8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 2, 2016

ECOLAB INC.

(Exact name of registrant as specified in its charter)

Delaware	1-9328	41-0231510
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

370 Wabasha Street North, Saint Paul, Minnesota	55102
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 1-800-232-6522

(Not applicable)

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CRF 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On August 2, 2016, Ecolab Inc. (“Ecolab”) announced earnings for the second quarter ended June 30, 2016.  A copy of the (i) News Release issued by Ecolab in connection with this report under Item 2.02 is furnished and attached as Exhibit (99.1), (ii) Supplemental Data to be used in connection with the conference call to be held discussing the second quarter results is furnished and attached as Exhibit (99.2), and (iii) Supplemental Discussion and related materials to be used in such conference call is furnished and attached as Exhibit (99.3), each of which is incorporated by reference herein. Ecolab also will publish the attached exhibits on its website located at www.ecolab.com.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are furnished pursuant to Item 2.02 of Form 8-K and should not be deemed to be “filed” under the Securities Exchange Act of 1934.

(99.1) Ecolab Inc. News Release dated August 2, 2016.

(99.2) Supplemental Data for Second Quarter dated August 2, 2016.

(99.3) Supplemental Discussion for Second Quarter dated August 2, 2016.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ECOLAB INC.
Date: August 2, 2016	By:	/s/ David F. Duvick
		David F. Duvick
		Assistant Secretary

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EXHIBIT INDEX

Exhibit No.	Description	Method Of Filing
(99.1)	Ecolab Inc. News Release dated August 2, 2016.	Filed herewith electronically.
(99.2)	Supplemental Data for Second Quarter dated August 2, 2016.	Filed herewith electronically.
(99.3)	Supplemental Discussion for Second Quarter dated August 2, 2016.	Filed herewith electronically.

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EX-99.1

Exhibit 99.1

News Release

Ecolab Inc.

370 Wabasha Street North

St. Paul, Minnesota  55102

FOR IMMEDIATE RELEASE

Michael J. Monahan(651) 250-2809

Andrew C. Hedberg(651) 250-2185

ECOLAB SECOND QUARTER REPORTED DILUTED EPS $0.87

ADJUSTED DILUTED EPS $1.08, FLAT TO LAST YEAR; INCLUDES $0.08 (7%) CURRENCY HEADWIND

2016 full-year adjusted EPS forecast narrowed to $4.35 to $4.50, from $4.35 to $4.55

SECOND QUARTER HIGHLIGHTS:

· Reported diluted EPS $0.87; includes $0.21 per share special charge primarily related to the energy industry downturn, as well as discrete tax items

· Adjusted diluted EPS $1.08, as lower delivered product costs, cost savings and lower taxes and shares offset an $0.08 (7%) per share currency headwind

· Solid Global Institutional, Global Industrial and Other segment acquisition adjusted fixed currency sales +4%, offset by Global Energy sales decline

· Strong operating cash flow of $875 million year to date, +37%

	Second Quarter Ended June 30
	Reported				Adjusted *
(unaudited)	Public Currency Rates		%		Public Currency Rates		%
(millions, except per share)	2016	2015	Change		2016	2015	Change
Net sales	$ 3,317.2	$ 3,389.1	(2)	%	$ 3,317.2	$ 3,389.1	(2)	%
Operating income	412.5	437.8	(6)	%	500.6	514.4	(3)	%
Net income attributable to Ecolab	258.4	302.0	(14)	%	319.3	323.7	(1)	%
Diluted earnings per share	$ 0.87	$ 1.00	(13)	%	$ 1.08	$ 1.08	0	%
					Adjusted *
	Fixed Currency Rates *		%		Fixed Currency Rates		%
	2016	2015	Change		2016	2015	Change
Net sales	$ 3,252.5	$ 3,213.8	1	%	$ 3,252.5	$ 3,213.8	1	%
Operating income	402.9	399.1	1	%	491.0	475.7	3	%

* See “Non-GAAP Financial Information” section of this release for further discussion

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ST. PAUL, Minn., August 2, 2016: Continued strong Global Institutional, Global Industrial and Other segment sales growth along with margin expansion and lower taxes and shares more than offset lower Global Energy segment results to deliver 7% second quarter adjusted diluted earnings per share growth before currency effects. Unfavorable currency of $0.08 per share (a 7% impact) offset the operating gain, yielding flat adjusted diluted earnings per share growth.

CEO comment

Douglas M. Baker, Jr., Ecolab chairman and chief executive officer, commented on the quarter, saying, “As expected, we continued to show strong organic sales growth and margin expansion in our Institutional, Industrial and Other segments as they outpaced sluggish global markets. These results were driven by our robust innovation portfolio, strong sales execution and cost savings work, and more than offset lower results from our Energy segment, which reflect continued depressed operating conditions in the global energy industry. Currency exchange remained a significant headwind in the quarter. 

“The good news is our energy and currency headwinds appear to be abating, and we expect better earnings growth in the second half. We look for our Institutional, Industrial and Other segments to show continued strong fixed currency growth as they build on new business wins achieved through our continued product leadership and sales execution. The apparent bottoming of conditions in the energy markets should yield narrowing Energy segment comparisons in the second half of 2016 primarily due to the weak prior year period, with the business positioned for a gradual recovery beginning next year.  Further, forecasts suggest the second half will see diminishing currency headwinds.

“Our underlying business performance is solid and we remain confident in our future. We are focused on fundamental long term growth markets – food, water, energy and healthcare – and we are well-positioned as a leader in each, serving customers who are in turn leaders in their markets. We continue to invest in the key technology and service excellence drivers that enable us to solve critical customer problems and win new business. And we continue to effectively manage our costs and drive further efficiency in our operations.  While the year has presented many external challenges, our focus on the fundamentals has enabled us to continue driving share gains and margin expansion, further improving our competitive advantage.  We expect that our investments

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and actions today will yield superior growth in this year’s environment, and double digit earnings growth in the years to come.”

Second Quarter 2016 Consolidated Results

Ecolab's reported sales for the second quarter declined 2%, while fixed currency sales increased 1%. Acquisition adjusted fixed currency sales decreased 1%. 

Second quarter 2016 reported operating income decreased 6%, while fixed currency operating income increased 1%. Both reported second quarter 2016 and 2015 results include special gains and charges. Excluding special gains and charges, second quarter 2016 adjusted operating income declined 3%. Excluding special gains and charges and at fixed currency rates, adjusted fixed currency operating income increased 3%. Our reported operating income margin decreased 50 basis points, and our adjusted fixed currency operating income margin increased 30 basis points. The increase in adjusted fixed currency operating income and improvement in adjusted fixed currency operating income margin was driven by appropriate pricing, good sales volume growth, and cost savings in our Global Institutional, Global Industrial and Other segments, which was partially offset by an increase in variable compensation and a decline in Global Energy results. 

Second quarter 2016 reported net income attributable to Ecolab decreased 14% and reported diluted earnings per share decreased 13%. Excluding special gains and charges and discrete tax items, adjusted net income attributable to Ecolab declined 1% and adjusted diluted earnings per share was flat. Our second quarter 2016 adjusted diluted earnings per share includes an $0.08 per share currency headwind (including the impact of the Venezuela deconsolidation of $0.01 per share) against second quarter 2015, which negatively impacted our adjusted diluted earnings per share comparison by 7%.

The reported income tax rate for the second quarter of 2016 was 24.1%, compared with the reported rate of 18.0% in the second quarter of 2015. Excluding the tax rate impact of the special gains and charges and discrete tax items, the adjusted tax rate was 25.5% in the second quarter of 2016, compared with 27.1% for the same period last year. The improved adjusted tax rate was primarily driven by the permanent enactment of the research and development tax credit and global tax planning strategies.

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We reacquired 2.3 million shares of our common stock during the second quarter of 2016.

Second Quarter 2016 Segment Review

We evaluate the performance of our international operations based on fixed currency rates of foreign exchange, which eliminate the translation impact of exchange rate fluctuations on our international results. We also provide our segment results based on public currency rates for informational purposes.

Acquisition adjusted growth rates generally exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude the Venezuelan results of operations from both the current period and comparable period of the prior year.

Global Industrial
(unaudited)	Second Quarter Ended June 30						Acq. Adj.
(millions)	2016		2015		% Change		% Change
Fixed currency
Sales	$ 1,152.2		$ 1,103.2		4	%	2	%
Operating income	171.3		147.9		16	%	13	%
Operating income margin	14.9	%	13.4	%
Acq. adj. operating income margin	15.1	%	13.6	%
Public currency
Sales	$ 1,182.2		$ 1,167.8		1	%
Operating income	176.3		161.0		10	%

Global Industrial acquisition adjusted fixed currency sales rose 2%, led by good gains in Food & Beverage with modest growth in Water and Paper. Latin America led the Global Industrial regional growth, with modest gains in Europe and North America. Acquisition adjusted fixed currency operating income rose 13% and operating margins expanded significantly through appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains, which were partially offset by an increase in variable compensation.

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Global Institutional
(unaudited)	Second Quarter Ended June 30						Acq. Adj.
(millions)	2016		2015		% Change		% Change
Fixed currency
Sales	$ 1,142.3		$ 1,054.1		8	%	5	%
Operating income	245.0		228.5		7	%	8	%
Operating income margin	21.4	%	21.7	%
Acq. adj. operating income margin	22.1	%	21.7	%
Public currency
Sales	$ 1,158.8		$ 1,078.1		7	%
Operating income	247.7		232.6		6	%

Global Institutional acquisition adjusted fixed currency sales grew 5% as we enjoyed good growth led by gains in our Specialty and Institutional business. Sales for the segment showed good growth in North America, Asia Pacific, Latin America and Europe. Acquisition adjusted fixed currency operating income increased 8% and acquisition adjusted operating margins increased as appropriate pricing and sales volume gains more than offset investments in the business and an increase in variable compensation.   

Global Energy
(unaudited)	Second Quarter Ended June 30						Acq. Adj.
(millions)	2016		2015		% Change		% Change
Fixed currency
Sales	$ 754.6		$ 867.6		(13)	%	(13)	%
Operating income	77.5		109.9		(29)	%	(32)	%
Operating income margin	10.3	%	12.7	%
Acq. adj. operating income margin	9.8	%	12.4	%
Public currency
Sales	$ 771.1		$ 950.3		(19)	%
Operating income	80.0		132.1		(39)	%

Global Energy acquisition adjusted fixed currency sales declined 13% reflecting a decrease in our upstream business revenues which more than offset modest growth in downstream. Acquisition adjusted fixed currency operating income decreased 32% due to lower sales volumes, reduced plant overhead absorption (driven by both lower volumes and a planned reduction in inventory levels) and reduced pricing, which more than offset delivered product cost savings, synergies and other cost reduction actions. 

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Other
(unaudited)	Second Quarter Ended June 30						Acq. Adj.
(millions)	2016		2015		% Change		% Change
Fixed currency
Sales	$ 203.4		$ 188.9		8	%	8	%
Operating income	38.8		31.8		22	%	22	%
Operating income margin	19.1	%	16.8	%
Acq. adj. operating income margin	19.1	%	16.8	%
Public currency
Sales	$ 205.1		$ 192.9		6	%
Operating income	38.9		32.3		20	%

The Other segment fixed currency sales increased 8% driven by strong growth in both Pest Elimination and Equipment Care. All regions showed solid sales growth. Fixed currency operating income rose 22% and operating margins expanded sharply due to pricing and sales volume gains, which were partially offset by an increase in variable compensation.

Corporate

The Corporate segment includes amortization expense of $42 million in both the second quarter of 2016 and 2015, related to the Nalco merger intangible assets. The Corporate segment also includes special gains and charges. Total special gains and charges for the second quarter of 2016 were a net charge of $88 million ($57 million after-tax), including the special charges related to Energy as described below, wage-hour litigation and other asset impairments. Special gains and charges for the second quarter 2015 were a net charge of $77 million ($61 million after-tax).

Energy Inventory, Workforce and Asset Charges

As a result of excess supply pressures and the negative impact on energy industry exploration and production investments, particularly in North America, the company recorded charges of $64 million ($43 million after tax), comprised of inventory write downs, fixed asset charges, headcount reductions and other charges during the second quarter of 2016.

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Business Outlook

2016 – Full Year

Ecolab expects full year 2016 adjusted diluted earnings per share growth in the $4.35 to $4.50 range, compared with full year 2015 adjusted diluted earnings per share of $4.37. Ecolab previously forecasted adjusted diluted earnings per share in the $4.35 to $4.55 range.

When compared with our 2015 performance, we expect mid-single digit acquisition adjusted fixed currency sales growth in our Global Institutional, Global Industrial and Other segments with an approximate 10% decline in Global Energy segment sales. We anticipate improved adjusted gross margin, with a slightly unfavorable selling, general and administrative (“SG&A”) ratio to sales, higher interest expense and a comparable adjusted tax rate versus 2015. 

At current rates of exchange, we expect foreign currency and the impact of the Venezuelan devaluation and deconsolidation to have an unfavorable impact of approximately 4 percentage points on full year sales and a 6% to 7% (approximately $0.27 to $0.32 per share) unfavorable impact on diluted earnings per share.

Our detailed outlook for the full year of 2016 is as follows:

Adjusted Gross Margin, excluding special gains and charges	approx. 48%
SG&A % of Sales	32% to 33%
Interest expense, net	approx. $270 million
Adjusted tax rate	approx. 26%
Noncontrolling interest	$0.04 to $0.08
Adjusted EPS, excluding special gains and charges	$4.35 - $4.50
Diluted shares	approx. 297 million

We expect quantifiable special gains and charges and discrete tax items for the full-year 2016 to be a net charge of approximately $0.18 per diluted share. Amounts do not reflect the impact of other future special gains and charges, or discrete tax items, that are not currently quantifiable.

Reported 2015 diluted earnings per share of $3.32 included special gains and charges and discrete tax items. Excluding these items, 2015 adjusted diluted earnings per share were $4.37.

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2016 — Third Quarter

Ecolab expects third quarter 2016 adjusted diluted earnings per share in the $1.24 to $1.32 range, compared with adjusted diluted earnings per share of $1.28 a year ago. 

At current rates of exchange, we expect foreign currency and the impact of the Venezuelan devaluation and deconsolidation to have an unfavorable impact of approximately 3 percentage points on third quarter sales and a 6% ($0.08) unfavorable impact on diluted earnings per share.

Our detailed outlook for the third quarter of 2016 is as follows:

Adjusted Gross Margin, excluding special gains and charges	48% to 49%
SG&A % of Sales	approx. 32%
Interest expense, net	approx. $66 million
Adjusted tax rate	approx. 26%
Noncontrolling interest	$0.01 to $0.02
Adjusted EPS, excluding special gains and charges	$1.24 - $1.32
Diluted shares	approx. 296 million

We expect quantifiable special gains and charges and discrete tax items for the third quarter of 2016 to be immaterial. Amounts do not reflect the impact of other future special gains and charges, or discrete tax items, that are not currently quantifiable.

Reported third quarter 2015 diluted earnings per share of $0.86 included special gains and charges and discrete tax items. Excluding these items, second quarter 2015 adjusted diluted earnings per share were $1.28.

About Ecolab

A trusted partner at more than one million customer locations, Ecolab (ECL) is the global leader in water, hygiene and energy technologies and services that protect people and vital resources. With 2015 sales of $13.5 billion and 47,000 associates, Ecolab delivers comprehensive solutions and on-site service to promote safe food, maintain clean environments, optimize water and energy use and improve operational efficiencies for customers in the food, healthcare, energy, hospitality and industrial markets in more than 170 countries around the world. For more Ecolab news and information, visit www.ecolab.com.  

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Ecolab will host a live webcast to review the second quarter earnings announcement and earnings guidance today at 1:00 p.m. Eastern Time. The webcast, along with related materials, will be available to the public on Ecolab's website at www.ecolab.com/investor. A replay of the webcast and related materials will be available at that site. Listening to the webcast requires Internet access, the Windows Media Player or other compatible streaming media player.

Cautionary Statements Regarding Forward-Looking Information

This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding our financial and business performance and prospects, including forecasted 2016 third quarter and full-year financial and business results, including sales growth, adjusted gross margin, SG&A ratios to sales, interest expense, adjusted tax rate, noncontrolling interest, adjusted diluted earnings per share and diluted shares outstanding; energy market conditions; foreign currency and impact of the Venezuelan deconsolidation; and special gains and charges and quantifiable discrete tax items. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. In particular, the ultimate results of any restructuring, integration and business improvement actions, including cost synergies, depend on a number of factors, including the development of final plans, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness.

Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the Securities and Exchange Commission (the "SEC") and include the vitality of the markets we serve, including the impact of oil price fluctuations on the markets served by our Global Energy segment;

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the impact of economic factors such as the worldwide economy, capital flows, interest rates and  foreign currency risk, including  reduced sales and earnings in other countries resulting from the weakening of local currencies versus the U.S. dollar; our ability to attract and retain high caliber management talent to lead our business; our ability to execute key business initiatives; potential information technology infrastructure failures and cybersecurity attacks; exposure to global economic, political and legal risks related to our international operations including with respect to our operations in Russia; the costs and effects of complying with laws and regulations, including those relating to the environment and to the manufacture, storage, distribution, sale and use of our products; the occurrence of litigation or claims, including related to the Deepwater Horizon oil spill; our ability to develop competitive advantages through innovation; difficulty in procuring raw materials or fluctuations in raw material costs; our substantial indebtedness; our ability to acquire complementary businesses and to effectively integrate such businesses; restraints on pricing flexibility due to contractual obligations; pressure on operations from consolidation of customers, vendors or competitors; public health epidemics; potential losses arising from the impairment of goodwill or other assets; potential loss of deferred tax assets; changes in tax law and unanticipated tax liabilities; potential chemical spill or release; potential class action lawsuits;  the loss or insolvency of a major customer or distributor; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events or changes in expectations, except as required by law.

Non-GAAP Financial Information

This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures include:

· fixed currency sales

· acquisition adjusted fixed currency sales

· adjusted gross margin

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· fixed currency operating income

· adjusted operating income

· adjusted fixed currency operating income

· adjusted fixed currency operating income margin

· adjusted tax rate

· adjusted net income attributable to Ecolab

· adjusted diluted earnings per share

We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and cash flows and that these measures are useful for period-to-period comparison of results.

Our non-GAAP financial measures for gross margin and operating income exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include in special gains and charges items that are unusual in nature and significant in amount. Both special (gains) and charges and discrete tax items can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs associated with historical trends and future results.

We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2016. Fixed currency amounts also reflect all Venezuelan bolivar operations, prior to the deconsolidation of our Venezuelan operations, at a Marginal Currency System (“SIMADI”) rate of approximately 200 bolivares to 1 U.S. dollar, which was the approximate conversion rate for SIMADI at year end 2015. Fixed currency sales, acquisition adjusted fixed currency sales, fixed currency operating income, adjusted fixed currency operating income and adjusted fixed currency operating income margin measures eliminate the impact of exchange rate fluctuations on our international sales, acquisition adjusted sales, operating income, adjusted operating income and

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adjusted operating income margin, respectively, and promote a better understanding of our sales and operating income trends from underlying business performance.

Acquisition adjusted growth rates generally exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude the Venezuelan results of operations from both the current period and comparable period of the prior year.

These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this news release. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in this news release.

###

(ECL-E)

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ECOLAB INC.

CONSOLIDATED STATEMENT OF INCOME

(unaudited)

	Second Quarter Ended				Six Months Ended
	June 30		%		June 30		%
(millions, except per share)	2016	2015	Change		2016	2015	Change
Net sales	$ 3,317.2	$ 3,389.1	(2)	%	$ 6,414.6	$ 6,686.7	(4)	%
Cost of sales (1)	1,785.2	1,806.5	(1)	%	3,416.6	3,571.8	(4)	%
Selling, general and administrative expenses	1,093.3	1,079.2	1	%	2,181.5	2,216.0	(2)	%
Special (gains) and charges (1)	26.2	65.6			32.5	73.4
Operating income	412.5	437.8	(6)	%	784.0	825.5	(5)	%
Interest expense, net	65.3	61.2	7	%	131.4	123.7	6	%
Income before income taxes	347.2	376.6	(8)	%	652.6	701.8	(7)	%
Provision for income taxes	83.6	67.8	23	%	157.0	157.6	0	%
Net income including noncontrolling interest	263.6	308.8	(15)	%	495.6	544.2	(9)	%
Net income attributable to noncontrolling interest	5.2	6.8			6.4	8.8
Net income attributable to Ecolab	$ 258.4	$ 302.0	(14)	%	$ 489.2	$ 535.4	(9)	%
Earnings attributable to Ecolab per common share
Basic	$ 0.88	$ 1.02	(14)	%	$ 1.67	$ 1.80	(7)	%
Diluted	$ 0.87	$ 1.00	(13)	%	$ 1.64	$ 1.77	(7)	%
Weighted-average common shares outstanding
Basic	292.4	296.2	(1)	%	293.4	297.2	(1)	%
Diluted	296.5	301.1	(2)	%	297.5	302.2	(2)	%
(1) Special (gains) and charges in the Consolidated Statement of Income above include the following:
(millions)	2016	2015			2016	2015
Cost of sales
Restructuring related activities	$ 0.9	$ 1.6			$ 0.9	$ 2.2
Energy related charges	51.0	-			51.0	-
Fixed asset impairment and other inventory charges	10.0	-			10.0	-
Venezuela related activities	-	9.4			-	9.4
Subtotal	61.9	11.0			61.9	11.6
Special (gains) and charges
Restructuring related activities	(2.1)	18.9			0.9	21.0
Champion and Nalco integration costs	-	4.5			-	10.2
Energy related charges	12.6	-			12.6	-
Venezuela related activities	(7.8)	20.8			(7.8)	20.8
Other	23.5	21.4			26.8	21.4
Subtotal	26.2	65.6			32.5	73.4
Total special (gains) and charges	$ 88.1	$ 76.6			$ 94.4	$ 85.0

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ECOLAB INC.

REPORTABLE SEGMENT INFORMATION

(unaudited)

	Second Quarter Ended June 30
	Fixed Currency Rates				Public Currency Rates
			%				%
(millions)	2016	2015	Change		2016	2015	Change
Net Sales
Global Industrial	$ 1,152.2	$ 1,103.2	4	%	$ 1,182.2	$ 1,167.8	1	%
Global Institutional	1,142.3	1,054.1	8	%	1,158.8	1,078.1	7	%
Global Energy	754.6	867.6	(13)	%	771.1	950.3	(19)	%
Other	203.4	188.9	8	%	205.1	192.9	6	%
Subtotal at fixed currency rates	3,252.5	3,213.8	1	%	3,317.2	3,389.1	(2)	%
Currency impact	64.7	175.3	*		-	-	*
Consolidated	$ 3,317.2	$ 3,389.1	(2)	%	$ 3,317.2	$ 3,389.1	(2)	%
Operating Income
Global Industrial	$ 171.3	$ 147.9	16	%	$ 176.3	$ 161.0	10	%
Global Institutional	245.0	228.5	7	%	247.7	232.6	6	%
Global Energy	77.5	109.9	(29)	%	80.0	132.1	(39)	%
Other	38.8	31.8	22	%	38.9	32.3	20	%
Corporate	(129.7)	(119.0)	*		(130.4)	(120.2)	*
Subtotal at fixed currency rates	402.9	399.1	1	%	412.5	437.8	(6)	%
Currency impact	9.6	38.7	*		-	-	*
Consolidated	$ 412.5	$ 437.8	(6)	%	$ 412.5	$ 437.8	(6)	%
	Six Months Ended  June 30
	Fixed Currency Rates				Public Currency Rates
			%				%
(millions)	2016	2015	Change		2016	2015	Change
Net Sales
Global Industrial	$ 2,231.3	$ 2,140.9	4	%	$ 2,271.0	$ 2,295.0	(1)	%
Global Institutional	2,191.0	2,029.3	8	%	2,211.7	2,091.2	6	%
Global Energy	1,514.6	1,758.4	(14)	%	1,538.4	1,929.7	(20)	%
Other	391.0	360.9	8	%	393.5	370.8	6	%
Subtotal at fixed currency rates	6,327.9	6,289.5	1	%	6,414.6	6,686.7	(4)	%
Currency impact	86.7	397.2	*		-	-	*
Consolidated	$ 6,414.6	$ 6,686.7	(4)	%	$ 6,414.6	$ 6,686.7	(4)	%
Operating Income
Global Industrial	$ 300.0	$ 250.5	20	%	$ 306.8	$ 279.4	10	%
Global Institutional	441.1	394.8	12	%	444.4	402.6	10	%
Global Energy	137.9	214.1	(36)	%	142.3	260.4	(45)	%
Other	68.9	54.9	26	%	69.1	55.4	25	%
Corporate	(177.7)	(169.6)	*		(178.6)	(172.3)	*
Subtotal at fixed currency rates	770.2	744.7	3	%	784.0	825.5	(5)	%
Currency impact	13.8	80.8	*		-	-	*
Consolidated	$ 784.0	$ 825.5	(5)	%	$ 784.0	$ 825.5	(5)	%

* Not meaningful.

As shown in the “Fixed Currency Rates” tables above, we evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Amounts shown in the “Public Currency Rates” tables above reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period, and are provided for informational purposes. The difference between the fixed currency exchange rates and the public currency exchange rates is reported as “Currency impact” in the “Fixed Currency Rates” tables above.

The Corporate segment includes amortization from the Nalco merger intangible assets. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income. 

14

ECOLAB INC.

CONSOLIDATED BALANCE SHEET

(unaudited)

	June 30	December 31	June 30
(millions)	2016	2015	2015
Assets
Current assets
Cash and cash equivalents	$ 167.4	$ 92.8	$ 310.6
Accounts receivable, net	2,318.0	2,390.2	2,494.8
Inventories	1,331.7	1,388.2	1,462.7
Deferred income taxes	-	250.0	164.6
Other current assets	278.3	326.3	538.4
Total current assets	4,095.4	4,447.5	4,971.1
Property, plant and equipment, net	3,257.3	3,228.3	3,123.4
Goodwill	6,504.4	6,490.8	6,513.4
Other intangible assets, net	3,978.3	4,109.2	4,231.0
Other assets	389.2	365.9	356.4
Total assets	$ 18,224.6	$ 18,641.7	$ 19,195.3
Liabilities and Equity
Current liabilities
Short-term debt	$ 1,749.9	$ 2,205.3	$ 2,185.2
Accounts payable	977.8	1,049.6	961.0
Compensation and benefits	459.9	509.0	425.1
Income taxes	86.6	52.2	45.8
Other current liabilities	964.2	948.3	828.9
Total current liabilities	4,238.4	4,764.4	4,446.0
Long-term debt	5,097.0	4,260.2	5,102.3
Postretirement health care and pension benefits	968.4	1,117.1	1,139.6
Deferred income taxes	1,023.4	1,281.2	1,405.4
Other liabilities	227.8	238.4	222.5
Total liabilities	11,555.0	11,661.3	12,315.8
Equity
Common stock	351.6	350.3	349.3
Additional paid-in capital	5,181.1	5,086.1	5,001.6
Retained earnings	6,444.6	6,160.3	5,894.7
Accumulated other comprehensive loss	(1,492.7)	(1,423.3)	(1,195.1)
Treasury stock	(3,884.1)	(3,263.5)	(3,238.9)
Total Ecolab shareholders’ equity	6,600.5	6,909.9	6,811.6
Noncontrolling interest	69.1	70.5	67.9
Total equity	6,669.6	6,980.4	6,879.5
Total liabilities and equity	$ 18,224.6	$ 18,641.7	$ 19,195.3

During the first quarter of 2016, we early-adopted the accounting guidance issued in November 2015 that requires all deferred tax assets and liabilities to be classified as noncurrent on the Consolidated Balance Sheet, using the prospective application method. Prior periods have not been retrospectively adjusted for adoption of this guidance.

During the third quarter of 2015, we early-adopted the updated accounting guidance related to simplifying the presentation of debt issue costs, using the retrospective application method. We updated our Consolidated Balance Sheet for prior periods to reflect the changes, resulting in reductions as of June 30, 2015 to other assets, short-term debt and long-term debt of $22.0 million, $0.1 million and $21.9 million, respectively. The updated guidance had no impact on previously reported earnings or consolidated cash flows.

15

ECOLAB INC.

SUPPLEMENTAL NON-GAAP RECONCILIATIONS

(unaudited)

	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions, except percent and per share)	2016		2015		2016		2015
Net sales
Reported GAAP net sales	$ 3,317.2		$ 3,389.1		$ 6,414.6		$ 6,686.7
Effect of foreign currency translation	(64.7)		(175.3)		(86.7)		(397.2)
Non-GAAP fixed currency sales	$ 3,252.5		$ 3,213.8		$ 6,327.9		$ 6,289.5
Operating income
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP fixed currency operating income	$ 402.9		$ 399.1		$ 770.2		$ 744.7
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Special gains and charges	88.1		76.6		94.4		85.0
Non-GAAP adjusted operating income	500.6		514.4		878.4		910.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP adjusted fixed currency operating income	$ 491.0		$ 475.7		$ 864.6		$ 829.7
Operating income margin
Reported GAAP operating income margin	12.4	%	12.9	%	12.2	%	12.3	%
Non-GAAP adjusted fixed currency operating income margin	15.1	%	14.8	%	13.7	%	13.2	%
Net Income Attributable to Ecolab
Reported GAAP net income	$ 258.4		$ 302.0		$ 489.2		$ 535.4
Special (gains) and charges, after tax	57.0		61.1		61.4		66.4
Discrete tax net expense (benefit)	3.9		(39.4)		(0.9)		(36.8)
Non-GAAP adjusted net income attributable to Ecolab	$ 319.3		$ 323.7		$ 549.7		$ 565.0
Diluted Earnings per Share Attributable to Ecolab ("EPS")
Reported GAAP diluted EPS	$ 0.87		$ 1.00		$ 1.64		$ 1.77
Special (gains) and charges, after tax	0.19		0.20		0.21		0.22
Discrete tax net expense (benefit)	0.01		(0.13)		(0.00)		(0.12)
Non-GAAP adjusted diluted EPS	$ 1.08		$ 1.08		$ 1.85		$ 1.87
Provision for Income Taxes
Reported GAAP tax rate	24.1	%	18.0	%	24.1	%	22.5	%
Special gains and charges	2.3		0.4		1.4		(0.1)
Discrete tax items	(0.9)		8.7		0.1		4.7
Non-GAAP adjusted tax rate	25.5	%	27.1	%	25.6	%	27.1	%

16

ECOLAB INC.

SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION

(unaudited)

The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share.

	First	Second	Six	Third	Nine	Fourth
	Quarter	Quarter	Months	Quarter	Months	Quarter	Year
	Ended	Ended	Ended	Ended	Ended	Ended	Ended
	Mar. 31	June 30	June 30	Sept. 30	Sept. 30	Dec. 31	Dec. 31
	2015	2015	2015	2015	2015	2015	2015
Diluted earnings per share, as reported (U.S. GAAP)	$ 0.77	$ 1.00	$ 1.77	$ 0.86	$ 2.63	$ 0.69	$ 3.32
Adjustments:
Special (gains) and charges (1)	0.02	0.20	0.22	0.48	0.70	0.55	1.25
Discrete tax expense (benefits) (2)	0.01	(0.13)	(0.12)	(0.06)	(0.19)	(0.02)	(0.21)
Adjusted diluted earnings per share (Non-GAAP)	$ 0.80	$ 1.08	$ 1.87	$ 1.28	$ 3.15	$ 1.22	$ 4.37

	First	Second	Six	Third	Nine	Fourth
	Quarter	Quarter	Months	Quarter	Months	Quarter	Year
	Ended	Ended	Ended	Ended	Ended	Ended	Ended
	Mar. 31	June 30	June 30	Sept. 30	Sept. 30	Dec. 31	Dec. 31
	2016	2016	2016	2016	2016	2016	2016
Diluted earnings per share, as reported (U.S. GAAP)	$ 0.77	$ 0.87	$ 1.64
Adjustments:
Special (gains) and charges (3)	0.01	0.19	0.21
Discrete tax expense (benefits) (4)	(0.02)	0.01	(0.00)
Adjusted diluted earnings per share (Non-GAAP)	$ 0.77	$ 1.08	$ 1.85

Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.

(1) Special (gains) and charges for 2015 included restructuring charges of $1.6 million, $14.6 million, $10.0 million and $49.3 million, net of tax, in the first, second, third and fourth quarters, respectively. Special (gains) and charges for 2015 also included $3.2 million, $2.8 million, $2.4 million and $2.3 million of costs, net of tax, in the first, second, third and fourth quarters, respectively, related to Champion integration costs. Special (gains) and charges for 2015 also included $0.5 million, $0.1 million, $0.6 million and $0.1 million of costs, net of tax, in the first, second, third and fourth quarters, respectively, related to Nalco integration costs. Special (gains) and charges for 2015 also include charges of $30.2 million, $124.6 million, $80.9 million, net of tax, in the second, third and fourth quarters, respectively, related to Venezuelan charges. Special (gains) and charges for 2015 also included a charge of $15.4 million, net of tax, in the fourth quarter related to a fixed asset impairment. Special (gains) and charges for 2015 also included charges of $13.4 million, $7.8 million and $17.1 million, net of tax, in the second, third and fourth quarters, respectively, primarily related to litigation related charges, a loss on the sale of a portion of our Ecovation business and the net impact of inventory reserve and inventory cost policy harmonization efforts.

(2) The first quarter 2015 discrete tax net expense of $2.6 million was driven primarily by a change to a deferred tax liability resulting from the Naperville facility transaction. The second quarter 2015 discrete tax net benefit of $39.4 million was driven primarily from our ability to recognize a worthless stock deduction for the tax basis in a wholly owned domestic subsidiary. The third quarter 2015 discrete tax net benefit of $19.2 million was driven primarily by the release of valuation allowances on certain deferred tax assets and a refund claim for taxes paid in a prior period resulting from updated IRS regulations, offset partially by recognizing adjustments from filing our 2014 U.S. federal tax return. The fourth quarter discrete tax net benefit of $7.3 million was driven primarily by the finalization of prior year IRS audits, valuation allowance releases and other statute of limitation tax reserve releases.

(3) Special (gains) and charges for 2016 included restructuring charges of $1.8 million, net of tax, and gains related to restructuring of  $1.9 million, net of tax, in the first and second quarters, respectively. Special (gains) and charges for 2016 also included a charge of $42.9 million, net of tax, during the second quarter associated with the downturn in the global energy market. Special (gains) and charges for 2016 also included a charge of $6.3 million, net of tax, during the second quarter related to other fixed asset impairments and inventory charges. Special (gains) and charges for 2016 also included a gain of $4.9 million, net of tax, during the second quarter related to the recovery of previously written off Venezuelan intercompany receivables. Special (gains) and charges for 2016 also included $2.6 million and $14.6 million, net of tax, in the first and second quarters, respectively, related to other charges, including litigation related charges.

(4) The first quarter 2016 discrete tax net benefit of $4.8 million was driven primarily by the release of reserves for uncertain tax positions due to expiration of statute of limitations in non-U.S. jurisdictions. The second quarter 2016 discrete tax net expense of $3.9 million was driven by individually immaterial items, including adjustments to deferred tax asset and liability positions.

17

EX-99.2

Exhibit 99.2

Second Quarter 2016
Teleconference
Supplemental Data

Cautionary Statement

Forward-Looking InformationThis communication contains forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding our future financial and business performance and prospects, including forecasted 2016 third quarter and full year business and financial results, sales growth, performance against the market, investments, innovation, cost efficiencies, unfavorable foreign currency and merger and acquisition opportunities. These statements are based on the current expectations of management of the Company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are set forth under Item 1A of our most recent Annual Report on Form 10-K and our other our public filings with the Securities and Exchange Commission (the “SEC”) and include the vitality of the markets we serve, including the markets served by our Global Energy segment; the impact of worldwide economic factors such as the worldwide economy, credit markets, interest rates and foreign currency risk, including reduced sales and earnings in other countries resulting from the weakening of local currencies versus the U.S. dollar; exposure to economic, political and legal risks related to our international operations; the costs and effects of complying with laws and regulations relating to our operations; the occurrence of litigation or claims; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement except as required by law.

Non-GAAP Financial Information    This communication includes Company information that does not conform to generally accepted accounting principles (GAAP). Management believes that a presentation of this information is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. Reconciliations of our non-GAAP measures included within this presentation are included in the “Non-GAAP Financial Measures” section of this presentation.

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 2

2Q 2016 Overview

◢Earnings:

§ Reported diluted EPS $0.87, -13% versus last year; adjusted diluted EPS $1.08, flat year on year

§ Reported and adjusted diluted EPS include $0.08 (7%) unfavorable currency

◢Sales:

§ Reported sales -2%; fixed currency sales +1%; acquisition adjusted fixed currency sales -1%

§ Solid acquisition adjusted fixed currency Global Institutional, Global Industrial and Other segment sales, +4%, offset by lower Global Energy sales 

§ Strong new business growth and new product introductions drove market share gains

◢Operating Margin:

§ Reported operating margin -50 bps; adjusted fixed currency operating margin +30 bps 

§ Strong margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by an increase in variable compensation and a decline in Global Energy

◢Outlook:

§ Expect a solid second half with continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons

§ 3Q: Adjusted diluted EPS of $1.24 to $1.32, including an approximate $0.08, or 6%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

§ 2016: Adjusted diluted EPS of $4.35 to $4.50, including an approximate $0.27 to $0.32, or 6% to 7%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 3

2Q 2016 Results

	Second Quarter Ended June 30
	Reported					Adjusted *
(unaudited)	Public Currency Rates			%		Public Currency Rates			%
(millions, except per share)	2016		2015	Change		2016		2015	Change
Net sales		$ 3,317.2	$ 3,389.1	(2)	%		$ 3,317.2	$ 3,389.1	(2)	%
Operating income		412.5	437.8	(6)	%		500.6	514.4	(3)	%
Net income attributable to Ecolab		258.4	302.0	(14)	%		319.3	323.7	(1)	%
Diluted earnings per share		$ 0.87	$ 1.00	(13)	%		$ 1.08	$ 1.08	0	%
						Adjusted *
	Fixed Currency Rates *			%		Fixed Currency Rates			%
	2016		2015	Change		2016		2015	Change
Net sales		$ 3,252.5	$ 3,213.8	1	%		$ 3,252.5	$ 3,213.8	1	%
Operating income		402.9	399.1	1	%		491.0	475.7	3	%

*See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations.

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 4

2Q 2016 Sales Growth Detail

	FixedRate	Acq./Div.Adj.
GlobalIndustrial	%Change	%Change	Consolidated	%Change
F&B	4%	4%	Volume & mix	(1)%
Water	6%	1%	Pricing	<1%
Paper	1%	1%	Subtotal	(1)%
Textile Care	6%	6%	Acq./Div.	2%
Total Global Industrial	4%	2%	Fixed currency growth	1%
			Currency impact	(3)%
Global Institutional			Total	(2)%
Institutional	10%	6%
Specialty	6%	6%
Healthcare	4%	4%
Total Global Institutional	8%	5%
Global Energy	(13)%	(13)%
Other
Pest Elimination	8%	8%
Equipment Care	6%	6%
Total Other	8%	8%

Amounts in the tables above may reflect rounding.  Acq./Div. Adj. excludes the impact of acquisitions and divestitures and Venezuela results.

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 5

2Q 2016 Income Statement / Margins

($millions, unaudited)	2016	%sales	2015	%sales	%change		Comments*
Gross Profit	$ 1,532.0	46.2%	$ 1,582.6	46.7%	(3)	%	Excluding special charges, our adjusted gross margin was 48.0% and increased 100 bps, resulting from lower delivered product costs, cost efficiencies and the impact of the decline in Global Energy, which on average has a lower gross profit margin.
SG&A	1,093.3	33.0%	1,079.2	31.8%	1	%	The 120 bps increase in 2016 reflects the impact of investments in the business, higher variable compensation and the decline in Global Energy, which on average has a lower SG&A ratio.
Operating Income (fixed FX)
Global Industrial	171.3	14.9%	147.9	13.4%	16	%	2016 acquisition adjusted fixed currency margins were 15.1% vs. 13.6% in 2015. The 150 bps improvement was due to appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains, partially offset by higher variable compensation.
Global Institutional	245.0	21.4%	228.5	21.7%	7	%	2016 acquisition adjusted fixed currency margins were 22.1% vs. 21.7% in 2015. The 40 bps improvement reflected appropriate pricing and sales volume gains, which more than offset investments in the business and higher variable compensation.
Global Energy	77.5	10.3%	109.9	12.7%	(29)	%	2016 acquisition adjusted fixed currency margins were 9.8% vs. 12.4% in 2015. The 260 bps decrease reflected lower sales volume, reduced plant overhead absorption (driven by both lower volumes and a planned reduction in inventory levels) and reduced pricing, which more than offset delivered product cost savings, synergies and other cost reduction actions.
Other	38.8	19.1%	31.8	16.8%	22	%	The 230 bps improvement was due to pricing and sales volume gains, partially offset by higher variable compensation.
Subtotal at fixed FX	532.6	16.4%	518.1	16.1%	3	%
Corporate
Special Gains/(Ch.)	(88.1)		(76.6)				2016: Energy inventory, Energy workforce, other asset charges and a wage-hour litigation charge. 2015: Venezuela devaluation, loss on disposition of business, restructuring, other charges.
Corp. Expense	(41.6)		(42.4)				Includes Nalco intangible amortization of $42 million in 2016 and 2015.
Total Corporate Exp.	(129.7)		(119.0)
FX	9.6		38.7
Consolidated Op. Inc.	$ 412.5	12.4%	$ 437.8	12.9%	(6)	%	2016 adjusted fixed currency margin was 15.1%, +30 bps vs. the equivalent 2015 margin of 14.8%. Good margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by higher variable compensation and a decline in Global Energy.

*See Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations.

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 6

2Q 2016 Balance Sheet / Cash Flow

SummaryBalanceSheet
(unaudited)	June 30			June 30
(millions)	2016	2015	(millions, unaudited)	2016	2015
Cash and cash eq.	$ 167.4	$ 310.6	Short-term debt	$ 1,749.9	$ 2,185.2
Accounts receivable, net	2,318.0	2,494.8	Accounts payable	977.8	961.0
Inventories	1,331.7	1,462.7	Other current liabilities	1,510.7	1,299.8
Other current assets	278.3	703.0	Long-term debt	5,097.0	5,102.3
PP&E, net	3,257.3	3,123.4	Pension/Postretirement	968.4	1,139.6
Goodwill and intangibles	10,482.7	10,744.4	Other liabilities	1,251.2	1,627.9
Other assets	389.2	356.4	Total equity	6,669.6	6,879.5
Total assets	$ 18,224.6	$ 19,195.3	Total liab. and equity	$ 18,224.6	$ 19,195.3
SelectedCashFlowitems			SelectedBalanceSheetmeasures
	Six Months Ended
(unaudited)	June 30			June 30
(millions)	2016	2015	(unaudited)	2016	2015
Cash from op. activities	$ 874.8	$ 636.6	Total Debt/Total Capital	50.7%	51.4%
Depreciation	276.0	285.8	Net Debt/Total Capital	50.0%	50.4%
Amortization	145.3	149.9	Net Debt/EBITDA*	2.8	2.5
Capital expenditures	303.7	327.5	Net Debt/Adjusted EBITDA*	2.3	2.4

* EBITDA and Adjusted EBITDA are non-GAAP measures.  EBITDA is defined as the sum of operating income, depreciation and amortization. Adjusted EBITDA is defined as the sum of adjusted operating income, depreciation and amortization. The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. See “Non-GAAP Financial Measures” section of this presentation corresponding reconciliations.

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 7

2016 Focus

◢Expect solid second half

§ Continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons, lessening FX headwind

§ Execute the Ecolab Model

§ Drive growth through best product/best service to produce best results/lowest total use cost

§ Leverage corporate account new business investments and momentum

§ Expect continued mid-single digit growth in Global Institutional, Global Industrial and Other segments along with better Global Energy comparisons

§ Invest in the future

§ Continued investments in critical areas

§ Product innovation and new field technology

§ Enterprise systems

◢Improve cost efficiency and effectiveness

◢Focused M&A

§ Technologies, products/services, geographic expansion, opportunities in distressed markets

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 8

Appendix

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 9

Non-GAAP Financial Measures

	Second Quarter Ended				Six Months Ended
(unaudited)	June 30				June 30
(millions, except percent)	2016		2015		2016		2015
Net Sales
Reported GAAP net sales	$ 3,317.2		$ 3,389.1		$ 6,414.6		$ 6,686.7
Effect of foreign currency translation	(64.7)		(175.3)		(86.7)		(397.2)
Non-GAAP fixed currency sales	$ 3,252.5		$ 3,213.8		$ 6,327.9		$ 6,289.5
Cost of Sales
Reported GAAP cost of sales	$ 1,785.2		$ 1,806.5		$ 3,416.6		$ 3,571.8
Special (gains) and charges	61.9		11.0		61.9		11.6
Non-GAAP adjusted cost of sales	$ 1,723.3		$ 1,795.5		$ 3,354.7		$ 3,560.2
Gross Margin
Reported Gross Margin	46.2	%	46.7	%	46.7	%	46.6	%
Non-GAAP adjusted Gross Margin	48.0	%	47.0	%	47.7	%	46.8	%
Operating income
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP fixed currency operating income	$ 402.9		$ 399.1		$ 770.2		$ 744.7
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Special gains and charges	88.1		76.6		94.4		85.0
Non-GAAP adjusted operating income	500.6		514.4		878.4		910.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP adjusted fixed currency operating income	$ 491.0		$ 475.7		$ 864.6		$ 829.7
Operating Income Margin
Reported GAAP operating income margin	12.4	%	12.9	%	12.2	%	12.3	%
Non-GAAP adjusted fixed currency operating income margin	15.1	%	14.8	%	13.7	%	13.2	%

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 10

Non-GAAP Financial Measures

	Second Quarter Ended				Six Months Ended
(unaudited)	June 30				June 30
(millions, except percent and per share)	2016		2015		2016		2015
Net Income Attributable to Ecolab
Reported GAAP net income	$ 258.4		$ 302.0		$ 489.2		$ 535.4
Special (gains) and charges, after tax	57.0		61.1		61.4		66.4
Discrete tax net expense (benefit)	3.9		(39.4)		(0.9)		(36.8)
Non-GAAP adjusted net income attributable to Ecolab	$ 319.3		$ 323.7		$ 549.7		$ 565.0
Diluted Earnings per Share Attributable to Ecolab ("EPS")
Reported GAAP diluted EPS	$ 0.87		$ 1.00		$ 1.64		$ 1.77
Special (gains) and charges, after tax	0.19		0.20		0.21		0.22
Discrete tax net expense (benefit)	0.01		(0.13)		(0.00)		(0.12)
Non-GAAP adjusted diluted EPS	$ 1.08		$ 1.08		$ 1.85		$ 1.87
Provision for Income Taxes
Reported GAAP tax rate	24.1	%	18.0	%	24.1	%	22.5	%
Special gains and charges	2.3		0.4		1.4		(0.1)
Discrete tax items	(0.9)		8.7		0.1		4.7
Non-GAAP adjusted tax rate	25.5	%	27.1	%	25.6	%	27.1	%
EBITDA (trailing twelve months ended)
Net income including non-controlling interest	$ 968.6		$ 1,256.9
Provision for income taxes	299.9		411.5
Interest expense, net	251.3		249.0
Depreciation	549.7		567.8
Amortization	295.4		304.5
EBITDA	$ 2,364.9		$ 2,789.7
Special (gains) and charges impacting EBITDA	504.8		137.5
Adjusted EBITDA	$ 2,869.7		$ 2,927.2

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures. 11

EX-99.3

Exhibit 99.3

ECOLAB SECOND QUARTER 2016

2Q 2016 Overview

◢Earnings:

§ Reported diluted EPS $0.87, -13% versus last year; adjusted diluted EPS $1.08, flat year on year

§ Reported and adjusted diluted EPS include $0.08 (7%) unfavorable currency

◢Sales:

§ Reported sales -2%; fixed currency sales +1%; acquisition adjusted fixed currency sales -1%

§ Solid acquisition adjusted fixed currency Global Institutional, Global Industrial and Other segment sales, +4%, offset by lower Global Energy sales 

§ Strong new business growth and new product introductions drove market share gains

◢Operating Margin:

§ Reported operating margin -50 bps; adjusted fixed currency operating margin +30 bps 

§ Strong margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by an increase in variable compensation and a decline in Global Energy

◢Outlook:

§ Expect a solid second half with continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons

§ 3Q: Adjusted diluted EPS of $1.24 to $1.32, including an approximate $0.08, or 6%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

§ 2016: Adjusted diluted EPS of $4.35 to $4.50, including an approximate $0.27 to $0.32, or 6% to 7%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

SUMMARY

Continued attractive new account gains and new product introductions drove strong acquisition adjusted fixed currency sales growth in our Global Institutional, Global Industrial and Other segments during the second quarter,

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nearly offsetting a decline in Global Energy sales. New business and ongoing cost efficiency work led the adjusted fixed currency operating margin expansion, more than offsetting the impact of soft economies, challenging end markets and continued currency headwinds. These, along with lower taxes and shares outstanding, drove the 7% adjusted earnings per share increase before currency translation.

While Energy segment results have been challenging, we believe that recent trends suggest a bottoming of the energy cycle has been reached, and we expect our second half Energy segment sequential results to reflect that stabilization. We look for the market recovery to begin to gradually take hold in 2017 and improve through 2018-2019, and the Energy segment to show results reflecting that market improvement.

Looking to the third quarter, we expect our Global Institutional, Global Industrial and Other segments to continue to show further strong acquisition adjusted fixed currency growth, outpacing their markets and soft international economies as they leverage investments we have made to further improve sales and service force effectiveness and profitability, and more than offset lower year-on-year results from our Global Energy business. We look for third quarter adjusted diluted earnings per share to be in the $1.24 to $1.32 range, with that range including approximately $0.08 per share, or 6%, of unfavorable impact from the Venezuelan devaluation and deconsolidation and currency translation, as we continue to aggressively drive business growth.

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For the full year, the Global Institutional, Global Industrial and Other segments are expected to continue to show strong acquisition adjusted fixed currency growth. Global Energy year-on-year sales comparisons should improve versus the first half and for the full year are expected to decline around 10% versus last year. We continue to expect to outperform our markets in 2016 while also investing in the key drivers for future sustainable above average earnings growth. We expect our consolidated results to show improving comparisons in the second half, and have narrowed our forecast for adjusted diluted earnings per share for 2016 to the $4.35 to $4.50 range from $4.35 to $4.55, which includes expected currency headwinds of $0.27 to $0.32 per share (of which $0.17 per share is from the Venezuela devaluation and deconsolidation).

HIGHLIGHTS

· Reported second quarter diluted earnings per share were $0.87.

· On an adjusted basis, excluding special gains and charges and discrete tax items from both years, second quarter 2016 adjusted diluted earnings per share were $1.08, and included an $0.08, or 7%, currency headwind. This compared with adjusted diluted earnings per share of $1.08 a year ago.  

· The adjusted diluted earnings per share growth was driven by delivered product and other cost savings, cost efficiencies and lower taxes and shares, which offset investments in the businessand higher variable compensation.

· Our consolidated acquisition adjusted fixed currency sales were modestly lower as our Global Institutional, Global Industrial and Other

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segments grew 4% but were offset by lower Global Energy sales. Regional sales growth was led by Latin America and Europe.

· Reported operating margins declined 50 basis points. Adjusted fixed currency operating margins expanded 30 basis points asdelivered product and other cost savings and cost efficiencies offset investments in the business, higher variable compensation and lower Energy results.

· In 2016’s difficult environment, we are focused on driving new business gains by helping customers lower costs. We are using our industry-leading product innovation and service strengths to help customers achieve the best results and lowest operating costs, and through these, aggressively drive new account gains across all of our segments.

· We expect third quarter adjusted diluted earnings per share in the $1.24 to $1.32 range, reflecting a combined Venezuela devaluation and deconsolidation impact and currency translation drag of approximately $0.08, or 6%.

· Consolidated results are expected to improve, with the second half outperforming the first half. We narrowed our full year adjusted diluted earnings per share forecast to the $4.35 to $4.50 per share range from $4.35 to $4.55. This forecast includes expected unfavorable currency exchange in the $0.27 to $0.32 per share range, of which $0.17 per share is from the Venezuela devaluation and deconsolidation.  

· In summary, despite a very challenging global economic and market environment, we expect to continue to deliver solid fundamental results in 2016. We remain confident in our business, our markets and our people, as well as our capacities to meet our aggressive growth objectives over the coming years.

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VENEZUELA

As previously disclosed, Ecolab deconsolidated its Venezuela operations at year-end 2015.  This change in accounting treatment, in which we stopped consolidating the results of our local Venezuelan operations in our 2016 financial statements, does not directly affect the local operations of our Venezuelan businesses. We continue to serve customers in Venezuela after the deconsolidation.

Also as previously disclosed, the earnings per share impact of currency on growth rates versus 2015 includes the $0.15 per share effect of the Venezuela bolivar devaluation during 2015. The combined impact of the Venezuela bolivar devaluation and deconsolidation on adjusted earnings per share represents a total year-on-year 2016 headwind of approximately $0.17 per share. 

To provide useful period-to-period comparison of results, acquisition adjusted growth rates generally exclude the results of any acquired business from the first twelve months post-acquisition, exclude the results of divested businesses from the previous twelve months prior to divestiture, and exclude the Venezuelan results of operations from both the current period and comparable period of the prior year.

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SALES DISCUSSION

Consolidated sales	% Change
Volume & mix	(1)%
Pricing	<1%
Subtotal	(1)%
Acq./Div.	2%
Fixed currency growth	1%
Currency impact	(3)%
Total	(2)%

Ecolab’s consolidated reported sales for the second quarter decreased 2%. Consolidated fixed currency sales for the quarter increased 1%. Acquisition adjusted fixed currency sales decreased 1% when compared to the year ago period. Looking at the growth components, volume and mix decreased 1% versus last year while pricing was modestly positive.  Acquisitions and divestitures were 2% and currency was a negative 3%.

GLOBAL INDUSTRIAL SEGMENT

	Fixed Rate	Acq./Div. Adj.
Global Industrial	% Change	% Change
Food & Beverage	4%	4%
Water	6%	1%
Paper	1%	1%
Textile Care	6%	6%
Total Global Industrial	4%	2%

FOOD & BEVERAGE

Second quarter fixed currency Food & Beverage sales increased 4% as corporate account and share gains more than offset generally flat industry trends. Globally, we enjoyed good growth in our food and beverage markets, moderate sales gains in dairy and lower sales in agri. Regional growth was strong in Latin America and Asia Pacific, while North America and Europe

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recorded modest gains.

Food & Beverage continues to drive growth using its enterprise selling approach to customers, in which we combine Ecolab’s industry-leading cleaning and sanitizing, water treatment and pest elimination capabilities to demonstrate our value through the delivery of improved food safety results, lower operating costs and enhanced product quality for customers. This has enabled us to win business with key global customers. We look to more than offset tough industry conditions with further customer penetration and new business capture, new market growth and leverage from our strong innovation pipeline.

WATER

Fixed currency Water sales grew 6%. Acquisition adjusted fixed currency Water sales rose 1% compared to the prior year. Heavy and light industry sales rose 4%, with strong gains in light partially offset by flat sales to the globally challenged heavy industry market. Mining declined double-digits. Regionally, we saw strong growth in Latin America, good gains in Europe, and modest declines in North America and Asia Pacific.

In this challenging environment, we continue to build our total water management capabilities that provide customers with end to end water solutions that significantly reduce their water consumption and total operating costs while improving their product quality. We also continue to invest in our light and heavy industry businesses and in our global corporate accounts sales team to accelerate our share gains, as well as in additional new water

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technologies to improve customers’ operating performance, lower their operating costs and improve safety. We expect modest acquisition adjusted sales growth in the third quarter reflecting continued weak mining results, with improving fourth quarter results as market share gains in our heavy and light businesses drive better sales growth.

PAPER

Second quarter fixed currency Paper sales increased 1%. Good growth in Latin America and North America, driven by strong sales efforts and business wins, more than offset declines in Asia Pacific.  

We continue to focus on maximizing results for our customers through minimizing their water use and optimizing their total cost in the growing segments of board & packaging, tissue & towel, and pulp. Paper expects to show better growth over the balance of the year through the globalization of best practices and the focus on delivering value through innovative solutions.

GLOBAL INSTITUTIONAL SEGMENT

	Fixed Rate	Acq./Div. Adj.
Global Institutional	% Change	% Change
Institutional	10%	6%
Specialty	6%	6%
Healthcare	4%	4%
Total Global Institutional	8%	5%

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INSTITUTIONAL

Fixed currency sales growth for the Institutional business grew 10%. Adjusted for acquisitions, fixed currency sales for Institutional grew 6%. Global lodging demandcontinued to show modest growth while restaurant foot traffic data remains soft. North America posted strong sales growth, Asia Pacific turned in solid sales gains, and Europe and Latin America rose modestly. New business wins, led by demand for our leading product innovation in key platforms including warewashing, laundry and housekeeping, along with appropriate pricing, drove our results.

We remain focused on sharpening our execution in delivering increased customer value, offering effective solutions that reduce our customers’ water, energy and labor costs, backed by superior on-site service. Looking ahead, the Swisher integration remains on plan, and we expect continued solid Institutional sales growth in the third quarter and for the full year.

SPECIALTY

Second quarter sales for Specialty grew 6% in fixed currencies. Quickservice sales growth was solid as we continue to see growth in our global accounts and as food safety gains greater focus among our customers. New account growth, increased service coverage and additional solutions leveraged generally modest industry trends to drive growth.  Quickservice sales were strong across all regions, benefiting from new accounts and additional customer solutions. 

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The food retail business posted a strong gain, with the improved sales growth reflecting continued new customer additions and product introductions.

New account wins have been solid, and with our ongoing investments in new products, the sales and service force and increased solutions for customers, we expect a good third quarter and full year in 2016 for Specialty.

HEALTHCARE

Fixed currency Healthcare sales rose 4% in the second quarter. We achieved good growth in most product lines; regionally, Europe showed strong gains. We enjoyed strong new business success in the quarter as we continued our focus on executing the Ecolab value proposition: offering innovative products and premium on-site service to reduce healthcare acquired infections and increase operational efficiencies, and thereby deliver improved outcomes in hospital operating rooms, patient rooms and central sterile areas.

Ecolab’s outcome-based programs are still a relatively new approach for the industry and we are well positioned to capitalize on these trends. The improving sales traction and new business pipeline makes us confident in the long term growth potential for our business. Further, the pending acquisition of Anios should bolster our position in Europe and accelerate our international expansion. We look for third quarter and second half 2016 Healthcare sales to show better organic growth as the new business gains benefit results.

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GLOBAL ENERGY SEGMENT

	Fixed Rate	Acq./Div. Adj.
Global Energy	% Change	% Change
Energy	(13)%	(13)%

Second quarter fixed currency Global Energy segment sales decreased 13% reflecting the period’s continued weak operating conditions and comparison to the relatively less depressed second quarter environment last year. Within our upstream businesses, the well stimulation business (representing less than 10% of Energy segment sales) recorded a significant decline. Our production business (which represents approximately 65% of Energy segment sales) also declined due to lower price and customer usage changes amid weaker market conditions. Downstream sales rose modestly when compared to last year, with this quarter’s slower growth reflecting the timing of orders.

Looking ahead, stabilizing supply and demand metrics and drilling rig counts suggest a bottoming in the energy markets. However, we expect industry activity will take time to gain momentum, with demand and pricing improvement developing gradually and taking hold starting in 2017. We look for the second half of 2016 to reflect this lag, with a decline in upstream partially offset by good growth in downstream. We expect full year 2016 acquisition-adjusted Energy segment sales to decrease around 10% year on year, with the second half outperforming the first. We remain aggressive, using both our industry-leading product innovation and our outstanding sales and service team to drive sales and share gains, as well as strengthen our position for future growth. We expect these factors to enable us to show improving growth over the next several years as the energy markets recover.

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OTHER SEGMENT

	Fixed Rate	Acq./Div. Adj.
Other	% Change	% Change
Pest Elimination	8%	8%
Equipment Care	6%	6%
Total Other	8%	8%

PEST ELIMINATION

Fixed currency Pest Elimination sales increased 8% in the second quarter. Sales to food retail, food and beverage, healthcare and restaurant customersled the growth, which was strong in all regions. We continue to drive market penetration, with innovative service offerings and technologies, and make progress in globalizing our market-focused capabilities and field technologies.We expect Pest Elimination sales to show further strong growth in the third quarter led by gains in all markets.

EQUIPMENT CARE

Equipment Care sales grew 6% in the second quarter. Productivity improvements from our technology and training investments continue to pay off, helping us to drive good customer wins and strong sales growth. We look for mid- to upper-single digit sales growth in the third quarter, and for the full year 2016.   

CONSOLIDATED MARGIN PERFORMANCE

($ millions, unaudited)	2016	% sales	2015	% sales	% change
Gross Profit	$ 1,532.0	46.2%	$ 1,582.6	46.7%	(3)	%

Second quarter gross margins were 46.2%. When adjusted for special charges, second quarter 2016 gross margins were 48.0% and rose 100 basis

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points above last year. The improvement resulted from lower delivered product costs, cost efficiencies and the decline in Global Energy (which on average has a lower gross profit margin).

($ millions, unaudited)	2016	% sales	2015	% sales	% change
SG&A	$ 1,093.3	33.0%	$ 1,079.2	31.8%	1	%

SG&A expenses represented 33.0% of second quarter sales. The 120 basis point increase reflected the impact of investments in the business, higher variable compensation and the decline in Global Energy (which on average has a lower SG&A ratio).

($ millions, unaudited)	2016	% sales	2015	% sales	% change
Consolidated Op. Inc.	$ 412.5	12.4%	$ 437.8	12.9%	(6)	%
Consolidated Fixed
Currency Op. Inc. (adj.)	$ 491.0	15.1%	$ 475.7	14.8%	3	%

Consolidated operating income margins were 12.4%. Adjusted for special charges, fixed currency operating income margins were 15.1%, rising 30 basis points over last year’s comparable margin. Good margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by higher variable compensation and a decline in Global Energy. 

SEGMENT MARGIN PERFORMANCE

($ millions - fixed currency, unaudited)	2016	% sales	2015	% sales	% change
Global Industrial Op. Inc.	$ 171.3	14.9%	$ 147.9	13.4%	16	%

Fixed currency operating income for the Global Industrial segment increased 16%.  Acquisition adjusted fixed currency operating income grew 13% and margins increased 150 basis points to 15.1%. Appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains

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drove the increase, which was partially offset by higher variable compensation.

($ millions - fixed currency, unaudited)	2016	% sales	2015	% sales	% change
Global Institutional Op. Inc.	$ 245.0	21.4%	$ 228.5	21.7%	7	%

Fixed currency operating income for the Global Institutional segment increased 7%. Acquisition adjusted fixed currency operating income grew 8% and margins rose 40 basis points to 22.1%. Results benefited from appropriate pricing and sales volume gains, which more than offset investments in the business and higher variable compensation.

($ millions - fixed currency, unaudited)	2016	% sales	2015	% sales	% change
Global Energy Op. Inc.	$ 77.5	10.3%	$ 109.9	12.7%	(29)	%

Fixed currency Global Energy segment operating income decreased 29%.  Acquisition adjusted fixed currency operating income declined 32% and margins declined 260 basis points to 9.8%. The decrease reflected lower sales volumes, reduced plant overhead absorption (driven by both lower volumes and a planned reduction in inventory levels) and reduced pricing, which more than offset delivered product cost savings, synergies and other cost reduction actions.

($ millions - fixed currency, unaudited)	2016	% sales	2015	% sales	% change
Other Op. Inc.	$ 38.8	19.1%	$ 31.8	16.8%	22	%

Fixed currency operating income for the Other segment increased 22% and margins expanded 230 basis points. Pricing and sales volume gains led the increase, which was partially offset by higher variable compensation.

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($ millions, unaudited)	2016	2015
Corporate
Special Gains/(Charges)	($88.1)	($76.6)
Corp. Expense	(41.6)	(42.4)
Total Corporate Expense	($129.7)	($119.0)

The Corporate segment includes amortization expense of $42 million in both the second quarter of 2016 and 2015, related to the Nalco merger intangible assets. The Corporate segment also includes special gains and charges. Total special gains and charges for the second quarter of 2016 were a net charge of $88 million ($57 million after-tax), including the special charge related to Energy as described below, wage-hour litigation and other asset impairments. Special gains and charges for the second quarter 2015 were a net charge of $77 million ($61 million after-tax).

ENERGY INVENTORY, WORKFORCE AND ASSET CHARGES

As a result of excess supply pressures and the negative impact on energy industry exploration and production investments, particularly in North America, the company recorded charges of $64 million ($43 million after tax), comprised of inventory write downs, fixed asset charges, headcount reductions and other charges during the second quarter of 2016.

TAX RATE, SHARES AND CONSOLIDATED INCOME

The reported income tax rate for the second quarter of 2016 was 24.1% compared with the reported rate of 18.0% in the second quarter of 2015. Discrete tax items for the second quarter 2016 were an unfavorable $4 million. Excluding the tax rate impact of the special gains and charges and discrete tax items, the adjusted tax rate was 25.5% in the second quarter of 2016,

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compared with 27.1% for the same period last year. The improved adjusted tax rate was primarily driven by the permanent enactment of the research and development tax credit and global tax planning strategies.

Ecolab reacquired 2.3 million shares of its common stock during the second quarter. The reacquired shares included 0.2 million shares acquired as part of an accelerated share repurchase that settled during the quarter. 

The net of this performance is that Ecolab reported second quarter diluted earnings per share of $0.87 compared with $1.00 reported a year ago. When adjusted for special gains and charges and discrete tax items in both years, adjusted earnings were the same at $1.08.

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BALANCE SHEET, CASH FLOW AND LEVERAGE

2Q 2016 Balance Sheet / Cash Flow

Summary Balance Sheet and Selected Balance Sheet Measures

(unaudited)	June 30
($ millions)	2016	2015
Cash and cash eq.	$ 167.4	$ 310.6
Accounts receivable, net	2,318.0	2,494.8
Inventories	1,331.7	1,462.7
Other current assets	278.3	703.0
PP&E, net	3,257.3	3,123.4
Goodwill and intangibles	10,482.7	10,744.4
Other assets	389.2	356.4
Total assets	$ 18,224.6	$ 19,195.3
Short-term debt	$ 1,749.9	$ 2,185.2
Accounts payable	977.8	961.0
Other current liabilities	1,510.7	1,299.8
Long-term debt	5,097.0	5,102.3
Pension/Postretirement	968.4	1,139.6
Other liabilities	1,251.2	1,627.9
Total equity	6,669.6	6,879.5
Total liab. and equity	$ 18,224.6	$ 19,195.3

	June 30
(unaudited)	2016	2015
Total Debt/Total Capital	50.7%	51.4%
Net Debt/Total Capital	50.0%	50.4%
Net Debt/EBITDA	2.8	2.5
Net Debt/Adjusted EBITDA	2.3	2.4
The inputs to EBITDA reflect the trailing twelve months of activity for the period presented.

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Selected Cash Flow items

	Six Months Ended
(unaudited)	June 30
($ millions)	2016	2015
Cash from op. activities	$ 874.8	$ 636.6
Depreciation	276.0	285.8
Amortization	145.3	149.9
Capital expenditures	303.7	327.5

Net debt to total capital was 51%, with net debt to adjusted EBITDA ratio at 2.3 times. Year to date cash from operations showed a very strong increase, primarily reflecting improved working capital metrics (accounts receivable, inventory and accounts payable).

FORECAST

2016 Focus

◢Expect solid second half

§ Continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons, lessening FX headwind

§ Execute the Ecolab Model

§ Drive growth through best product/best service to produce best results/lowest total use cost

§ Leverage corporate account new business investments and momentum

§ Expect continued mid-single digit growth in Global Institutional, Global Industrial and Other segments along with better Global Energy comparisons

§ Invest in the future

§ Continued investments in critical areas

§ Product innovation and new field technology

§ Enterprise systems

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◢Improve cost efficiency and effectiveness

◢Focused M&A

§ Technologies, products/services, geographic expansion, opportunities in distressed markets

Looking ahead, we remain focused on our long term fundamentals: driving fixed currency organic growth through the effective implementation of our successful Ecolab model, which means offering the best products, backed by the best service, to yield the best results at the lowest total use cost to the customer. We will use this model, along with our well-developed corporate accounts and independent customer approach, to drive superior fixed currency organic growth in the expected turbulent economic environment. While we will carefully watch our costs, we will continue to make key long term investments in our growth model and critical support systems. We will also continue to invest in key acquisitions that improve our competitive set for the future.  

As a result of this focus on our fundamentals, and as mentioned in the opening discussion, we look for our Global Institutional, Global Industrial and Other segments to continue to deliver strong acquisition adjusted fixed currency sales growth and offset lower Global Energy segment results. We expect the Venezuela devaluation and deconsolidation and foreign currency to have an unfavorable impact on sales of approximately 3 percentage points on third quarter sales and an unfavorable $0.08 per share, or approximately 6 percentage points, impact to earnings growth. As a result, we expect third quarter adjusted earnings to be in the $1.24 to $1.32 range compared with $1.28 earned last year.   

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We continue to expect a strong operating performance for the full year 2016 reflecting our business balance and more than offsetting headwinds from significantly reduced energy market activity, sluggish international economies and currency translation. We look for continued mid-single digit fixed currency sales growth in our Global Institutional, Global Industrial and Other segments and cost savings to more than offset lower Global Energy results. Net, we look for adjusted diluted earnings per share growth to improve in the second half versus the first half, and have narrowed our full year earnings to be in the $4.35 to $4.50 per share range from the prior $4.35 to $4.55 per share range. This forecast includes an expected unfavorable $0.27 to $0.32 per share Venezuela devaluation and deconsolidation and currency impact.

SUMMARY

In summary, we once again delivered on our forecast in the second quarter, while offsetting significant market and currency challenges and investing in our future. We will stay focused on driving fundamental growth in our businesses. We expect to realize good growth from our operations before still substantial currency headwinds in the third quarter, with improved growth in the second half, to deliver another year of superior earnings per share growth in 2016 before the impact of currency and the Venezuela devaluation and deconsolidation while continuing to make the right investments to sustain our future growth.

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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

This communication contains forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding our future financial and business performance and prospects, including forecasted 2016 third quarter and full-year financial and business results, energy market forecast, sales growth, performance against the market, innovation, investments, pricing, cost savings, foreign currency, Venezuela deconsolidation impact, integration status, pending Anios acquisition and merger and acquisition opportunities. These statements are based on the current expectations of management of the Company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are set forth under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015 and other public filings with the Securities and Exchange Commission (the “SEC”) and include the vitality of the markets we serve, including the impact of oil price fluctuations on the markets served by our Global Energy segment; the impact of economic factors such as the worldwide economy, capital flows, interest rates and foreign currency risk, including  reduced sales and earnings in other countries resulting from the weakening of local currencies versus the U.S. dollar; our ability to attract and retain high caliber management talent to lead our business; our ability to execute key business initiatives; potential information technology infrastructure failures and cybersecurity attacks; exposure to global economic, political and legal risks related to our international operations including with

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respect to our operations in Russia; the costs and effects of complying with laws and regulations, including those relating to the environment and to the manufacture, storage, distribution, sale and use of our products; the occurrence of litigation or claims, including related to the Deepwater Horizon oil spill; our ability to develop competitive advantages through innovation; difficulty in procuring raw materials or fluctuations in raw material costs; our substantial indebtedness; our ability to acquire complementary businesses and to effectively integrate such businesses; restraints on pricing flexibility due to contractual obligations; pressure on operations from consolidation of customers, vendors or competitors; public health epidemics; potential losses arising from the impairment of goodwill or other assets; potential loss of deferred tax assets; changes in tax law and unanticipated tax liabilities; potential chemical spill or release; potential class action lawsuits;  the loss or insolvency of a major customer or distributor; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties and factors, the forward-looking events discussed in this communication may not occur. We caution that undue reliance should not be placed on forward-looking statements, which speak only as of the date made. Ecolab does not undertake, and expressly disclaims, any duty to update any forward-looking statement except as required by law.

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NON-GAAP FINANCIAL INFORMATION

This discussion and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financial measures include:

· fixed currency sales

· acquisition adjusted fixed currency sales

· adjusted cost of sales

· adjusted gross margin

· adjusted operating income

· adjusted fixed currency operating income

· adjusted fixed currency operating income margin

· EBITDA

· adjusted EBITDA

· adjusted tax rate

· adjusted net income attributable to Ecolab

· adjusted diluted earnings per share

We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and cash flows and that these measures are useful for period-to-period comparison of results.

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Our non-GAAP financial measures for cost of sales, gross margin and operating income exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted earnings per share further exclude the impact of discrete tax items. We include in special gains and charges items that are unusual in nature and significant in amount. Both special (gains) and charges and discrete tax items can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs associated with historical trends and future results.

EBITDA is defined as the sum of net income including non-controlling interest, provision for income taxes, net interest expense, depreciation and amortization. Adjusted EBITDA is defined as the sum of EBITDA and special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are used as inputs to our net debt to EBITDA and net debt to adjusted EBITDA ratios, which we view as important indicators of our creditworthiness.

We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency amounts included in this supplemental discussion are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2016. Fixed currency amounts also reflect all Venezuelan bolivar operations, prior to the deconsolidation of our Venezuelan operations, at a Marginal Currency System (“SIMADI”) rate of approximately 200 bolivares to 1 U.S. dollar, which was the approximate conversion rate for SIMADI at year end 2015. Fixed currency sales, acquisition adjusted fixed currency sales,

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adjusted fixed currency operating income and adjusted fixed currency operating income margin measures eliminate the impact of exchange rate fluctuations on our international sales, acquisition adjusted sales, adjusted operating income and adjusted operating income margin, respectively, and promote a better understanding of our sales and operating income trends from underlying business performance.

Acquisition adjusted growth rates generally exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture. Acquisition adjusted growth rates also exclude the Venezuelan results of operations from both the current period and comparable period of the prior year.

These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this supplemental discussion. Reconciliations of our non-GAAP measures are included in the following "Supplemental Non-GAAP Reconciliations" and “Supplemental Diluted Earnings per Share Information” tables included in the second quarter 2016 supplemental discussion.

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SUPPLEMENTAL NON-GAAP RECONCILIATIONS

(unaudited)

	Second Quarter Ended				Six Months Ended
(unaudited)	June 30				June 30
(millions, except percent)	2016		2015		2016		2015
Net Sales
Reported GAAP net sales	$ 3,317.2		$ 3,389.1		$ 6,414.6		$ 6,686.7
Effect of foreign currency translation	(64.7)		(175.3)		(86.7)		(397.2)
Non-GAAP fixed currency sales	$ 3,252.5		$ 3,213.8		$ 6,327.9		$ 6,289.5
Cost of Sales
Reported GAAP cost of sales	$ 1,785.2		$ 1,806.5		$ 3,416.6		$ 3,571.8
Special (gains) and charges	61.9		11.0		61.9		11.6
Non-GAAP adjusted cost of sales	$ 1,723.3		$ 1,795.5		$ 3,354.7		$ 3,560.2
Gross Margin
Reported Gross Margin	46.2	%	46.7	%	46.7	%	46.6	%
Non-GAAP adjusted Gross Margin	48.0	%	47.0	%	47.7	%	46.8	%
Operating income
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP fixed currency operating income	$ 402.9		$ 399.1		$ 770.2		$ 744.7
Reported GAAP operating income	$ 412.5		$ 437.8		$ 784.0		$ 825.5
Special gains and charges	88.1		76.6		94.4		85.0
Non-GAAP adjusted operating income	500.6		514.4		878.4		910.5
Effect of foreign currency translation	(9.6)		(38.7)		(13.8)		(80.8)
Non-GAAP adjusted fixed currency operating income	$ 491.0		$ 475.7		$ 864.6		$ 829.7
Operating Income Margin
Reported GAAP operating income margin	12.4	%	12.9	%	12.2	%	12.3	%
Non-GAAP adjusted fixed currency operating income margin	15.1	%	14.8	%	13.7	%	13.2	%

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SUPPLEMENTAL NON-GAAP RECONCILIATIONS

(unaudited)

	Second Quarter Ended				Six Months Ended
(unaudited)	June 30				June 30
(millions, except percent and per share)	2016		2015		2016		2015
Net Income Attributable to Ecolab
Reported GAAP net income	$ 258.4		$ 302.0		$ 489.2		$ 535.4
Special (gains) and charges, after tax	57.0		61.1		61.4		66.4
Discrete tax net expense (benefit)	3.9		(39.4)		(0.9)		(36.8)
Non-GAAP adjusted net income attributable to Ecolab	$ 319.3		$ 323.7		$ 549.7		$ 565.0
Diluted Earnings per Share Attributable to Ecolab ("EPS")
Reported GAAP diluted EPS	$ 0.87		$ 1.00		$ 1.64		$ 1.77
Special (gains) and charges, after tax	0.19		0.20		0.21		0.22
Discrete tax net expense (benefit)	0.01		(0.13)		(0.00)		(0.12)
Non-GAAP adjusted diluted EPS	$ 1.08		$ 1.08		$ 1.85		$ 1.87
Provision for Income Taxes
Reported GAAP tax rate	24.1	%	18.0	%	24.1	%	22.5	%
Special gains and charges	2.3		0.4		1.4		(0.1)
Discrete tax items	(0.9)		8.7		0.1		4.7
Non-GAAP adjusted tax rate	25.5	%	27.1	%	25.6	%	27.1	%
EBITDA (trailing twelve months ended)
Net income including non-controlling interest	$ 968.6		$ 1,256.9
Provision for income taxes	299.9		411.5
Interest expense, net	251.3		249.0
Depreciation	549.7		567.8
Amortization	295.4		304.5
EBITDA	$ 2,364.9		$ 2,789.7
Special (gains) and charges impacting EBITDA	504.8		137.5
Adjusted EBITDA	$ 2,869.7		$ 2,927.2

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SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION

(unaudited)

The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share.

	First	Second	Six	Third	Nine	Fourth
	Quarter	Quarter	Months	Quarter	Months	Quarter	Year
	Ended	Ended	Ended	Ended	Ended	Ended	Ended
	Mar. 31	June 30	June 30	Sept. 30	Sept. 30	Dec. 31	Dec. 31
	2015	2015	2015	2015	2015	2015	2015
Diluted earnings per share, as reported (U.S. GAAP)	$ 0.77	$ 1.00	$ 1.77	$ 0.86	$ 2.63	$ 0.69	$ 3.32
Adjustments:
Special (gains) and charges (1)	0.02	0.20	0.22	0.48	0.70	0.55	1.25
Discrete tax expense (benefits) (2)	0.01	(0.13)	(0.12)	(0.06)	(0.19)	(0.02)	(0.21)
Adjusted diluted earnings per share (Non-GAAP)	$ 0.80	$ 1.08	$ 1.87	$ 1.28	$ 3.15	$ 1.22	$ 4.37

	First	Second	Six	Third	Nine	Fourth
	Quarter	Quarter	Months	Quarter	Months	Quarter	Year
	Ended	Ended	Ended	Ended	Ended	Ended	Ended
	Mar. 31	June 30	June 30	Sept. 30	Sept. 30	Dec. 31	Dec. 31
	2016	2016	2016	2016	2016	2016	2016
Diluted earnings per share, as reported (U.S. GAAP)	$ 0.77	$ 0.87	$ 1.64
Adjustments:
Special (gains) and charges (3)	0.01	0.19	0.21
Discrete tax expense (benefits) (4)	(0.02)	0.01	(0.00)
Adjusted diluted earnings per share (Non-GAAP)	$ 0.77	$ 1.08	$ 1.85

Per share amounts do not necessarily sum due to changes in shares outstanding and rounding.

(1) Special (gains) and charges for 2015 included restructuring charges of $1.6 million, $14.6 million, $10.0 million and $49.3 million, net of tax, in the first, second, third and fourth quarters, respectively. Special (gains) and charges for 2015 also included $3.2 million, $2.8 million, $2.4 million and $2.3 million of costs, net of tax, in the first, second, third and fourth quarters, respectively, related to Champion integration costs. Special (gains) and charges for 2015 also included $0.5 million, $0.1 million, $0.6 million and $0.1 million of costs, net of tax, in the first, second, third and fourth quarters, respectively, related to Nalco integration costs. Special (gains) and charges for 2015 also include charges of $30.2 million, $124.6 million, $80.9 million, net of tax, in the second, third and fourth quarters, respectively, related to Venezuelan charges. Special (gains) and charges for 2015 also included a charge of $15.4 million, net of tax, in the fourth quarter related to a fixed asset impairment. Special (gains) and charges for 2015 also included charges of $13.4 million, $7.8 million and $17.1 million, net of tax, in the second, third and fourth quarters, respectively, primarily related to litigation related charges, a loss on the sale of a portion of our Ecovation business and the net impact of inventory reserve and inventory cost policy harmonization efforts.

(2) The first quarter 2015 discrete tax net expense of $2.6 million was driven primarily by a change to a deferred tax liability resulting from the Naperville facility transaction. The second quarter 2015 discrete tax net benefit of $39.4 million was driven primarily from our ability to recognize a worthless stock deduction for the tax basis in a wholly owned domestic subsidiary. The third quarter 2015 discrete tax net benefit of $19.2 million was driven primarily by the release of valuation allowances on certain deferred tax assets and a refund claim for taxes paid in a prior period resulting from updated IRS regulations, offset partially by recognizing adjustments from filing our 2014 U.S. federal tax return. The fourth quarter discrete tax net benefit of $7.3 million was driven primarily by the finalization of prior year IRS audits, valuation allowance releases and other statute of limitation tax reserve releases.

(3) Special (gains) and charges for 2016 included restructuring charges of $1.8 million, net of tax, and gains related to restructuring of  $1.9 million, net of tax, in the first and second quarters, respectively. Special (gains) and charges for 2016 also included a charge of $42.9 million, net of tax, during the second quarter associated with the downturn in the global energy market. Special (gains) and charges for 2016 also included a charge of $6.3 million, net of tax, during the second quarter related to other fixed asset impairments and inventory charges. Special (gains) and charges for 2016 also included a gain of $4.9 million, net of tax, during the second quarter related to the recovery of previously written off Venezuelan intercompany receivables. Special (gains) and charges for 2016 also included $2.6 million and $14.6 million, net of tax, in the first and second quarters, respectively, related to other charges, including litigation related charges.

(4) The first quarter 2016 discrete tax net benefit of $4.8 million was driven primarily by the release of reserves for uncertain tax positions due to expiration of statute of limitations in non-U.S. jurisdictions. The second quarter 2016 discrete tax net expense of $3.9 million was driven by individually immaterial items, including adjustments to deferred tax asset and liability positions.

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