CONSOLIDATED FINANCIAL INFORMATION	3 Months Ended
Mar. 31, 2020
CONSOLIDATED FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL INFORMATION	1. CONSOLIDATED FINANCIAL INFORMATION The unaudited consolidated financial information for the first quarter ended March 31, 2020 and 2019 reflects, in the opinion of 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, 2019 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, 2019. Sales, cost of sales and selling, general and administrative expenses in the selected consolidated income statement information includes immaterial revisions to amounts previously reported in the Company’s quarterly report on Form 10-Q for the first quarter of 2019. The revision had no impact on previously reported total net sales or operating income. Except for the changes due to 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, 2020 and 2019 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 7, 2020 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. ChampionX Separation On December 18, 2019, the Company entered into definitive agreements with ChampionX Holding Inc. (ChampionX), a wholly owned subsidiary of the Company formed for the purpose of holding the Upstream Energy business, and Apergy Corporation (Apergy) pursuant to which the Company will separate the Upstream Energy business and combine it with Apergy in a tax-efficient Reverse Morris Trust transaction. The transaction will occur in a multi-step process pursuant to which, prior to the merger between ChampionX and Apergy, the Company will transfer certain assets, liabilities and entities to ChampionX and its subsidiaries. In exchange, the Company will receive shares of ChampionX common stock and a cash payment, and all shares of ChampionX common stock will be distributed to Ecolab stockholders in an exchange offer. Under the terms of the exchange offer, Ecolab stockholders have the option to exchange all, some or none of their shares of Ecolab common stock for shares of ChampionX common stock. If the exchange offer is fully subscribed and at the conclusion of this exchange, the shares of ChampionX common stock will immediately be converted into shares of Apergy common stock as part of the Merger. All shares of Ecolab common stock that will be tendered and accepted in the exchange will be retired and reduce the number of shares of common stock outstanding. As a result of and immediately following the Transactions, ChampionX stockholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy stock and equity holders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis (127 million shares). Ecolab stockholders that do not participate in this Exchange Offer will retain the shares of Ecolab common stock that they held prior to the Merger. In connection with the transaction, ChampionX will enter into a credit agreement with respect to an estimated $537 million senior secured term loan credit facility to finance the one-time special cash payment to Ecolab and will otherwise pay certain expenses in connection with the transaction. The Company intends to use the proceeds to repay debt, pay dividends, repurchase its stock, or a combination thereof. Ecolab will account for this transaction as a sale and will recognize a gain or loss based on the excess or deficit of consideration received over the carrying value of ChampionX. Consideration received includes a one-time special cash payment (net of cash included on the opening ChampionX balance sheet) from ChampionX and the fair value of the shares of Ecolab common stock tendered and retired as part of the exchange. The cash consideration Ecolab will receive of $0.5 billion is less than the carrying value of ChampionX of about $3.7 billion. As a result, the gain or loss calculated by subtracting the remaining book value of ChampionX from the non-cash share consideration will be a non-cash gain or loss. The fair value of the Ecolab common stock tendered in the exchange less stock-based equity is based on the 62% (approximately 122.6 million shares) of the outstanding stock of Apergy multiplied by the value of the volume-weighted average Apergy share price of the last three full trading days ending on the expiration date of the exchange offer. As of March 31, 2020 the price of Apergy’s stock was $5.75 and during the quarter ended March 31, 2020 the average price was $21.00. Utilizing the $5.75 and the $21.00 Apergy stock prices to calculate the fair value of the non-cash Ecolab common stock consideration yields a non-cash loss of ($2.5 billion) and ($0.8 billion), respectively. Completion of the transaction is subject to the satisfaction or waiver of customary closing conditions, including approval by Apergy’s stockholders, approval by certain foreign regulatory authorities and receipt of opinions with respect to the tax-free nature of the transaction. ChampionX continues to be classified as held for use as of March 31, 2020.

CONSOLIDATED FINANCIAL INFORMATION

3 Months Ended

Mar. 31, 2020

1. CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the first quarter ended March 31, 2020 and 2019 reflects, in the opinion of 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, 2019 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, 2019.

Sales, cost of sales and selling, general and administrative expenses in the selected consolidated income statement information includes immaterial revisions to amounts previously reported in the Company’s quarterly report on Form 10-Q for the first quarter of 2019. The revision had no impact on previously reported total net sales or operating income. Except for the changes due to 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, 2020 and 2019 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 7, 2020 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.

ChampionX Separation

On December 18, 2019, the Company entered into definitive agreements with ChampionX Holding Inc. (ChampionX), a wholly owned subsidiary of the Company formed for the purpose of holding the Upstream Energy business, and Apergy Corporation (Apergy) pursuant to which the Company will separate the Upstream Energy business and combine it with Apergy in a tax-efficient Reverse Morris Trust transaction.

The transaction will occur in a multi-step process pursuant to which, prior to the merger between ChampionX and Apergy, the Company will transfer certain assets, liabilities and entities to ChampionX and its subsidiaries. In exchange, the Company will receive shares of ChampionX common stock and a cash payment, and all shares of ChampionX common stock will be distributed to Ecolab stockholders in an exchange offer. Under the terms of the exchange offer, Ecolab stockholders have the option to exchange all, some or none of their shares of Ecolab common stock for shares of ChampionX common stock. If the exchange offer is fully subscribed and at the conclusion of this exchange, the shares of ChampionX common stock will immediately be converted into shares of Apergy common stock as part of the Merger. All shares of Ecolab common stock that will be tendered and accepted in the exchange will be retired and reduce the number of shares of common stock outstanding.

As a result of and immediately following the Transactions, ChampionX stockholders will own, in the aggregate, approximately 62% of the issued and outstanding Apergy common stock on a fully diluted basis and Apergy stock and equity holders will own, in the aggregate, approximately 38% of the issued and outstanding Apergy common stock on a fully diluted basis (127 million shares). Ecolab stockholders that do not participate in this Exchange Offer will retain the shares of Ecolab common stock that they held prior to the Merger.

In connection with the transaction, ChampionX will enter into a credit agreement with respect to an estimated $537 million senior secured term loan credit facility to finance the one-time special cash payment to Ecolab and will otherwise pay certain expenses in connection with the transaction. The Company intends to use the proceeds to repay debt, pay dividends, repurchase its stock, or a combination thereof.

Ecolab will account for this transaction as a sale and will recognize a gain or loss based on the excess or deficit of consideration received over the carrying value of ChampionX. Consideration received includes a one-time special cash payment (net of cash included on the opening ChampionX balance sheet) from ChampionX and the fair value of the shares of Ecolab common stock tendered and retired as part of the exchange. The cash consideration Ecolab will receive of $0.5 billion is less than the carrying value of ChampionX of about $3.7 billion. As a result, the gain or loss calculated by subtracting the remaining book value of ChampionX from the non-cash share consideration will be a non-cash gain or loss.

The fair value of the Ecolab common stock tendered in the exchange less stock-based equity is based on the 62% (approximately 122.6 million shares) of the outstanding stock of Apergy multiplied by the value of the volume-weighted average Apergy share price of the last three full trading days ending on the expiration date of the exchange offer. As of March 31, 2020 the price of Apergy’s stock was $5.75 and during the quarter ended March 31, 2020 the average price was $21.00. Utilizing the $5.75 and the $21.00 Apergy stock prices to calculate the fair value of the non-cash Ecolab common stock consideration yields a non-cash loss of ($2.5 billion) and ($0.8 billion), respectively.

Completion of the transaction is subject to the satisfaction or waiver of customary closing conditions, including approval by Apergy’s stockholders, approval by certain foreign regulatory authorities and receipt of opinions with respect to the tax-free nature of the transaction. ChampionX continues to be classified as held for use as of March 31, 2020.