Ecolab (NYSE: ECL):
THIRD QUARTER
HIGHLIGHTS:
- Reported sales $4.0 billion, +8% versus last year. Organic
sales +7%, led by double-digit growth in the Institutional &
Specialty segment and Pest Elimination division, solid Industrial
segment growth, and improved Healthcare & Life Sciences segment
growth.
- Reported operating income +17%. Organic operating income
+20%, driven by continued strong pricing, improved volume trends
and slightly lower delivered product costs.
- Reported operating income margin 14.3%. Organic operating
income margin 15.5%, +160 bps versus last year reflecting robust
gross margin expansion.
- Reported diluted EPS $1.41, +17%. Adjusted diluted EPS,
excluding special gains and charges and discrete tax items were
$1.54, +18%.
- Third quarter cash flow from operating activities $788
million; free cash flow increased to $621 million, +$377 million
versus last year.
OUTLOOK
- 4Q 2023: Expect fourth quarter 2023 adjusted diluted
earnings per share in the $1.48 to $1.58 range, +17 to 24% versus
last year.
- 2024 outlook: Continue to expect mid-teens or better growth
in adjusted diluted earnings per share, as discussed at Ecolab’s
September 2023 investor day.
Third Quarter Ended September
30
Reported
Adjusted
(unaudited)
Public Currency Rates
%
Public Currency Rates
%
(millions, except per share)
2023
2022
Change
2023
2022
Change
Net sales
$3,958.1
$3,669.3
8
%
$3,958.1
$3,669.3
8
%
Operating income
566.0
483.0
17
%
608.6
507.9
20
%
Net income attributable to Ecolab
404.0
347.1
16
%
441.7
372.5
19
%
Diluted earnings per share attributable to
Ecolab
$1.41
$1.21
17
%
$1.54
$1.30
18
%
Organic
%
2023
2022
Change
Net sales
$3,899.3
$3,640.0
7
%
Operating income
604.1
505.4
20
%
CEO Comment
Christophe Beck, Ecolab’s chairman and chief executive officer,
said, “Ecolab continued to deliver very strong sales and earnings
growth despite unpredictable macro conditions. Consistent execution
by our team drove further pricing, accelerating volume trends, and
very strong organic operating income growth. Importantly, organic
operating income margin continued to expand significantly, driven
by robust gross margin expansion. As expected, SG&A expense
remained consistent with second quarter levels, with underlying
productivity remaining solid as we continue to leverage our leading
digital capabilities. Together, this great performance resulted in
adjusted earnings per share growth at the upper end of our forecast
range.
“We remain focused on driving new business wins and further
pricing improvements, supported by the unmatched value we create
for customers through reduced water and energy consumption, and
enhanced productivity. At the same time, we continue to make
investments in our market-leading innovation, digital offerings and
service capabilities, which help amplify our competitive strengths.
Ecolab’s long-term fundamentals are stronger than ever, and we
remain confident in our outlook. We expect strong growth in
adjusted earnings in the fourth quarter, with this momentum
continuing into 2024 as we work to deliver superior shareholder
returns.”
Third Quarter 2023 Consolidated
Results
Ecolab’s third quarter reported sales increased 8% and organic
sales increased 7% when compared to the prior year.
Third quarter 2023 reported operating income increased 17%
including the impact of special gains and charges, which were a net
charge primarily related to restructuring costs. Organic operating
income increased 20%, as robust pricing and slightly lower
delivered product costs more than offset investments in the
business including incentive compensation.
Reported other income increased $20 million in the third quarter
of 2023 as modestly higher pension costs were more than offset by
the comparison to last year’s $25 million settlement expense
related to U.S. pension plan lump-sum payments to retirees.
Reported interest expense increased 14% reflecting the impact
from higher average interest rates on outstanding debt.
The reported income tax rate for the third quarter of 2023 was
19.1% compared with the reported rate of 14.6% in the third quarter
of 2022. Excluding special gains and charges and discrete tax
items, the adjusted tax rate for the third quarter of 2023 was
18.5% compared with the adjusted tax rate of 18.3% in the third
quarter of 2022.
Reported net income increased 16% versus the prior year.
Excluding the impact of special gains and charges and discrete tax
items, adjusted net income increased 19% versus the prior year.
Reported diluted earnings per share increased 17% versus the
prior year. Adjusted diluted earnings per share increased 18% when
compared against the third quarter of 2022. Currency translation
was neutral to earnings per share in the third quarter of 2023.
Third Quarter 2023 Segment
Review
Global Industrial
(unaudited)
Third Quarter Ended September
30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$1,826.9
$1,763.4
4
%
4
%
Operating income
287.5
266.6
8
%
8
%
Operating income margin
15.7
%
15.1
%
Organic operating income margin
15.7
%
15.1
%
Public currency
Sales
$1,841.8
$1,769.6
4
%
Operating income
289.8
269.0
8
%
The Industrial segment includes Water,
Food & Beverage, and Paper
Organic sales increased 4%, as good growth in Food &
Beverage and Water more than offset the expected short-term decline
in Paper sales, which continues to be impacted by soft industry
demand. Organic operating income increased 8% as continued pricing
overcame investments in the business including incentive
compensation and softer volume. Industrial’s operating income is
expected to return to double-digit growth in the fourth
quarter.
Global Institutional &
Specialty
(unaudited)
Third Quarter Ended September
30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$1,308.7
$1,165.7
12
%
11
%
Operating income
249.9
195.2
28
%
28
%
Operating income margin
19.1
%
16.7
%
Organic operating income margin
19.3
%
16.7
%
Public currency
Sales
$1,313.0
$1,166.0
13
%
Operating income
250.8
196.1
28
%
The Institutional & Specialty segment
includes Institutional and Specialty
Organic sales increased 11%, with both the Institutional and
Specialty divisions growing double-digits reflecting additional
pricing and new business gains. Very strong organic operating
income growth of 28% was driven by strong pricing which overcame
investments in the business including incentive compensation.
Global Healthcare & Life
Sciences
(unaudited)
Third Quarter Ended September
30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$400.7
$360.1
11
%
11
%
Operating income
44.0
32.0
38
%
38
%
Operating income margin
11.0
%
8.9
%
Organic operating income margin
11.0
%
8.9
%
Public currency
Sales
$406.2
$356.6
14
%
Operating income
45.2
31.3
44
%
The Healthcare & Life Sciences segment
includes Healthcare and Life Sciences
Organic sales increased 11%, reflecting continued growth in
Healthcare and improved Life Sciences sales growth. Healthcare’s
underlying growth improved, driven by good pricing and new business
gains; the business also benefited from larger than normal surgical
sales. Organic operating income increased 38% versus last year as
further pricing, volume growth, and cost savings more than offset
targeted investments in the business including incentive
compensation.
Other
(unaudited)
Third Quarter Ended September
30
Organic
(millions)
2023
2022
% Change
% Change
Fixed currency
Sales
$380.3
$350.8
8
%
8
%
Operating income
72.9
63.3
15
%
15
%
Operating income margin
19.2
%
18.0
%
Organic operating income margin
19.2
%
18.0
%
Public currency
Sales
$382.1
$349.4
9
%
Operating income
72.9
63.1
16
%
The Other segment includes Pest
Elimination, Textile Care and Colloidal Technologies
Organic sales increased 8%, led by double-digit growth in Pest
Elimination. Organic operating income increased 15% as continued
pricing overcame investments in the business including incentive
compensation.
Corporate
(unaudited)
Third Quarter Ended September
30
(millions)
2023
2022
Public currency
Sales
$15.0
$27.7
Corporate operating expense
Nalco and Purolite amortization
49.9
52.0
Special (gains) and charges
42.6
24.9
Other
0.2
(0.4
)
Total Corporate operating expense
$92.7
$76.5
Third quarter of 2023 corporate segment includes:
- sales of $15 million to ChampionX under the Master Cross Supply
and Product Transfer agreements Ecolab entered into as part of the
ChampionX separation
- amortization expense of $28 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 $43 million,
primarily related to restructuring costs
Special gains and charges for the third quarter of 2022
impacting operating expense were a net charge of $25 million and
primarily related to Purolite integration costs and other
charges.
Business Outlook
2023 – Fourth Quarter
Ecolab expects fourth quarter 2023 adjusted diluted earnings per
share in the $1.48 to $1.58 range, rising 17% to 24% compared with
adjusted diluted earnings per share of $1.27 a year ago. Within
this forecast, the company expects to deliver continued pricing,
volume growth, year-over-year gross margin expansion of 250 to 300
basis points and SG&A expense that remains consistent with 2023
second and third quarter levels as we continue to make targeted
investments in our growth capabilities while driving further
productivity improvements.
The Company currently expects quantifiable special charges in
the fourth quarter of 2023 to be approximately $0.09 per share,
principally related to restructuring charges. Other than the
special gains and charges noted above, other such amounts are not
currently quantifiable.
2024 Outlook
Ecolab continues to expect to deliver strong performance in
2024. The Company assumes continued soft macroeconomic demand and
slightly lower delivered product costs. As discussed at Ecolab’s
September 2023 investor day, the Company expects good sales growth,
driven by new business gains and continued pricing actions,
improved SG&A productivity, and attractive operating income
margin expansion. This strong performance is expected to result in
mid-teens or better growth in 2024 adjusted diluted earnings per
share.
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 third 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, and our financial and business
performance and prospects, including sales, earnings, special
charges, margins, pricing, productivity, new business and
investments. 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)
Third Quarter Ended
Nine Months Ended
September 30
%
September 30
%
(millions, except per share)
2023
2022
Change
2023
2022
Change
Product and equipment sales
$3,170.9
$2,963.0
$9,152.0
$8,473.9
Service and lease sales
787.2
706.3
2,229.8
2,042.7
Net sales
3,958.1
3,669.3
8
%
11,381.8
10,516.6
8
%
Product and equipment cost of sales
1,868.1
1,877.1
5,561.7
5,371.7
Service and lease cost of sales
462.4
414.5
1,308.8
1,204.4
Cost of sales (1)
2,330.5
2,291.6
2
%
6,870.5
6,576.1
4
%
Selling, general and administrative
expenses
1,024.9
876.9
17
%
3,026.8
2,731.7
11
%
Special (gains) and charges (1)
36.7
17.8
82.2
45.5
Operating income
566.0
483.0
17
%
1,402.3
1,163.3
21
%
Other (income) expense
(14.5
)
5.7
(354
)%
(42.0
)
(32.6
)
29
%
Interest expense, net
74.3
65.1
14
%
226.3
174.1
30
%
Income before income taxes
506.2
412.2
23
%
1,218.0
1,021.8
19
%
Provision for income taxes
96.8
60.2
61
%
235.8
182.4
29
%
Net income including noncontrolling
interest
409.4
352.0
16
%
982.2
839.4
17
%
Net income attributable to noncontrolling
interest
5.4
4.9
15.1
12.1
Net income attributable to Ecolab
$404.0
$347.1
16
%
$967.1
$827.3
17
%
Earnings attributable to Ecolab per common
share
Basic
$1.42
$1.22
16
%
$3.39
$2.90
17
%
Diluted
$1.41
$1.21
17
%
$3.38
$2.88
17
%
Weighted-average common shares
outstanding
Basic
285.1
284.9
0
%
284.9
285.4
0
%
Diluted
286.9
286.3
0
%
286.4
287.0
0
%
(1) Cost of sales and Special (gains) and
charges in the Consolidated Statement of Income above include the
following:
Third Quarter Ended
Nine Months Ended
September 30
September 30
(millions)
2023
2022
2023
2022
Cost of sales
Restructuring activities
$5.9
$2.1
$17.2
$5.5
Acquisition and integration activities
-
4.2
-
32.7
COVID-19 activities, net
-
-
-
16.3
Russia/Ukraine activities
-
0.8
-
7.2
Subtotal (a)
5.9
7.1
17.2
61.7
Special (gains) and charges
Restructuring activities
20.0
(0.3
)
46.3
0.8
Acquisition and integration activities
3.0
4.1
11.5
15.0
Russia/Ukraine activities
0.5
-
1.1
5.9
Other
13.2
14.0
23.3
23.8
Subtotal
36.7
17.8
82.2
45.5
Other (income) expense
Pension Settlements/Curtailments
-
24.8
-
24.8
Total special (gains) and charges
$42.6
$49.7
$99.4
$132.0
(a) Special charges of $4.2 million and
$5.6 million in the third quarter of 2023 and 2022, respectively,
and $11.0 million and $58.8 million for the first nine months of
2023 and 2022, respectively, were recorded in product and equipment
cost of sales. Special charges of $1.7 million and $1.5 million in
the third quarter of 2023 and 2022, respectively, and $6.2 million
and $2.9 million for the first nine months of 2023 and 2022,
respectively, were recorded in service and lease cost of sales.
ECOLAB INC.
REPORTABLE SEGMENT
INFORMATION
(unaudited)
Third Quarter Ended September
30
Fixed Currency Rates
Public Currency Rates
%
%
(millions)
2023
2022
Change
2023
2022
Change
Net Sales
Global Industrial
$1,826.9
$1,763.4
4
%
$1,841.8
$1,769.6
4
%
Global Institutional & Specialty
1,308.7
1,165.7
12
%
1,313.0
1,166.0
13
%
Global Healthcare & Life Sciences
400.7
360.1
11
%
406.2
356.6
14
%
Other
380.3
350.8
8
%
382.1
349.4
9
%
Corporate
15.0
27.7
(46
)%
15.0
27.7
(46
)%
Subtotal at fixed currency rates
3,931.6
3,667.7
7
%
3,958.1
3,669.3
8
%
Currency impact
26.5
1.6
*
-
-
*
Consolidated reported GAAP net sales
$3,958.1
$3,669.3
8
%
$3,958.1
$3,669.3
8
%
Operating Income (loss)
Global Industrial
$287.5
$266.6
8
%
$289.8
$269.0
8
%
Global Institutional & Specialty
249.9
195.2
28
%
250.8
196.1
28
%
Global Healthcare & Life Sciences
44.0
32.0
38
%
45.2
31.3
44
%
Other
72.9
63.3
15
%
72.9
63.1
16
%
Corporate
(92.2
)
(76.6
)
*
(92.7
)
(76.5
)
*
Subtotal at fixed currency rates
562.1
480.5
17
%
566.0
483.0
17
%
Currency impact
3.9
2.5
*
-
-
*
Consolidated reported GAAP operating
income
$566.0
$483.0
17
%
$566.0
$483.0
17
%
Nine Months Ended September
30
Fixed Currency Rates
Public Currency Rates
%
%
(millions)
2023
2022
Change
2023
2022
Change
Net Sales
Global Industrial
$5,321.8
$4,928.1
8
%
$5,359.7
$5,025.2
7
%
Global Institutional & Specialty
3,703.9
3,275.2
13
%
3,714.0
3,304.7
12
%
Global Healthcare & Life Sciences
1,166.8
1,092.7
7
%
1,176.7
1,110.3
6
%
Other
1,072.2
970.1
11
%
1,076.0
980.0
10
%
Corporate
55.3
96.1
(42
)%
55.4
96.4
(43
)%
Subtotal at fixed currency rates
11,320.0
10,362.2
9
%
11,381.8
10,516.6
8
%
Currency impact
61.8
154.4
*
-
-
*
Consolidated reported GAAP net sales
$11,381.8
$10,516.6
8
%
$11,381.8
$10,516.6
8
%
Operating Income
Global Industrial
$758.5
$663.3
14
%
$765.1
$684.2
12
%
Global Institutional & Specialty
584.3
452.4
29
%
585.9
457.6
28
%
Global Healthcare & Life Sciences
111.7
129.1
(13
)%
113.7
132.2
(14
)%
Other
186.4
152.0
23
%
186.6
153.2
22
%
Corporate
(248.4
)
(263.0
)
*
(249.0
)
(263.9
)
*
Subtotal at fixed currency rates
1,392.5
1,133.8
23
%
1,402.3
1,163.3
21
%
Currency impact
9.8
29.5
*
-
-
*
Consolidated reported GAAP operating
income
$1,402.3
$1,163.3
21
%
$1,402.3
$1,163.3
21
%
* 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)
September 30
December 31,
September 30
(millions)
2023
2022
2022
Assets
Current assets
Cash and cash equivalents
$1,001.3
$598.6
$112.9
Accounts receivable, net
2,823.5
2,698.1
2,714.3
Inventories
1,536.0
1,792.8
1,802.7
Other current assets
428.6
404.7
469.4
Total current assets
5,789.4
5,494.2
5,099.3
Property, plant and equipment, net
3,332.8
3,293.4
3,260.9
Goodwill
8,098.4
8,012.7
7,741.4
Other intangible assets, net
3,528.6
3,680.7
3,915.0
Operating lease assets
536.0
448.2
427.0
Other assets
572.9
535.1
593.4
Total assets
$21,858.1
$21,464.3
$21,037.0
Liabilities and Equity
Current liabilities
Short-term debt
$1,129.1
$505.1
$497.9
Accounts payable
1,498.8
1,728.2
1,584.4
Compensation and benefits
553.3
493.6
434.2
Income taxes
134.3
197.6
110.4
Other current liabilities
1,285.0
1,285.9
1,145.4
Total current liabilities
4,600.5
4,210.4
3,772.3
Long-term debt
7,487.1
8,075.3
8,026.7
Pension and postretirement benefits
627.1
670.3
878.0
Deferred income taxes
450.9
505.6
577.1
Operating lease liabilities
415.0
337.8
317.5
Other liabilities
455.0
406.3
375.5
Total liabilities
14,035.6
14,205.7
13,947.1
Equity
Common stock
365.4
364.7
364.6
Additional paid-in capital
6,710.1
6,580.2
6,551.8
Retained earnings
9,832.8
9,318.8
9,205.1
Accumulated other comprehensive loss
(1,801.4
)
(1,726.6
)
(1,830.5
)
Treasury stock
(7,311.1
)
(7,301.0
)
(7,228.4
)
Total Ecolab shareholders’ equity
7,795.8
7,236.1
7,062.6
Noncontrolling interest
26.7
22.5
27.3
Total equity
7,822.5
7,258.6
7,089.9
Total liabilities and equity
$21,858.1
$21,464.3
$21,037.0
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Third Quarter Ended
Nine Months Ended
September 30
September 30
(millions, except percent and per
share)
2023
2022
2023
2022
Net sales
Reported GAAP net sales
$3,958.1
$3,669.3
$11,381.8
$10,516.6
Effect of foreign currency translation
(26.5
)
(1.6
)
(61.8
)
(154.4
)
Non-GAAP fixed currency sales
3,931.6
3,667.7
11,320.0
10,362.2
Effect of acquisitions and
divestitures
(32.3
)
(27.7
)
(79.0
)
(96.1
)
Non-GAAP organic sales
$3,899.3
$3,640.0
$11,241.0
$10,266.1
Cost of sales
Reported GAAP cost of sales
$2,330.5
$2,291.6
$6,870.5
$6,576.1
Special (gains) and charges
5.9
7.1
17.2
61.7
Non-GAAP adjusted cost of sales
$2,324.6
$2,284.5
$6,853.3
$6,514.4
Gross profit
Reported GAAP gross profit
$1,627.6
$1,377.7
$4,511.3
$3,940.5
Special (gains) and charges
5.9
7.1
17.2
61.7
Non-GAAP adjusted gross profit
$1,633.5
$1,384.8
$4,528.5
$4,002.2
Gross margin
Reported GAAP gross margin
41.1
%
37.5
%
39.6
%
37.5
%
Non-GAAP adjusted gross margin
41.3
%
37.7
%
39.8
%
38.1
%
Operating income
Reported GAAP operating income
$566.0
$483.0
$1,402.3
$1,163.3
Special (gains) and charges at public
currency rates
42.6
24.9
99.4
107.2
Non-GAAP adjusted operating income
608.6
507.9
1,501.7
1,270.5
Effect of foreign currency translation
(4.6
)
(2.1
)
(10.5
)
(27.9
)
Non-GAAP adjusted fixed currency operating
income
604.0
505.8
1,491.2
1,242.6
Effect of acquisitions and
divestitures
0.1
(0.4
)
(1.9
)
(0.4
)
Non-GAAP organic operating income
$604.1
$505.4
$1,489.3
$1,242.2
Operating income margin
Reported GAAP operating income margin
14.3
%
13.2
%
12.3
%
11.1
%
Non-GAAP adjusted fixed currency operating
income margin
15.4
%
13.8
%
13.2
%
12.0
%
Non-GAAP organic operating income
margin
15.5
%
13.9
%
13.2
%
12.1
%
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Third Quarter Ended
Nine Months Ended
September 30
September 30
(millions, except percent and per
share)
2023
2022
2023
2022
Other (income) expense
Reported GAAP other (income) expense
($14.5
)
$5.7
($42.0
)
($32.6
)
Special (gains) and charges
-
24.8
-
24.8
Non-GAAP adjusted other (income)
expense
($14.5
)
($19.1
)
($42.0
)
($57.4
)
Net Income attributable to Ecolab
Reported GAAP net income attributable to
Ecolab
$404.0
$347.1
$967.1
$827.3
Special (gains) and charges, after tax
34.2
39.6
78.6
105.8
Discrete tax net expense (benefit)
3.5
(14.2
)
2.3
(9.5
)
Non-GAAP adjusted net income attributable
to Ecolab
$441.7
$372.5
$1,048.0
$923.6
Diluted EPS attributable to Ecolab
Reported GAAP diluted EPS
$1.41
$1.21
$3.38
$2.88
Special (gains) and charges, after tax
0.12
0.14
0.27
0.37
Discrete tax net expense (benefit)
0.01
(0.05
)
0.01
(0.03
)
Non-GAAP adjusted diluted EPS
$1.54
$1.30
$3.66
$3.22
Provision for Income Taxes
Reported GAAP tax rate
19.1
%
14.6
%
19.4
%
17.9
%
Special gains and charges
0.1
0.6
0.1
0.2
Discrete tax items
(0.7
)
3.1
(0.2
)
0.8
Non-GAAP adjusted tax rate
18.5
%
18.3
%
19.3
%
18.9
%
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Third Quarter Ended September
30
2023
2022
(millions)
Fixed Currency
Impact of Acquisitions and
Divestitures
Organic
Fixed Currency
Impact of Acquisitions and
Divestitures
Organic
Net Sales
Global Industrial
$1,826.9
$ -
$1,826.9
$1,763.4
$ -
$1,763.4
Global Institutional & Specialty
1,308.7
(17.3
)
1,291.4
1,165.7
-
1,165.7
Global Healthcare & Life Sciences
400.7
-
400.7
360.1
-
360.1
Other
380.3
-
380.3
350.8
-
350.8
Corporate
15.0
(15.0
)
-
27.7
(27.7
)
-
Subtotal at fixed currency rates
3,931.6
(32.3
)
3,899.3
3,667.7
(27.7
)
3,640.0
Currency impact
26.5
1.6
Consolidated reported GAAP net sales
$3,958.1
$3,669.3
Operating Income (loss)
Global Industrial
$287.5
$ -
$287.5
$266.6
$ -
$266.6
Global Institutional & Specialty
249.9
(0.1
)
249.8
195.2
-
195.2
Global Healthcare & Life Sciences
44.0
-
44.0
32.0
-
32.0
Other
72.9
-
72.9
63.3
-
63.3
Corporate
(50.3
)
0.2
(50.1
)
(51.3
)
(0.4
)
(51.7
)
Subtotal at fixed currency rates
604.0
0.1
604.1
505.8
(0.4
)
505.4
Special (gains) and charges at fixed
currency rates
41.9
25.3
Reported OI at fixed currency rates
562.1
480.5
Currency impact
3.9
2.5
Consolidated reported GAAP operating
income
$566.0
$483.0
Nine Months Ended September
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
$5,321.8
$ -
$5,321.8
$4,928.1
$ -
$4,928.1
Global Institutional & Specialty
3,703.9
(23.7
)
3,680.2
3,275.2
-
3,275.2
Global Healthcare & Life Sciences
1,166.8
-
1,166.8
1,092.7
-
1,092.7
Other
1,072.2
-
1,072.2
970.1
-
970.1
Corporate
55.3
(55.3
)
-
96.1
(96.1
)
-
Subtotal at fixed currency rates
11,320.0
(79.0
)
11,241.0
10,362.2
(96.1
)
10,266.1
Currency impact
61.8
154.4
Consolidated reported GAAP net sales
$11,381.8
$10,516.6
Operating Income (loss)
Global Industrial
$758.5
$ -
$758.5
$663.3
$ -
$663.3
Global Institutional & Specialty
584.3
(0.8
)
583.5
452.4
-
452.4
Global Healthcare & Life Sciences
111.7
-
111.7
129.1
-
129.1
Other
186.4
-
186.4
152.0
-
152.0
Corporate
(149.7
)
(1.1
)
(150.8
)
(154.2
)
(0.4
)
(154.6
)
Subtotal at fixed currency rates
1,491.2
(1.9
)
1,489.3
1,242.6
(0.4
)
1,242.2
Special (gains) and charges at fixed
currency rates
98.7
108.8
Reported OI at fixed currency rates
1,392.5
1,133.8
Currency impact
9.8
29.5
Consolidated reported GAAP operating
income
$1,402.3
$1,163.3
ECOLAB INC.
SUPPLEMENTAL NON-GAAP
RECONCILIATIONS
(unaudited)
Selected Cash Flow items
Third Quarter Ended
Nine Months Ended
September 30
September 30
(millions)
2023
2022
2023
2022
Cash provided by operating activities
$787.7
$436.7
$1,559.3
$929.2
Less: Capital expenditures
(166.5
)
(192.5
)
(512.2
)
(510.0
)
Free cash flow
$621.2
$244.2
$1,047.1
$419.2
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
$1.41
$3.38
Adjustments:
Special (gains) and charges (3)
0.07
0.08
0.15
0.12
0.27
Discrete tax expense (benefits) (4)
(0.01
)
0.01
0.00
0.01
0.01
Adjusted diluted earnings per share
(Non-GAAP)
$0.88
$1.24
$2.12
$1.54
$3.66
$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. These 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, $23.3 million and $34.2 million,
net of tax, in the first, second and third quarters, respectively.
These 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, $2.8 million and $3.5 million in the
first, second and third 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/20231030816180/en/
Investor Contact: Andrew Hedberg
(651) 250-2185 Cairn Clark (651) 250-2291
Media Contact: Nigel Glennie (651)
250-2576
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