UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)                                                                                                                                                                                                                       

☒            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File No. 1-9328

ECOLAB INC.

(Exact name of registrant as specified in its charter)

Delaware	41-0231510
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1 Ecolab Place, St. Paul, Minnesota 55102

(Address of principal executive offices)(Zip Code)

1-800-232-6522

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value 2.625% Euro Notes due 2025 1.000% Euro Notes due 2024	ECL ECL 25 ECL 24	New York Stock Exchange New York Stock Exchange New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ⌧	Accelerated filer ◻
Non-accelerated filer ◻	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

The number of shares of each of the registrant’s classes of Common Stock outstanding as of March 31, 2023: 284,720,960 shares, par value $1.00 per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	First Quarter Ended
	March 31
(millions, except per share amounts)	2023		2022
Product and equipment sales		$2,876.3		$2,624.1
Service and lease sales		695.3		642.6
Net sales		3,571.6		3,266.7
Product and equipment cost of sales		1,798.3		1,695.6
Service and lease cost of sales		406.9		377.8
Cost of sales (including special charges (a))		2,205.2		2,073.4
Selling, general and administrative expenses		990.3		914.7
Special (gains) and charges		24.5		24.1
Operating income		351.6		254.5
Other (income) expense		(13.1)		(18.8)
Interest expense, net		74.2		53.0
Income before income taxes		290.5		220.3
Provision for income taxes		52.4		45.6
Net income including noncontrolling interest		238.1		174.7
Net income attributable to noncontrolling interest		4.7		2.8
Net income attributable to Ecolab		$233.4		$171.9
Earnings attributable to Ecolab per common share
Basic		$0.82		$0.60
Diluted		$0.82		$0.60
Weighted-average common shares outstanding
Basic		284.6		286.2
Diluted		285.9		288.1

(a) Cost of sales includes special (gains) and charges of $3.2 and $52.9 in the first quarter of 2023 and 2022, respectively, which is recorded in product and equipment cost of sales and service and lease cost of sales.

The accompanying notes are an integral part of the consolidated financial statements.

2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	First Quarter Ended
	March 31
(millions)	2023		2022
Net income including noncontrolling interest		$238.1		$174.7
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments
Foreign currency translation		11.1		42.2
(Loss) gain on net investment hedges		(16.7)		18.9
Total foreign currency translation adjustments		(5.6)		61.1
Derivatives and hedging instruments		(4.7)		(4.6)
Pension and postretirement benefits		0.2		13.7
Subtotal		(10.1)		70.2
Total comprehensive income, including noncontrolling interest		228.0		244.9
Comprehensive income attributable to noncontrolling interest		5.2		1.8
Comprehensive income attributable to Ecolab		$222.8		$243.1

The accompanying notes are an integral part of the consolidated financial statements.

3

CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31		December 31
(millions, except per share amounts)	2023		2022
ASSETS
Current assets
Cash and cash equivalents		$419.4		$598.6
Accounts receivable, net		2,667.8		2,698.1
Inventories		1,727.3		1,792.8
Other current assets		458.3		404.7
Total current assets		5,272.8		5,494.2
Property, plant and equipment, net		3,312.7		3,293.4
Goodwill		8,062.2		8,012.7
Other intangible assets, net		3,616.8		3,680.7
Operating lease assets		430.6		448.2
Other assets		556.4		535.1
Total assets		$21,251.5		$21,464.3
LIABILITIES AND EQUITY
Current liabilities
Short-term debt		$1,118.1		$505.1
Accounts payable		1,469.9		1,728.2
Compensation and benefits		450.2		493.6
Income taxes		171.6		197.6
Other current liabilities		1,279.8		1,285.9
Total current liabilities		4,489.6		4,210.4
Long-term debt		7,521.7		8,075.3
Pension and postretirement benefits		665.5		670.3
Deferred income taxes		496.1		505.6
Operating lease liabilities		323.4		337.8
Other liabilities		390.2		406.3
Total liabilities		13,886.5		14,205.7
Commitments and contingencies (Note 16)
Equity (a)
Common stock		365.0		364.7
Additional paid-in capital		6,626.5		6,580.2
Retained earnings		9,401.3		9,318.8
Accumulated other comprehensive loss		(1,737.2)		(1,726.6)
Treasury stock		(7,311.4)		(7,301.0)
Total Ecolab shareholders’ equity		7,344.2		7,236.1
Noncontrolling interest		20.8		22.5
Total equity		7,365.0		7,258.6
Total liabilities and equity		$21,251.5		$21,464.3

(a) Common stock, 800.0 shares authorized, $1.00 par value per share, 284.7 shares outstanding as of March 31, 2023 and 284.5 shares outstanding as of December 31, 2022. Shares outstanding are net of treasury stock.

The accompanying notes are an integral part of the consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	First Quarter Ended
	March 31
(millions)	2023		2022
OPERATING ACTIVITIES
Net income including noncontrolling interest		$238.1		$174.7
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		158.7		155.2
Amortization		75.6		79.5
Deferred income taxes		(18.0)		(15.7)
Share-based compensation expense		31.4		28.2
Pension and postretirement plan contributions		(14.6)		(17.3)
Pension and postretirement plan (income) expense, net		2.6		(0.8)
Restructuring charges, net of cash paid		(27.3)		(9.0)
Other, net		2.3		-
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		41.0		(29.6)
Inventories		70.6		(94.8)
Other assets		3.5		(127.2)
Accounts payable		(268.5)		25.5
Other liabilities		(97.2)		1.4
Cash provided by operating activities		198.2		170.1
INVESTING ACTIVITIES
Capital expenditures		(173.7)		(148.7)
Property and other assets sold		4.8		0.3
Other, net		(20.5)		19.2
Cash used for investing activities		(189.4)		(129.2)
FINANCING ACTIVITIES
Net issuances of commercial paper and notes payable		5.5		82.1
Reacquired shares		(10.6)		(262.1)
Dividends paid		(157.7)		(154.0)
Exercise of employee stock options		15.5		9.2
Hedge settlements		(18.4)		-
Other, net		(0.7)		19.5
Cash used for financing activities		(166.4)		(305.3)
Effect of exchange rate changes on cash and cash equivalents		(21.6)		3.9
Decrease in cash and cash equivalents		(179.2)		(260.5)
Cash and cash equivalents, beginning of period		598.6		359.9
Cash and cash equivalents, end of period		$419.4		$99.4

The accompanying notes are an integral part of the consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

	First Quarter Ended March 31, 2023 and 2022
(millions, except per share amounts)	Common Stock		Additional Paid-in Capital		Retained Earnings		OCI (Loss)		Treasury Stock		Ecolab Shareholders' Equity		Non-Controlling Interest		Total Equity
Balance, December 31, 2021		$364.1		$6,464.6		$8,814.5		($1,634.8)		($6,784.2)		$7,224.2		$28.9		$7,253.1
Net income						171.9						171.9		2.8		174.7
Other comprehensive income (loss)								71.2				71.2		(1.0)		70.2
Cash dividends declared (a)						(146.0)						(146.0)		(7.8)		(153.8)
Fair value adjustment of prior acquisition												-		0.6		0.6
Stock options and awards		0.4		36.9						0.1		37.4				37.4
Reacquired shares										(277.1)		(277.1)				(277.1)
Balance, March 31, 2022		$364.5		$6,501.5		$8,840.4		($1,563.6)		($7,061.2)		$7,081.6		$23.5		$7,105.1
Balance, December 31, 2022		$364.7		$6,580.2		$9,318.8		($1,726.6)		($7,301.0)		$7,236.1		$22.5		$7,258.6
Net income						233.4						233.4		4.7		238.1
Other comprehensive income (loss)								(10.6)				(10.6)		0.5		(10.1)
Cash dividends declared (a)						(150.9)						(150.9)		(6.9)		(157.8)
Stock options and awards		0.3		46.3						0.2		46.8				46.8
Reacquired shares										(10.6)		(10.6)				(10.6)
Balance, March 31, 2023		$365.0		$6,626.5		$9,401.3		($1,737.2)		($7,311.4)		$7,344.2		$20.8		$7,365.0

(a) Dividends declared per common share were $0.53 and $0.51 in the first quarter of 2023 and 2022, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

6

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the first quarter ended March 31, 2023 and 2022 reflects, in the opinion of management, all adjustments necessary for a fair statement of the financial position, results of operations, comprehensive income, equity and cash flows of Ecolab Inc. ("Ecolab" or "the Company") for the interim periods presented. Any adjustments consist of normal recurring items.

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2022 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

With respect to the unaudited financial information of the Company for the first quarter ended March 31, 2023 and 2022 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated May 4, 2023 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

2. SPECIAL (GAINS) AND CHARGES

Special (gains) and charges reported on the Consolidated Statements of Income include the following:

	First Quarter Ended
	March 31
(millions)	2023		2022
Cost of sales
Restructuring activities		$3.2		$2.6
Acquisition and integration activities		-		27.6
Russia/Ukraine		-		6.4
Other		-		16.3
Cost of sales subtotal		3.2		52.9
Special (gains) and charges
Restructuring activities		12.6		0.8
Acquisition and integration activities		5.0		7.5
Russia/Ukraine		0.3		11.6
Other		6.6		4.2
Special (gains) and charges subtotal		24.5		24.1
Total special (gains) and charges		$27.7		$77.0

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with the Company’s internal management reporting.

Restructuring activities

Restructuring activities are primarily related to the Combined Program, Institutional Advancement Program, Accelerate 2020 and other immaterial restructuring programs which are described below. These activities have been included as a component of cost of sales and special (gains) and charges on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.

Combined Program

In November 2022 the Company approved a Europe cost savings program. In connection with these actions, the Company expected to incur pre-tax charges of $130 million ($110 million after tax). In February 2023, the Company expanded its previously announced Europe cost savings program to focus on its Institutional and Healthcare businesses in other regions. In connection with the expanded program (“Combined Program”), the Company now expects to incur total pre-tax charges of $195 million ($150 million after tax). The Company expects that these restructuring charges will be completed by 2024. Program actions include headcount reductions from terminations, not

7

filling certain open positions, and facility closures. The Combined Program charges are expected to be primarily cash expenditures related to severance and asset disposals.

In anticipation of this Combined Program, a limited number of actions were taken in the fourth quarter of 2022. As a result, the Company reclassified $19.3 million ($14.5 million after tax) from other restructuring to the Combined Program in the first quarter of 2023.

During the first quarter of 2023 the Company recorded total restructuring charges of $13.4 million ($10.2 million after tax) primarily related to severance. The net liability related to the Combined Program was $56.3 million and $62.0 million as of March 31, 2023 and December 31, 2022, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Restructuring activity related to the Combined Program since inception of the underlying actions includes the following items:

	Employee		Asset
(millions)	Costs		Disposals		Total
2022 Activity
Recorded expense and accrual		$67.2		$-		$67.2
Net cash payments		(5.2)		-		(5.2)
Net restructuring liability, December 31, 2022		62.0		-		62.0
2023 Activity
Recorded expense and accrual		11.4		2.0		13.4
Net cash payments		(36.4)		-		(36.4)
Non-cash charges