Ecolab Inc. (NYSE: ECL):
SECOND QUARTER
HIGHLIGHTS:
- Reported sales $3.9 billion, +8% versus last year. Organic
sales +9%, led by strong growth in the Institutional &
Specialty, Industrial, and Other segment sales.
- Reported operating income +14%. Organic operating income
accelerated to +21%, as strong pricing and productivity more than
offset easing but ongoing delivered product cost inflation and
challenging macroeconomic conditions.
- Reported operating income margin 12.6%. Organic operating
income margin 13.4%, +130bps versus last year, reflecting ongoing
gross margin expansion and productivity.
- Reported diluted EPS $1.15, +6%. Adjusted diluted EPS,
excluding special gains and charges and discrete tax items were
$1.24, +13%.
- Second quarter cash flow from operating activities $573
million; free cash flow was strong at $401 million, +$248 million
versus last year.
3Q 2023 OUTLOOK
- Expect third quarter 2023 adjusted diluted earnings per
share in the $1.45 to $1.55 range, +12 to 19% versus last
year.
Second Quarter Ended June 30
Reported
Adjusted
(unaudited)
Public Currency Rates
%
Public Currency Rates
%
(millions, except per share)
2023
2022
Change
2023
2022
Change
Net sales
$3,852.1
$3,580.6
8
%
$3,852.1
$3,580.6
8
%
Operating income
484.7
425.8
14
%
513.8
431.1
19
%
Net income attributable to Ecolab
329.7
308.3
7
%
355.8
314.6
13
%
Diluted earnings per share attributable to
Ecolab
$1.15
$1.08
6
%
$1.24
$1.10
13
%
Organic
%
2023
2022
Change
Net sales
$3,807.9
$3,488.4
9
%
Operating income
508.7
421.3
21
%
CEO Comment
Christophe Beck, Ecolab’s chairman and chief executive officer,
said, “The second quarter was one of great momentum for Ecolab,
reflecting the strategic decisions made over the past few years and
the fundamental work done over the last several quarters. Our
team’s strong execution resulted in continued robust organic sales
growth, operating income margin expansion, and 13% growth in
adjusted diluted earnings per share. As anticipated, the
year-over-year rate of price increases started to ease, entirely
due to comparisons with the accelerated pricing actions taken last
year. Pricing in the quarter remained strong, sustained by
carryover from last year and further new pricing. Overall volume
remained steady, and turned modestly positive excluding Europe, as
our team effectively offset softer macro demand with strong new
business wins, leveraging our proven ‘circle the customer, circle
the globe’ growth strategy. This robust topline performance, along
with productivity initiatives and easing inflationary headwinds,
drove 21% organic operating income growth, with double-digit growth
across most businesses and geographies.
“We continue to strengthen our performance, including targeted
actions in institutional, life sciences, and healthcare.
Institutional continued its very strong recovery. Focus on new
business and penetration generated share gains, and value pricing
and productivity drove strong margin recovery. Our highly
attractive life sciences business was not immune to the short-term
market pressure, which led to flattish sales. However, we took the
opportunity to gain share with major customers and to further
invest in capacity and capabilities in biopharma, which resulted in
a short-term operating income decline. Also, as promised, we have
stayed focused on driving our healthcare transformation, which is
showing good progress. We are well underway on the cost-saving
initiatives we announced earlier this year and are now implementing
our second strategic move to further improve business performance.
Over the next few months, we will be creating two separate, yet
focused businesses from our North American Healthcare business:
surgical and infection prevention. This move will provide greater
focus and support for our surgical business and allow infection
prevention to leverage the critical mass and reach of our North
American Institutional field team.
“Moving forward, we are very well positioned to deliver
continued strong performance. Our leading positions in attractive
market segments, driven by fundamental global growth trends,
combined with our unique innovation, digital capabilities, and
global service expertise will continue to help fuel robust new
business wins and operating margin expansion. Despite macroeconomic
headwinds, we anticipate strong organic sales gains and mid-teens
growth in adjusted diluted earnings per share in the second half of
2023.”
Second Quarter 2023 Consolidated
Results
Ecolab’s second quarter reported sales increased 8% and organic
sales increased 9% when compared to the prior year.
Second quarter 2023 reported operating income increased 14%
including the impact of special gains and charges, which were a net
charge primarily related to restructuring costs. Organic operating
income growth accelerated to 21%, as strong pricing overcame
investments in the business including incentive compensation,
softer volume, and higher delivered product costs.
Reported other income decreased $5 million in the second quarter
of 2023 due to higher pension costs.
Reported interest expense increased 39% reflecting the impact
from higher average interest rates on outstanding debt.
The reported income tax rate for the second quarter of 2023 was
20.6% compared with the reported rate of 19.7% in the second
quarter of 2022. Excluding special gains and charges and discrete
tax items, the adjusted tax rate for the second quarter of 2023 was
19.9% compared with the adjusted tax rate of 19.2% in the second
quarter of 2022.
Reported net income increased 7% versus the prior year.
Excluding the impact of special gains and charges and discrete tax
items, adjusted net income increased 13% versus the prior year.
Reported diluted earnings per share increased 6% versus the
prior year. Adjusted diluted earnings per share increased 13% when
compared against the second quarter of 2022. Currency translation
had a $0.03 unfavorable impact on earnings per share in the second
quarter of 2023.
Second Quarter 2023 Segment
Review
Global Industrial
(unaudited)
Second Quarter Ended June 30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$1,795.6
$1,653.3
9
%
9
%
Operating income
255.4
216.8
18
%
18
%
Operating income margin
14.2
%
13.1
%
Organic operating income margin
14.2
%
13.1
%
Public currency
Sales
$1,808.5
$1,689.9
7
%
Operating income
257.6
224.1
15
%
The Industrial segment includes Water,
Food & Beverage, and Paper
Organic sales increased 9%, led by double-digit gains in Water
and Food & Beverage. Organic operating income increased 18% as
strong pricing overcame softer volume, higher delivered product
costs, and investments in the business including incentive
compensation.
Global Institutional &
Specialty
(unaudited)
Second Quarter Ended June 30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$1,268.6
$1,118.2
13
%
13
%
Operating income
208.7
148.6
40
%
40
%
Operating income margin
16.5
%
13.3
%
Organic operating income margin
16.5
%
13.3
%
Public currency
Sales
$1,272.2
$1,129.3
13
%
Operating income
209.2
150.6
39
%
The Institutional & Specialty segment
includes Institutional and Specialty
Organic sales increased 13%, with the Institutional division and
Specialty both growing double-digits. Organic operating income
growth accelerated to 40% as strong pricing overcame investments in
the business including incentive compensation, and higher delivered
product costs.
Global Healthcare & Life
Sciences
(unaudited)
Second Quarter Ended June 30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$387.5
$384.4
1
%
1
%
Operating income
32.7
55.2
(41)
%
(41)
%
Operating income margin
8.4
%
14.4
%
Organic operating income margin
8.4
%
14.4
%
Public currency
Sales
$390.8
$390.9
0
%
Operating income
33.3
56.6
(41)
%
The Healthcare & Life Sciences segment
includes Healthcare and Life Sciences
Organic sales increased 1% as modest growth in Healthcare sales
was offset by soft near-term life sciences industry demand. Organic
operating income decreased 41% versus last year, as strong pricing
was more than offset by softer volume, targeted investments in the
business, and higher supply chain costs.
Other
(unaudited)
Second Quarter Ended June 30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$362.6
$332.5
9
%
9
%
Operating income
63.4
51.6
23
%
23
%
Operating income margin
17.5
%
15.5
%
Organic operating income margin
17.5
%
15.5
%
Public currency
Sales
$363.9
$336.6
8
%
Operating income
63.5
52.2
22
%
The Other segment includes Pest
Elimination, Textile Care and Colloidal Technologies
Organic sales grew 9%, led by double-digit growth in Pest
Elimination. Organic operating income increased 23% as strong
pricing overcame investments in the business including incentive
compensation and unfavorable mix.
Corporate
(unaudited)
Second Quarter Ended June 30
(millions)
2023
2022
Public currency
Sales
$16.7
$33.9
Corporate operating expense
Nalco and Purolite amortization
50.6
52.4
Special (gains) and charges
29.1
5.3
Other
(0.8)
-
Total Corporate operating expense
$78.9
$57.7
Second quarter of 2023 corporate segment includes:
- sales of $17 million to ChampionX under the Master Cross Supply
and Product Transfer agreements Ecolab entered into as part of the
ChampionX separation
- amortization expense of $29 million related to the Nalco merger
intangible assets and $22 million related to Purolite acquisition
intangible assets
- special gains and charges were a net charge of $29 million,
primarily related to restructuring costs
Special gains and charges for the second quarter of 2022 were a
net charge of $5 million and primarily reflected Purolite
acquisition costs.
Business Outlook
2023
Ecolab expects to deliver performance that continues to
strengthen despite a challenging macro environment where end market
demand continues to ease. The Company expects robust sales and
earnings growth driven by continued pricing and new business gains,
improved productivity, and delivered product costs to remain high
but ease progressively. This strong performance is expected to more
than overcome the volatile macro environment to deliver mid-teens
growth in adjusted diluted earnings per share in the second half of
2023.
2023 – Third Quarter
Ecolab expects third quarter 2023 adjusted diluted earnings per
share in the $1.45 to $1.55 range, rising 12% to 19% compared with
adjusted diluted earnings per share of $1.30 a year ago.
The Company currently expects quantifiable special charges in
the third quarter of 2023 to be approximately $0.05 per share,
principally related to restructuring charges. Other than the
special gains and charges noted above, other such amounts are not
currently quantifiable.
About Ecolab
A trusted partner for millions of customers, Ecolab (NYSE:ECL)
is a global sustainability leader offering water, hygiene and
infection prevention solutions and services that protect people and
the resources vital to life. Building on a century of innovation,
Ecolab has annual sales of $14 billion, employs more than 47,000
associates and operates in more than 170 countries around the
world. The company delivers comprehensive science-based solutions,
data-driven insights and world-class service to advance food
safety, maintain clean and safe environments, and optimize water
and energy use. Ecolab’s innovative solutions improve operational
efficiencies and sustainability for customers in the food,
healthcare, life sciences, hospitality and industrial markets.
www.ecolab.com
Ecolab will host a live webcast to review the second quarter
earnings announcement 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.
Cautionary Statements Regarding
Forward-Looking Information
This news release 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 macroeconomic conditions,
delivered product costs, demand, inflation, and our financial and
business performance and prospects, including sales, earnings,
special charges, margins, and productivity. 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 news release. In particular, the
ultimate results of any restructuring initiative 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
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
impact of economic factors such as the worldwide economy, capital
flows, interest rates, foreign currency risk, reduced sales and
earnings in our international operations resulting from the
weakening of local currencies versus the U.S. dollar, demand
uncertainty, supply chain challenges and inflation; the vitality of
the markets we serve; exposure to global economic, political and
legal risks related to our international operations, including
geopolitical instability, the impact of sanctions or other actions
taken by the U.S. or other countries, and retaliatory measures
taken by Russia in response, in connection with the conflict in
Ukraine; difficulty in procuring raw materials or fluctuations in
raw material costs; our ability to attract, retain and develop high
caliber management talent to lead our business and successfully
execute organizational change and changing labor market dynamics;
information technology infrastructure failures or breaches in data
security; the effects and duration of the COVID-19 pandemic or
other public health outbreaks, epidemics or pandemics; our ability
to acquire complementary businesses and to effectively integrate
such businesses, including Purolite; our ability to execute key
business initiatives, including restructurings and our Enterprise
Resource Planning system upgrades; our ability to successfully
compete with respect to value, innovation and customer support;
pressure on operations from consolidation of customers or vendors;
restraints on pricing flexibility due to contractual obligations
and our ability to meet our contractual commitments; the costs and
effects of complying with laws and regulations, including those
relating to the environment, climate change standards, and to the
manufacture, storage, distribution, sale and use of our products,
as well as to the conduct of our business generally, including
labor and employment and anti-corruption; potential chemical spill
or release; our commitments, goals, targets, objectives and
initiatives related to sustainability; potential to incur
significant tax liabilities or indemnification liabilities relating
to the separation and split-off of our ChampionX business; the
occurrence of litigation or claims, including class action
lawsuits; 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;
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; potential
losses arising from the impairment of goodwill or other assets; 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 news release 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
- organic sales, formerly known as acquisition adjusted fixed
currency sales
- adjusted cost of sales
- adjusted gross profit
- adjusted gross margin
- fixed currency operating income
- adjusted operating income
- adjusted fixed currency operating income
- adjusted fixed currency operating income margin
- organic operating income, formerly known as acquisition
adjusted fixed currency operating income
- organic operating income margin, formerly known as acquisition
adjusted fixed currency operating income margin
- adjusted tax rate
- adjusted net income attributable to Ecolab
- adjusted diluted earnings per share
- free cash flow
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 financial measures for adjusted cost of sales,
adjusted gross margin, adjusted gross profit and adjusted operating
income exclude the impact of special (gains) and charges and our
non-GAAP financial measures for adjusted tax rate, adjusted net
income attributable to Ecolab and adjusted diluted earnings per
share further exclude the impact of discrete tax items. We include
items within special (gains) and charges and discrete tax items
that we believe can significantly affect the period-over-period
assessment of operating results and not necessarily reflect costs
and/or income 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.
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
release are based on translation into U.S. dollars at the fixed
foreign currency exchange rates established by management at the
beginning of 2023. 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 and Purolite transactions or the
impact of special (gains) and charges as these are not allocated to
the Company’s reportable segments.
Our non-GAAP financial measures for organic sales, organic
operating income and organic operating income margin are at fixed
currency and exclude the impact of special (gains) and charges, the
results of our acquired businesses from the first twelve months
post acquisition and the results of divested businesses from the
twelve months prior to divestiture. In addition, as part of the
separation, we also entered into a Master Cross Supply and Product
Transfer agreement with ChampionX to provide, receive or transfer
certain products for a period up to 36 months and for a small set
of products with limited suppliers over the next few years. Sales
of product to ChampionX under this agreement are recorded in
product and equipment sales in the Corporate segment along with the
related cost of sales. These transactions are removed from the
consolidated results as part of the calculation of the impact of
acquisitions and divestitures.
We define free cash flow as net cash provided by operating
activities less cash outlays for capital expenditures. It should
not be inferred that the entire free cash flow amount is available
for discretionary expenditures. It should not be considered a
substitute for income or cash flow data prepared in accordance with
U.S. GAAP and may not be comparable to similarly titled measures
used by other companies. We believe free cash flow is meaningful to
investors as it functions as a useful measure of performance and we
use this measure as an indication of the strength of the Company
and its ability to generate cash.
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.
We do not provide reconciliations for non-GAAP estimates on a
forward-looking basis (including those contained in this news
release) 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.
(ECL-E)
ECOLAB INC.
CONSOLIDATED STATEMENTS OF
INCOME
(unaudited)
Second Quarter Ended
Six Months Ended
June 30
%
June 30
%
(millions, except per share)
2023
2022
Change
2023
2022
Change
Product and equipment sales
$3,104.8
$2,886.8
$5,981.1
$5,510.9
Service and lease sales
747.3
693.8
1,442.6
1,336.4
Net sales
3,852.1
3,580.6
8
%
7,423.7
6,847.3
8
%
Product and equipment cost of sales
1,895.3
1,799.0
3,693.6
3,494.6
Service and lease cost of sales
439.5
412.1
846.4
789.9
Cost of sales (1)
2,334.8
2,211.1
6
%
4,540.0
4,284.5
6
%
Selling, general and administrative
expenses
1,011.6
940.1
8
%
2,001.9
1,854.8
8
%
Special (gains) and charges (1)
21.0
3.6
45.5
27.7
Operating income
484.7
425.8
14
%
836.3
680.3
23
%
Other (income) expense
(14.4
)
(19.5
)
(26)
%
(27.5
)
(38.3
)
(28)
%
Interest expense, net
77.8
56.0
39
%
152.0
109.0
39
%
Income before income taxes
421.3
389.3
8
%
711.8
609.6
17
%
Provision for income taxes
86.6
76.6
13
%
139.0
122.2
14
%
Net income including noncontrolling
interest
334.7
312.7
7
%
572.8
487.4
18
%
Net income attributable to noncontrolling
interest
5.0
4.4
9.7
7.2
Net income attributable to Ecolab
$329.7
$308.3
7
%
$563.1
$480.2
17
%
Earnings attributable to Ecolab per common
share
Basic
$1.16
$1.08
7
%
$1.98
$1.68
18
%
Diluted
$1.15
$1.08
6
%
$1.97
$1.67
18
%
Weighted-average common shares
outstanding
Basic
284.9
285.1
0
%
284.8
285.7
0
%
Diluted
286.3
286.6
0
%
286.1
287.4
0
%
(1) Cost of sales and Special (gains) and
charges in the Consolidated Statement of Income above include the
following:
Second Quarter Ended
Six Months Ended
June 30
June 30
(millions)
2023
2022
2023
2022
Cost of sales
Restructuring activities
$8.1
$0.8
$11.3
$3.4
Acquisition and integration activities
-
0.9
-
28.5
COVID-19 activities, net
-
-
-
16.3
Russia/Ukraine activities
-
-
-
6.4
Subtotal (a)
8.1
1.7
11.3
54.6
Special (gains) and charges
Restructuring activities
13.7
0.3
26.3
1.1
Acquisition and integration activities
3.5
3.4
8.5
10.9
Russia/Ukraine activities
0.3
(5.7
)
0.6
5.9
Other
3.5
5.6
10.1
9.8
Subtotal
21.0
3.6
45.5
27.7
Total special (gains) and charges
$29.1
$5.3
$56.8
$82.3
(a) Special charges of $6.0 million and
$1.2 million in the second quarter of 2023 and 2022, respectively,
and $6.8 million and $53.2 million for the first six months of 2023
and 2022, respectively, were recorded in product and equipment cost
of sales. Special charges of $2.1 million and $0.5 million in the
second quarter of 2023 and 2022, respectively, and $4.5 million and
$1.4 million for the first six months of 2023 and 2022,
respectively, were recorded in service and lease cost of sales.
ECOLAB INC.
REPORTABLE SEGMENT
INFORMATION
(unaudited)
Second Quarter Ended June 30
Fixed Currency Rates
Public Currency Rates
%
%
(millions)
2023
2022
Change
2023
2022
Change
Net Sales
Global Industrial
$1,795.6
$1,653.3
9
%
$1,808.5
$1,689.9
7
%
Global Institutional & Specialty
1,268.6
1,118.2
13
%
1,272.2
1,129.3
13
%
Global Healthcare & Life Sciences
387.5
384.4
1
%
390.8
390.9
0
%
Other
362.6
332.5
9
%
363.9
336.6
8
%
Corporate
16.7
33.8
(51)
%
16.7
33.9
(51)
%
Subtotal at fixed currency rates
3,831.0
3,522.2
9
%
3,852.1
3,580.6
8
%
Currency impact
21.1
58.4
*
-
-
*
Consolidated reported GAAP net sales
$3,852.1
$3,580.6
8
%
$3,852.1
$3,580.6
8
%
Operating Income (loss)
Global Industrial
$255.4
$216.8
18
%
$257.6
$224.1
15
%
Global Institutional & Specialty
208.7
148.6
40
%
209.2
150.6
39
%
Global Healthcare & Life Sciences
32.7
55.2
(41)
%
33.3
56.6
(41)
%
Other
63.4
51.6
23
%
63.5
52.2
22
%
Corporate
(78.8
)
(57.4
)
*
(78.9
)
(57.7
)
*
Subtotal at fixed currency rates
481.4
414.8
16
%
484.7
425.8
14
%
Currency impact
3.3
11.0
*
-
-
*
Consolidated reported GAAP operating
income
$484.7
$425.8
14
%
$484.7
$425.8
14
%
Six Months Ended June 30
Fixed Currency Rates
Public Currency Rates
%
%
(millions)
2023
2022
Change
2023
2022
Change
Net Sales
Global Industrial
$3,494.9
$3,164.7
10
%
$3,517.9
$3,255.6
8
%
Global Institutional & Specialty
2,395.2
2,109.5
14
%
2,401.0
2,138.7
12
%
Global Healthcare & Life Sciences
766.1
732.6
5
%
770.5
753.7
2
%
Other
691.9
619.3
12
%
693.9
630.6
10
%
Corporate
40.3
68.4
(41)
%
40.4
68.7
(41)
%
Subtotal at fixed currency rates
7,388.4
6,694.5
10
%
7,423.7
6,847.3
8
%
Currency impact
35.3
152.8
*
-
-
*
Consolidated reported GAAP net sales
$7,423.7
$6,847.3
8
%
$7,423.7
$6,847.3
8
%
Operating Income
Global Industrial
$471.0
$396.7
19
%
$475.3
$415.2
14
%
Global Institutional & Specialty
334.4
257.2
30
%
335.1
261.5
28
%
Global Healthcare & Life Sciences
67.7
97.1
(30)
%
68.5
100.9
(32)
%
Other
113.5
88.7
28
%
113.7
90.1
26
%
Corporate
(156.2
)
(186.4
)
*
(156.3
)
(187.4
)
*
Subtotal at fixed currency rates
830.4
653.3
27
%
836.3
680.3
23
%
Currency impact
5.9
27.0
*
-
-
*
Consolidated reported GAAP operating
income
$836.3
$680.3
23
%
$836.3
$680.3
23
%
* 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 and Purolite transactions intangible
assets. The Corporate segment also includes special (gains) and
charges reported on the Consolidated Statement of Income.
ECOLAB INC.
CONSOLIDATED BALANCE
SHEETS
(unaudited)
June 30
December
June 30
(millions)
2023
2022
2022
Assets
Current assets
Cash and cash equivalents
$554.2
$598.6
$124.9
Accounts receivable, net
2,780.1
2,698.1
2,668.0
Inventories
1,646.2
1,792.8
1,720.7
Other current assets
456.0
404.7
391.5
Total current assets
5,436.5
5,494.2
4,905.1
Property, plant and equipment, net
3,326.5
3,293.4
3,264.0
Goodwill
8,101.3
8,012.7
7,935.9
Other intangible assets, net
3,603.6
3,680.7
4,030.6
Operating lease assets
446.8
448.2
400.8
Other assets
541.5
535.1
627.2
Total assets
$21,456.2
$21,464.3
$21,163.6
Liabilities and Equity
Current liabilities
Short-term debt
$1,121.9
$505.1
$618.3
Accounts payable
1,476.8
1,728.2
1,524.8
Compensation and benefits
469.1
493.6
434.8
Income taxes
117.3
197.6
73.6
Other current liabilities
1,282.4
1,285.9
1,154.5
Total current liabilities
4,467.5
4,210.4
3,806.0
Long-term debt
7,499.6
8,075.3
8,167.8
Pension and postretirement benefits
660.8
670.3
838.0
Deferred income taxes
474.1
505.6
630.4
Operating lease liabilities
335.4
337.8
291.8
Other liabilities
438.3
406.3
311.2
Total liabilities
13,875.7
14,205.7
14,045.2
Equity
Common stock
365.3
364.7
364.5
Additional paid-in capital
6,684.1
6,580.2
6,529.8
Retained earnings
9,580.0
9,318.8
9,003.3
Accumulated other comprehensive loss
(1,761.8
)
(1,726.6
)
(1,617.9
)
Treasury stock
(7,310.9
)
(7,301.0
)
(7,186.3
)
Total Ecolab shareholders’ equity
7,556.7
7,236.1
7,093.4
Noncontrolling interest
23.8
22.5
25.0
Total equity
7,580.5
7,258.6
7,118.4
Total liabilities and equity
$21,456.2
$21,464.3
$21,163.6
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Second Quarter Ended
Six Months Ended
June 30
June 30
(millions, except percent and per
share)
2023
2022
2023
2022
Net sales
Reported GAAP net sales
$3,852.1
$3,580.6
$7,423.7
$6,847.3
Effect of foreign currency translation
(21.1
)
(58.4
)
(35.3
)
(152.8
)
Non-GAAP fixed currency sales
3,831.0
3,522.2
7,388.4
6,694.5
Effect of acquisitions and
divestitures
(23.1
)
(33.8
)
(46.7
)
(68.4
)
Non-GAAP organic sales
$3,807.9
$3,488.4
$7,341.7
$6,626.1
Cost of sales
Reported GAAP cost of sales
$2,334.8
$2,211.1
$4,540.0
$4,284.5
Special (gains) and charges
8.1
1.7
11.3
54.6
Non-GAAP adjusted cost of sales
$2,326.7
$2,209.4
$4,528.7
$4,229.9
Gross profit
Reported GAAP gross profit
$1,517.3
$1,369.5
$2,883.7
$2,562.8
Special (gains) and charges
8.1
1.7
11.3
54.6
Non-GAAP adjusted gross profit
$1,525.4
$1,371.2
$2,895.0
$2,617.4
Gross margin
Reported GAAP gross margin
39.4
%
38.2
%
38.8
%
37.4
%
Non-GAAP adjusted gross margin
39.6
%
38.3
%
39.0
%
38.2
%
Operating income
Reported GAAP operating income
$484.7
$425.8
$836.3
$680.3
Special (gains) and charges at public
currency rates
29.1
5.3
56.8
82.3
Non-GAAP adjusted operating income
513.8
431.1
893.1
762.6
Effect of foreign currency translation
(3.6
)
(9.8
)
(6.3
)
(25.8
)
Non-GAAP adjusted fixed currency operating
income
510.2
421.3
886.8
736.8
Effect of acquisitions and
divestitures
(1.5
)
-
(2.0
)
-
Non-GAAP organic operating income
$508.7
$421.3
$884.8
$736.8
Operating income margin
Reported GAAP operating income margin
12.6
%
11.9
%
11.3
%
9.9
%
Non-GAAP adjusted fixed currency operating
income margin
13.3
%
12.0
%
12.0
%
11.0
%
Non-GAAP organic operating income
margin
13.4
%
12.1
%
12.1
%
11.1
%
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Second Quarter Ended
Six Months Ended
June 30
June 30
(millions, except percent and per
share)
2023
2022
2023
2022
Net Income attributable to Ecolab
Reported GAAP net income attributable to
Ecolab
$329.7
$308.3
$563.1
$480.2
Special (gains) and charges, after tax
23.3
2.6
44.4
66.2
Discrete tax net expense (benefit)
2.8
3.7
(1.2
)
4.7
Non-GAAP adjusted net income attributable
to Ecolab
$355.8
$314.6
$606.3
$551.1
Diluted EPS attributable to Ecolab
Reported GAAP diluted EPS
$1.15
$1.08
$1.97
$1.67
Special (gains) and charges, after tax
0.08
0.01
0.15
0.23
Discrete tax net expense (benefit)
0.01
0.01
-
0.02
Non-GAAP adjusted diluted EPS
$1.24
$1.10
$2.12
$1.92
Provision for Income Taxes
Reported GAAP tax rate
20.6
%
19.7
%
19.5
%
20.0
%
Special gains and charges
(0.1
)
0.4
0.2
-
Discrete tax items
(0.6
)
(0.9
)
0.2
(0.7
)
Non-GAAP adjusted tax rate
19.9
%
19.2
%
19.9
%
19.3
%
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Second Quarter Ended June 30
2023
2022
(millions)
Fixed Currency
Impact of Acquisitions and
Divestitures
Organic
Fixed Currency
Impact of Acquisitions and
Divestitures
Organic
Net Sales
Global Industrial
$1,795.6
$ -
$1,795.6
$1,653.3
$ -
$1,653.3
Global Institutional & Specialty
1,268.6
(6.4
)
1,262.2
1,118.2
-
1,118.2
Global Healthcare & Life Sciences
387.5
-
387.5
384.4
-
384.4
Other
362.6
-
362.6
332.5
-
332.5
Corporate
16.7
(16.7
)
-
33.8
(33.8
)
-
Subtotal at fixed currency rates
3,831.0
(23.1
)
3,807.9
3,522.2
(33.8
)
3,488.4
Currency impact
21.1
58.4
Consolidated reported GAAP net sales
$3,852.1
$3,580.6
Operating Income (loss)
Global Industrial
$255.4
$ -
$255.4
$216.8
$ -
$216.8
Global Institutional & Specialty
208.7
(0.7
)
208.0
148.6
-
148.6
Global Healthcare & Life Sciences
32.7
-
32.7
55.2
-
55.2
Other
63.4
-
63.4
51.6
-
51.6
Corporate
(50.0
)
(0.8
)
(50.8
)
(50.9
)
-
(50.9
)
Subtotal at fixed currency rates
510.2
(1.5
)
508.7
421.3
-
421.3
Special (gains) and charges at fixed
currency rates
28.8
6.5
Reported OI at fixed currency rates
481.4
414.8
Currency impact
3.3
11.0
Consolidated reported GAAP operating
income
$484.7
$425.8
Six Months Ended June 30
2023
2022
(millions)
Fixed Currency
Impact of Acquisitions and
Divestitures
Acquisition Adjusted
Fixed Currency
Impact of Acquisitions and
Divestitures
Acquisition Adjusted
Net Sales
Global Industrial
$3,494.9
$ -
$3,494.9
$3,164.7
$ -
$3,164.7
Global Institutional & Specialty
2,395.2
(6.4
)
2,388.8
2,109.5
-
2,109.5
Global Healthcare & Life Sciences
766.1
-
766.1
732.6
-
732.6
Other
691.9
-
691.9
619.3
-
619.3
Corporate
40.3
(40.3
)
-
68.4
(68.4
)
-
Subtotal at fixed currency rates
7,388.4
(46.7
)
7,341.7
6,694.5
(68.4
)
6,626.1
Currency impact
35.3
152.8
Consolidated reported GAAP net sales
$7,423.7
$6,847.3
Operating Income (loss)
Global Industrial
$471.0
$ -
$471.0
$396.7
$ -
$396.7
Global Institutional & Specialty
334.4
(0.7
)
333.7
257.2
-
257.2
Global Healthcare & Life Sciences
67.7
-
67.7
97.1
-
97.1
Other
113.5
-
113.5
88.7
-
88.7
Corporate
(99.8
)
(1.3
)
(101.1
)
(102.9
)
-
(102.9
)
Subtotal at fixed currency rates
886.8
(2.0
)
884.8
736.8
-
736.8
Special (gains) and charges at fixed
currency rates
56.4
83.5
Reported OI at fixed currency rates
830.4
653.3
Currency impact
5.9
27.0
Consolidated reported GAAP operating
income
$836.3
$680.3
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Selected Cash Flow items
Second Quarter Ended
Six Months Ended
June 30
June 30
(millions)
2023
2022
2023
2022
Cash provided by operating activities
$573.4
$322.4
$771.6
$492.5
Less: Capital expenditures
(172.0
)
(168.8
)
(345.7
)
(317.5
)
Free cash flow
$401.4
$153.6
$425.9
$175.0
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
2022
2022
2022
2022
2022
2022
2022
Diluted earnings per share, as reported
(U.S. GAAP)
$0.60
$1.08
$1.67
$1.21
$2.88
$0.93
$3.81
Adjustments:
Special (gains) and charges (1)
0.22
0.01
0.23
0.14
0.37
0.35
0.72
Discrete tax expense (benefits) (2)
0.00
0.01
0.02
(0.05
)
(0.03
)
(0.01
)
(0.04
)
Adjusted diluted earnings per share
(Non-GAAP)
$0.82
$1.10
$1.92
$1.30
$3.22
$1.27
$4.49
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
2023
2023
2023
2023
2023
2023
2023
Diluted earnings per share, as reported
(U.S. GAAP)
$0.82
$1.15
$1.97
Adjustments:
Special (gains) and charges (3)
0.07
0.08
0.15
Discrete tax expense (benefits) (4)
(0.01
)
0.01
0.00
Adjusted diluted earnings per share
(Non-GAAP)
$0.88
$1.24
$2.12
$0.00
$0.00
$0.00
$0.00
Per share amounts do not necessarily sum
due to changes in shares outstanding and rounding.
(1) Special (gains) and charges for 2022
includes charges of $63.6 million, $2.6 million, $39.6 million and
$101.5 million, net of tax, in the first, second, third and fourth
quarters, respectively. Charges were primarily related to
acquisition and integration charges, reserves related to our
operations in Russia, COVID-19 related inventory write downs and
employee-related costs, restructuring charges, litigation and other
charges and pension settlements.
(2) Discrete tax expenses (benefits) for
2022 includes $1.0 million, $3.7 million, ($14.2) million and
($2.3) million in the first, second, third and fourth quarters,
respectively. These expenses (benefits) are primarily associated
with stock compensation excess tax benefits and other discrete tax
benefits.
(3) Special (gains) and charges for 2023
includes charges of $21.1 million and $23.3 million, net of tax, in
the first and second quarters, respectively. Charges were primarily
related to restructuring charges, acquisition and integration
charges and litigation and other charges.
(4) Discrete tax (benefits) for 2023
includes ($4.0) million and $2.8 million in the first and second
quarters, respectively. These expenses (benefits) are primarily
associated with stock compensation excess tax benefits and other
discrete tax benefits.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230731507842/en/
Investor Contact: Andrew Hedberg
(651) 250-2185 Cairn Clark (651) 250-2291 Media Contact: Nigel Glennie (651) 250-2576
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