REVENUES

6 Months Ended

Jun. 30, 2022

REVENUES

REVENUES

14. REVENUES

Revenue Recognition

Product and Sold Equipment

Product revenue is generated from sales of cleaning, sanitizing, water treatment, process treatment and colloidal silica products. In addition, the Company sells equipment which may be used in combination with its specialized products. Revenue recognized from product and equipment sales is recognized at the point in time when the obligations in the contract with the customer are satisfied, which generally occurs with the transfer of the product or delivery of the equipment.

On June 3, 2020, the Company completed the separation of its Upstream Energy business (“ChampionX”). The Company 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, while purchases from ChampionX are recorded in inventory. Sales of product to ChampionX post-separation for the second quarter of 2022 and 2021 were $33.9 million and $34.5 million, respectively, and first six months of 2022 and 2021 were $68.6 million and $67.3 million, respectively. As of June 30, 2022, the Company had an outstanding accounts receivable balance for sales of product to ChampionX of $18.1 million.

Service and Lease Equipment

Service and lease equipment revenue is generated from providing services or leasing equipment to customers. Service offerings include installing or repairing certain types of equipment, activities that supplement or replace headcount at the customer location, or fulfilling deliverables included in the contract. Global Industrial segment services are associated with water treatment and paper process applications. Global Institutional & Specialty segment services include cleaning and sanitizing programs and wash process solutions. Global Healthcare & Life Sciences segment services include pharmaceutical, personal care, infection and containment control solutions. Revenues included in Other primarily relate to services designed to detect, eliminate and prevent pests. Service revenue is recognized over time utilizing an input method and aligns with when the services are provided. Typically, revenue is recognized over time using costs incurred to date because the effort provided by the field selling and service organization represents services provided, which corresponds with the transfer of control. Revenue recognized from leased equipment primarily relates to warewashing and water treatment equipment recognized on a straight-line basis over the length of the lease contract pursuant to Topic 842 Leases.

The Company’s operating lease revenue was as follows:

	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2022		2021		2022		2021
Operating lease revenue*		$115.2		$105.7		$227.3		$203.1

*Includes immaterial variable lease revenue

The following table shows principal activities, separated by reportable segments, from which the Company generates its revenue. Corporate segment includes sales to ChampionX under the Master Cross Supply and Product Transfer agreements entered into as part of the ChampionX Separation. For more information about the Company’s reportable segments, refer to Note 15.

Net sales at public exchange rates by reportable segment are as follows:

	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2022		2021		2022		2021
Global Industrial
Product and sold equipment		$1,471.4		$1,327.5		$2,829.8		$2,555.0
Service and lease equipment		218.5		217.0		425.8		420.5
Global Institutional & Specialty
Product and sold equipment		934.2		805.1		1,758.8		1,507.8
Service and lease equipment		193.0		170.9		375.4		325.6
Global Healthcare & Life Sciences
Product and sold equipment		360.2		272.9		694.2		536.0
Service and lease equipment		30.7		28.9		59.5		58.5
Other
Product and sold equipment		87.1		74.2		159.5		141.3
Service and lease equipment		251.6		231.3		475.6		434.9
Corporate
Product and sold equipment		33.9		34.7		68.6		67.7
Service and lease equipment		-		0.2		0.1		0.4
Total
Total product and sold equipment		$2,886.8		$2,514.4		$5,510.9		$4,807.8
Total service and lease equipment		$693.8		$648.3		$1,336.4		$1,239.9

Net sales at public exchange rates by geographic region for the second quarter ended June 30 are as follows:

	Global				Global Institutional				Global Healthcare
	Industrial				& Specialty				& Life Sciences				Other				Corporate
	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
North America		$776.6		$692.8		$828.1		$734.5		$157.7		$108.7		$214.9		$187.7		$30.3		$25.0
Europe		341.3		342.1		164.3		120.9		184.8		169.7		69.7		62.9		0.9		1.2
Asia Pacific		209.0		197.6		53.0		50.3		24.0		14.8		19.6		19.7		1.1		1.3
Latin America		156.0		134.3		41.5		31.1		4.7		2.0		13.1		12.7		1.6		6.2
Greater China		106.5		95.5		26.6		29.9		15.2		1.5		18.8		19.3		-		0.6
India, Middle East and Africa		100.5		82.2		13.7		9.3		4.5		5.1		2.6		3.2		-		0.6
Total		$1,689.9		$1,544.5		$1,127.2		$976.0		$390.9		$301.8		$338.7		$305.5		$33.9		$34.9

Net sales at public exchange rates by geographic region for the six months ended June 30 are as follows:

	Global				Global Institutional				Global Healthcare
	Industrial				& Specialty				& Life Sciences				Other				Corporate
(millions)	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
North America		$1,493.2		$1,329.2		$1,560.1		$1,357.2		$302.7		$207.4		$396.6		$348.5		$59.7		$47.7
Europe		654.8		655.2		301.0		228.2		358.1		345.3		131.8		120.7		1.5		1.8
Asia Pacific		414.1		387.0		105.7		101.6		43.0		25.5		36.2		37.8		2.1		2.7
Latin America		292.4		259.5		78.3		62.4		10.3		2.5		26.1		24.7		5.1		12.7
Greater China		216.7		189.8		64.4		66.1		29.7		2.7		39.1		38.2		0.1		1.2
India, Middle East and Africa		184.4		154.8		24.7		17.9		9.9		11.1		5.3		6.3		0.2		2.0
Total		$3,255.6		$2,975.5		$2,134.2		$1,833.4		$753.7		$594.5		$635.1		$576.2		$68.7		$68.1

Net sales by geographic region were determined based on origin of sale. The United States made up 53% and 52% of total revenues during the six months ended June 30, 2022 and 2021, respectively.

Accounts Receivable and Allowance for Expected Credit Losses

Accounts receivable are carried at the invoiced amounts, less an allowance for expected credit losses, and generally do not bear interest. The Company’s allowance for expected credit losses estimates the amount of expected future credit losses by analyzing accounts receivable balances by age and applying historical write-off and collection experience. The Company’s estimates separately consider macroeconomic trends, specific circumstances and credit conditions of customer receivables. Account balances are written off against the allowance when it is determined the receivable will not be recovered.

The Company’s allowance for expected return of products shipped and credits related to pricing or quantities shipped was $24.9 million and $19.3 million as of June 30, 2022 and 2021, respectively. Returns and credit activity is recorded directly as a reduction to revenue.

The following table summarizes the activity in the allowance for expected credit losses:

	Six Months Ended
	June 30
(millions)	2022		2021
Beginning balance		$52.8		$68.4
Bad debt expense		24.8		7.1
Write-offs		(8.5)		(8.5)
Other (a)		3.8		(6.2)
Ending balance		$72.9		$60.8

(a) Other amounts are primarily the effects of changes in currency translations.

Contract Liability

Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Accounts receivable are recorded when the right to consideration becomes unconditional. The contract liability relates to billings in advance of performance (primarily service obligations) under the contract. Contract liabilities are recognized as revenue when the performance obligation has been performed, which primarily occurs during the subsequent quarter.

The following table summarizes the contract liability activity:

	Six Months Ended
	June 30
(millions)	2022		2021
Contract liability as of beginning of the year		$91.7		$80.4
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the year		(91.7)		(80.4)
Increases due to billings excluding amounts recognized as revenue during the period ended		99.1		87.9
Contract liability as of end of period		$99.1		$87.9