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 October 26, 2021, Ecolab Inc. (“Ecolab”) announced earnings for the third quarter ended September 30, 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 third 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 Third Quarter dated October 26, 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: October 26, 2021 | By: | /s/ David F. Duvick |
David F. Duvick | ||
Assistant Secretary |
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Exhibit 99.1
News Release
| | |
| | |
| Michael Monahan (651) 250-2809 Andrew Hedberg (651) 250-2185 |
ECOLAB THIRD QUARTER REPORTED DILUTED CONTINUING OPERATIONS EPS $1.12;
ADJUSTED DILUTED CONTINUING OPERATIONS EPS $1.38, +20%
THIRD QUARTER HIGHLIGHTS:
● | Strong third quarter results leveraged market reopenings with new business wins, new products and accelerated pricing to deliver strong sales and double-digit earnings growth. |
● | Reported operating margins from continuing operations +40 bps. Acquisition adjusted fixed currency operating margin +80 bps led by the Institutional & Specialty segment. |
● | Reported diluted EPS from continuing operations $1.12, +32% versus last year. |
● | Cash flow from operating activities remained strong in the quarter at $623 million; free cash flow was $445 million, +$104 million (+31%) versus last year. |
| | Third Quarter Ended September 30 | ||||||||||||||||
| | Reported | | | | | Adjusted | | | | ||||||||
(unaudited) | | Public Currency Rates | | % | | Public Currency Rates | | % | ||||||||||
(millions, except per share) | | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
Net sales | | $3,320.8 | | | $3,018.6 | | | 10 | % | | $3,320.8 | | | $3,018.6 | | | 10 | % |
Operating income | | 465.8 | | | 411.4 | | | 13 | % | | 525.0 | | | 455.9 | | | 15 | % |
Net income from continuing operations attributable to Ecolab | | 324.5 | | | 246.2 | | | 32 | % | | 399.0 | | | 332.3 | | | 20 | % |
| | | | | | | | | | | | | | | | | | |
Diluted earnings per share from continuing operations attributable to Ecolab | | $1.12 | | | $0.85 | | | 32 | % | | $1.38 | | | $1.15 | | | 20 | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Adjusted | | | | ||||
| | Fixed Currency Rates | | % | | Fixed Currency Rates | | % | ||||||||||
| | 2021 | | 2020 | | Change | | 2021 | | | 2020 | | Change | |||||
Net sales | | $3,349.4 | | | $3,098.3 | | | 8 | % | | $3,349.4 | | | $3,098.3 | | | 8 | % |
Operating income | | 471.3 | | | 426.6 | | | 10 | % | | 530.5 | | | 471.1 | | | 13 | % |
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ST. PAUL, Minn., October 26, 2021: The third quarter results showed strong growth with robust new business wins and accelerating pricing, that along with continued recovery in the U.S. and improving European markets, more than offset significantly increased delivered product costs and the Hurricane Ida impact.
CEO comment
Commenting on the quarter, Christophe Beck, Ecolab’s president and chief executive officer, said,
“The strong third quarter results were better than expected, driven by continued accelerating pricing, new business gains and new product sales, as we also successfully managed to significantly reduce the unfavorable impacts from Hurricane Ida on both our customers and supply chain. We enjoyed strong double-digit sales growth and expanded operating margins in our Institutional & Specialty and Other segments, which leveraged continued recovery in the U.S., recent business wins and improving trends in Europe. Industrial segment sales also showed strong growth and sequential acceleration, though its operating income was negatively impacted by higher delivered product costs and incremental costs to ensure exceptional customer service in a challenging environment. The Healthcare & Life Sciences segment’s underlying growth remained good but reported results declined versus a very strong gain last year.
“We continue to expect strong year-on-year growth in the fourth quarter 2021 led by increased volume and price momentum. Our new business wins remain robust; new programs, including Ecolab Science Certified and our focus on Net Zero water and energy solutions for customers, are yielding significant progress; and our expanding digital solutions are providing greater value for our customers, salesforce productivity and greater market differentiation for Ecolab. We expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. At the same time that we are realizing further top line strength, we have experienced substantial additional delivered product and other cost inflation that we believe will increase fourth quarter costs nearly $0.20 per share versus what we expected a few months ago. We continue to mitigate the cost increases with strong pricing in a way that is sustainable for the long term and is aligned with the incremental value we create for customers. We expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter. And we continue to expect the full year 2021 to show a strong increase over 2020, more than offsetting the substantial delivered product and other cost increases which are estimated to reach a combined unfavorable impact approximating $0.90 per share this year, most of which we have mitigated.
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“With the top line and pricing accelerating, we expect to enter 2022 in a great position. We will continue to drive strong top and bottom-line growth through product and service innovation, digital solutions, new markets and appropriate pricing as we leverage an expected continuing though uneven global recovery, generally improving COVID-19 impacts and offset further significant cost inflation. Our value proposition and unique capabilities to help protect people and planet health while driving enhanced business health are more important than ever. We therefore remain confident in our long-term outlook and ability to leverage our robust growth opportunities through our investments to yield superior results for our customers and shareholders.”
Third Quarter 2021 Consolidated Results
Ecolab's third quarter reported sales increased 10%, with fixed currency and acquisition adjusted fixed currency sales both increasing 8% when compared to the prior year.
Third quarter 2021 reported operating income increased 13% and includes the impact of special charges, which primarily reflected COVID-19 related inventory reserves and employee costs (net of government subsidies). Adjusted operating income increased 15% and adjusted fixed currency operating income increased 13%. The operating income gain reflects accelerated pricing and volume growth which more than offset significantly higher delivered product costs, and the estimated $0.03 per share impact from Hurricane Ida.
Reported interest expense decreased 43% as debt refinancing charges of $32 million in 2021 were significantly less than $83 million incurred in 2020; adjusted for debt refinancing costs, interest expense decreased 15% reflecting lower average debt levels and lower average interest rates from debt refinancing transactions in 2020 and 2021.
The reported income tax rate for the third quarter of 2021 was 18.3% compared with the reported rate of 14.5% in the third quarter of 2020. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the third quarter of 2021 was 19.5% compared with the adjusted tax rate of 20.0% in the third quarter of 2020.
Third quarter 2021 reported net income from continuing operations attributable to Ecolab increased 32%. Excluding the impact of special gains and charges and discrete tax items, adjusted net income from continuing operations attributable to Ecolab increased 20% versus the prior year.
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Similarly, reported diluted earnings per share from continuing operations increased 32%, and adjusted diluted earnings per share from continuing operations increased 20% when compared against the third quarter 2020. Currency translation had a $0.03 per share favorable impact to earnings.
Third Quarter 2021 Segment Review
Global Industrial | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Third Quarter Ended September 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $1,620.4 | | | $1,512.9 | | | 7 | % | | 7 | % |
Operating income | | 268.3 | | | 302.3 | | | (11) | % | | (11) | % |
Operating income margin | | 16.6 | % | | 20.0 | % | | | | | | |
Acq. adj. operating income margin | | 16.6 | % | | 20.0 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $1,603.1 | | | $1,469.3 | | | 9 | % | | | |
Operating income | | 264.2 | | | 293.0 | | | (10) | % | | | |
The Industrial segment includes Water, Food & Beverage, Downstream and Paper
Acquisition adjusted fixed currency sales increased 7%. Strong growth in Water and Paper, led by recovering market conditions and new business wins, along with a good gain in Food & Beverage and modest Downstream sales growth, yielded the increase. Acquisition adjusted fixed currency operating income decreased 11% compared to a very strong 18% increase last year as accelerating pricing and higher volume were more than offset by significantly higher delivered product costs, the impact from Hurricane Ida and unfavorable mix.
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Global Institutional & Specialty | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Third Quarter Ended September 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $1,076.6 | | | $914.4 | | | 18 | % | | 17 | % |
Operating income (loss) | | 196.5 | | | 83.7 | | | 135 | % | | 135 | % |
Operating income margin | | 18.3 | % | | 9.2 | % | | | | | | |
Acq. adj. operating income margin | | 18.3 | % | | 9.2 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $1,070.6 | | | $898.4 | | | 19 | % | | | |
Operating income (loss) | | 195.5 | | | 82.1 | | | 138 | % | | | |
The Institutional & Specialty segment includes Institutional and Specialty
Acquisition adjusted fixed currency sales increased 17%. Strong growth in the Institutional division reflected recovering markets in the U.S. and Europe, as the number of Ecolab accounts and solutions per account near pre-COVID-19 levels, driven by new business wins including gains from Ecolab Science Certified programs, innovation and pricing. Specialty sales increased modestly as strong quickservice sales more than offset lower food retail sales. Acquisition adjusted fixed currency operating income increased 135% reflecting increased volume, accelerating pricing and favorable mix that more than offset higher delivered product costs.
Global Healthcare & Life Sciences | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Third Quarter Ended September 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $290.2 | | | $335.1 | | | (13) | % | | (17) | % |
Operating income | | 37.3 | | | 69.0 | | | (46) | % | | (43) | % |
Operating income margin | | 12.9 | % | | 20.6 | % | | | | | | |
Acq. adj. operating income margin | | 14.1 | % | | 20.6 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $286.9 | | | $322.3 | | | (11) | % | | | |
Operating income | | 36.9 | | | 66.0 | | | (44) | % | | | |
The Healthcare & Life Sciences segment includes Healthcare and Life Sciences
Acquisition adjusted fixed currency sales decreased 17% compared to a 29% increase last year when sales benefited from strong COVID-19 related demand. The underlying Healthcare sales are
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estimated to be growing at mid-single digit rates and Life Sciences’ sales are estimated to be growing at low double-digit rates, both driven by new business wins and increased hygiene awareness. Acquisition adjusted fixed currency operating income decreased 43%, primarily reflecting the comparison to the very strong sales volume last year when operating income grew 82%, partially offset by favorable pricing.
Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Third Quarter Ended September 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2021 | | 2020 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $326.3 | | | $288.7 | | | 13 | % | | 13 | % |
Operating income | | 59.2 | | | 45.8 | | | 29 | % | | 29 | % |
Operating income margin | | 18.1 | % | | 15.9 | % | | | | | | |
Acq. adj. operating income margin | | 18.1 | % | | 15.9 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $324.2 | | | $281.7 | | | 15 | % | | | |
Operating income | | 59.0 | | | 44.6 | | | 32 | % | | | |
The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies
Acquisition adjusted fixed currency sales increased 13% led by continued strong growth in Pest Elimination as it benefited from new business wins and recovering markets. Acquisition adjusted fixed currency operating income increased 29% reflecting strong volume and favorable pricing that was partially offset by higher delivered product costs.
Third quarter of 2021 corporate segment includes:
● | sales of $36 million to ChampionX under the Master Cross Supply and Product Transfer agreements we entered into as part of the ChampionX separation |
● | amortization expense of $31 million related to the Nalco merger intangible assets |
● | net special charges of $59 million that primarily reflected COVID-19 related inventory reserves and employee costs (net of government subsidies) as discussed below. |
Special gains and charges for the third quarter of 2020 were a net charge of $44 million and include restructuring charges, Healthcare product recall charges, COVID-19 employee-related costs (net of government subsidies) and litigation and other charges.
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COVID-19 Sanitizer Inventory Reserves
Customer demand for sanitizer products surged at the outset of COVID-19. We worked hard to meet the rapidly increasing demand and sold the vast majority of our sanitizer inventory. However, COVID-19 variant-related delays of customer reopenings and consumer activity resulted in a small portion of the sanitizer inventory becoming unneeded. We recognized a special charge of $50 million in the third quarter of 2021 for excess inventory and estimated disposal costs.
2021 Business Outlook
We expect continued, if uneven, recovery in the U.S. and European markets, with the rest of the world following. We continue to expect strong year-on-year growth in the fourth quarter 2021 led by increased volume and price momentum, and expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. At the same time, we have experienced substantial additional delivered product and other cost inflation that we believe will increase fourth quarter costs nearly $0.20 per share (which includes an estimated $0.04 impact from Hurricane Ida) versus what we expected a few months ago. We expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter. We continue to expect the full year 2021 to show a strong earnings increase over 2020, more than offsetting the substantial delivered product and other cost increases which we estimate will reach a combined unfavorable impact approximating $0.90 per share this year; this includes estimated unfavorable impacts of $0.15 from the Texas freeze and $0.07 from Hurricane Ida, costs we have mostly mitigated through pricing and productivity gains.
We believe our value proposition to help customers address major challenges around people and planet health while improving their own business performance is stronger than ever. We have accelerated our pricing and expect to more than cover the substantial delivered product cost and other cost increases, our new business and innovation pipelines are at record levels; new focus areas, including life sciences, data centers and animal health, are well-positioned to drive growth and global leadership; and our leading digital capabilities continue to develop and add competitive advantage. Our strong business momentum, along with our enhanced value proposition and favorable macro trends, positions us well to leverage the global recovery post-COVID and our long-term fundamentals remain strong to deliver further superior shareholder returns.
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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 third quarter earnings announcement today at 1:00 p.m. Eastern Time. The webcast, along with related materials, will be available to the public on Ecolab's website at www.ecolab.com/investor. A replay of the webcast and related materials will be available at that site.
Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding COVID-19 pandemic trends, the U.S. and global economic recovery, delivered product costs and supply chain disruptions, and our financial and business performance and prospects, including sales, earnings, pricing 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, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy and other unintended consequences.
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Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; 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; 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 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
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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 |
● | 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 |
● | free cash flow |
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
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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.
Acquisition adjusted growth rates exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude sales to our Venezuelan deconsolidated subsidiaries from both the current period and comparable period of the prior year. In addition, as part of the separation, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
We define free cash flow as net cash provided by operating activities less cash outlays for capital expenditures. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. It should not be considered a substitute for income or cash flow data
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prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. We believe free cash flow is meaningful to investors as it functions as a useful measure of performance and we use this measure as an indication of the strength of the Company and its ability to generate cash.
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 STATEMENTS OF INCOME
(unaudited)
| | Third Quarter Ended | | | | Nine Months Ended | |
| ||||||
| | September 30 | | % | | September 30 | | % | ||||||
(millions, except per share) | | 2021 |
| 2020 | | Change |
| 2021 |
| 2020 |
| Change | ||
| | | | | | | | | | | | | | |
Product and equipment sales | | $2,653.8 | | $2,426.4 | | | | | $7,461.6 | | $7,017.5 | | | |
Service and lease sales | | 667.0 | | 592.2 | | | | | 1,906.9 | | 1,707.4 | | | |
Net sales | | 3,320.8 | | 3,018.6 | | 10 | % | | 9,368.5 | | 8,724.9 | | 7 | % |
Product and equipment cost of sales | | 1,625.1 | | 1,405.4 | | | | | 4,452.9 | | 4,071.6 | | | |
Service and lease cost of sales | | 391.6 | | 364.2 | | | | | 1,119.8 | | 1,053.9 | | | |
Cost of sales (2) | | 2,016.7 | | 1,769.6 | | 14 | % | | 5,572.7 | | 5,125.5 | | 9 | % |
Selling, general and administrative expenses | | 832.0 | | 802.6 | | 4 | % | | 2,548.2 | | 2,499.5 | | 2 | % |
Special (gains) and charges (2) | | 6.3 | | 35.0 | | | | | 36.7 | | 120.3 | | | |
Operating income | | 465.8 | | 411.4 | | 13 | % | | 1,210.9 | | 979.6 | | 24 | % |
Other (income) expense (2) | | (13.0) | | (15.1) | | (14) | % | | (27.5) | | (45.6) | | (40) | % |
Interest expense, net (2) | | 76.4 | | 134.8 | | (43) | % | | 173.7 | | 241.8 | | (28) | % |
Income before income taxes | | 402.4 | | 291.7 | | 38 | % | | 1,064.7 | | 783.4 | | 36 | % |
Provision for income taxes | | 73.8 | | 42.4 | | 74 | % | | 226.0 | | 103.5 | | 118 | % |
Net income including noncontrolling interest | | 328.6 | | 249.3 | | 32 | % | | 838.7 | | 679.9 | | 23 | % |
Net income attributable to noncontrolling interest | | 4.1 | | 3.1 | | | | | 9.8 | | 12.8 | | | |
Net income from continuing operations attributable to Ecolab | | 324.5 | | 246.2 | | 32 | % | | 828.9 | | 667.1 | | 24 | % |
Net income (loss) from discontinued operations, net of tax (1) | | - | | - | | | | | - | | (2,172.5) | | | |
Net income (loss) attributable to Ecolab | | $324.5 | | $246.2 | | 32 | % | | $828.9 | | ($1,505.4) | | | |
| | | | | | | | | | | | | | |
Earnings attributable to Ecolab per common share | | | | | | | | | | | | | ||
Basic | | | | | | | | | | | | | | |
Continuing operations | | $1.13 | | $0.86 | | 31 | % | | $2.90 | | $2.32 | | 25 | % |
Discontinued operations | | - | | - | | | | | - | | ($7.56) | | | |
Earnings attributable to Ecolab | | $1.13 | | $0.86 | | 31 | % | | $2.90 | | ($5.24) | | | |
Diluted | | | | | | | | | | | | | | |
Continuing operations | | $1.12 | | $0.85 | | 32 | % | | $2.87 | | $2.29 | | 25 | % |
Discontinued operations | | - | | - | | | | | - | | ($7.47) | | | |
Earnings attributable to Ecolab | | $1.12 | | $0.85 | | 32 | % | | $2.87 | | ($5.18) | | | |
| | | | | | | | | | | | | | |
Weighted-average common shares outstanding | | | | | | | | | | | | | ||
Basic | | 286.4 | | 285.4 | | 0 | % | | 286.1 | | 287.5 | | 0 | % |
Diluted | | 289.2 | | 288.4 | | 0 | % | | 289.0 | | 290.8 | | (1) | % |
| | | | | | | | | | | | | | |
(1) Net Income (loss) attributable to discontinued operations, net of tax, relates to the separation of ChampionX. | ||||||||||||||
(2) Cost of sales, Special (gains) and charges, Other (income) expense and Interest expense, net in the Consolidated Statement of Income above include the following: | ||||||||||||||
| | | | | | | | | | | | | | |
| | Third Quarter Ended | | | | Nine Months Ended | |
| ||||||
| | September 30 | | | | | September 30 | | | | ||||
(millions) | | 2021 | | 2020 | | | | | 2021 | | 2020 | | | |
| | | | | | | | | | | | | | |
Cost of sales | | | | | | | | | | | | | | |
Restructuring activities | | $2.2 | | $1.0 | | | | | $24.1 | | $6.6 | | | |
Acquisition and integration activities | | - | | 1.5 | | | | | - | | 4.1 | | | |
COVID-19 activities, net | | 50.7 | | 1.8 | | | | | 51.8 | | 8.7 | | | |
Other | | - | | 5.2 | | | | | 0.3 | | 26.2 | | | |
Subtotal (a) | | 52.9 | | 9.5 | | | | | 76.2 | | 45.6 | | | |
| | | | | | | | | | | | | | |
Special (gains) and charges | | | | | | | | | | | | | | |
Restructuring activities | | 0.4 | | 26.9 | | | | | 6.5 | | 31.4 | | | |
Acquisition and integration activities | | 0.8 | | 2.7 | | | | | 3.3 | | 5.5 | | | |
Disposal and impairment charges | | - | | - | | | | | - | | 45.9 | | | |
COVID-19 activities, net | | 1.5 | | (3.0) | | | | | 16.2 | | 7.2 | | | |
Other | | 3.6 | | 8.4 | | | | | 10.7 | | 30.3 | | | |
Subtotal | | 6.3 | | 35.0 | | | | | 36.7 | | 120.3 | | | |
| | | | | | | | | | | | | | |
Interest expense, net | | 32.3 | | 83.1 | | | | | 32.3 | | 83.8 | | | |
Pension Settlements/Curtailments | | 7.0 | | - | | | | | 26.6 | | - | | | |
| | | | | | | | | | | | | | |
Total special (gains) and charges | | $98.5 | | $127.6 | | | | | $171.8 | | $249.7 | | | |
13
(a) Special charges of $51.0 million and $7.8 million in the third quarter of 2021 and 2020, respectively, and $74.3 million and $38.1 million for the first nine months of 2021 and 2020, respectively, were recorded in product and equipment cost of sales. Special charges of $1.9 million and $1.7 million in the third quarter of 2021 and 2020, respectively, and $1.9 million and $7.5 million for the first nine months of 2021 and 2020, respectively, were recorded in service and lease cost of sales.
14
ECOLAB INC.
REPORTABLE SEGMENT INFORMATION
(unaudited)
| | Third Quarter Ended September 30 | ||||||||||||
| | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | % | | | | | | % | ||
(millions) | | 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||
Net Sales | | | | | | | | | | | | | | |
Global Industrial | | $1,620.4 | | $1,512.9 | | 7 | % | | $1,603.1 | | $1,469.3 | | 9 | % |
Global Institutional & Specialty | | 1,076.6 | | 914.4 | | 18 | % | | 1,070.6 | | 898.4 | | 19 | % |
Global Healthcare & Life Sciences | | 290.2 | | 335.1 | | (13) | % | | 286.9 | | 322.3 | | (11) | % |
Other | | 326.3 | | 288.7 | | 13 | % | | 324.2 | | 281.7 | | 15 | % |
Corporate | | 35.9 | | 47.2 | | (24) | % | | 36.0 | | 46.9 | | (23) | % |
Subtotal at fixed currency rates | | 3,349.4 | | 3,098.3 | | 8 | % | | 3,320.8 | | 3,018.6 | | 10 | % |
Currency impact | | (28.6) | | (79.7) | | * | | | - | | - | | * | |
Consolidated reported GAAP net sales | | $3,320.8 | | $3,018.6 | | 10 | % | | $3,320.8 | | $3,018.6 | | 10 | % |
| | | | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | | | |
Global Industrial | | $268.3 | | $302.3 | | (11) | % | | $264.2 | | $293.0 | | (10) | % |
Global Institutional & Specialty | | 196.5 | | 83.7 | | 135 | % | | 195.5 | | 82.1 | | 138 | % |
Global Healthcare & Life Sciences | | 37.3 | | 69.0 | | (46) | % | | 36.9 | | 66.0 | | (44) | % |
Other | | 59.2 | | 45.8 | | 29 | % | | 59.0 | | 44.6 | | 32 | % |
Corporate | | (90.0) | | (74.2) | | * | | | (89.8) | | (74.3) | | * | |
Subtotal at fixed currency rates | | 471.3 | | 426.6 | | 10 | % | | 465.8 | | 411.4 | | 13 | % |
Currency impact | | (5.5) | | (15.2) | | * | | | - | | - | | * | |
Consolidated reported GAAP operating income | | $465.8 | | $411.4 | | 13 | % | | $465.8 | | $411.4 | | 13 | % |
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30 | ||||||||||||
| | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | % | | | | | | % | ||
(millions) | | 2021 |
| 2020 |
| Change |
| 2021 |
| 2020 |
| Change | ||
Net Sales | | | | | | | | | | | | | | |
Global Industrial | | $4,609.7 | | $4,476.4 | | 3 | % | | $4,578.6 | | $4,326.7 | | 6 | % |
Global Institutional & Specialty | | 2,914.0 | | 2,734.6 | | 7 | % | | 2,904.0 | | 2,678.6 | | 8 | % |
Global Healthcare & Life Sciences | | 887.4 | | 913.3 | | (3) | % | | 881.4 | | 866.4 | | 2 | % |
Other | | 904.2 | | 817.4 | | 11 | % | | 900.4 | | 794.0 | | 13 | % |
Corporate | | 104.1 | | 59.5 | | 75 | % | | 104.1 | | 59.2 | | 76 | % |
Subtotal at fixed currency rates | | 9,419.4 | | 9,001.2 | | 5 | % | | 9,368.5 | | 8,724.9 | | 7 | % |
Currency impact | | (50.9) | | (276.3) | | * | | | - | | - | | * | |
Consolidated reported GAAP net sales | | $9,368.5 | | $8,724.9 | | 7 | % | | $9,368.5 | | $8,724.9 | | 7 | % |
| | | | | | | | | | | | | | |
Operating Income | | | | | | | | | | | | | | |
Global Industrial | | $750.8 | | $799.7 | | (6) | % | | $743.8 | | $770.3 | | (3) | % |
Global Institutional & Specialty | | 398.2 | | 229.4 | | 74 | % | | 397.5 | | 226.1 | | 76 | % |
Global Healthcare & Life Sciences | | 131.2 | | 162.0 | | (19) | % | | 130.5 | | 151.5 | | (14) | % |
Other | | 143.4 | | 88.4 | | 62 | % | | 143.0 | | 86.8 | | 65 | % |
Corporate | | (204.4) | | (257.4) | | * | | | (203.9) | | (255.1) | | * | |
Subtotal at fixed currency rates | | 1,219.2 | | 1,022.1 | | 19 | % | | 1,210.9 | | 979.6 | | 24 | % |
Currency impact | | (8.3) | | (42.5) | | * | | | - | | - | | * | |
Consolidated reported GAAP operating income | | $1,210.9 | | $979.6 | | 24 | % | | $1,210.9 | | $979.6 | | 24 | % |
* 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.
15
ECOLAB INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | September 30 | | December 31 | | September 30 | |||
(millions) | | 2021 | | 2020 | | 2020 | |||
Assets | | | | | | | | | |
Current assets | | | | | | | | | |
Cash and cash equivalents | | $897.9 | | | $1,260.2 | | | $1,034.7 | |
Accounts receivable, net | | 2,384.1 | | | 2,273.8 | | | 2,320.7 | |
Inventories | | 1,378.2 | | | 1,285.2 | | | 1,287.8 | |
Other current assets | | 326.6 | | | 298.2 | | | 348.8 | |
Total current assets | | 4,986.8 | | | 5,117.4 | | | 4,992.0 | |
| | | | | | | | | |
Property, plant and equipment, net | | 3,069.6 | | | 3,124.9 | | | 3,146.2 | |
Goodwill | | 6,125.6 | | | 6,006.9 | | | 5,958.0 | |
Other intangible assets, net | | 2,889.7 | | | 2,977.0 | | | 3,023.4 | |
Operating lease assets | | 377.4 | | | 423.8 | | | 433.9 | |
Other assets | | 477.1 | | | 476.0 | | | 543.6 | |
Total assets | | $17,926.2 | | | $18,126.0 | | | $18,097.1 | |
| | | | | | | | | |
Liabilities and Equity | | | | | | | | | |
Current liabilities | | | | | | | | | |
Short-term debt | | $18.7 | | | $17.3 | | | $247.3 | |
Accounts payable | | 1,237.1 | | | 1,160.6 | | | 1,108.4 | |
Compensation and benefits | | 452.9 | | | 469.3 | | | 456.0 | |
Income taxes | | 68.0 | | | 96.1 | | | 53.3 | |
Other current liabilities | | 1,117.8 | | | 1,188.9 | | | 1,241.4 | |
Total current liabilities | | 2,894.5 | | | 2,932.2 | | | 3,106.4 | |
| | | | | | | | | |
Long-term debt | | 5,931.8 | | | 6,669.3 | | | 6,667.7 | |
Postretirement health care and pension benefits | | 996.6 | | | 1,226.2 | | | 1,081.2 | |
Deferred income taxes | | 589.4 | | | 483.9 | | | 580.6 | |
Operating lease liabilities | | 263.0 | | | 300.5 | | | 310.7 | |
Other liabilities | | 289.1 | | | 312.4 | | | 301.1 | |
Total liabilities | | 10,964.4 | | | 11,924.5 | | | 12,047.7 | |
| | | | | | | | | |
Equity | | | | | | | | | |
Common stock | | 363.7 | | | 362.6 | | | 362.1 | |
Additional paid-in capital | | 6,399.8 | | | 6,235.0 | | | 6,177.3 | |
Retained earnings | | 8,659.8 | | | 8,243.0 | | | 8,079.9 | |
Accumulated other comprehensive loss | | (1,733.5) | | | (1,994.4) | | | (1,945.9) | |
Treasury stock | | (6,756.3) | | | (6,679.7) | | | (6,658.7) | |
Total Ecolab shareholders’ equity | | 6,933.5 | | | 6,166.5 | | | 6,014.7 | |
Noncontrolling interest | | 28.3 | | | 35.0 | | | 34.7 | |
Total equity | | 6,961.8 | | | 6,201.5 | | | 6,049.4 | |
Total liabilities and equity | | $17,926.2 | | | $18,126.0 | | | $18,097.1 | |
16
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| Third Quarter Ended |
| Nine Months Ended |
| ||||||||
| | September 30 | | September 30 | | ||||||||
(millions, except percent and per share) | | 2021 |
| 2020 | | 2021 |
| 2020 | | ||||
| | | | | | | | | | | | | |
Net sales | | | | | | | | | | | | | |
Reported GAAP net sales | | $3,320.8 | | | $3,018.6 | | | $9,368.5 | | | $8,724.9 | | |
Effect of foreign currency translation | | 28.6 | | | 79.7 | | | 50.9 | | | 276.3 | | |
Non-GAAP fixed currency sales | | 3,349.4 | | | 3,098.3 | | | 9,419.4 | | | 9,001.2 | | |
Effect of acquisitions and divestitures | | (51.7) | | | (47.5) | | | (194.5) | | | (97.3) | | |
Non-GAAP acquisition adjusted fixed currency sales | | 3,297.7 | | | 3,050.8 | | | 9,224.9 | | | 8,903.9 | | |
| | | | | | | | | | | | | |
Cost of sales | | | | | | | | | | | | | |
Reported GAAP cost of sales | | $2,016.7 | | | $1,769.6 | | | $5,572.7 | | | $5,125.5 | | |
Special (gains) and charges | | 52.9 | | | 9.5 | | | 76.2 | | | 45.6 | | |
Non-GAAP adjusted cost of sales | | $1,963.8 | | | $1,760.1 | | | $5,496.5 | | | $5,079.9 | | |
| | | | | | | | | | | | | |
Gross margin | | | | | | | | | | | | | |
Reported GAAP gross margin | | 39.3 | % | | 41.4 | % | | 40.5 | % | | 41.3 | % | |
Non-GAAP adjusted gross margin | | 40.9 | % | | 41.7 | % | | 41.3 | % | | 41.8 | % | |
| | | | | | | | | | | | | |
Operating income | | | | | | | | | | | | | |
Reported GAAP operating income | | $465.8 | | | $411.4 | | | $1,210.9 | | | $979.6 | | |
Effect of foreign currency translation | | 5.5 | | | 15.2 | | | 8.3 | | | 42.5 | | |
Non-GAAP fixed currency operating income | | 471.3 | | | 426.6 | | | 1,219.2 | | | 1,022.1 | | |
Special (gains) and charges | | 59.2 | | | 44.5 | | | 112.9 | | | 165.9 | | |
Non-GAAP adjusted fixed currency operating income | | 530.5 | | | 471.1 | | | 1,332.1 | | | 1,188.0 | | |
Effect of acquisitions and divestitures | | 2.3 | | | 0.0 | | | 1.6 | | | (2.6) | | |
Non-GAAP acquisition adjusted fixed currency operating income | | $532.8 | | | $471.1 | | | $1,333.7 | | | $1,185.4 | | |
| | | | | | | | | | | | | |
Operating income margin | | | | | | | | | | | | | |
Reported GAAP operating income margin | | 14.0 | % | | 13.6 | % | | 12.9 | % | | 11.2 | % | |
Non-GAAP adjusted fixed currency operating income margin | | 15.8 | % | | 15.2 | % | | 14.1 | % | | 13.2 | % | |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 16.2 | % | | 15.4 | % | | 14.5 | % | | 13.3 | % | |
| | | | | | | | | | | | | |
Other (income) expense | | | | | | | | | | | | | |
Reported GAAP other (income) expense | | ($13.0) | | | ($15.1) | | | ($27.5) | | | ($45.6) | | |
Special (gains) and charges | | 7.0 | | | - | | | 26.6 | | | - | | |
Non-GAAP adjusted other (income) expense | | ($20.0) | | | ($15.1) | | | ($54.1) | | | ($45.6) | | |
| | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | |
Reported GAAP interest expense, net | | $76.4 | | | $134.8 | | | $173.7 | | | $241.8 | | |
Special (gains) and charges | | 32.3 | | | 83.1 | | | 32.3 | | | 83.8 | | |
Non-GAAP adjusted interest expense, net | | $44.1 | | | $51.7 | | | $141.4 | | | $158.0 | | |
17
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| Third Quarter Ended |
| Nine Months Ended | | ||||||||
| | September 30 | | September 30 | | ||||||||
(millions, except percent and per share) | | 2021 |
| 2020 | | 2021 |
| 2020 | | ||||
Net Income from continuing operations attributable to Ecolab | | | | | | | | | | | | | |
Reported GAAP net income from continuing operations attributable to Ecolab | | $324.5 | | | $246.2 | | | $828.9 | | | $667.1 | | |
Special (gains) and charges, after tax | | 80.8 | | | 98.5 | | | 139.1 | | | 200.3 | | |
Discrete tax net expense (benefit) | | (6.3) | | | (12.4) | | | 17.5 | | | (56.8) | | |
Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $399.0 | | | $332.3 | | | $985.5 | | | $810.6 | | |
| | | | | | | | | | | | | |
Diluted EPS from continuing operations attributable to Ecolab | | | | | | | | | | | | | |
Reported GAAP diluted EPS from continuing operations | | $1.12 | | | $0.85 | | | $2.87 | | | $2.29 | | |
Special (gains) and charges, after tax | | 0.28 | | | 0.34 | | | 0.48 | | | 0.69 | | |
Discrete tax net expense (benefit) | | (0.02) | | | (0.04) | | | 0.06 | | | (0.20) | | |
Non-GAAP adjusted diluted EPS from continuing operations | | $1.38 | | | $1.15 | | | $3.41 | | | $2.79 | | |
| | | | | | | | | | | | | |
Provision for Income Taxes | | | | | | | | | | | | | |
Reported GAAP tax rate | | 18.3 | % | | 14.5 | % | | 21.2 | % | | 13.2 | % | |
Special gains and charges | | - | | | 2.6 | | | (0.3) | | | 1.6 | | |
Discrete tax items | | 1.2 | | | 2.9 | | | (1.4) | | | 5.5 | | |
Non-GAAP adjusted tax rate | | 19.5 | % | | 20.0 | % | | 19.5 | % | | 20.3 | % | |
18
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | Third Quarter Ended September 30 | ||||||||||
(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 | | $1,620.4 | | - | | $1,620.4 | | $1,512.9 | | - | | $1,512.9 |
Global Institutional & Specialty | | 1,076.6 | | (4.1) | | 1,072.5 | | 914.4 | | - | | 914.4 |
Global Healthcare & Life Sciences | | 290.2 | | (11.7) | | 278.5 | | 335.1 | | (0.3) | | 334.8 |
Other | | 326.3 | | - | | 326.3 | | 288.7 | | - | | 288.7 |
Corporate | | 35.9 | | (35.9) | | - | | 47.2 | | (47.2) | | - |
Subtotal at fixed currency rates | | 3,349.4 | | (51.7) | | 3,297.7 | | 3,098.3 | | (47.5) | | 3,050.8 |
Currency impact | | (28.6) | | | | | | (79.7) | | | | |
Consolidated reported GAAP net sales | | $3,320.8 | | | | | | $3,018.6 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $268.3 | | - | | $268.3 | | $302.3 | | - | | $302.3 |
Global Institutional & Specialty | | 196.5 | | 0.2 | | 196.7 | | 83.7 | | - | | 83.7 |
Global Healthcare & Life Sciences | | 37.3 | | 2.1 | | 39.4 | | 69.0 | | - | | 69.0 |
Other | | 59.2 | | - | | 59.2 | | 45.8 | | - | | 45.8 |
Corporate | | (30.8) | | - | | (30.8) | | (29.7) | | - | | (29.7) |
Adjusted at fixed currency rates | | 530.5 | | 2.3 | | 532.8 | | 471.1 | | - | | 471.1 |
Special (gains) and charges | | 59.2 | | | | | | 44.5 | | | | |
Reported OI at fixed currency rates | | 471.3 | | | | | | 426.6 | | | | |
Currency impact | | (5.5) | | | | | | (15.2) | | | | |
Consolidated reported GAAP operating income | | $465.8 | | | | | | $411.4 | | | | |
| | | | | | | | | | | | |
| | Nine Months Ended September 30 | ||||||||||
| | 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 | | $4,609.7 | | ($59.4) | | $4,550.3 | | $4,476.4 | | ($36.9) | | $4,439.5 |
Global Institutional & Specialty | | 2,914.0 | | (10.2) | | 2,903.8 | | 2,734.6 | | - | | 2,734.6 |
Global Healthcare & Life Sciences | | 887.4 | | (20.8) | | 866.6 | | 913.3 | | (0.9) | | 912.4 |
Other | | 904.2 | | - | | 904.2 | | 817.4 | | - | | 817.4 |
Corporate | | 104.1 | | (104.1) | | - | | 59.5 | | (59.5) | | - |
Subtotal at fixed currency rates | | 9,419.4 | | (194.5) | | 9,224.9 | | 9,001.2 | | (97.3) | | 8,903.9 |
Currency impact | | (50.9) | | | | | | (276.3) | | | | |
Consolidated reported GAAP net sales | | $9,368.5 | | | | | | $8,724.9 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $750.8 | | ($2.5) | | $748.3 | | $799.7 | | ($2.5) | | $797.2 |
Global Institutional & Specialty | | 398.2 | | 1.8 | | 400.0 | | 229.4 | | - | | 229.4 |
Global Healthcare & Life Sciences | | 131.2 | | 2.3 | | 133.5 | | 162.0 | | (0.1) | | 161.9 |
Other | | 143.4 | | - | | 143.4 | | 88.4 | | - | | 88.4 |
Corporate | | (91.5) | | - | | (91.5) | | (91.5) | | - | | (91.5) |
Adjusted at fixed currency rates | | 1,332.1 | | 1.6 | | 1,333.7 | | 1,188.0 | | (2.6) | | 1,185.4 |
Special (gains) and charges | | 112.9 | | | | | | 165.9 | | | | |
Reported OI at fixed currency rates | | 1,219.2 | | | | | | 1,022.1 | | | | |
Currency impact | | (8.3) | | | | | | (42.5) | | | | |
Consolidated reported GAAP operating income | | $1,210.9 | | | | | | $979.6 | | | | |
19
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
Selected Cash Flow items - continuing operations | | Third Quarter Ended | | ||||
| | September 30 | | ||||
(millions) | | 2021 | | 2020 | | ||
| | | | | | | |
Cash provided by operating activities | | $622.7 | | | $451.8 | | |
Less: Capital expenditures | | (178.2) | | | (111.7) | | |
Free cash flow | | $444.5 | | | $340.1 | | |
20
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.
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| | 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 | |
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Diluted earnings per share, as reported (U.S. GAAP) | | $0.67 | | $1.08 | | $1.75 | | $1.12 | | $2.87 | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | | | | |
Discrete tax expense (benefits) (4) | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | | | | |
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, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, employee-related COVID-19 costs (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, $34.1 million and $80.8 million, net of tax, in the first, second and third quarters, respectively. Charges include covid related inventory write downs, debt refinancing charges, restructuring charges, employee-related COVID-19 costs (net of government subsidies), acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million and ($6.3) million in the first, second and third quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
21
Exhibit 99.2
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. Third Quarter 2021 Teleconference Supplemental Data |
Please see Ecolab’s news release dated October 26, 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 U.S. and global economic recovery, delivered product costs and supply chain disruptions, and our financial and business performance and prospects, including sales, earnings, pricing and new business. 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, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy, and other unintended consequences. Additional risks and uncertainties 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, including the impact of vaccination mandates; the vitality of the markets we serve; the impact of economic factors such as the worldwide economy; our ability to execute key business initiatives; 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 October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 3 Overview ▪ Strong growth reflecting continued recovery in the U.S. and improving European markets, along with robust new business wins and accelerating pricing that more than offset significantly increased delivered product costs and the Hurricane Ida impact, drove third quarter results. Sales: ▪ Reported sales from continuing operations +10%. Acquisition adjusted fixed currency sales 8%. ▪ Double-digit growth in the Institutional & Specialty and Other segments, along with strong gains in the Industrial segment, more than offset the Healthcare & Life Sciences segment’s decline versus a very strong increase last year. Operating Income: ▪ Reported operating income from continuing operations +13%. ▪ Adjusted fixed currency operating income from continuing operations also +13%. ▪ Strong performances by the Institutional & Specialty and Other segments more than offset a delivered product cost driven decline in the Industrial segment and the Healthcare & Life Sciences segment comparison to very strong year- ago results. Earnings: ▪ Reported diluted EPS from continuing operations $1.12, +32%. ▪ Adjusted diluted EPS from continuing operations, excluding special gains and charges and discrete tax items, were $1.38, +20%. Adjusted diluted EPS included an estimated unfavorable $0.03 per share impact from Hurricane Ida. ▪ The very strong increase in adjusted EPS reflects accelerated pricing and increased volume that more than offset significantly higher delivered product costs and the impact of Hurricane Ida. 3Q 2021 Overview |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. -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 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 US EU China 4 Restaurants and lodging: U.S. restaurant and hotel traffic continued to recover toward 2019 levels while trends in Europe improved significantly as restrictions eased. ▪ U.S. full service in-unit traffic averaged 74% of 2019 levels in 3Q. ▪ U.S. quickservice traffic nearing 2019 levels. ▪ Europe foodservice trends accelerated toward 2019 levels as the region more broadly reopened but remain well behind U.S. levels. ▪ Strong improvement in lodging room demand in Europe and solid trends in the U.S. 3Q 2021 Environment 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 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-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 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 5 2021 Outlook We expect continued, if uneven, recovery in the U.S. and European markets, with the rest of the world following. ▪ 4Q 2021: We continue to expect strong year-on-year growth in the fourth quarter 2021 led by increased volume and price momentum, and expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. At the same time that we are realizing further top line strength, we have experienced substantial additional delivered product and other cost inflation that we believe will increase fourth quarter costs approximately $0.20 per share (which includes an estimated $0.04 impact from Hurricane Ida) versus what we expected a few months ago. We continue to mitigate the cost increases with strong pricing in a way that is sustainable for the long term and aligned with the incremental value we create for customers. We expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter. ▪ 2021: We continue to expect strong year-on-year earnings growth for the full year 2021, which will include the impact of higher delivered product and other costs that are expected to have a combined unfavorable impact approximating $0.90 per share this year; this includes estimated unfavorable impacts of $0.15 from the Texas freeze and $0.07 from Hurricane Ida, costs we have mostly mitigated through pricing and productivity gains. |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 6 3Q 2021 Results *See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations. (unaudited) (millions, except per share) 2021 Net sales $3,320.8 $3,018.6 10 % $3,320.8 $3,018.6 10 % Operating income 465.8 411.4 13 % 525.0 455.9 15 % NI from cont. ops. attributable to Ecolab 324.5 246.2 32 % 399.0 332.3 20 % Diluted earnings per share NI from cont. ops. attributable to Ecolab $1.12 $0.85 32 % $1.38 $1.15 20 % 2021 Net sales $3,349.4 $3,098.3 8 % $3,349.4 $3,098.3 8 % Operating income 471.3 426.6 10 % 530.5 471.1 13 % Fixed Currency Rates * % Fixed Currency Rates % 2021 2020 Change 2020 Change Adjusted * Third Quarter Ended September 30 Reported Adjusted * Public Currency Rates % Public Currency Rates % 2021 2020 Change 2020 Change |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 7 3Q 2021 Sales Growth Detail Amounts in the tables above may reflect rounding. Acq./Div. Adj. excludes sales to ChampionX post-separation and Venezuela results. Fixed Rate Acq./Div. Adj. Global Industrial % Change % Change Consolidated % Change Water 8% 8% Volume & mix 6% Food & Beverage 5% 5% Pricing 3% Downstream 2% 2% Subtotal 8% Paper 17% 17% Acq./Div. 0% Total Global Industrial 7% 7% Fixed currency growth 8% Currency impact 2% Global Institutional & Specialty Total 10% Institutional 24% 24% Specialty 1% 1% Total Global Institutional & Specialty 18% 17% Global Healthcare & Life Sciences Healthcare -15% -19% Life Sciences -10% -10% Total Global Healthcare & Life Sciences -13% -17% Other Pest Elimination 9% 9% Textile Care 23% 23% Colloidal Technologies 24% 24% Total Other 13% 13% Total 8% 8% |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 8 3Q 2021 Income Statement / Margins (cont. ops.) * Public rates of exchange, except where noted. **See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations. ($ millions, unaudited)* 2021 % sales 2020 % sales Comments** Gross Profit $1,304.1 39.3% $1,249.0 41.4% 4 % Adjusted gross margins of 40.9% in 2021 and 41.7% in 2020 primarily reflected accelerating pricing and increased volume that was more than offset by significantly higher delivered product costs and Hurricane Ida impacts. SG&A 832.0 25.1% 802.6 26.6% 4 % The ratio decreased 150 basis points as volume leverage and cost savings more than offset investments in the business. Op. Income at fixed FX Global Industrial 268.3 16.6% 302.3 20.0% -11 % Margins declined as accelerating pricing and higher volume were more than offset by significantly higher delivered product costs, the impact from Hurricane Ida and unfavorable mix. Global Institutional & Specialty 196.5 18.3% 83.7 9.2% 135 % The substanital margin increase reflected increased volume, accelerating pricing and favorable mix that more than offset higher delivered product costs. Global Healthcare & Life Sciences 37.3 12.9% 69.0 20.6% -46 % Acquisition adjusted margins were 14.1% in 2021 and 20.6% in 2020. The margin decrease primarily reflected comparison to the very strong sales volume benefit last year when operating income grew 82%, partially offset by favorable pricing. Other 59.2 18.1% 45.8 15.9% 29 % Margins increased reflecting the strong volume and favorable pricing that was partially offset by higher delivered product costs. Subtotal at fixed FX 561.3 16.9% 500.8 16.2% 12 % FX (5.5) (15.2) Corporate Corp. Expense (30.8) (29.7) Nalco intangible amortization. Special Gains/(Ch.) (59.2) (44.5) 2021: Primarily reflected COVID-19 related inventory reserves and employee- related COVID-19 costs (net of government subsidies). Total Corporate Exp. (90.0) (74.2) Consolidated Op. Inc. $465.8 14.0% $411.4 13.6% 13 % 2021 acquisition adjusted fixed currency operating margins were 16.2% vs. 15.4%. The improvement was driven by accelerated pricing and volume growth which more than offset significantly higher delivered product costs, and the estimated $0.03 per share impact from Hurricane Ida. % change |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 9 3Q 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. $897.9 $1,034.7 Short-term debt $18.7 $247.3 Accounts receivable, net 2,384.1 2,320.7 Accounts payable 1,237.1 1,108.4 Inventories 1,378.2 1,287.8 Other current liabilities 1,638.7 1,750.7 Other current assets 326.6 348.8 Long-term debt 5,931.8 6,667.7 PP&E, net 3,069.6 3,146.2 Pension/Postretirement 996.6 1,081.2 Goodwill and intangibles 9,015.3 8,981.4 Other liabilities 1,141.5 1,192.4 Other assets 854.5 977.5 Total equity 6,961.8 6,049.4 Total assets $17,926.2 $18,097.1 Total liab. and equity $17,926.2 $18,097.1 Selected Cash Flow items (millions, unaudited) 2021 2020 (unaudited) 2021 2020 Cash from op. activities $1,421.0 $1,092.0 Total Debt/Total Capital 46.1% 53.3% Depreciation 453.1 443.1 Net Debt/Total Capital 42.1% 49.3% Amortization 174.4 162.1 Net Debt/EBITDA(*) 2.0 2.5 Capital expenditures 423.8 362.3 Net Debt/Adjusted EBITDA(*) 1.9 2.3 September 30 September 30 Nine Months Ended Selected Balance Sheet measures September 30 September 30 |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 10 Non-GAAP Financial Measures (unaudited) (millions, except percent) Net sales Reported GAAP net sales $3,320.8 $3,018.6 $9,368.5 $8,724.9 Effect of foreign currency translation 28.6 79.7 50.9 276.3 Non-GAAP fixed currency sales 3,349.4 3,098.3 9,419.4 9,001.2 Effect of acquisitions and divestitures (51.7) (47.5) (194.5) (97.3) Non-GAAP acquisition adjusted fixed currency sales 3,297.7 3,050.8 9,224.9 8,903.9 Cost of Sales Reported GAAP cost of sales $2,016.7 $1,769.6 $5,572.7 $5,125.5 Special (gains) and charges 52.9 9.5 76.2 45.6 Non-GAAP adjusted cost of sales $1,963.8 $1,760.1 $5,496.5 $5,079.9 Gross Margin Reported GAAP gross margin 39.3 % 41.4 % 40.5 % 41.3 % Non-GAAP adjusted gross margin 40.9 % 41.7 % 41.3 % 41.8 % Operating income Reported GAAP operating income $465.8 $411.4 $1,210.9 $979.6 Effect of foreign currency translation 5.5 15.2 8.3 42.5 Non-GAAP fixed currency operating income 471.3 426.6 1,219.2 1,022.1 Special (gains) and charges 59.2 44.5 112.9 165.9 Non-GAAP adjusted fixed currency operating income 530.5 471.1 1,332.1 1,188.0 Effect of acquisitions and divestitures 2.3 - 1.6 (2.6) Non-GAAP acquisition adjusted fixed currency operating income $532.8 $471.1 $1,333.7 $1,185.4 Operating Income Margin Reported GAAP operating income margin 14.0 % 13.6 % 12.9 % 11.2 % Non-GAAP adjusted fixed currency operating income margin 15.8 % 15.2 % 14.1 % 13.2 % Non-GAAP acquisition adjusted fixed currency operating income margin 16.2 % 15.4 % 14.5 % 13.3 % Third Quarter Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020 |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 11 Non-GAAP Financial Measures (unaudited) (millions, except percent and per share) Interest expense, net Reported GAAP interest expense, net $76.4 $134.8 $173.7 $241.8 Special (gains) and charges, after tax 32.3 83.1 32.3 83.8 Non-GAAP adjusted interest expense, net $44.1 $51.7 $141.4 $158.0 Other (income) expense Reported GAAP other (income) expense ($13.0) ($15.1) ($27.5) ($45.6) Special (gains) and charges 7.0 - 26.6 - Non-GAAP adjusted other (income) expense ($20.0) ($15.1) ($54.1) ($45.6) Net Income from continuing operations attributable to Ecolab Reported GAAP net income from continuing operations attributable to Ecolab $324.5 $246.2 $828.9 $667.1 Special (gains) and charges, after tax 80.8 98.5 139.1 200.3 Discrete tax net expense (benefit) (6.3) (12.4) 17.5 (56.8) Non-GAAP adjusted net income from continuing operations attributable to Ecolab $399.0 $332.3 $985.5 $810.6 Diluted EPS from continuing operations attributable to Ecolab Reported GAAP diluted EPS from continuing operations $1.12 $0.85 $2.87 $2.29 Special (gains) and charges, after tax 0.28 0.34 0.48 0.69 Discrete tax net expense (benefit) (0.02) (0.04) 0.06 (0.20) Non-GAAP adjusted diluted EPS from continuing operations $1.38 $1.15 $3.41 $2.79 Provision for Income Taxes Reported GAAP tax rate 18.3 % 14.5 % 21.2 % 13.2 % Special gains and charges 0.0 2.6 (0.3) 1.6 Discrete tax items 1.2 2.9 (1.4) 5.5 Non-GAAP adjusted tax rate 19.5 % 20.0 % 19.5 % 20.3 % EBITDA (trailing twelve months ended) Net income including non-controlling interest $1,143.6 $1,079.6 Provision for income taxes 299.1 190.0 Interest expense, net 222.1 287.9 Depreciation 604.3 588.3 Amortization 230.7 213.1 EBITDA $2,499.8 $2,358.9 Special (gains) and charges impacting EBITDA 201.8 222.5 Adjusted EBITDA $2,701.6 $2,581.4 Third Quarter Ended Nine Months Ended 2021 2020 2021 2020 September 30 September 30 |
Please see Ecolab’s news release dated October 26, 2021 for additional information, including discussion on the use of certain non-GAAP financial measures. .. 12 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 $1,620.4 $0.0 $1,620.4 $1,512.9 $0.0 $1,512.9 Global Institutional & Specialty 1,076.6 (4.1) 1,072.5 914.4 - 914.4 Global Healthcare & Life Sciences 290.2 (11.7) 278.5 335.1 (0.3) 334.8 Other 326.3 - 326.3 288.7 - 288.7 Corporate 35.9 (35.9) - 47.2 (47.2) - Subtotal at fixed currency rates 3,349.4 (51.7) 3,297.7 3,098.3 (47.5) 3,050.8 Currency impact (28.6) (79.7) Consolidated reported GAAP net sales $3,320.8 $3,018.6 Operating Income Global Industrial $268.3 $0.0 $268.3 $302.3 $0.0 $302.3 Global Institutional & Specialty 196.5 0.2 196.7 83.7 - 83.7 Global Healthcare & Life Sciences 37.3 2.1 39.4 69.0 - 69.0 Other 59.2 - 59.2 45.8 - 45.8 Corporate (30.8) - (30.8) (29.7) - (29.7) Adjusted at fixed currency rates 530.5 2.3 532.8 471.1 - 471.1 Special (gains) and charges 59.2 44.5 Reported OI at fixed currency rates 471.3 426.6 Currency impact (5.5) (15.2) Consolidated reported GAAP operating income $465.8 $411.4 Third Quarter Ended September 30 2021 2020 |
Please see Ecolab’s news release dated October 26, 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 $4,609.7 ($59.4) $4,550.3 $4,476.4 ($36.9) $4,439.5 Global Institutional & Specialty 2,914.0 (10.2) 2,903.8 2,734.6 - 2,734.6 Global Healthcare & Life Sciences 887.4 (20.8) 866.6 913.3 (0.9) 912.4 Other 904.2 - 904.2 817.4 - 817.4 Corporate 104.1 (104.1) - 59.5 (59.5) - Subtotal at fixed currency rates 9,419.4 (194.5) 9,224.9 9,001.2 (97.3) 8,903.9 Currency impact (50.9) (276.3) Consolidated reported GAAP net sales $9,368.5 $8,724.9 Operating Income Global Industrial $750.8 ($2.5) $748.3 $799.7 ($2.5) $797.2 Global Institutional & Specialty 398.2 1.8 400.0 229.4 - 229.4 Global Healthcare & Life Sciences 131.2 2.3 133.5 162.0 (0.1) 161.9 Other 143.4 - 143.4 88.4 - 88.4 Corporate (91.5) - (91.5) (91.5) - (91.5) Adjusted at fixed currency rates 1,332.1 1.6 1,333.7 1,188.0 (2.6) 1,185.4 Special (gains) and charges 112.9 165.9 Reported OI at fixed currency rates 1,219.2 1,022.1 Currency impact (8.3) (42.5) Consolidated reported GAAP operating income $1,210.9 $979.6 Nine Months Ended September 30 2021 2020 |
Exhibit 99.3
ECOLAB THIRD QUARTER 2021
Overview
Strong third quarter results leveraged market reopenings with new business wins, new products and accelerated pricing to deliver strong sales and double-digit earnings growth.
◢ | Sales: |
◾ | Reported sales from continuing operations +10% from the year-ago period. Acquisition adjusted fixed currency sales +8%. |
◾ | Double-digit growth in the Institutional & Specialty and Other segments, along with strong gains in the Industrial segment, more than offset the Healthcare & Life Sciences segment’s decline versus a very strong increase last year. |
◢ | Earnings: |
◾ | Reported diluted EPS from continuing operations $1.12, +32%. |
◾ | Adjusted diluted EPS from continuing operations excluding special gains and charges and discrete tax items $1.38, +20%. |
◾ | The double-digit adjusted EPS increase reflects accelerated pricing and volume growth that more than offset significantly higher delivered product costs and a lower than estimated unfavorable impact from Hurricane Ida of $0.03 per share in the third quarter achieved through aggressive management. |
◢ | Outlook: |
◾ | We expect continued, if uneven, recovery in the U.S. and European markets, with the rest of the world following. We continue to expect strong year-on-year growth in the fourth quarter 2021 led by the increased volume and price momentum, and expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. At the same time, we have experienced substantial additional delivered product and other cost inflation that we believe will increase fourth quarter costs by nearly $0.20 per share versus what we expected a few months ago. We expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter. We continue to expect the full year 2021 to show a strong increase over 2020, more than offsetting the substantial delivered product and other cost increases which are estimated to have a combined unfavorable impact approximating $0.90 per share this year, costs we have mostly mitigated through pricing and productivity gains. |
2
SUMMARY
We delivered strong third quarter results that were better than expected as we successfully leveraged market reopenings with robust new business wins and accelerating pricing to more than offset significantly higher delivered product costs, while also significantly reducing the unfavorable impacts from Hurricane Ida on both our customers and supply chain. We enjoyed strong double-digit sales growth and expanded operating margins in our Institutional & Specialty and Other segments, which leveraged continued recovery in the U.S. and improving trends in Europe. The Industrial segment showed accelerated sales growth, though its operating income was negatively impacted by significantly higher delivered product costs, as well as costs to ensure exceptional customer service in a challenging environment. Healthcare & Life Sciences segment sales declined as results compared to very strong year-ago sales though underlying segment sales growth is estimated to have been in the mid-single digit range.
We expect continued strong year-on-year growth in the fourth quarter, driven by accelerating sales volume and pricing momentum as we leverage an expected continuing though uneven global recovery and generally improving COVID-19 impacts. We look for our Institutional & Specialty and Other segments to show continued strong year-on-year growth in the fourth quarter, with both segments sales approaching their pre-COVID peak 2019 levels despite end markets that have not fully recovered. Industrial segment sales are expected to remain strong and Healthcare & Life Sciences segment sales are expected to maintain its solid underlying growth, though reported sales will likely be modestly below last year when compared to 2020’s very strong gain.
3
We expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. We have also experienced continued substantial delivered product and other cost inflation that we believe will increase fourth quarter costs by nearly $0.20 per share versus what we expected a few months ago. As a result, we expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter.
We continue to execute aggressive pricing actions to offset significantly increased delivered product costs, leveraging the strong product and service value and digital insights that we deliver to customers and that underlies our fundamental business proposition of best results at the lowest total cost, and we expect pricing will build further in the fourth quarter. When combined with our strong new business wins, we expect to once again successfully manage the current inflation challenges to deliver superior results. We continue to expect strong year-on-year growth for the full year 2021, which will include the impact of higher delivered product and other costs increases that are expected to have a combined unfavorable impact approximating $0.90 per share this year; this includes estimated unfavorable impacts of $0.15 from the Texas freeze and $0.07 from Hurricane Ida, costs we have mostly mitigated through pricing and productivity gains.
We expect to enter 2022 with solid momentum as we continue to drive strong top and bottom-line growth through product and service innovation, digital solutions, new markets and appropriate pricing as we leverage an expected continuing though uneven global recovery, generally improving COVID-19 impacts and offset further cost inflation.
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Our value proposition to help solve the world’s people, planet and business health needs is more important than ever, and we have further strengthened our competitive position and unique capabilities to best serve our customers. Our advanced products and services enable us to help create better customer outcomes with a reduced environmental impact while simultaneously reducing their costs, as reflected by recent programs including Ecolab Science Certified and Net Zero, which have further differentiated Ecolab’s value proposition. Our new business and innovation pipelines are at record levels; new focus areas, including life sciences, data centers and animal health, are well-positioned to drive growth and global leadership; and our leading digital capabilities continue to develop and add competitive advantages. Our strong business momentum, along with our enhanced value proposition and favorable macro trends, positions us well to leverage the global recovery post COVID and our long-term fundamentals remain strong to deliver further superior shareholder returns.
HIGHLIGHTS
● | Strong third quarter results leveraged recovering markets with new business wins, new products and accelerating pricing to deliver strong sales and double-digit earnings growth. |
● | Reported consolidated sales increased 10%; fixed currency acquisition adjusted sales increased 8%. |
● | Sales were led by the Institutional & Specialty and Other segments, which both delivered double-digit growth. Industrial segment sales growth was strong and continued to accelerate while the Healthcare & |
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Life Sciences segment showed a decline versus a very strong increase last year, with underlying segment sales estimated to have been in the mid-single digit growth range. |
● | Reported operating margins from continuing operations increased 40 bps. Acquisition adjusted fixed currency operating margin increased 80 bps, led by the Institutional & Specialty segment. |
● | Third quarter reported diluted earnings per share from continuing operations were $1.12 compared with $0.85 last year. |
● | On an adjusted basis, excluding special gains and charges and discrete tax items from both years, third quarter 2021 adjusted diluted earnings per share from continuing operations were $1.38 compared with adjusted diluted earnings per share from continuing operations of $1.15 a year ago. The strong adjusted earnings per share increase reflects accelerated pricing and volume growth that more than offset significantly higher delivered product costs, and the estimated unfavorable impact from Hurricane Ida of $0.03 per share in the third quarter. |
● | We continue to expect strong year-on-year growth in the fourth quarter 2021 led by the increased volume and price momentum, and expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. We have also experienced continued substantial delivered product and other cost inflation which we believe will increase fourth quarter costs by nearly $0.20 per share (which includes an estimated $0.04 per share impact from Hurricane Ida) versus what we expected a few months ago. As a result, we expect fourth quarter earnings to grow double digits, though not as strongly as |
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the third quarter. |
● | We continue to expect strong year-on-year growth for the full year 2021, which will include the impact of higher delivered product and other cost increases that are expected to have a combined unfavorable impact approximating $0.90 per share this year; this includes estimated unfavorable impacts of $0.15 from the Texas freeze and $0.07 from Hurricane Ida, costs we have mostly mitigated through pricing and productivity gains. |
● | In summary, we delivered strong third quarter results as our business continues to improve and we expect a further strong year-on-year performance in the fourth quarter. Our solid business momentum, along with our enhanced value proposition and favorable macro trends, positions us well to leverage the post COVID-19 global recovery and that our long-term fundamentals remain strong to deliver further superior shareholder returns. |
CONSOLIDATED SALES
Consolidated sales | % Change | |
Volume & mix | 6% | |
Pricing | 3% | |
Subtotal | 8% | |
Acq./Div. | 0% | |
Fixed currency growth | 8% | |
Currency impact | 2% | |
Total | 10% | |
| | |
Amounts above do not sum due to rounding.
Ecolab’s third quarter reported sales increased 10% when compared to the year ago period. Fixed currency acquisition adjusted sales increased 8%. Looking at the components, consolidated volume and mix increased 6%,
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pricing increased 3%, and currency added 2% to sales growth.
GLOBAL INDUSTRIAL SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Industrial | % Change | % Change | ||
Water | 8% | | 8% | |
Food & Beverage | 5% | | 5% | |
Downstream | 2% | | 2% | |
Paper | 17% | | 17% | |
Total Global Industrial | 7% | | 7% | |
WATER
Fixed currency Water sales increased 8% as new business wins and accelerating pricing leveraged recovering markets. Light industry water treatment sales enjoyed solid growth, led by good gains in food & beverage, light manufacturing and data centers. Heavy industry sales recorded a very strong increase driven by primary metals. Mining also showed strong growth benefiting from our strategic shift toward precious metals and fertilizers and away from coal. Fixed-currency acquisition-adjusted sales growth showed double-digit growth in Latin America, strong gains in Europe and Asia Pacific, and a moderate increase 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 new business wins remain strong as we utilize our unique ability to provide innovative solutions and integrated digital technologies and service expertise that help customers reduce water consumption and meet their sustainability
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objectives. Further, we have remained aggressive on pricing to help offset increased delivered product costs. We expect further strong sales growth in the fourth quarter driven by increased pricing, business wins and improving markets.
FOOD & BEVERAGE
Fixed currency Food & Beverage sales rose 5%, primarily reflecting accelerating pricing, recovering markets and new business wins. Globally we realized strong growth in beverage, brewing and dairy plant, and modest growth in food, protein and animal health. Regional fixed currency sales growth was strong in Latin America, with moderate growth in Europe, North America, and Asia Pacific.
With more favorable end market trends, accelerating pricing and strong new business wins, we anticipate further good sales growth in the fourth quarter.
DOWNSTREAM
Downstream fixed currency sales grew 2% and improved on a sequential basis benefiting from pricing, increased refinery operating rates and new business wins. Fixed currency sales showed strong growth in Asia Pacific and Latin America, increased modestly in Europe, and declined in North America as strong petrochemical sales growth and business wins were more than offset by the impact of Hurricane Ida and low-margin refinery business exits.
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We expect growth to improve further in the fourth quarter driven by pricing, new business wins, recovering refinery production and stronger petrochemical demand.
PAPER
Paper fixed currency sales recorded another double-digit gain, up 17%, driven by strong new business wins, accelerating pricing and improved market growth. Board & packaging led the gain, with tissue showing strong growth due to recovering production rates and new business, and graphics sales further recovered from last year’s sharp decline as market trends stabilized. Fixed currency sales growth was strong across all regions.
We expect Paper to show strong sales growth in the fourth quarter driven by continued growth in board & packaging and improving tissue and graphics demand.
GLOBAL INDUSTRIAL SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Industrial Op. Inc. | $268.3 | | 16.6% | | $302.3 | | 20.0% | | (11)% | |
Acq./Div. Adj. Op. Inc. | $268.3 | | 16.6% | | $302.3 | | 20.0% | | (11)% | |
Acquisition adjusted fixed currency operating income for the Global Industrial segment decreased 11% compared to a very strong 18% increase last year, as accelerating pricing and higher volume were more than offset by significantly higher delivered product costs, the impact from Hurricane Ida and unfavorable mix.
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GLOBAL INSTITUTIONAL & SPECIALTY SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Institutional & Specialty | % Change | % Change | ||
Institutional | 24% | | 24% | |
Specialty | 1% | | 1% | |
Total Global Institutional & Specialty | 18% | | 17% | |
INSTITUTIONAL
Fixed currency sales for the Global Institutional business increased 24%, driven by continued strong gains in North America and significantly improved European sales as our new business wins, product innovation and higher pricing continued to successfully leverage the broadening market recovery.
Our major global regions showed sharp year-on-year sales improvement in the quarter. Our U.S. business continued its strong growth as further new account gains and improved solution penetration leveraged still-recovering in-unit restaurant dining and lodging trends. Europe also showed very strong growth in the quarter as increased consumer traffic and in-unit dining, along with new business wins, led the increase. Latin America ongoing sales were strong while Asia Pacific sales declined modestly reflecting increased COVID-19 restrictions in that region.
We have continued to work aggressively to support our customers through this difficult environment, as well as assure our long-term value drivers remain robust. Our advanced products and programs, including hospital-grade disinfectants, along with our expert service to help solve customer problems, have continued to be significant differentiators for us and important in our strong new business wins. These products and programs, many of which offer
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faster and more efficient cleaning processes and thereby save labor hours, have proven very effective in helping U.S. restaurants and hotels in the current labor shortages. Further, our Ecolab Science Certified program continues to expand as the program assists our customers in meeting the public’s heightened expectations for cleaner and safer consumer locations.
We expect another strong performance by Institutional in the fourth quarter led by continued robust momentum in the U.S. and Europe, with improved performances in other regions, as we look to leverage improving and geographically broadening end market fundamentals.
SPECIALTY
Third quarter Specialty acquisition adjusted fixed currency sales increased 1% as strong quickservice sales more than offset lower food retail sales. Quickservice sales showed a strong gain as new business wins more than offset easing sanitizer usage from last year’s peak levels. Food retail sales declined versus the strong sanitizer demand in 2020 and customer labor shortages that has resulted in reduced in-store services and associated product usage.
We expect Specialty sales to show strong growth in the fourth quarter, led by quickservice sales as we benefit from new customer wins, our broad range of innovative products and service expertise and further normalization of demand.
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INSTITUTIONAL & SPECIALTY SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Institutional & Specialty Op. Inc. | $196.5 | | 18.3% | | $83.7 | | 9.2% | | 135% | |
Acq./Div. Adj. Op. Inc. | $196.7 | | 18.3% | | $83.7 | | 9.2% | | 135% | |
Acquisition adjusted fixed currency operating income increased 135% reflecting increased volume, accelerating pricing and favorable mix that more than offset higher delivered product costs.
GLOBAL HEALTHCARE & LIFE SCIENCES SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Healthcare & Life Sciences | % Change | % Change | ||
Healthcare | (15)% | | (19)% | |
Life Sciences | (10)% | | (10)% | |
Total Global Healthcare & Life Sciences | (13)% | | (17)% | |
HEALTHCARE
Third quarter Healthcare fixed currency sales declined 15%. Acquisition adjusted sales declined 19%, reflecting the comparison against last year’s 25% gain that was driven by COVID-19 related hand and surface disinfection sales as well as softer elective surgical procedure activity in 2021 due to the rise in COVID-19 variants during the quarter. Excluding the one-time sales from the prior year, underlying third quarter 2021 sales growth was estimated to be in the mid-single-digit range driven by new business wins and increased hygiene awareness.
Fourth quarter 2021 sales will also compare with a large prior year gain, when the fourth quarter 2020 grew 22% led by several large one-time sanitizer orders from national health systems, as well as reflect above normal current
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customer inventories of sanitation products from the buying surge last year; as such, we expect lower fourth quarter 2021 sales. We believe the impact of normalizing hospital surgeries and in-patient activity on consumption, along with our broadened product line, ongoing product innovation, digital tools and proven service value, will drive improved results in 2022, and that the business remains well-positioned for attractive long-term growth.
LIFE SCIENCES
Life Sciences’ third quarter acquisition adjusted fixed currency sales declined 10%. Adjusted for the comparison versus the very strong third quarter 2020, when sales increased 48% driven by extraordinary COVID-19 demand, underlying third quarter 2021 Life Sciences sales are estimated to have grown low double-digits. This continued strong underlying growth was driven by solid ongoing pharmaceutical and personal care customer demand along with new 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. We look for fourth quarter sales to show a strong gain versus 2020’s substantial increase.
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HEALTHCARE & LIFE SCIENCES SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Global Healthcare & Life Sciences Op. Inc. | $37.3 | | 12.9% | | $69.0 | | 20.6% | | (46)% | |
Acq./Div. Adj. Op. Inc. | $39.4 | | 14.1% | | $69.0 | | 20.6% | | (43)% | |
Acquisition adjusted fixed currency operating income decreased 43%, primarily reflecting the comparison to the very strong sales volume last year when operating income grew 82%, partially offset by favorable pricing.
OTHER SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Other | % Change | % Change | ||
Pest Elimination | 9% | | 9% | |
Textile Care | 23% | | 23% | |
Colloidal Technologies | 24% | | 24% | |
Total Other | 13% | | 13% | |
| | | | |
PEST ELIMINATION
Fixed currency Pest Elimination sales increased 9% reflecting strong growth in food and beverage plants, restaurants and hospitality. We realized continued robust new business wins that we believe are the result of our high service levels, innovation and increased awareness around food safety and hygiene standards. Growth was strong in North America and Asia Pacific, with a moderate gain in Europe and a moderate decline in Latin America.
We expect Pest Elimination to show good growth in the fourth quarter as the restaurant and hospitality markets continue to recover, other end markets continue to grow and new programs add additional differentiation to drive business wins. Further, we believe our ongoing innovation and enhanced
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digital offerings will extend our differentiation and help drive future above average long-term growth.
OTHER MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Other Op. Inc. | $59.2 | | 18.1% | | $45.8 | | 15.9% | | 29% | |
Acq./Div. Adj. Op. Inc. | $59.2 | | 18.1% | | $45.8 | | 15.9% | | 29% | |
Acquisition adjusted fixed currency operating income increased 29% reflecting strong volume and favorable pricing that was partially offset by higher delivered product costs.
CONSOLIDATED MARGIN PERFORMANCE
($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Gross Profit | $1,304.1 | | 39.3% | | $1,249.0 | | 41.4% | | 4% | |
Gross Profit (adj.) | $1,357.0 | | 40.9% | | $1,258.5 | | 41.7% | | 8% | |
Third quarter gross margins adjusted for special charges decreased 80 basis points versus last year’s adjusted margin, reflecting accelerating pricing and increased volume that was more than offset by significantly higher delivered product costs and Hurricane Ida impacts.
($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
SG&A | $832.0 | | 25.1% | | $802.6 | | 26.6% | | 4% | |
The third quarter SG&A ratio to sales decreased 150 basis points as volume leverage and cost savings more than offset investments in the business.
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($ millions, unaudited) | 2021 |
| % sales | 2020 |
| % sales | % change | |||
Operating Income | $465.8 | | 14.0% | | $411.4 | | 13.6% | | 13% | |
Fixed Currency Operating | | | | | | | | | | |
Income (adj.) | $530.5 | | 15.8% | | $471.1 | | 15.2% | | 13% | |
Fixed Currency Operating | | | | | | | | | | |
Income (acq./div. adj.) | $532.8 | | 16.2% | | $471.1 | | 15.4% | | 13% | |
Acquisition adjusted fixed currency operating income increased 13%. The strong operating leverage reflects accelerating pricing and increased volume which more than offset significantly higher delivered product costs and the estimated unfavorable impact from Hurricane Ida of $0.03 per share in the third quarter.
CORPORATE EXPENSE
($ millions - unaudited) | 2021 |
| 2020 |
|
Corporate | | | | |
Corp. Expense | ($30.8) | | ($29.7) | |
Special Gains/(Charges) | (59.2) | | (44.5) | |
Total Corporate Expense | ($90.0) | | ($74.2) | |
Third quarter of 2021 corporate segment includes amortization expense of $31 million related to the Nalco merger intangible assets as well as net special charges of $59 million that primarily reflected COVID-19 related inventory reserves and employee costs (net of government subsidies) as discussed below.
Special gains and charges for the third quarter of 2020 were a net charge of $44 million and include restructuring charges, Healthcare product recall charges, COVID-19 employee-related costs (net of government subsidies) and litigation and other charges.
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COVID-19 INVENTORY RESERVES
Customer demand for sanitizer products surged at the outset of COVID-19. We worked hard to meet the rapidly increasing demand and sold the vast majority of our sanitizer inventory. However, COVID-19 variant-related delays of customer reopenings and consumer activity resulted in a small portion of the sanitizer inventory becoming unneeded. We recognized a special charge of $50 million in the third quarter of 2021 for excess inventory and estimated disposal costs.
OTHER INCOME, INTEREST, TAX RATE, SHARES AND CONSOLIDATED INCOME
Reported interest expense decreased 43% as debt refinancing charges of $32 million in 2021 were significantly less than $83 million incurred in 2020; adjusted for debt refinancing costs, interest expense decreased 15% reflecting lower average debt levels and lower average interest rates from debt refinancing transactions in 2020 and 2021.
The reported income tax rate for the third quarter of 2021 was 18.3% compared with the reported rate of 14.5% in the third quarter of 2020. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the third quarter of 2021 was 19.5% compared with the adjusted tax rate of 20.0% in the third quarter of 2020.
The net of this performance is that Ecolab reported third quarter diluted earnings per share from continuing operations of $1.12 compared with $0.85
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reported a year ago. When adjusted for special gains and charges and discrete tax items in both years, third quarter adjusted diluted earnings per share from continuing operations were $1.38 compared with $1.15 reported a year ago. Currency translation had a $0.03 favorable impact on third quarter 2021 adjusted diluted earnings per share from continuing operations.
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BALANCE SHEET, CASH FLOW AND LEVERAGE
(unaudited) | September 30 |
| ||
($ millions) | 2021 |
| 2020 |
|
Cash and cash eq. | $897.9 | | $1,034.7 | |
Accounts receivable, net | 2,384.1 | | 2,320.7 | |
Inventories | 1,378.2 | | 1,287.8 | |
Other current assets | 326.6 | | 348.8 | |
PP&E, net | 3,069.6 | | 3,146.2 | |
Goodwill and intangibles | 9,015.3 | | 8,981.4 | |
Other assets | 854.5 | | 977.5 | |
Total assets | $17,926.2 | | $18,097.1 | |
| | | | |
Short-term debt | $18.7 | | $247.3 | |
Accounts payable | 1,237.1 | | 1,108.4 | |
Other current liabilities | 1,638.7 | | 1,750.7 | |
Long-term debt | 5,931.8 | | 6,667.7 | |
Pension/Postretirement | 996.6 | | 1,081.2 | |
Other liabilities | 1,141.5 | | 1,192.4 | |
Total equity | 6,961.8 | | 6,049.4 | |
Total liab. and equity | $17,926.2 | | $18,097.1 | |
| September 30 | |||
(unaudited) | 2021 | 2020 | ||
Total Debt/Total Capital | 46.1% | | 53.3% | |
Net Debt/Total Capital | 42.1% | | 49.3% | |
Net Debt/EBITDA | 2.0 |
| 2.5 | |
Net Debt/Adjusted EBITDA | 1.9 | | 2.3 | |
| | | | |
The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. | |
| Nine Months Ended |
| ||
(unaudited) | September 30 |
| ||
($ millions) | 2021 |
| 2020 |
|
Cash from op. activities | $1,421.0 | | $1,092.0 | |
Depreciation | 453.1 | | 443.1 | |
Amortization | 174.4 | | 162.1 | |
Capital expenditures | 423.8 | | 362.3 | |
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SUMMARY
In summary, our business continued to show strong year-on-year and sequential improvement. The recovery of our markets continues to broaden, and we believe we are in a strong position to leverage these trends as we benefit from robust new business wins, further customer penetration gains and accelerating pricing. We continue to expect strong year-on-year growth in the fourth quarter 2021 led by the increased volume and price momentum, and expect these drivers to result in the fourth quarter showing better year-over-year sales growth than the third quarter. We have also experienced continued substantial delivered product and other cost inflation which we believe will increase fourth quarter costs by nearly $0.20 per share versus what we expected a few months ago. We continue to mitigate the cost increases with strong pricing in a way that is sustainable for the long term and is aligned with the incremental value we create for customers. As a result, we expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter. We continue to expect strong year-on-year growth for the full year 2021, which will include the impact of higher delivered product and other cost increases that are expected to have a combined unfavorable impact approximating $0.90 per share this year, costs we have mostly mitigated through pricing and productivity gains.
Our strong business momentum, along with our enhanced value proposition and favorable macro trends, gives us confidence that Ecolab is well-positioned to leverage the global recovery post COVID and that our long-term fundamentals remain strong to deliver further superior shareholder returns.
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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 U.S. and global economic recovery, delivered product costs and supply chain disruptions, 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, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy and other unintended consequences.
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Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; 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; 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
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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 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
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•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
•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,
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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.
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.
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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.
Acquisition adjusted growth rates exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude sales to our Venezuelan deconsolidated subsidiaries from both the current period and comparable period of the prior year. In addition, as part of the separation, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this supplemental discussion. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in the
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third 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 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.
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SUPPLEMENTAL NON-GAAP RECONCILIATIONS
|
| Third Quarter Ended |
| Nine Months Ended | ||||||||
(unaudited) | | September 30 | | September 30 | ||||||||
(millions, except percent) | | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
| | | | | | | | | | | | |
Net sales | | | | | | | | | | | | |
Reported GAAP net sales | | $3,320.8 | | | $3,018.6 | | | $9,368.5 | | | $8,724.9 | |
Effect of foreign currency translation | | 28.6 | | | 79.7 | | | 50.9 | | | 276.3 | |
Non-GAAP fixed currency sales | | 3,349.4 | | | 3,098.3 | | | 9,419.4 | | | 9,001.2 | |
Effect of acquisitions and divestitures | | (51.7) | | | (47.5) | | | (194.5) | | | (97.3) | |
Non-GAAP acquisition adjusted fixed currency sales | | 3,297.7 | | | 3,050.8 | | | 9,224.9 | | | 8,903.9 | |
| | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Reported GAAP cost of sales | | $2,016.7 | | | $1,769.6 | | | $5,572.7 | | | $5,125.5 | |
Special (gains) and charges | | 52.9 | | | 9.5 | | | 76.2 | | | 45.6 | |
Non-GAAP adjusted cost of sales | | $1,963.8 | | | $1,760.1 | | | $5,496.5 | | | $5,079.9 | |
| | | | | | | | | | | | |
Gross Margin | | | | | | | | | | | | |
Reported GAAP gross margin | | 39.3 | % | | 41.4 | % | | 40.5 | % | | 41.3 | % |
Non-GAAP adjusted gross margin | | 40.9 | % | | 41.7 | % | | 41.3 | % | | 41.8 | % |
| | | | | | | | | | | | |
Operating income | | | | | | | | | | | | |
Reported GAAP operating income | | $465.8 | | | $411.4 | | | $1,210.9 | | | $979.6 | |
Effect of foreign currency translation | | 5.5 | | | 15.2 | | | 8.3 | | | 42.5 | |
Non-GAAP fixed currency operating income | | 471.3 | | | 426.6 | | | 1,219.2 | | | 1,022.1 | |
Special (gains) and charges | | 59.2 | | | 44.5 | | | 112.9 | | | 165.9 | |
Non-GAAP adjusted fixed currency operating income | | 530.5 | | | 471.1 | | | 1,332.1 | | | 1,188.0 | |
Effect of acquisitions and divestitures | | 2.3 | | | - | | | 1.6 | | | (2.6) | |
Non-GAAP acquisition adjusted fixed currency operating income | | $532.8 | | | $471.1 | | | $1,333.7 | | | $1,185.4 | |
| | | | | | | | | | | | |
Operating Income Margin | | | | | | | | | | | | |
Reported GAAP operating income margin | | 14.0 | % | | 13.6 | % | | 12.9 | % | | 11.2 | % |
Non-GAAP adjusted fixed currency operating income margin | | 15.8 | % | | 15.2 | % | | 14.1 | % | | 13.2 | % |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 16.2 | % | | 15.4 | % | | 14.5 | % | | 13.3 | % |
29
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited) |
| Third Quarter Ended |
| Nine Months Ended | ||||||||
(millions, except percent and per share) | | September 30 | | September 30 | ||||||||
| | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Interest expense, net | | | | | | | | | | | | |
Reported GAAP interest expense, net | | $76.4 | | | $134.8 | | | $173.7 | | | $241.8 | |
Special (gains) and charges, after tax | | 32.3 | | | 83.1 | | | 32.3 | | | 83.8 | |
Non-GAAP adjusted interest expense, net | | $44.1 | | | $51.7 | | | $141.4 | | | $158.0 | |
Other (income) expense | | | | | | | | | | | | |
Reported GAAP other (income) expense | | ($13.0) | | | ($15.1) | | | ($27.5) | | | ($45.6) | |
Special (gains) and charges | | 7.0 | | | - | | | 26.6 | | | - | |
Non-GAAP adjusted other (income) expense | | ($20.0) | | | ($15.1) | | | ($54.1) | | | ($45.6) | |
Net Income from continuing operations attributable to Ecolab | | | | | | | | | | | | |
Reported GAAP net income from continuing operations attributable to Ecolab | | $324.5 | | | $246.2 | | | $828.9 | | | $667.1 | |
Special (gains) and charges, after tax | | 80.8 | | | 98.5 | | | 139.1 | | | 200.3 | |
Discrete tax net expense (benefit) | | (6.3) | | | (12.4) | | | 17.5 | | | (56.8) | |
Non-GAAP adjusted net income from continuing operations attributable to Ecolab | | $399.0 | | | $332.3 | | | $985.5 | | | $810.6 | |
Diluted EPS from continuing operations attributable to Ecolab | | | | | | | | | | | | |
Reported GAAP diluted EPS from continuing operations | | $1.12 | | | $0.85 | | | $2.87 | | | $2.29 | |
Special (gains) and charges, after tax | | 0.28 | | | 0.34 | | | 0.48 | | | 0.69 | |
Discrete tax net expense (benefit) | | (0.02) | | | (0.04) | | | 0.06 | | | (0.20) | |
Non-GAAP adjusted diluted EPS from continuing operations | | $1.38 | | | $1.15 | | | $3.41 | | | $2.79 | |
Provision for Income Taxes | | | | | | | | | | | | |
Reported GAAP tax rate | | 18.3 | % | | 14.5 | % | | 21.2 | % | | 13.2 | % |
Special gains and charges | | 0.0 | | | 2.6 | | | (0.3) | | | 1.6 | |
Discrete tax items | | 1.2 | | | 2.9 | | | (1.4) | | | 5.5 | |
Non-GAAP adjusted tax rate | | 19.5 | % | | 20.0 | % | | 19.5 | % | | 20.3 | % |
EBITDA (trailing twelve months ended) | | | | | | | | | | | | |
Net income including non-controlling interest | | $1,143.6 | | | $1,079.6 | | | | | | | |
Provision for income taxes | | 299.1 | | | 190.0 | | | | | | | |
Interest expense, net | | 222.1 | | | 287.9 | | | | | | | |
Depreciation | | 604.3 | | | 588.3 | | | | | | | |
Amortization | | 230.7 | | | 213.1 | | | | | | | |
EBITDA | | $2,499.8 | | | $2,358.9 | | | | | | | |
Special (gains) and charges impacting EBITDA | | 201.8 | | | 222.5 | | | | | | | |
Adjusted EBITDA | | $2,701.6 | | | $2,581.4 | | | | | | | |
| | | | | | | | | | | | |
30
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | Third Quarter Ended September 30 | ||||||||||
(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 | | $1,620.4 | | - | | $1,620.4 | | $1,512.9 | | - | | $1,512.9 |
Global Institutional & Specialty | | 1,076.6 | | (4.1) | | 1,072.5 | | 914.4 | | - | | 914.4 |
Global Healthcare & Life Sciences | | 290.2 | | (11.7) | | 278.5 | | 335.1 | | (0.3) | | 334.8 |
Other | | 326.3 | | - | | 326.3 | | 288.7 | | - | | 288.7 |
Corporate | | 35.9 | | (35.9) | | - | | 47.2 | | (47.2) | | - |
Subtotal at fixed currency rates | | 3,349.4 | | (51.7) | | 3,297.7 | | 3,098.3 | | (47.5) | | 3,050.8 |
Currency impact | | (28.6) | | | | | | (79.7) | | | | |
Consolidated reported GAAP net sales | | $3,320.8 | | | | | | $3,018.6 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $268.3 | | - | | $268.3 | | $302.3 | | - | | $302.3 |
Global Institutional & Specialty | | 196.5 | | 0.2 | | 196.7 | | 83.7 | | - | | 83.7 |
Global Healthcare & Life Sciences | | 37.3 | | 2.1 | | 39.4 | | 69.0 | | - | | 69.0 |
Other | | 59.2 | | - | | 59.2 | | 45.8 | | - | | 45.8 |
Corporate | | (30.8) | | - | | (30.8) | | (29.7) | | - | | (29.7) |
Adjusted at fixed currency rates | | 530.5 | | 2.3 | | 532.8 | | 471.1 | | - | | 471.1 |
Special (gains) and charges | | 59.2 | | | | | | 44.5 | | | | |
Reported OI at fixed currency rates | | 471.3 | | | | | | 426.6 | | | | |
Currency impact | | (5.5) | | | | | | (15.2) | | | | |
Consolidated reported GAAP operating income | | $465.8 | | | | | | $411.4 | | | | |
| | | | | | | | | | | | |
| | Nine Months Ended September 30 | ||||||||||
| | 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 | | $4,609.7 | | ($59.4) | | $4,550.3 | | $4,476.4 | | ($36.9) | | $4,439.5 |
Global Institutional & Specialty | | 2,914.0 | | (10.2) | | 2,903.8 | | 2,734.6 | | - | | 2,734.6 |
Global Healthcare & Life Sciences | | 887.4 | | (20.8) | | 866.6 | | 913.3 | | (0.9) | | 912.4 |
Other | | 904.2 | | - | | 904.2 | | 817.4 | | - | | 817.4 |
Corporate | | 104.1 | | (104.1) | | - | | 59.5 | | (59.5) | | - |
Subtotal at fixed currency rates | | 9,419.4 | | (194.5) | | 9,224.9 | | 9,001.2 | | (97.3) | | 8,903.9 |
Currency impact | | (50.9) | | | | | | (276.3) | | | | |
Consolidated reported GAAP net sales | | $9,368.5 | | | | | | $8,724.9 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $750.8 | | ($2.5) | | $748.3 | | $799.7 | | ($2.5) | | $797.2 |
Global Institutional & Specialty | | 398.2 | | 1.8 | | 400.0 | | 229.4 | | - | | 229.4 |
Global Healthcare & Life Sciences | | 131.2 | | 2.3 | | 133.5 | | 162.0 | | (0.1) | | 161.9 |
Other | | 143.4 | | - | | 143.4 | | 88.4 | | - | | 88.4 |
Corporate | | (91.5) | | - | | (91.5) | | (91.5) | | - | | (91.5) |
Adjusted at fixed currency rates | | 1,332.1 | | 1.6 | | 1,333.7 | | 1,188.0 | | (2.6) | | 1,185.4 |
Special (gains) and charges | | 112.9 | | | | | | 165.9 | | | | |
Reported OI at fixed currency rates | | 1,219.2 | | | | | | 1,022.1 | | | | |
Currency impact | | (8.3) | | | | | | (42.5) | | | | |
Consolidated reported GAAP operating income | | $1,210.9 | | | | | | $979.6 | | | | |
31
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 | | $1.08 | | $1.75 | | $1.12 | | $2.87 | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | | | | |
Discrete tax expense (benefits) (4) | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | | | | |
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, disposal and impairment charges, Healthcare product recall charges, acquisition and integration charges, employee-related COVID-19 costs (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, $34.1 million and $80.8 million, net of tax, in the first, second and third quarters, respectively. Charges include covid related inventory write downs, debt refinancing charges, restructuring charges, employee-related COVID-19 costs (net of government subsidies), acquisition and integration charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million and ($6.3) million in the first, second and third quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
32
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