2.Special (Gains) and Charges

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

	First Quarter Ended
	March 31
(millions)	2015		2014

Cost of sales
Restructuring charges	$	0.6	$	6.0

Special (gains) and charges
Restructuring charges	2.1		22.6
Champion acquisition and integration costs	5.2		6.5
Nalco merger and integration costs	0.5		1.3
Other gains	—		(0.8		)
Subtotal	7.8		29.6

Total special (gains) and charges	$	8.4	$	35.6

For segment reporting purposes, special (gains) and charges are included in the Corporate segment, which is consistent with the company’s internal management reporting.

Restructuring Charges

The company’s restructuring activities are associated with plans to enhance its efficiency and effectiveness and sharpen its competitiveness. Its restructuring plans include net costs associated with significant actions involving employee-related severance charges, contract termination costs and asset write-downs and disposals. Employee termination costs are largely based on policies and severance plans, and include personnel reductions and related costs for severance, benefits and outplacement services. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the actions. Contract termination costs include charges to terminate leases prior to the end of their respective terms and other contract terminations. Asset write-downs and disposals include leasehold improvement write-downs, other asset write-downs associated with combining operations and disposal of assets.

Restructuring charges have been included as a component of both cost of sales and special (gains) and charges within the Consolidated Statement of Income. Amounts included within cost of sales include supply chain related severance and other asset write-downs associated with combining operations. Restructuring liabilities have been classified as a component of both other current and other non-current liabilities on the Consolidated Balance Sheet.

Energy Restructuring Plan

In April 2013, following the completion of the acquisition of privately held Champion Technologies and its related company Corsicana Technologies (collectively “Champion”), the company commenced plans to undertake restructuring and other cost-saving actions to realize its acquisition-related cost synergies as well as streamline and strengthen Ecolab’s position in the global energy market (the “Energy Restructuring Plan”). Actions associated with the acquisition to improve the effectiveness and efficiency of the business include a reduction of the combined business’s current global workforce. Actions also include leveraging and simplifying its global supply chain, including the reduction of plant, distribution center and redundant facility locations and product line optimization.

The company expects to incur total pre-tax restructuring charges of approximately $80 million ($55 million after tax). The restructuring charges are expected to be substantially complete by the end of 2015, although certain actions will likely continue into 2016. Approximately $40 million ($25 million after tax) of charges are expected to be incurred in 2015. The company anticipates that approximately two-thirds of the remaining Energy Plan pre-tax charges will represent cash expenditures. No decisions have been made for any asset disposals and estimates could vary depending on the actual actions taken.

The company recorded restructuring charges related to the Energy Restructuring Plan of $1.0 million ($0.8 million after tax) and $4.9 million ($3.0 million after tax) during the first quarter of 2015 and 2014, respectively.

Restructuring charges and activity related to the Energy Restructuring Plan since inception of the underlying actions include the following:

	Energy Restructuring Plan
	Employee
	Termination			Asset
(millions)	Costs			Disposals			Other			Total
2013 - 2014 Activity:
Recorded expense and accrual	$	30.8		$	4.2		$	1.9		$	36.9
Cash payments	(29.6		)	—			(1.8		)	(31.4		)
Non-cash charges	—			(4.2		)	—			(4.2		)
Effect of foreign currency translation	0.8			—			—			0.8
Restructuring liability, December 31, 2014	2.0			—			0.1			2.1

2015 Activity:
Recorded expense and accrual	1.0			(0.2		)	0.2			1.0
Cash activity	(0.4		)	3.8			(0.2		)	3.2
Non-cash charges	—			(3.6		)	—			(3.6		)
Effect of foreign currency translation	—			—			—			—
Restructuring liability, March 31, 2015	$	2.6		$	—		$	0.1		$	2.7

As shown in the previous table, cash activity under the Energy Restructuring Plan resulted in net cash proceeds of $3.2 million during the first quarter of 2015, primarily from the sale of facilities. Cash payments from 2013 through 2014 were $31.4 million. The majority of cash payments under this plan are related to severance, with the current accrual expected to be paid over a period of a few months to several quarters.

Combined Restructuring Plan

In February 2011, the company commenced a comprehensive plan to substantially improve the efficiency and effectiveness of its European business, as well as undertake certain restructuring activities outside of Europe, historically referred to as the “2011 Restructuring Plan”.

Additionally, in January 2012, following the merger with Nalco, the company formally commenced plans to undertake restructuring actions related to the reduction of its global workforce and optimization of its supply chain and office facilities, including planned reductions of plant and distribution center locations, historically referred to as the “Merger Restructuring Plan”.

During the first quarter of 2013, the company determined that the objectives of the plans discussed above were aligned, and consequently, the previously separate restructuring plans were combined into one plan.

The combined restructuring plan (the “Combined Plan”) combines opportunities and initiatives from both plans and continues to follow the original format of the Merger Restructuring Plan by focusing on global actions related to optimization of the supply chain and office facilities, including reductions of the global workforce, plant and distribution center locations.

The total pre-tax restructuring charges under the Combined Plan are expected to be approximately $400 million ($300 million after tax), which includes a small increase from the fourth quarter of 2014. The restructuring charges are expected to be substantially complete by the end of 2015, although certain actions will likely continue into 2016. Approximately $50 million ($40 million after tax) of charges are expected to be incurred in 2015. The company anticipates that approximately two-thirds of the remaining Combined Plan pre-tax charges will represent net cash expenditures. No decisions have been made regarding any additional non-cash charges and estimates could vary depending on the actual actions taken.

The company recorded restructuring charges related to the Combined Plan of $1.7 million ($0.8 million after tax) and $23.7 million ($19.8 million after tax), during the first quarter of 2015 and 2014, respectively.

Restructuring charges and activity related to the Combined Plan since inception of the underlying actions include the following:

	Combined Plan
	Employee
	Termination			Asset
(millions)	Costs			Disposals			Other			Total
2011 - 2014 Activity:
Recorded net expense and accrual	$	308.8		$	(1.2	)	$	43.6		$	351.2
Net cash payments	(242.4		)	11.7			(30.3		)	(261.0		)
Non-cash net charges	—			(10.5		)	(4.3		)	(14.8		)
Effect of foreign currency translation	(1.9		)	—			—			(1.9		)
Restructuring liability, December 31, 2014	64.5			—			9.0			73.5

2015 Activity:
Recorded net expense and accrual	1.4			0.1			0.2			1.7
Net cash payments	(7.2		)	0.2			(4.4		)	(11.4		)
Non-cash net charges	—			(0.3		)	—			(0.3		)
Effect of foreign currency translation	(4.6		)	—			—			(4.6		)
Restructuring liability, March 31, 2015	$	54.1		$	—		$	4.8		$	58.9

As shown in the previous table, net cash payments under the Combined Plan were $11.4 million during the first quarter of 2015 and $261.0 million from 2011 through 2014. The majority of cash payments under this plan are related to severance, with the current accrual expected to be paid over a period of a few months to several quarters.

Non-restructuring Special (Gains) and Charges

Champion acquisition and integration costs

As a result of the Champion acquisition completed in 2013, the company incurred charges of $5.2 million ($3.2 million after tax) and $6.5 million ($4.1 million after tax) during the first quarter of 2015 and 2014, respectively. Champion related special charges for 2015 and 2014 include integration costs and have been included as a component of special (gains) and charges on the Consolidated Statement of Income.

Nalco merger and integration costs

As a result of the Nalco merger completed in 2011, the company incurred net charges of $0.5 million ($0.5 million after tax) and $1.3 million ($0.9 million after tax) during the first quarter of 2015 and 2014, respectively. Nalco related special charges for 2015 and 2014 include integration costs and have been included as a component of special (gains) and charges on the Consolidated Statement of Income.

Venezuelan currency devaluation

Venezuela is a country experiencing a highly inflationary economy as defined under U.S. GAAP. As a result, the U.S. dollar is the functional currency for the company’s subsidiaries in Venezuela. Any currency remeasurement adjustments for non-dollar denominated monetary assets and liabilities held by the company’s subsidiaries and other transactional foreign exchange gains and losses are reflected in earnings.

In 2013, the Venezuelan government established a new foreign exchange mechanism known as the Complementary System of Foreign Currency Acquirement (“SICAD 1”). It operates similar to an auction system and allows entities to exchange a limited number of Bolivar Fuertes (“bolivars”) for U.S. dollars at a bid rate established via weekly auctions. As of February 28, 2015, the fiscal quarter end for the company’s international operations, the SICAD 1 exchange rate closed at 12.0 bolivars to 1 U.S. dollar. The company does not use the SICAD 1 rate or expect to use the SICAD 1 currency exchange mechanism.

In January 2014, the Venezuelan government announced the replacement of the Commission for the Administration of Foreign Exchange (“CADIVI”) with a new foreign currency administration, the National Center for Foreign Commerce (“CENCOEX”), which did not impact the fixed currency exchange rate of 6.30 bolivars to 1 U.S. dollar. In March 2014, the Venezuelan government introduced an additional currency exchange auction mechanism (“SICAD 2”), which operated similar to SICAD 1. In February 2015, SICAD 2 was replaced by a free-floating rate, the Marginal Currency System (“SIMADI”), with an exchange rate at February 28, 2015 of 176.62 bolivars to 1 U.S. dollar.

During the first quarter of 2015, the company continued to transact business across its operating units at the CENCOEX fixed currency exchange rate of 6.30 bolivars to 1 U.S. dollar, including with Petróleos de Venezuela (“PDVSA”), the Venezuelan state-owned oil and natural gas company. As the fixed currency exchange rate of 6.30 bolivars to 1 U.S. dollar remained legally available to the company and it continued to transact at this rate, the company remeasured the net monetary assets of its Venezuelan subsidiaries at this rate throughout the first quarter of 2015. The company continues to monitor the complex economic and political conditions with respect to its operating units in Venezuela.

As of February 28, 2015, the company had $120 million of net monetary assets denominated in bolivars that were required to be remeasured to U.S. dollars. As of February 28, 2015, the company had other net assets in Venezuela of $115 million, largely comprised of accounts receivable (denominated in U.S. dollars), inventory, property, plant and equipment and other intangible assets, excluding goodwill. Net sales within Venezuela are approximately 2% of the company’s consolidated net sales. Assets held in Venezuela at February 28, 2015 represented less than 2% of the company’s consolidated assets.