SPECIAL (GAINS) AND CHARGES

9 Months Ended

Sep. 30, 2024

SPECIAL (GAINS) AND CHARGES

SPECIAL (GAINS) AND CHARGES

3. SPECIAL (GAINS) AND CHARGES

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

	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2024		2023		2024		2023
Cost of sales
Other restructuring		$0.9		$5.9		$3.2		$17.2
Cost of sales subtotal		0.9		5.9		3.2		17.2
Special (gains) and charges
One Ecolab		24.4		-		38.9		-
Other restructuring		0.4		20.0		20.1		46.3
Sale of global surgical solutions business		(364.0)		4.8		(350.7)		4.8
Acquisition and integration activities		3.5		3.0		8.3		11.5
Other		3.1		8.9		(8.8)		19.6
Special (gains) and charges subtotal		(332.6)		36.7		(292.2)		82.2
Total special (gains) and charges		($331.7)		$42.6		($289.0)		$99.4

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

One Ecolab

On July 30, 2024, the Company announced the One Ecolab initiative, which will enhance its growth and margin expansion journey. As a program within this initiative, the Company also announced that it commenced a restructuring plan to leverage its digital technologies to realign the functional work done in many countries into global centers of excellence. The Company anticipates restructuring costs of $175 million ($136 million after tax) and special charges of $50 million ($39 million after tax) by the end of 2027. The Company anticipates that the restructuring costs will primarily be cash expenditures for severance costs relating to team reorganization.

In anticipation of this One Ecolab initiative, a limited number of actions were taken in the first and second quarter of 2024. As a result, the Company reclassified $5.3 million ($4.0 million after tax) from other restructuring to One Ecolab in the third quarter of 2024.

The Company recorded restructuring charges of $17.4 million ($13.3 million after tax) and $22.7 million ($17.3 million after tax) during the third quarter and first nine months of 2024, respectively, primarily related to severance and professional services. In addition, the

Company recorded non-restructuring special charges of $7.0 million ($5.2 million after tax) and $16.2 million ($12.2 million after tax) during the third quarter and first nine months of 2024, respectively, primarily related to professional services. The Company has recorded $28.0 million ($21.3 million after tax) of cumulative restructuring charges and $16.2 million ($12.2 million after tax) of cumulative special charges under the One Ecolab initiative.

The net restructuring liability related to the One Ecolab initiative was $14.1 million as of September 30, 2024. 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 One Ecolab initiative since inception of the underlying actions includes the following items:

	Employee		Asset
(millions)	Costs		Disposals		Other		Total
2024 Activity
Recorded expense (income) and accrual		$2.8		$-		$19.9		$22.7
Net cash payments		-		-		(13.9)		(13.9)
Non-cash net charges		-		-		-		-
Reclassification		-		-		5.3		5.3
Restructuring liability, September 30, 2024		$2.8		$-		$11.3		$14.1

Other restructuring

Other restructuring is primarily related to the Combined Program, which is 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 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 (the “Combined Program”), the Company expects to incur total pre-tax charges of $195 million ($150 million after tax). The Company expects that these restructuring charges will be substantially completed by the end of 2024. Program actions include headcount reductions from terminations, not 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 third quarter of 2024 and 2023, the Company recorded restructuring charges of $1.3 million ($0.6 million after tax) and $24.2 million ($20.5 million after tax), respectively, and during the first nine months of 2024 and 2023 $23.3 million ($17.8 million after tax) and $57.3 million ($46.9 million after tax), respectively, primarily related to severance and professional services. The Company has recorded $182.2 million ($150.7 million after tax) of cumulative charges under the Combined Plan.

The Company reclassified $5.3 million ($4.0 million after tax) from the Combined restructuring program to other restructuring activities in the second quarter of 2024.

The net liability related to the Combined Program was $18.0 million and $43.1 million as of September 30, 2024 and December 31, 2023, 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		Other		Total
2022-2023 Activity
Recorded expense and accrual		$114.2		$14.0		$16.7		$144.9
Net cash payments		(90.4)		-		(16.7)		(107.1)
Non-cash charges		-		(14.0)		-		(14.0)
Reclassification		19.3		-		-		19.3
Net restructuring liability, December 31, 2023		43.1		-		-		43.1
2024 Activity
Recorded expense and accrual		3.8		1.2		18.3		23.3
Net cash payments		(29.5)		-		(12.4)		(41.9)
Non-cash charges		-		(1.2)		-		(1.2)
Reclassification		-		-		(5.3)		(5.3)
Net restructuring liability, September 30, 2024		$17.4		$-		$0.6		$18.0

Other Restructuring Activities

During 2024, the Company incurred restructuring charges of $10.6 million ($8.0 million after tax) related to an immaterial restructuring plan approved in the second quarter. This plan became part of the One Ecolab initiative in the third quarter.

The restructuring liability balance for all other restructuring plans excluding the Combined Program and One Ecolab was $6.8 million as of the end of the third quarter.

Sale of global surgical solutions business

On April 27, 2024, the Company reached a definitive agreement to sell its global surgical solutions business, which closed on August 1, 2024. The Company recorded a gain on sale of $365.3 million ($264.2 million after tax) in 2024, as described in Note 2. Excluding the gain on sale, the Company recorded charges of $3.3 million ($2.5 million after tax) and $14.6 million ($11.3 million after tax) in the third quarter and first nine months of 2024, which are primarily related to professional fees to support the sale. The Company recorded charges of $4.8 million ($3.6 million after tax) in the third quarter and first nine months of 2023, primarily related to professional fees to support the sale.

Acquisition and integration related costs

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income include $3.5 million ($2.7 million after tax) and $3.0 million ($2.2 million after tax) in the third quarter of 2024 and 2023, respectively. Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income include $8.3 million ($6.3 million after tax) and $11.5 million ($8.6 million after tax) in the first nine months of 2024 and 2023, respectively.

Further information related to the Company’s acquisitions is included in Note 4.

Other operating activities

Other special (gains) and charges of $3.1 million ($2.3 million after tax) and $8.9 million ($6.7 million after tax) recorded in the third quarter of 2024 and 2023, respectively, and ($8.8 million) ($6.9 million gain after tax) and $19.6 million ($14.9 million after tax) recorded in the first nine months of 2024 and 2023, respectively, related primarily to recoveries of COVID era credits and certain legal charges, which are recorded in special (gains) and charges on the Consolidated Statements of Income.