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 July 26, 2022, Ecolab Inc. (“Ecolab”) announced earnings for the second quarter ended June 30, 2022. 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 second 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 Second Quarter dated July 26, 2022. | 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: July 26, 2022 | By: | /s/ David F. Duvick |
David F. Duvick | ||
Assistant Secretary |
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Exhibit 99.1
News Release
Investor Contact: | Media Contact: | |
Andrew Hedberg (651) 250-2185 | Roman Blahoski (651) 250-4385 | |
Cairn Clark (651) 250-2291 | |
ECOLAB SECOND QUARTER REPORTED DILUTED EPS $1.08
ADJUSTED DILUTED EPS $1.10
EXPECT IMPROVED SECOND HALF 2022 PERFORMANCE
SECOND QUARTER HIGHLIGHTS:
● | Reported sales $3.6 billion, +13% versus last year. Fixed currency sales +17%. |
● | Acquisition adjusted fixed currency sales +13%, led by double-digit growth in Institutional & Specialty, Industrial and Other segment sales. |
● | Total pricing accelerated to +9%, driven by higher structural pricing and the implementation of the energy surcharge, which together exceeded delivered product cost inflation in the last month of the quarter, helping to sequentially stabilize gross margin. |
● | Reported diluted EPS $1.08, flat versus last year. |
● | Adjusted diluted EPS, excluding special gains and charges and discrete tax items were $1.10, -10% versus last year. Adjusted diluted EPS includes $0.06 per share of unfavorable currency translation and $0.06 per share of Purolite amortization. |
| | Second Quarter Ended June 30 | ||||||||||||||||
| | Reported | | | | | Adjusted | | | | ||||||||
(unaudited) | | Public Currency Rates | | % | | Public Currency Rates | | % | ||||||||||
(millions, except per share) | | 2022 | | 2021 | | Change | | 2022 | | | 2021 | | Change | |||||
Net sales | | $3,580.6 | | | $3,162.7 | | | 13 | % | | $3,580.6 | | | $3,162.7 | | | 13 | % |
Operating income | | 425.8 | | | 447.8 | | | (5) | % | | 431.1 | | | 469.1 | | | (8) | % |
Net income attributable to Ecolab | | 308.3 | | | 310.8 | | | (1) | % | | 314.6 | | | 352.6 | | | (11) | % |
| | | | | | | | | | | | | | | | | | |
Diluted earnings per share attributable to Ecolab | | $1.08 | | | $1.08 | | | 0 | % | | $1.10 | | | $1.22 | | | (10) | % |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Adjusted | | | | ||||
| | Fixed Currency Rates | | % | | Fixed Currency Rates | | % | ||||||||||
| | 2022 | | 2021 | | Change | | 2022 | | | 2021 | | Change | |||||
Net sales | | $3,616.2 | | | $3,092.6 | | | 17 | % | | $3,616.2 | | | $3,092.6 | | | 17 | % |
Operating income | | 432.2 | | | 435.0 | | | (1) | % | | 437.5 | | | 456.3 | | | (4) | % |
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ST. PAUL, Minn., July 26, 2022: Second quarter adjusted earnings reflected double-digit sales growth, driven by very strong Institutional & Specialty, Industrial and Other segment sales, accelerating total pricing and further new business wins, which together were more than offset by continued substantial delivered product cost inflation, investments in the business, and unfavorable currency translation in a rapidly changing global operating environment.
CEO Comment
Commenting on the quarter, Christophe Beck, Ecolab’s chairman and chief executive officer, said, “We delivered the second quarter as expected, with continued, strong 13% acquisition adjusted fixed currency sales growth and adjusted diluted earnings per share reaching 90% of last year’s result. The expected decline in earnings was driven by $0.06 per share of unfavorable currency translation and $0.17 per share of net impact due to the time lag between a full quarter of incremental energy costs, following the Ukraine invasion, and the progressive implementation of the energy surcharge that started on April 1. Topline growth was driven by 9% total pricing, nearly doubling from first quarter levels, and good organic volume growth, led by further strong performance from our Institutional & Specialty segment. We entered the quarter with approximately 30% delivered product cost inflation but by accelerating structural pricing and executing our new global energy surcharge with customers around the world, our team reacted very quickly and managed to deliver total pricing that exceeded delivered product cost inflation in the last month of the quarter. This helped us to sequentially stabilize gross margin, which was our absolute priority.
“We now enter the second half of 2022 in a strong position. With the global energy surcharge mechanism implemented, total pricing is expected to accelerate further to keep us ahead of inflation, resulting in easing year-over-year margin pressure going forward. As we also prepare for a potentially more challenging macroeconomic environment, our primary focus will now shift to new business development to support our strong topline momentum. While this shift will naturally take some time to fully develop, we expect our overall performance to improve sequentially in the second half, though full year earnings will be impacted by increasing currency translation headwinds, now estimated to be $0.30 per share unfavorable for the full year, and the timing lag of the second quarter energy surcharge. We look for the third quarter to show continued strong sales growth and a sequentially narrowing decline in year-over-year adjusted diluted earnings per share comparisons, reflecting an estimated $0.10 per share impact from unfavorable currency translation and potentially softer volume growth as our team shifts their focus to new business. With total
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pricing expected to accelerate even further, reaching the low double-digit level in the second half, further new business wins, breakthrough innovation and continued productivity benefits, we expect the fourth quarter to show accelerating earnings growth, resulting in modest gains in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a very strong position to get back to more traditional Ecolab-like performance going forward.
“While the external environment over the past few years has been complex, the actions we have taken have made us even stronger. We launched new innovative programs to gain share and drive penetration; we enhanced our value proposition to strengthen pricing; we initiated a new global energy surcharge that helped us adjust to rapid changes; we expanded our global digital capabilities to improve service and productivity and we invested in new high growth opportunities like life sciences and data centers to expand in new growth markets. When combined with our resilient service model and a large and growing $152 billion market opportunity driven by secular trends in people and planet health, I have great confidence in Ecolab’s long-term growth trajectory and ability to deliver superior results for our customers and shareholders for years to come.”
Second Quarter 2022 Consolidated Results
Ecolab’s second quarter reported sales increased 13%, fixed currency sales increased 17% and acquisition adjusted fixed currency sales increased 13% when compared to the prior year.
Second quarter 2022 reported operating income decreased 5% and includes the impact of special gains and charges, which were a net charge primarily related to Purolite acquisition costs. Adjusted operating income decreased 8%. Adjusted fixed currency operating income decreased 4%, as accelerating total pricing and good volume growth were more than offset by substantially higher delivered product costs and investments in the business.
Reported interest expense increased 23% as interest on new debt issued to fund the Purolite acquisition was partially offset by benefits from debt refinancing transactions completed last year.
The reported income tax rate for the second quarter of 2022 was 19.7% compared with the reported rate of 21.5% in the second quarter of 2021. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the second quarter of 2022 was 19.2% compared with the adjusted tax rate of 19.3% in the second quarter of 2021.
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Second quarter 2022 reported net income decreased 1% versus the prior year. Excluding the impact of special gains and charges and discrete tax items, adjusted net income decreased 11% versus the prior year.
Reported diluted earnings per share were flat versus the prior year. Adjusted diluted earnings per share decreased 10% when compared against the second quarter 2021. Adjusted diluted earnings per share includes $0.06 of Purolite amortization. Currency translation had a $0.06 unfavorable impact on second quarter 2022 earnings per share.
Ecolab reacquired approximately 0.7 million shares of its common stock during the second quarter of 2022 as a part of the previously announced share repurchase program.
Second Quarter 2022 Segment Review
Global Industrial | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Second Quarter Ended June 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2022 | | 2021 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $1,704.1 | | | $1,502.3 | | | 13 | % | | 13 | % |
Operating income | | 227.0 | | | 251.3 | | | (10) | % | | (10) | % |
Operating income margin | | 13.3 | % | | 16.7 | % | | | | | | |
Acq. adj. operating income margin | | 13.3 | % | | 16.7 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $1,689.9 | | | $1,544.5 | | | 9 | % | | | |
Operating income | | 223.8 | | | 260.8 | | | (14) | % | | | |
The Industrial segment includes Water, Food & Beverage, Downstream and Paper
Acquisition adjusted fixed currency sales increased 13%. Strong double-digit growth across all divisions was driven by accelerating total pricing and new business wins. Acquisition adjusted fixed currency operating income decreased 10% as accelerating total pricing was more than offset by significantly higher delivered product costs and unfavorable mix.
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Global Institutional & Specialty | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Second Quarter Ended June 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2022 | | 2021 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $1,135.1 | | | $963.5 | | | 18 | % | | 18 | % |
Operating income | | 152.6 | | | 137.7 | | | 11 | % | | 11 | % |
Operating income margin | | 13.4 | % | | 14.3 | % | | | | | | |
Acq. adj. operating income margin | | 13.4 | % | | 14.3 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $1,127.2 | | | $976.0 | | | 15 | % | | | |
Operating income | | 151.3 | | | 138.5 | | | 9 | % | | | |
The Institutional & Specialty segment includes Institutional and Specialty
Acquisition adjusted fixed currency sales increased 18%. Very strong growth in the Institutional division reflected robust volume gains, accelerating total pricing, good new business wins, and innovation, which successfully leveraged global market trends that modestly improved through the quarter. Specialty sales showed good growth, driven by strong quickservice sales gains. Acquisition adjusted fixed currency operating income increased 11% as accelerating total pricing and strong volume growth overcame higher delivered product costs and investments in the business.
Global Healthcare & Life Sciences | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Second Quarter Ended June 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2022 | | 2021 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $400.8 | | | $292.0 | | | 37 | % | | 0 | % |
Operating income | | 58.5 | | | 46.1 | | | 27 | % | | (38) | % |
Operating income margin | | 14.6 | % | | 15.8 | % | | | | | | |
Acq. adj. operating income margin | | 9.8 | % | | 15.8 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $390.9 | | | $301.8 | | | 30 | % | | | |
Operating income | | 56.8 | | | 48.0 | | | 18 | % | | | |
The Healthcare & Life Sciences segment includes Healthcare and Life Sciences
Acquisition adjusted fixed currency sales were flat as double-digit growth in Life Sciences was offset by modestly lower Healthcare sales. While Healthcare sales improved sequentially, its decline versus the prior year reflected good growth in North America that was more than offset by a slower recovery in Europe. Acquisition adjusted fixed currency operating income decreased 38%,
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as accelerating total pricing was more than offset by higher delivered product costs, lower volume and investments in the business.
Other | | | | | | | | | | | | |
| | | | | | | | | | | | |
(unaudited) | | Second Quarter Ended June 30 | | | | | Acq. Adj. | |||||
(millions) |
| 2022 | | 2021 | | % Change |
| % Change | ||||
| | | | | | | | | | | | |
Fixed currency | | | | | | | | | | | | |
Sales | | $342.3 | | | $300.3 | | | 14 | % | | 14 | % |
Operating income | | 52.0 | | | 50.8 | | | 2 | % | | 2 | % |
Operating income margin | | 15.2 | % | | 16.9 | % | | | | | | |
Acq. adj. operating income margin | | 15.2 | % | | 16.9 | % | | | | | | |
| | | | | | | | | | | | |
Public currency | | | | | | | | | | | | |
Sales | | $338.7 | | | $305.5 | | | 11 | % | | | |
Operating income | | 51.6 | | | 51.7 | | | 0 | % | | | |
The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies
Acquisition adjusted fixed currency sales increased 14%, reflecting double-digit growth in Pest Elimination, Textile Care and Colloidal Technologies. Acquisition adjusted fixed currency operating income increased 2% as accelerating total pricing and volume gains overcame higher delivered product costs and investments in the business.
Corporate | | | | | | |
| | | | | | |
(unaudited) | | Second Quarter Ended June 30 | ||||
(millions) |
| 2022 | | 2021 | ||
| | | | | | |
Public currency | | | | | | |
Sales | | $33.9 | | | $34.9 | |
| | | | | | |
Corporate operating expense | | | | | | |
Nalco and Purolite amortization | | 52.4 | | | 29.9 | |
Special (gains) and charges | | 5.3 | | | 21.3 | |
Total Corporate operating expense | | $57.7 | | | $51.2 | |
Second quarter of 2022 corporate segment includes:
● | sales of $34 million to ChampionX under the Master Cross Supply and Product Transfer agreements we entered into as part of the ChampionX separation |
● | amortization expense of $30 million related to the Nalco merger intangible assets and $23 million related to Purolite acquisition intangible assets |
● | special gains and charges were a net charge of $5 million, primarily related to Purolite acquisition costs |
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Special gains and charges for the second quarter of 2021 were a net charge of $21 million and primarily included COVID-related charges and restructuring charges.
2022 Business Outlook
While the economic environment remains complex and unpredictable, we assume growth will continue, inflation will remain higher for longer and currency translation impacts become more challenging. With the global energy surcharge mechanism implemented, total pricing is expected to accelerate further to keep us ahead of inflation, resulting in easing year-over-year margin pressure going forward. As we also prepare for a potentially more challenging macroeconomic environment, our primary focus will now shift to new business development to support our strong topline momentum. While this shift will naturally take some time to fully develop, we expect our overall performance to improve sequentially in the second half, though full year earnings will be impacted by increasing currency translation headwinds, now estimated to be $0.30 per share unfavorable for the full year, and the timing lag of the second quarter energy surcharge. We look for the third quarter to show continued strong sales growth and a sequentially narrowing decline in year-over-year adjusted diluted earnings per share comparisons, reflecting an estimated $0.10 per share impact from unfavorable currency translation and potentially softer volume growth as our team shifts their focus to new business. With total pricing expected to accelerate even further, reaching the low double-digit level in the second half, further new business wins, breakthrough innovation and continued productivity benefits, we expect the fourth quarter to show accelerating earnings growth, resulting in modest gains in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a very strong position to get back to more traditional Ecolab-like performance going forward.
About Ecolab
A trusted partner at nearly three million customer locations, Ecolab (ECL) is a global leader in water, hygiene and infection prevention solutions and services that protect people, planet and business health. With annual sales of $13 billion and more than 47,000 associates, Ecolab delivers comprehensive science-based solutions, data-driven insights and world-class 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
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Ecolab will host a live webcast to review the second 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 news release 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 global economic conditions, inflation and currency translation, and our financial and business performance and prospects, including sales, earnings, pricing, margins, new business, innovation and productivity. 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 news release.
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; difficulty in procuring raw materials or fluctuations in raw material costs; 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; information technology infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change and changing labor market dynamics in the wake of the COVID-19 pandemic; exposure to global economic, political and legal risks related to our international operations, including the impact of sanctions or other actions taken by the U.S.
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or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; realization of anticipated benefits of the Purolite acquisition; our ability to acquire complementary businesses and to effectively integrate such businesses; 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; potential chemical spill or release; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; 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; 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; potential losses arising from the impairment of goodwill or other assets; 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 news release may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.
Non-GAAP Financial Information
This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
These non-GAAP financial measures include:
•fixed currency sales
•acquisition adjusted fixed currency sales
•adjusted cost of sales
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•adjusted gross margin
•fixed currency operating income
•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 tax rate
•adjusted net income attributable to Ecolab
•adjusted diluted earnings per share
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income, other (income) expense and interest expense exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items 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 2022. We also provide our segment results based on public currency rates for informational purposes.
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Our reportable segments do not include the impact of intangible asset amortization from the Nalco and Purolite mergers 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. 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 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 news release) 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)
| | Second Quarter Ended | | | | Six Months Ended | |
| ||||||
| | June 30 | | % | | June 30 | | % | ||||||
(millions, except per share) | | 2022 |
| 2021 | | Change |
| 2022 |
| 2021 |
| Change | ||
| | | | | | | | | | | | | | |
Product and equipment sales | | $2,886.8 | | $2,514.4 | | | | | $5,510.9 | | $4,807.8 | | | |
Service and lease sales | | 693.8 | | 648.3 | | | | | 1,336.4 | | 1,239.9 | | | |
Net sales | | 3,580.6 | | 3,162.7 | | 13 | % | | 6,847.3 | | 6,047.7 | | 13 | % |
Product and equipment cost of sales | | 1,799.0 | | 1,464.9 | | | | | 3,494.6 | | 2,827.8 | | | |
Service and lease cost of sales | | 412.1 | | 379.1 | | | | | 789.9 | | 728.2 | | | |
Cost of sales (1) | | 2,211.1 | | 1,844.0 | | 20 | % | | 4,284.5 | | 3,556.0 | | 20 | % |
Selling, general and administrative expenses | | 940.1 | | 853.3 | | 10 | % | | 1,854.8 | | 1,716.2 | | 8 | % |
Special (gains) and charges (1) | | 3.6 | | 17.6 | | | | | 27.7 | | 30.4 | | | |
Operating income | | 425.8 | | 447.8 | | (5) | % | | 680.3 | | 745.1 | | (9) | % |
Other (income) expense (1) | | (19.5) | | 2.5 | | (880) | % | | (38.3) | | (14.5) | | 164 | % |
Interest expense, net | | 56.0 | | 45.6 | | 23 | % | | 109.0 | | 97.3 | | 12 | % |
Income before income taxes | | 389.3 | | 399.7 | | (3) | % | | 609.6 | | 662.3 | | (8) | % |
Provision for income taxes | | 76.6 | | 86.1 | | (11) | % | | 122.2 | | 152.2 | | (20) | % |
Net income including noncontrolling interest | | 312.7 | | 313.6 | | 0 | % | | 487.4 | | 510.1 | | (4) | % |
Net income attributable to noncontrolling interest | | 4.4 | | 2.8 | | | | | 7.2 | | 5.7 | | | |
Net income attributable to Ecolab | | $308.3 | | $310.8 | | (1) | % | | 480.2 | | 504.4 | | (5) | % |
| | | | | | | | | | | | | | |
Earnings attributable to Ecolab per common share | | | | | | | | | | | | | ||
Basic | | $1.08 | | $1.09 | | (1) | % | | $1.68 | | $1.76 | | (5) | % |
Diluted | | $1.08 | | $1.08 | | 0 | % | | $1.67 | | $1.75 | | (5) | % |
| | | | | | | | | | | | | | |
Weighted-average common shares outstanding | | | | | | | | | | | | | ||
Basic | | 285.1 | | 286.0 | | 0 | % | | 285.7 | | 286.0 | | 0 | % |
Diluted | | 286.6 | | 288.8 | | (1) | % | | 287.4 | | 288.9 | | (1) | % |
| | | | | | | | | | | | | | |
(1) Cost of sales, Special (gains) and charges and Other (income) expense, net in the Consolidated Statement of Income above include the following: | ||||||||||||||
| | | | | | | | | | | | | | |
| | Second Quarter Ended | | | | Six Months Ended | |
| ||||||
| | June 30 | | | | | June 30 | | | | ||||
(millions) | | 2022 | | 2021 | | | | | 2022 | | 2021 | | | |
| | | | | | | | | | | | | | |
Cost of sales | | | | | | | | | | | | | | |
Restructuring activities | | $0.8 | | $3.7 | | | | | $3.4 | | $21.9 | | | |
Acquisition and integration activities | | 0.9 | | - | | | | | 28.5 | | - | | | |
COVID-19 activities, net | | - | | - | | | | | 16.3 | | 1.1 | | | |
Russia/Ukraine activities | | - | | - | | | | | 6.4 | | - | | | |
Other | | - | | - | | | | | - | | 0.3 | | | |
Subtotal (a) | | 1.7 | | 3.7 | | | | | 54.6 | | 23.3 | | | |
| | | | | | | | | | | | | | |
Special (gains) and charges | | | | | | | | | | | | | | |
Restructuring activities | | 0.3 | | 2.5 | | | | | 1.1 | | 6.1 | | | |
Acquisition and integration activities | | 3.4 | | 1.3 | | | | | 10.9 | | 2.5 | | | |
COVID-19 activities, net | | 3.1 | | 8.3 | | | | | 4.6 | | 14.7 | | | |
Russia/Ukraine activities | | (5.7) | | - | | | | | 5.9 | | | | | |
Other | | 2.5 | | 5.5 | | | | | 5.2 | | 7.1 | | | |
Subtotal | | 3.6 | | 17.6 | | | | | 27.7 | | 30.4 | | | |
| | | | | | | | | | | | | | |
Other (income) expense | | | | | | | | | | | | | | |
Pension Settlements/Curtailments | | - | | 19.6 | | | | | - | | 19.6 | | | |
| | | | | | | | | | | | | | |
Total special (gains) and charges | | $5.3 | | $40.9 | | | | | $82.3 | | $73.3 | | | |
(a) Special charges of $1.2 million and $3.7 million in the second quarter of 2022 and 2021 respectively, and $53.2 million and $23.3 million for the first six months of 2022 and 2021, respectively, were recorded in product and equipment cost of sales. Special charges of $0.5 million in the second quarter of 2022 and $1.4 million for the first six months of 2022 were recorded in service and lease cost of sales.
12
ECOLAB INC.
REPORTABLE SEGMENT INFORMATION
(unaudited)
| | Second Quarter Ended June 30 | ||||||||||||
| | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | % | | | | | | % | ||
(millions) | | 2022 |
| 2021 |
| Change |
| 2022 |
| 2021 |
| Change | ||
Net Sales | | | | | | | | | | | | | | |
Global Industrial | | $1,704.1 | | $1,502.3 | | 13 | % | | $1,689.9 | | $1,544.5 | | 9 | % |
Global Institutional & Specialty | | 1,135.1 | | 963.5 | | 18 | % | | 1,127.2 | | 976.0 | | 15 | % |
Global Healthcare & Life Sciences | | 400.8 | | 292.0 | | 37 | % | | 390.9 | | 301.8 | | 30 | % |
Other | | 342.3 | | 300.3 | | 14 | % | | 338.7 | | 305.5 | | 11 | % |
Corporate | | 33.9 | | 34.5 | | (2) | % | | 33.9 | | 34.9 | | (3) | % |
Subtotal at fixed currency rates | | 3,616.2 | | 3,092.6 | | 17 | % | | 3,580.6 | | 3,162.7 | | 13 | % |
Currency impact | | (35.6) | | 70.1 | | * | | | - | | - | | * | |
Consolidated reported GAAP net sales | | $3,580.6 | | $3,162.7 | | 13 | % | | $3,580.6 | | $3,162.7 | | 13 | % |
| | | | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | | | |
Global Industrial | | $227.0 | | $251.3 | | (10) | % | | $223.8 | | $260.8 | | (14) | % |
Global Institutional & Specialty | | 152.6 | | 137.7 | | 11 | % | | 151.3 | | 138.5 | | 9 | % |
Global Healthcare & Life Sciences | | 58.5 | | 46.1 | | 27 | % | | 56.8 | | 48.0 | | 18 | % |
Other | | 52.0 | | 50.8 | | 2 | % | | 51.6 | | 51.7 | | 0 | % |
Corporate | | (57.9) | | (50.9) | | * | | | (57.7) | | (51.2) | | * | |
Subtotal at fixed currency rates | | 432.2 | | 435.0 | | (1) | % | | 425.8 | | 447.8 | | (5) | % |
Currency impact | | (6.4) | | 12.8 | | * | | | - | | - | | * | |
Consolidated reported GAAP operating income | | $425.8 | | $447.8 | | (5) | % | | $425.8 | | $447.8 | | (5) | % |
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 | ||||||||||||
| | Fixed Currency Rates | | Public Currency Rates | ||||||||||
| | | | | | % | | | | | | % | ||
(millions) | | 2022 |
| 2021 |
| Change |
| 2022 |
| 2021 |
| Change | ||
Net Sales | | | | | | | | | | | | | | |
Global Industrial | | $3,261.1 | | $2,887.2 | | 13 | % | | $3,255.6 | | $2,975.5 | | 9 | % |
Global Institutional & Specialty | | 2,140.2 | | 1,807.6 | | 18 | % | | 2,134.2 | | 1,833.4 | | 16 | % |
Global Healthcare & Life Sciences | | 763.4 | | 573.1 | | 33 | % | | 753.7 | | 594.5 | | 27 | % |
Other | | 638.3 | | 565.7 | | 13 | % | | 635.1 | | 576.2 | | 10 | % |
Corporate | | 68.6 | | 67.3 | | 2 | % | | 68.7 | | 68.1 | | 1 | % |
Subtotal at fixed currency rates | | 6,871.6 | | 5,900.9 | | 16 | % | | 6,847.3 | | 6,047.7 | | 13 | % |
Currency impact | | (24.3) | | 146.8 | | * | | | - | | - | | * | |
Consolidated reported GAAP net sales | | $6,847.3 | | $6,047.7 | | 13 | % | | $6,847.3 | | $6,047.7 | | 13 | % |
| | | | | | | | | | | | | | |
Operating Income | | | | | | | | | | | | | | |
Global Industrial | | $416.2 | | $461.1 | | (10) | % | | $415.2 | | $481.1 | | (14) | % |
Global Institutional & Specialty | | 263.4 | | 199.6 | | 32 | % | | 262.4 | | 200.5 | | 31 | % |
Global Healthcare & Life Sciences | | 102.6 | | 88.7 | | 16 | % | | 101.0 | | 93.0 | | 9 | % |
Other | | 89.2 | | 83.1 | | 7 | % | | 89.1 | | 84.6 | | 5 | % |
Corporate | | (187.5) | | (113.4) | | * | | | (187.4) | | (114.1) | | * | |
Subtotal at fixed currency rates | | 683.9 | | 719.1 | | (5) | % | | 680.3 | | 745.1 | | (9) | % |
Currency impact | | (3.6) | | 26.0 | | * | | | - | | - | | * | |
Consolidated reported GAAP operating income | | $680.3 | | $745.1 | | (9) | % | | $680.3 | | $745.1 | | (9) | % |
* 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 and Purolite merger intangible assets. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income.
13
ECOLAB INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | June 30 | | December 31 | | June 30 | |||
(millions) | | 2022 | | 2021 | | 2021 | |||
Assets | | | | | | | | | |
Current assets | | | | | | | | | |
Cash and cash equivalents | | $124.9 | | | $359.9 | | | $1,402.4 | |
Accounts receivable, net | | 2,668.0 | | | 2,478.4 | | | 2,331.0 | |
Inventories | | 1,720.7 | | | 1,491.8 | | | 1,418.5 | |
Other current assets | | 391.4 | | | 357.0 | | | 335.5 | |
Total current assets | | 4,905.0 | | | 4,687.1 | | | 5,487.4 | |
| | | | | | | | | |
Property, plant and equipment, net | | 3,264.0 | | | 3,288.5 | | | 3,077.9 | |
Goodwill | | 7,935.9 | | | 8,063.9 | | | 6,172.4 | |
Other intangible assets, net | | 4,030.6 | | | 4,224.1 | | | 2,925.4 | |
Operating lease assets | | 400.8 | | | 396.8 | | | 391.5 | |
Other assets | | 627.3 | | | 546.0 | | | 479.1 | |
Total assets | | $21,163.6 | | | $21,206.4 | | | $18,533.7 | |
| | | | | | | | | |
Liabilities and Equity | | | | | | | | | |
Current liabilities | | | | | | | | | |
Short-term debt | | $618.3 | | | $411.0 | | | $17.3 | |
Accounts payable | | 1,524.8 | | | 1,384.2 | | | 1,213.3 | |
Compensation and benefits | | 434.8 | | | 509.5 | | | 430.3 | |
Income taxes | | 73.6 | | | 104.3 | | | 48.9 | |
Other current liabilities | | 1,154.5 | | | 1,144.2 | | | 1,170.5 | |
Total current liabilities | | 3,806.0 | | | 3,553.2 | | | 2,880.3 | |
| | | | | | | | | |
Long-term debt | | 8,167.8 | | | 8,347.2 | | | 6,708.9 | |
Postretirement health care and pension benefits | | 838.0 | | | 894.2 | | | 1,046.6 | |
Deferred income taxes | | 630.4 | | | 622.0 | | | 567.3 | |
Operating lease liabilities | | 291.8 | | | 282.6 | | | 273.8 | |
Other liabilities | | 311.2 | | | 254.1 | | | 320.5 | |
Total liabilities | | 14,045.2 | | | 13,953.3 | | | 11,797.4 | |
| | | | | | | | | |
Equity | | | | | | | | | |
Common stock | | 364.5 | | | 364.1 | | | 363.2 | |
Additional paid-in capital | | 6,529.8 | | | 6,464.6 | | | 6,333.3 | |
Retained earnings | | 9,003.3 | | | 8,814.5 | | | 8,472.8 | |
Accumulated other comprehensive loss | | (1,617.9) | | | (1,634.8) | | | (1,710.6) | |
Treasury stock | | (7,186.3) | | | (6,784.2) | | | (6,749.6) | |
Total Ecolab shareholders’ equity | | 7,093.4 | | | 7,224.2 | | | 6,709.1 | |
Noncontrolling interest | | 25.0 | | | 28.9 | | | 27.2 | |
Total equity | | 7,118.4 | | | 7,253.1 | | | 6,736.3 | |
Total liabilities and equity | | $21,163.6 | | | $21,206.4 | | | $18,533.7 | |
14
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| Second Quarter Ended |
| Six Months Ended |
| ||||||||
| | June 30 | | June 30 | | ||||||||
(millions, except percent and per share) | | 2022 |
| 2021 | | 2022 |
| 2021 | | ||||
| | | | | | | | | | | | | |
Net sales | | | | | | | | | | | | | |
Reported GAAP net sales | | $3,580.6 | | | $3,162.7 | | | $6,847.3 | | | $6,047.7 | | |
Effect of foreign currency translation | | 35.6 | | | (70.1) | | | 24.3 | | | (146.8) | | |
Non-GAAP fixed currency sales | | 3,616.2 | | | 3,092.6 | | | 6,871.6 | | | 5,900.9 | | |
Effect of acquisitions and divestitures | | (151.2) | | | (34.5) | | | (293.7) | | | (67.3) | | |
Non-GAAP acquisition adjusted fixed currency sales | | $3,465.0 | | | $3,058.1 | | | $6,577.9 | | | $5,833.6 | | |
| | | | | | | | | | | | | |
Cost of sales | | | | | | | | | | | | | |
Reported GAAP cost of sales | | $2,211.1 | | | $1,844.0 | | | $4,284.5 | | | $3,556.0 | | |
Special (gains) and charges | | 1.7 | | | 3.7 | | | 54.6 | | | 23.3 | | |
Non-GAAP adjusted cost of sales | | $2,209.4 | | | $1,840.3 | | | $4,229.9 | | | $3,532.7 | | |
| | | | | | | | | | | | | |
Gross margin | | | | | | | | | | | | | |
Reported GAAP gross margin | | 38.2 | % | | 41.7 | % | | 37.4 | % | | 41.2 | % | |
Non-GAAP adjusted gross margin | | 38.3 | % | | 41.8 | % | | 38.2 | % | | 41.6 | % | |
| | | | | | | | | | | | | |
Operating income | | | | | | | | | | | | | |
Reported GAAP operating income | | $425.8 | | | $447.8 | | | $680.3 | | | $745.1 | | |
Effect of foreign currency translation | | 6.4 | | | (12.8) | | | 3.6 | | | (26.0) | | |
Non-GAAP fixed currency operating income | | 432.2 | | | 435.0 | | | 683.9 | | | 719.1 | | |
Special (gains) and charges | | 5.3 | | | 21.3 | | | 82.3 | | | 53.7 | | |
Non-GAAP adjusted fixed currency operating income | | 437.5 | | | 456.3 | | | 766.2 | | | 772.8 | | |
Effect of acquisitions and divestitures | | (8.5) | | | 0.0 | | | (6.0) | | | 0.0 | | |
Non-GAAP acquisition adjusted fixed currency operating income | | $429.0 | | | $456.3 | | | $760.2 | | | $772.8 | | |
| | | | | | | | | | | | | |
Operating income margin | | | | | | | | | | | | | |
Reported GAAP operating income margin | | 11.9 | % | | 14.2 | % | | 9.9 | % | | 12.3 | % | |
Non-GAAP adjusted fixed currency operating income margin | | 12.1 | % | | 14.8 | % | | 11.2 | % | | 13.1 | % | |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 12.4 | % | | 14.9 | % | | 11.6 | % | | 13.2 | % | |
| | | | | | | | | | | | | |
Other (income) expense | | | | | | | | | | | | | |
Reported GAAP other (income) expense | | ($19.5) | | | $2.5 | | | ($38.3) | | | (14.5) | | |
Special (gains) and charges | | - | | | 19.6 | | | 0.0 | | | 19.6 | | |
Non-GAAP adjusted other (income) expense | | ($19.5) | | | (17.10) | | | ($38.3) | | | (34.1) | | |
15
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited)
|
| Second Quarter Ended |
| Six Months Ended | | ||||||||
| | June 30 | | June 30 | | ||||||||
(millions, except percent and per share) | | 2022 |
| 2021 | | 2022 |
| 2021 | | ||||
Net Income attributable to Ecolab | | | | | | | | | | | | | |
Reported GAAP net income attributable to Ecolab | | $308.3 | | | $310.8 | | | $480.2 | | | $504.4 | | |
Special (gains) and charges, after tax | | 2.6 | | | 34.1 | | | 66.2 | | | 58.3 | | |
Discrete tax net expense (benefit) | | 3.7 | | | 7.7 | | | 4.7 | | | 23.8 | | |
Non-GAAP adjusted net income attributable to Ecolab | | $314.6 | | | $352.6 | | | $551.1 | | | $586.5 | | |
| | | | | | | | | | | | | |
Diluted EPS attributable to Ecolab | | | | | | | | | | | | | |
Reported GAAP diluted EPS | | $1.08 | | | $1.08 | | | $1.67 | | | $1.75 | | |
Special (gains) and charges, after tax | | 0.01 | | | 0.12 | | | 0.23 | | | 0.20 | | |
Discrete tax net expense (benefit) | | 0.01 | | | 0.02 | | | 0.02 | | | 0.08 | | |
Non-GAAP adjusted diluted EPS | | $1.10 | | | $1.22 | | | $1.92 | | | $2.03 | | |
| | | | | | | | | | | | | |
Provision for Income Taxes | | | | | | | | | | | | | |
Reported GAAP tax rate | | 19.7 | % | | 21.5 | % | | 20.0 | % | | 23.0 | % | |
Special gains and charges | | 0.4 | | | (0.4) | | | 0.0 | | | (0.3) | | |
Discrete tax items | | (0.9) | | | (1.8) | | | (0.7) | | | (3.2) | | |
Non-GAAP adjusted tax rate | | 19.2 | % | | 19.3 | % | | 19.3 | % | | 19.5 | % | |
16
ECOLAB INC.
SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | Second Quarter Ended June 30 | ||||||||||
(unaudited) | | 2022 | | 2021 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $1,704.1 | | ($7.2) | | $1,696.9 | | $1,502.3 | | - | | $1,502.3 |
Global Institutional & Specialty | | 1,135.1 | | - | | 1,135.1 | | 963.5 | | - | | 963.5 |
Global Healthcare & Life Sciences | | 400.8 | | (110.1) | | 290.7 | | 292.0 | | - | | 292.0 |
Other | | 342.3 | | - | | 342.3 | | 300.3 | | - | | 300.3 |
Corporate | | 33.9 | | (33.9) | | - | | 34.5 | | (34.5) | | - |
Subtotal at fixed currency rates | | 3,616.2 | | (151.2) | | 3,465.0 | | 3,092.6 | | (34.5) | | 3,058.1 |
Currency impact | | (35.6) | | | | | | 70.1 | | | | |
Consolidated reported GAAP net sales | | $3,580.6 | | | | | | $3,162.7 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $227.0 | | ($1.3) | | $225.7 | | $251.3 | | - | | $251.3 |
Global Institutional & Specialty | | 152.6 | | - | | 152.6 | | 137.7 | | - | | 137.7 |
Global Healthcare & Life Sciences | | 58.5 | | (29.9) | | 28.6 | | 46.1 | | - | | 46.1 |
Other | | 52.0 | | - | | 52.0 | | 50.8 | | - | | 50.8 |
Corporate | | (52.6) | | 22.7 | | (29.9) | | (29.6) | | - | | (29.6) |
Subtotal at fixed currency rates | | 437.5 | | (8.5) | | 429.0 | | 456.3 | | - | | 456.3 |
Special (gains) and charges | | 5.3 | | | | | | 21.3 | | | | |
Reported OI at fixed currency rates | | 432.2 | | | | | | 435.0 | | | | |
Currency impact | | (6.4) | | | | | | 12.8 | | | | |
Consolidated reported GAAP operating income | | $425.8 | | | | | | $447.8 | | | | |
| | | | | | | | | | | | |
| | Six Months Ended June 30 | ||||||||||
| | 2022 | | 2021 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $3,261.1 | | ($13.1) | | $3,248.0 | | $2,887.2 | | - | | $2,887.2 |
Global Institutional & Specialty | | 2,140.2 | | - | | 2,140.2 | | 1,807.6 | | - | | 1,807.6 |
Global Healthcare & Life Sciences | | 763.4 | | (212.0) | | 551.4 | | 573.1 | | - | | 573.1 |
Other | | 638.3 | | - | | 638.3 | | 565.7 | | - | | 565.7 |
Corporate | | 68.6 | | (68.6) | | - | | 67.3 | | (67.3) | | - |
Subtotal at fixed currency rates | | 6,871.6 | | (293.7) | | 6,577.9 | | 5,900.9 | | (67.3) | | 5,833.6 |
Currency impact | | (24.3) | | | | | | 146.8 | | | | |
Consolidated reported GAAP net sales | | $6,847.3 | | | | | | $6,047.7 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $416.2 | | ($2.1) | | $414.1 | | $461.1 | | - | | $461.1 |
Global Institutional & Specialty | | 263.4 | | - | | 263.4 | | 199.6 | | - | | 199.6 |
Global Healthcare & Life Sciences | | 102.6 | | (49.5) | | 53.1 | | 88.7 | | - | | 88.7 |
Other | | 89.2 | | - | | 89.2 | | 83.1 | | - | | 83.1 |
Corporate | | (105.2) | | 45.6 | | (59.6) | | (59.7) | | - | | (59.7) |
Subtotal at fixed currency rates | | 766.2 | | (6.0) | | 760.2 | | 772.8 | | - | | 772.8 |
Special (gains) and charges | | 82.3 | | | | | | 53.7 | | | | |
Reported OI at fixed currency rates | | 683.9 | | | | | | 719.1 | | | | |
Currency impact | | (3.6) | | | | | | 26.0 | | | | |
Consolidated reported GAAP operating income | | $680.3 | | | | | | $745.1 | | | | |
17
ECOLAB INC.
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share.
|
| 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 | | $1.04 | | $3.91 | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (1) | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
Discrete tax expense (benefits) (2) | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | (0.04) | | 0.02 | |
Impact of Purolite on diluted earnings per share | | | | | | | | | | | | 0.02 | | 0.02 | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | $1.28 | | $4.69 | |
|
| 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 |
|
| | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 |
|
Diluted earnings per share, as reported (U.S. GAAP) | | $0.60 | | $1.08 | | $1.67 | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.22 | | 0.01 | | 0.23 | | | | | | | | | |
Discrete tax expense (benefits) (4) | | 0.00 | | 0.01 | | 0.02 | | | | | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.82 | | $1.10 | | $1.92 | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2021 includes charges of $24.2 million, $34.1 million, $80.8 million and $74.4 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include COVID-19 related inventory write downs and employee-related costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million, ($6.3) million and ($11.7) million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
(3) Special (gains) and charges for 2022 includes charges of $63.6 million and $2.6 million, net of tax, in the first and second quarters, respectively. Charges include acquisition and integration charges, reserves related to our operations in Russia, COVID-19 related inventory write downs and employee-related costs, restructuring charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2022 includes $1.0 million and $3.7 million in the first and second quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
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Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. Second Quarter 2022 Teleconference Supplemental Data 1 |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. CAUTIONARY STATEMENT Forward - Looking Information This communication contains forward looking statements as that term is defined in the Private Securities Litigation Reform Ac t o f 1995. These forward - looking statements include, but are not limited to, statements regarding global economic conditions, inflation and currency translation, and our fi nancial and business performance and prospects, including sales, earnings, pricing, margins, new business, innovation and productivity. These statements are based on the current expectations of manage men t. 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. Additional risks and uncertainties are set forth under Item 1A of our most recent Form 10 - K, and our other public filings with t he Securities and Exchange Commission (“SEC”), and include the effects and duration of the COVID - 19 pandemic, including the impact of vaccination mandates; difficulty in procuring raw materials or fluctu ations in raw material costs; 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 e arn ings in our international operations resulting from the weakening of local currencies versus the U.S. dollar; information technology infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change and changing labor market dynamics in the wake of the COVID - 19 pandemic; exposure to global economic, political and legal risks related to our international operations, including the impact of sanctions or other actions taken by the U.S. or other countries, and retali ato ry measures taken by Russia in response, in connection with the conflict in Ukraine; 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 dat e 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). Man ag ement believes that a presentation of this information is meaningful to investors because it provides insight with respect to ongoing operating results of the C omp any 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 m ay 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 Me asures” section of this presentation. 2 |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 3 KEY THEMES As expected, delivered continued strong double - digit organic sales growth ▪ Fueled by a near doubling of total pricing to 9% versus 1Q, continued good volume gains, and new business ▪ Implemented our energy surcharge to manage incremental energy costs that drove delivered product costs higher Gross margin stabilized sequentially from 1Q ▪ Total pricing exceeded delivered product cost inflation in the last month of the quarter ▪ Expect low double - digit total pricing in the second half resulting in easing year - over - year gross margin pressure Expect sequentially improving performance, exiting the year in a strong position ▪ Assumes economic growth continues, delivered product cost inflation remains high, and unfavorable currency translation contin ues ▪ Expect to overcome external challenges with strong sales growth, low double - digit total pricing, new business, and cost efficien cies Resilient model positioned for superior, long - term performance ▪ $152B market opportunity serving the essential food, water, healthcare and life sciences industries ▪ Strong and differentiated value proposition with solutions that help customers reduce their total costs in a high inflationar y e nvironment ▪ 90%+ consumable revenue: resilient demand profile with products critical to customer operations |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 4 3Q and 2022 OUTLOOK ▪ While the economic environment remains complex and unpredictable, we assume growth will continue, inflation will remain higher for longer and currency translation impacts become more challenging. With the global energy surcharge mechanism implemented, tota l pricing is expected to accelerate further in order to keep us ahead of inflation, resulting in easing year - over - year margin pressure going forward. ▪ As we also prepare for a potentially more challenging macroeconomic environment, our primary focus will now shift to new business development to support our strong topline momentum. While this shift will naturally take some time to fully develop , we expect our overall performance to improve sequentially in the second half, though full year earnings will be impacted by increasing currency translation headwinds, now estimated to be $0.30 per share unfavorable for the full year, and the timing lag of the second quarter energy surcharge. ▪ 3Q 2022: We look for the third quarter to show continued strong sales growth and a sequentially narrowing decline in year - over - year adjusted diluted earnings per share comparisons, reflecting an estimated $0.10 per share impact from unfavorable currency translation and potentially softer volume growth as our team shifts their focus to new business .. ▪ Full year 2022: With total pricing expected to reach the low double - digit level, further new business wins, breakthrough innovation and productivity benefits, we expect the fourth quarter to show accelerating earnings growth, resulting in modest gains in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a strong position to get back to more traditional Ecolab - like performance going forward. |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 5 2Q 2022 SALES GROWTH DETAIL Amounts in the tables above may reflect rounding. Acq./Div. Adj. excludes sales to ChampionX post - separation. Fixed Rate Acq./Div. Adj. Global Industrial % Change % Change Consolidated % Change Water 13% 11% Volume & mix 4% Food & Beverage 13% 13% Pricing 9% Downstream 10% 10% Subtotal 13% Paper 17% 17% Acq./Div. 4% Total Global Industrial 13% 13% Fixed currency growth 17% Currency impact -3% Global Institutional & Specialty Total 13% Institutional 23% 23% Specialty 5% 5% Total Global Institutional & Specialty 18% 18% Global Healthcare & Life Sciences Healthcare -1% -3% Life Sciences 171% 10% Total Global Healthcare & Life Sciences 37% 0% Other Pest Elimination 11% 11% Textile Care 25% 25% Colloidal Technologies 17% 17% Total Other 14% 14% Total 17% 13% |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 6 2Q 2022 INCOME STATEMENT / MARGINS * Public rates of exchange, except where noted. **See “Non - GAAP Financial Measures” section of this presentation for corresponding reconciliations. ($ millions, unaudited)* 2022 % sales 2021 % sales Comments** Gross Profit $1,369.5 38.2% $1,318.7 41.7% 4 % Adjusted gross margins of 38.3% in 2022 and 41.8% in 2021 primarily reflected accelerating pricing that was more than offset by a 30% increase in delivered product costs. SG&A 940.1 26.3% 853.3 27.0% 10 % SG&A ratio to sales improved by 70 basis points as sales leverage and cost savings more than offset investments in the business to support good volume growth. Op. Income at fixed FX Global Industrial 227.0 13.3% 251.3 16.7% -10 % Margins declined as accelerating pricing was more than offset by significantly higher delivered product costs and unfavorable mix. Global Institutional & Specialty 152.6 13.4% 137.7 14.3% 11 % Margins declined as accelerating pricing and very strong volume growth overcame higher delivered product costs and investments in the business. Global Healthcare & Life Sciences 58.5 14.6% 46.1 15.8% 27 % Margins declined as accelerating pricing was more than offset by higher delivered product costs, lower volume and investments in the business. Other 52.0 15.2% 50.8 16.9% 2 % Margins declined as accelerating pricing was offset by higher delivered product costs and investments in the business. Subtotal at fixed FX 490.1 13.7% 485.9 15.7% 1 % FX (6.4) 12.8 Corporate Corp. Expense (52.6) (29.6) Nalco and Purolite intangible amortization. Special Gains/(Ch.) (5.3) (21.3) 2022: Primarily reflected Purolite acquisition costs. Total Corporate Exp. (57.9) (50.9) Consolidated Op. Inc. $425.8 11.9% $447.8 14.2% -5 % 2022 acquisition adjusted fixed currency operating margins were 12.4% vs. 14.9% last year. The decrease reflects accelerating pricing and good volume growth that were more than offset by substantially higher delivered product costs and investments in the business. % change |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 7 2Q 2022 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) 2022 2021 (millions, unaudited) 2022 2021 Cash and cash eq. $124.9 $1,402.4 Short-term debt $618.3 $17.3 Accounts receivable, net 2,668.0 2,331.0 Accounts payable 1,524.8 1,213.3 Inventories 1,720.7 1,418.5 Other current liabilities 1,662.9 1,649.7 Other current assets 391.4 335.5 Long-term debt 8,167.8 6,708.9 PP&E, net 3,264.0 3,077.9 Pension/Postretirement 838.0 1,046.6 Goodwill and intangibles 11,966.5 9,097.8 Other liabilities 1,233.4 1,161.6 Other assets 1,028.1 870.6 Total equity 7,118.4 6,736.3 Total assets $21,163.6 $18,533.7 Total liab. and equity $21,163.6 $18,533.7 Selected Cash Flow items (millions, unaudited) 2022 2021 (unaudited) 2022 2021 Cash from op. activities $492.5 $798.3 Total Debt/Total Capital 55.2% 50.0% Depreciation 311.2 303.9 Net Debt/Total Capital 54.9% 44.1% Amortization 158.2 116.7 Net Debt/EBITDA(*) 3.5 2.2 Capital expenditures 317.5 245.6 Net Debt/Adjusted EBITDA(*) 3.2 2.0 June 30 June 30 Six Months Ended Selected Balance Sheet measures June 30 June 30 |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 8 NON - GAAP FINANCIAL MEASURES (unaudited) (millions, except percent) Net sales Reported GAAP net sales $3,580.6 $3,162.7 Effect of foreign currency translation 35.6 (70.1) Non-GAAP fixed currency sales 3,616.2 3,092.6 Effect of acquisitions and divestitures (151.2) (34.5) Non-GAAP acquisition adjusted fixed currency sales $3,465.0 $3,058.1 Cost of Sales Reported GAAP cost of sales $2,211.1 $1,844.0 Special (gains) and charges 1.7 3.7 Non-GAAP adjusted cost of sales $2,209.4 $1,840.3 Gross Margin Reported GAAP gross margin 38.2 % 41.7 % Non-GAAP adjusted gross margin 38.3 % 41.8 % Operating income Reported GAAP operating income $425.8 $447.8 Effect of foreign currency translation 6.4 (12.8) Non-GAAP fixed currency operating income 432.2 435.0 Special (gains) and charges 5.3 21.3 Non-GAAP adjusted fixed currency operating income 437.5 456.3 Effect of acquisitions and divestitures (8.5) - Non-GAAP acquisition adjusted fixed currency operating income $429.0 $456.3 Operating Income Margin Reported GAAP operating income margin 11.9 % 14.2 % Non-GAAP adjusted fixed currency operating income margin 12.1 % 14.8 % Non-GAAP acquisition adjusted fixed currency operating income margin 12.4 % 14.9 % Second Quarter Ended June 30 2022 2021 |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 9 NON - GAAP FINANCIAL MEASURES (unaudited) (millions, except percent and per share) Net Income attributable to Ecolab Reported GAAP net income attributable to Ecolab $308.3 $310.8 Special (gains) and charges, after tax 2.6 34.1 Discrete tax net expense (benefit) 3.7 7.7 Non-GAAP adjusted net income attributable to Ecolab $314.6 $352.6 Diluted EPS attributable to Ecolab Reported GAAP diluted EPS $1.08 $1.08 Special (gains) and charges, after tax 0.01 0.12 Discrete tax net expense (benefit) 0.01 0.02 Non-GAAP adjusted diluted EPS $1.10 $1.22 Provision for Income Taxes Reported GAAP tax rate 19.7 % 21.5 % Special gains and charges 0.4 (0.4) Discrete tax items (0.9) (1.8) Non-GAAP adjusted tax rate 19.2 % 19.3 % EBITDA (trailing twelve months ended) Net income including non-controlling interest $1,121.3 $1,064.3 Provision for income taxes 240.2 $267.7 Interest expense, net 230.0 $280.5 Depreciation 611.7 $605.2 Amortization 280.2 $231.9 EBITDA $2,483.4 $2,449.6 Special (gains) and charges impacting EBITDA 242.7 235.6 Adjusted EBITDA $2,726.1 $2,685.2 Second Quarter Ended 2022 2021 June 30 |
Please see Ecolab’s news release dated July 26, 2022 for additional information, including discussion on the use of certain non - GAAP financial measures. 10 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 $1,704.1 ($7.2) $1,696.9 $1,502.3 $0.0 $1,502.3 Global Institutional & Specialty 1,135.1 - 1,135.1 963.5 - 963.5 Global Healthcare & Life Sciences 400.8 (110.1) 290.7 292.0 - 292.0 Other 342.3 - 342.3 300.3 - 300.3 Corporate 33.9 (33.9) - 34.5 (34.5) - Subtotal at fixed currency rates 3,616.2 (151.2) 3,465.0 3,092.6 (34.5) 3,058.1 Currency impact (35.6) 70.1 Consolidated reported GAAP net sales $3,580.6 $3,162.7 Operating Income Global Industrial $227.0 ($1.3) $225.7 $251.3 $0.0 $251.3 Global Institutional & Specialty 152.6 - 152.6 137.7 - 137.7 Global Healthcare & Life Sciences 58.5 (29.9) 28.6 46.1 - 46.1 Other 52.0 - 52.0 50.8 - 50.8 Corporate (52.6) 22.7 (29.9) (29.6) - (29.6) Subtotal at fixed currency rates 437.5 (8.5) 429.0 456.3 - 456.3 Special (gains) and charges 5.3 21.3 Reported OI at fixed currency rates 432.2 435.0 Currency impact (6.4) 12.8 Consolidated reported GAAP operating income $425.8 $447.8 Second Quarter Ended June 30 2022 2021 |
Exhibit 99.3
ECOLAB SECOND QUARTER 2022
Strong double-digit sales growth, driven by accelerating total pricing, good volume leverage and further new business wins was more than offset by continued substantial delivered product cost inflation, investments in the business, and unfavorable currency translation in a rapidly changing global operating environment.
◢ | Sales: |
◢ | Earnings: |
◾ | Reported diluted EPS $1.08, flat versus last year. |
◾ | As expected, adjusted diluted EPS excluding special gains and charges and discrete tax items were $1.10, -10%. Adjusted diluted EPS includes $0.06 per share of unfavorable currency translation and $0.06 per share of Purolite amortization. |
◢ | Outlook: |
◾ | We expect to see sequentially improving performance in the second half, though full year earnings growth will be impacted by increasing currency translation headwinds (now estimated to be $0.30 per share unfavorable for the full year) and the timing of the second quarter energy surcharge. As we prepare for a potentially more challenging macroeconomic environment, our primary focus will now shift to new business development to support our strong topline momentum. |
◾ | We look for the third quarter to show continued strong sales growth and a sequentially narrowing decline in year-over-year adjusted diluted earnings per share comparisons, reflecting an estimated $0.10 per share impact from unfavorable currency translation and potentially softer volume growth as our team shifts their focus to new business. |
◾ | With total pricing expected to reach the low double-digit level, further new business wins, breakthrough innovation and productivity benefits, we expect the fourth quarter to show accelerating earnings growth, resulting in modest gains in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a strong position to get back to more traditional Ecolab-like performance going forward. |
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SUMMARY
Ecolab’s strong topline momentum continued in the second quarter as fixed currency acquisition adjusted sales rose 13%, driven by accelerating total pricing, good volume leverage and further new business wins. We enjoyed robust double-digit sales growth in our Institutional & Specialty, Industrial and Other segments, while acquisition adjusted Healthcare & Life Sciences segment results improved sequentially but were flat compared to the year-ago period as double-digit growth in Life Sciences was offset by modestly lower Healthcare sales. Acquisition adjusted sales increased double-digits across all major regions.
The expected decline in earnings was driven by $0.06 per share of unfavorable currency translation and $0.17 per share of net impact due to the time lag between a full quarter of incremental energy costs, following the Ukraine invasion, and the progressive implementation of the energy surcharge that started on April 1. Delivered product costs increased an estimated 30% versus last year, up from the first quarter’s 25% increase. Importantly, our team continues to respond very well to the inflationary challenges as they effectively worked with customers during the quarter to roll-out our energy surcharge. By accelerating structural pricing and executing our energy surcharge, our total pricing increased to 9%, up from 5% last quarter. Importantly, our total pricing exceeded delivered product cost inflation in the last month of the quarter. This helped to sequentially stabilize our gross margin.
Looking ahead, with the energy surcharge mechanism implemented, our total
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pricing is expected to keep us ahead of inflation, resulting in easing year-over-year gross margin pressure in the second half. As we prepare for a potentially more challenging macroenvironment, our primary focus is shifting to new business development to support our strong topline momentum, though this shift will naturally take some time to fully develop. At the same time, we are continuing to invest in our key long-term business drivers and leverage our ongoing digital automation work to drive our performance, productivity and improved results for customers. With this, we expect to see sequentially improving performance in the second half, though full year earnings growth will be impacted by increasing currency translation headwinds (now estimated to be $0.30 per share unfavorable for the full year) and the timing lag of the second quarter energy surcharge. We look for the third quarter to show continued strong sales growth and a sequentially narrowing decline in year-over-year adjusted diluted earnings per share comparisons, reflecting an estimated $0.10 per share impact from unfavorable currency translation and potentially softer volume growth as our team shifts their focus to new business. With total pricing expected to reach the low double-digit level, further new business wins, breakthrough innovation and productivity benefits, we expect the fourth quarter to show accelerating earnings growth, resulting in modest gains in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a strong position to get back to more traditional Ecolab-like performance going forward.
While the global economic environment remains complex and is uncertain, we are confident in our positioning and the resiliency of our model. Our well-balanced portfolio serves a $152 billion market, comprised of the essential
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food, water, healthcare and life sciences industries. Our strong and differentiated value proposition – providing the leading products and expert service that deliver the best results and lowest operating costs for customers – is more important than ever, and we have further strengthened our business portfolio, competitive position and unique capabilities to best serve our customers. Further, 90% of our revenue comes from consumable products that are critical to our customers’ operations.
Our new focus areas, including life sciences and data centers, are well-positioned to drive growth and global leadership; and our leading digital capabilities continue to develop and add competitive advantages. With our firm pricing execution that is overcoming inflationary headwinds and ultimately driving higher margins, we expect to continue to leverage the favorable long-term macro trends and our robust growth opportunities to drive superior results for our customers and shareholders.
CONSOLIDATED SALES
Consolidated sales | % Change | |
Volume & mix | 4% | |
Pricing | 9% | |
Subtotal | 13% | |
Acq./Div. | 4% | |
Fixed currency growth | 17% | |
Currency impact | (3)% | |
Total | 13% | |
| | |
Ecolab’s second quarter reported sales increased 13% when compared to the year ago period. Fixed currency sales increased 17%. Looking at the components, consolidated volume and mix increased 4%, total pricing
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increased 9% and acquisitions added 4% to sales growth. Currency was an unfavorable 3%.
GLOBAL INDUSTRIAL SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Industrial | % Change | % Change | ||
Water | 13% | | 11% | |
Food & Beverage | 13% | | 13% | |
Downstream | 10% | | 10% | |
Paper | 17% | | 17% | |
Total Global Industrial | 13% | | 13% | |
WATER
Fixed currency Water sales increased 13%; acquisition adjusted sales increased 11% reflecting accelerating total pricing and new business wins. Light industry water treatment sales enjoyed strong growth, driven by double-digit growth across manufacturing, data centers and microelectronics, and food and beverage. Heavy industry sales also recorded a strong increase, led by strong gains in power and chemicals. Mining showed very strong growth, benefiting from our strategic shift toward high-value metals and fertilizers.
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 chemistry solutions and integrated digital technologies and service expertise that help customers reduce water consumption toward net zero and meet their sustainability objectives. Further, we remain aggressive on pricing to offset increasing delivered product costs. We expect further strong sales
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growth in the third quarter driven by increased total pricing and new business wins.
FOOD & BEVERAGE
Fixed currency Food & Beverage sales increased 13%, reflecting accelerating total pricing and stable end market trends. Growth was led by very strong gains in animal health while beverage and brewing, dairy, protein and food also all grew at double-digit rates. Fixed currency sales growth was strong across all regions.
We anticipate strong sales growth led by further strong pricing in the third quarter.
DOWNSTREAM
Downstream fixed currency sales grew 10%, driven by accelerating total pricing, good new business wins, strong growth in additives, and good gains in petrochemical sales. Fixed currency sales showed robust growth in Europe, Asia Pacific and Latin America, and moderate growth in North America.
We expect continued strong growth in the third quarter, driven by further pricing and new business wins.
PAPER
Paper fixed currency acquisition adjusted sales recorded another strong gain, rising 17%, driven by accelerating total pricing and good new business wins. Board & packaging sales remained strong, with tissue and graphics also
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showing strong growth reflecting new business and the continued recovery of production rates. Fixed currency sales growth remained strong in all regions.
We expect Paper to show continued sales growth above its long-term trend in the third quarter of 2022, reflecting further strong pricing, growth in board & packaging and tissue, and normalizing demand for graphic paper.
GLOBAL INDUSTRIAL SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Global Industrial Op. Inc. | $227.0 | | 13.3% | | $251.3 | | 16.7% | | (10)% | |
Acq./Div. Adj. Op. Inc. | $225.7 | | 13.3% | | $251.3 | | 16.7% | | (10)% | |
Acquisition adjusted fixed currency operating income decreased 10% as accelerating total pricing was more than offset by significantly higher delivered product costs and unfavorable mix.
GLOBAL INSTITUTIONAL & SPECIALTY SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Institutional & Specialty | % Change | % Change | ||
Institutional | 23% | | 23% | |
Specialty | 5% | | 5% | |
Total Global Institutional & Specialty | 18% | | 18% | |
INSTITUTIONAL
Fixed currency sales for the global Institutional business increased 23%. The strong growth was driven by improved volume, accelerating total pricing, good new business wins, and new innovation, which together successfully leveraged global market trends that modestly improved through the quarter. Europe and Latin America showed very strong growth benefiting from increased consumer traffic and in-unit dining relative to last year and new business wins. Our North American business continued its very strong growth
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driven by robust volume gains and further new account wins as it outpaced still-recovering in-unit restaurant dining and lodging trends. Asia Pacific sales showed good growth, as softer trends in China due to significantly increased COVID restrictions were more than offset by strong growth in other parts of the 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, and our expert service to help solve customer problems have continued to be significant differentiators for us and remain important factors in our new business wins. These products and programs, many of which offer faster and more efficient cleaning processes and thereby reduce the labor required and the total cost to clean, are helping customers manage more effectively in the current labor market and inflationary challenges.
While customer labor availability issues continue to impact our customers’ operating capacity, further delaying the full recovery in the global restaurant and hospitality markets, we expect our continued new business gains and further pricing will result in another strong performance by Institutional in the third quarter.
SPECIALTY
Second quarter Specialty fixed currency sales increased 5%, driven by strong quickservice sales and modest growth in food retail sales. Quickservice sales showed a strong gain versus last year as accelerating total pricing, new
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business wins and growth in core cleaning and sanitizing sales continued to drive momentum, despite an uneven recovery in end market traffic. Food retail sales grew modestly reflecting good new business wins, though customer labor shortages continued to impact in-store services and associated cleaning and sanitizing product usage.
We expect third quarter Specialty sales to show improved growth as quickservice and food retail benefit from further pricing, new customer wins, our broad range of innovative products and service expertise, and further normalization of demand.
INSTITUTIONAL & SPECIALTY SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Global Institutional & Specialty Op. Inc. | $152.6 | | 13.4% | | $137.7 | | 14.3% | | 11% | |
Acq./Div. Adj. Op. Inc. | $152.6 | | 13.4% | | $137.7 | | 14.3% | | 11% | |
Acquisition adjusted fixed currency operating income increased 11% as accelerating total pricing and strong volume growth overcame higher delivered product costs and investments in the business.
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GLOBAL HEALTHCARE & LIFE SCIENCES SALES
| Fixed Rate | Acq./Div. Adj. | ||
Global Healthcare & Life Sciences | % Change | % Change | ||
Healthcare | (1)% | | (3)% | |
Life Sciences | 171% | | 10% | |
Total Global Healthcare & Life Sciences | 37% | | 0% | |
HEALTHCARE
As expected, reported second quarter global Healthcare fixed currency sales declined 1% versus the prior year. Acquisition adjusted sales declined 3%, as good growth in North America sales was more than offset by a slower recovery in Europe.
We expect improving sales trends in the third quarter, reflecting accelerating pricing, along with the continued normalization of elective procedures and healthcare facility operations. We believe with our broadened product line, ongoing product innovation, digital tools and proven service value will drive improved sales growth in the third quarter and that the business remains well-positioned for attractive long-term growth.
LIFE SCIENCES
Life Sciences’ second quarter reported sales increased 171% reflecting the acquisition of Purolite; acquisition adjusted fixed currency sales increased 10%. Legacy Ecolab Life Sciences’ growth was driven by accelerating total pricing and good new customer gains. Similar to the first quarter, Purolite sales showed modest growth due to its capacity still being sold-out through the third quarter, though robust demand for its innovative solutions continues to rise.
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We anticipate accelerating sales growth through the balance of the year as market fundamentals remain strong and Purolite’s capacity expansion comes online later this year. Demand for our specialized products and services that help ensure safe, efficient, and effective manufacturing facilities for our pharmaceutical and personal care customers remains robust. We look for Life Sciences to show continued strong growth in the third quarter, benefiting from increased pricing and new business wins. While Purolite’s short-term capacity constraints will continue to impact the third quarter, we expect sales growth to accelerate later in the year, driven by further pricing and capacity additions.
HEALTHCARE & LIFE SCIENCES SEGMENT MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Global Healthcare & Life Sciences Op. Inc. | $58.5 | | 14.6% | | $46.1 | | 15.8% | | 27% | |
Acq./Div. Adj. Op. Inc. | $28.6 | | 9.8% | | $46.1 | | 15.8% | | (38)% | |
Acquisition adjusted fixed currency operating income decreased 38% as accelerating total pricing was more than offset by higher delivered product costs, lower volume and investments in the business.
OTHER SEGMENT SALES
| Fixed Rate | Acq./Div. Adj. | ||
Other | % Change | % Change | ||
Pest Elimination | 11% | | 11% | |
Textile Care | 25% | | 25% | |
Colloidal Technologies | 17% | | 17% | |
Total Other | 14% | | 14% | |
| | | | |
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PEST ELIMINATION
Fixed currency Pest Elimination sales increased 11% reflecting strong growth across food retail, hospitality, restaurants and food and beverage. We realized continued robust new business wins driven by our high service levels, innovation, and increased awareness around food safety and hygiene standards. Regionally, North America delivered double-digit growth, Europe showed a solid increase, and Asia Pacific and Latin America sales rose modestly.
We expect Pest Elimination to show strong growth in the third quarter as we benefit from new customer wins and leverage our ongoing innovation and enhanced digital offerings to further extend our competitive advantages.
OTHER MARGIN PERFORMANCE
($ millions - fixed currency, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Other Op. Inc. | $52.0 | | 15.2% | | $50.8 | | 16.9% | | 2% | |
Acq./Div. Adj. Op. Inc. | $52.0 | | 15.2% | | $50.8 | | 16.9% | | 2% | |
Acquisition adjusted fixed currency operating income increased 2% as accelerating total pricing and volume gains overcame higher delivered product costs and investments in the business.
CONSOLIDATED MARGIN PERFORMANCE
($ millions, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Gross Profit | $1,369.5 | | 38.2% | | $1,318.7 | | 41.7% | | 4% | |
Gross Profit (adj.) | $1,371.2 | | 38.3% | | $1,322.4 | | 41.8% | | 4% | |
Second quarter gross margins adjusted for special charges decreased 350 basis points versus last year’s adjusted margin, primarily reflecting
13
accelerating total pricing that was more than offset by a 30% increase in delivered product costs. Importantly, our total pricing exceeded delivered product cost inflation in the last month of the quarter and as a result, we expect year-over-year gross margin pressure to ease in the second half.
($ millions, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
SG&A | $940.1 | | 26.3% | | $853.3 | | 27.0% | | 10% | |
The second quarter SG&A ratio to sales improved by 70 basis points as sales leverage and cost savings more than offset investments in the business to support good volume growth.
($ millions, unaudited) | 2022 |
| % sales | 2021 |
| % sales | % change | |||
Operating Income | $425.8 | | 11.9% | | $447.8 | | 14.2% | | (5)% | |
Fixed Currency Operating | | | | | | | | | | |
Income (adj.) | $437.5 | | 12.1% | | $456.3 | | 14.8% | | (4)% | |
Fixed Currency Operating | | | | | | | | | | |
Income (acq./div. adj.) | $429.0 | | 12.4% | | $456.3 | | 14.9% | | (6)% | |
Adjusted fixed currency operating income decreased 4%, as accelerating total pricing and volume growth were more than offset by substantially higher delivered product costs and investments in the business.
CORPORATE EXPENSE
($ millions - unaudited) | 2022 |
| 2021 |
|
Corporate | | | | |
Nalco and Purolite amortization | ($52.6) | | ($29.6) | |
Special Gains/(Charges) | (5.3) | | (21.3) | |
Total Corporate Expense | ($57.9) | | ($50.9) | |
Second quarter of 2022 corporate segment includes:
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● | sales of $34 million to ChampionX under the Master Cross Supply and Product Transfer agreements we entered into as part of the ChampionX separation |
● | amortization expense of $30 million related to the Nalco merger intangible assets and $23 million related to Purolite acquisition intangible assets |
● | net special charges of $5 million that primarily reflected Purolite acquisition costs |
Special gains and charges for the second quarter of 2021 were a net charge of $21 million and primarily included COVID-related charges and restructuring charges.
INTEREST, TAX RATE, SHARES AND CONSOLIDATED INCOME
Reported interest expense increased 23% as interest on new debt issued to fund the Purolite acquisition was partially offset by benefits from debt refinancing transactions completed last year.
The reported income tax rate for the second quarter of 2022 was 19.7% compared with the reported rate of 21.5% for the second quarter of 2021. Excluding special gains and charges and discrete tax items, the adjusted tax rate for the second quarter of 2022 was 19.2% compared with 19.3% for the second quarter of 2021.
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The net of this performance is that Ecolab reported second quarter diluted earnings per share of $1.08, flat versus the prior year. When adjusted for special gains and charges and discrete tax items, second quarter adjusted diluted earnings per share were $1.10, -10% compared with $1.22 reported a year ago. Adjusted diluted earnings per share include $0.06 of Purolite amortization. Currency translation had a $0.06 unfavorable impact on second quarter 2022 earnings per share.
Ecolab reacquired approximately 0.7 million shares of its common stock during the second quarter of 2022 as a part of the previously announced share repurchase program.
BALANCE SHEET, CASH FLOW AND LEVERAGE
(unaudited) | June 30 |
| ||
($ millions) | 2022 |
| 2021 |
|
Cash and cash eq. | $124.9 | | $1,402.4 | |
Accounts receivable, net | 2,668.0 | | 2,331.0 | |
Inventories | 1,720.7 | | 1,418.5 | |
Other current assets | 391.4 | | 335.5 | |
PP&E, net | 3,264.0 | | 3,077.9 | |
Goodwill and intangibles | 11,966.5 | | 9,097.8 | |
Other assets | 1,028.1 | | 870.6 | |
Total assets | $21,163.6 | | $18,533.7 | |
| | | | |
Short-term debt | $618.3 | | $17.3 | |
Accounts payable | 1,524.8 | | 1,213.3 | |
Other current liabilities | 1,662.9 | | 1,649.7 | |
Long-term debt | 8,167.8 | | 6,708.9 | |
Pension/Postretirement | 838.0 | | 1,046.6 | |
Other liabilities | 1,233.4 | | 1,161.6 | |
Total equity | 7,118.4 | | 6,736.3 | |
Total liab. and equity | $21,163.6 | | $18,533.7 | |
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| Six Months Ended |
| ||
(unaudited) | June 30 |
| ||
($ millions) | 2022 |
| 2021 |
|
Cash from op. activities | $492.5 | | $798.3 | |
Depreciation | 311.2 | | 303.9 | |
Amortization | 158.2 | | 116.7 | |
Capital expenditures | 317.5 | | 245.6 | |
SUMMARY
In summary, our business continued to show very strong sales growth in the second quarter driven by rapidly accelerating pricing, good volume gains and further new business wins. Our total pricing nearly doubled from first quarter levels and exceeded delivered product cost inflation in the last month of the quarter.
We believe that our total pricing will reach low-double digit levels, resulting in easing year-over-year gross margin pressure in the coming quarters. This, along with further new business wins and benefits from innovation and digital automation, are expected to result in sequentially improving performance in the second half, resulting in modest growth in full year 2022 adjusted earnings per share. Importantly, we expect to exit the year in a strong position to get back to more traditional Ecolab-like performance going forward.
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,”
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“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 global economic conditions, inflation, currency translation, supply constraints, capacity expansion and end market trends, and our financial and business performance and prospects, including sales, earnings, pricing, margins, new business, innovation and productivity. 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.
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; difficulty in procuring raw materials or fluctuations in raw material costs; 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; information technology infrastructure failures or breaches in data security; our ability to attract, retain and develop high caliber management talent to lead our business and
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successfully execute organizational change and changing labor market dynamics in the wake of the COVID-19 pandemic; exposure to global economic, political and legal risks related to our international operations, including the impact of sanctions or other actions taken by the U.S. or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; realization of anticipated benefits of the Purolite acquisition; our ability to acquire complementary businesses and to effectively integrate such businesses; 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; potential chemical spill or release; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; 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; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any
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failure to comply with covenants that apply to our indebtedness; potential losses arising from the impairment of goodwill or other assets; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.
NON-GAAP FINANCIAL INFORMATION
This discussion and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures include:
•fixed currency sales
•acquisition adjusted fixed currency sales
•adjusted cost of sales
•adjusted gross margin
•fixed currency operating income
•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
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•adjusted tax rate
•adjusted net income attributable to Ecolab
•adjusted diluted earnings per share
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income, other (income) expense and interest expense exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items 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
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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 2022. We also provide our segment results based on public currency rates for information purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco and Purolite mergers 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. 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
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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 second quarter 2022 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
|
| Second Quarter Ended |
| Six Months Ended | ||||||||
(unaudited) | | June 30 | | June 30 | ||||||||
(millions, except percent) | | 2022 |
| 2021 | | 2022 |
| 2021 | ||||
| | | | | | | | | | | | |
Net sales | | | | | | | | | | | | |
Reported GAAP net sales | | $3,580.6 | | | $3,162.7 | | | $6,847.3 | | | $6,047.7 | |
Effect of foreign currency translation | | 35.6 | | | (70.1) | | | 24.3 | | | (146.8) | |
Non-GAAP fixed currency sales | | 3,616.2 | | | 3,092.6 | | | 6,871.6 | | | 5,900.9 | |
Effect of acquisitions and divestitures | | (151.2) | | | (34.5) | | | (293.7) | | | (67.3) | |
Non-GAAP acquisition adjusted fixed currency sales | | $3,465.0 | | | $3,058.1 | | | $6,577.9 | | | $5,833.6 | |
| | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Reported GAAP cost of sales | | $2,211.1 | | | $1,844.0 | | | $4,284.5 | | | $3,556.0 | |
Special (gains) and charges | | 1.7 | | | 3.7 | | | 54.6 | | | 23.3 | |
Non-GAAP adjusted cost of sales | | $2,209.4 | | | $1,840.3 | | | $4,229.9 | | | $3,532.7 | |
| | | | | | | | | | | | |
Gross Margin | | | | | | | | | | | | |
Reported GAAP gross margin | | 38.2 | % | | 41.7 | % | | 37.4 | % | | 41.2 | % |
Non-GAAP adjusted gross margin | | 38.3 | % | | 41.8 | % | | 38.2 | % | | 41.6 | % |
| | | | | | | | | | | | |
Operating income | | | | | | | | | | | | |
Reported GAAP operating income | | $425.8 | | | $447.8 | | | $680.3 | | | $745.1 | |
Effect of foreign currency translation | | 6.4 | | | (12.8) | | | 3.6 | | | (26.0) | |
Non-GAAP fixed currency operating income | | 432.2 | | | 435.0 | | | 683.9 | | | 719.1 | |
Special (gains) and charges | | 5.3 | | | 21.3 | | | 82.3 | | | 53.7 | |
Non-GAAP adjusted fixed currency operating income | | 437.5 | | | 456.3 | | | 766.2 | | | 772.8 | |
Effect of acquisitions and divestitures | | (8.5) | | | - | | | (6.0) | | | - | |
Non-GAAP acquisition adjusted fixed currency operating income | | $429.0 | | | $456.3 | | | $760.2 | | | $772.8 | |
| | | | | | | | | | | | |
Operating Income Margin | | | | | | | | | | | | |
Reported GAAP operating income margin | | 11.9 | % | | 14.2 | % | | 9.9 | % | | 12.3 | % |
Non-GAAP adjusted fixed currency operating income margin | | 12.1 | % | | 14.8 | % | | 11.2 | % | | 13.1 | % |
Non-GAAP acquisition adjusted fixed currency operating income margin | | 12.4 | % | | 14.9 | % | | 11.6 | % | | 13.2 | % |
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SUPPLEMENTAL NON-GAAP RECONCILIATIONS
(unaudited) |
| Second Quarter Ended |
| Six Months Ended | ||||||||
(millions, except percent and per share) | | June 30 | | June 30 | ||||||||
| | 2022 |
| 2021 | | 2022 |
| 2021 | ||||
Net Income attributable to Ecolab | | | | | | | | | | | | |
Reported GAAP net income attributable to Ecolab | | $308.3 | | | $310.8 | | | $480.2 | | | $504.4 | |
Special (gains) and charges, after tax | | 2.6 | | | 34.1 | | | 66.2 | | | 58.3 | |
Discrete tax net expense (benefit) | | 3.7 | | | 7.7 | | | 4.7 | | | 23.8 | |
Non-GAAP adjusted net income attributable to Ecolab | | $314.6 | | | $352.6 | | | $551.1 | | | $586.5 | |
Diluted EPS attributable to Ecolab | | | | | | | | | | | | |
Reported GAAP diluted EPS | | $1.08 | | | $1.08 | | | $1.67 | | | $1.75 | |
Special (gains) and charges, after tax | | 0.01 | | | 0.12 | | | 0.23 | | | 0.20 | |
Discrete tax net expense (benefit) | | 0.01 | | | 0.02 | | | 0.02 | | | 0.08 | |
Non-GAAP adjusted diluted EPS | | $1.10 | | | $1.22 | | | $1.92 | | | $2.03 | |
Provision for Income Taxes | | | | | | | | | | | | |
Reported GAAP tax rate | | 19.7 | % | | 21.5 | % | | 20.0 | % | | 23.0 | % |
Special gains and charges | | 0.4 | | | (0.4) | | | 0.0 | | | (0.3) | |
Discrete tax items | | (0.9) | | | (1.8) | | | (0.7) | | | (3.2) | |
Non-GAAP adjusted tax rate | | 19.2 | % | | 19.3 | % | | 19.3 | % | | 19.5 | % |
EBITDA (trailing twelve months ended) | | | | | | | | | | | | |
Net income including non-controlling interest | | $1,121.3 | | | $1,064.3 | | | | | | | |
Provision for income taxes | | 240.2 | | | $267.7 | | | | | | | |
Interest expense, net | | 230.0 | | | $280.5 | | | | | | | |
Depreciation | | 611.7 | | | $605.2 | | | | | | | |
Amortization | | 280.2 | | | $231.9 | | | | | | | |
EBITDA | | $2,483.4 | | | $2,449.6 | | | | | | | |
Special (gains) and charges impacting EBITDA | | 242.7 | | | 235.6 | | | | | | | |
Adjusted EBITDA | | $2,726.1 | | | $2,685.2 | | | | | | | |
| | | | | | | | | | | | |
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SUPPLEMENTAL NON-GAAP RECONCILIATIONS
| | Second Quarter Ended June 30 | ||||||||||
(unaudited) | | 2022 | | 2021 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $1,704.1 | | ($7.2) | | $1,696.9 | | $1,502.3 | | - | | $1,502.3 |
Global Institutional & Specialty | | 1,135.1 | | - | | 1,135.1 | | 963.5 | | - | | 963.5 |
Global Healthcare & Life Sciences | | 400.8 | | (110.1) | | 290.7 | | 292.0 | | - | | 292.0 |
Other | | 342.3 | | - | | 342.3 | | 300.3 | | - | | 300.3 |
Corporate | | 33.9 | | (33.9) | | - | | 34.5 | | (34.5) | | - |
Subtotal at fixed currency rates | | 3,616.2 | | (151.2) | | 3,465.0 | | 3,092.6 | | (34.5) | | 3,058.1 |
Currency impact | | (35.6) | | | | | | 70.1 | | | | |
Consolidated reported GAAP net sales | | $3,580.6 | | | | | | $3,162.7 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $227.0 | | ($1.3) | | $225.7 | | $251.3 | | - | | $251.3 |
Global Institutional & Specialty | | 152.6 | | - | | 152.6 | | 137.7 | | - | | 137.7 |
Global Healthcare & Life Sciences | | 58.5 | | (29.9) | | 28.6 | | 46.1 | | - | | 46.1 |
Other | | 52.0 | | - | | 52.0 | | 50.8 | | - | | 50.8 |
Corporate | | (52.6) | | 22.7 | | (29.9) | | (29.6) | | - | | (29.6) |
Subtotal at fixed currency rates | | 437.5 | | (8.5) | | 429.0 | | 456.3 | | - | | 456.3 |
Special (gains) and charges | | 5.3 | | | | | | 21.3 | | | | |
Reported OI at fixed currency rates | | 432.2 | | | | | | 435.0 | | | | |
Currency impact | | (6.4) | | | | | | 12.8 | | | | |
Consolidated reported GAAP operating income | | $425.8 | | | | | | $447.8 | | | | |
| | | | | | | | | | | | |
| | Six Months Ended June 30 | ||||||||||
| | 2022 | | 2021 | ||||||||
(millions) | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted | | Fixed Currency | | Impact of Acquisitions and Divestitures | | Acquisition Adjusted |
Net Sales | | | | | | | | | | | | |
Global Industrial | | $3,261.1 | | ($13.1) | | $3,248.0 | | $2,887.2 | | - | | $2,887.2 |
Global Institutional & Specialty | | 2,140.2 | | - | | 2,140.2 | | 1,807.6 | | - | | 1,807.6 |
Global Healthcare & Life Sciences | | 763.4 | | (212.0) | | 551.4 | | 573.1 | | - | | 573.1 |
Other | | 638.3 | | - | | 638.3 | | 565.7 | | - | | 565.7 |
Corporate | | 68.6 | | (68.6) | | - | | 67.3 | | (67.3) | | - |
Subtotal at fixed currency rates | | 6,871.6 | | (293.7) | | 6,577.9 | | 5,900.9 | | (67.3) | | 5,833.6 |
Currency impact | | (24.3) | | | | | | 146.8 | | | | |
Consolidated reported GAAP net sales | | $6,847.3 | | | | | | $6,047.7 | | | | |
| | | | | | | | | | | | |
Operating Income (loss) | | | | | | | | | | | | |
Global Industrial | | $416.2 | | ($2.1) | | $414.1 | | $461.1 | | - | | $461.1 |
Global Institutional & Specialty | | 263.4 | | - | | 263.4 | | 199.6 | | - | | 199.6 |
Global Healthcare & Life Sciences | | 102.6 | | (49.5) | | 53.1 | | 88.7 | | - | | 88.7 |
Other | | 89.2 | | - | | 89.2 | | 83.1 | | - | | 83.1 |
Corporate | | (105.2) | | 45.6 | | (59.6) | | (59.7) | | - | | (59.7) |
Subtotal at fixed currency rates | | 766.2 | | (6.0) | | 760.2 | | 772.8 | | - | | 772.8 |
Special (gains) and charges | | 82.3 | | | | | | 53.7 | | | | |
Reported OI at fixed currency rates | | 683.9 | | | | | | 719.1 | | | | |
Currency impact | | (3.6) | | | | | | 26.0 | | | | |
Consolidated reported GAAP operating income | | $680.3 | | | | | | $745.1 | | | | |
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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 | |
| | 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 | | $1.04 | | $3.91 | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (1) | | 0.08 | | 0.12 | | 0.20 | | 0.28 | | 0.48 | | 0.26 | | 0.74 | |
Discrete tax expense (benefits) (2) | | 0.06 | | 0.02 | | 0.08 | | (0.02) | | 0.06 | | (0.04) | | 0.02 | |
Impact of Purolite on diluted earnings per share | | | | | | | | | | | | 0.02 | | 0.02 | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.81 | | $1.22 | | $2.03 | | $1.38 | | $3.41 | | $1.28 | | $4.69 | |
|
| 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 |
|
| | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 | | 2022 |
|
Diluted earnings per share, as reported (U.S. GAAP) | | $0.60 | | $1.08 | | $1.67 | | | | | | | | | |
Adjustments: | | | | | | | | | | | | | | | |
Special (gains) and charges (3) | | 0.22 | | 0.01 | | 0.23 | | | | | | | | | |
Discrete tax expense (benefits) (4) | | 0.00 | | 0.01 | | 0.02 | | | | | | | | | |
Adjusted diluted earnings per share (Non-GAAP) | | $0.82 | | $1.10 | | $1.92 | | | | | | | | | |
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2021 includes charges of $24.2 million, $34.1 million, $80.8 million and $74.4 million, net of tax, in the first, second, third and fourth quarters, respectively. Charges include COVID-19 related inventory write downs and employee-related costs (net of government subsidies), restructuring charges, debt refinancing charges, acquisition and integration charges, and litigation and other charges.
(2) Discrete tax expenses (benefits) for 2021 includes $16.1 million, $7.7 million, ($6.3) million and ($11.7) million in the first, second, third and fourth quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
(3) Special (gains) and charges for 2022 includes charges of $63.6 million and $2.6 million, net of tax, in the first and second quarters, respectively. Charges include acquisition and integration charges, reserves related to our operations in Russia, COVID-19 related inventory write downs and employee-related costs, restructuring charges, and litigation and other charges.
(4) Discrete tax expenses (benefits) for 2022 includes $1.0 million and $3.7 million in the first and second quarters, respectively. These expenses (benefits) are primarily associated with stock compensation excess tax benefits more than offset by other discrete tax expense.
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