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) April 28, 2020

ECOLAB INC.

(Exact name of registrant as specified in its charter)

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

1 Ecolab Place, 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 CFR 240.13e-4(c))

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

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

Item 7.01 Regulation FD Disclosure.

On April 28, 2020, Ecolab Inc. (“Ecolab”) released the preliminary financial information of ChampionX Holding Inc. (“ChampionX”) on a carve-out basis for the first quarter ended March 31, 2020 and Ecolab announced earnings for the first quarter ended March 31, 2020. A copy of the preliminary financial information of ChampionX released by Ecolab in connection with this report under Item 7.01 is furnished and attached as Exhibit (99.1), which is incorporated by reference herein. A copy of the financial information of Ecolab in connection with this report under Item 7.01 is furnished and attached as Exhibit (99.2), 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 7.01 of Form 8-K and should not be deemed to be “filed” under the Securities Exchange Act of 1934.

Exhibit No.	Description	Method Of Filing
(99.1)	First Quarter 2020 Preliminary Financial Information of ChampionX	Filed herewith electronically.
(99.2)	First Quarter 2020 Financial Information of Ecolab	Filed herewith electronically.
(104)	Cover Page Interactive Data File.	Embedded within the Inline XBRL document.

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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: April 28, 2020	By:	/s/ David F. Duvick
		David F. Duvick
		Assistant Secretary

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EX-99.1

Exhibit (99.1)

First Quarter 2020 Preliminary Financial Information of ChampionX

Presented below is unaudited preliminary combined financial information of ChampionX Holding Inc. (“ChampionX”, or the “Company”) for the first quarter ended March 31, 2020 comparing to the same period of the prior year. The financial information for the first quarter ended March 31, 2020 shown below are preliminary, derived from the internal records of Ecolab Inc. (“Ecolab”) and based on the most current information available to management. The Company’s normal reporting processes with respect to the estimated financial data provided below have not been fully completed for the first quarter of 2020. As a result, these estimated results may differ from the actual results that will be reflected in ChampionX’s combined financial statements for the first quarter ended March 31, 2020 when they are publicly disclosed. These estimated results may change, and those changes may be material.

The preliminary combined financial information is presented on a carve-out basis and stated in U.S. dollars translated at the actual average public exchange rates prevailing during the periods presented. The ChampionX combined financial information has been prepared from Ecolab’s historical accounting records and reflects assumptions, estimates and allocations, which ChampionX believes are reasonable, to depict ChampionX’s results of operations as if the upstream energy business had been conducted by ChampionX independently from Ecolab during the periods presented. The allocations may not, however, reflect the expenses ChampionX would have incurred as a stand-alone entity. As a result, the combined financial information is not indicative of ChampionX’s financial condition, results of operations or cash flows, had ChampionX operated the upstream business as a stand-alone entity during the periods presented and is not indicative of ChampionX’s future financial condition, results of operations or cash flows.

Additionally, the carve-out allocations included in the ChampionX combined financial information follow the SEC guidelines on preparing carve-out financial statements as if the upstream energy business has been conducted independently from Ecolab. These allocations may differ from the amounts allocated to Ecolab’s Upstream Energy segment for the purposes of internal review and resource allocation at Ecolab.

Adjusted operating income and adjusted operating income margin are non-GAAP measures. Please read “ChampionX Supplemental Non-GAAP Information” below for a reconciliation of these non-GAAP measures to their respective most closely related GAAP measures.

(unaudited)	First Quarter Ended March 31,						Increase / (Decrease)
(millions, except percentages)	2020			2018			$		%
Net sales	$	559.1	%	$	578.3	%	$	(19.2)	(3.3)	%
Operating (loss) income (a)		(118.3)			34.6			(152.9)	(441.9)	%
Operating (loss) income margin (a)		(21.2)	%		6.0	%
(Loss) income before income taxes (a)	$	(114.7)		$	39.0		$	(153.7)	(394.1)	%
Depreciation		23.5			21.3
Amortization		28.0			29.1
Interest (income) expense, net		(0.3)			(0.2)
Special (gains) and charges, net (a), (b)		156.3			(3.8)
Adjusted operating income (non-GAAP)	$	38.0		$	30.8		$	7.2	23.3	%
Adjusted operating income margin (non-GAAP)		6.8	%		5.3	%

______________________________________

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(a) In the first quarter ended March 31, 2020, ChampionX, together with Ecolab, performed an impairment assessment triggered by the substantial decline in oil prices and COVID-19 pandemic. Although the fair value of Ecolab’s overall Upstream Energy business, which includes Oilfield Performance and Specialty Performance on a combined basis, exceeded its carrying value and resulted in no impairment for Ecolab, ChampionX, on a carve-out basis, is required to perform the impairment assessment at its reporting unit level and examine Oilfield Performance and Specialty Performance separately.  Based on the preliminary analysis, there is no impairment on goodwill in ChampionX’s Oilfield Performance reporting unit, and the estimated goodwill impairment in ChampionX’s Specialty Performance reporting unit would be in a range from $125 million to $175 million. The preliminary amount recorded in ChampionX’s carve-out financial statements is $150 million, the midpoint of the estimated range for its Specialty Performance reporting unit. ChampionX is in the process of finalizing the impairment analysis. There was no impairment charge in the first quarter ended March 31, 2019.

(b) Other special (gains) and charges, net, in the first quarter ended March 31, 2020 included net restructuring charges of $0.9 million and a loss of $5.4 million from disposing ChampionX’s interests in a consolidated joint venture in Russia. Special (gains) and charges, net, in the first quarter ended March 31, 2019 included net restructuring charges of $5.7 million and a gain of $9.5 million in connection with costs recovered from a dispute related to a contract terminated in 2017.

ChampionX’s  net sales in the first quarter decreased by $19.2 million, or 3.3%, compared to the same period of the prior year as a result of a significant decline in the well stimulation business that was partially offset by good growth in production sales.

ChampionX incurred an operating loss of $118.3 million in the first quarter of 2020, which included the impact of goodwill impairment and other special (gains) and charges, representing a decrease of $152.9 million compared to the operating income of $34.6 million in the first quarter of 2019. Adjusted operating income, excluding goodwill impairment and other special (gains) and charges, increased by $7.2 million, or 23.3%, in the first quarter of 2020 compared to the first quarter in 2019, as cost savings actions and improved delivered product costs more than offset the impact of lower volume.

ChampionX incurred a loss before income taxes of $114.7 million in the first quarter of 2020, which included the impact of goodwill impairment and other special (gains) and charges, representing a decrease of $153.7 million compared to the income before income tax of $39.0 million in the first quarter of 2019.  The decrease was primarily driven by the decrease in operating income, as discussed above.

Non-GAAP Financial Information

The ChampionX combined financial information includes certain non-GAAP financial measures. These non-GAAP measures include the following:

- Adjusted operating income

- Adjusted operating income margin

ChampionX provides these measures as additional information regarding its operating results. ChampionX uses these non-GAAP financial measures internally to evaluate its performance, to make financial, investment and operational decisions, including with respect to incentive compensation. ChampionX believes that its presentation of these non-GAAP financial measures provides greater transparency with respect to its results of operations and that these measures are useful for period-to-period comparison of results.

ChampionX’s non-GAAP financial measures of adjusted operating income and adjusted operating income margin exclude the impact of special gains and charges. ChampionX includes items within special gains and charges that it believes can significantly affect the period-over-period assessment of operating results and do not necessarily reflect costs and/or income associated with historical trends and future results.

These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP financial measures used by other companies. Investors should not rely on any single financial measure when evaluating ChampionX’s business. ChampionX recommends that investors view these non-GAAP financial measures in conjunction with GAAP measures and has provided reconciliations of reported GAAP

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amounts to the non-GAAP amounts in “ChampionX Supplemental Non-GAAP Information” included in this document.  

ChampionX

Supplemental Non-GAAP Information

(unaudited)

A reconciliation of each of ChampionX’s non-GAAP financial measures to their most comparable GAAP measure for the periods presented above is as follows:

	First Quarter Ended March 31,
(millions, except percentages)	2020			2019
Operating (loss) income
Operating (loss) income	$	(118.3)		$	34.6
Special (gains) and charges, net		156.3			(3.8)
Adjusted operating income (non-GAAP)	$	38.0		$	30.8
Operating (loss) income margin
Operating (loss) income margin		(21.2)	%		6.0	%
Increase (decrease) due to special (gains) and charges, net		28.0	%		(0.7)	%
Adjusted operating income margin (non-GAAP)		6.8	%		5.3	%

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EX-99.2

Exhibit (99.2)

ECOLAB FIRST QUARTER REPORTED DILUTED EPS $0.97

ADJUSTED DILUTED EPS $1.13, +10%

FIRST QUARTER HIGHLIGHTS:

· Reported diluted EPS $0.97, -4%.

· Adjusted diluted EPS $1.13, +10%, excluding special gains and charges and discrete tax items.

· Reported sales +2%. Acquisition adjusted fixed currency sales also +2% as good growth in the Institutional and Healthcare & Life Sciences segments more than offset a 3% decline in Upstream Energy. Excluding the Upstream Energy business, acquisition adjusted fixed currency sales were +3%.

· Reported operating income +8%.  Adjusted operating income +12% as pricing, improved volume growth and cost saving initiatives more than offset investments in the business and other selling related expenses during the quarter.

	First Quarter Ended March 31
	Reported				Adjusted
(unaudited)	Public Currency Rates		%		Public Currency Rates		%
(millions, except per share)	2020	2019	Change		2020	2019	Change
Net sales	$ 3,581.4	$ 3,505.4	2	%	$ 3,581.4	$ 3,505.4	2	%
Operating income	397.2	367.2	8	%	458.7	411.1	12	%
Net income attributable to Ecolab	283.4	296.5	(4)	%	331.3	300.3	10	%
Diluted earnings per share	$ 0.97	$ 1.01	(4)	%	$ 1.13	$ 1.03	10	%
					Adjusted
	Fixed Currency Rates		%		Fixed Currency Rates		%
	2020	2019	Change		2020	2019	Change
Net sales	$ 3,603.0	$ 3,501.0	3	%	$ 3,603.0	$ 3,501.0	3	%
Operating income	400.1	366.7	9	%	461.6	410.6	12	%

Results shown in this document are preliminary until our financial statements are filed in our first quarter 2020 Form 10-Q.  See the “Non-GAAP Financial Information” section of this document for further discussion regarding adjusted financial information.

First Quarter 2020 Consolidated Results

Ecolab's first quarter reported sales increased 2% and fixed currency sales increased 3%.  Acquisition and divestiture adjusted fixed currency sales increased 2% when compared to the prior year.  Excluding the Upstream Energy business, acquisition adjusted fixed currency sales increased 3%. 

First quarter 2020 reported operating income increased 8% and fixed currency operating income rose 9%; both include the impact of special charges, which primarily relate to the planned

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separation of the ChampionX business and our previously announced efficiency initiative. Adjusted fixed currency operating income increased 12%.  Pricing, improved volume growth and cost saving initiatives more than offset investments in the business and other selling related expenses during the quarter.

Reported other income, which primarily consists of the return on pension assets and other non-service costs of our pension obligations, decreased 28%, reflecting the amortization of prior year losses driven by the impact of lower discount rates on liabilities.

Reported interest expense decreased 3% in the quarter primarily reflecting lower average debt levels through the quarter and lower average interest rates.

The reported income tax rate for the first quarter of 2020 was 20.3% compared with the reported rate of 11.4% in the first quarter of 2019.  Excluding special gains and charges and discrete tax items, the adjusted tax rate was 20.6% in the first quarter of both 2020 and 2019.

First quarter 2020 reported net income attributable to Ecolab decreased 4%.  Excluding the impact of special gains and charges and discrete tax items, adjusted net income attributable to Ecolab increased 10%.

Reported diluted earnings per share decreased 4%. Adjusted diluted earnings per share rose 10% when compared against first quarter 2019.  Currency translation had a $0.01 unfavorable impact on first quarter 2020 adjusted diluted earnings per share. 

Ecolab reacquired approximately 0.5 million shares of its common stock in the first quarter of 2020.

New segment alignment

Effective in the first quarter of 2020, Ecolab modified its segment reporting.  These changes are reflected in this document and the new segment components are noted within each of the following segment discussions.  Please see Ecolab’s Form 8-K filed April 20, 2020 for further details, including 2018 and 2019 sales and operating income shown in the new segment format and translated at 2020 fixed currency exchange rates established at the beginning of 2020.

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First Quarter 2020 Segment Review

Global Industrial
(unaudited)	First Quarter Ended March 31						Acq. Adj.
(millions)	2020		2019		% Change		% Change
Fixed currency
Sales	$ 1,444.0		$ 1,397.4		3	%	3	%
Operating income	226.9		181.2		25	%	25	%
Operating income margin	15.7	%	13.0	%
Acq. adj. operating income margin	15.7	%	13.0	%
Public currency
Sales	$ 1,434.5		$ 1,402.0		2	%
Operating income	225.3		181.9		24	%

Note: The Industrial segment includes Water, Food & Beverage, Downstream and Paper

Acquisition adjusted fixed currency sales rose 3% led by strong growth in Food & Beverage and good gains in Downstream and Paper. Acquisition adjusted fixed currency operating income increased 25% reflecting continued pricing, lower delivered product costs and improved volume gains.

Global Institutional
(unaudited)	First Quarter Ended March 31						Acq. Adj.
(millions)	2020		2019		% Change		% Change
Fixed currency
Sales	$ 1,072.3		$ 1,020.2		5	%	4	%
Operating income	183.5		176.2		4	%	4	%
Operating income margin	17.1	%	17.3	%
Acq. adj. operating income margin	17.3	%	17.3	%
Public currency
Sales	$ 1,067.2		$ 1,020.8		5	%
Operating income	182.8		176.0		4	%

Note: The Institutional segment includes Institutional and Specialty

Acquisition adjusted fixed currency sales grew 4% led by very strong growth in Specialty, which benefited from sharply increased cleaning and sanitizing product sales.  The Institutional business also saw strong cleaning and sanitizing product sales, but it was offset by slowing restaurant, lodging and entertainment facility customer demand due to the coronavirus pandemic.  Acquisition adjusted fixed currency operating income increased 4% as pricing, volume gains and cost savings actions offset other selling related expenses.

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Global Healthcare and Life Sciences
(unaudited)	First Quarter Ended March 31						Acq. Adj.
(millions)	2020		2019		% Change		% Change
Fixed currency
Sales	$ 246.2		$ 227.0		8	%	4	%
Operating income	25.6		27.3		(6)	%	(3)	%
Operating income margin	10.4	%	12.0	%
Acq. adj. operating income margin	11.2	%	12.0	%
Public currency
Sales	$ 243.6		$ 227.6		7	%
Operating income	25.2		27.2		(7)	%

Note: The Healthcare & Life Sciences segment includes Healthcare and Life Sciences

Acquisition adjusted fixed currency sales grew 4% led by strong Life Sciences results.  Acquisition adjusted fixed currency operating income declined 3% as volume gains were more than offset by investments in the business and lower efficiency due to the Healthcare product recall remediation.

Upstream Energy
(unaudited)	First Quarter Ended March 31						Acq. Adj.
(millions)	2020		2019		% Change		% Change
Fixed currency
Sales	$ 562.7		$ 581.7		(3)	%	(3)	%
Operating income	39.0		36.5		7	%	7	%
Operating income margin	6.9	%	6.3	%
Acq. adj. operating income margin	6.9	%	6.3	%
Public currency
Sales	$ 560.4		$ 580.0		(3)	%
Operating income	38.8		36.5		6	%

Note: The Upstream Energy segment consists of ChampionX

Acquisition adjusted fixed currency sales decreased 3% as a significant decline in the well stimulation business was partially offset by good growth in production sales. Acquisition adjusted fixed currency operating income increased 7% as cost savings actions and improved delivered product costs more than offset the impact of lower volume.

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Other
(unaudited)	First Quarter Ended March 31						Acq. Adj.
(millions)	2020		2019		% Change		% Change
Fixed currency
Sales	$ 277.8		$ 274.7		1	%	1	%
Operating income	25.3		28.9		(12)	%	(12)	%
Operating income margin	9.1	%	10.5	%
Acq. adj. operating income margin	9.1	%	10.5	%
Public currency
Sales	$ 275.7		$ 275.0		0	%
Operating income	25.2		29.1		(13)	%

Note: The Other segment includes Pest Elimination, Textile Care and Colloidal Technologies

Acquisition adjusted fixed currency sales growth moderated to 1% due to the impact of COVID-19 on Pest Elimination.  Acquisition adjusted fixed currency operating income decreased 12% as pricing was more than offset by reduced productivity on the lower sales growth.

Corporate

Corporate expense includes amortization expense of $39 million in the first quarter of 2020 and $40 million in the first quarter of 2019 related to the Nalco merger intangible assets. Corporate expense also includes net special charges of $62 million ($50 million after tax) in 2020. These charges are primarily related to the planned separation of the ChampionX business and the previously announced efficiency initiative.

Special gains and charges for the first quarter of 2019 were a net charge of $44 million ($32 million after tax) primarily related to the previously announced efficiency initiative. 

About Ecolab

A trusted partner at nearly three million commercial customer locations, Ecolab (ECL) is the global leader in water, hygiene and infection prevention technologies and services. With annual sales of $15 billion and 50,000 associates, Ecolab delivers comprehensive solutions, data-driven insights and personalized service to advance food safety, maintain clean environments, optimize water and energy use, and improve operational efficiencies and sustainability for customers in the food, healthcare, hospitality, industrial and energy markets in more than 170 countries around the world. www.ecolab.com 

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Cautionary Statements Regarding Forward-Looking Information

This communication contains certain statements relating to future events and Ecolab’s 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 may include, but are not limited to, the anticipated separation of our ChampionX business into a new stand-alone company and merger with Apergy Corporation and statements regarding our financial and business performance and prospects, including the impact of the coronavirus outbreak on our sales, operating results and cash flows and investments in technologies. These statements are based on the current expectations of management of Ecolab. 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 proposed ChampionX transaction may not be consummated within the anticipated period or at all and the ultimate results of any restructuring or efficiency initiative, 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 or efficiency initiative and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness. If we experience delays or fail to successfully execute on our plans, our goals for such initiatives may not be achieved.  With respect to the coronavirus, numerous factors will determine the extent of the impact on our business, including the extent to which the pandemic continues to spread; actions by various governments to address the pandemic, such as stay-at-home orders and restrictions on gatherings and travel; scientific advances to combat COVID-19; the time it takes for our key end markets to recover; the financial health of our customers and channel partners; potential supply chain disruptions; and the health and welfare of our employees.

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 effects and duration of the coronavirus (COVID-19) pandemic, the vitality of the markets we serve, including the impact of oil

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price fluctuations on the markets served by our Upstream Energy business; the impact of economic factors such as the worldwide economy, capital flows, interest rates, foreign currency risk, and reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; potential information technology infrastructure failures or breaches in data security; our ability to achieve the intended benefits of our plan to separate our Upstream Energy business and combine it with Apergy Corporation; our ability to attract, retain and develop high caliber management talent to lead our business; our ability to successfully compete with respect to value, innovation and customer support; exposure to global economic, political and legal risks related to our international operations; difficulty in procuring raw materials or fluctuations in raw material costs; pressure on operations from consolidation of customers and vendors; the costs and effects of complying with laws and regulations, including those relating to the environment, to the manufacture, storage, distribution, sale and use of our products and to labor and employment, as well as to the conduct of our business generally; the occurrence of litigation or claims, including the pending lawsuits against certain of our subsidiaries related to the Deepwater Horizon oil spill or class action lawsuits; restraints on pricing flexibility due to contractual obligations; our ability to acquire complementary businesses and to effectively integrate such businesses; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any failure to comply with covenants that apply to our indebtedness; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; potential losses arising from the impairment of goodwill or other assets; potential chemical spill or release; the loss or insolvency of a major customer or distributor; repeated or prolonged government and/or business shutdowns or similar events; 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, any 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 document 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”).

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These non-GAAP financial measures include:

· fixed currency sales

· acquisition adjusted fixed currency sales

· adjusted cost of sales

· adjusted gross margin

· fixed currency operating income

· fixed currency operating income margin

· adjusted operating income

· adjusted fixed currency operating income

· adjusted fixed currency operating income margin

· acquisition adjusted fixed currency operating income

· acquisition adjusted fixed currency operating income margin

· adjusted other income expense

· adjusted interest expense

· adjusted tax rate

· adjusted net income attributable to Ecolab

· adjusted diluted earnings per share

· adjusted diluted operating 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 that these measures are useful for period-to-period comparison of results.

Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income, other (income) expense and interest expense 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 items within special (gains) and charges, discrete tax items and certain external factors that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs associated with historical trends and future results. After tax special (gains) and charges are derived by applying the applicable local jurisdictional tax rate to the corresponding pre-tax special (gains) and charges.

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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. Fixed currency amounts included in this document are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2020. We also provide our segment results based on public currency rates for informational purposes.

Our reportable segments do not include the impact of intangible asset amortization from the Nalco merger or the impact of special (gains) and charges as these are not allocated to the Company’s reportable segments.

Acquisition adjusted growth rates 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 sales to our Venezuelan deconsolidated subsidiaries 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 document. 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 document.

We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this report) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of various items that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact reported earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.

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ECOLAB INC.

CONSOLIDATED STATEMENT OF INCOME

(unaudited)

	First Quarter Ended
	March 31		%
(millions, except per share)	2020	2019	Change
Product and equipment sales	$ 2,930.0	$ 2,886.3
Service and lease sales	651.4	619.1
Net sales	3,581.4	3,505.4	2	%
Product and equipment cost of sales	1,715.9	1,710.0
Service and lease cost of sales	400.9	379.6
Cost of sales (1)	2,116.8	2,089.6	1	%
Selling, general and administrative expenses	1,015.0	1,008.3	1	%
Special (gains) and charges (1)	52.4	40.3
Operating income	397.2	367.2	8	%
Other (income) expense	(15.2)	(21.2)	(28)	%
Interest expense, net (1)	48.1	49.4	(3)	%
Income before income taxes	364.3	339.0	7	%
Provision for income taxes	74.1	38.6	92	%
Net income including noncontrolling interest	290.2	300.4	(3)	%
Net income attributable to noncontrolling interest	6.8	3.9
Net income attributable to Ecolab	$ 283.4	$ 296.5	(4)	%
Earnings attributable to Ecolab per common share
Basic	$ 0.98	$ 1.03	(5)	%
Diluted	$ 0.97	$ 1.01	(4)	%
Weighted-average common shares outstanding
Basic	288.8	288.2	0	%
Diluted	292.6	292.3	0	%
(1) Cost of sales, Special (gains) and charges and Interest expense, net in the Consolidated Statement of Income above include the following:
	First Quarter Ended
	March 31
(millions)	2020	2019
Cost of sales
Restructuring activities	3.0	3.4
Acquisition and integration activities	0.4	0.2
Other	5.7	-
Subtotal (a)	9.1	3.6
Special (gains) and charges
Restructuring activities	4.3	37.1
Upstream Energy separation	36.6	4.3
Acquisition and integration activities	5.4	2.5
Other	6.1	(3.6)
Subtotal	52.4	40.3
Interest expense, net	-	0.2
Total special (gains) and charges	$ 61.5	$ 44.1
(a) Special (gains) and charges of $9.1 million and $3.6 million in the first quarter of 2020 and 2019, respectively, were recorded in product and equipment cost of sales.

10

ECOLAB INC.

REPORTABLE SEGMENT INFORMATION

(unaudited)

	First Quarter Ended March 31
	Fixed Currency Rates				Public Currency Rates
			%				%
(millions)	2020	2019	Change		2020	2019	Change
Net Sales
Global Industrial	$ 1,444.0	$ 1,397.4	3	%	$ 1,434.5	$ 1,402.0	2	%
Global Institutional	1,072.3	1,020.2	5	%	1,067.2	1,020.8	5	%
Global Healthcare and Life Sciences	246.2	227.0	8	%	243.6	227.6	7	%
Upstream Energy	562.7	581.7	(3)	%	560.4	580.0	(3)	%
Other	277.8	274.7	1	%	275.7	275.0	0	%
Subtotal at fixed currency rates	3,603.0	3,501.0	3	%	3,581.4	3,505.4	2	%
Currency impact	(21.6)	4.4	*		-	-	*
Consolidated reported GAAP net sales	$ 3,581.4	$ 3,505.4	2	%	$ 3,581.4	$ 3,505.4	2	%
Operating Income
Global Industrial	$ 226.9	$ 181.2	25	%	$ 225.3	$ 181.9	24	%
Global Institutional	183.5	176.2	4	%	182.8	176.0	4	%
Global Healthcare and Life Sciences	25.6	27.3	(6)	%	25.2	27.2	(7)	%
Upstream Energy	39.0	36.5	7	%	38.8	36.5	6	%
Other	25.3	28.9	(12)	%	25.2	29.1	(13)	%
Corporate	(100.2)	(83.4)	*		(100.1)	(83.5)	*
Subtotal at fixed currency rates	400.1	366.7	9	%	397.2	367.2	8	%
Currency impact	(2.9)	0.5	*		-	-	*
Consolidated reported GAAP operating income	$ 397.2	$ 367.2	8	%	$ 397.2	$ 367.2	8	%

* 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. 

11

ECOLAB INC.

CONSOLIDATED BALANCE SHEET

(unaudited)

	March 31	December 31	March 31
(millions)	2020	2019	2019
Assets
Current assets
Cash and cash equivalents	$ 1,661.9	$ 186.4	$ 79.0
Accounts receivable, net	2,855.9	2,796.5	2,691.6
Inventories	1,529.7	1,505.6	1,645.6
Other current assets	389.6	339.9	334.8
Total current assets	6,437.1	4,828.4	4,751.0
Property, plant and equipment, net	3,920.7	3,954.9	3,878.6
Goodwill	7,231.5	7,251.7	7,324.2
Other intangible assets, net	3,591.9	3,672.5	3,877.3
Operating lease assets	558.5	577.5	570.9
Other assets	599.9	584.1	525.6
Total assets	$ 22,339.6	$ 20,869.1	$ 20,927.6
Liabilities and Equity
Current liabilities
Short-term debt	$ 1,038.3	$ 380.6	$ 1,132.3
Accounts payable	1,279.5	1,284.3	1,237.7
Compensation and benefits	513.5	599.5	478.2
Income taxes	140.8	142.8	89.6
Other current liabilities	1,285.3	1,223.4	1,218.2
Total current liabilities	4,257.4	3,630.6	4,156.0
Long-term debt	6,744.0	5,973.5	6,008.2
Postretirement health care and pension benefits	1,072.0	1,088.0	942.3
Deferred income taxes	737.4	740.4	792.3
Operating lease liabilities	406.9	425.2	412.2
Other liabilities	261.3	285.6	349.7
Total liabilities	13,479.0	12,143.3	12,660.7
Equity
Common stock	360.8	359.6	358.2
Additional paid-in capital	6,018.1	5,907.1	5,731.0
Retained earnings	10,136.9	9,993.7	9,131.8
Accumulated other comprehensive loss	(2,113.7)	(2,089.7)	(1,734.9)
Treasury stock	(5,580.0)	(5,485.4)	(5,265.4)
Total Ecolab shareholders’ equity	8,822.1	8,685.3	8,220.7
Noncontrolling interest	38.5	40.5	46.2
Total equity	8,860.6	8,725.8	8,266.9
Total liabilities and equity	$ 22,339.6	$ 20,869.1	$ 20,927.6

12

ECOLAB INC.

SUPPLEMENTAL NON-GAAP RECONCILIATIONS

(unaudited)

	First Quarter Ended
	March 31
(millions, except percent and per share)	2020		2019
Net sales
Reported GAAP net sales	$ 3,581.4		$ 3,505.4
Effect of foreign currency translation	21.6		(4.4)
Non-GAAP fixed currency sales	3,603.0		3,501.0
Effect of acquisitions and divestitures	(24.0)		0.0
Non-GAAP acquisition adjusted fixed currency sales	3,579.0		3,501.0
Less: Upstream acquisition adjusted fixed currency sales	562.7		581.7
Non-GAAP acquisition adjusted fixed currency sales, excluding Upstream	$ 3,016.3		$ 2,919.3
Cost of sales
Reported GAAP cost of sales	$ 2,116.8		$ 2,089.6
Special (gains) and charges	9.1		3.6
Non-GAAP adjusted cost of sales	$ 2,107.7		$ 2,086.0
Gross margin
Reported GAAP gross margin	40.9	%	40.4	%
Non-GAAP adjusted gross margin	41.1	%	40.5	%
Operating income
Reported GAAP operating income	$ 397.2		$ 367.2
Effect of foreign currency translation	2.9		(0.5)
Non-GAAP fixed currency operating income	400.1		366.7
Special (gains) and charges	61.5		43.9
Non-GAAP adjusted fixed currency operating income	461.6		410.6
Effect of acquisitions and divestitures	0.2		0.0
Non-GAAP acquisition adjusted fixed currency operating income	$ 461.8		$ 410.6
Operating income margin
Reported GAAP operating income margin	11.1	%	10.5	%
Non-GAAP adjusted fixed currency operating income margin	12.8	%	11.7	%
Non-GAAP acquisition adjusted fixed currency operating income margin	12.9	%	11.7	%
Interest expense, net
Reported GAAP interest expense, net	$ 48.1		$ 49.4
Special (gains) and charges, after tax	-		0.2
Non-GAAP adjusted interest expense, net	$ 48.1		$ 49.2

13

ECOLAB INC.

SUPPLEMENTAL NON-GAAP RECONCILIATIONS

(unaudited)

	First Quarter Ended
	March 31
(millions, except percent and per share)	2020		2019
Net Income Attributable to Ecolab
Reported GAAP net income attributable to Ecolab	$ 283.4		$ 296.5
Special (gains) and charges, after tax	50.2		31.5
Discrete tax net expense (benefit)	(2.3)		(27.7)
Non-GAAP adjusted net income attributable to Ecolab	$ 331.3		$ 300.3
Diluted Earnings per Share Attributable to Ecolab ("EPS")
Reported GAAP diluted EPS	$ 0.97		$ 1.01
Special (gains) and charges, after tax	0.17		0.11
Discrete tax net expense (benefit)	(0.01)		(0.09)
Non-GAAP adjusted diluted EPS	$ 1.13		$ 1.03
Provision for Income Taxes
Reported GAAP tax rate	20.3	%	11.4	%
Special gains and charges	(0.2)		2.0
Discrete tax items	0.5		7.2
Non-GAAP adjusted tax rate	20.6	%	20.6	%

14

ECOLAB INC.

SUPPLEMENTAL NON-GAAP RECONCILIATIONS

	First Quarter Ended March 31
(unaudited)	2020			2019
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Net Sales
Global Industrial	$ 1,444.0	-	$ 1,444.0	$ 1,397.4	-	$ 1,397.4
Global Institutional	1,072.3	(14.1)	1,058.2	1,020.2	-	1,020.2
Global Healthcare and Life Sciences	246.2	(9.5)	236.7	227.0	-	227.0
Upstream Energy	562.7	-	562.7	581.7	-	581.7
Other	277.8	(0.4)	277.4	274.7	-	274.7
Subtotal at fixed currency rates	3,603.0	(24.0)	3,579.0	3,501.0	-	3,501.0
Currency impact	(21.6)			4.4
Consolidated reported GAAP net sales	$ 3,581.4			$ 3,505.4
Operating Income
Global Industrial	$ 226.9	-	$ 226.9	$ 181.2	-	$ 181.2
Global Institutional	183.5	(0.6)	182.9	176.2	-	176.2
Global Healthcare and Life Sciences	25.6	0.8	26.4	27.3	-	27.3
Upstream Energy	39.0	-	39.0	36.5	-	36.5
Other	25.3	-	25.3	28.9	-	28.9
Corporate	(38.7)	-	(38.7)	(39.5)	-	(39.5)
Adjusted at fixed currency rates	461.6	0.2	461.8	410.6	-	410.6
Special (gains) and charges	61.5			43.9
Reported OI at fixed currency rates	400.1			366.7
Currency impact	(2.9)			0.5
Consolidated reported GAAP operating income	$ 397.2			$ 367.2

15

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
	2019	2019	2019	2019	2019	2019	2019
Diluted earnings per share, as reported (U.S. GAAP)	$ 1.01	$ 1.26	$ 2.28	$ 1.59	$ 3.86	$ 1.47	$ 5.33
Adjustments:
Special (gains) and charges (1)	0.11	0.16	0.26	0.18	0.45	0.24	0.69
Discrete tax expense (benefits) (2)	(0.09)	-	(0.09)	(0.06)	(0.15)	(0.05)	(0.20)
Adjusted diluted earnings per share (Non-GAAP)	$ 1.03	$ 1.42	$ 2.45	$ 1.71	$ 4.16	$ 1.66	$ 5.82

	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
	2020	2020	2020	2020	2020	2020	2020
Diluted earnings per share, as reported (U.S. GAAP)	$ 0.97
Adjustments:
Special (gains) and charges (3)	0.17
Discrete tax expense (benefits) (4)	(0.01)
Adjusted diluted earnings per share (Non-GAAP)	$ 1.13

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

(1) Special (gains) and charges for 2019 includes restructuring costs of $30.4 million, $29.1 million, $21.7 million and $25.4 million, net of tax, in the first, second, third and fourth quarters, respectively relating primarily to the efficiency initiative. Special (gains) and charges also include charges relating to the ChampionX separation of $3.3 million, $12.4 million, $24.0 million and $31.8 million, net of tax, in the first, second, third and fourth quarters, acquisition and integration costs of $2.1 million $1.3 million, $5.3 million and $1.2 million, net of tax, in the first, second, third and fourth quarters, and net (gains) and charges for litigation and other charges of ($4.3) million, $3.1 million, $2.7 million and $6.0 million, net of tax, in the first, second, third and fourth quarters, respectively. Special (gains) and charges in the fourth quarter included Healthcare product recall costs of $7.1 million, net of tax.

(2) Discrete tax expense (benefits) for 2019 includes ($18.7) million, ($13.1) million, ($8.2) million and ($3.1) million of tax benefits associated with stock compensation excess tax benefits in the first, second, third and fourth quarters, respectively. Discrete tax expense (benefits) also includes adjustments to the estimate for the U.S. tax reform one-time repatriation tax of ($5.1) million, $6.3 million, ($4.3) million and $0.0 million in the first, second, third and fourth quarters and other discrete tax expense (benefits) of ($3.9) million, $7.8 million, ($4.0) million and ($12.1) million in the first, second, third and fourth quarters, respectively.

(3) Special (gains) and charges for 2020 includes charges relating to the ChampionX separation of $31.8 million, net of tax, in the first quarter, restructuring costs of $6.1 million, net of tax, in the first quarter relating primarily to the efficiency initiative, acquisition and integration costs of $3.9 million, net of tax, in the first quarter, Healthcare product recall costs of $3.8 million, net of tax, in the first quarter, and net (gains) and charges for litigation and other charges of $4.6 million, net of tax, in the first quarter.

(4) Discrete tax expense (benefits) for 2020 includes ($23.4) million of tax benefits associated with stock compensation excess tax benefits in the first quarter. Discrete tax expense (benefits) also includes frictional tax costs relating to the ChampionX separation of $18.8 million in the first quarter and other discrete tax expense of $2.3 million in the first quarter.

16

XML

Document and Entity Information	Apr. 28, 2020
Document Type	8-K
Document Period End Date	Apr. 28, 2020
Entity File Number	1-9328
Entity Registrant Name	ECOLAB INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-0231510
Entity Address, Address Line One	1 Ecolab Place
Entity Address, State or Province	MN
Entity Address, City or Town	Saint Paul
Entity Address, Postal Zip Code	55102
City Area Code	800
Local Phone Number	232-6522
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000031462
Amendment Flag	false
Common Stock [Member]
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	ECL
Security Exchange Name	NYSE
Euro Notes due 2025 [Member}
Title of 12(b) Security	2.625% Euro Notes due 2025
Trading Symbol	ECL 25
Security Exchange Name	NYSE
Euro Notes due 2024 [Member]
Title of 12(b) Security	1.000% Euro Notes due 2024
Trading Symbol	ECL 24
Security Exchange Name	NYSE