OPERATING SEGMENTS

9 Months Ended

Sep. 30, 2023

OPERATING SEGMENTS

OPERATING SEGMENTS

15. OPERATING SEGMENTS

The Company’s organizational structure consists of global business unit and global regional leadership teams. The Company’s ten operating segments follow its commercial and product-based activities and are based on engagement in business activities, availability of discrete financial information and review of operating results by the Chief Operating Decision Maker at the identified operating segment level.

The Company’s operating segments that share similar economic characteristics and future prospects, nature of the products and production processes, end-use markets, channels of distribution and regulatory environment have been aggregated into three reportable segments: Global Industrial, Global Institutional & Specialty and Global Healthcare & Life Sciences. The Company’s operating segments that do not meet the quantitative criteria to be separately reported have been combined into Other. The Company provides similar information for Other as the Company considers the information regarding its underlying operating segments as useful in understanding its consolidated results.

Comparability of Reportable Segments

Effective January 1, 2023, the Company’s former Downstream operating segment is now part of the Water operating segment. This change did not have any impact on the Global Industrial reportable segment.

The Company evaluates the performance of its non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminates the impact of exchange rate fluctuations on its international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. The “Fixed Currency Rate Change” column shown in the following table reflects international operations at fixed currency exchange rates established by management at the beginning of 2023, rather than the 2022 established rates. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported within the “Effect of foreign currency translation” row in the following table. The “Other” column shown in the following table reflects immaterial changes between reportable segments, including the movement of certain customers and cost allocations.

The impact of the preceding changes on previously reported full year 2022 reportable segment net sales and operating income is summarized as follows:

	December 31, 2022
	2022 Reported					Fixed	2022 Reported
	Valued at 2022				Currency		Valued at 2023
(millions)	Management Rates		Other		Rate Change		Management Rates
Net Sales
Global Industrial		$6,944.0		$-		($207.7)		$6,736.3
Global Institutional & Specialty		4,480.0		10.2		(75.9)		4,414.3
Global Healthcare & Life Sciences		1,570.0		-		(64.2)		1,505.8
Other		1,355.0		(10.2)		(31.5)		1,313.3
Corporate		124.1		-		(0.4)		123.7
Subtotal at fixed currency rates		14,473.1		-		(379.7)		14,093.4
Effect of foreign currency translation		(285.3)				379.7		94.4
Consolidated reported GAAP net sales		$14,187.8		$-		$-		$14,187.8
Operating Income
Global Industrial		$977.0		$0.8		($42.0)		$935.8
Global Institutional & Specialty		634.5		(1.6)		(11.2)		621.7
Global Healthcare & Life Sciences		205.0		(1.8)		(9.9)		193.3
Other		212.8		2.6		(5.5)		209.9
Corporate		(416.7)		-		2.3		(414.4)
Subtotal at fixed currency rates		1,612.6		-		(66.3)		1,546.3
Effect of foreign currency translation		(50.1)				66.3		16.2
Consolidated reported GAAP operating income		$1,562.5		$-		$-		$1,562.5

Reportable Segment Information

Financial information for the Company’s reportable segments, is as follows:

	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2023		2022		2023		2022
Net Sales
Global Industrial		$1,826.9		$1,763.4		$5,321.8		$4,928.1
Global Institutional & Specialty		1,308.7		1,165.7		3,703.9		3,275.2
Global Healthcare & Life Sciences		400.7		360.1		1,166.8		1,092.7
Other		380.3		350.8		1,072.2		970.1
Corporate		15.0		27.7		55.3		96.1
Subtotal at fixed currency rates		3,931.6		3,667.7		11,320.0		10,362.2
Effect of foreign currency translation		26.5		1.6		61.8		154.4
Consolidated reported GAAP net sales		$3,958.1		$3,669.3		$11,381.8		$10,516.6
Operating Income
Global Industrial		$287.5		$266.6		$758.5		$663.3
Global Institutional & Specialty		249.9		195.2		584.3		452.4
Global Healthcare & Life Sciences		44.0		32.0		111.7		129.1
Other		72.9		63.3		186.4		152.0
Corporate		(92.2)		(76.6)		(248.4)		(263.0)
Subtotal at fixed currency rates		562.1		480.5		1,392.5		1,133.8
Effect of foreign currency translation		3.9		2.5		9.8		29.5
Consolidated reported GAAP operating income		$566.0		$483.0		$1,402.3		$1,163.3

The profitability of the Company’s operating segments is evaluated by management based on operating income.

Consistent with the Company’s internal management reporting, Corporate amounts in the table above include sales to ChampionX in accordance with the long-term supply agreement entered into with the Transaction, as discussed in Note 14. Corporate also includes intangible asset amortization specifically from the Nalco and Purolite acquisitions and special (gains) and charges, as discussed in Note 2, that are not allocated to the Company’s reportable segments.