.7 | | 9.6% | | $56.3 | | 17.2% | | (47)% | |
| Acq./Div. Adj. Op. Inc. | $37.6 | | 13.2% | | $56.2 | | 17.2% | | (33)% | |
Acquisition adjusted fixed currency operating income decreased 33%, primarily reflecting the comparison to the very strong sales volume last year (when operating income grew 65%) as well as the impact of the fourth quarter 2021’s unfavorable supply constraints; these were partially offset by favorable pricing and lower variable compensation.
14
OTHER SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Other | % Change | % Change | ||
| Pest Elimination | 10% | | 10% | |
| Textile Care | 18% | | 18% | |
| Colloidal Technologies | 27% | | 27% | |
| Total Other | 13% | | 13% | |
| | | | | |
PEST ELIMINATION
Fixed currency Pest Elimination sales increased 10% reflecting continued strong growth in food and beverage plants, restaurants and hospitality. We realized continued robust new business wins led by our high service levels, innovation and increased awareness around food safety and hygiene standards. Growth was strong across all major markets.
We expect Pest Elimination to show strong growth in the first quarter as we leverage our ongoing innovation and as our enhanced digital offerings add further differentiation to drive additional business wins.
OTHER MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Other Op. Inc. | $43.9 | | 13.6% | | $44.4 | | 15.5% | | (1)% | |
| Acq./Div. Adj. Op. Inc. | $43.9 | | 13.6% | | $44.4 | | 15.5% | | (1)% | |
Acquisition adjusted fixed currency operating income decreased 1% as accelerated pricing and volume growth was more than offset by the comparison to lower variable compensation last year and higher delivered product costs.
15
CONSOLIDATED MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Gross Profit | $1,321.5 | | 39.3% | | $1,285.0 | | 41.9% | | 3% | |
| Gross Profit (adj.) | $1,334.8 | | 39.8% | | $1,287.6 | | 42.0% | | 4% | |
Fourth quarter gross margins adjusted for special charges decreased 220 basis points versus last year’s adjusted margin, reflecting accelerated pricing that was more than offset by significantly higher delivered product costs and supply constraints.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| SG&A | $867.9 | | 25.8% | | $809.6 | | 26.4% | | 7% | |
The fourth quarter SG&A ratio to sales decreased by 60 basis points as volume leverage and cost savings more than offset the comparison to lower variable compensation last year and investments in the business.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2021 | **** | % sales | 2020 | **** | % sales | % change | |||
| Operating Income | $387.7 | | 11.5% | | $416.1 | | 13.6% | | (7)% | |
| Fixed Currency Operating | | | | | | | | | | |
| Income (adj.) | $485.7 | | 14.2% | | $488.3 | | 15.6% | | (1)% | |
| Fixed Currency Operating | | | | | | | | | | |
| Income (acq./div. adj.) | $489.3 | | 14.6% | | $488.2 | | 15.9% | | 0% | |
Adjusted fixed currency operating income decreased 1%. The operating income decrease reflects the accelerated pricing and volume growth, which were offset by significantly higher delivered product costs, supply constraints and comparison to lower variable compensation last year.
16
CORPORATE EXPENSE
| | | | | |
|---|---|---|---|---|
| ($ millions - unaudited) | 2021 | **** | 2020 | **** |
| Corporate | | | | |
| Corp. Expense | ($30.6) | | ($30.4) | |
| Special Gains/(Charges) | (83.6) | | (61.9) | |
| Total Corporate Expense | ($114.2) | | ($92.3) | |
Fourth quarter of 2021 corporate segment includes amortization expense of $31 million related to the Nalco merger intangible assets as well as net special charges of $84 million that primarily reflected COVID-related charges and Purolite acquisition costs.
Special gains and charges for the fourth quarter of 2020 were a net charge of $62 million and primarily include restructuring charges and COVID-related costs.
OTHER INCOME, INTEREST, TAX RATE, SHARES AND CONSOLIDATED INCOME
Reported interest expense decreased 8% reflecting lower average debt levels and lower average interest rates from debt refinancing transactions, though this benefit was partially offset by new debt issued to fund the December 1, 2021 Purolite acquisition.
The reported income tax rate for the fourth quarter of 2021 was 12.6% compared with the reported rate of 19.3% in the fourth quarter of 2020. Excluding special gains and charges, discrete tax items and the impact of the Purolite transaction, the adjusted tax rate for the fourth quarter of 2021 was 17.3% compared with the adjusted tax rate of 18.3% in the fourth quarter of 17
- The lower tax rate in the fourth quarter 2021 reflected tax planning benefits.
The net of this performance is that Ecolab reported fourth quarter diluted earnings per share from continuing operations of $1.04, flat versus the prior year. As expected, the impact of Purolite (excluding acquisition-related special charges) was $0.02 per share dilutive to reported earnings per share from continuing operations as strong sales growth since its December 1, 2021 acquisition was more than offset by acquisition-related amortization and interest expense. When adjusted for special gains and charges, discrete tax items and the impact of the Purolite transaction, fourth quarter adjusted diluted earnings per share from continuing operations were $1.28 compared with $1.23 reported a year ago. Currency translation did not have a material impact on fourth quarter 2021 earnings per share.
18
BALANCE SHEET, CASH FLOW AND LEVERAGE
| | | | | |
|---|---|---|---|---|
| (unaudited) | December 31 | **** | ||
| ($ millions) | 2021 | **** | 2020 | **** |
| Cash and cash eq. | $359.9 | | $1,260.2 | |
| Accounts receivable, net | 2,478.4 | | 2,273.8 | |
| Inventories | 1,491.8 | | 1,285.2 | |
| Other current assets | 357.0 | | 298.2 | |
| PP&E, net | 3,288.5 | | 3,124.9 | |
| Goodwill and intangibles | 12,288.0 | | 8,983.9 | |
| Other assets | 942.8 | | 899.8 | |
| Total assets | $21,206.4 | | $18,126.0 | |
| | | | | |
| Short-term debt | $411.0 | | $17.3 | |
| Accounts payable | 1,384.2 | | 1,160.6 | |
| Other current liabilities | 1,758.0 | | 1,754.3 | |
| Long-term debt | 8,347.2 | | 6,669.3 | |
| Pension/Postretirement | 894.2 | | 1,226.2 | |
| Other liabilities | 1,158.7 | | 1,096.8 | |
| Total equity | 7,253.1 | | 6,201.5 | |
| Total liab. and equity | $21,206.4 | | $18,126.0 | |
| | | | | |
|---|---|---|---|---|
| | December 31 | |||
| (unaudited) | 2021 | 2020 | ||
| Total Debt/Total Capital | 54.7% | | 51.9% | |
| Net Debt/Total Capital | 53.7% | | 46.7% | |
| Net Debt/EBITDA | 3.4 | 2.4 | | |
| Net Debt/Adjusted EBITDA | 3.1 | | 2.2 | |
| | | | | |
| The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. | |
| | | | | |
|---|---|---|---|---|
| | Twelve Months Ended | **** | ||
| (unaudited) | December 31 | **** | ||
| ($ millions) | 2021 | **** | 2020 | **** |
| Cash from op. activities | $2,061.9 | | $1,741.8 | |
| Depreciation | 604.4 | | 594.3 | |
| Amortization | 238.7 | | 218.4 | |
| Capital expenditures | 643.0 | | 489.0 | |
19
SUMMARY
In summary, our business continued to show strong sales growth in the fourth quarter that was partially offset by negative COVID-related effects on broad business activity and a near doubling of unfavorable supply chain impacts compared to the third quarter.
We enter 2022 in a strong position, with very strong sales momentum, record new business wins, pricing of 4% and rising, and improved productivity, all of which we expect will drive continued strong topline momentum for the full year. We expect these drivers will enable us to deliver strong full year 2022 sales growth with adjusted diluted earnings per share growth reaching low-teens levels as our accelerating pricing and continued strong volume growth outpace the currently expected higher delivered product cost inflation and supply constraints over the balance of the year.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements 20
include, but are not limited to, statements regarding COVID-19 pandemic trends, the global economic recovery, delivered product and supply chain costs, supply chain disruptions, and our financial and business performance and prospects, including sales, earnings, pricing, innovation and new business. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. With respect to the COVID-19 pandemic, numerous factors will determine the extent of the impact on our business, including the severity of the disease, the duration of the outbreak, the distribution, acceptance and efficacy of vaccines, the likelihood of a resurgence of the outbreak, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy and other unintended consequences.
Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; difficulty in procuring raw materials or fluctuations in raw material costs; the vitality of the markets we serve; the impact of economic factors such as the worldwide economy, capital flows, interest rates, foreign currency risk, and reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar; information technology 21
infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; exposure to global economic, political and legal risks related to our international operations; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; realization of anticipated benefits of the Purolite acquisition; our ability to acquire complementary businesses and to effectively integrate such businesses; the costs and effects of complying with laws and regulations, including those relating to the environment and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; potential chemical spill or release; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; the occurrence of litigation or claims, including class action lawsuits; the loss or insolvency of a major customer or distributor; repeated or prolonged government and/or business shutdowns or similar events; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any failure to comply with covenants that apply to our indebtedness; potential losses arising from the impairment of goodwill or other assets; and other22
uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.
NON-GAAP FINANCIAL INFORMATION
This discussion and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures include:
•fixed currency sales
•adjusted net sales
•adjusted fixed currency sales
•acquisition adjusted fixed currency sales
•adjusted cost of sales
•adjusted gross margin
•fixed currency operating income
•fixed currency operating income margin
•adjusted operating income
•adjusted fixed currency operating income
•adjusted fixed currency operating income margin
•acquisition adjusted fixed currency operating income 23
•acquisition adjusted fixed currency operating income margin
•EBITDA
•adjusted EBITDA
•adjusted other (income) expense
•adjusted interest expense
•adjusted tax rate
•adjusted net income attributable to Ecolab
•adjusted diluted earnings per share
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.
Our non-GAAP adjusted financial measures for net sales excludes Purolite sales. Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income, other (income) expense and interest expense exclude the impact of special (gains) and charges and (with the exception of other (income) expense) the impact of the Purolite transaction, 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 24
operating results and not necessarily reflect costs associated with 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.
EBITDA is defined as the sum of net income including non-controlling interest, provision for income taxes, net interest expense, depreciation and amortization. Adjusted EBITDA is defined as the sum of EBITDA and the impacts of the Purolite transaction and special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are used as inputs to our net debt to EBITDA and net debt to adjusted EBITDA ratios. We view these ratios as important indicators of the operational and financial health of our organization.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange, which eliminate the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this supplemental discussion are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2021. We also provide our segment results based on public currency rates for information purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco merger or the impact of special (gains) and charges as these are not allocated to the Company’s reportable segments.
Acquisition adjusted growth rates exclude the results of any acquired business 25
from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude sales to our Venezuelan deconsolidated subsidiaries from both the current period and comparable period of the prior year. In addition, as part of the separation, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
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 this supplemental discussion. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in the second quarter 2021 supplemental discussion.
We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this discussion) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable 26
effort. This is due to the inherent difficulty of forecasting the timing and amount of various items that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact reported earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.
27
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Fourth Quarter Ended | **** | Twelve Months Ended | ||||||||
| (unaudited) | | December 31 | | December 31 | ||||||||
| (millions, except percent) | | 2021 | 2020 | | 2021 | 2020 | ||||||
| | | | | | | | | | | | | |
| Net sales | | | | | | | | | | | | |
| Reported GAAP net sales | | $3,364.6 | | | $3,065.3 | | | $12,733.1 | | | $11,790.2 | |
| Impact of Purolite on net sales | | 12.0 | | | - | | | 12.0 | | | - | |
| Non-GAAP adjusted net sales | | 3,352.6 | | | 3,065.3 | | | 12,721.1 | | | 11,790.2 | |
| Effect of foreign currency translation | | 60.8 | | | 55.8 | | | 111.7 | | | 332.1 | |
| Non-GAAP adjusted fixed currency sales | | 3,413.4 | | | 3,121.1 | | | 12,832.8 | | | 12,122.3 | |
| Effect of acquisitions and divestitures | | (57.6) | | | (41.4) | | | (252.0) | | | (138.9) | |
| Non-GAAP acquisition adjusted fixed currency sales | | $3,355.8 | | | $3,079.7 | | | $12,580.8 | | | $11,983.4 | |
| | | | | | | | | | | | | |
| Cost of Sales | | | | | | | | | | | | |
| Reported GAAP cost of sales | | $2,043.1 | | | $1,780.3 | | | $7,615.8 | | | $6,905.8 | |
| Special (gains) and charges | | 17.7 | | | 2.6 | | | 93.9 | | | 48.2 | |
| Impact of Purolite on cost of sales | | 7.6 | | | - | | | 7.6 | | | - | |
| Non-GAAP adjusted cost of sales | | $2,017.8 | | | $1,777.7 | | | $7,514.3 | | | $6,857.6 | |
| | | | | | | | | | | | | |
| Gross Margin | | | | | | | | | | | | |
| Reported GAAP gross margin | | 39.3 | % | | 41.9 | % | | 40.2 | % | | 41.4 | % |
| Non-GAAP adjusted gross margin | | 39.8 | % | | 42.0 | % | | 40.9 | % | | 41.8 | % |
| | | | | | | | | | | | | |
| Operating income | | | | | | | | | | | | |
| Reported GAAP operating income | | $387.7 | | | $416.1 | | | $1,598.6 | | | $1,395.7 | |
| Effect of foreign currency translation | | 10.6 | | | 10.3 | | | 18.9 | | | 52.8 | |
| Non-GAAP fixed currency operating income | | 398.3 | | | 426.4 | | | 1,617.5 | | | 1,448.5 | |
| Special (gains) and charges | | 83.6 | | | 61.9 | | | 196.5 | | | 227.8 | |
| Impact of Purolite on operating income | | 3.8 | | | - | | | 3.8 | | | - | |
| Non-GAAP adjusted fixed currency operating income | | 485.7 | | | 488.3 | | | 1,817.8 | | | 1,676.3 | |
| Effect of acquisitions and divestitures | | 3.6 | | | (0.1) | | | 5.2 | | | (2.8) | |
| Non-GAAP acquisition adjusted fixed currency operating income | | $489.3 | | | $488.2 | | | $1,823.0 | | | $1,673.5 | |
| | | | | | | | | | | | | |
| Operating Income Margin | | | | | | | | | | | | |
| Reported GAAP operating income margin | | 11.5 | % | | 13.6 | % | | 12.6 | % | | 11.8 | % |
| Non-GAAP adjusted fixed currency operating income margin | | 14.2 | % | | 15.6 | % | | 14.2 | % | | 13.8 | % |
| Non-GAAP acquisition adjusted fixed currency operating income margin | | 14.6 | % | | 15.9 | % | | 14.5 | % | | 14.0 | % |
28
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | **** | Fourth Quarter Ended | **** | Twelve Months Ended | ||||||||
| (millions, except percent and per share) | | December 31 | | December 31 | ||||||||
| | | 2021 | 2020 | | 2021 | 2020 | ||||||
| Interest expense, net | | | | | | | | | | | | |
| Reported GAAP interest expense, net | | $44.6 | | | $48.4 | | | $218.3 | | | $290.2 | |
| Special (gains) and charges | | 0.8 | | | - | | | 33.1 | | | 83.8 | |
| Impact of Purolite on interest expense | | 3.5 | | | - | | | 3.5 | | | - | |
| Non-GAAP adjusted interest expense, net | | $40.3 | | | $48.4 | | | $181.7 | | | $206.4 | |
| Other (income) expense | | | | | | | | | | | | |
| Reported GAAP other (income) expense | | ($6.4) | | | ($10.3) | | | ($33.9) | | | ($55.9) | |
| Special (gains) and charges | | 10.6 | | | 0.4 | | | 37.2 | | | 0.4 | |
| Non-GAAP adjusted other (income) expense | | ($17.0) | | | ($10.7) | | | ($71.1) | | | ($56.3) | |
| Net Income from continuing operations attributable to Ecolab | | | | | | | | | | | | |
| Reported GAAP net income from continuing operations attributable to Ecolab | | $301.0 | | | $300.3 | | | $1,129.9 | | | $967.4 | |
| Special (gains) and charges, after tax | | 74.4 | | | 53.8 | | | 213.5 | | | 254.1 | |
| Discrete tax net expense (benefit) | | (11.7) | | | 1.0 | | | 5.8 | | | (55.8) | |
| Impact of Purolite on net income | | 5.6 | | | - | | | 5.6 | | | - | |
| Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $369.3 | | | $355.1 | | | $1,354.8 | | | $1,165.7 | |
| Diluted EPS from continuing operations attributable to Ecolab | | | | | | | | | | | | |
| Reported GAAP diluted EPS from continuing operations | | $1.04 | | | $1.04 | | | $3.91 | | | $3.33 | |
| Special (gains) and charges, after tax | | 0.26 | | | 0.19 | | | 0.74 | | | 0.88 | |
| Discrete tax net expense (benefit) | | (0.04) | | | - | | | 0.02 | | | (0.19) | |
| Impact of Purolite on diluted EPS | | 0.02 | | | - | | | 0.02 | | | - | |
| Non-GAAP adjusted diluted EPS from continuing operations | | $1.28 | | | $1.23 | | | $4.69 | | | $4.02 | |
| Provision for Income Taxes | | | | | | | | | | | | |
| Reported GAAP tax rate | | 12.6 | % | | 19.3 | % | | 19.1 | % | | 15.2 | % |
| Special gains and charges | | 2.0 | | | (0.8) | | | 0.1 | | | 0.7 | |
| Discrete tax items | | 2.6 | | | (0.2) | | | (0.3) | | | 3.8 | |
| Purolite tax impacts | | 0.1 | | | - | | | 0.0 | | | - | |
| Non-GAAP adjusted tax rate | | 17.3 | % | | 18.3 | % | | 18.9 | % | | 19.7 | % |
| EBITDA (trailing twelve months ended) | | | | | | | | | | | | |
| Net income including non-controlling interest | | $1,144.0 | | | $984.8 | | | | | | | |
| Provision for income taxes | | 270.2 | | | 176.6 | | | | | | | |
| Interest expense, net | | 218.3 | | | 290.2 | | | | | | | |
| Depreciation | | 604.4 | | | 594.3 | | | | | | | |
| Amortization | | 238.7 | | | 218.4 | | | | | | | |
| EBITDA | | $2,475.6 | | | $2,264.3 | | | | | | | |
| Special (gains) and charges impacting EBITDA | | 233.7 | | | 228.2 | | | | | | | |
| Impact of Purolite on EBITDA | | (3.3) | | | - | | | | | | | |
| Adjusted EBITDA | | $2,706.0 | | | $2,492.5 | | | | | | | |
| | | | | | | | | | | | | |
29
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Fourth Quarter Ended December 31 | ||||||||||
| (unaudited) | | 2021 | | 2020 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $1,695.2 | | (6.5) | | $1,688.7 | | $1,571.8 | | - | | $1,571.8 |
| Global Institutional & Specialty | | 1,064.2 | | (4.1) | | 1,060.1 | | 894.4 | | - | | 894.4 |
| Global Healthcare & Life Sciences | | 308.0 | | (23.7) | | 284.3 | | 327.8 | | (0.3) | | 327.5 |
| Other | | 322.7 | | - | | 322.7 | | 286.0 | | - | | 286.0 |
| Corporate | | 35.3 | | (35.3) | | - | | 41.1 | | (41.1) | | - |
| Subtotal at fixed currency rates | | 3,425.4 | | (69.6) | | 3,355.8 | | 3,121.1 | | (41.4) | | 3,079.7 |
| Currency impact | | (60.8) | | | | | | (55.8) | | | | |
| Consolidated reported GAAP net sales | | $3,364.6 | | | | | | $3,065.3 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $280.2 | | (0.9) | | $279.3 | | $323.4 | | - | | $323.4 |
| Global Institutional & Specialty | | 158.7 | | 0.4 | | 159.1 | | 94.6 | | - | | 94.6 |
| Global Healthcare & Life Sciences | | 29.7 | | 7.9 | | 37.6 | | 56.3 | | (0.1) | | 56.2 |
| Other | | 43.9 | | - | | 43.9 | | 44.4 | | - | | 44.4 |
| Corporate | | (30.6) | | - | | (30.6) | | (30.4) | | - | | (30.4) |
| Subtotal at fixed currency rates | | 481.9 | | 7.4 | | 489.3 | | 488.3 | | (0.1) | | 488.2 |
| Special (gains) and charges | | 83.6 | | | | | | 61.9 | | | | |
| Reported OI at fixed currency rates | | 398.3 | | | | | | 426.4 | | | | |
| Currency impact | | (10.6) | | | | | | (10.3) | | | | |
| Consolidated reported GAAP operating income | | $387.7 | | | | | | $416.1 | | | | |
| | | | | | | | | | | | | |
| | | Year Ended December 31 | ||||||||||
| | | 2021 | | 2020 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $6,304.9 | | ($65.9) | | $6,239.0 | | $6,048.2 | | ($37.1) | | $6,011.1 |
| Global Institutional & Specialty | | 3,978.2 | | (14.2) | | 3,964.0 | | 3,629.0 | | - | | 3,629.0 |
| Global Healthcare & Life Sciences | | 1,195.4 | | (44.5) | | 1,150.9 | | 1,241.1 | | (1.2) | | 1,239.9 |
| Other | | 1,226.9 | | - | | 1,226.9 | | 1,103.4 | | - | | 1,103.4 |
| Corporate | | 139.4 | | (139.4) | | - | | 100.6 | | (100.6) | | - |
| Subtotal at fixed currency rates | | 12,844.8 | | (264.0) | | 12,580.8 | | 12,122.3 | | (138.9) | | 11,983.4 |
| Currency impact | | (111.7) | | | | | | (332.1) | | | | |
| Consolidated reported GAAP net sales | | $12,733.1 | | | | | | $11,790.2 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $1,031.0 | | ($3.4) | | $1,027.6 | | $1,123.1 | | ($2.6) | | $1,120.5 |
| Global Institutional & Specialty | | 556.9 | | 2.2 | | 559.1 | | 324.0 | | - | | 324.0 |
| Global Healthcare & Life Sciences | | 160.9 | | 10.2 | | 171.1 | | 218.3 | | (0.2) | | 218.1 |
| Other | | 187.3 | | - | | 187.3 | | 132.8 | | - | | 132.8 |
| Corporate | | (122.1) | | - | | (122.1) | | (121.9) | | - | | (121.9) |
| Subtotal at fixed currency rates | | 1,814.0 | | 9.0 | | 1,823.0 | | 1,676.3 | | (2.8) | | 1,673.5 |
| Special (gains) and charges | | 196.5 | | | | | | 227.8 | | | | |
| Reported OI at fixed currency rates | | 1,617.5 | | | | | | 1,448.5 | | | | |
| Currency impact | | (18.9) | | | | | | (52.8) | | | | |
| Consolidated reported GAAP operating income | | $1,598.6 | | | | | | $1,395.7 | | | | |
30
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share from continuing operations, as reported, to the non-GAAP measure of adjusted diluted earnings per share from continuing operations.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | First | Second | Six | Third | Nine | Fourth | | |||||||
| | | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | |
| | | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | |
| | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | |
| Diluted earnings per share, as reported (U.S. GAAP) | | $1.00 | | $0.44 | | $1.44 | | $0.85 | | $2.29 | | $1.04 | | $3.33 | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(1)^ | | 0.06 | | 0.29 | | 0.35 | | 0.34 | | 0.69 | | 0.19 | | 0.88 | |
| Discrete tax expense (benefits) ^(2)^ | | (0.07) | | (0.08) | | (0.15) | | (0.04) | | (0.20) | | 0.00 | | (0.19) | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.99 | | $0.65 | | $1.64 | | $1.15 | | $2.79 | | $1.23 | | $4.02 | |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | First | Second | Six | Third | Nine | Fourth | **** | |||||||
| | | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | **** |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | **** |
| | | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | **** |
| | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | **** |
| Diluted earnings per share, as reported (U.S. GAAP) | | $0.67 | | $1.08 | | $1.75 | | $1.12 | | $2.87 | | $1.04 | | $3.91 | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(3)^ | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
| Discrete tax expense (benefits) ^(4)^ | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | (0.04) | | 0.02 | |
| Impact of Purolite on diluted earnings per share | | | | | | | | | | | | 0.02 | | 0.02 | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | $1.28 | | $4.69 | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2020 includes charges of $18.5 million, $83.3 million, $98.5 million and $53.8 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include debt refinancing charges, restructuring charges, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, employee-related COVID-19 costs (net of government subsidies), and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2020 includes ($21.9) million, ($22.5) million, ($12.4) million and $1.0 million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits, offset by other discrete tax expense.
(3) Special (gains) and charges for 2021 includes charges of $24.2 million, $34.1 million, $80.8 million and $74.4 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include covid related inventory write downs, employee-related COVID-19 costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million, ($6.3) million and ($11.7) million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense. 31