UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition.
On April 27, 2021, Ecolab Inc. (“Ecolab”) announced earnings for the first quarter ended March 31, 2021. A copy of the (i) News Release issued by Ecolab in connection with this report under Item 2.02 is furnished and attached as Exhibit (99.1), (ii) Supplemental Data to be used in connection with the conference call to be held discussing the 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) | Filed herewith electronically. | ||||
(99.2) | Filed herewith electronically. | ||||
(99.3) | Supplemental Discussion for First Quarter dated April 27, 2021. | Filed herewith electronically. | |||
(104) | Cover Page Interactive Data File. | Embedded within the Inline XBRL document. |
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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 27, 2021 | By: | /s/ David F. Duvick |
David F. Duvick | ||
Assistant Secretary |
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Exhibit 99.1
News Release
| | |
| Michael J. Monahan (651) 250-2809 Nate Brochmann (651) 250-3837 | |
| Andrew C. Hedberg (651) 250-2185 |
ECOLAB FIRST QUARTER REPORTED DILUTED CONTINUING OPERATIONS EPS $0.67
ADJUSTED DILUTED CONTINUING OPERATIONS EPS $0.81, -18%
EPS INCLUDES ESTIMATED UNFAVORABLE $0.10 (-10pp) PER SHARE IMPACT FROM TEXAS FREEZE
FIRST QUARTER HIGHLIGHTS:
● | First quarter results reflected underlying sequential improvement from the fourth quarter offset by supply chain and customer disruptions from the Texas freeze. |
● | As previously disclosed, the Texas freeze is expected to have an unfavorable impact of $0.15 per share in full year 2021; the first quarter impact was an estimated $0.10 per share. |
● | Reported diluted EPS from continuing operations $0.67, -33% versus last year. |
| | First Quarter Ended March 31 | ||||||||||||||||
| | Reported | | | | | Adjusted | | | | ||||||||
(unaudited) | | Public Currency Rates | | % | | Public Currency Rates | | % | ||||||||||
(millions, except per share) | | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
Net sales | | $2,885.0 | | | $3,020.6 | | | (4) | % | | $2,885.0 | | | $3,020.6 | | | (4) | % |
Operating income | | 297.3 | | | 376.2 | | | (21) | % | | 329.7 | | | 401.2 | | | (18) | % |
Net income from continuing operations attributable to Ecolab | | 193.6 | | | 292.0 | | | (34) | % | | 233.9 | | | 288.6 | | | (19) | % |
| | | | | | | | | | | | | | | | | | |
Diluted earnings per share | | | | | | | | | | | | | | | | | | |
Net income from continuing operations attributable to Ecolab | | $0.67 | | | $1.00 | | | (33) | % | | $0.81 | | | $0.99 | | | (18) | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Adjusted | | | | ||||
| | Fixed Currency Rates | | % | | Fixed Currency Rates | | % | ||||||||||
| | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
Net sales | | $2,890.6 | | | $3,088.6 | | | (6) | % | | $2,890.6 | | | $3,088.6 | | | (6) | % |
Operating income | | 297.8 | | | 384.0 | | | (22) | % | | 330.2 | | | 409.0 | | | (19) | % |
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ST. PAUL, Minn., April 27, 2021: Sequentially improving underlying trends in Ecolab’s first quarter, driven by further strong new business wins, customer penetration gains, continued pricing and generally better market conditions, were negatively impacted by short-term supply chain and customer disruptions from the Texas freeze. Strong top and bottom line growth in the Healthcare & Life Sciences segment once again led results along with further income gains in the Industrial segment, while Institutional & Specialty and Other segment sales declines continued to narrow as markets further improved.
CEO comment
Commenting on the quarter, Christophe Beck, Ecolab’s president and chief executive officer said, “Our business continues to show fundamental improvement that gives us confidence in our full year outlook. First quarter results were in line with our expectations as underlying sequential sales and earnings improvement from the fourth quarter 2020 was offset by the previously discussed impact from the Texas freeze. This was a short-term event that primarily impacted our Industrial segment, as raw materials supply was sharply reduced and certain customer operations were constrained. Adjusted diluted earnings per share of $0.81 were also as expected and included an estimated unfavorable $0.10 per share impact from the Texas freeze.
“Importantly, our general market outlook remains largely unchanged. North America and China are moving ahead while Europe and several other regions remain behind as they recover from extended lockdowns and slow rates of vaccinations. We continue to believe that we are in a strong position to capitalize on the improving trends while we leverage continued new business wins, customer penetration gains and good pricing. The investments we made to further our product and service innovation, new hygiene and digital technologies and successful sales and profit initiatives are also contributing to our results. We are therefore confident that these critical efforts have expanded our global competitive advantage and uniquely position us to capture new business opportunities and drive accelerated growth for Ecolab.
“We look for significant growth in the second quarter, primarily driven by strong year-on-year growth in our Institutional division as new business as well as improving trends in early-reopening U.S. states and continued U.S. vaccination progress more than offset a softer Europe and emerging market recovery. We expect robust consolidated gains in the second half, and continue to look for strong year-on-year growth for the full year 2021 with earnings per share above 2019 earnings per
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share from continuing operations excluding the estimated $0.15 per share impact of the Texas freeze. With rising hygiene standards, increased demand for our sustainable solutions and our unique digital capabilities, we remain confident in our long-term outlook and believe we are well-positioned for continued superior future growth.”
First Quarter 2021 Consolidated Results
Ecolab's first quarter reported sales decreased 4%, fixed currency sales decreased 6% and acquisition adjusted fixed currency sales decreased 8% when compared to the prior year. The Texas freeze is estimated to have had a -1pp impact on overall sales growth.
First quarter 2021 reported operating income decreased 21% and fixed currency operating income decreased 22% when compared to the prior year; both include the impact of special charges, which were primarily related to restructuring activities and pay protection for certain employees impacted by COVID-19’s effects (net of government subsidies). Adjusted fixed currency operating income decreased 19%. COVID-19 related lower volume, the Texas freeze impact and unfavorable business mix more than offset cost savings and favorable pricing. The Texas freeze is estimated to have had a -9pp impact on operating income growth.
Reported other income, which primarily consists of the return on pension assets and other non-service costs of our pension obligations, increased 10% reflecting higher returns on pension assets.
Reported interest expense increased 7% due to higher average debt levels in this year’s quarter. The increased average debt levels in 2021 incorporate the late March 2020 issuance of debt to further increase our liquidity at the beginning of the COVID-19 pandemic.
The reported income tax rate for the first quarter of 2021 was 25.2% compared with the reported rate of 13.7% in the first quarter of 2020. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the first quarter of 2021 was 19.7% compared with the adjusted tax rate of 20.5% in the first quarter of 2020.
First quarter 2021 reported net income from continuing operations attributable to Ecolab decreased 34%. Excluding the impact of special gains and charges and discrete tax items, adjusted net income from continuing operations attributable to Ecolab decreased 19% versus the prior year.
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Reported diluted earnings per share from continuing operations decreased 33%. Adjusted diluted earnings per share from continuing operations declined 18% when compared against first quarter 2020; the Texas freeze is estimated to have had a -10pp impact on adjusted diluted earnings per share from continuing operations growth. Currency translation had a $0.02 favorable impact on first quarter 2021 adjusted diluted earnings per share from continuing operations.
Ecolab reacquired approximately 0.3 million shares of its common stock during the first quarter of 2021.
First Quarter 2021 Segment Review
Segment results reflect continuing operations.
Global Industrial | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $1,433.9 | | | $1,465.0 | | | (2) | % | | (3) | % |
Operating income | | 219.2 | | | 209.6 | | | 5 | % | | 4 | % |
Operating income margin | | 15.3 | % | | 14.3 | % | | | | | | |
Acq. adj. operating income margin | | 15.6 | % | | 14.5 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $1,431.0 | | | $1,433.1 | | | 0 | % | | | |
Operating income | | 218.8 | | | 204.8 | | | 7 | % | | | |
The Industrial segment includes Water, Food & Beverage, Downstream and Paper
Acquisition adjusted fixed currency sales decreased 3% as modest Paper sales growth and steady Water sales were more than offset by a modest Food & Beverage decline and a significant decrease in Downstream sales. Industrial segment results reflect unfavorable impacts in all divisions from supply chain and customer operating disruptions from the Texas freeze during the quarter, most notably in Downstream; excluding those weather-related impacts, Industrial sales are estimated to have improved sequentially and would have been similar to last year. Acquisition adjusted fixed currency operating income increased 4% reflecting cost savings and favorable pricing that more than offset lower volume from the Texas freeze. The Texas freeze is estimated to have had a -14pp impact on Industrial’s acquisition adjusted fixed currency operating income growth.
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Global Institutional & Specialty | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $858.5 | | | $1,087.2 | | | (21) | % | | (21) | % |
Operating income | | 63.1 | | | 183.7 | | | (66) | % | | (65) | % |
Operating income margin | | 7.4 | % | | 16.9 | % | | | | | | |
Acq. adj. operating income margin | | 7.5 | % | | 16.9 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $857.4 | | | $1,070.1 | | | (20) | % | | | |
Operating income | | 63.2 | | | 182.0 | | | (65) | % | | | |
The Institutional & Specialty segment includes Institutional and Specialty
Acquisition adjusted fixed currency sales declined 21%. Sales reflected a narrowing decline in the Institutional division and a Specialty division sales decrease versus a very strong year-ago period. Results for both divisions continued to be unfavorably impacted by the continuation of COVID-19’s second wave during most of the quarter, as increased sanitizing product sales were more than offset by global demand pressure on restaurant, lodging and entertainment facilities for other products due to the pandemic. Acquisition adjusted fixed currency operating income decreased 65% reflecting the significant COVID-19 related volume decline and unfavorable business mix which more than offset cost savings and favorable pricing.
Global Healthcare & Life Sciences | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $293.7 | | | $256.8 | | | 14 | % | | 14 | % |
Operating income | | 45.6 | | | 24.0 | | | 90 | % | | 90 | % |
Operating income margin | | 15.5 | % | | 9.3 | % | | | | | | |
Acq. adj. operating income margin | | 15.7 | % | | 9.4 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $292.7 | | | $244.7 | | | 20 | % | | | |
Operating income | | 45.4 | | | 22.5 | | | 102 | % | | | |
The Healthcare & Life Sciences segment includes Healthcare and Life Sciences
Acquisition adjusted fixed currency sales grew 14% led by double-digit gains in both the Healthcare and Life Sciences divisions, as both benefited from new business and continued demand due to COVID-19. Acquisition adjusted fixed currency operating income grew 90% reflecting the strong volume gains, favorable pricing and cost savings.
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Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | First Quarter Ended March 31 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $271.3 | | | $279.6 | | | (3) | % | | (3) | % |
Operating income | | 32.9 | | | 21.8 | | | 51 | % | | 51 | % |
Operating income margin | | 12.1 | % | | 7.8 | % | | | | | | |
Acq. adj. operating income margin | | 12.1 | % | | 7.8 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $270.7 | | | $272.7 | | | (1) | % | | | |
Operating income | | 32.8 | | | 21.3 | | | 54 | % | | | |
The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies
Acquisition adjusted fixed currency sales declined 3% as a solid increase in Pest Elimination was more than offset by declines in the remaining Other divisions. Acquisition adjusted fixed currency operating income increased 51% as cost savings, favorable pricing and favorable business mix together more than offset lower volumes.
Corporate
● | sales of $33 million to ChampionX in the first quarter of 2021 under the Master Cross Supply and Product Transfer agreements entered into as part of the ChampionX separation |
● | amortization expense of $31 million in the first quarter of 2021 related to the Nalco merger intangible assets |
● | net special charges of $32 million in the first quarter of 2021 primarily related to restructuring charges and COVID-19 related charges, including pay protection for certain employees impacted by COVID-19’s effects (net of government subsidies), testing and related costs |
Special gains and charges for the first quarter of 2020 were a net charge of $25 million and include restructuring charges, acquisition and integration charges, Healthcare product recall charges and litigation and other charges.
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Business Outlook
The continued uncertain outlook regarding the timing and pace of global economic recovery from COVID-19’s impact does not yet present an adequate basis for us to provide either quarterly or annual earnings forecasts.
We expect continued recovery in the full year 2021. Healthcare & Life Sciences segment sales are expected to moderately improve over the prior year’s very strong gain, with good year-on-year sales growth from our Industrial and Other segments. We look for our Institutional & Specialty segment to show a significant year-on-year increase for the full year as it progressively recovers toward its pre-COVID peak 2019 levels.
We look for significant growth in the second quarter, primarily driven by strong year-on-year growth in our Institutional division as new business as well as improving trends in early-reopening U.S. states and continued U.S. vaccination progress more than offset a softer Europe and emerging market recovery. We expect robust consolidated gains in the second half, and continue to look for strong year-on-year growth for the full year 2021 with earnings per share above 2019 earnings per share from continuing operations excluding the estimated $0.15 per share impact of the Texas freeze.
About Ecolab
A trusted partner at nearly three million commercial customer locations, Ecolab (ECL) is the global leader in water, hygiene and infection prevention solutions and services. With annual sales of $12 billion and more than 44,000 associates, Ecolab delivers comprehensive solutions, data-driven insights and personalized 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.
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Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding COVID-19 pandemic trends, the global economic recovery, and our financial and business performance and prospects, including sales, earnings and new business. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. With respect to the COVID-19 pandemic, numerous factors will determine the extent of the impact on our business, including the severity of the disease, the duration of the outbreak, the distribution and efficacy of vaccines, the likelihood of a resurgence of the outbreak, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic 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; 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; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; potential information technology infrastructure failures or breaches in data security; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; our ability to successfully compete with respect to value, innovation and customer support; exposure to global economic, political and legal risks related to our international operations; difficulty in procuring raw materials or fluctuations in raw material costs; pressure on
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operations from consolidation of customers or vendors; 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; restraints on pricing flexibility due to contractual obligations; our ability to acquire complementary businesses and to effectively integrate such businesses; 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; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; potential losses arising from the impairment of goodwill or other assets; potential chemical spill or release; 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; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.
Non-GAAP Financial Information
This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
These non-GAAP financial measures (including with respect to continuing operations) include:
● | fixed currency sales |
● | acquisition adjusted fixed currency sales |
● | adjusted cost of sales |
● | adjusted gross margin |
● | fixed currency operating income |
● | fixed currency operating income margin |
● | adjusted operating income |
● | adjusted fixed currency operating income |
● | adjusted fixed currency operating income margin |
● | acquisition adjusted fixed currency operating income |
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● | acquisition adjusted fixed currency operating income margin |
● | adjusted other income expense |
● | adjusted interest expense |
● | adjusted tax rate |
● | adjusted net income attributable to Ecolab |
● | adjusted diluted earnings per share |
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP adjusted financial measures for 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, discrete tax items and certain external factors 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 2021. We also provide our segment results based on public currency rates for informational purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco merger or the impact of special (gains) and charges as these are not allocated to the Company’s reportable segments.
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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.
These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this news release. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in this news release.
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) |
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ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
| | First Quarter Ended | | | |||
| | March 31 | | % | |||
(millions, except per share) | | 2021 |
| 2020 | | Change | |
| | | | | | | |
Product and equipment sales | | $2,293.4 | | $2,424.0 | | | |
Service and lease sales | | 591.6 | | 596.6 | | | |
Net sales | | 2,885.0 | | 3,020.6 | | (4) | % |
Product and equipment cost of sales | | 1,362.9 | | 1,364.7 | | | |
Service and lease cost of sales | | 349.1 | | 355.5 | | | |
Cost of sales (2) | | 1,712.0 | | 1,720.2 | | 0 | % |
Selling, general and administrative expenses | | 862.9 | | 908.3 | | (5) | % |
Special (gains) and charges (2) | | 12.8 | | 15.9 | | | |
Operating income | | 297.3 | | 376.2 | | (21) | % |
Other (income) expense | | (17.0) | | (15.4) | | 10 | % |
Interest expense, net | | 51.7 | | 48.3 | | 7 | % |
Income before income taxes | | 262.6 | | 343.3 | | (24) | % |
Provision for income taxes | | 66.1 | | 47.0 | | 41 | % |
Net income including noncontrolling interest | | 196.5 | | 296.3 | | (34) | % |
Net income attributable to noncontrolling interest | | 2.9 | | 4.3 | | | |
Net income from continuing operations attributable to Ecolab | | 193.6 | | 292.0 | | (34) | % |
Net income (loss) from discontinued operations, net of tax (1) | | - | | (8.6) | | | |
Net income (loss) attributable to Ecolab | | $193.6 | | $283.4 | | (32) | % |
| | | | | | | |
Earnings attributable to Ecolab per common share | | | | | | ||
Basic | | | | | | | |
Continuing operations | | $0.68 | | $1.01 | | (33) | % |
Discontinued operations | | - | | ($0.03) | | | |
Earnings attributable to Ecolab | | $0.68 | | $0.98 | | (31) | % |
Diluted | | | | | | | |
Continuing operations | | $0.67 | | $1.00 | | (33) | % |
Discontinued operations | | - | | ($0.03) | | | |
Earnings attributable to Ecolab | | $0.67 | | $0.97 | | (31) | % |
| | | | | | | |
Weighted-average common shares outstanding | | | | | | ||
Basic | | 286.0 | | 288.8 | | (1) | % |
Diluted | | 288.8 | | 292.6 | | (1) | % |
| | | | | | | |
(1) Net Income (loss) attributable to discontinued operations, net of tax, relates to the separation of ChampionX. | |||||||
(2) Cost of sales and Special (gains) and charges in the Consolidated Statement of Income above include the following: | |||||||
| | | | | | | |
| | First Quarter Ended | | | |||
| | March 31 | | | | ||
(millions) | | 2021 | | 2020 | | | |
| | | | | | | |
Cost of sales | | | | | | | |
Restructuring activities | | $18.2 | | $3.0 | | | |
Acquisition and integration activities | | - | | 0.4 | | | |
COVID-19 activities, net | | 1.1 | | - | | | |
Other | | 0.3 | | 5.7 | | | |
Subtotal (a) | | 19.6 | | 9.1 | | | |
| | | | | | | |
Special (gains) and charges | | | | | | | |
Restructuring activities | | 3.6 | | 4.2 | | | |
Acquisition and integration activities | | 1.2 | | 5.4 | | | |
Disposal and impairment charges | | - | | 1.2 | | | |
COVID-19 activities, net | | 6.4 | | - | | | |
Other | | 1.6 | | 5.1 | | | |
Subtotal | | 12.8 | | 15.9 | | | |
| | | | | | | |
Total special (gains) and charges | | $32.4 | | $25.0 | | | |
(a) Special charges of $19.6 million and $9.1 million in the first quarter of 2021 and 2020, respectively were recorded in product and equipment cost of sales.
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ECOLAB INC.
REPORTABLE SEGMENT INFORMATION
(unaudited)
| | First Quarter Ended March 31 | ||||||||||||
| | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | % | | | | | | % | ||
(millions) | | 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||
Net Sales | | | | | | | | | | | | | | |
Global Industrial | | $1,433.9 | | $1,465.0 | | (2) | % | | $1,431.0 | | $1,433.1 | | 0 | % |
Global Institutional & Specialty | | 858.5 | | 1,087.2 | | (21) | % | | 857.4 | | 1,070.1 | | (20) | % |
Global Healthcare & Life Sciences | | 293.7 | | 256.8 | | 14 | % | | 292.7 | | 244.7 | | 20 | % |
Other | | 271.3 | | 279.6 | | (3) | % | | 270.7 | | 272.7 | | (1) | % |
Corporate | | 33.2 | | - | | * | | | 33.2 | | - | | * | |
Subtotal at fixed currency rates | | 2,890.6 | | 3,088.6 | | (6) | % | | 2,885.0 | | 3,020.6 | | (4) | % |
Currency impact | | (5.6) | | (68.0) | | * | | | - | | - | | * | |
Consolidated reported GAAP net sales | | $2,885.0 | | $3,020.6 | | (4) | % | | $2,885.0 | | $3,020.6 | | (4) | % |
| | | | | | | | | | | | | | |
Operating Income | | | | | | | | | | | | | | |
Global Industrial | | $219.2 | | $209.6 | | 5 | % | | $218.8 | | $204.8 | | 7 | % |
Global Institutional & Specialty | | 63.1 | | 183.7 | | (66) | % | | 63.2 | | 182.0 | | (65) | % |
Global Healthcare & Life Sciences | | 45.6 | | 24.0 | | 90 | % | | 45.4 | | 22.5 | | 102 | % |
Other | | 32.9 | | 21.8 | | 51 | % | | 32.8 | | 21.3 | | 54 | % |
Corporate | | (63.0) | | (55.1) | | * | | | (62.9) | | (54.4) | | * | |
Subtotal at fixed currency rates | | 297.8 | | 384.0 | | (22) | % | | 297.3 | | 376.2 | | (21) | % |
Currency impact | | (0.5) | | (7.8) | | * | | | - | | - | | * | |
Consolidated reported GAAP operating income | | $297.3 | | $376.2 | | (21) | % | | $297.3 | | $376.2 | | (21) | % |
| | | | | | | | | | | | | | |
* Not meaningful.
As shown in the “Fixed Currency Rates” tables above, we evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Amounts shown in the “Public Currency Rates” tables above reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period, and are provided for informational purposes. The difference between the fixed currency exchange rates and the public currency exchange rates is reported as “Currency impact” in the “Fixed Currency Rates” tables above.
The Corporate segment includes amortization from the Nalco merger intangible assets. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income.
13
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
(unaudited)
| | March 31 | | December 31 | | March 31 | |||
(millions) | | 2021 | | 2020 | | 2020 | |||
Assets | | | | | | | | | |
Current assets | | | | | | | | | |
Cash and cash equivalents | | $1,189.5 | | | $1,260.2 | | | $1,552.2 | |
Accounts receivable, net | | 2,272.0 | | | 2,273.8 | | | 2,409.9 | |
Inventories | | 1,347.0 | | | 1,285.2 | | | 1,121.2 | |
Other current assets | | 341.5 | | | 298.2 | | | 334.3 | |
Current assets of discontinued operations | | - | | | - | | | 1,019.5 | |
Total current assets | | 5,150.0 | | | 5,117.4 | | | 6,437.1 | |
| | | | | | | | | |
Property, plant and equipment, net | | 3,078.7 | | | 3,124.9 | | | 3,202.5 | |
Goodwill | | 6,119.5 | | | 6,006.9 | | | 5,556.0 | |
Other intangible assets, net | | 2,966.8 | | | 2,977.0 | | | 2,877.1 | |
Operating lease assets | | 412.5 | | | 423.8 | | | 454.4 | |
Other assets | | 480.6 | | | 476.0 | | | 529.6 | |
Long-term assets of discontinued operations | | - | | | - | | | 3,282.9 | |
Total assets | | $18,208.1 | | | $18,126.0 | | | $22,339.6 | |
| | | | | | | | | |
Liabilities and Equity | | | | | | | | | |
Current liabilities | | | | | | | | | |
Short-term debt | | $24.3 | | | $17.3 | | | $1,035.2 | |
Accounts payable | | 1,128.2 | | | 1,160.6 | | | 1,042.2 | |
Compensation and benefits | | 457.6 | | | 469.3 | | | 480.6 | |
Income taxes | | 52.4 | | | 96.1 | | | 127.0 | |
Other current liabilities | | 1,189.7 | | | 1,188.9 | | | 1,168.7 | |
Current liabilities of discontinued operations | | - | | | - | | | 403.7 | |
Total current liabilities | | 2,852.2 | | | 2,932.2 | | | 4,257.4 | |
| | | | | | | | | |
Long-term debt | | 6,685.8 | | | 6,669.3 | | | 6,743.5 | |
Postretirement health care and pension benefits | | 1,207.8 | | | 1,226.2 | | | 1,066.9 | |
Deferred income taxes | | 526.8 | | | 483.9 | | | 537.6 | |
Operating lease liabilities | | 291.2 | | | 300.5 | | | 333.7 | |
Other liabilities | | 324.2 | | | 312.4 | | | 245.6 | |
Long-term liabilities of discontinued operations | | - | | | - | | | 294.3 | |
Total liabilities | | 11,888.0 | | | 11,924.5 | | | 13,479.0 | |
| | | | | | | | | |
Equity | | | | | | | | | |
Common stock | | 363.0 | | | 362.6 | | | 360.8 | |
Additional paid-in capital | | 6,285.7 | | | 6,235.0 | | | 6,018.1 | |
Retained earnings | | 8,299.3 | | | 8,243.0 | | | 10,136.9 | |
Accumulated other comprehensive loss | | (1,914.5) | | | (1,994.4) | | | (2,113.7) | |
Treasury stock | | (6,741.2) | | | (6,679.7) | | | (5,580.0) | |
Total Ecolab shareholders’ equity | | 6,292.3 | | | 6,166.5 | | | 8,822.1 | |
Noncontrolling interest | | 27.8 | | | 35.0 | | | 38.5 | |
Total equity | | 6,320.1 | | | 6,201.5 | | | 8,860.6 | |
Total liabilities and equity | | $18,208.1 | | | $18,126.0 | | | $22,339.6 | |
14
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| First Quarter Ended |
| ||||
| | March 31 | | ||||
(millions, except percent and per share) | | 2021 |
| 2020 | | ||
| | | | | | | |
Net sales | | | | | | | |
Reported GAAP net sales | | $2,885.0 | | | $3,020.6 | | |
Effect of foreign currency translation | | 5.6 | | | 68.0 | | |
Non-GAAP fixed currency sales | | 2,890.6 | | | 3,088.6 | | |
Effect of acquisitions and divestitures | | (71.7) | | | (17.5) | | |
Non-GAAP acquisition adjusted fixed currency sales | | 2,818.9 | | | 3,071.1 | | |
| | | | | | | |
Cost of sales | | | | | | | |
Reported GAAP cost of sales | | $1,712.0 | | | $1,720.2 | | |
Special (gains) and charges | | 19.6 | | | 9.1 | | |
Non-GAAP adjusted cost of sales | | $1,692.4 | | | $1,711.1 | | |
| | | | | | | |
Gross margin | | | | | | | |
Reported GAAP gross margin | | 40.7 | % | | 43.1 | % | |
Non-GAAP adjusted gross margin | | 41.3 | % | | 43.4 | % | |
| | | | | | | |
Operating income | | | | | | | |
Reported GAAP operating income | | $297.3 | | | $376.2 | | |
Effect of foreign currency translation | | 0.5 | | | 7.8 | | |
Non-GAAP fixed currency operating income | | 297.8 | | | 384.0 | | |
Special (gains) and charges | | 32.4 | | | 25.0 | | |
Non-GAAP adjusted fixed currency operating income | | 330.2 | | | 409.0 | | |
Effect of acquisitions and divestitures | | (0.3) | | | (0.1) | | |
Non-GAAP acquisition adjusted fixed currency operating income | | $329.9 | | | $408.9 | | |
| | | | | | | |
Operating income margin | | | | | | | |
Reported GAAP operating income margin | | 10.3 | % | | 12.5 | % | |
Non-GAAP adjusted fixed currency operating income margin | | 11.4 | % | | 13.2 | % | |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 11.7 | % | | 13.3 | % | |
| | | | | | | |
15
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| First Quarter Ended |
| ||||
| | March 31 | | ||||
(millions, except percent and per share) | | 2021 |
| 2020 | | ||
Net Income from continuing operations attributable to Ecolab | | | | | | | |
Reported GAAP net income from continuing operations attributable to Ecolab | | $193.6 | | | $292.0 | | |
Special (gains) and charges, after tax | | 24.2 | | | 18.5 | | |
Discrete tax net expense (benefit) | | 16.1 | | | (21.9) | | |
Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $233.9 | | | $288.6 | | |
| | | | | | | |
Diluted EPS from continuing operations attributable to Ecolab | | | | | | | |
Reported GAAP diluted EPS from continuing operations | | $0.67 | | | $1.00 | | |
Special (gains) and charges, after tax | | 0.08 | | | 0.06 | | |
Discrete tax net expense (benefit) | | 0.06 | | | (0.07) | | |
Non-GAAP adjusted diluted EPS from continuing operations | | $0.81 | | | $0.99 | | |
| | | | | | | |
Provision for Income Taxes | | | | | | | |
Reported GAAP tax rate | | 25.2 | % | | 13.7 | % | |
Special gains and charges | | - | | | 0.8 | | |
Discrete tax items | | (5.5) | | | 6.0 | | |
Non-GAAP adjusted tax rate | | 19.7 | % | | 20.5 | % | |
16
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | First Quarter Ended March 31 | ||||||||||
(unaudited) | | 2021 | | 2020 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $1,433.9 | | (33.1) | | $1,400.8 | | $1,465.0 | | (17.2) | | $1,447.8 |
Global Institutional & Specialty | | 858.5 | | (2.9) | | 855.6 | | 1,087.2 | | - | | 1,087.2 |
Global Healthcare & Life Sciences | | 293.7 | | (2.5) | | 291.2 | | 256.8 | | (0.3) | | 256.5 |
Other | | 271.3 | | - | | 271.3 | | 279.6 | | - | | 279.6 |
Corporate | | 33.2 | | (33.2) | | - | | - | | - | | - |
Subtotal at fixed currency rates | | 2,890.6 | | (71.7) | | 2,818.9 | | 3,088.6 | | (17.5) | | 3,071.1 |
Currency impact | | (5.6) | | | | | | (68.0) | | | | |
Consolidated reported GAAP net sales | | $2,885.0 | | | | | | $3,020.6 | | | | |
| | | | | | | | | | | | |
Operating Income | | | | | | | | | | | | |
Global Industrial | | $219.2 | | (1.3) | | $217.9 | | $209.6 | | (0.1) | | $209.5 |
Global Institutional & Specialty | | 63.1 | | 1.0 | | 64.1 | | 183.7 | | - | | 183.7 |
Global Healthcare & Life Sciences | | 45.6 | | - | | 45.6 | | 24.0 | | - | | 24.0 |
Other | | 32.9 | | - | | 32.9 | | 21.8 | | - | | 21.8 |
Corporate | | (30.6) | | - | | (30.6) | | (30.1) | | - | | (30.1) |
Adjusted at fixed currency rates | | 330.2 | | (0.3) | | 329.9 | | 409.0 | | (0.1) | | 408.9 |
Special (gains) and charges | | 32.4 | | | | | | 25.0 | | | | |
Reported OI at fixed currency rates | | 297.8 | | | | | | 384.0 | | | | |
Currency impact | | (0.5) | | | | | | (7.8) | | | | |
Consolidated reported GAAP operating income | | $297.3 | | | | | | $376.2 | | | | |
| | | | | | | | | | | | |
17
ECOLAB INC.
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share from continuing operations, as reported, to the non-GAAP measure of adjusted diluted earnings per share from continuing operations.
|
| First |
| Second |
| Six |
| Third |
| Nine |
| Fourth |
|
| |
| | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | |
| | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | |
| | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | |
| | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | |
Diluted earnings per share, as reported (U.S. GAAP) | | $1.00 | | $0.44 | | $1.44 | | $0.85 | | $2.29 | | $1.04 | | $3.33 | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (1) | | 0.06 | | 0.29 | | 0.35 | | 0.34 | | 0.69 | | 0.19 | | 0.88 | |
Discrete tax expense (benefits) (2) | | (0.07) | | (0.08) | | (0.15) | | (0.04) | | (0.20) | | 0.00 | | (0.19) | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.99 | | $0.65 | | $1.64 | | $1.15 | | $2.79 | | $1.23 | | $4.02 | |
|
| First |
| Second |
| Six |
| Third |
| Nine |
| Fourth |
|
|
|
| | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year |
|
| | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended |
|
| | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 |
|
| | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 |
|
Diluted earnings per share, as reported (U.S. GAAP) | | $0.67 | | | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.08 | | | | | | | | | | | | | |
Discrete tax expense (benefits) (4) | | 0.06 | | | | | | | | | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | | | | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2020 includes charges of $18.5 million, $83.3 million, $98.5 million and $53.8 million, net of tax in the first, second, third and fourth quarters, respectively. Charges include debt refinancing charges, restructuring charges relating to the efficiency initiative, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, charges for pay protection for certain employees impacted by COVID-19 net of government subsidies, and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2020 includes ($21.9) million, ($22.5) million, ($12.4) million and $1.0 million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits, offset by other discrete tax expense.
(3) Special (gains) and charges for 2021 includes charges of $24.2 million, net of tax in the first quarter. Charges include restructuring charges, charges for pay protection for certain employees impacted by COVID-19 net of government subsidies, acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 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.
18
Exhibit 99.2
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. First Quarter 2021 Teleconference Supplemental Data |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. Cautionary Statement 2 Forward-Looking Information This communication contains forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding COVID-19 pandemic trends, the global economic recovery, and our financial and business performance and prospects, including sales and earnings. These statements are based on the current expectations of management. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. In particular, with respect to the 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 and efficacy of vaccines, the likelihood of a resurgence of the outbreak, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic or to stimulate the economy and other unintended consequences. Additional risks and uncertainties are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (“SEC”), and include the effects and duration of the COVID-19 pandemic; the vitality of the markets we serve; the impact of economic factors such as the worldwide economy; our ability to execute key business initiatives; potential information technology infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business; our ability to innovate and to commercialize digital solutions; exposure to global economic, political and legal risks; difficulty in procuring raw materials or fluctuations in raw material costs; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties 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, except as required by law. Non-GAAP Financial Information This communication includes Company information that does not conform to generally accepted accounting principles (GAAP). Management believes that a presentation of this information is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. Reconciliations of our non-GAAP measures included within this presentation are included in the “Non-GAAP Financial Measures” section of this presentation. |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 3 Overview ▪ Sequentially improving underlying trends in Ecolab’s first quarter, driven by further good new business wins, customer penetration gains, continued pricing and generally improving market conditions were negatively impacted by supply chain and customer disruptions from the Texas freeze. Sales: ▪ Reported sales from continuing operations -4%. Acquisition adjusted fixed currency sales -8%. The Texas freeze is estimated to have had a -1pp impact on sales growth. ▪ Strong growth in the Healthcare & Life Sciences segment was more than offset by a modest Industrial segment decrease and narrowed declines in the Institutional & Specialty and Other segments as markets continued to improve and picked up toward the end of the quarter. Operating Income: ▪ Reported operating income from continuing operations -21%. ▪ Adjusted fixed currency operating income from continuing operations -19%. The Texas freeze is estimated to have had a -9pp impact on operating income growth. ▪ Strong performances in the Healthcare & Life Sciences, Other and Industrial segments were offset by the COVID-19 impacted Institutional & Specialty segment. Earnings: ▪ Reported diluted EPS from continuing operations $0.67, -33%. ▪ Adjusted diluted EPS from continuing operations, excluding special gains and charges and discrete tax items, were $0.81, -18%. Adjusted diluted EPS included an estimated unfavorable $0.10 (-10pp) per share from the Texas freeze supply chain and customer disruptions. ▪ The adjusted EPS decrease reflects COVID-19 related volume declines, Texas freeze impacts and unfavorable business mix which together more than offset cost savings and favorable pricing. 1Q 2021 Overview |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 4 Restaurants and lodging: The prior recovering trends in restaurant, hotel, entertainment facility, etc. traffic continued to be negatively impacted in 1Q 2021 by increased restrictions outside the U.S. following the global resurgence of COVID-19 infections. Trends generally improved towards the end of the quarter our large U.S. market. ▪ U.S. full service in-unit traffic average 45% of 2019 levels in 1Q. ▪ U.S. quickservice traffic averaged 98% of 2019 levels. ▪ Europe foodservice trends significantly more negative than U.S. ▪ Global lodging room demand improvement in the U.S. and China was partially offset by softer Europe trends. ▪ Sanitizing use in these facilities continued above 2019 levels and partially offset the traffic-related declines in other cleaning categories. 1Q 2021 Environment 4 Sources: NPD/Crest, Smith Travel. QSR foot traffic includes take-out. US Full Service Restaurant In-unit Foot Traffic vs 2019 Industry data US Quickservice Restaurant Traffic vs 2019 Lodging Rooms Sold vs 2019 -30% -20% -10% 0% 10% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 -100% -80% -60% -40% -20% 0% 20% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 US EU China -100% -80% -60% -40% -20% 0% 20% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 March reflects estimated in-unit foot traffic |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 5 2021 Comment The continued uncertain outlook regarding the timing and pace of global economic recovery from COVID-19’s impact does not yet present an adequate basis for us to provide either quarterly or annual earnings forecasts. We expect continued recovery in the full year 2021. Healthcare & Life Sciences segment sales are expected to moderately improve over the prior year’s very strong gain, with good year-on-year sales growth from our Industrial and Other segments. We look for our Institutional & Specialty segment to show a significant year-on-year increase for the full year as it progressively recovers toward its pre-COVID peak 2019 levels. We look for significant growth in the second quarter, primarily driven by strong year-on-year growth in our Institutional division as new business as well as improving trends in early- reopening U.S. states and continued U.S. vaccination progress more than offset a softer Europe and emerging market recovery. We expect robust consolidated gains in the second half, and continue to look for strong year-on-year growth for the full year 2021 with earnings per share above 2019 earnings per share from continuing operations excluding the estimated $0.15 per share impact of the Texas freeze. |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 6 1Q 2021 Results *See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations. (unaudited) (millions, except per share) 2021 Net sales $2,885.0 $3,020.6 -4 % $2,885.0 $3,020.6 -4 % Operating income 297.3 376.2 -21 % 329.7 401.2 -18 % NI from cont. ops. attributable to Ecolab 193.6 292.0 -34 % 233.9 288.6 -19 % Diluted earnings per share NI from cont. ops. attributable to Ecolab $0.67 $1.00 -33 % $0.81 $0.99 -18 % 2021 Net sales $2,890.6 $3,088.6 -6 % $2,890.6 $3,088.6 -6 % Operating income 297.8 384.0 -22 % 330.2 409.0 -19 % Adjusted * First Quarter Ended March 31 Reported Adjusted * Public Currency Rates % Public Currency Rates % 2021 2020 Change 2020 Change Fixed Currency Rates * % Fixed Currency Rates % 2021 2020 Change 2020 Change |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 7 1Q 2021 Sales Growth Detail Amounts in the tables above may reflect rounding. Acq./Div. Adj. excludes sales to ChampionX post-separation and Venezuela results. Fixed Rate Acq./Div. Adj. Global Industrial % Change % Change Consolidated* % Change Water 0% 0% Volume & mix -10% Food & Beverage 2% -2% Pricing 1% Downstream -17% -17% Subtotal -8% Paper 2% 2% Acq./Div. 2% Total Global Industrial -2% -3% Fixed currency growth -6% Currency impact 2% Total -4% Global Institutional & Specialty Institutional -25% -25% Specialty -9% -9% Total Global Institutional & Specialty -21% -21% Global Healthcare & Life Sciences Healthcare 13% 12% Life Sciences 18% 19% Total Global Healthcare & Life 14% 14% Other Pest Elimination 5% 5% Textile Care -23% -23% Colloidal Technologies -6% -6% Total Other -3% -3% Total -6% -8% |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 8 1Q 2021 Income Statement / Margins (cont. ops.) *Public rates of exchange, except where noted. **See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations. ($ millions, unaudited)* 2021 % sales 2020 % sales Comments** Gross Profit $1,173.0 40.7% $1,300.4 43.1% -10 % Adjusted gross margins were 41.3% in 2021 and 43.4% in 2020, with a narrowing decrease primarily reflecting the impact of COVID-19 related volume declines, the Texas freeze and unfavorable business mix which together more than offset the benefits of pricing. The freeze is estimated to have had a -0.7pp impact on gross margins. SG&A 862.9 29.9% 908.3 30.1% -5 % The ratio decreased as cost savings more than offset the impact of lower sales and investments in the business. Operating Income (fixed FX) Global Industrial 219.2 15.3% 209.6 14.3% 5 % The margin increase was driven by cost savings and favorable pricing that more than offset lower volume from the Texas freeze. The freeze is estimated to have had a -1.7pp impact on Industrial margins. Global Institutional & Specialty 63.1 7.4% 183.7 16.9% -66 % The lower margin reflected the significant COVID-19 related volume decline and unfavorable business mix which more than offset cost savings and favorable pricing. Global Healthcare & Life Sciences 45.6 15.5% 24.0 9.3% 90 % Margins increased due to the strong volume gains, favorable pricing and cost savings. Other 32.9 12.1% 21.8 7.8% 51 % Margins increased due to cost savings, favorable pricing and favorable business mix which together more than offset lower volumes. Subtotal at fixed FX 360.8 12.6% 439.1 14.2% -18 % FX (0.5) (7.8) Corporate Corp. Expense (30.6) (30.1) Nalco intangible amortization. Special Gains/(Ch.) (32.4) (25.0) 2020: Primarily related to restructuring charges and COVID-19 related charges, including pay protection for certain employees impacted by COVID-19’s effects (net of government subsidies), testing and related costs. Total Corporate Exp. (63.0) (55.1) Consolidated Op. Inc. $297.3 10.3% $376.2 12.5% -21 % Margins declined due to COVID-19 related volume declines, the Texas freeze impact and unfavorable business mix which together more than offset cost savings and favorable pricing. The freeze is estimated to have had a -1.1pp impact on consolidated margins. % change |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 9 1Q 2021 Balance Sheet / Cash Flow EBITDA and Adjusted EBITDA are non-GAAP measures. EBITDA is defined as the sum of earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as the sum of EBITDA and special (gains) and charges impacting EBITDA. The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. See “Non-GAAP Financial Measures” section of this presentation corresponding reconciliations. * Summary Balance Sheet (millions, unaudited) 2021 2020 (millions, unaudited) 2021 2020 Cash and cash eq. $1,189.5 $1,552.2 Short-term debt $24.3 $1,035.2 Accounts receivable, net 2,272.0 2,409.9 Accounts payable 1,128.2 1,042.2 Inventories 1,347.0 1,121.2 Other current liabilities 1,699.7 1,776.3 Other current assets 341.5 334.3 Current liabilities of disc. ops. - 403.7 Current assets of disc. ops. - 1,019.5 Long-term debt 6,685.8 6,743.5 PP&E, net 3,078.7 3,202.5 Pension/Postretirement 1,207.8 1,066.9 Goodwill and intangibles 9,086.3 8,433.1 Other liabilities 1,142.2 1,116.9 Other assets 893.1 984.0 Long-term liabilities of disc. ops. - 294.3 Long-term assets of disc. ops. - 3,282.9 Total equity 6,320.1 8,860.6 Total assets $18,208.1 $22,339.6 Total liab. and equity $18,208.1 $22,339.6 Selected Cash Flow items (millions, unaudited) 2021 2020 (unaudited) 2021 2020 Cash from op. activities $295.3 $308.3 Total Debt/Total Capital 51.5% 46.7% Depreciation 150.7 146.4 Net Debt/Total Capital 46.6% 41.3% Amortization 64.5 52.3 Net Debt/EBITDA(*) 2.5 2.3 Capital expenditures 102.1 147.7 Net Debt/Adjusted EBITDA(*) 2.3 2.1 March 31 March 31 Three Months Ended Selected Balance Sheet measures March 31 March 31 |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 10 Appendix |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 11 Non-GAAP Financial Measures (unaudited) (millions, except percent) Net sales Reported GAAP net sales $2,885.0 $3,020.6 Effect of foreign currency translation 5.6 68.0 Non-GAAP fixed currency sales 2,890.6 3,088.6 Effect of acquisitions and divestitures (71.7) (17.5) Non-GAAP acquisition adjusted fixed currency sales 2,818.9 3,071.1 Cost of Sales Reported GAAP cost of sales $1,712.0 $1,720.2 Special (gains) and charges 19.6 9.1 Non-GAAP adjusted cost of sales $1,692.4 $1,711.1 Gross Margin Reported GAAP gross margin 40.7 % 43.1 % Non-GAAP adjusted gross margin 41.3 % 43.4 % Operating income Reported GAAP operating income $297.3 $376.2 Effect of foreign currency translation 0.5 7.8 Non-GAAP fixed currency operating income 297.8 384.0 Special (gains) and charges 32.4 25.0 Non-GAAP adjusted fixed currency operating income 330.2 409.0 Effect of acquisitions and divestitures (0.3) (0.1) Non-GAAP acquisition adjusted fixed currency operating income $329.9 $408.9 Operating Income Margin Reported GAAP operating income margin 10.3 % 12.5 % Non-GAAP adjusted fixed currency operating income margin 11.4 % 13.2 % Non-GAAP acquisition adjusted fixed currency operating income margin 11.7 % 13.3 % First Quarter Ended March 31 2021 2020 |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 12 Non-GAAP Financial Measures (unaudited) (millions, except percent and per share) Net Income from continuing operations attributable to Ecolab Reported GAAP net income from continuing operations attributable to Ecolab $193.6 $292.0 Special (gains) and charges, after tax 24.2 18.5 Discrete tax net expense (benefit) 16.1 (21.9) Non-GAAP adjusted net income from continuing operations attributable to Ecolab $233.9 $288.6 Diluted EPS from continuing operations attributable to Ecolab Reported GAAP diluted EPS from continuing operations $0.67 $1.00 Special (gains) and charges, after tax 0.08 0.06 Discrete tax net expense (benefit) 0.06 (0.07) Non-GAAP adjusted diluted EPS from continuing operations $0.81 $0.99 Provision for Income Taxes Reported GAAP tax rate 25.2 % 13.7 % Special gains and charges 0.0 0.8 Discrete tax items (5.5) 6.0 Non-GAAP adjusted tax rate 19.7 % 20.5 % EBITDA (trailing twelve months ended) Net income including non-controlling interest $885.0 $1,483.6 Provision for income taxes 195.7 305.7 Interest expense, net 293.6 189.7 Depreciation 598.6 577.3 Amortization 230.6 207.7 EBITDA $2,203.5 $2,764.0 Special (gains) and charges impacting EBITDA 235.6 150.1 Adjusted EBITDA $2,439.1 $2,914.1 2021 2020 March 31 First Quarter Ended |
Please see Ecolab’s news release dated April 27, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 13 Non-GAAP Financial Measures (unaudited) (millions) Fixed Currency Impact of Acquisitions and Divestitures Acquisition Adjusted Fixed Currency Impact of Acquisitions and Divestitures Acquisition Adjusted Net Sales Global Industrial $1,433.9 (33.1) $1,400.8 $1,465.0 (17.2) $1,447.8 Global Institutional & Specialty 858.5 (2.9) 855.6 1,087.2 - 1,087.2 Global Healthcare & Life Sciences 293.7 (2.5) 291.2 256.8 (0.3) 256.5 Other 271.3 - 271.3 279.6 - 279.6 Corporate 33.2 (33.2) - - - - Subtotal at fixed currency rates 2,890.6 (71.7) 2,818.9 3,088.6 (17.5) 3,071.1 Currency impact (5.6) (68.0) Consolidated reported GAAP net sales $2,885.0 $3,020.6 Operating Income Global Industrial $219.2 (1.3) $217.9 $209.6 (0.1) $209.5 Global Institutional & Specialty 63.1 1.0 64.1 183.7 - 183.7 Global Healthcare & Life Sciences 45.6 - 45.6 24.0 - 24.0 Other 32.9 - 32.9 21.8 - 21.8 Corporate (30.6) - (30.6) (30.1) - (30.1) Adjusted at fixed currency rates 330.2 (0.3) 329.9 409.0 (0.1) 408.9 Special (gains) and charges 32.4 25.0 Reported OI at fixed currency rates 297.8 384.0 Currency impact (0.5) (7.8) Consolidated reported GAAP operating income $297.3 $376.2 First Quarter Ended March 31 2021 2020 |
Exhibit 99.3
ECOLAB FIRST QUARTER 2021
Overview
Sequentially improving underlying trends in Ecolab’s first quarter, driven by further strong new business wins, customer penetration gains, continued pricing and generally better market conditions, were negatively impacted by short-term supply chain and customer disruptions from the Texas freeze.
◢ | Sales: |
◾ | Reported sales from continuing operations -4% from the year-ago period. Acquisition adjusted fixed currency sales -8% as strong growth in the Healthcare & Life Sciences segment were more than offset by a modest Industrial segment decrease and narrowed declines in the Institutional & Specialty and Other segments. The Texas freeze is estimated to have had a -1pp impact on overall sales growth. |
◢ | Earnings: |
◾ | Reported diluted EPS from continuing operations $0.67, -33%. |
◾ | Adjusted diluted EPS from continuing operations excluding special gains and charges and discrete tax items $0.81, -18%. |
◾ | The adjusted EPS decrease reflects COVID-19 related volume declines, Texas freeze impact and unfavorable business mix which together more than offset cost savings and favorable pricing. |
◾ | Short-term Texas freeze supply chain and customer disruptions were as expected an estimated unfavorable $0.10 (-10pp) per share. |
◢ | Outlook: |
◾ | We look for significant growth in the second quarter, primarily driven by strong year-on-year growth in our Institutional division as new business as well as improving trends in early-reopening U.S. states and continued U.S. vaccination progress more than offset a softer Europe and emerging market recovery. We expect robust consolidated gains in the second half, and continue to look for strong year-on-year growth for the full year 2021 with earnings per share above 2019 earnings per share from continuing operations excluding the estimated $0.15 per share impact of the Texas freeze. |
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SUMMARY
Sequentially improving underlying trends in Ecolab’s first quarter, driven by further strong new business wins, customer penetration gains, continued pricing and generally improving market conditions, were negatively impacted by short-term supply chain and customer disruptions from the Texas freeze.
Healthcare & Life Sciences segment sales and income continued to be strong as it further benefited from good underlying trends and heightened demand for cleaning and sanitizing products. Our Industrial segment saw a modest sales decline as improving underlying trends were temporarily masked by disruptions from the Texas freeze, while income growth continued due to pricing and cost savings. Sales declines for our Institutional & Specialty segment narrowed slightly despite further COVID-19 restrictions during the first quarter in the U.S. and most notably in Europe, which reduced consumer activity within restaurants, hotels and entertainment facilities. The Other segment sales decline narrowed considerably from the fourth quarter rate driven by good Pest Elimination results and operating income showed strong growth.
Developing though still uneven improvements in COVID-19 trends provide an encouraging outlook for the world and our end markets in 2021, and one that is in line with our general expectations. We continue to believe we are in a strong position to capitalize on these expected expanding positive trends as we leverage the developing recovery over the balance of the year, utilizing investments we made in our product and service innovation, new hygiene and digital technologies, and successful sales and profit initiatives.
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While the continued uncertainty regarding the timing and pace of the global recovery from COVID-19’s impact does not yet present an adequate basis for us to provide either quarterly or annual earnings forecasts, we expect significant improvement for the full year 2021. We expect full year 2021 Healthcare & Life Sciences segment sales to moderately improve over the prior year’s very strong gain, with good year-on-year sales growth from our Industrial and Other segments. We look for our Institutional & Specialty segment to show a significant year-on-year increase for the full year as it progressively recovers toward its pre-COVID peak 2019 levels.
We look for significant growth in the second quarter, primarily driven by strong year-on-year growth in our Institutional division as new business as well as improving trends in early-reopening U.S. states and continued U.S. vaccination progress more than offset a softer Europe and emerging market recovery. We expect robust consolidated gains in the second half, and continue to look for strong year-on-year growth for the full year 2021 with earnings per share above 2019 earnings per share from continuing operations excluding the estimated $0.15 per share impact of the Texas freeze.
While COVID-19 has had a significant and likely lasting impact on society, it has also created long-term opportunities for us. Our food safety, water management and infection protection positioning has become even more important. Further, we believe that our long-term growth opportunities remain robust, driven by our large remaining market opportunity; our leading global market positions; and our focus on providing our strong and growing customer base with improved results while lowering their water, energy and other
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operating costs. We continue to believe looking beyond the near-term uncertainty and focusing on our sustainable long-term business drivers will yield Ecolab investors superior long-term benefits.
HIGHLIGHTS
● | First quarter results reflected continued underlying sequential improvement from the fourth quarter that was offset by short-term supply chain and customer disruptions from the Texas freeze. |
● | Reported consolidated sales declined 4%; fixed currency acquisition adjusted sales declined 8%. The Texas freeze is estimated to have had a -1pp impact on overall sales growth. As expected, the Healthcare & Life Sciences segment showed strong sales growth, the Industrial segment experienced a modest sales decline reflecting the Texas freeze impact, and the moderate Other segment sales decline narrowed considerably from the fourth quarter. Institutional & Specialty segment’s sales decline narrowed slightly from the fourth quarter as sales trends within our U.S. Institutional business improved toward the end of the first quarter. |
● | The Healthcare & Life Sciences and Other segments showed strong acquisition adjusted fixed currency operating income gains, Industrial delivered modest gains, while Institutional & Specialty’s decline was similar to the fourth quarter. |
● | First quarter reported diluted earnings per share from continuing operations were $0.67 compared with $1.00 last year. |
● | On an adjusted basis, excluding special gains and charges and discrete tax items from both years, first quarter 2021 adjusted diluted earnings |
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per share from continuing operations were $0.81, compared with adjusted diluted earnings per share from continuing operations of $0.99 a year ago. The adjusted EPS decrease reflects COVID-19 related volume declines, Texas freeze impacts and unfavorable business mix which together more than offset cost savings and favorable pricing. The short-term Texas freeze supply chain and customer disruptions were as expected an estimated unfavorable $0.10 per share in the first quarter. |
● | Our markets are generally improving and the increasing rate of vaccinations along with the associated relaxation of social restrictions provides further support for the global economic recovery. We expect that improvement, leveraged by our investments and work we have done to further our critical innovation, service and digital business drivers as well as cost efficiency measures, will help drive strong comparisons against 2020’s results. We expect quarterly results to show strong growth over the balance of the year and result in 2021 adjusted earnings per share that exceed 2019’s adjusted earnings per share from continuing operations, excluding the estimated $0.15 per share impact from the Texas freeze. |
● | In summary, our business continues to show underlying improvement that gives us confidence in our full-year outlook. As the broader economic recovery develops over the balance of the year, we expect to leverage our strong market positions, expanded growth opportunities and outstanding team, to deliver the best results for customers and superior long-term performance for Ecolab shareholders. |
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CONSOLIDATED SALES
Consolidated sales | % Change | |
Volume & mix | (10)% | |
Pricing | 1% | |
Subtotal | (8)% | |
Acq./Div. | 2% | |
Fixed currency growth | (6)% | |
Currency impact | 2% | |
Total | (4)% | |
| | |
Ecolab’s first quarter reported sales decreased 4% when compared to the year ago period. Fixed currency acquisition adjusted sales declined 8%. Looking at the components, consolidated volume and mix declined 10%. Pricing increased 1%, acquisitions added 2% and currency added 2% to sales growth. The Texas freeze is estimated to have had a -1pp impact on sales growth.
GLOBAL INDUSTRIAL SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Industrial | % Change | % Change | ||
Water | 0% | | 0% | |
Food & Beverage | 2% | | (2)% | |
Downstream | (17)% | | (17)% | |
Paper | 2% | | 2% | |
Total Global Industrial | (2)% | | (3)% | |
WATER
Fixed currency Water sales were flat as generally improving business trends were negatively impacted by the supply chain and customer operating disruptions due to the Texas freeze. The Texas freeze is estimated to have had a -3pp impact on Water sales growth. Excluding the impact of the freeze,
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both the Light and Heavy industry water treatment businesses showed strong growth. Mining declined primarily reflecting coal-related business exits and supply chain disruptions. Fixed currency acquisition adjusted sales growth showed modest growth in Asia Pacific, Europe and Latin America and moderate declines in North America.
The impact of increasing water demand, its growing quality and availability issues, and the resulting rising costs continue to be a critical issue for our customers, and one that Ecolab is uniquely positioned to help them solve. Our advanced technologies and service expertise remain important differentiators for us in this market, and the increasing needs for effective water solutions, along with our repositioned portfolio, should present very attractive long term growth opportunities for our Water business. We expect improving sales comparisons and good growth for the full year as our markets recover through 2021 and our advanced solutions drive market share gains.
FOOD & BEVERAGE
Reported first quarter fixed currency Food & Beverage sales rose 2%; acquisition adjusted sales declined 2% reflecting COVID-19 related impacts that benefited customer demand last year but hurt the first quarter as further lockdowns were put in place, particularly in Europe, reducing beverage and brewing demand and production. Globally, we realized modest growth in beverage and brewery sales and stable dairy plant sales, but saw COVID-19 related declines elsewhere. Fixed currency acquisition adjusted sales growth was modest in Asia Pacific and Latin America while North America and Europe sales declined.
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With more favorable end-market trends expected to build as COVID-19 restrictions ease through the year, we expect a better second quarter and a stronger second half that benefits from new business wins and improved pricing.
DOWNSTREAM
Fixed currency sales declined 17%; the Texas freeze is estimated to have had a -5pp impact on Downstream sales growth due to unplanned North America customer outages and supply shortages from the freeze. Excluding the impact from the Texas freeze, higher petrochemical sales were more than offset by continued lower refinery sales as production remained low and higher refinery fuel inventories helped to meet rising transportation demand. Fixed currency sales declined in all major regions.
We expect improved results over the remaining quarters to yield modest Downstream sales growth for the full year 2021, led by new business wins, increased refinery production and continued growth in petrochemical demand.
PAPER
First quarter fixed currency sales grew 2% as strong international gains more than offset supply chain impacts from the Texas freeze; the Texas freeze is estimated to have had a -2pp impact on Paper sales growth. Board & packaging along with tissue & towel end markets led the increase, while graphics posted a modest decline. Fixed currency acquisition adjusted sales growth was strong in Asia Pacific, Europe and Latin America, more than offsetting lower sales in North America.
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We expect Paper to show steady sales growth in 2021 as good new business wins and continued growth in tissue & towel and board & packaging markets more than offset declines in graphic paper.
GLOBAL INDUSTRIAL SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Industrial Op. Inc. | $219.2 | | 15.3% | | $209.6 | | 14.3% | | 5% | |
Acq./Div. Adj. Op. Inc. | $217.9 | | 15.6% | | $209.5 | | 14.5% | | 4% | |
Acquisition adjusted fixed currency operating income for the Global Industrial segment increased 4% reflecting cost savings and favorable pricing that more than offset lower volume from the Texas freeze. The Texas freeze is estimated to have had a -14pp impact on Industrial’s acquisition adjusted fixed currency operating income growth.
GLOBAL INSTITUTIONAL & SPECIALTY SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Institutional & Specialty | % Change | % Change | ||
Institutional | (25)% | | (25)% | |
Specialty | (9)% | | (9)% | |
Total Global Institutional & Specialty | (21)% | | (21)% | |
INSTITUTIONAL
Fixed currency sales for the Institutional business declined 25%, narrowing from the fourth quarter decrease, despite ongoing COVID-19 related restrictions which negatively impacted most of the first quarter. While hand and surface sanitizer sales remained strong relative to pre-COVID levels, continued mandated restrictions for in-unit dining, especially in Europe, and travel concerns during the quarter negatively impacted foot traffic at full-service restaurants, occupancy rates at hotels and consumer visits to
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entertainment facilities. Improvements in North America restrictions late in the quarter led to improving sales trends within that region. Sequentially, China sales delivered strong growth, North America and Latin America showed significantly narrowed sales declines and Europe worsened reflecting the increased lockdown in that region.
We have continued to work aggressively to support our customers through this uncertain environment, as well as ensure our long-term value drivers remain robust. Our advanced products, including hospital-grade disinfectants, along with our expert service to help customers solve problems, have continued to be significant differentiators for us and important in our strong new business wins. Our ‘Ecolab Science Certified’ program continued to expand as the program assists our customers in meeting the public’s heightened expectations for cleaner and safer consumer locations and helping them feel more confident as they make decisions on where to stay and dine in the new environment, and further differentiate and enhance our brand for customers and their guests.
The pace and timing of the reopening remains very uneven across global regions, as North American restrictions have eased while European restrictions remain more significant. The improving end market momentum we saw in the U.S. late in the first quarter was encouraging and we continue to believe the overall outlook for Institutional’s full year 2021 remains very strong. As the rollout of vaccinations expand, we expect end market fundamentals will improve more broadly as the year progresses. We continue
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to expect a very strong Institutional performance in the second quarter and for the full year 2021 as sales progressively recover toward 2019 levels.
SPECIALTY
First quarter fixed currency Specialty sales declined 9% reflecting comparison to the very strong first quarter 2020, where strong COVID-19 driven buying significantly boosted sales. Adjusted for COVID-19 related product sales in both periods, first quarter 2021 sales are estimated to have increased 1%. Adjusted for those product sales, estimated quickservice revenues increased modestly as new customer wins were mostly offset by reduced in-unit dining foot traffic due to COVID-related lockdowns, most notably in Europe. Adjusted food retail sales are also estimated to have increased modestly with expanded cleaning protocols, new customer additions and product and program introductions.
We expect second quarter sales to show a moderate decline versus the strong demand benefit from COVID-19 in last year’s second quarter, with the second half of this year showing strong sales growth. This should result in a moderate full year sales gain as we benefit from new customer wins, driven by our broad range of innovative products and service expertise along with the normalization of demand.
INSTITUTIONAL & SPECIALTY SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Institutional & Specialty Op. Inc. | $63.1 | | 7.4% | | $183.7 | | 16.9% | | (66)% | |
Acq./Div. Adj. Op. Inc. | $64.1 | | 7.5% | | $183.7 | | 16.9% | | (65)% | |
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Acquisition adjusted fixed currency operating income for the Global Institutional & Specialty segment decreased 65% reflecting the significant COVID-19 related volume decline and unfavorable business mix which together more than offset cost savings and favorable pricing.
GLOBAL HEALTHCARE & LIFE SCIENCES SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Healthcare & Life Sciences | % Change | % Change | ||
Healthcare | 13% | | 12% | |
Life Sciences | 18% | | 19% | |
Total Global Healthcare & Life Sciences | 14% | | 14% | |
HEALTHCARE
First quarter Healthcare acquisition adjusted fixed currency sales grew 12% as strong COVID-19 related hand and surface disinfection sales growth continued to more than offset the unfavorable effects of delayed elective surgical procedures. Underlying Healthcare sales, adjusted for one-time sales we do not expect to recur, are estimated to have increased 5%.
Global sales of hand and surface cleaning and sanitizing products to healthcare facilities and national health systems rose significantly in 2020 in response to the pandemic and are expected to remain at elevated levels over the near term. While hospital and surgery utilization rates continue to gradually recover, we believe the underlying demand, adjusted for COVID-19’s impact, remains steady. We expect further good underlying sales gains for the Healthcare business in 2021, though comparison against 2020’s very strong COVID-19 influenced sales may yield flattish comparisons for the balance of this year.
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LIFE SCIENCES
Life Sciences’ first quarter acquisition adjusted fixed currency sales grew 19%, as the stronger than normal growth continued to be driven by heightened COVID-19 concerns, higher cleaning standards and increased demand for our Bioquell biodecontamination systems and offerings, as well as ongoing business wins and pricing.
We believe the long-term outlook for Life Sciences remains robust, driven by our specialized products and services that help ensure safe, efficient and effective manufacturing facilities for our pharmaceutical and personal care customers. Second quarter sales will compare to a 2020 second quarter gain that exceeded 50% and was led by extraordinary COVID-19 driven demand for biodecontamination systems; while underlying Life Sciences demand remains solid, a return to more normal demand levels this year will likely result in a second quarter 2021 sales decline versus last year’s very strong gain. However, we expect good second half growth that yields a full year 2021 sales increase in line with Life Science’s historic and very attractive rates.
HEALTHCARE & LIFE SCIENCES SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Healthcare & Life Sciences Op. Inc. | $45.6 | | 15.5% | | $24.0 | | 9.3% | | 90% | |
Acq./Div. Adj. Op. Inc. | $45.6 | | 15.7% | | $24.0 | | 9.4% | | 90% | |
Acquisition adjusted fixed currency Global Healthcare & Life Sciences segment operating income grew 90% reflecting the strong volume gains, favorable pricing and cost savings.
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OTHER SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Other | % Change | % Change | ||
Pest Elimination | 5% | | 5% | |
Textile Care | (23)% | | (23)% | |
Colloidal Technologies | (6)% | | (6)% | |
Total Other | (3)% | | (3)% | |
| | | | |
PEST ELIMINATION
Fixed currency Pest Elimination sales increased 5% in the first quarter as good growth in food and beverage plants, grocery stores, quickservice restaurant sales and new business more than offset lower full service restaurant and hospitality sales that were negatively impacted by capacity restrictions. Regionally, sales were strong in Latin America and Asia Pacific, good in Europe and modest in North America.
We expect Pest Elimination to show strong growth versus the second quarter last year. We look for full year 2021 to show good improvement as the restaurant and hospitality markets recover, other end markets continue to grow, and new programs add additional differentiation to drive business wins. Further, we believe an increased focus on health and safety following the COVID-19 pandemic, coupled with our ongoing innovation and digital offerings, will extend our differentiation and help drive our above average long-term growth.
OTHER MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Other Op. Inc. | $32.9 | | 12.1% | | $21.8 | | 7.8% | | 51% | |
Acq./Div. Adj. Op. Inc. | $32.9 | | 12.1% | | $21.8 | | 7.8% | | 51% | |
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Acquisition adjusted fixed currency operating income increased 51% as cost savings, along with favorable pricing and business mix, together more than offset lower volumes.
CONSOLIDATED MARGIN PERFORMANCE
($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Gross Profit | $1,173.0 | | 40.7% | | $1,300.4 | | 43.1% | | (10)% | |
Gross Profit (adj.) | $1,192.6 | | 41.3% | | $1,309.5 | | 43.4% | | (9)% | |
First quarter gross margins adjusted for special charges decreased, showing a narrowing sequential decline. The first quarter decline primarily reflected the impact of COVID-19 volume declines, the Texas freeze and an unfavorable business mix, which together more than offset the benefits of pricing. The freeze is estimated to have had a -0.7pp impact on gross margins.
($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
SG&A | $862.9 | | 29.9% | | $908.3 | | 30.1% | | (5)% | |
The first quarter SG&A ratio to sales decreased as cost savings more than offset the impact of lower sales and investments in the business.
($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Operating Income | $297.3 | | 10.3% | | $376.2 | | 12.5% | | (21)% | |
Fixed Currency Operating | | | | | | | | | | |
Income (adj.) | $330.2 | | 11.4% | | $409.0 | | 13.2% | | (19)% | |
Fixed Currency Operating | | | | | | | | | | |
Income (acq./div. adj.) | $329.9 | | 11.7% | | $408.9 | | 13.3% | | (19)% | |
Adjusted fixed currency operating income decreased 19%. The Texas freeze is estimated to have had a -9pp impact on operating income growth. COVID-19 related volume declines, the Texas freeze impact and an unfavorable business mix more than offset cost savings and favorable pricing.
16
CORPORATE EXPENSE
($ millions - unaudited) | 2021 |
| 2020 |
|
Corporate | | | | |
Corp. Expense | ($30.6) | | ($30.1) | |
Special Gains/(Charges) | (32.4) | | (25.0) | |
Total Corporate Expense | ($63.0) | | ($55.1) | |
Corporate expense includes amortization expense of $31 million in the first quarter of 2021 related to the Nalco merger intangible assets. Corporate expense also includes net special charges of $32 million in the first quarter of 2021 primarily related to restructuring charges and COVID-19 related charges, including pay protection for certain employees impacted by COVID-19’s effects (net of government subsidies), testing and related costs.
Special gains and charges for the first quarter of 2020 were a net charge of $25 million and include restructuring charges, acquisition and integration charges, Healthcare product recall charges and litigation and other charges.
OTHER INCOME, INTEREST, TAX RATE, SHARES AND CONSOLIDATED INCOME
Reported other income, which primarily consists of the return on pension assets and other non-service costs of our pension obligations, increased 10% reflecting higher returns on pension assets.
Reported interest expense increased 7% due to higher average debt levels in this year’s quarter. The increased average debt levels in 2021 incorporate the late March 2020 issuance of debt to further increase our liquidity at the beginning of the COVID-19 pandemic.
17
The reported income tax rate for the first quarter of 2021 was 25.2% compared with the reported rate of 13.7% in the first quarter of 2020. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the first quarter of 2021 was 19.7% compared with the adjusted tax rate of 20.5% in the first quarter of 2020.
The net of this performance is that Ecolab reported first quarter diluted earnings per share from continuing operations of $0.67 compared with $1.00 reported a year ago. When adjusted for special gains and charges and discrete tax items in both years, first quarter adjusted diluted earnings per share from continuing operations were $0.81 compared with $0.99 reported a year ago; the Texas freeze supply chain and customer disruptions were an estimated unfavorable $0.10 per share. Currency translation had a $0.02 favorable impact on first quarter 2021 adjusted diluted earnings per share from continuing operations.
Ecolab reacquired approximately 0.3 million shares of its common stock during the first quarter of 2021.
18
BALANCE SHEET, CASH FLOW AND LEVERAGE
(unaudited) | March 31 |
| ||
($ millions) | 2021 |
| 2020 |
|
Cash and cash eq. | $1,189.5 | | $1,552.2 | |
Accounts receivable, net | 2,272.0 | | 2,409.9 | |
Inventories | 1,347.0 | | 1,121.2 | |
Other current assets | 341.5 | | 334.3 | |
Current assets of discontinued operations | - | | 1,019.5 | |
PP&E, net | 3,078.7 | | 3,202.5 | |
Goodwill and intangibles | 9,086.3 | | 8,433.1 | |
Other assets | 893.1 | | 984.0 | |
Long-term assets of discontinued operations | - | | 3,282.9 | |
Total assets | $18,208.1 | | $22,339.6 | |
| | | | |
Short-term debt | $24.3 | | $1,035.2 | |
Accounts payable | 1,128.2 | | 1,042.2 | |
Other current liabilities | 1,699.7 | | 1,776.3 | |
Current liabilities of discontinued operations | - | | 403.7 | |
Long-term debt | 6,685.8 | | 6,743.5 | |
Pension/Postretirement | 1,207.8 | | 1,066.9 | |
Other liabilities | 1,142.2 | | 1,116.9 | |
Long-term liabilities of discontinued operations | - | | 294.3 | |
Total equity | 6,320.1 | | 8,860.6 | |
Total liab. and equity | $18,208.1 | | $22,339.6 | |
| March 31 | |||
(unaudited) | 2021 | 2020 | ||
Total Debt/Total Capital | 51.5% | | 46.7% | |
Net Debt/Total Capital | 46.6% | | 41.3% | |
Net Debt/EBITDA | 2.5 |
| 2.3 | |
Net Debt/Adjusted EBITDA | 2.3 | | 2.1 | |
| | | | |
The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. | |
| Three Months Ended |
| ||
(unaudited) | March 31 |
| ||
($ millions) | 2021 |
| 2020 |
|
Cash from op. activities | $295.3 | | $308.3 | |
Depreciation | 150.7 | | 146.4 | |
Amortization | 64.5 | | 52.3 | |
Capital expenditures | 102.1 | | 147.7 | |
19
SUMMARY
In summary, our business continues to show fundamental improvement that gives us confidence in our full-year outlook. Our markets are generally improving and we believe we are in a strong position to capitalize on these trends as we benefit from further good new business wins, customer penetration gains and continued pricing. As the global economy recovers over the balance of the year, we expect to leverage it through our strong market positions, expanded growth opportunities and outstanding team to deliver the best results for customers and superior long-term performance for Ecolab shareholders.
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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, the global economic recovery, and our financial and business performance and prospects, including sales, earnings, new business and pricing. 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 and efficacy of vaccines, the likelihood of a resurgence of the outbreak, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic or to stimulate the economy and other unintended consequences.
Additional risks and uncertainties that may affect operating results and
21
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; 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; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; potential information technology infrastructure failures or breaches in data security; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; our ability to successfully compete with respect to value, innovation and customer support; exposure to global economic, political and legal risks related to our international operations; difficulty in procuring raw materials or fluctuations in raw material costs; pressure on operations from consolidation of customers or vendors; 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; restraints on pricing flexibility due to contractual obligations; our ability to acquire complementary businesses and to effectively integrate such businesses; 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
22
indebtedness; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; potential losses arising from the impairment of goodwill or other assets; potential chemical spill or release; 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; 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 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
23
•fixed currency operating income margin
•adjusted operating income
•adjusted fixed currency operating income
•adjusted fixed currency operating income margin
•acquisition adjusted fixed currency operating income
•acquisition adjusted fixed currency operating income margin
•EBITDA
•adjusted EBITDA
•adjusted other income expense
•adjusted interest expense
•adjusted tax rate
•adjusted net income attributable to Ecolab
•adjusted diluted earnings per share
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP adjusted financial measures for 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
24
exclude the impact of discrete tax items. We include items within special (gains) and charges, discrete tax items and certain external factors 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.
EBITDA is defined as the sum of net income including non-controlling interest, provision for income taxes, net interest expense, depreciation and amortization. Adjusted EBITDA is defined as the sum of EBITDA and special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are used as inputs to our net debt to EBITDA and net debt to adjusted EBITDA ratios. We view these ratios as important indicators of the operational and financial health of our organization.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange, which eliminate the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this supplemental discussion are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2021. We also provide our segment results based on public currency rates for information purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco merger or the impact of special (gains) and
25
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.
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 first quarter 2021 supplemental discussion.
We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this discussion) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable 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
26
earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.
27
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
|
| First Quarter Ended |
| ||||
(unaudited) | | March 31 | | ||||
(millions, except percent) | | 2021 |
| 2020 | | ||
| | | | | | | |
Net sales | | | | | | | |
Reported GAAP net sales | | $2,885.0 | | | $3,020.6 | | |
Effect of foreign currency translation | | 5.6 | | | 68.0 | | |
Non-GAAP fixed currency sales | | 2,890.6 | | | 3,088.6 | | |
Effect of acquisitions and divestitures | | (71.7) | | | (17.5) | | |
Non-GAAP acquisition adjusted fixed currency sales | | 2,818.9 | | | 3,071.1 | | |
| | | | | | | |
Cost of Sales | | | | | | | |
Reported GAAP cost of sales | | $1,712.0 | | | $1,720.2 | | |
Special (gains) and charges | | 19.6 | | | 9.1 | | |
Non-GAAP adjusted cost of sales | | $1,692.4 | | | $1,711.1 | | |
| | | | | | | |
Gross Margin | | | | | | | |
Reported GAAP gross margin | | 40.7 | % | | 43.1 | % | |
Non-GAAP adjusted gross margin | | 41.3 | % | | 43.4 | % | |
| | | | | | | |
Operating income | | | | | | | |
Reported GAAP operating income | | $297.3 | | | $376.2 | | |
Effect of foreign currency translation | | 0.5 | | | 7.8 | | |
Non-GAAP fixed currency operating income | | 297.8 | | | 384.0 | | |
Special (gains) and charges | | 32.4 | | | 25.0 | | |
Non-GAAP adjusted fixed currency operating income | | 330.2 | | | 409.0 | | |
Effect of acquisitions and divestitures | | (0.3) | | | (0.1) | | |
Non-GAAP acquisition adjusted fixed currency operating income | | $329.9 | | | $408.9 | | |
| | | | | | | |
Operating Income Margin | | | | | | | |
Reported GAAP operating income margin | | 10.3 | % | | 12.5 | % | |
Non-GAAP adjusted fixed currency operating income margin | | 11.4 | % | | 13.2 | % | |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 11.7 | % | | 13.3 | % | |
28
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited) |
| First Quarter Ended |
| ||||
(millions, except percent and per share) | | March 31 | | ||||
| | 2021 |
| 2020 | | ||
Net Income from continuing operations attributable to Ecolab | | | | | | | |
Reported GAAP net income from continuing operations attributable to Ecolab | | $193.6 | | | $292.0 | | |
Special (gains) and charges, after tax | | 24.2 | | | 18.5 | | |
Discrete tax net expense (benefit) | | 16.1 | | | (21.9) | | |
Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $233.9 | | | $288.6 | | |
Diluted EPS from continuing operations attributable to Ecolab | | | | | | | |
Reported GAAP diluted EPS from continuing operations | | $0.67 | | | $1.00 | | |
Special (gains) and charges, after tax | | 0.08 | | | 0.06 | | |
Discrete tax net expense (benefit) | | 0.06 | | | (0.07) | | |
Non-GAAP adjusted diluted EPS from continuing operations | | $0.81 | | | $0.99 | | |
Provision for Income Taxes | | | | | | | |
Reported GAAP tax rate | | 25.2 | % | | 13.7 | % | |
Special gains and charges | | 0.0 | | | 0.8 | | |
Discrete tax items | | (5.5) | | | 6.0 | | |
Non-GAAP adjusted tax rate | | 19.7 | % | | 20.5 | % | |
EBITDA (trailing twelve months ended) | | | | | | | |
Net income including non-controlling interest | | $885.0 | | | $1,483.6 | | |
Provision for income taxes | | 195.7 | | | 305.7 | | |
Interest expense, net | | 293.6 | | | 189.7 | | |
Depreciation | | 598.6 | | | 577.3 | | |
Amortization | | 230.6 | | | 207.7 | | |
EBITDA | | $2,203.5 | | | $2,764.0 | | |
Special (gains) and charges impacting EBITDA | | 235.6 | | | 150.1 | | |
Adjusted EBITDA | | $2,439.1 | | | $2,914.1 | | |
| | | | | | | |
29
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | First Quarter Ended March 31 | ||||||||||
(unaudited) | | 2021 | | 2020 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $1,433.9 | | (33.1) | | $1,400.8 | | $1,465.0 | | (17.2) | | $1,447.8 |
Global Institutional & Specialty | | 858.5 | | (2.9) | | 855.6 | | 1,087.2 | | - | | 1,087.2 |
Global Healthcare & Life Sciences | | 293.7 | | (2.5) | | 291.2 | | 256.8 | | (0.3) | | 256.5 |
Other | | 271.3 | | - | | 271.3 | | 279.6 | | - | | 279.6 |
Corporate | | 33.2 | | (33.2) | | - | | - | | - | | - |
Subtotal at fixed currency rates | | 2,890.6 | | (71.7) | | 2,818.9 | | 3,088.6 | | (17.5) | | 3,071.1 |
Currency impact | | (5.6) | | | | | | (68.0) | | | | |
Consolidated reported GAAP net sales | | $2,885.0 | | | | | | $3,020.6 | | | | |
| | | | | | | | | | | | |
Operating Income | | | | | | | | | | | | |
Global Industrial | | $219.2 | | (1.3) | | $217.9 | | $209.6 | | (0.1) | | $209.5 |
Global Institutional & Specialty | | 63.1 | | 1.0 | | 64.1 | | 183.7 | | - | | 183.7 |
Global Healthcare & Life Sciences | | 45.6 | | - | | 45.6 | | 24.0 | | - | | 24.0 |
Other | | 32.9 | | - | | 32.9 | | 21.8 | | - | | 21.8 |
Corporate | | (30.6) | | - | | (30.6) | | (30.1) | | - | | (30.1) |
Adjusted at fixed currency rates | | 330.2 | | (0.3) | | 329.9 | | 409.0 | | (0.1) | | 408.9 |
Special (gains) and charges | | 32.4 | | | | | | 25.0 | | | | |
Reported OI at fixed currency rates | | 297.8 | | | | | | 384.0 | | | | |
Currency impact | | (0.5) | | | | | | (7.8) | | | | |
Consolidated reported GAAP operating income | | $297.3 | | | | | | $376.2 | | | | |
| | | | | | | | | | | | |
30
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share from continuing operations, as reported, to the non-GAAP measure of adjusted diluted earnings per share from continuing operations.
|
| First |
| Second |
| Six |
| Third |
| Nine |
| Fourth |
|
| |
| | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year | |
| | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | |
| | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 | |
| | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | | 2020 | |
Diluted earnings per share, as reported (U.S. GAAP) | | $1.00 | | $0.44 | | $1.44 | | $0.85 | | $2.29 | | $1.04 | | $3.33 | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (1) | | 0.06 | | 0.29 | | 0.35 | | 0.34 | | 0.69 | | 0.19 | | 0.88 | |
Discrete tax expense (benefits) (2) | | (0.07) | | (0.08) | | (0.15) | | (0.04) | | (0.20) | | 0.00 | | (0.19) | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.99 | | $0.65 | | $1.64 | | $1.15 | | $2.79 | | $1.23 | | $4.02 | |
|
| First |
| Second |
| Six |
| Third |
| Nine |
| Fourth |
|
|
|
| | Quarter | | Quarter | | Months | | Quarter | | Months | | Quarter | | Year |
|
| | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended |
|
| | Mar. 31 | | June 30 | | June 30 | | Sept. 30 | | Sept. 30 | | Dec. 31 | | Dec. 31 |
|
| | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 |
|
Diluted earnings per share, as reported (U.S. GAAP) | | $0.67 | | | | | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.08 | | | | | | | | | | | | | |
Discrete tax expense (benefits) (4) | | 0.06 | | | | | | | | | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | | | | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2020 includes charges of $18.5 million, $83.3 million, $98.5 million and $53.8 million, net of tax in the first, second, third and fourth quarters, respectively. Charges include debt refinancing charges, restructuring charges relating to the efficiency initiative, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, charges for pay protection for certain employees impacted by COVID-19 net of government subsidies, and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2020 includes ($21.9) million, ($22.5) million, ($12.4) million and $1.0 million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits, offset by other discrete tax expense.
(3) Special (gains) and charges for 2021 includes charges of $24.2 million, net of tax in the first quarter. Charges include restructuring charges, charges for pay protection for certain employees impacted by COVID-19 net of government subsidies, acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 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.
31
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