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) April 26, 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 April 26, 2022, Ecolab Inc. (“Ecolab”) announced earnings for the first quarter ended March 31, 2022. 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 first 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 April 26, 2022. | | Filed herewith electronically. | |
| | | | | | |
| (99.2) | | Supplemental Data for First Quarter dated April 26, 2022. | | Filed herewith electronically. | |
| | | | | | |
| (99.3) | | Supplemental Discussion for First Quarter dated April 26, 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: April 26, 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<br><br>Cairn Clark (651) 250-2291 |
ECOLAB FIRST QUARTER REPORTED DILUTED EPS $0.60;
ADJUSTED DILUTED EPS $0.82, +1%;
CONTINUE TO EXPECT STRONG SECOND HALF 2022 EARNINGS GROWTH
FIRST QUARTER HIGHLIGHTS :
| ● | Very strong first quarter sales growth, driven by strong volume gains and accelerating pricing that overcame surging delivered product cost inflation in a rapidly changing global operating environment. |
|---|---|
| ● | Reported sales +13% versus last year. Acquisition adjusted fixed currency sales +12%. |
| --- | --- |
| ● | Reported diluted EPS $0.60, -10% versus last year. |
| --- | --- |
| ● | Adjusted diluted EPS, excluding special gains and charges and discrete tax items were $0.82, +1% versus last year. Adjusted diluted EPS includes $0.06 per share of Purolite amortization. |
| --- | --- |
| ● | The earnings increase reflects accelerating pricing and strong volume growth which overcame substantial incremental increases in delivered product costs following the start of the war in Eastern Europe and further headwinds from unfavorable currency translation. |
| --- | --- |
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | First Quarter Ended March 31 | ||||||||||||||||
| | | Reported | | | | | Adjusted | | | | ||||||||
| (unaudited) | | Public Currency Rates | | % | | Public Currency Rates | | % | ||||||||||
| (millions, except per share) | | 2022 | | 2021 | | Change | | 2022 | | | 2021 | | Change | |||||
| Net sales | | $3,266.7 | | | $2,885.0 | | | 13 | % | | $3,266.7 | | | $2,885.0 | | | 13 | % |
| Operating income | | 254.5 | | | 297.3 | | | (14) | % | | 331.5 | | | 329.7 | | | 1 | % |
| Net income attributable to Ecolab | | 171.9 | | | 193.6 | | | (11) | % | | 236.5 | | | 233.9 | | | 1 | % |
| | | | | | | | | | | | | | | | | | | |
| Diluted earnings per share attributable to Ecolab | | $0.60 | | | $0.67 | | | (10) | % | | $0.82 | | | $0.81 | | | 1 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Adjusted | | | | ||||
| | | Fixed Currency Rates | | % | | Fixed Currency Rates | | % | ||||||||||
| | | 2022 | | 2021 | | Change | | 2022 | | | 2021 | | Change | |||||
| Net sales | | $3,255.4 | | | $2,808.3 | | | 16 | % | | $3,255.4 | | | $2,808.3 | | | 16 | % |
| Operating income | | 251.7 | | | 284.1 | | | (11) | % | | 328.7 | | | 316.5 | | | 4 | % |
1
ST. PAUL, Minn., April 26, 2022: First quarter adjusted earnings reflected double-digit sales growth, driven by very strong Institutional & Specialty, Industrial and Other segment sales, accelerating pricing and further strong new business wins, that overcame continued substantial delivered product cost inflation and unfavorable currency translation in a rapidly changing global operating environment.
CEO Comment
Commenting on the quarter, Christophe Beck, Ecolab’s president and chief executive officer, said, “First quarter earnings were consistent with our expectations, even though the operating environment was not. Our very strong sales growth, driven by improved volume gains and rapidly increasing pricing, overcame surging delivered product cost inflation. Sales growth accelerated further from the fourth quarter, led by double-digit gains in our Institutional & Specialty, Industrial and Other segments, while the Healthcare & Life Sciences segment declined versus a strong increase last year. Raw material and freight costs increased an estimated 25% versus last year, exacerbated by the start of the war in Eastern Europe during the last month of the quarter, and added an estimated $0.55 per share of year-on-year incremental costs to the first quarter alone. Importantly, our team reacted aggressively and continued to accelerate our pricing, which reached 5% in the quarter, up from 3% in the fourth quarter. This strong pricing momentum, along with robust new business gains, and benefits from innovation and digital automation and services, helped us to fully overcome these unprecedented headwinds.
“Looking ahead, we remain focused on continuously strengthening our long-term business fundamentals by driving strong new business, accelerating pricing and leveraging margin improvement through innovation and productivity. While we expect the impact of substantial raw material and cost inflation to increase further in the second quarter and remain high for the balance of the year, we are also very pleased with our progress on pricing, and now expect it to be in the 6% to 7% range for the balance of the year. In addition, to offset the rapid rise in energy costs following the start of the war in Eastern Europe thus impacting the full second quarter, we have begun to roll out a global temporary energy surcharge of up to 12%, which is expected to develop progressively through the year. Despite the substantial cost headwinds, we expect our combined pricing actions (which include our ongoing structural pricing and the energy surcharge), along with strong volume growth and long-term productivity improvements, to yield second quarter adjusted diluted earnings per share approaching last year’s $1.22. Further, as our current pricing actions roll 2
out through this year, we believe they will result in accelerating earnings growth through the second half and deliver low-teens growth in adjusted diluted earnings per share for the full year 2022, understanding there is uncertainty in the timing of the realization of the surcharge which will become more clear as we exit the second quarter.
“With our continued strong long-term macro drivers, strengthened value proposition and improved competitive advantages, we remain confident we are taking the right steps to deliver superior long-term growth and shareholder returns.”
First Quarter 2022 Consolidated Results
Ecolab’s first quarter reported sales increased 13%, fixed currency sales increased 16% and acquisition adjusted fixed currency sales increased 12% when compared to the prior year.
First quarter 2022 reported operating income decreased 14% and includes the impact of special charges, which were primarily related to Purolite acquisition costs, COVID-related charges and charges related to our operations in Russia. Adjusted operating income increased 1% while adjusted fixed currency operating income increased 4%. The adjusted operating income gain reflects accelerating structural pricing and strong volume growth which overcame substantially higher delivered product costs and unfavorable mix.
Reported interest expense increased 3% as interest on new debt issued to fund the Purolite acquisition was partially offset by benefits from debt refinancing transactions completed last year.
The reported income tax rate for the first quarter of 2022 was 20.7% compared with the reported rate of 25.2% in the first quarter of 2021. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the first quarter of 2022 was 19.5% compared with the adjusted tax rate of 19.7% in the first quarter of 2021.
First quarter 2022 reported net income decreased 11% versus the prior year. Excluding the impact of special gains and charges and discrete tax items, adjusted net income increased 1% versus the prior year.
3
Reported diluted earnings per share decreased 10% versus the prior year. Adjusted diluted earnings per share increased 1% when compared against the first quarter 2021. Adjusted diluted earnings per share includes $0.06 of Purolite amortization. Currency translation had a $0.03 unfavorable impact on first quarter 2022 earnings per share.
Ecolab reacquired approximately 1.5 million shares of its common stock during the first quarter of 2022.
First Quarter 2022 Segment Review
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Industrial | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2022 | | 2021 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $1,557.0 | | | $1,384.9 | | | 12 | % | | 12 | % |
| Operating income | | 189.2 | | | 209.8 | | | (10) | % | | (10) | % |
| Operating income margin | | 12.2 | % | | 15.1 | % | | | | | | |
| Acq. adj. operating income margin | | 12.1 | % | | 15.1 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $1,565.7 | | | $1,431.0 | | | 9 | % | | | |
| Operating income | | 191.4 | | | 220.3 | | | (13) | % | | | |
The Industrial segment includes Water, Food & Beverage, Downstream and Paper
Acquisition adjusted fixed currency sales increased 12%. Strong double-digit growth across all divisions was driven by accelerating structural pricing and new business wins. Acquisition adjusted fixed currency operating income decreased 10% as accelerating structural pricing and increased volume were more than offset by significantly higher delivered product costs and unfavorable mix.
4
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Institutional & Specialty | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2022 | | 2021 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $1,005.1 | | | $844.1 | | | 19 | % | | 19 | % |
| Operating income | | 110.8 | | | 61.9 | | | 79 | % | | 79 | % |
| Operating income margin | | 11.0 | % | | 7.3 | % | | | | | | |
| Acq. adj. operating income margin | | 11.0 | % | | 7.3 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $1,007.0 | | | $857.4 | | | 17 | % | | | |
| Operating income | | 111.1 | | | 62.0 | | | 79 | % | | | |
The Institutional & Specialty segment includes Institutional and Specialty
Acquisition adjusted fixed currency sales increased 19%. Strong growth in the Institutional division reflected improved volume gains, good new business wins, new innovation and structural pricing despite a stalled recovery in restaurant and lodging activity due to extended COVID-related impacts and customer staffing shortages. Specialty sales showed good growth as strong quickservice sales were partially offset by lower food retail sales, in part due to customer staffing shortages impacting cleaning intensity. Acquisition adjusted fixed currency operating income increased 79% as very strong volume growth and accelerating structural pricing overcame higher delivered product costs and sales force investments.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Global Healthcare & Life Sciences | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2022 | | 2021 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $362.6 | | | $281.1 | | | 29 | % | | (7) | % |
| Operating income | | 44.1 | | | 42.6 | | | 4 | % | | (42) | % |
| Operating income margin | | 12.2 | % | | 15.2 | % | | | | | | |
| Acq. adj. operating income margin | | 9.4 | % | | 15.2 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $362.8 | | | $292.7 | | | 24 | % | | | |
| Operating income | | 44.2 | | | 45.0 | | | (2) | % | | | |
The Healthcare & Life Sciences segment includes Healthcare and Life Sciences
Acquisition adjusted fixed currency sales decreased 7% compared to a 14% increase last year when sales benefited from strong COVID-related demand. Acquisition adjusted fixed currency operating income decreased 42%, primarily reflecting the comparison to the very strong sales 5
volume gain last year (when operating income grew 90%) and higher delivered product costs; these were partially offset by accelerating structural pricing.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
| (millions) | **** | 2022 | | 2021 | | % Change | % Change | |||||
| | | | | | | | | | | | | |
| Fixed currency | | | | | | | | | | | | |
| Sales | | $296.0 | | | $265.4 | | | 12 | % | | 12 | % |
| Operating income | | 37.2 | | | 32.3 | | | 15 | % | | 15 | % |
| Operating income margin | | 12.6 | % | | 12.2 | % | | | | | | |
| Acq. adj. operating income margin | | 12.6 | % | | 12.2 | % | | | | | | |
| | | | | | | | | | | | | |
| Public currency | | | | | | | | | | | | |
| Sales | | $296.4 | | | $270.7 | | | 9 | % | | | |
| Operating income | | 37.5 | | | 32.9 | | | 14 | % | | | |
The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies
Acquisition adjusted fixed currency sales increased 12%. Growth was led by double-digit gains in Pest Elimination and Textile Care. Acquisition adjusted fixed currency operating income increased 15% as accelerating structural pricing overcame higher delivered product costs.
| | | | | | | |
|---|---|---|---|---|---|---|
| <br><br>Corporate | | | | | | |
| | | | | | | |
| (unaudited) | | First Quarter Ended March 31 | ||||
| (millions) | **** | 2022 | | 2021 | ||
| | | | | | | |
| Public currency | | | | | | |
| Sales | | $34.8 | | | $33.2 | |
| | | | | | | |
| Corporate operating expense | | | | | | |
| Nalco and Purolite amortization | | 52.7 | | | 30.5 | |
| Special (gains) and charges | | 77.0 | | | 32.4 | |
| Total Corporate operating expense | | $129.7 | | | $62.9 | |
First quarter of 2022 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 $30 million related to the Nalco merger intangible assets and $23 million related to Purolite acquisition intangible assets |
| --- | --- |
| ● | net special charges of $77 million that primarily reflected Purolite acquisition costs, COVID-related charges and charges related to our operations in Russia as discussed below |
| --- | --- |
6
Special gains and charges for the first quarter of 2021 were a net charge of $32 million and primarily included restructuring charges and COVID-related charges.
Comment on Russia Operations
In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, Ecolab has made the determination that it will limit its Russian business to operations that are essential to life, providing minimal support for its healthcare, pharma, food and beverage and certain water businesses. Ecolab may further narrow its presence in Russia depending on future developments. Ecolab’s Russian operations represented approximately 1% of Ecolab’s 2021 annual sales.
2022 Business Outlook
We assume continued, if uneven, global economic growth in 2022 as global COVID impacts generally move behind us. In this rapidly changing environment, we remain focused on continuing to drive strong new business gains, pricing, and margin improvement. While we expect the impact of substantial raw material and cost inflation to increase further in the second quarter and remain high for the balance of the year, we are also very pleased with our progress on structural pricing, and now expect it to be in the 6% to 7% range for the balance of the year. In addition, to offset the rapid rise in energy costs following the start of the war in Eastern Europe thus impacting the full second quarter, we have begun to roll out a global temporary energy surcharge of up to 12%, which is expected to develop progressively through the year. Despite the substantial cost headwinds, we expect our combined pricing actions (which include our ongoing structural pricing and the energy surcharge), along with strong volume growth and long-term productivity improvements, to yield second quarter adjusted diluted earnings per share approaching last year’s $1.22. Further, as our current pricing actions roll out through this year, we believe they will result in accelerating earnings growth through the second half and deliver low-teens growth in adjusted diluted earnings per share for the full year 2022, understanding there is uncertainty in the timing of the realization of the surcharge which will become more clear as we exit the second quarter.
We remain confident in our long-term outlook as our value proposition to help solve the world’s people and planet health needs while improving business health is more important than ever. With our firm pricing execution focus and an inflationary environment that will ultimately ease and lead to 7
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
Ecolab will host a live webcast to review the first 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, global economic conditions, raw material and cost inflation, pricing actions, our Russian operations, and our financial and business performance and prospects, including sales, earnings, and productivity improvements. 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 8
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 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 and changing labor market dynamics in the wake of the COVID-19 pandemic; exposure to global economic, political and legal risks related to our international operations, including the impact of sanctions or other actions taken by the U.S. or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine; 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 9
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 include:
•fixed currency sales
•acquisition adjusted fixed currency sales
•adjusted cost of sales
•adjusted gross margin
•fixed currency operating income
•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 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. 10
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 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 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 2022. 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 and Purolite mergers 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 11
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.
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)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | | First Quarter Ended | | | |||
| | | March 31 | | % | |||
| (millions, except per share) | | 2022 | 2021 | | Change | ||
| | | | | | | | |
| Product and equipment sales | | $2,624.1 | | $2,293.4 | | | |
| Service and lease sales | | 642.6 | | 591.6 | | | |
| Net sales | | 3,266.7 | | 2,885.0 | | 13 | % |
| Product and equipment cost of sales | | 1,695.6 | | 1,362.9 | | | |
| Service and lease cost of sales | | 377.8 | | 349.1 | | | |
| Cost of sales ^(1)^ | | 2,073.4 | | 1,712.0 | | 21 | % |
| Selling, general and administrative expenses | | 914.7 | | 862.9 | | 6 | % |
| Special (gains) and charges ^(1)^ | | 24.1 | | 12.8 | | | |
| Operating income | | 254.5 | | 297.3 | | (14) | % |
| Other (income) expense ^(1)^ | | (18.8) | | (17.0) | | 11 | % |
| Interest expense, net ^(1)^ | | 53.0 | | 51.7 | | 3 | % |
| Income before income taxes | | 220.3 | | 262.6 | | (16) | % |
| Provision for income taxes | | 45.6 | | 66.1 | | (31) | % |
| Net income including noncontrolling interest | | 174.7 | | 196.5 | | (11) | % |
| Net income attributable to noncontrolling interest | | 2.8 | | 2.9 | | | |
| Net income attributable to Ecolab | | $171.9 | | $193.6 | | (11) | % |
| | | | | | | | |
| Earnings attributable to Ecolab per common share | | | | | | ||
| Basic | | $0.60 | | $0.68 | | (12) | % |
| Diluted | | $0.60 | | $0.67 | | (10) | % |
| | | | | | | | |
| Weighted-average common shares outstanding | | | | | | ||
| Basic | | 286.2 | | 286.0 | | 0 | % |
| Diluted | | 288.1 | | 288.8 | | 0 | % |
| | | | | | | | |
| (1) Cost of sales, Special (gains) and charges, Other (income) expense and Interest expense, net in the Consolidated Statement of Income above include the following: | |||||||
| | | | | | | | |
| | | First Quarter Ended | | | |||
| | | March 31 | | | | ||
| (millions) | | 2022 | | 2021 | | | |
| | | | | | | | |
| Cost of sales | | | | | | | |
| Restructuring activities | | $2.6 | | $18.2 | | | |
| Acquisition and integration activities | | 27.6 | | - | | | |
| COVID-19 activities, net | | 16.3 | | 1.1 | | | |
| Russia/Ukraine charges | | 6.4 | | - | | | |
| Other | | - | | 0.3 | | | |
| Subtotal ^(a)^ | | 52.9 | | 19.6 | | | |
| | | | | | | | |
| Special (gains) and charges | | | | | | | |
| Restructuring activities | | 0.8 | | 3.6 | | | |
| Acquisition and integration activities | | 7.5 | | 1.2 | | | |
| COVID-19 activities, net | | 1.5 | | 6.4 | | | |
| Russia/Ukraine charges | | 11.6 | | - | | | |
| Other | | 2.7 | | 1.6 | | | |
| Subtotal | | 24.1 | | 12.8 | | | |
| | | | | | | | |
| Total special (gains) and charges | | $77.0 | | $32.4 | | | |
(a) Special charges of $52.0 million and $19.6 million in the first quarter of 2022 and 2021 were recorded in product and equipment cost of sales. Special charges of $0.9 million in the first quarter of 2022 were recorded in service and lease cost of sales. 13
ECOLAB INC.
REPORTABLE SEGMENT INFORMATION
(unaudited)
| | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | First Quarter Ended March 31 | ||||||||||||
| | | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | | % | | | | | | % | ||
| (millions) | | 2022 | 2021 | **** | Change | 2022 | 2021 | Change | ||||||
| Net Sales | | | | | | | | | | | | | | |
| Global Industrial | | $1,557.0 | | $1,384.9 | | 12 | % | | $1,565.7 | | $1,431.0 | | 9 | % |
| Global Institutional & Specialty | | 1,005.1 | | 844.1 | | 19 | % | | 1,007.0 | | 857.4 | | 17 | % |
| Global Healthcare & Life Sciences | | 362.6 | | 281.1 | | 29 | % | | 362.8 | | 292.7 | | 24 | % |
| Other | | 296.0 | | 265.4 | | 12 | % | | 296.4 | | 270.7 | | 9 | % |
| Corporate | | 34.7 | | 32.8 | | 6 | % | | 34.8 | | 33.2 | | 5 | % |
| Subtotal at fixed currency rates | | 3,255.4 | | 2,808.3 | | 16 | % | | 3,266.7 | | 2,885.0 | | 13 | % |
| Currency impact | | 11.3 | | 76.7 | | * | | | - | | - | | * | |
| Consolidated reported GAAP net sales | | $3,266.7 | | $2,885.0 | | 13 | % | | $3,266.7 | | $2,885.0 | | 13 | % |
| | | | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | | | |
| Global Industrial | | $189.2 | | $209.8 | | (10) | % | | $191.4 | | $220.3 | | (13) | % |
| Global Institutional & Specialty | | 110.8 | | 61.9 | | 79 | % | | 111.1 | | 62.0 | | 79 | % |
| Global Healthcare & Life Sciences | | 44.1 | | 42.6 | | 4 | % | | 44.2 | | 45.0 | | (2) | % |
| Other | | 37.2 | | 32.3 | | 15 | % | | 37.5 | | 32.9 | | 14 | % |
| Corporate | | (129.6) | | (62.5) | | * | | | (129.7) | | (62.9) | | * | |
| Subtotal at fixed currency rates | | 251.7 | | 284.1 | | (11) | % | | 254.5 | | 297.3 | | (14) | % |
| Currency impact | | 2.8 | | 13.2 | | * | | | - | | - | | * | |
| Consolidated reported GAAP operating income | | $254.5 | | $297.3 | | (14) | % | | $254.5 | | $297.3 | | (14) | % |
| | | | | | | | | | | | | | | |
* 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 and Purolite merger intangible assets. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income.
14
ECOLAB INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | March 31 | | December 31 | | March 31 | |||
| (millions) | | 2022 | | 2021 | | 2021 | |||
| Assets | | | | | | | | | |
| Current assets | | | | | | | | | |
| Cash and cash equivalents | | $99.4 | | | $359.9 | | | $1,189.5 | |
| Accounts receivable, net | | 2,508.2 | | | 2,478.4 | | | 2,272.0 | |
| Inventories | | 1,589.9 | | | 1,491.8 | | | 1,347.0 | |
| Other current assets | | 407.0 | | | 357.0 | | | 341.5 | |
| Total current assets | | 4,604.5 | | | 4,687.1 | | | 5,150.0 | |
| | | | | | | | | | |
| Property, plant and equipment, net | | 3,285.7 | | | 3,288.5 | | | 3,078.7 | |
| Goodwill | | 8,081.0 | | | 8,063.9 | | | 6,119.5 | |
| Other intangible assets, net | | 4,138.3 | | | 4,224.1 | | | 2,966.8 | |
| Operating lease assets | | 385.8 | | | 396.8 | | | 412.5 | |
| Other assets | | 571.9 | | | 546.0 | | | 480.6 | |
| Total assets | | $21,067.2 | | | $21,206.4 | | | $18,208.1 | |
| | | | | | | | | | |
| Liabilities and Equity | | | | | | | | | |
| Current liabilities | | | | | | | | | |
| Short-term debt | | $493.1 | | | $411.0 | | | $24.3 | |
| Accounts payable | | 1,423.9 | | | 1,384.2 | | | 1,128.2 | |
| Compensation and benefits | | 469.6 | | | 509.5 | | | 457.6 | |
| Income taxes | | 108.6 | | | 104.3 | | | 52.4 | |
| Other current liabilities | | 1,136.1 | | | 1,144.2 | | | 1,189.7 | |
| Total current liabilities | | 3,631.3 | | | 3,553.2 | | | 2,852.2 | |
| | | | | | | | | | |
| Long-term debt | | 8,267.2 | | | 8,347.2 | | | 6,685.8 | |
| Postretirement health care and pension benefits | | 874.5 | | | 894.2 | | | 1,207.8 | |
| Deferred income taxes | | 619.2 | | | 622.0 | | | 526.8 | |
| Operating lease liabilities | | 275.2 | | | 282.6 | | | 291.2 | |
| Other liabilities | | 294.7 | | | 254.1 | | | 324.2 | |
| Total liabilities | | 13,962.1 | | | 13,953.3 | | | 11,888.0 | |
| | | | | | | | | | |
| Equity | | | | | | | | | |
| Common stock | | 364.5 | | | 364.1 | | | 363.0 | |
| Additional paid-in capital | | 6,501.5 | | | 6,464.6 | | | 6,285.7 | |
| Retained earnings | | 8,840.4 | | | 8,814.5 | | | 8,299.3 | |
| Accumulated other comprehensive loss | | (1,563.6) | | | (1,634.8) | | | (1,914.5) | |
| Treasury stock | | (7,061.2) | | | (6,784.2) | | | (6,741.2) | |
| Total Ecolab shareholders’ equity | | 7,081.6 | | | 7,224.2 | | | 6,292.3 | |
| Noncontrolling interest | | 23.5 | | | 28.9 | | | 27.8 | |
| Total equity | | 7,105.1 | | | 7,253.1 | | | 6,320.1 | |
| Total liabilities and equity | | $21,067.2 | | | $21,206.4 | | | $18,208.1 | |
15
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | First Quarter Ended | **** | ||||
| | | March 31 | | ||||
| (millions, except percent and per share) | | 2022 | 2021 | | |||
| | | | | | | | |
| Net sales | | | | | | | |
| Reported GAAP net sales | | $3,266.7 | | | $2,885.0 | | |
| Effect of foreign currency translation | | (11.3) | | | (76.7) | | |
| Non-GAAP fixed currency sales | | 3,255.4 | | | 2,808.3 | | |
| Effect of acquisitions and divestitures | | (142.5) | | | (32.8) | | |
| Non-GAAP acquisition adjusted fixed currency sales | | $3,112.9 | | | $2,775.5 | | |
| | | | | | | | |
| Cost of sales | | | | | | | |
| Reported GAAP cost of sales | | $2,073.4 | | | $1,712.0 | | |
| Special (gains) and charges | | 52.9 | | | 19.6 | | |
| Non-GAAP adjusted cost of sales | | $2,020.5 | | | $1,692.4 | | |
| | | | | | | | |
| Gross margin | | | | | | | |
| Reported GAAP gross margin | | 36.5 | % | | 40.7 | % | |
| Non-GAAP adjusted gross margin | | 38.1 | % | | 41.3 | % | |
| | | | | | | | |
| Operating income | | | | | | | |
| Reported GAAP operating income | | $254.5 | | | $297.3 | | |
| Effect of foreign currency translation | | (2.8) | | | (13.2) | | |
| Non-GAAP fixed currency operating income | | 251.7 | | | 284.1 | | |
| Special (gains) and charges | | 77.0 | | | 32.4 | | |
| Non-GAAP adjusted fixed currency operating income | | 328.7 | | | 316.5 | | |
| Effect of acquisitions and divestitures | | 2.5 | | | 0.0 | | |
| Non-GAAP acquisition adjusted fixed currency operating income | | $331.2 | | | $316.5 | | |
| | | | | | | | |
| Operating income margin | | | | | | | |
| Reported GAAP operating income margin | | 7.8 | % | | 10.3 | % | |
| Non-GAAP adjusted fixed currency operating income margin | | 10.1 | % | | 11.3 | % | |
| Non-GAAP acquisition adjusted fixed currency operating income margin | | 10.6 | % | | 11.4 | % | |
16
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | First Quarter Ended | **** | ||||
| | | March 31 | | ||||
| (millions, except percent and per share) | | 2022 | 2021 | | |||
| Net Income attributable to Ecolab | | | | | | | |
| Reported GAAP net income attributable to Ecolab | | $171.9 | | | $193.6 | | |
| Special (gains) and charges, after tax | | 63.6 | | | 24.2 | | |
| Discrete tax net expense (benefit) | | 1.0 | | | 16.1 | | |
| Non-GAAP adjusted net income attributable to Ecolab | | $236.5 | | | $233.9 | | |
| | | | | | | | |
| Diluted EPS attributable to Ecolab | | | | | | | |
| Reported GAAP diluted EPS | | $0.60 | | | $0.67 | | |
| Special (gains) and charges, after tax | | 0.22 | | | 0.08 | | |
| Discrete tax net expense (benefit) | | 0.00 | | | 0.06 | | |
| Non-GAAP adjusted diluted EPS | | $0.82 | | | $0.81 | | |
| | | | | | | | |
| Provision for Income Taxes | | | | | | | |
| Reported GAAP tax rate | | 20.7 | % | | 25.2 | % | |
| Special gains and charges | | (0.9) | | | - | | |
| Discrete tax items | | (0.3) | | | (5.5) | | |
| Non-GAAP adjusted tax rate | | 19.5 | % | | 19.7 | % | |
17
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | First Quarter Ended March 31 | ||||||||||
| (unaudited) | | 2022 | | 2021 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $1,557.0 | | ($5.9) | | $1,551.1 | | $1,384.9 | | - | | $1,384.9 |
| Global Institutional & Specialty | | 1,005.1 | | - | | 1,005.1 | | 844.1 | | - | | 844.1 |
| Global Healthcare & Life Sciences | | 362.6 | | (101.9) | | 260.7 | | 281.1 | | - | | 281.1 |
| Other | | 296.0 | | - | | 296.0 | | 265.4 | | - | | 265.4 |
| Corporate | | 34.7 | | (34.7) | | - | | 32.8 | | (32.8) | | - |
| Subtotal at fixed currency rates | | 3,255.4 | | (142.5) | | 3,112.9 | | 2,808.3 | | (32.8) | | 2,775.5 |
| Currency impact | | 11.3 | | | | | | 76.7 | | | | |
| Consolidated reported GAAP net sales | | $3,266.7 | | | | | | $2,885.0 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $189.2 | | ($0.8) | | $188.4 | | $209.8 | | - | | $209.8 |
| Global Institutional & Specialty | | 110.8 | | - | | 110.8 | | 61.9 | | - | | 61.9 |
| Global Healthcare & Life Sciences | | 44.1 | | (19.6) | | 24.5 | | 42.6 | | - | | 42.6 |
| Other | | 37.2 | | - | | 37.2 | | 32.3 | | - | | 32.3 |
| Corporate | | (52.6) | | 22.9 | | (29.7) | | (30.1) | | - | | (30.1) |
| Subtotal at fixed currency rates | | 328.7 | | 2.5 | | 331.2 | | 316.5 | | - | | 316.5 |
| Special (gains) and charges | | 77.0 | | | | | | 32.4 | | | | |
| Reported OI at fixed currency rates | | 251.7 | | | | | | 284.1 | | | | |
| Currency impact | | 2.8 | | | | | | 13.2 | | | | |
| Consolidated reported GAAP operating income | | $254.5 | | | | | | $297.3 | | | | |
| | | | | | | | | | | | | |
18
ECOLAB INC.
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | 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 ^(1)^ | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
| Discrete tax expense (benefits) ^(2)^ | | 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 | |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | 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 | **** |
| | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | **** |
| Diluted earnings per share, as reported (U.S. GAAP) | | $0.60 | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(3)^ | | 0.22 | | | | | | | | | | | | | |
| Discrete tax expense (benefits) ^(4)^ | | 0.00 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.82 | | | | | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) 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-19 related inventory write downs and employee-related costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(2) 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.
(3) Special (gains) and charges for 2022 includes charges of $63.6 million, net of tax, in the first quarter. Charges include acquisition and integration charges, reserves related to our operations in Russia, COVID-19 related inventory write downs and employee-related costs, restructuring charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2022 includes $1.0 million in the first quarter. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense. 19
Exhibit 99.2
| Please see Ecolab<br>’<br>s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>First Quarter 2022<br>Teleconference<br>Supplemental Data |
|---|
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>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 Securities<br>Litigation Reform Act of 1995. These forward<br>-<br>looking statements include, but are not limited to, statements regarding COVID<br>-<br>19<br>pandemic trends, global economic recovery, delivered product cost inflation, pricing actions, volume growth, cost savings and<br>pr<br>oductivity<br>improvements, and our financial and business performance and prospects, including sales and earnings. These statements are ba<br>sed<br>on<br>the current expectations of management. There are<br>a number of<br>risks and uncertainties that could cause actual results to differ materially<br>from the forward<br>-<br>looking statements. In particular, with respect to the pandemic, numerous factors will determine the extent of<br>the impact<br>on our business, including the severity of the disease, the duration of the outbreak, the acceptance, distribution and effica<br>cy<br>of vaccines,<br>the likelihood of a resurgence of the outbreak, including as a result of emerging variants, actions that may be taken by gove<br>rnm<br>ental<br>authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy, and<br>ot<br>her<br>unintended 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 t<br>he Securities<br>and Exchange Commission (“SEC”), and include the effects and duration of the COVID<br>-<br>19 pandemic, including the impact of vaccinat<br>ion<br>mandates; difficulty in procuring raw materials or fluctuations in raw material costs; the vitality of the markets we serve;<br>the<br>impact of<br>economic factors such as the worldwide economy, capital flows, interest rates, foreign currency risk, and reduced sales and e<br>arn<br>ings in<br>our international operations resulting from the weakening of local currencies versus the U.S. dollar; information technology<br>inf<br>rastructure<br>failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our<br>bu<br>siness and<br>successfully execute organizational change and changing labor market dynamics in the wake of the COVID<br>-<br>19 pandemic; exposure to<br>global economic, political and legal risks related to our international operations, including the impact of sanctions or othe<br>r a<br>ctions taken by<br>the U.S. or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine<br>; a<br>nd other<br>uncertainties or risks reported from time to time in our reports to the SEC.<br>In light of<br>these risks, uncertainties and factors, the forward<br>-<br>looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward<br>-<br>loo<br>king<br>statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any<br>for<br>ward<br>-<br>looking statement, except as required by law.<br>Non<br>-<br>GAAP Financial Information<br>This communication includes Company information that does not conform to generally accepted<br>accounting principles (GAAP). Management believes that a presentation of this information is meaningful to investors because<br>it<br>provides<br>insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial result<br>s o<br>f the<br>Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures<br>may not be consistent with similar measures provided by other companies. Reconciliations of our non<br>-<br>GAAP measures included withi<br>n<br>this presentation are included in the “Non<br>-<br>GAAP Financial Measures” section of this presentation. |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>3<br><br>Overview<br>▪<br>Continued strong double<br>-<br>digit sales growth, driven by accelerating pricing and further new business wins, overcame<br>continued substantial delivered product cost inflation and unfavorable currency translation in a rapidly changing global<br>operating environment to deliver the adjusted diluted earnings per share gain.<br><br>Sales:<br>▪<br>Sales growth accelerated from the fourth quarter 2021 with reported sales +13% and acquisition adjusted fixed<br>currency sales +12% from the year<br>-<br>ago period.<br>▪<br>Achieved double<br>-<br>digit growth in the Institutional & Specialty, Industrial and Other segments, while acquisition adjusted<br>Healthcare & Life Sciences segment sales declined versus very strong COVID<br>-<br>related demand in the year<br>-<br>ago period.<br><br>Earnings:<br>▪<br>Reported diluted EPS $0.60,<br>-<br>10% versus last year.<br>▪<br>Adjusted diluted EPS excluding special gains and charges and discrete tax items were $0.82, +1%.<br>Adjusted diluted<br>EPS includes $0.06 per share of<br>Purolite<br>amortization. Currency was an unfavorable $0.03 per share.<br>▪<br>The earnings increase reflects accelerating pricing and volume growth, which overcame substantial incremental<br>increases in delivered product costs following the start of the war in Eastern Europe and further headwinds from<br>unfavorable currency translation.<br><br>Outlook:<br>▪<br>For the full year 2022, we believe our strong pricing, volume gains and cost efficiency actions will deliver continued<br>strong sales gains for the full year with adjusted diluted earnings per share growth reaching low<br>-<br>teens levels.<br>▪<br>For the second quarter, we expect our combined pricing actions (which include our ongoing structural pricing and the<br>energy surcharge), along with strong volume growth and long<br>-<br>term productivity improvements, to yield second quarter<br>adjusted diluted earnings per share approaching last year’s $1.22.<br>1Q 2022 Overview |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>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>Jan-22<br>Feb-22<br>Mar-22<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>slowed early in the quarter as the rapid rise in new COVID infections in January impacted<br>business activity.<br>▪<br>U.S. full<br>-<br>service in<br>-<br>unit traffic averaged 62% of 2019 levels in 1Q, down from 4Q levels of<br>70%.<br>▪<br>U.S.<br>quickservice<br>traffic softened versus 4Q levels.<br>▪<br>Europe foodservice trends softened versus 4Q levels.<br>▪<br>Global lodging room demand was generally stable versus 4Q levels.<br>1<br>Q 2022 Environment<br>Sources: NPD/Crest, Smith Travel. QSR foot traffic includes take<br>-<br>out.<br>US<br>Full Service<br>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>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>Jan-22<br>Feb-22<br>Mar-22<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>Jan-22<br>Feb-22<br>Mar-22 |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>5<br>2022 Outlook<br><br>We assume continued, if uneven, global economic growth in 2022 as global COVID impacts<br>generally move behind us. In this rapidly changing environment, we remain focused on<br>continuing to drive strong new business gains, pricing, and margin improvement. While we<br>expect the impact of substantial raw material and cost inflation to increase further in the<br>second quarter and remain high for the balance of the year, we are also very pleased with<br>our progress on structural pricing, and now expect it to be in the 6% to 7% range for the<br>balance of the year. In addition, to offset the rapid rise in energy costs following the start of<br>the war in Eastern Europe thus impacting the full second quarter, we have begun to roll out<br>a global temporary energy surcharge of up to 12%, which is expected to develop<br>progressively over the next several months.<br>▪<br>2Q 2022:<br>Despite the substantial cost headwinds, we expect our combined pricing<br>actions (which include our ongoing structural pricing and the energy surcharge), along<br>with strong volume growth and long<br>-<br>term productivity improvements, to yield second<br>quarter adjusted diluted earnings per share approaching last year’s $1.22.<br>▪<br>Full year 2022:<br>Further, as our current pricing actions fully roll out through this summer,<br>we believe they will result in accelerating earnings growth through the second half of the<br>year and deliver low<br>-<br>teens growth in adjusted diluted earnings per share for the full year<br>2022. |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>6<br>1Q 2022 Results<br>*See “Non<br>-<br>GAAP Financial Measures” section of this presentation for corresponding reconciliations.<br>(unaudited)<br>(millions, except per share)<br>2022<br>Net sales<br>$3,266.7<br>$2,885.0<br>13<br>%<br>$3,266.7<br>$2,885.0<br>13<br>%<br>Operating income<br>254.5<br>297.3<br>-14<br>%<br>331.5<br>329.7<br>1<br>%<br>Net income attributable to Ecolab<br>171.9<br>193.6<br>-11<br>%<br>236.5<br>233.9<br>1<br>%<br>Diluted earnings per share<br>Net income attributable to Ecolab<br>$0.60<br>$0.67<br>-10<br>%<br>$0.82<br>$0.81<br>1<br>%<br>2022<br>Net sales<br>$3,255.4<br>$2,808.3<br>16<br>%<br>$3,255.4<br>$2,808.3<br>16<br>%<br>Operating income<br>251.7<br>284.1<br>-11<br>%<br>328.7<br>316.5<br>4<br>%<br>Adjusted *<br>First Quarter Ended March 31<br>Reported<br>Adjusted *<br>Public Currency Rates<br>%<br>Public Currency Rates<br>%<br>2022<br>2021<br>Change<br>2021<br>Change<br>Fixed Currency Rates *<br>%<br>Fixed Currency Rates<br>%<br>2022<br>2021<br>Change<br>2021<br>Change |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>7<br>1Q 2022 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>12%<br><br><br>11%<br><br><br>Volume & mix<br><br>7%<br><br><br>Food & Beverage<br><br>10%<br><br><br>10%<br><br><br>Pricing<br><br>5%<br><br><br>Downstream<br><br>16%<br><br><br>16%<br><br><br>Subtotal<br><br>12%<br><br><br>Paper<br>16%<br><br><br>16%<br><br><br>Acq./Div.<br><br>4%<br><br><br>Total Global Industrial<br><br>12%<br><br><br>12%<br><br><br>Fixed currency growth<br><br>16%<br><br><br>Currency impact<br><br> -2%<br>Global Institutional & Specialty<br>Total<br><br>13%<br><br><br>Institutional<br><br>26%<br><br><br>26%<br><br><br>Specialty<br><br>5%<br><br><br>5%<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> -6%<br> -9%<br>Life Sciences<br><br>155%<br><br><br>2%<br><br><br>Total Global Healthcare & Life<br>Sciences<br>29%<br><br><br> -7%<br>Other<br>Pest Elimination<br><br>11%<br><br><br>11%<br><br><br>Textile Care<br><br>15%<br><br><br>15%<br><br><br>Colloidal Technologies<br><br>3%<br><br><br>3%<br><br><br>Total Other<br><br>12%<br><br><br>12%<br><br><br>Total<br>16%<br><br><br>12% |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>8<br>1Q 2022 Income<br>Statement / Margins<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>2022<br>% sales<br>2021<br>% sales<br> Comments**<br>Gross Profit<br>$1,193.3<br>36.5%<br>$1,173.0<br>40.7%<br>2<br>%<br>Adjusted gross margins of 38.1% in 2022 and 41.3<br>% in 2021 primarily reflected<br>accelerating structural pricing that was more than offset by a 25% increase in delivered<br>product costs.<br>SG&A<br>914.7<br><br><br>28.0%<br>862.9<br><br><br>29.9%<br>6<br>%<br>SG&A ratio improved 190 basis points as volume leverage and cost savings more than<br>offset investments in the business.<br>Op. Income at fixed FX<br>Global Industrial<br>189.2<br><br><br>12.2%<br>209.8<br><br><br>15.1%<br>-10<br>%<br>Margins declined as accelerating structural pricing and increased volume were more<br>than offset by significantly higher delivered product costs and unfavorable mix.<br>Global Institutional & Specialty<br>110.8<br><br><br>11.0%<br>61.9<br><br><br>7.3%<br>79<br>%<br>Margins increased as strong volume growth and accelerating structural pricing<br>overcame higher delivered product costs and sales force investments.<br>Global Healthcare & Life Sciences<br>44.1<br><br><br>12.2%<br>42.6<br><br><br>15.2%<br>4<br>%<br>The margin decrease primarily reflected the comparison to the very strong sales volume<br>gain last year (when operating income grew 90%) and higher delivered product costs;<br>these were partially offset by accelerating structural pricing.<br>Other<br>37.2<br><br><br>12.6%<br>32.3<br><br><br>12.2%<br>15<br>%<br>Margins increased as accelerating structural pricing overcame higher delivered product<br>costs.<br>Subtotal at fixed FX<br>381.3<br><br><br>11.8%<br>346.6<br><br><br>12.3%<br>10<br>%<br>FX<br>2.8<br><br><br>13.2<br><br><br>Corporate<br>Corp. Expense<br>(52.6)<br><br><br>(30.1)<br><br><br>Nalco and Purolite intangible amortization.<br>Special Gains/(Ch.)<br>(77.0)<br><br><br>(32.4)<br><br><br>2022: Primarily reflected Purolite acquisition costs, COVID-related charges, and<br>charges related to our operations in Russia.<br>Total Corporate Exp.<br>(129.6)<br><br><br>(62.5)<br><br><br>Consolidated Op. Inc.<br>$254.5<br>7.8%<br>$297.3<br>10.3%<br>-14<br>%<br>2022 acquisition adjusted fixed currency operating margins were 10.6% vs. 11.4%. The<br>decrease reflects the accelerating structural pricing and robust volume growth, which<br>were more than offset by substantially higher delivered product costs and unfavorable<br>mix.<br>% change |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>9<br>1Q 2022 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>2022<br>2021<br>(millions, unaudited)<br>2022<br>2021<br>Cash and cash eq.<br><br>$99.4<br><br>$1,189.5<br><br>Short-term debt<br><br>$493.1<br><br>$24.3<br>Accounts receivable, net<br>2,508.2<br>2,272.0<br><br>Accounts payable<br>1,423.9<br>1,128.2<br>Inventories<br>1,589.9<br>1,347.0<br><br>Other current liabilities<br>1,714.3<br>1,699.7<br>Other current assets<br>407.0<br>341.5<br><br>Long-term debt<br>8,267.2<br>6,685.8<br>PP&E, net<br>3,285.7<br>3,078.7<br>Pension/Postretirement<br>874.5<br>1,207.8<br>Goodwill and intangibles<br>12,219.3<br>9,086.3<br><br>Other liabilities<br>1,189.1<br>1,142.2<br>Other assets<br>957.7<br>893.1<br><br>Total equity<br>7,105.1<br>6,320.1<br>Total assets<br>$21,067.2<br>$18,208.1<br>Total liab. and equity<br>$21,067.2<br>$18,208.1<br>Selected Cash Flow items<br>(millions, unaudited)<br><br>2022<br>2021<br><br>(unaudited)<br><br>2022<br>2021<br>Cash from op. activities<br>$170.1<br>$295.3<br><br>Total Debt/Total Capital<br><br>55.2%<br><br><br>51.5%<br><br><br>Depreciation<br>155.2<br>150.7<br><br>Net Debt/Total Capital<br><br>54.9%<br><br><br>46.6%<br><br><br>Amortization<br>79.5<br>64.5<br><br>Net Debt/EBITDA(*)<br><br>3.5<br><br><br>2.5<br><br><br>Capital expenditures<br>148.7<br>102.1<br><br>Net Debt/Adjusted EBITDA(*)<br><br>3.2<br><br><br>2.3<br><br><br>March 31<br>March 31<br>Three Months Ended<br>Selected Balance Sheet measures<br>March 31<br>March 31 |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>on the use of certain non<br>-<br>GAAP financial measures.<br>..<br>10<br>Non<br>-<br>GAAP Financial Measures<br><br>(millions, except percent and per share)<br><br>Net sales<br>Reported GAAP net sales<br>$3,266.7<br>$2,885.0<br>Effect of foreign currency translation<br>(11.3)<br>(76.7)<br>Non-GAAP fixed currency sales<br>3,255.4<br>2,808.3<br>Effect of acquisitions and divestitures<br>(142.5)<br>(32.8)<br>Non-GAAP acquisition adjusted fixed currency sales<br>$3,112.9<br>$2,775.5<br>Cost of sales<br>Reported GAAP cost of sales<br>$2,073.4<br>$1,712.0<br>Special (gains) and charges<br>52.9<br><br><br>19.6<br>Non-GAAP adjusted cost of sales<br>$2,020.5<br>$1,692.4<br>Gross margin<br>Reported GAAP gross margin<br>36.5<br>%<br>40.7<br>%<br>Non-GAAP adjusted gross margin<br>38.1<br>%<br>41.3<br>%<br>Operating income<br>Reported GAAP operating income<br>$254.5<br>$297.3<br>Effect of foreign currency translation<br>(2.8)<br>(13.2)<br>Non-GAAP fixed currency operating income<br>251.7<br>284.1<br>Special (gains) and charges<br>77.0<br>32.4<br>Non-GAAP adjusted fixed currency operating income<br>328.7<br>316.5<br>Effect of acquisitions and divestitures<br>2.5<br>0.0<br>Non-GAAP acquisition adjusted fixed currency operating income<br>$331.2<br>$316.5<br>Operating income margin<br>Reported GAAP operating income margin<br>7.8<br>%<br>10.3<br>%<br>Non-GAAP adjusted fixed currency operating income margin<br>10.1<br>%<br>11.3<br>%<br>Non-GAAP acquisition adjusted fixed currency operating income margin<br>10.6<br>%<br>11.4<br>%<br>2022<br>2021<br>First Quarter Ended<br>March 31 |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>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>(millions, except percent and per share)<br><br>Net Income attributable to Ecolab<br>Reported GAAP net income attributable to Ecolab<br>$171.9<br>$193.6<br>Special (gains) and charges, after tax<br>63.6<br><br><br>24.2<br><br><br>Discrete tax net expense (benefit)<br>1.0<br><br><br>16.1<br><br><br>Non-GAAP adjusted net income attributable to Ecolab<br>$236.5<br>$233.9<br>Diluted EPS attributable to Ecolab<br>Reported GAAP diluted EPS<br>$0.60<br>$0.67<br>Special (gains) and charges, after tax<br>0.22<br><br><br>0.08<br><br><br>Discrete tax net expense (benefit)<br>-<br><br><br>0.06<br><br><br>Non-GAAP adjusted diluted EPS<br>$0.82<br>$0.81<br>Provision for Income Taxes<br>Reported GAAP tax rate<br>20.7<br>%<br>25.2<br><br><br>%<br>Special gains and charges<br>(0.9)<br>-<br><br><br>Discrete tax items<br>(0.3)<br>(5.5)<br><br><br>Non-GAAP adjusted tax rate<br>19.5<br>%<br>19.7<br>%<br>EBITDA (trailing twelve months ended)<br>Net income including non-controlling interest<br>$1,122.2<br>$885.0<br>Provision for income taxes<br>249.7<br><br><br>195.7<br><br><br>Interest expense, net<br>219.6<br><br><br>293.6<br><br><br>Depreciation<br>608.9<br><br><br>598.6<br><br><br>Amortization<br>253.7<br><br><br>230.6<br><br><br>EBITDA<br>$2,454.1<br>$2,203.5<br>Special (gains) and charges impacting EBITDA<br>278.3<br><br><br>235.6<br><br><br>Adjusted EBITDA<br>$2,732.4<br>$2,439.1<br>2022<br>2021<br>March 31<br>First Quarter Ended |
| --- |
| Please see Ecolab’s news release dated April 26, 2022 for additional information, including discussion<br>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>$1,557.0<br>($5.9)<br>$1,551.1<br>$1,384.9<br>-<br><br><br>$1,384.9<br>Global Institutional & Specialty<br>1,005.1<br>-<br><br><br>1,005.1<br>844.1<br>-<br><br><br>844.1<br>Global Healthcare & Life Sciences<br>362.6<br>(101.9)<br><br><br>260.7<br>281.1<br>-<br><br><br>281.1<br>Other<br>296.0<br>-<br><br><br>296.0<br>265.4<br>-<br><br><br>265.4<br>Corporate<br>34.7<br>(34.7)<br><br><br> -<br>32.8<br>(32.8)<br><br><br> -<br>Subtotal at fixed currency rates<br>3,255.4<br>(142.5)<br><br><br>3,112.9<br>2,808.3<br>(32.8)<br><br><br>2,775.5<br>Currency impact<br>11.3<br><br><br>76.7<br><br><br>Consolidated reported GAAP net sales<br>$3,266.7<br>$2,885.0<br>Operating Income (loss)<br>Global Industrial<br>$189.2<br>($0.8)<br>$188.4<br>$209.8<br>-<br><br><br>$209.8<br>Global Institutional & Specialty<br>110.8<br>-<br><br><br>110.8<br>61.9<br>-<br><br><br>61.9<br>Global Healthcare & Life Sciences<br>44.1<br>(19.6)<br><br><br>24.5<br>42.6<br>-<br><br><br>42.6<br>Other<br>37.2<br>-<br><br><br>37.2<br>32.3<br>-<br><br><br>32.3<br>Corporate<br>(52.6)<br><br><br>22.9<br><br><br>(29.7)<br><br><br>(30.1)<br><br><br>-<br><br><br>(30.1)<br>Subtotal at fixed currency rates<br>328.7<br>2.5<br><br><br>331.2<br>316.5<br>-<br><br><br>316.5<br>Special (gains) and charges<br>77.0<br>32.4<br>Reported OI at fixed currency rates<br>251.7<br>284.1<br>Currency impact<br>2.8<br><br><br>13.2<br><br><br>Consolidated reported GAAP operating income<br>$254.5<br>$297.3<br>2022<br>2021<br>First Quarter Ended March 31 |
| --- |
Exhibit 99.3
****
ECOLAB FIRST QUARTER 2022
Overview
Continued strong double-digit sales growth, driven by accelerating pricing and further new business wins, overcame continued substantial delivered product cost inflation and unfavorable currency translation in a rapidly changing global operating environment to deliver the adjusted diluted earnings per share gain.
| ◢ | Sales: |
|---|---|
| ◾ | Sales growth accelerated from the fourth quarter 2021 with reported sales +13% and acquisition adjusted fixed currency sales +12% from the year-ago period. |
| --- | --- |
| ◾ | Achieved double-digit growth in the Institutional & Specialty, Industrial and Other segments, while acquisition adjusted Healthcare & Life Sciences segment sales declined versus very strong COVID-related demand in the year-ago period. |
| --- | --- |
| ◢ | Earnings: |
| --- | --- |
| ◾ | Reported diluted EPS $0.60, -10% versus last year. |
| --- | --- |
| ◾ | Adjusted diluted EPS excluding special gains and charges and discrete tax items were $0.82, +1%. Adjusted diluted EPS includes $0.06 per share of Purolite amortization. Currency was an unfavorable $0.03 per share. |
| --- | --- |
| ◾ | The earnings increase reflects accelerating pricing and volume growth, which overcame substantial incremental increases in delivered product costs following the start of the war in Eastern Europe and further headwinds from unfavorable currency translation. |
| --- | --- |
| ◢ | Outlook: |
| --- | --- |
| ◾ | For the full year 2022, as our current pricing actions roll out through this year, we believe they will result in accelerating earnings growth through the second half and deliver low-teens growth in adjusted diluted earnings per share for the full year 2022, understanding there is uncertainty in the timing of the realization of the surcharge which will become more clear as we exit the second quarter. |
| --- | --- |
| ◾ | For the second quarter, we expect our combined pricing actions (which include our ongoing structural pricing and the energy surcharge), along with strong volume growth and long-term productivity improvements, to yield second quarter adjusted diluted earnings per share approaching last year’s $1.22. |
| --- | --- |
2
SUMMARY
Ecolab enjoyed strong 12% fixed currency acquisition adjusted sales growth in the first quarter, driven by accelerating pricing and strong new business wins. We delivered robust double-digit sales gains in our Institutional & Specialty, Industrial and Other segments, while acquisition adjusted Healthcare & Life Sciences segment results improved sequentially but declined compared to very strong year-ago sales which benefited from COVID-related demand. Regionally, we enjoyed double-digit acquisition adjusted sales gains in North America, Asia Pacific and Latin America, with moderate growth in Europe.
Our team drove this strong sales performance in a rapidly changing environment where the rapid rise in new COVID infections early in the quarter slowed the global recovery and further disrupted global supply chains, while the war in Eastern Europe later in the quarter further exacerbated the supply chain costs and geopolitical uncertainty. Headwinds from the resulting delivered product cost inflation increased significantly versus last year as well as sequentially versus the fourth quarter, and those costs soared an estimated 25% in the first quarter versus last year and added an estimated $0.55 per share of incremental costs to the first quarter alone. Our team reacted aggressively and continued to accelerate our pricing, which reached 5% in the quarter, up from 3% in the fourth quarter. This strong pricing momentum, along with our robust new business gains and benefits from innovation and digital automation and services, helped us to fully overcome these unprecedented headwinds. Adjusted diluted earnings per share excluding special gains and charges and discrete tax items were $0.82, +1%, 3
and include $0.06 per share of Purolite amortization. Currency translation was a $0.03 unfavorable impact on earnings per share.
Looking ahead at the full year 2022, we assume continued, if uneven, global economic growth as COVID impacts generally move behind us and that inflation continues to remain a significant challenge. In this rapidly changing environment, we remain focused on continuing to drive accelerating pricing, new business gains and leveraging margin improvement through innovation and productivity. While we expect the impact of substantial raw material and cost inflation to increase further in the second quarter and remain high, we are also very pleased with our progress on pricing, and now expect it to be in the 6% to 7% range for the balance of the year. In addition, in order to offset the rapid rise in energy costs following the start of the war in Eastern Europe that will impact the full second quarter, we have begun to roll out a global temporary energy surcharge of up to 12%, which is expected to develop progressively through the year. At the same time, we are continuing to invest in our key long-term business drivers and leverage our ongoing digital automation work to drive our performance in ways that improve both our customers’ results as well as our overall cost efficiency.
Despite the substantial cost headwinds, we expect our combined pricing actions (which include our ongoing structural pricing and the energy surcharge), along with strong volume growth and long-term productivity improvements, to yield second quarter adjusted diluted earnings per share approaching last year’s $1.22. Further, as our current pricing actions roll out through this year, we believe they will result in accelerating earnings growth 4
through the second half and deliver low-teens growth in adjusted diluted earnings per share for the full year 2022, understanding there is uncertainty in the timing of the realization of the surcharge which will become more clear as we exit the second quarter.
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 Net Zero and Water Flow Intelligence, which have further differentiated Ecolab’s value proposition. Our new business and innovation pipelines continue to grow 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 long-term macro trends and expanding margins, position us well to leverage the global recovery and deliver further superior long-term shareholder returns as the business normalizes.
HIGHLIGHTS
| ● | Strong first quarter sales, driven by strong volume gains and accelerating pricing, overcame surging delivered product cost inflation in a rapidly changing global operating environment and unfavorable |
|---|
5
| currency exchange to deliver the adjusted diluted earnings per share gain. | |
|---|---|
| ● | Reported consolidated sales increased 13%; fixed currency acquisition adjusted sales increased 12%. |
| --- | --- |
| ● | Sales were led by the Institutional & Specialty, Industrial and Other segments which each delivered double-digit growth. Healthcare & Life Sciences segment acquisition adjusted sales improved sequentially but showed a decline versus a very strong increase last year. |
| --- | --- |
| ● | First quarter reported diluted earnings per share were $0.60, -10% compared with last year. |
| --- | --- |
| ● | On an adjusted basis, excluding special gains and charges and discrete tax items, first quarter 2022 adjusted diluted earnings per share were $0.82, +1% compared with adjusted diluted earnings per share of $0.81 a year ago. The adjusted earnings per share increase reflects accelerating pricing and volume growth, which overcame 25% delivered product cost inflation. As mentioned, delivered product cost inflation resulted in an estimated $0.55 per share of incremental costs in the first quarter versus last year. Adjusted diluted earnings per share included $0.06 per share of Purolite amortization. Currency translation had a $0.03 unfavorable impact on earnings per share. |
| --- | --- |
| ● | We now look for structural pricing to increase 6% to 7% for the balance of the year, and when adding in our previously announced temporary energy surcharge of up to 12%, we expect very strong pricing to help offset the substantial delivered product cost inflation. Along with our new business wins, strengthened business portfolio and improved productivity, we look to realize continued strong topline momentum for |
| --- | --- |
6
| the full year. We expect these drivers will enable us to overcome the significantly higher delivered product costs and deliver a solid year of growth. | |
|---|---|
| ● | 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 delivered product cost inflation to produce another year of attractive earnings per share growth 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. |
| --- | --- |
CONSOLIDATED SALES
| | | |
|---|---|---|
| Consolidated sales | % Change | |
| Volume & mix | 7% | |
| Pricing | 5% | |
| Subtotal | 12% | |
| Acq./Div. | 4% | |
| Fixed currency growth | 16% | |
| Currency impact | (2)% | |
| Total | 13% | |
| | | |
Ecolab’s first quarter reported sales increased 13% when compared to the year ago period. Fixed currency acquisition adjusted sales increased 12%. Looking at the components, consolidated volume and mix increased 7%, pricing increased 5% and acquisitions added 4% to sales growth. Currency was an unfavorable 2%. 7
GLOBAL INDUSTRIAL SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Industrial | % Change | % Change | ||
| Water | 12% | | 11% | |
| Food & Beverage | 10% | | 10% | |
| Downstream | 16% | | 16% | |
| Paper | 16% | | 16% | |
| Total Global Industrial | 12% | | 12% | |
WATER
Fixed currency acquisition adjusted Water sales increased 11% as accelerating pricing and new business wins leveraged recovering markets. All segments enjoyed double-digit growth. Light and heavy industry water treatment sales were led by strong gains across all end markets. Mining showed very strong growth benefiting from our strategic shift toward high-value metals and fertilizers and away from coal. Regionally, Latin 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 its resulting rising cost have only elevated water as a critical issue for our customers and Ecolab continues to be uniquely positioned to help solve them. Our new business wins remain strong as we utilize our unique ability to provide innovative solutions, integrated digital technologies and service expertise that help customers reduce their water consumption as they work toward their net zero goals and meet their sustainability objectives. We remain aggressive on pricing to offset substantial and increasing delivered 8
product costs, and we expect further strong sales growth in the second quarter driven by increased pricing, business wins and improving markets.
FOOD & BEVERAGE
Fixed currency Food & Beverage sales rose 10%, reflecting accelerating pricing and stabilized end markets. Globally we realized strong growth across all segments. Regionally fixed currency sales growth was strong in North America, Latin America and Asia Pacific, with moderate growth in Europe.
With further strong pricing and favorable end market trends, we anticipate strong sales growth in the second quarter.
DOWNSTREAM
Downstream fixed currency sales grew 16%, driven by accelerating pricing, growth in additives, good new business wins and higher refinery operating rates versus last year. Fixed currency sales showed strong growth in Asia Pacific, Latin America, Europe and North America.
We expect continued strong growth in the second quarter and full year to be driven by pricing, new business wins and continued recovery in refinery production.
PAPER
Paper fixed currency acquisition adjusted sales recorded another strong gain, rising 16%, driven by strong new business wins, accelerating pricing and improved market trends. Board & packaging sales remained strong, with 9
tissue and graphics also showing strong growth reflecting new business and the continued recovery of customer production rates. Fixed currency sales growth remained strong in all regions.
We expect Paper to show further sales growth above its long-term trend in the second quarter of 2022 with continued strong pricing, growth in board & packaging and improving tissue demand.
GLOBAL INDUSTRIAL SEGMENT MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Global Industrial Op. Inc. | $189.2 | | 12.2% | | $209.8 | | 15.1% | | (10)% | |
| Acq./Div. Adj. Op. Inc. | $188.4 | | 12.1% | | $209.8 | | 15.1% | | (10)% | |
Acquisition adjusted fixed currency operating income decreased 10% as accelerating structural pricing and increased volume were more than offset by significantly higher delivered product costs and unfavorable mix.
GLOBAL INSTITUTIONAL & SPECIALTY SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Institutional & Specialty | % Change | % Change | ||
| Institutional | 26% | | 26% | |
| Specialty | 5% | | 5% | |
| 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, accelerating pricing, good new business wins and new innovation which more than offset a stalled recovery during the quarter due to COVID-related impacts. Our North American business continued its very strong growth driven by further new account gains 10
as it outpaced still-recovering in-unit restaurant dining and lodging trends. Europe and Latin America also showed very strong growth benefiting from new business wins, while Asia Pacific sales showed good growth despite increased COVID restrictions in that region.
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 through their current labor shortages.
We expect continued strong results in the second quarter. The recent general decline in COVID infections has led to easing social restrictions in most regions, while customer staffing shortages continue to significantly impact our customers’ operating capacity and delay the full recovery in the global restaurant and hospitality markets. We continue to win new business, utilizing our aggressive efforts to assure product supply and service support for our customers through this difficult environment 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 11
than offset the market challenges and lead to another strong performance by Institutional in the second quarter.
SPECIALTY
First quarter Specialty fixed currency sales increased 5%, as strong quickservice sales more than offset lower food retail sales. Quickservice sales showed a strong gain versus last year as continued new business wins and growth in core cleaning and sanitizing sales more than offset softer end market traffic. Food retail sales declined slightly as customer labor shortages have resulted in reduced in-store services and their associated product usage.
We expect second quarter Specialty sales to show strong growth as our quickservice and food retail businesses benefit from pricing, 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) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Global Institutional & Specialty Op. Inc. | $110.8 | | 11.0% | | $61.9 | | 7.3% | | 79% | |
| Acq./Div. Adj. Op. Inc. | $110.8 | | 11.0% | | $61.9 | | 7.3% | | 79% | |
Acquisition adjusted fixed currency operating income increased 79% as very strong volume growth and accelerating structural pricing overcame higher delivered product costs and sales force investments.
12
GLOBAL HEALTHCARE & LIFE SCIENCES SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Global Healthcare & Life Sciences | % Change | % Change | ||
| Healthcare | (6)% | | (9)% | |
| Life Sciences | 155% | | 2% | |
| Total Global Healthcare & Life Sciences | 29% | | (7)% | |
HEALTHCARE
As expected, first quarter global Healthcare fixed currency sales declined 6%; acquisition adjusted sales declined 9%, reflecting the impact of customer sanitizer inventory reductions from the large COVID orders in first quarter 2021 and a modest return of elective surgical procedure activity.
We expect flattish sales in the second quarter, as the continued normalization of elective procedures and hospital operations in North America are offset by a slower recovery in Europe. We believe our broadened product line, ongoing product innovation, digital tools and proven service value will leverage the normalization of hospital activity in the second half and drive increased sales for the full year 2022, with the business remaining well-positioned for attractive long-term growth.
LIFE SCIENCES
Life Sciences’ first quarter reported sales increased 155% reflecting the acquisition of Purolite; acquisition adjusted fixed currency sales increased 2%. Legacy Ecolab Life Sciences’ modest growth reflected the comparison against last year’s 19% growth as well as COVID-related new business start-up delays by customers in 2022’s first quarter. Purolite showed strong growth led by robust bioprocessing sales. 13
We expect strengthening division sales through the balance of the year as market fundamentals remain strong and capacity expansion comes online for Purolite later this year. Demand for our specialized products and services that help ensure safe, efficient and effective manufacturing facilities for our pharmaceutical and personal care customers remains robust. The addition of Purolite deepens Ecolab’s core customer relationships in life sciences by adding product safety expertise to our environmental safety programs as it also leverages our corporate accounts, field service, R&D and our global footprint. We look for Life Sciences to show strong second quarter acquisition adjusted sales growth as COVID-related delays are expected to ease; we expect Purolite’s sales growth to accelerate in the second half as their expanded capacity benefits results.
HEALTHCARE & LIFE SCIENCES SEGMENT MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Global Healthcare & Life Sciences Op. Inc. | $44.1 | | 12.2% | | $42.6 | | 15.2% | | 4% | |
| Acq./Div. Adj. Op. Inc. | $24.5 | | 9.4% | | $42.6 | | 15.2% | | (42)% | |
Acquisition adjusted fixed currency operating income decreased 42%, primarily reflecting the comparison to the very strong sales volume last year (when operating income grew 90%) and higher delivered product costs; these were partially offset by accelerating structural pricing.
14
OTHER SEGMENT SALES
| | | | | |
|---|---|---|---|---|
| | Fixed Rate | Acq./Div. Adj. | ||
| Other | % Change | % Change | ||
| Pest Elimination | 11% | | 11% | |
| Textile Care | 15% | | 15% | |
| Colloidal Technologies | 3% | | 3% | |
| Total Other | 12% | | 12% | |
| | | | | |
PEST ELIMINATION
Fixed currency Pest Elimination sales increased 11% reflecting continued strong growth in hospitality, restaurants and food retail. We realized continued robust new business wins that we believe are the result of our high service levels, innovation, and increased awareness around food safety and hygiene standards. Growth was strong in North America, Europe, Asia Pacific and Latin America.
We expect Pest Elimination to show strong growth in the second quarter as we benefit from new customer wins and leverage our ongoing innovation and enhanced digital offerings to further extend our competitive advantages.
OTHER MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions - fixed currency, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Other Op. Inc. | $37.2 | | 12.6% | | $32.3 | | 12.2% | | 15% | |
| Acq./Div. Adj. Op. Inc. | $37.2 | | 12.6% | | $32.3 | | 12.2% | | 15% | |
Acquisition adjusted fixed currency operating income increased 15% as accelerating structural pricing overcame higher delivered product costs.
15
CONSOLIDATED MARGIN PERFORMANCE
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Gross Profit | $1,193.3 | | 36.5% | | $1,173.0 | | 40.7% | | 2% | |
| Gross Profit (adj.) | $1,246.2 | | 38.1% | | $1,192.6 | | 41.3% | | 4% | |
First quarter gross margins adjusted for special charges decreased 320 basis points versus last year’s adjusted margin, primarily reflecting accelerating structural pricing that was more than offset by a 25% increase in delivered product costs.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| SG&A | $914.7 | | 28.0% | | $862.9 | | 29.9% | | 6% | |
The first quarter SG&A ratio to sales decreased by 190 basis points as volume leverage and cost savings more than offset investments in the business.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| ($ millions, unaudited) | 2022 | **** | % sales | 2021 | **** | % sales | % change | |||
| Operating Income | $254.5 | | 7.8% | | $297.3 | | 10.3% | | (14)% | |
| Fixed Currency Operating | | | | | | | | | | |
| Income (adj.) | $328.7 | | 10.1% | | $316.5 | | 11.3% | | 4% | |
| Fixed Currency Operating | | | | | | | | | | |
| Income (acq./div. adj.) | $331.2 | | 10.6% | | $316.5 | | 11.4% | | 5% | |
Adjusted operating income increased 1%, while adjusted fixed currency operating income increased 4%. The operating income gain reflects accelerating structural pricing and robust volume growth which overcame substantially higher delivered product costs and unfavorable mix.
16
CORPORATE EXPENSE
| | | | | |
|---|---|---|---|---|
| ($ millions - unaudited) | 2022 | **** | 2021 | **** |
| Corporate | | | | |
| Nalco and Purolite amortization | ($52.6) | | ($30.1) | |
| Special Gains/(Charges) | (77.0) | | (32.4) | |
| Total Corporate Expense | ($129.6) | | ($62.5) | |
First quarter of 2022 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 $30 million related to the Nalco merger intangible assets and $23 million related to Purolite acquisition intangible assets |
| --- | --- |
| ● | net special charges of $77 million that primarily reflected Purolite acquisition costs, COVID-related charges and charges related to our operations in Russia as discussed further below |
| --- | --- |
Special gains and charges for the first quarter of 2021 were a net charge of $32 million and primarily include restructuring charges and COVID-related charges.
INTEREST, TAX RATE, SHARES AND CONSOLIDATED INCOME
Reported interest expense increased 3% as interest on new debt issued to fund the Purolite acquisition was partially offset by benefits from debt refinancing transactions completed last year.
17
The reported income tax rate for the first quarter of 2022 was 20.7% compared with the reported rate of 25.2% for the first quarter of 2021. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the first quarter of 2022 was 19.5% compared with 19.7% for the first quarter of 2021.
The net of this performance is that Ecolab reported first quarter diluted earnings per share of $0.60, -10% versus the prior year. When adjusted for special gains and charges and discrete tax items, first quarter adjusted diluted earnings per share were $0.82, +1% compared with $0.81 reported a year ago. Adjusted diluted earnings per share include $0.06 of Purolite amortization. Currency translation had a $0.03 unfavorable impact on first quarter 2022 earnings per share.
Ecolab reacquired approximately 1.5 million shares its common stock during the first quarter of 2022.
COMMENT ON RUSSIA OPERATIONS
In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, Ecolab has made the determination that it will limit its Russian business to operations that are essential to life, providing minimal support for its healthcare, pharma, food and beverage and certain water businesses. Ecolab may further narrow its presence in Russia depending on future developments. Ecolab’s Russian operations represented approximately 1% of Ecolab’s 2021 annual sales. 18
BALANCE SHEET, CASH FLOW AND LEVERAGE
| | | | | |
|---|---|---|---|---|
| (unaudited) | March 31 | **** | ||
| ($ millions) | 2022 | **** | 2021 | **** |
| Cash and cash eq. | $99.4 | | $1,189.5 | |
| Accounts receivable, net | 2,508.2 | | 2,272.0 | |
| Inventories | 1,589.9 | | 1,347.0 | |
| Other current assets | 407.0 | | 341.5 | |
| PP&E, net | 3,285.7 | | 3,078.7 | |
| Goodwill and intangibles | 12,219.3 | | 9,086.3 | |
| Other assets | 957.7 | | 893.1 | |
| Total assets | $21,067.2 | | $18,208.1 | |
| | | | | |
| Short-term debt | $493.1 | | $24.3 | |
| Accounts payable | 1,423.9 | | 1,128.2 | |
| Other current liabilities | 1,714.3 | | 1,699.7 | |
| Long-term debt | 8,267.2 | | 6,685.8 | |
| Pension/Postretirement | 874.5 | | 1,207.8 | |
| Other liabilities | 1,189.1 | | 1,142.2 | |
| Total equity | 7,105.1 | | 6,320.1 | |
| Total liab. and equity | $21,067.2 | | $18,208.1 | |
| | | | | |
|---|---|---|---|---|
| | Three Months Ended | **** | ||
| (unaudited) | March 31 | **** | ||
| ($ millions) | 2022 | **** | 2021 | **** |
| Cash from op. activities | $170.1 | | $295.3 | |
| Depreciation | 155.2 | | 150.7 | |
| Amortization | 79.5 | | 64.5 | |
| Capital expenditures | 148.7 | | 102.1 | |
SUMMARY
In summary, our business continued to show strong sales growth in the first quarter that overcame continued substantial unfavorable delivered product cost inflation to deliver the adjusted earnings per share growth.
As our current pricing actions roll out through this year, we believe they will result in accelerating earnings growth through the second half and deliver low- 19
teens growth in adjusted diluted earnings per share for the full year 2022, understanding there is uncertainty in the timing of the realization of the surcharge which will become clearer as we exit the second quarter.
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 include, but are not limited to, statements regarding COVID-19 pandemic trends, global economic conditions, delivered product cost inflation, supply constraints, pricing actions, our Russian operations, new business, productivity, end market trends, expanded capacity, and our financial and business performance and prospects, including sales and earnings. 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, 20
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 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 and changing labor market dynamics in the wake of the COVID-19 pandemic; exposure to global economic, political and legal risks related to our international operations, including the impact of sanctions or other actions taken by the U.S. or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine; 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 21
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 statement22
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
•acquisition adjusted fixed currency sales
•adjusted cost of sales
•adjusted gross margin
•fixed currency operating income
•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 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 23
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 cost of sales, gross margin, operating income, other (income) expense and interest expense exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs associated with 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.
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 2022. 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 and Purolite mergers or the impact of special 24
(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 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 2022 supplemental discussion.
25
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 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.
26
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | First Quarter Ended | **** | ||||
| (unaudited) | | March 31 | | ||||
| (millions, except percent) | | 2022 | 2021 | | |||
| | | | | | | | |
| Net sales | | | | | | | |
| Reported GAAP net sales | | 3,266.7 | | | 2,885.0 | | |
| Effect of foreign currency translation | | (11.3) | | | (76.7) | | |
| Non-GAAP fixed currency sales | | 3,255.4 | | | 2,808.3 | | |
| Effect of acquisitions and divestitures | | (142.5) | | | (32.8) | | |
| Non-GAAP acquisition adjusted fixed currency sales | | $3,112.9 | | | $2,775.5 | | |
| | | | | | | | |
| Cost of Sales | | | | | | | |
| Reported GAAP cost of sales | | $2,073.4 | | | $1,712.0 | | |
| Special (gains) and charges | | 52.9 | | | 19.6 | | |
| Non-GAAP adjusted cost of sales | | $2,020.5 | | | $1,692.4 | | |
| | | | | | | | |
| Gross Margin | | | | | | | |
| Reported GAAP gross margin | | 36.5 | % | | 40.7 | % | |
| Non-GAAP adjusted gross margin | | 38.1 | % | | 41.3 | % | |
| | | | | | | | |
| Operating income | | | | | | | |
| Reported GAAP operating income | | $254.5 | | | $297.3 | | |
| Effect of foreign currency translation | | (2.8) | | | (13.2) | | |
| Non-GAAP fixed currency operating income | | 251.7 | | | 284.1 | | |
| Special (gains) and charges | | 77.0 | | | 32.4 | | |
| Non-GAAP adjusted fixed currency operating income | | 328.7 | | | 316.5 | | |
| Effect of acquisitions and divestitures | | 2.5 | | | - | | |
| Non-GAAP acquisition adjusted fixed currency operating income | | $331.2 | | | $316.5 | | |
| | | | | | | | |
| Operating Income Margin | | | | | | | |
| Reported GAAP operating income margin | | 7.8 | % | | 10.3 | % | |
| Non-GAAP adjusted fixed currency operating income margin | | 10.1 | % | | 11.3 | % | |
| Non-GAAP acquisition adjusted fixed currency operating income margin | | 10.6 | % | | 11.4 | % | |
27
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| (unaudited) | **** | First Quarter Ended | **** | ||||
| (millions, except percent and per share) | | March 31 | | ||||
| | | 2022 | 2021 | | |||
| Net Income attributable to Ecolab | | | | | | | |
| Reported GAAP net income attributable to Ecolab | | $171.9 | | | $193.6 | | |
| Special (gains) and charges, after tax | | 63.6 | | | 24.2 | | |
| Discrete tax net expense (benefit) | | 1.0 | | | 16.1 | | |
| Non-GAAP adjusted net income attributable to Ecolab | | $236.5 | | | $233.9 | | |
| Diluted EPS attributable to Ecolab | | | | | | | |
| Reported GAAP diluted EPS | | $0.60 | | | $0.67 | | |
| Special (gains) and charges, after tax | | 0.22 | | | 0.08 | | |
| Discrete tax net expense (benefit) | | - | | | 0.06 | | |
| Non-GAAP adjusted diluted EPS | | $0.82 | | | $0.81 | | |
| Provision for Income Taxes | | | | | | | |
| Reported GAAP tax rate | | 20.7 | % | | 25.2 | % | |
| Special gains and charges | | (0.9) | | | - | | |
| Discrete tax items | | (0.3) | | | (5.5) | | |
| Non-GAAP adjusted tax rate | | 19.5 | % | | 19.7 | % | |
| EBITDA (trailing twelve months ended) | | | | | | | |
| Net income including non-controlling interest | | $1,122.2 | | | $885.0 | | |
| Provision for income taxes | | 249.7 | | | 195.7 | | |
| Interest expense, net | | 219.6 | | | 293.6 | | |
| Depreciation | | 608.9 | | | 598.6 | | |
| Amortization | | 253.7 | | | 230.6 | | |
| EBITDA | | $2,454.1 | | | $2,203.5 | | |
| Special (gains) and charges impacting EBITDA | | 278.3 | | | 235.6 | | |
| Adjusted EBITDA | | $2,732.4 | | | $2,439.1 | | |
| | | | | | | | |
28
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | First Quarter Ended March 31 | ||||||||||
| (unaudited) | | 2022 | | 2021 | ||||||||
| (millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
| Net Sales | | | | | | | | | | | | |
| Global Industrial | | $1,557.0 | | ($5.9) | | $1,551.1 | | $1,384.9 | | - | | $1,384.9 |
| Global Institutional & Specialty | | 1,005.1 | | - | | 1,005.1 | | 844.1 | | - | | 844.1 |
| Global Healthcare & Life Sciences | | 362.6 | | (101.9) | | 260.7 | | 281.1 | | - | | 281.1 |
| Other | | 296.0 | | - | | 296.0 | | 265.4 | | - | | 265.4 |
| Corporate | | 34.7 | | (34.7) | | - | | 32.8 | | (32.8) | | - |
| Subtotal at fixed currency rates | | 3,255.4 | | (142.5) | | 3,112.9 | | 2,808.3 | | (32.8) | | 2,775.5 |
| Currency impact | | 11.3 | | | | | | 76.7 | | | | |
| Consolidated reported GAAP net sales | | $3,266.7 | | | | | | $2,885.0 | | | | |
| | | | | | | | | | | | | |
| Operating Income (loss) | | | | | | | | | | | | |
| Global Industrial | | $189.2 | | ($0.8) | | $188.4 | | $209.8 | | - | | $209.8 |
| Global Institutional & Specialty | | 110.8 | | - | | 110.8 | | 61.9 | | - | | 61.9 |
| Global Healthcare & Life Sciences | | 44.1 | | (19.6) | | 24.5 | | 42.6 | | - | | 42.6 |
| Other | | 37.2 | | - | | 37.2 | | 32.3 | | - | | 32.3 |
| Corporate | | (52.6) | | 22.9 | | (29.7) | | (30.1) | | - | | (30.1) |
| Subtotal at fixed currency rates | | 328.7 | | 2.5 | | 331.2 | | 316.5 | | - | | 316.5 |
| Special (gains) and charges | | 77.0 | | | | | | 32.4 | | | | |
| Reported OI at fixed currency rates | | 251.7 | | | | | | 284.1 | | | | |
| Currency impact | | 2.8 | | | | | | 13.2 | | | | |
| Consolidated reported GAAP operating income | | $254.5 | | | | | | $297.3 | | | | |
| | | | | | | | | | | | | |
29
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 | |
| | | 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 ^(1)^ | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
| Discrete tax expense (benefits) ^(2)^ | | 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 | |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | 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 | **** |
| | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | **** |
| Diluted earnings per share, as reported (U.S. GAAP) | | $0.60 | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | |
| Special (gains) and charges ^(3)^ | | 0.22 | | | | | | | | | | | | | |
| Discrete tax expense (benefits) ^(4)^ | | 0.00 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share (Non-GAAP) | | $0.82 | | | | | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) 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-19 related inventory write downs and employee-related costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(2) 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.
(3) Special (gains) and charges for 2022 includes charges of $63.6 million, net of tax, in the first quarter. Charges include acquisition and integration charges, reserves related to our operations in Russia, COVID-19 related inventory write downs and employee-related costs, restructuring charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2022 includes $1.0 million in the first quarter. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense. 30