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OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION
 12 Months Ended
Dec. 31, 2018
OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION  
OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

18. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

 

The Company’s organizational structure consists of global business unit and global regional leadership teams. The Company’s eleven operating segments follow its commercial and product-based activities and are based on engagement in business activities, availability of discrete financial information and review of operating results by the Chief Operating Decision Maker at the identified operating segment level.

 

Nine of the Company’s eleven operating segments have been aggregated into three reportable segments based on similar economic characteristics and future prospects, nature of the products and production processes, end-use markets, channels of distribution and regulatory environment. The Company’s reportable segments are Global Industrial, Global Institutional and Global Energy. Operating segments that do not meet the quantitative criteria to be separately reported have been combined into Other. The Company provides similar information for Other as compared to its three reportable segments as the Company considers the information regarding its two underlying operating segments as useful in understanding its consolidated results.

 

The Company’s eleven operating segments are aggregated as follows:

 

Global Industrial

 

Includes the Water, Food & Beverage, Paper, Life Sciences and Textile Care operating segments. It provides water treatment and process applications, and cleaning and sanitizing solutions primarily to large industrial customers within the manufacturing, food and beverage processing, chemical, mining and primary metals, power generation, pulp and paper, and commercial laundry industries. The underlying operating segments exhibit similar manufacturing processes, distribution methods and economic characteristics.

 

Global Institutional

 

Includes the Institutional, Specialty and Healthcare operating segments. It provides specialized cleaning and sanitizing products to the foodservice, hospitality, lodging, healthcare, government and education and retail industries. The underlying operating segments exhibit similar manufacturing processes, distribution methods and economic characteristics.

 

Global Energy

 

Includes the Energy operating segment. It serves the process chemicals and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications.

 

Other

 

Includes the Pest Elimination operating segment which provides services to detect, eliminate and prevent pests, such as rodents and insects and the CTG operating segment which produces and sells colloidal silica, which is comprised of nano-sized particles of silica in water used primarily for binding and polishing applications.

 

Comparability of Reportable Segments

 

The Company evaluates the performance of its non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on its international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Fixed currency rates are generally based on existing market rates at the time they are established. The “Fixed Currency Rate Change” column shown in the following table reflects the impact on previously reported values related to fixed currency exchange rates established by management at the beginning of 2018. Fixed currency amounts during 2018 for Argentina operations are reflected at the Argentine Peso rate established by management at the beginning of the year.

 

Effective in the first quarter of 2018, the Company established the CTG operating segment. CTG was previously recorded in the Water operating segment which is aggregated into the Global Industrial reportable segment. Prior to the sale in November 2017, the Equipment Care operating segment was also included, which provided kitchen repair and maintenance. The Company also made insignificant changes to its reportable segments, including the movement of certain customers and cost allocations between reportable segments. These changes are presented in "Segment Change" column of the table on the following page.

The impact of the preceding changes on previously reported full year 2017 and 2016 reportable segment net sales and operating income is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

  

2017 Reported

  

Revenue

 

  

Pension

 

  

 

 

  

Fixed

  

2017 Revised

 

  

Valued at 2017

  

Standard

 

  

Standard

 

  

Segment

 

  

Currency

  

Valued at 2018

(millions)

  

Management Rates

  

Adoption

 

  

Adoption

 

  

Change

 

  

Rate Change

  

Management Rates

Net Sales

  

 

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

 

  

 

 

Global Industrial

  

 

$4,878.5

 

 

 

$(0.8)

 

 

 

 

$-

 

 

 

 

$(56.9)

 

 

 

$286.0

 

 

 

$5,106.8

 

Global Institutional

  

 

4,744.9

 

 

 

(1.4)

 

 

 

 

 -

 

 

 

 

(23.7)

 

 

 

190.2

 

 

 

4,910.0

 

Global Energy

  

 

3,199.3

 

 

 

 -

 

 

 

 

 -

 

 

 

 

0.7

 

 

 

81.7

 

 

 

3,281.7

 

Other

  

 

823.5

 

 

 

 -

 

 

 

 

 -

 

 

 

 

79.9

 

 

 

28.1

 

 

 

931.5

 

Subtotal at fixed currency rates

  

 

13,646.2

 

 

 

(2.2)

 

 

 

 

 -

 

 

 

 

 -

 

 

 

586.0

 

 

 

14,230.0

 

Effect of foreign currency translation

  

 

192.1

 

 

 

(0.2)

 

 

 

 

 -

 

 

 

 

 -

 

 

 

(586.0)

 

 

 

(394.1)

 

Consolidated reported GAAP net sales

  

 

$13,838.3

 

 

 

$(2.4)

 

 

 

 

$-

 

 

 

 

$-

 

 

 

$-

 

 

 

$13,835.9

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Industrial

  

 

$722.0

 

 

 

$(0.8)

 

 

 

 

$(12.8)

 

 

 

 

$2.6

 

 

 

$47.5

 

 

 

$758.5

 

Global Institutional

  

 

985.7

 

 

 

(1.4)

 

 

 

 

(13.1)

 

 

 

 

(14.9)

 

 

 

23.5

 

 

 

979.8

 

Global Energy

  

 

338.5

 

 

 

 -

 

 

 

 

(16.7)

 

 

 

 

(0.7)

 

 

 

15.0

 

 

 

336.1

 

Other

  

 

149.3

 

 

 

 -

 

 

 

 

(24.5)

 

 

 

 

13.0

 

 

 

4.7

 

 

 

142.5

 

Corporate

 

 

(208.6)

 

 

 

 -

 

 

 

 

 -

 

 

 

 

 -

 

 

 

(5.3)

 

 

 

(213.9)

 

Subtotal at fixed currency rates

 

 

1,986.9

 

 

 

(2.2)

 

 

 

 

(67.1)

 

 

 

 

 -

 

 

 

85.4

 

 

 

2,003.0

 

Effect of foreign currency translation

 

 

32.9

 

 

 

(0.2)

 

 

 

 

(0.2)

 

 

 

 

 -

 

 

 

(85.4)

 

 

 

(52.9)

 

Consolidated reported GAAP operating income

 

 

$2,019.8

 

 

 

$(2.4)

 

 

 

 

$(67.3)

 

 

 

 

$-

 

 

 

$-

 

 

 

$1,950.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

  

2016 Reported

  

Revenue

 

  

Pension

 

  

 

 

  

Fixed

  

2016 Revised

 

  

Valued at 2017

  

Standard

 

  

Standard

 

  

Segment

 

  

Currency

  

Valued at 2018

(millions)

  

Management Rates

  

Adoption

 

  

Adoption

 

  

Change

 

  

Rate Change

  

Management Rates

Net Sales

  

 

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

 

 

  

 

 

 

  

 

 

Global Industrial

  

 

$4,687.2

 

 

 

$(0.4)

 

 

 

 

$-

 

 

 

 

$(70.3)

 

 

 

$274.6

 

 

 

$4,891.1

 

Global Institutional

  

 

4,440.1

 

 

 

(0.5)

 

 

 

 

 -

 

 

 

 

 -

 

 

 

158.6

 

 

 

4,598.2

 

Global Energy

  

 

3,075.8

 

 

 

 -

 

 

 

 

 -

 

 

 

 

 -

 

 

 

80.0

 

 

 

3,155.8

 

Other

  

 

801.7

 

 

 

 -

 

 

 

 

 -

 

 

 

 

70.3

 

 

 

26.4

 

 

 

898.4

 

Subtotal at fixed currency rates

  

 

13,004.8

 

 

 

(0.9)

 

 

 

 

 -

 

 

 

 

 -

 

 

 

539.6

 

 

 

13,543.5

 

Effect of foreign currency translation

  

 

148.0

 

 

 

(0.1)

 

 

 

 

 -

 

 

 

 

 -

 

 

 

(539.6)

 

 

 

(391.7)

 

Consolidated reported GAAP net sales

  

 

$13,152.8

 

 

 

$(1.0)

 

 

 

 

$-

 

 

 

 

$-

 

 

 

$-

 

 

 

$13,151.8

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Industrial

  

 

$720.0

 

 

 

$(0.4)

 

 

 

 

$(4.2)

 

 

 

 

$(0.8)

 

 

 

$43.7

 

 

 

$758.3

 

Global Institutional

  

 

950.5

 

 

 

(0.5)

 

 

 

 

(10.2)

 

 

 

 

(9.8)

 

 

 

19.5

 

 

 

949.5

 

Global Energy

  

 

346.7

 

 

 

 -

 

 

 

 

(8.0)

 

 

 

 

(1.5)

 

 

 

12.7

 

 

 

349.9

 

Other

  

 

145.2

 

 

 

 -

 

 

 

 

(20.4)

 

 

 

 

12.1

 

 

 

4.7

 

 

 

141.6

 

Corporate

 

 

(272.6)

 

 

 

 -

 

 

 

 

 -

 

 

 

 

-

 

 

 

(5.2)

 

 

 

(277.8)

 

Subtotal at fixed currency rates

 

 

1,889.8

 

 

 

(0.9)

 

 

 

 

(42.8)

 

 

 

 

 -

 

 

 

75.4

 

 

 

1,921.5

 

Effect of foreign currency translation

 

 

25.2

 

 

 

(0.1)

 

 

 

 

(1.0)

 

 

 

 

 -

 

 

 

(75.4)

 

 

 

(51.3)

 

Consolidated reported GAAP operating income

 

 

$1,915.0

 

 

 

$(1.0)

 

 

 

 

$(43.8)

 

 

 

 

$-

 

 

 

$-

 

 

 

$1,870.2

 

 

Reportable Segment Information

 

Financial information for each of the Company’s reportable segments is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

Operating Income (Loss)

 

 

(millions)

 

2018

 

2017

 

2016

 

 

2018

 

2017

 

 

2016

 

 

Global Industrial

 

 

$5,462.4

 

 

 

$5,106.8

 

 

$4,891.1

 

 

 

$768.1

 

 

 

$758.5

 

 

 

$758.3

 

 

Global Institutional

 

 

5,204.5

 

 

 

4,910.0

 

 

4,598.2

 

 

 

1,026.9

 

 

 

979.8

 

 

 

949.5

 

 

Global Energy

 

 

3,501.8

 

 

 

3,281.7

 

 

3,155.8

 

 

 

358.5

 

 

 

336.1

 

 

 

349.9

 

 

Other

 

 

877.6

 

 

 

931.5

 

 

898.4

 

 

 

161.3

 

 

 

142.5

 

 

 

141.6

 

 

Corporate

 

 

 -

 

 

 

 -

 

 

 -

 

 

 

(307.1)

 

 

 

(213.9)

 

 

 

(277.8)

 

 

Subtotal at fixed currency

 

 

15,046.3

 

 

 

14,230.0

 

 

13,543.5

 

 

 

2,007.7

 

 

 

2,003.0

 

 

 

1,921.5

 

 

Effect of foreign currency translation

 

 

(378.1)

 

 

 

(394.1)

 

 

(391.7)

 

 

 

(60.7)

 

 

 

(52.9)

 

 

 

(51.3)

 

 

Consolidated

 

 

$14,668.2

 

 

 

$13,835.9

 

 

$13,151.8

 

 

 

$1,947.0

 

 

 

$1,950.1

 

 

 

$1,870.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The profitability of the Company’s operating segments is evaluated by management based on operating income.

 

Consistent with the Company’s internal management reporting, Corporate amounts in the table above include intangible asset amortization specifically from the Nalco merger and special (gains) and charges, as discussed in Note 3, that are not allocated to the Company’s reportable segments.

 

The Company has an integrated supply chain function that serves all of its reportable segments. As such, asset and capital expenditure information by reportable segment has not been provided and is not available, since the Company does not produce or utilize such information internally. In addition, although depreciation and amortization expense is a component of each reportable segment’s operating results, it is not discretely identifiable.

 

 Geographic Information

 

Long-lived assets at public exchange rates by geographic region are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Long-Lived Assets, net

 

 

 

 

 

 

 

 

 

(millions)

 

2018

    

2017

 

United States

 

 

$9,175.4

 

 

 

$8,853.7

 

Europe

 

 

2,538.7

 

 

 

2,623.8

 

Asia Pacific, excluding Greater China

 

 

1,003.4

 

 

 

1,022.5

 

Latin America

 

 

565.8

 

 

 

605.8

 

MEA

 

 

302.1

 

 

 

310.1

 

Canada

 

 

616.8

 

 

 

649.1

 

Greater China

 

 

1,194.6

 

 

 

1,301.0

 

Total

 

 

$15,396.8

 

 

 

$15,366.0

 

 

 

 

    

    

    

 

    

 

Geographic data for long-lived assets is based on physical location of those assets. Refer to Note 17 for net sales by geographic region.