10-Q 1 ecl-20180331x10q.htm 10-Q ecl_Current folio_10Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to              

 

Commission File No. 1-9328

 

ECOLAB INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

41-0231510

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

1 Ecolab Place, St. Paul, Minnesota  55102

(Address of principal executive offices)(Zip Code)

 

1-800-232-6522

(Registrant’s telephone number, including area code)

 

(Not applicable)

(Former name, former address and former fiscal year,

if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

 

 

Non-accelerated filer    (Do not check if a smaller reporting company)

 

Smaller reporting company

 

 

 

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.   

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 31, 2018.

 

288,520,477 shares of common stock, par value $1.00 per share.

 

 

 

 


 

PART I - FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

 

 

CONSOLIDATED STATEMENT OF INCOME

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended 

 

 

March 31

(millions, except per share amounts)

 

2018

    

2017

 

 

 

 

 

 

 

 

Product and equipment sales

 

 

$2,847.2

 

 

 

$2,604.4

Service and lease sales

 

 

623.7

 

 

 

558.0

Net sales

 

 

3,470.9

 

 

 

3,162.4

Product and equipment cost of sales

 

 

1,696.6

 

 

 

1,500.7

Service and lease cost of sales

 

 

385.5

 

 

 

351.1

Cost of sales (including special charges (a))

 

 

2,082.1

 

 

 

1,851.8

Selling, general and administrative expenses

 

 

1,008.5

 

 

 

947.2

Special (gains) and charges

 

 

26.0

 

 

 

6.2

Operating income

 

 

354.3

 

 

 

357.2

Other (income) expense

 

 

(19.4)

 

 

 

(16.8)

Interest expense, net

 

 

56.4

 

 

 

62.5

Income before income taxes

 

 

317.3

 

 

 

311.5

Provision for income taxes

 

 

69.1

 

 

 

54.2

Net income including noncontrolling interest

 

 

248.2

 

 

 

257.3

Net income attributable to noncontrolling interest

 

 

0.9

 

 

 

3.3

Net income attributable to Ecolab

 

 

$247.3

 

 

 

$254.0

 

 

 

 

 

 

 

 

Earnings attributable to Ecolab per common share

 

 

 

 

 

 

 

Basic

 

 

$ 0.86

 

 

 

$ 0.87

Diluted

 

 

$ 0.84

 

 

 

$ 0.86

 

 

 

 

 

 

 

 

Dividends declared per common share

 

 

$0.410

 

 

 

$0.370

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

Basic

 

 

288.6

 

 

 

290.6

Diluted

 

 

292.7

 

 

 

295.0

 

 

 

 

 

 

 

 

 

(a)

Cost of sales includes special charges of $1.5 million in the first quarter of 2017, which is recorded in product and equipment cost of sales.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2


 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended 

 

 

March 31

(millions)

    

2018

    

2017

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

 

$248.2

 

 

 

$257.3

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

Foreign currency translation

 

 

115.6

 

 

 

81.0

Gain (loss) on net investment hedges

 

 

(26.2)

 

 

 

2.8

 

 

 

89.4

 

 

 

83.8

 

 

 

 

 

 

 

 

Derivatives and hedging instruments

 

 

(2.1)

 

 

 

(9.2)

 

 

 

 

 

 

 

 

Pension and postretirement benefits

 

 

 

 

 

 

 

Amortization of net actuarial loss and prior service costs included in

 

 

 

 

 

 

 

net periodic pension and postretirement costs

 

 

0.3

 

 

 

3.3

 

 

 

0.3

 

 

 

3.3

 

 

 

 

 

 

 

 

Subtotal

 

 

87.6

 

 

 

77.9

 

 

 

 

 

 

 

 

Total comprehensive income, including noncontrolling interest

 

 

335.8

 

 

 

335.2

Comprehensive income attributable to noncontrolling interest

 

 

3.4

 

 

 

4.5

Comprehensive income attributable to Ecolab

 

 

$332.4

 

 

 

$330.7

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

3


 

CONSOLIDATED BALANCE SHEET

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31

 

December 31

(millions, except shares and per share amounts)

    

2018

 

2017

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$175.5

 

 

 

$211.4

Accounts receivable, net

 

 

2,574.3

 

 

 

2,571.4

Inventories

 

 

1,541.8

 

 

 

1,446.5

Other current assets

 

 

305.2

 

 

 

365.0

Total current assets

 

 

4,596.8

 

 

 

4,594.3

Property, plant and equipment, net

 

 

3,779.9

 

 

 

3,707.1

Goodwill

 

 

7,303.0

 

 

 

7,167.1

Other intangible assets, net

 

 

4,012.2

 

 

 

4,017.6

Other assets

 

 

492.4

 

 

 

477.4

Total assets

 

 

$20,184.3

 

 

 

$19,963.5

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Short-term debt

 

 

$1,017.8

 

 

 

$564.4

Accounts payable

 

 

1,229.1

 

 

 

1,177.1

Compensation and benefits

 

 

497.0

 

 

 

549.4

Income taxes

 

 

170.0

 

 

 

183.6

Other current liabilities

 

 

1,068.9

 

 

 

1,000.7

Total current liabilities

 

 

3,982.8

 

 

 

3,475.2

Long-term debt

 

 

6,397.7

 

 

 

6,758.3

Postretirement health care and pension benefits

 

 

1,027.7

 

 

 

1,025.5

Deferred income taxes

 

 

652.8

 

 

 

635.4

Other liabilities

 

 

453.4

 

 

 

415.3

Total liabilities

 

 

12,514.4

 

 

 

12,309.7

 

 

 

 

 

 

 

 

Equity (a)

 

 

 

 

 

 

 

Common stock

 

 

355.5

 

 

 

354.7

Additional paid-in capital

 

 

5,496.5

 

 

 

5,435.7

Retained earnings

 

 

8,097.0

 

 

 

8,011.6

Accumulated other comprehensive loss

 

 

(1,558.3)

 

 

 

(1,643.4)

Treasury stock

 

 

(4,789.7)

 

 

 

(4,575.0)

Total Ecolab shareholders’ equity

 

 

7,601.0

 

 

 

7,583.6

Noncontrolling interest

 

 

68.9

 

 

 

70.2

Total equity

 

 

7,669.9

 

 

 

7,653.8

Total liabilities and equity

 

 

$20,184.3

 

 

 

$19,963.5

 

(a)

Common stock, 800.0 million shares authorized, $1.00 par value per share, 288.5 million shares outstanding at March 31, 2018 and 289.3 million shares outstanding at December 31, 2017. Shares outstanding are net of treasury stock.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

4


 

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended 

 

 

 

March 31

(millions)

 

 

2018

 

2017

 

    

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

 

 

$248.2

 

 

 

$257.3

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

 

150.9

 

 

 

142.2

Amortization

 

 

 

80.2

 

 

 

73.8

Deferred income taxes

 

 

 

13.3

 

 

 

3.3

Share-based compensation expense

 

 

 

33.7

 

 

 

30.9

Pension and postretirement plan contributions

 

 

 

(23.0)

 

 

 

(23.0)

Pension and postretirement plan expense

 

 

 

8.6

 

 

 

8.8

Restructuring charges, net of cash paid

 

 

 

(7.7)

 

 

 

(6.2)

Other, net

 

 

 

4.9

 

 

 

4.7

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

33.9

 

 

 

76.4

Inventories

 

 

 

(77.2)

 

 

 

(67.5)

Other assets

 

 

 

(1.0)

 

 

 

(13.7)

Accounts payable

 

 

 

40.4

 

 

 

12.9

Other liabilities

 

 

 

(18.0)

 

 

 

(74.2)

Cash provided by operating activities

 

 

 

487.2

 

 

 

425.7

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(203.3)

 

 

 

(167.5)

Property and other assets sold

 

 

 

0.5

 

 

 

0.5

Acquisitions and investments in affiliates, net of cash acquired

 

 

 

(76.5)

 

 

 

(826.6)

Divestiture of businesses

 

 

 

9.4

 

 

 

 -

Settlement of net investment hedges

 

 

 

14.1

 

 

 

 -

Other, net

 

 

 

 -

 

 

 

(1.7)

Cash used for investing activities

 

 

 

(255.8)

 

 

 

(995.3)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net issuances of commercial paper and notes payable

 

 

 

354.3

 

 

 

858.8

Long-term debt repayments

 

 

 

(300.6)

 

 

 

(0.4)

Reacquired shares

 

 

 

(215.1)

 

 

 

(374.5)

Dividends paid

 

 

 

(123.4)

 

 

 

(113.2)

Exercise of employee stock options

 

 

 

28.4

 

 

 

25.7

Acquisition related liabilities and contingent consideration

 

 

 

(8.6)

 

 

 

 -

Other, net

 

 

 

 -

 

 

 

(0.9)

Cash (used for) provided by financing activities

 

 

 

(265.0)

 

 

 

395.5

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

 

(2.3)

 

 

 

5.8

 

 

 

 

 

 

 

 

 

Decrease in cash, cash equivalents and restricted cash

 

 

 

(35.9)

 

 

 

(168.3)

Cash, cash equivalents and restricted cash, beginning of period (a)

 

 

 

211.4

 

 

 

380.4

Cash, cash equivalents and restricted cash, end of period (b)

 

 

 

$175.5

 

 

 

$212.1

 

 

 

 

 

 

 

 

 

 

(a)

2017 includes $53.0 million of restricted cash related to the Anios transaction, which was included in other assets on the Consolidated Balance Sheet as of December 31, 2016.

(b)

There was no restricted cash as of March 31, 2018 or 2017.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

5


 

CONSOLIDATED STATEMENT OF EQUITY

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ecolab Shareholders

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Ecolab

 

Non-

 

 

 

 

 

 

Common

 

Paid-in

 

Retained

 

OCI

 

Treasury

 

Shareholders'

 

Controlling

 

Total

 

(millions)

      

Stock

      

Capital

      

Earnings

      

(Loss)

      

Stock

      

Equity

      

Interest

      

Equity

 

Balance, December 31, 2015

 

 

$350.3

 

 

$5,086.1

 

 

$6,160.3

 

 

$(1,423.3)

 

 

$(3,263.5)

 

 

$6,909.9

 

 

$70.5

 

 

$6,980.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New accounting guidance adoption (a)

 

 

 

 

 

 

 

 

(29.3)

 

 

 

 

 

 

 

 

(29.3)

 

 

 

 

 

(29.3)

 

Net income

 

 

 

 

 

 

 

 

1,229.0

 

 

 

 

 

 

 

 

1,229.0

 

 

17.5

 

 

1,246.5

 

Comprehensive income (loss) activity

 

 

 

 

 

 

 

 

 

 

 

(289.6)

 

 

 

 

 

(289.6)

 

 

(1.3)

 

 

(290.9)

 

Cash dividends declared

 

 

 

 

 

 

 

 

(414.9)

 

 

 

 

 

 

 

 

(414.9)

 

 

(16.9)

 

 

(431.8)

 

Stock options and awards

 

 

2.3

 

 

200.2

 

 

 

 

 

 

 

 

3.2

 

 

205.7

 

 

 

 

 

205.7

 

Reacquired shares

 

 

 

 

 

(15.5)

 

 

 

 

 

 

 

 

(724.1)

 

 

(739.6)

 

 

 

 

 

(739.6)

 

Balance, December 31, 2016

 

 

352.6

 

 

5,270.8

 

 

6,945.1

 

 

(1,712.9)

 

 

(3,984.4)

 

 

6,871.2

 

 

69.8

 

 

6,941.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New accounting guidance adoption (b)

 

 

 

 

 

 

 

 

1.9

 

 

 

 

 

 

 

 

1.9

 

 

 

 

 

1.9

 

Net income

 

 

 

 

 

 

 

 

1,504.6

 

 

 

 

 

 

 

 

1,504.6

 

 

14.0

 

 

1,518.6

 

Comprehensive income (loss) activity

 

 

 

 

 

 

 

 

 

 

 

69.5

 

 

 

 

 

69.5

 

 

1.7

 

 

71.2

 

Cash dividends declared

 

 

 

 

 

 

 

 

(440.0)

 

 

 

 

 

 

 

 

(440.0)

 

 

(19.3)

 

 

(459.3)

 

Acquisition of noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.0

 

 

4.0

 

Stock options and awards

 

 

2.1

 

 

170.3

 

 

 

 

 

 

 

 

4.3

 

 

176.7

 

 

 

 

 

176.7

 

Reacquired shares

 

 

 

 

 

(5.4)

 

 

 

 

 

 

 

 

(594.9)

 

 

(600.3)

 

 

 

 

 

(600.3)

 

Balance, December 31, 2017

 

 

354.7

 

 

5,435.7

 

 

8,011.6

 

 

(1,643.4)

 

 

(4,575.0)

 

 

7,583.6

 

 

70.2

 

 

7,653.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New accounting guidance adoption (c)

 

 

 

 

 

 

 

 

(43.6)

 

 

 

 

 

 

 

 

(43.6)

 

 

 

 

 

(43.6)

 

Net income

 

 

 

 

 

 

 

 

247.3

 

 

 

 

 

 

 

 

247.3

 

 

0.9

 

 

248.2

 

Comprehensive income (loss) activity

 

 

 

 

 

 

 

 

 

 

 

85.1

 

 

 

 

 

85.1

 

 

2.5

 

 

87.6

 

Cash dividends declared

 

 

 

 

 

 

 

 

(118.3)

 

 

 

 

 

 

 

 

(118.3)

 

 

(4.7)

 

 

(123.0)

 

Stock options and awards

 

 

0.8

 

 

60.8

 

 

 

 

 

 

 

 

0.4

 

 

62.0

 

 

 

 

 

62.0

 

Reacquired shares

 

 

 

 

 

 -

 

 

 

 

 

 

 

 

(215.1)

 

 

(215.1)

 

 

 

 

 

(215.1)

 

Balance, March 31, 2018

 

 

$355.5

 

 

$5,496.5

 

 

$8,097.0

 

 

$(1,558.3)

 

 

$(4,789.7)

 

 

$7,601.0

 

 

$68.9

 

 

$7,669.9

 

 

 

(a)

Upon adoption of Topic 606, Revenue from Contracts with Customers and the related amendments (“the new revenue standard”), the Company changed its accounting policy for revenue recognition and has established deferred revenue for service revenues with the cumulative effect reflected as an adjustment to retained earnings.

(b)

In 2017, upon adoption of ASU 2016-09, Compensation – Stock Compensation, the Company released a valuation allowance for previously unrecognized excess tax benefits resulting in an adjustment to retained earnings.

(c)

Upon adoption of ASU 2016-16, Intra-Entity Transfers of Assets Other than Inventory, the Company recorded an adjustment to retained earnings representing the write-off of income tax effects that had been deferred from past transactions and the recording of deferred tax assets which previously were not allowed to be recognized.

 

See Note 17 for additional information regarding adoption of new accounting standards.

 

 

 

 

 

6


 

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. CONSOLIDATED FINANCIAL INFORMATION

 

The unaudited consolidated financial information for the first quarter ended March 31, 2018 and 2017 reflect, in the opinion of company management, all adjustments necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), equity and cash flows of Ecolab Inc. ("Ecolab" or "the Company") for the interim periods presented. Any adjustments consist of normal recurring items.

 

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2017 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 

Certain amounts in prior periods have been reclassified to conform to the current period presentation. The reclassifications are primarily related to the adoption of new accounting standards as described further in Note 17. Except for the changes due to the adoption of the new accounting standards, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

 

With respect to the unaudited financial information of the Company for the first quarter ended March 31, 2018 and 2017 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated May 3, 2018 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

7


 

 

2. SPECIAL (GAINS) AND CHARGES

 

Special (gains) and charges reported on the Consolidated Statement of Income include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter Ended 

 

 

March 31

(millions)

    

2018

 

2017

Cost of sales

 

 

 

 

 

 

 

Acquisition and integration costs

 

 

 -

 

 

 

1.5

 

 

 

 

 

 

 

 

Special (gains) and charges

 

 

 

 

 

 

 

Restructuring activities

 

 

0.3

 

 

 

(0.3)

Acquisition and integration costs

 

 

0.5

 

 

 

6.3

Other

 

 

25.2

 

 

 

0.2

Subtotal

 

 

26.0

 

 

 

6.2

 

 

 

 

 

 

 

 

Total special (gains) and charges

 

 

$26.0

 

 

 

$7.7

 

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with the Company’s internal management reporting.

 

Restructuring activities

 

During the second quarter of 2017, the Company commenced restructuring and other cost-saving actions in order to streamline operations. These actions include a reduction of the Company’s global workforce by approximately 570 positions, as well as asset disposals and lease terminations. Actions were substantially completed in 2017. The Company also has restructuring plans that commenced prior to 2015. Net restructuring charges were $0.3 million ($0.3 million after tax) and net restructuring gains were $0.3 million ($0.2 million after tax) in the first quarter of 2018 and 2017, respectively. The restructuring liability balance for all plans was $34.0 million and $41.5 million as of March 31, 2018 and December 31, 2017, respectively. The reduction in liability was driven primarily by severance and other cash payments. The majority of pretax charges represent net cash expenditures which are expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities. Cash payments during 2018 related to restructuring plans were $7.9 million.

 

Restructuring activities have been included as a component of special (gains) and charges on the Consolidated Statement of Income. Restructuring liabilities have been classified as a component of both other current and other noncurrent liabilities on the Consolidated Balance Sheet.

 

Acquisition and integration related costs

 

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statement of Income include $0.5 million ($0.3 million after tax) and $6.3 million ($4.2 million after tax) in the first quarter of 2018 and 2017, respectively. Charges are related to acquisition costs, advisory and legal fees, and integration charges for acquisitions. Acquisition and integration costs reported in product and equipment cost of sales on the Consolidated Statement of Income in the first quarter of 2017 relate to recognition of fair value step-up in the Anios inventory.

 

Further information related to the Company’s acquisitions is included in Note 3.

 

Other

 

During the first quarter of 2018, the Company recorded other special charges of $25.2 million, which primarily consisted of a $25.0 million ($18.9 million after tax) commitment to the Ecolab Foundation in response to the new U.S. tax law. Other charges were minimal in both the first quarter of 2018 and 2017.

 

8


 

3. ACQUISITIONS AND DISPOSITIONS

 

Acquisitions

 

The Company makes acquisitions that align with its strategic business objectives. The assets and liabilities of the acquired entities have been recorded as of the acquisition date, at their respective fair values, and are included in the Consolidated Balance Sheet. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed. The aggregate purchase price of acquisitions has been reduced for any cash or cash equivalents acquired with the acquisition. Acquisitions during the first three months of 2018 and 2017 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

 

Anios Acquisition

 

On February 1, 2017, the Company acquired Anios for total consideration of $798.3 million, including satisfaction of outstanding debt. Anios had annualized pre-acquisition sales of approximately $245 million and is a leading European manufacturer and marketer of hygiene and disinfection products for the healthcare, food service, and food and beverage processing industries. Anios provides an innovative product line that expands the solutions the Company is able to offer, while also providing a complementary geographic footprint within the healthcare market. During 2016, the Company deposited €50 million in an escrow account that was released back to the Company upon closing of the transaction in February 2017.

 

The Company incurred certain acquisition and integration costs associated with the transaction that were expensed and are reflected in the Consolidated Statement of Income. See Note 2 for additional information related to the Company’s special (gains) and charges related to such activities.

 

The components of the cash paid for Anios are shown in the following table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(millions)

 

2017

 

 

 

 

Tangible assets

 

 

$139.8

 

 

 

 

 

Identifiable intangible assets

 

 

 

 

 

 

 

 

Customer relationships

 

 

252.0

 

 

 

 

 

Trademarks

 

 

65.7

 

 

 

 

 

Other technology

 

 

16.1

 

 

 

 

 

Total assets acquired

 

 

473.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

511.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

187.0

 

 

 

 

 

Total consideration transferred

 

 

798.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt repaid upon close

 

 

192.8

 

 

 

 

 

Net consideration transferred to sellers