ECOLAB INC. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-9328

ECOLAB INC.

(Exact name of registrant as specified in its charter)


Delaware		41-0231510
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1 Ecolab Place, St. Paul, Minnesota 55102

(Address of principal executive offices)(Zip Code)

1-800-232-6522

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year,

if changed since last report)

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

2.625% Euro Notes due 2025

1.000% Euro Notes due 2024

ECL

ECL 25

ECL 24

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ⌧		Accelerated filer ◻
Non-accelerated filer ◻		Smaller reporting company ☐
		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. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

The number of shares of each of the registrant’s classes of Common Stock outstanding as of September 30, 2021: 286,567,307 shares, par value $1.00 per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Third Quarter Ended

Nine Months Ended

September 30

(millions, except per share amounts)

2021

2020

2021

2020

Product and equipment sales

$2,653.8

$2,426.4

$7,461.6

$7,017.5

Service and lease sales

667.0

592.2

1,906.9

1,707.4

Net sales

3,320.8

3,018.6

9,368.5

8,724.9

Product and equipment cost of sales

1,625.1

1,405.4

4,452.9

4,071.6

Service and lease cost of sales

391.6

364.2

1,119.8

1,053.9

Cost of sales (including special charges (a))

2,016.7

1,769.6

5,572.7

5,125.5

Selling, general and administrative expenses

832.0

802.6

2,548.2

2,499.5

Special (gains) and charges

6.3

35.0

36.7

120.3

Operating income

465.8

411.4

1,210.9

979.6

Other (income) expense (b)

(13.0)

(15.1)

(27.5)

(45.6)

Interest expense, net (c)

76.4

134.8

173.7

241.8

Income before income taxes

402.4

291.7

1,064.7

783.4

Provision for income taxes

73.8

42.4

226.0

103.5

Net income from continuing operations, including noncontrolling interest

328.6

249.3

838.7

679.9

Net income from continuing operations attributable to noncontrolling interest

4.1

3.1

9.8

12.8

Net income from continuing operations attributable to Ecolab

324.5

246.2

828.9

667.1

Net loss from discontinued operations, net of tax (Note 4) (d)

(2,172.5)

Net income (loss) attributable to Ecolab

$324.5

$246.2

$828.9

($1,505.4)

Earnings (loss) attributable to Ecolab per common share

Basic

Continuing operations

$ 1.13

$ 0.86

$ 2.90

$ 2.32

Discontinued operations

$ -

$ -

$ -

($ 7.56)

Earnings attributable to Ecolab

$ 1.13

$ 0.86

$ 2.90

($ 5.24)

Diluted

Continuing operations

$ 1.12

$ 0.85

$ 2.87

$ 2.29

Discontinued operations

$ -

$ -

$ -

($ 7.47)

Earnings attributable to Ecolab

$ 1.12

$ 0.85

$ 2.87

($ 5.18)

Weighted-average common shares outstanding

Basic

286.4

285.4

286.1

287.5

Diluted

289.2

288.4

289.0

290.8

(a)	Cost of sales includes special (gains) and charges, net of $52.9 and $9.5 in the third quarter of 2021 and 2020, respectively, and $76.2 and $45.6 in the first nine months of 2021 and 2020, respectively, which is recorded in product and equipment cost of sales.

(b)	Other (income) expense includes special charges of $7.0 and $26.6 in the third quarter and first nine months of 2021, respectively.

(c)	Interest expense, net includes special charges of $32.3 and $83.1 in the third quarter of 2021 and 2020, respectively, and $32.3 and $83.8 first nine months of 2021 and 2020, respectively.

(d)	Net income from discontinued operations, net of tax includes noncontrolling interest of $2.2 in the first nine months of 2020.

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2021		2020		2021		2020

Net income (loss) attributable to Ecolab		$324.5		$246.2		$828.9		($1,505.4)
Net income from continuing operations attributable to noncontrolling interest		4.1		3.1		9.8		12.8
Net income from discontinued operations attributable to noncontrolling interest		-		-		-		2.2
Net income (loss) attributable to Ecolab, including noncontrolling interest		328.6		249.3		838.7		(1,490.4)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments
Foreign currency translation		(107.2)		165.9		60.9		4.7
Separation of ChampionX		-		-		-		229.9
Gain (loss) on net investment hedges		35.2		(83.4)		8.8		(87.4)
Total foreign currency translation adjustments		(72.0)		82.5		69.7		147.2

Derivatives and hedging instruments		15.3		(19.1)		16.7		(14.1)

Pension and postretirement benefits
Current period net actuarial gain		-		-		109.9		-
Settlement charge		5.3		-		20.2		-
Amortization of net actuarial loss and prior period service credits, net		28.1		(18.5)		42.6		12.0
Total pension and postretirement benefits		33.4		(18.5)		172.7		12.0

Subtotal		(23.3)		44.9		259.1		145.1

Total comprehensive income (loss), including noncontrolling interest		305.3		294.2		1,097.8		(1,345.3)
Comprehensive income attributable to noncontrolling interest		3.7		27.1		8.0		15.0
Comprehensive income (loss) attributable to Ecolab		$301.6		$267.1		$1,089.8		($1,360.3)

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

(unaudited)



	September 30		December 31
(millions, except per share amounts)	2021		2020

ASSETS
Current assets
Cash and cash equivalents		$897.9		$1,260.2
Accounts receivable, net		2,384.1		2,273.8
Inventories		1,378.2		1,285.2
Other current assets		326.6		298.2
Total current assets		4,986.8		5,117.4
Property, plant and equipment, net		3,069.6		3,124.9
Goodwill		6,125.6		6,006.9
Other intangible assets, net		2,889.7		2,977.0
Operating lease assets		377.4		423.8
Other assets		477.1		476.0
Total assets		$17,926.2		$18,126.0

LIABILITIES AND EQUITY
Current liabilities
Short-term debt		$18.7		$17.3
Accounts payable		1,237.1		1,160.6
Compensation and benefits		452.9		469.3
Income taxes		68.0		96.1
Other current liabilities		1,117.8		1,188.9
Total current liabilities		2,894.5		2,932.2
Long-term debt		5,931.8		6,669.3
Postretirement health care and pension benefits		996.6		1,226.2
Deferred income taxes		589.4		483.9
Operating lease liabilities		263.0		300.5
Other liabilities		289.1		312.4
Total liabilities		10,964.4		11,924.5
Commitments and contingencies (Note 17)

Equity (a)
Common stock		363.7		362.6
Additional paid-in capital		6,399.8		6,235.0
Retained earnings		8,659.8		8,243.0
Accumulated other comprehensive loss		(1,733.5)		(1,994.4)
Treasury stock		(6,756.3)		(6,679.7)
Total Ecolab shareholders’ equity		6,933.5		6,166.5
Noncontrolling interest		28.3		35.0
Total equity		6,961.8		6,201.5
Total liabilities and equity		$17,926.2		$18,126.0

(a)	Common stock, 800.0 shares authorized, $1.00 par value per share, 286.6 shares outstanding at September 30, 2021 and 285.7 shares outstanding at December 31, 2020. Shares outstanding are net of treasury stock.

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended
	September 30
(millions)	2021		2020

OPERATING ACTIVITIES
Net income (loss) including noncontrolling interest		$838.7		($1,490.4)
Less: Net loss from discontinued operations including noncontrolling interest		-		(2,170.3)
Net income from continuing operations including noncontrolling interest		838.7		679.9
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		453.1		443.1
Amortization		174.4		162.1
Deferred income taxes		52.7		(16.6)
Share-based compensation expense		72.5		65.1
Pension and postretirement plan contributions		(51.3)		(50.1)
Pension and postretirement plan expense, net		29.9		27.9
Restructuring charges, net of cash paid		(35.1)		(9.4)
Debt refinancing		29.4		77.1
Other, net		19.7		44.2
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(101.0)		98.5
Inventories		(79.8)		(176.1)
Other assets		(48.1)		(22.4)
Accounts payable		71.5		11.8
Other liabilities		(5.6)		(243.1)
Cash provided by operating activities - continuing operations		1,421.0		1,092.0
Cash provided by operating activities - discontinued operations		-		118.4
Cash provided by operating activities		1,421.0		1,210.4

INVESTING ACTIVITIES
Capital expenditures		(423.8)		(362.3)
Property and other assets sold		12.3		2.5
Acquisitions and investments in affiliates, net of cash acquired		(209.9)		(487.0)
Divestiture of businesses		-		55.4
Other, net		(17.1)		(4.5)
Cash used for investing activities - continuing operations		(638.5)		(795.9)
Cash provided by investing activities - discontinued operations		-		443.2
Cash used for investing activities		(638.5)		(352.7)

FINANCING ACTIVITIES
Net issuances of commercial paper and notes payable		0.5		165.5
Long-term debt borrowings		293.7		1,855.9
Long-term debt repayments		(1,017.9)		(1,570.0)
Reacquired shares		(77.8)		(124.6)
Dividends paid		(426.5)		(421.8)
Exercise of employee stock options		94.3		199.7
Debt refinancing		(29.4)		(77.1)
Other, net		3.8		2.7
Cash (used for) provided by financing activities - continuing operations		(1,159.3)		30.3
Cash used for financing activities - discontinued operations		-		(1.6)
Cash (used for) provided by financing activities		(1,159.3)		28.7

Effect of exchange rate changes on cash and cash equivalents		14.5		(38.1)

(Decrease) increase in cash and cash equivalents		(362.3)		848.3
Cash and cash equivalents, beginning of period - continuing operations		1,260.2		118.8
Cash and cash equivalents, beginning of period - discontinued operations		-		67.6
Cash and cash equivalents, beginning of period		1,260.2		186.4
Cash and cash equivalents, end of period - continuing operations		897.9		1,034.7
Cash and cash equivalents, end of period - discontinued operations		-		-
Cash and cash equivalents, end of period		$897.9		$1,034.7

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)


	Third Quarter Ended September 30, 2021 and 2020
(millions, except per share amounts)	Common Stock		Additional Paid-in Capital		Retained Earnings		OCI (Loss)		Treasury Stock		Ecolab Shareholders' Equity		Non-Controlling Interest		Total Equity
Balance, June 30, 2020		$362.0		$6,155.0		$7,967.8		($1,989.7)		($6,639.9)		$5,855.2		$35.0		$5,890.2

Net income						246.3						246.3		3.0		249.3
Other comprehensive income (loss) activity								43.8				43.8		1.1		44.9
Cash dividends declared (a)						(134.2)						(134.2)		(4.4)		(138.6)
Stock options and awards		0.1		22.3						1.1		23.5				23.5
Reacquired shares										(19.9)		(19.9)				(19.9)
Balance, September 30, 2020		$362.1		$6,177.3		$8,079.9		($1,945.9)		($6,658.7)		$6,014.7		$34.7		$6,049.4

Balance, June 30, 2021		$363.2		$6,333.3		$8,472.8		($1,710.6)		($6,749.6)		$6,709.1		$27.2		$6,736.3

Net income						324.5						324.5		4.1		328.6
Other comprehensive income (loss) activity								(22.9)				(22.9)		(0.4)		(23.3)
Cash dividends declared (a)						(137.5)						(137.5)		(2.6)		(140.1)
Stock options and awards		0.5		66.5						0.4		67.4				67.4
Reacquired shares										(7.1)		(7.1)				(7.1)
Balance, September 30, 2021		$363.7		$6,399.8		$8,659.8		($1,733.5)		($6,756.3)		$6,933.5		$28.3		$6,961.8

	Nine Months Ended September 30, 2021 and 2020
(millions, except per share amounts)	Common Stock		Additional Paid-in Capital		Retained Earnings		OCI (Loss)		Treasury Stock		Ecolab Shareholders' Equity		Non-Controlling Interest		Total Equity
Balance, December 31, 2019		$359.6		$5,907.1		$9,993.7		($2,089.7)		($5,485.4)		$8,685.3		$40.5		$8,725.8

New accounting guidance adoption (b)						(4.3)						(4.3)				(4.3)
Net (loss) income						(1,505.3)						(1,505.3)		14.9		(1,490.4)
Other comprehensive income (loss) activity								143.8				143.8		1.3		145.1
Cash dividends declared (a)						(404.2)						(404.2)		(16.2)		(420.4)
Separation of ChampionX				(8.5)						(1,051.4)		(1,059.9)		3.4		(1,056.5)
Changes in noncontrolling interests				17.6								17.6		(9.2)		8.4
Stock options and awards		2.5		261.1						2.7		266.3				266.3
Reacquired shares										(124.6)		(124.6)				(124.6)
Balance, September 30, 2020		$362.1		$6,177.3		$8,079.9		($1,945.9)		($6,658.7)		$6,014.7		$34.7		$6,049.4

Balance, December 31, 2020		$362.6		$6,235.0		$8,243.0		($1,994.4)		($6,679.7)		$6,166.5		$35.0		$6,201.5

Net income						828.9						828.9		9.8		838.7
Other comprehensive income (loss) activity								260.9				260.9		(1.8)		259.1
Cash dividends declared (a)						(412.1)						(412.1)		(14.7)		(426.8)
Stock options and awards		1.1		164.8						1.2		167.1				167.1
Reacquired shares										(77.8)		(77.8)				(77.8)
Balance, September 30, 2021		$363.7		$6,399.8		$8,659.8		($1,733.5)		($6,756.3)		$6,933.5		$28.3		$6,961.8

(a)

Dividends declared per common share were $0.48 and $0.47 in the third quarter of 2021 and 2020, respectively, and $1.44 and $1.41 in the first nine months of 2021 and 2020, respectively.

(b)

Upon adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company reclassified the cumulative effect of applying the standard to retained earnings at the beginning of the period adopted.

The accompanying notes are an integral part of the consolidated financial statements.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the third quarter ended September 30, 2021 and 2020 reflects, in the opinion of management, all adjustments necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), equity and cash flows of Ecolab Inc. ("Ecolab" or "the Company") for the interim periods presented. Any adjustments consist of normal recurring items.

In March 2020, coronavirus 2019 (“COVID-19”) was declared a pandemic by the World Health Organization. As the impact of the pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial information as new events occur and additional information becomes known. To the extent actual results differ materially from those estimates and assumptions, the Company’s future financial statements could be affected.

On June 3, 2020, the Company completed the separation of its Upstream Energy business (the “ChampionX business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger (the “Merger”) of ChampionX with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”).

As discussed in Note 4 Discontinued Operations, during 2020, the ChampionX business met the criteria to be reported as discontinued operations because the separation of the ChampionX business was a strategic shift in business that had a major effect on the Company's operations and financial results. Therefore, the Company reported the historical results of ChampionX, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations. Unless otherwise noted, the accompanying Notes to the Consolidated Financial Statements have all been revised to reflect the effect of the separation of ChampionX and all prior year balances have been revised accordingly to reflect continuing operations only.

Subsequent to the separation of ChampionX, effective the third quarter of 2020, the Company no longer reports the Upstream Energy segment, which previously held the ChampionX business. The Company is aligned into three reportable segments and Other.

Except for the changes due to adoption of the new accounting standards, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2020 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.

With respect to the unaudited financial information of the Company for the third quarter ended September 30, 2021 and 2020 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated October 29, 2021 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

2. SPECIAL (GAINS) AND CHARGES

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


	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2021		2020		2021		2020
Cost of sales
Restructuring activities		$2.2		$1.0		$24.1		$6.6
Acquisition and integration activities		-		1.5		-		4.1
COVID-19 activities, net		50.7		1.8		51.8		8.7
Other		-		5.2		0.3		26.2
Cost of sales subtotal		52.9		9.5		76.2		45.6

Special (gains) and charges
Restructuring activities		0.4		26.9		6.5		31.4
Acquisition and integration activities		0.8		2.7		3.3		5.5
Disposal and impairment activities		-		-		-		45.9
COVID-19 activities, net		1.5		(3.0)		16.2		7.2
Other		3.6		8.4		10.7		30.3
Special (gains) and charges subtotal		6.3		35.0		36.7		120.3

Operating income subtotal		59.2		44.5		112.9		165.9

Interest expense, net		32.3		83.1		32.3		83.8
Other (income) expense		7.0		-		26.6		-

Total special (gains) and charges		$98.5		$127.6		$171.8		$249.7

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with the Company’s internal management reporting.

Restructuring activities

Restructuring activities are primarily related to the Institutional Advancement Program and Accelerate 2020, both of which are described below. Restructuring activities and related costs have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.

Institutional Advancement Program

The Company approved a restructuring plan in 2020 focused on the Institutional business (“the Institutional Plan”) which is intended to enhance our Institutional sales and service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging our ongoing investments in digital technology. In February 2021, the Company expanded the Institutional Plan. The Company expects that these restructuring charges will be completed by 2023, with total anticipated costs of $80 million ($60 million after tax). The costs are expected to be primarily cash expenditures for severance and facility closures. The Company also anticipates non-cash costs related to equipment disposals. Actual costs may vary from these estimates depending on actions taken.

During the third quarter and first nine months of 2021, the Company recorded restructuring charges of $1.4 million ($1.4 million after tax) and $9.5 million ($7.5 million after tax), respectively, primarily related to costs to support the transition to the new sales and service structure, and the disposal of equipment. The Company has recorded $44.7 million ($33.9 million after tax) of cumulative restructuring charges under the Institutional Plan. The liability related to the Institutional Plan was $8.0 million as of September 30, 2021 and is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Restructuring activity related to the Institutional Plan since inception of the underlying actions includes the following:

Employee

Termination

Asset

(millions)

Costs

Disposals

Other

Total

2020 Activity

Recorded expense and accrual

$25.6

$9.6

$35.2

Net cash payments

(0.9)

(9.6)

(10.5)

Restructuring liability, December 31, 2020

24.7

2021 Activity

Recorded expense (income) and accrual

2.2

6.0

1.3

9.5

Net cash payments

(18.9)

(2.7)

(21.6)

Non-cash net charges

(6.0)

1.4

(4.6)

Restructuring liability, September 30, 2021

$8.0

Accelerate 2020

During 2018, the Company formally commenced a restructuring plan Accelerate 2020 (“the Plan”), to leverage technology and system investments and organizational changes. The goals of the Plan are to simplify and automate processes and tasks, reduce complexity and management layers, consolidate facilities and focus on key long-term growth areas by further leveraging technology and structural improvements. During 2020, the Company expanded the Plan for additional costs and savings to further leverage the technology and structural improvements. The Company now expects that the restructuring activities will be completed by the end of 2022, with total anticipated costs of $255 million ($195 million after tax) when revised for continuing operations. The remaining costs are expected to be primarily cash expenditures for severance costs and some facility closure costs relating to team reorganizations. Actual costs may vary from these estimates depending on actions taken.

The Company recorded restructuring charges of $1.5 million ($1.2 million after tax) and $2.9 million ($2.8 million after tax) in the third quarter and first nine months of 2021, respectively, primarily related to severance. The liability related to the Plan was $40.6 million as of the end of the third quarter of 2021. The Company has recorded $242.1 million ($186.6 million after tax) of cumulative restructuring charges under the Plan. The remaining liability is expected to be paid over a period of several quarters and will continue to be funded from operating activities.

Restructuring activity related to the Accelerate 2020 Plan since inception of the underlying actions includes the following:


	Employee
	Termination		Asset
(millions)	Costs		Disposals		Other		Total
2018-2020 Activity
Recorded expense		$212.0		$8.0		$19.2		$239.2
Net cash payments		(144.3)		1.2		(12.2)		(155.3)
Non-cash charges		-		(9.2)		(2.0)		(11.2)
Effect of foreign currency translation		(0.9)		-		-		(0.9)
Restructuring liability, December 31, 2020		66.8		-		5.0		71.8

2021 Activity
Recorded expense		2.4		0.3		0.2		2.9
Net cash payments		(31.6)		-		(2.1)		(33.7)
Non-cash charges		-		(0.3)		(0.1)		(0.4)
Restructuring liability, September 30, 2021		$37.6		$-		$3.0		$40.6

Other Restructuring Activities

During the third quarter and nine months of 2021, the Company recorded restructuring charges (gains) of ($0.3) million ($0.5 million after tax) and $18.2 million ($16.9 million after tax), respectively, related to other immaterial restructuring activity. The charges are primarily related to severance and asset write-offs. During the third quarters and first nine months of 2021 and 2020, net restructuring charges related to prior year plans were minimal. The restructuring liability balance for all plans other than the Accelerate 2020 and Institutional Plan were $4.6 million and $5.9 million as of September 30, 2021 and December 31, 2020, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Cash payments during 2021 related to all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were $10.5 million.

Acquisition and integration related costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statements of Income include $0.8 million ($0.8 million after tax) and $3.3 million ($2.9 million after tax) in the third quarter and first nine months of 2021, respectively. Charges are related to Copal Invest NV, including its primary operating entity CID Lines (collectively, “CID Lines”), and Bioquell PLC (“Bioquell”) acquisitions and consist of integration costs, advisory and legal fees.

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statements of Income include $2.7 million ($2.3 million after tax) and $5.5 million ($4.3 million after tax) in the third quarter and first nine months of 2020, respectively. Charges are related to CID Lines, Bioquell and the Laboratoires Anios (“Anios”) acquisitions and consist of integration costs, advisory and legal fees. Acquisition and integration costs reported in product and equipment cost of sales of $1.5 million ($1.3 million after tax) and $4.1 million ($3.2 million after tax) on the Consolidated Statements of Income in the third quarter and first nine months of 2020, respectively, related to the recognition of fair value step-up in the CID Lines inventory, severance and the closure of a facility. The Company also incurred $0.7 million ($0.6 million after tax) of interest expense in the first nine months of 2020, none of which was incurred during the third quarter.

Further information related to the Company’s acquisitions is included in Note 3.

Disposal and impairment charges

Disposal and impairment charges reported in special (gains) and charges on the Consolidated Statements of Income include $45.9 million ($45.0 million after tax) in the first nine months of 2020. During the second quarter of 2020, the Company recorded a $28.6 million ($28.6 million after tax) impairment for a minority equity method investment due to the impact of the economic environment and the liquidity of the minority equity method investment. In addition, the Company recorded charges of $17.3 million ($16.3 million after tax) in the first six months of 2020 related to transaction fees associated with the sale of Holchem Group Limited (“Holchem”).

Further information related to the Company’s disposal is included in Note 3.

COVID-19 activities

Customer demand for sanitizer products surged at the outset of COVID-19. The Company worked hard to meet the rapidly increasing demand and sold the vast majority of the sanitizer inventory. However, COVID-19 variant-related delays of customer reopenings and consumer activity resulted in a small portion of excess sanitizer inventory. The Company recorded inventory reserves of $50 million in the third quarter of 2021 for excess sanitizer inventory and estimated disposal costs.

The Company recorded charges of $2.6 million and $4.1 million during the third quarter of 2021 and 2020, respectively, and $12.6 million and $30.6 million during the first nine months of 2021 and 2020, respectively, to protect the wages for certain employees directly impacted by the COVID-19 pandemic. The Company also recorded charges during the third quarter and first nine months of 2021 of $3.1 million and $11.5 million, respectively, related to COVID-19 testing and related expenses. In addition, the Company received subsidies and government assistance, which were recorded as a special (gain) of ($3.5) million and ($5.3) million during the third quarter of 2021 and 2020, respectively, and ($6.1) million and ($14.7) million during the first nine months of 2021 and 2020, respectively. COVID-19 pandemic charges are recorded in product and equipment cost of sales, service and lease cost of sales, and special (gains) and charges on the Consolidated Statements of Income. After tax net charges (gains) related to the COVID-19 pandemic were $40.6 million and ($0.9) million during the third quarter of 2021 and 2020, respectively, and $51.9 million and $12.3 million during the first nine months of 2021 and 2020, respectively.

Other operating activities

Other special charges recorded in the first nine months of 2021 in product and equipment cost of sales were $0.3 million ($0.2 million after tax). During the third quarter and first nine months of 2020, the Company recorded special charges of $5.2 million ($3.5 million after tax) and $26.2 million (17.8 million after tax), respectively, in product and equipment cost of sales on the Consolidated Statements of Income related to a Healthcare product recall in Europe.

Other special charges of $3.6 million ($2.7 million after tax) and $10.7 million ($8.3 million after tax) recorded in the third quarter and first nine months of 2021, respectively, relate primarily to legal reserve and certain legal charges which are recorded in special (gains) and charges on the Consolidated Statements of Income.

Other special charges of $8.4 million ($7.2 million after tax) and $30.3 million ($23.7 million after tax), respectively, recorded in the third quarter and first nine months of 2020 relate primarily to legal reserve and certain legal charges which are recorded in special (gains) and charges on the Consolidated Statements of Income.

Interest expense

Other special charges of $32.3 million ($28.4 million after tax) and $83.1 million ($64.0 million after tax) in the third quarter of 2021 and 2020, respectively, in interest expense on the Consolidated Statement of Income primarily related to debt refinancing charges.

Other (income) expense

During the third quarter and first nine months of 2021, the Company incurred settlement expense recorded in other (income) expense on the Consolidated Statements of Income of $7.0 million ($5.3 million after tax) and $26.6 million ($20.2 million after tax), respectively, related to U.S. pension plan lump-sum payments to retirees.

3. ACQUISITIONS AND DISPOSITIONS

Acquisitions

The Company makes business acquisitions that align with its strategic business objectives. The assets and liabilities of acquired businesses are recorded in the Consolidated Balance Sheets at fair value as of their acquisition dates. The purchase price allocation is based on estimates of the fair value of assets acquired, liabilities assumed and consideration transferred. Purchase consideration transferred is reduced by the amount of cash or cash equivalents acquired.

Acquisitions during the first nine months of 2021 and 2020 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

During the third quarter of 2021, the Company acquired National Wiper Alliance, Inc. (“NWA”), a U.S.-based business which sells dry wipes for healthcare and institutional applications. NWA became part of the Global Healthcare & Life Sciences reporting segment.

During the first quarter of 2021, the Company acquired VanBaerle Hygiene AG (“VanBaerle”), a Swiss-based business which sells cleaning products and related services to restaurants, long-term care facilities, hotels and laundries primarily for institutional applications. VanBaerle became part of the Global Institutional reporting segment. The purchase price included immaterial amounts of holdback and contingent consideration, which are recorded within other liabilities on the Consolidated Balance Sheets as of September 30, 2021.

Also, during the first quarter of 2021, the Company acquired TechTex Holdings Limited (“TechTex”), a U.K.-based business which sells wet and dry wipes and other nonwovens products primarily for life sciences and healthcare applications. TechTex became part of the Global Healthcare & Life Sciences reporting segment. The purchase price included an immaterial holdback amount that was subsequently settled prior to September 30, 2021.

The purchase accounting for these acquisitions are preliminary and subject to change as the Company finalizes the valuation of intangible assets, income tax balances and working capital. The Company does not expect any of the goodwill related to its acquisitions of VanBaerle or TechTex to be tax deductible, whereas the goodwill arising from the application of NWA is expected to be tax deductible.

Other than CID Lines, the Company did not close on any other business acquisitions during the first nine months of 2020.

The following table summarizes the acquisition date fair value of net assets acquired from the Company’s acquisitions other than CID Lines during the first nine months of 2021 and 2020.

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Net tangible assets (liabilities) acquired and equity method investments

$14.8

$12.4

Identifiable intangible assets

Customer relationships

41.0

72.1

Trademarks

1.1

4.7

Non-compete agreements

3.0

Other technology

1.5

Total intangible assets

45.1

81.3

Goodwill

60.2

119.2

Total aggregate purchase price

120.1

212.9

Acquisition-related liabilities and contingent consideration (a)

(4.4)

Net cash paid for acquisitions, including acquisition-related

liabilities and contingent consideration

$120.1

$208.5

(a)

Subsequent to the acquisitions, $1.4 in contingent consideration was remitted to the seller during the first nine months of 2021 and is included in investing activities on the Consolidated Statements of Cash Flows.

During the first nine months of 2020, the Company recorded purchase accounting adjustments associated with the finalization of the purchase accounting on its 2019 acquisitions. As a result of these purchase accounting adjustments, the net intangible assets and goodwill recognized from these acquisitions increased by $1.3 million and $0.3 million, respectively. In conjunction with the finalization of its purchase accounting, the Company made $3.5 million of acquisition-related payments which primarily consisted of the release of holdback liabilities and payment of contingent consideration.

The weighted average useful life of identifiable intangible assets acquired during the first nine months of 2021 was 14 years.

CID Lines Acquisition

On May 11, 2020, the Company acquired CID Lines for total consideration of $506.9 million in cash. CID Lines had annualized pre-acquisition sales of approximately $110 million and is a leading global provider of livestock biosecurity and hygiene solutions based in Belgium.

The Company incurred certain acquisition and integration costs associated with the transaction that were expensed and are reflected on the Consolidated Statements of Income. Further information related to the Company’s special (gains) and charges is included in Note 2.

The following table summarizes the acquisition date fair value of net assets acquired from the Company’s acquisition of CID Lines.


(millions)	May 11, 2020
Tangible assets		$54.1
Identifiable intangible assets
Customer relationships		147.5
Trademarks		58.6
Acquired technologies and product registrations		47.7
Total assets acquired		307.9

Goodwill		274.8

Total liabilities		97.2
Net consideration transferred to sellers		$485.5

Tangible assets are primarily comprised of accounts receivable of $30.1 million, property, plant and equipment of $7.7 million and inventory of $16.3 million. Liabilities primarily consist of deferred tax liabilities of $64.8 million and current liabilities of $32.4 million.

Customer relationships, trademarks, and other technology and product registrations are being amortized over weighted average lives of 14, 14, and 16 years, respectively.

Goodwill of $274.8 million arising from the acquisition consists largely of the synergies and economies of scale expected through adding complementary geographies and innovative products to the Company’s Food and Beverage businesses. CID Lines became part of the Global Industrial reportable segment. None of the goodwill recognized is expected to be deductible for income tax purposes.

During the first six months of 2021, the Company recorded purchase accounting adjustments that decreased goodwill recognized from the acquisition of CID Lines by $0.9 million. Purchase accounting was finalized in the second quarter of 2021 and no further purchase accounting adjustments will be recorded for the CID Lines acquisition.

Dispositions

There were no business dispositions during the first nine months of 2021.

In the second quarter of 2020, the Company completed the sale of Holchem, a U.K.-based supplier of hygiene and cleaning products and services for the food and beverage, foodservice and hospitality industries for total consideration of $106.6 million. Consideration consisted of $55.4 million of cash and $51.2 million in notes receivable recorded at fair value. After the recognition of transaction costs, the Company recognized an after-tax loss of $16.3 million, which is classified within special (gains) and charges on the Consolidated Statements of Income. Annual sales of Holchem were approximately $55 million and were included in the Global Industrial reportable segment prior to disposition. Further information related to the Company’s special (gains) and charges is included in Note 2.

As discussed in Note 4, the ChampionX separation met the criteria to be reported as discontinued operations. No other dispositions were significant to the Company’s consolidated financial statements for the first nine months of 2020.

Subsequent Event

On October 28, 2021, Ecolab entered into an agreement to acquire Purolite Corporation for $3.7 billion, subject to certain adjustments. Purolite is a leading, fast growing global provider of high-end ion exchange resins for separation and purification solutions that are highly complementary to our current offering and critical to high quality, safe drug production and biopharma products purification in the life sciences industries. It also provides ultra-pure water solutions for critical industrial markets like microelectronics, nuclear power and food and beverage.

4. DISCONTINUED OPERATIONS

On June 3, 2020, the Company effected the split-off of ChampionX through an offer to exchange (the “Exchange Offer”) all shares of ChampionX common stock owned by Ecolab for outstanding shares of Ecolab common stock. In the Exchange Offer, which was oversubscribed, the Company accepted approximately 5.0 million shares of Ecolab common stock in exchange for approximately 122.2 million shares of ChampionX common stock. In the Merger, each outstanding share of ChampionX common stock was converted into the right to receive one share of Apergy common stock, and ChampionX survived the Merger as a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy). In connection with and in accordance with the terms of the Transaction, prior to the consummation of the Exchange Offer and the Merger, ChampionX distributed $527.4 million in cash to Ecolab.

The following is a summary of the assets and liabilities transferred to ChampionX as part of the separation:



(millions)
Assets:
Cash and cash equivalent			$60.6
Current assets			810.5
Non-current assets			3,222.3
			4,093.4
Liabilities:
Current liabilities			313.0
Non-current liabilities			293.7
			606.7

Net assets distributed to ChampionX			($3,486.7)
Fair value of shares exchanged			1,051.4
Cash received from ChampionX			527.4
Consideration received less net assets			(1,907.9)

ChampionX cumulative translation adjustment ("CTA") write-off			(229.9)
Loss on separation			($2,137.8)

The Company accounted for this transaction as a sale and recognized a loss based on ChampionX net assets exceeding the effective proceeds.

The ChampionX business, as discussed in Note 1, met the criteria to be reported as discontinued operations because the separation of the ChampionX business was a strategic shift in business that had a major effect on the Company’s operations and financial results. Therefore, the results of discontinued operations for the second quarter ended June 30, 2020 include the historical results of ChampionX prior to separation.

Summarized results of the Company’s discontinued operations are as follows:


	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2021		2020		2021		2020

Product and equipment sales		$-		$-		$-		$858.9
Service and lease sales		-		-		-		99.6
Net sales		-		-		-		958.5
Product and equipment cost of sales		-		-		-		621.7
Service and lease cost of sales		-		-		-		80.4
Cost of sales (including special charges)		-		-		-		702.1
Selling, general and administrative expenses		-		-		-		180.5
Special (gains) and charges		-		-		-		2,221.7
Operating income		-		-		-		(2,145.8)
Other (income) expense		-		-		-		0.3
Interest expense (income), net		-		-		-		0.2
Income before income taxes		-		-		-		(2,146.3)
Provision for income taxes		-		-		-		24.0
Net loss including noncontrolling interest		-		-		-		(2,170.3)
Net income attributable to noncontrolling interest		-		-		-		2.2
Net loss from discontinued operations, net of tax		$-		$-		$-		($2,172.5)

Special (gains) and charges of $2,221.7 million in the first nine months of 2020 primarily relate to professional fees incurred to support the Transaction and restructuring charges specifically related to the ChampionX business. These charges have been included as a component of both cost of sales and special (gains) and charges in discontinued operations.

The Company also recognized discrete tax expense primarily related to friction costs associated with ChampionX separation activity of $22.7 million in the first nine months of 2020 that is allocated within discontinued operations tax expense.

In connection with the Transaction, the Company entered into agreements with ChampionX and Apergy to effect the separation and to provide a framework for the relationship following the separation, which included a Separation and Distribution Agreement, an Intellectual Property Matters Agreement, an Employee Matters Agreement, a Transition Services Agreement, and a Tax Matters Agreement. Transition services primarily involve the Company providing certain services to ChampionX related to general and administrative services for terms of up to 18 months following the separation. The amounts billed for transition services provided under the above agreements were not material to the Company’s results of operations.

The Company 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. 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, while purchases from ChampionX are recorded in inventory. Sales of product to ChampionX post-separation for the third quarter and first nine months of 2021 were $35.8 million and $103.5 million, respectively, and for the third quarter and first nine months of 2020 were $46.6 million and $58.9 million, respectively. As of September 30, 2021, the Company had an outstanding accounts receivable balance for sales of product to ChampionX of $18.0 million.

5. BALANCE SHEETS INFORMATION



	September 30		December 31
(millions)	2021		2020
Accounts receivable, net
Accounts receivable		$2,460.5		$2,358.1
Allowance for doubtful accounts		(76.4)		(84.3)
Total		$2,384.1		$2,273.8

Inventories
Finished goods		$886.5		$789.6
Raw materials and parts		550.2		511.2
Inventories at FIFO cost		1,436.7		1,300.8
FIFO cost to LIFO cost difference		(58.5)		(15.6)
Total		$1,378.2		$1,285.2

Other current assets
Prepaid assets		$122.8		$99.1
Taxes receivable		158.0		168.6
Derivative assets		25.6		3.2
Other		20.2		27.3
Total		$326.6		$298.2

Property, plant and equipment, net
Land		$153.2		$159.7
Buildings and leasehold improvements		1,083.7		1,060.0
Machinery and equipment		1,828.6		1,830.1
Merchandising and customer equipment		2,714.6		2,691.0
Capitalized software		863.7		820.8
Construction in progress		279.7		219.8
		6,923.5		6,781.4
Accumulated depreciation		(3,853.9)		(3,656.5)
Total		$3,069.6		$3,124.9

Other intangible assets, net
Intangible assets not subject to amortization
Trade names		$1,230.0		$1,230.0
Intangible assets subject to amortization
Customer relationships		2,593.2		2,530.9
Trademarks		348.0		348.0
Patents		499.5		492.5
Other technology		242.4		240.1
		3,683.1		3,611.5
Accumulated amortization
Customer relationships		(1,432.6)		(1,319.1)
Trademarks		(169.7)		(155.0)
Patents		(266.9)		(244.6)
Other technology		(154.2)		(145.8)
		(2,023.4)		(1,864.5)
Net intangible assets subject to amortization		1,659.7		1,747.0
Total		$2,889.7		$2,977.0

Other assets
Deferred income taxes		$150.8		$163.2
Pension		46.9		33.0
Derivative asset		3.2		-
Other		276.2		279.8
Total		$477.1		$476.0



	September 30		December 31
(millions)	2021		2020
Other current liabilities
Discounts and rebates		$341.0		$304.1
Dividends payable		137.5		137.2
Interest payable		44.0		51.7
Taxes payable, other than income		131.7		151.8
Derivative liabilities		1.0		25.8
Restructuring		48.9		98.1
Contract liability		86.7		80.4
Operating lease liabilities		115.7		125.6
Other		211.3		214.2
Total		$1,117.8		$1,188.9

Accumulated other comprehensive loss
Unrealized loss on derivative financial instruments, net of tax		($4.4)		($21.1)
Unrecognized pension and postretirement benefit expense, net of tax		(762.5)		(935.2)
Cumulative translation, net of tax		(966.6)		(1,038.1)
Total		($1,733.5)		($1,994.4)

6. DEBT AND INTEREST

Short-term Debt

The following table provides the components of the Company’s short-term debt obligations as of September 30, 2021 and December 31, 2020.




	September 30		December 31
(millions)	2021		2020
Short-term debt
Notes payable		$16.0		$15.5
Long-term debt, current maturities		2.7		1.8
Total		$18.7		$17.3

Lines of Credit

As of September 30, 2021, the Company has a $2.0 billion multi-year credit facility which expires in April 2026. The credit facility has been established with a diverse syndicate of banks and supports the Company’s U.S. and Euro commercial paper programs. There were no borrowings under the Company’s credit facility as of either September 30, 2021 or December 31, 2020.

Commercial Paper

The Company’s commercial paper program is used as a source of liquidity and consists of a $2.0 billion U.S. commercial paper program and a $2.0 billion Euro commercial paper program. The maximum aggregate amount of commercial paper that may be issued by the Company under its commercial paper programs may not exceed $2.0 billion.

The Company had no outstanding commercial paper under its U.S. or Euro programs as of either September 30, 2021 or December 31, 2020.

Notes Payable

The Company’s notes payable consists of uncommitted credit lines with major international banks and financial institutions, primarily to support global cash pooling structures. As of September 30, 2021 and December 31, 2020, the Company had $16.0 million and $15.5 million, respectively, outstanding under these credit lines.

Long-term Debt

The following table provides the components of the Company’s long-term debt obligations, including current maturities, as of September 30, 2021 and December 31, 2020.




	Maturity	September 30		December 31
(millions)	by Year	2021		2020

Long-term debt
Public and 144A notes (2021 principal amount)
Five year 2017 senior notes ($500 million)	2022		$-		$498.6
Seven year 2016 senior notes ($400 million)	2023		-		399.0
Seven year 2016 senior notes (€575 million)	2024		676.1		682.0
Ten year 2015 senior notes (€575 million)	2025		676.6		682.9
Ten year 2016 senior notes ($750 million)	2026		745.9		745.3
Ten year 2017 senior notes ($500 million)	2027		493.6		496.0
Ten year 2020 senior notes ($698 million)	2030		708.3		765.2
Ten year 2020 senior notes ($600 million)	2031		594.9		594.4
Thirty year 2011 senior notes ($389 million)	2041		384.2		452.2
Thirty year 2016 senior notes ($200 million)	2046		197.1		246.4
Thirty year 2017 senior notes ($484 million)	2047		424.0		611.9
Thirty year 2020 senior notes ($500 million)	2050		490.3		490.1
Thirty-four year 2021 144A notes ($685 million)	2055		534.9		-
Finance lease obligations and other			8.6		7.1
Total debt			5,934.5		6,671.1
Long-term debt, current maturities			(2.7)		(1.8)
Total long-term debt			$5,931.8		$6,669.3

Public and 144A Notes

In August 2021, the Company completed a private offering of a $300 million aggregate principal 34-year fixed rate note with a coupon rate of 2.75% (“New 34-year Notes”). Immediately following the offering, the Company completed a private offering to exchange a portion of the outstanding senior notes due 2030, 2041, 2046, 2047 (“Old Notes”), for $385 million of New 34-year Notes (collectively “144A Notes”). In connection with the exchange offering, $387 million of Old Notes were validly tendered and subsequently cancelled.

The New 34-year Notes bear a lower fixed coupon rate on an extended maturity date, compared with the Old Notes that were exchanged. There were no other significant changes to the terms between the Old Notes and the New 34-year Notes. The exchange was accounted for as a debt modification, and there were cash payments to the note holders of $118 million as a result of the exchange. Existing deferred financing costs associated with the Old Notes, as well as discounts associated with the New 34-year Notes aggregating $143 million, are being amortized over the term of the New 34-year Notes and recorded as interest expense.

In September 2021, the Company completed the retirement of the $500 million 2.375% Notes due 2022 and the $400 million 3.25% Notes due 2023 which was accounted for as a debt extinguishment. A make-whole premium of $25.0 million was expensed immediately and is reflected as a financing cash flow activity.

The Company’s public notes and 144A notes may be redeemed by the Company at its option at redemption prices that include accrued and unpaid interest and a make-whole premium. Upon the occurrence of a change of control accompanied by a downgrade of the public notes below investment grade rating, within a specified time period, the Company would be required to offer to repurchase the public notes and 144A notes at a price equal to 101% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase. The public notes and 144A notes are senior unsecured and unsubordinated obligations of the Company and rank equally with all other senior and unsubordinated indebtedness of the Company.

The Company entered into a registration rights agreement in connection with the issuance of the 144A Notes. Subject to certain limitations set forth in the registration rights agreement, the Company has agreed to (i) file a registration statement (the “Exchange Offer Registration Statement”) with respect to registered offers to exchange the 144A Notes for exchange notes (the “Exchange Notes”), which will have terms identical in all material respects to the New 34-year Notes, as applicable, except that the Exchange Notes will not contain transfer restrictions and will not provide for any increase in the interest rate thereon in certain circumstances and (ii) use commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective within 270 days after the date of issuance of the 144A Notes. Until such time as the Exchange Offer Registration Statement is declared effective, the 144A Notes may only be transferred in accordance with Rule 144A or Regulation S of the Securities Act of 1933, as amended.

Covenants

The Company is in compliance with its debt covenants as of September 30, 2021.

Net Interest Expense

Interest expense and interest income recognized during the third quarter and first nine months of 2021 and 2020 were as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Interest expense

$78.3

$139.0

$183.8

$253.4

Interest income

(1.9)

(4.2)

(10.1)

(11.6)

Interest expense, net

$76.4

$134.8

$173.7

$241.8

Interest expense generally includes the expense associated with the interest on the Company’s outstanding borrowings. Interest expense also includes the amortization of debt issuance costs and debt discounts, which are both recognized over the term of the related debt.

During the third quarter of 2021, the Company issued, exchanged and retired certain long-term debt, incurring debt refinancing charges of $32.3 million ($28.4 million after tax), which are included as a component of interest expense, net on the Consolidated Statement of Income.

During the third quarter of 2020, the Company retired certain long-term debt, and incurred debt refinancing charges of $83.1 million ($64.0 million after tax), which are included as a component of interest expense, net on the Consolidated Statement of Income.

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill arises from the Company’s acquisitions and represents the excess purchase consideration transferred over the fair value of acquired net assets. The Company’s reporting units are its operating segments. The Company assesses goodwill for impairment on an annual basis during the second quarter. If circumstances change or events occur that demonstrate it is more likely than not that the carrying amount of a reporting unit exceeds its fair value, the Company completes an interim goodwill assessment of that reporting unit prior to the next annual assessment. If the results of an annual or interim goodwill assessment demonstrate the carrying amount of a reporting unit is greater than its fair value, the Company will recognize an impairment loss for the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the carrying amount of goodwill assigned to that reporting unit.

During the second quarter of 2021, the Company completed its annual goodwill impairment assessment for each of its eleven reporting units using discounted cash flow analyses that incorporated assumptions, including future operating performance, long-term growth, and discount rates. The Company’s goodwill impairment assessments for 2021 indicated the estimated fair values of each of its reporting units exceeded the carrying amounts of the respective reporting units by significant margins. There has been no impairment of goodwill in any of the periods presented.

The changes in the carrying amount of goodwill for each of the Company's reportable segments during the nine-month period ended September 30, 2021 were as follows:

Global

Institutional

Healthcare &

(millions)

Industrial

& Specialty

Life Sciences

Other

Total

December 31, 2020

$4,287.9

$564.1

$909.8

$245.1

$6,006.9

Current year business combinations (a)

11.0

108.2

119.2

Prior year business combinations (b)

(0.9)

Effect of foreign currency translation

2.4

(0.4)

(1.5)

(0.1)

0.4

September 30, 2021

$4,289.4

$574.7

$1,016.5

$245.0

$6,125.6

(a)	Represents goodwill associated with current year acquisitions.

(b)	Represents purchase accounting adjustments associated with the CID Lines acquisition.

Other Intangible Assets

The Nalco trade name is the Company’s only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. During the second quarter of 2021, the Company completed its annual impairment assessment of the Nalco trade name using the relief from royalty discounted cash flow method, which incorporates assumptions, including future sales projections, royalty rates and discount rates. The Company’s Nalco tradename impairment assessment for 2021 indicated the estimated fair value of the Nalco trade name exceeded its $1.2 billion carrying amount by a significant margin. There has been no impairment of the Nalco trade name intangible since it was acquired.

The Company’s intangible assets subject to amortization include customer relationships, trademarks, patents and other technology primarily acquired through business acquisitions. The fair value of intangible assets acquired in business acquisitions are estimated primarily using discounted cash flow valuation methods at the time of acquisition. Intangible assets are amortized on a straight-line basis over their estimated lives. Total amortization expense related to intangible assets during the third quarter of 2021 and 2020 was $57.7 million and $58.9 million, respectively. Total amortization expense related to intangible assets during the first nine months of 2021 and 2020 was $174.4 and $162.1 million, respectively. Amortization expense related to intangible assets for the remaining three-month period of 2021 is expected to be approximately $53 million.

8. FAIR VALUE MEASUREMENTS

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, contingent consideration obligations, commercial paper, notes payable, foreign currency forward contracts, interest rate swap agreements, cross-currency swap derivative contracts and long-term debt.

Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. The hierarchy is broken down into three levels:

Level 1 - Inputs are quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Inputs include observable inputs other than quoted prices in active markets.

Level 3 - Inputs are unobservable inputs for which there is little or no market data available.

The carrying amount and the estimated fair value for assets and liabilities measured on a recurring basis were:

September 30, 2021

(millions)

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

Assets

Foreign currency forward contracts

$45.0

Interest rate swap agreements

2.4

Liabilities

Foreign currency forward contracts

31.6

Interest rate swap agreements

3.9

Cross-currency swap derivative contract

2.0


	December 31, 2020
(millions)	Carrying		Fair Value Measurements
	Amount		Level 1		Level 2		Level 3
Assets
Foreign currency forward contracts		$15.5		$-		$15.5		$-

Liabilities
Foreign currency forward contracts		69.9		-		69.9		-

The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date and is classified within Level 2. The carrying value of interest rate swap agreements are at fair value, which are determined based on current forward interest rates as of the balance sheet date and are classified within Level 2. The cross-currency swap derivative contract is used to partially hedge the Company’s net investments in foreign operations against adverse movements in exchange rates between the U.S. dollar and the Euro. The carrying value of the cross-currency swap derivative contract is at fair value, which is determined based on the income approach with the relevant interest rates and foreign currency current exchange rates and forward curves as inputs as of the balance sheet date and is classified within Level 2. For purposes of fair value disclosure above, derivative values are presented gross. Further discussion of gross versus net presentation of the Company's derivatives within Note 9.

Contingent consideration obligations are recognized and measured at fair value at the acquisition date and thereafter until settlement or expiration. Contingent consideration is classified within Level 3 as the underlying fair value is determined using income-based valuation approaches appropriate for the terms and conditions of each respective contingent consideration. The consideration expected to be transferred is based on the Company’s expectations of various financial measures. The ultimate payment of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration was not material to the Company’s consolidated financial statements.

The carrying values of accounts receivable, accounts payable, cash and cash equivalents, restricted cash, commercial paper and notes payable approximate fair value because of their short maturities and as such are classified within Level 1.

The fair value of long-term debt is based on quoted market prices for the same or similar debt instruments (classified as Level 2). The carrying amount and the estimated fair value of long-term debt, including current maturities, held by the Company were:

September 30, 2021

December 31, 2020

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

Long-term debt, including current maturities

$5,934.5

$6,623.3

$6,671.1

$7,704.4

9. DERIVATIVES AND HEDGING TRANSACTIONS

The Company uses foreign currency forward contracts, cross-currency swap derivative contracts, interest rate swap contracts and foreign currency debt to manage risks associated with foreign currency exchange rates, interest rates and net investments in foreign operations. The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. The Company records derivatives as assets and liabilities in the Consolidated Balance Sheets at fair value. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge. Cash flows from derivatives are classified in the statement of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued.

The Company is exposed to credit risk in the event of nonperformance of counterparties for foreign currency forward exchange contracts and interest rate swap agreements. The Company monitors its exposure to credit risk by using credit approvals and credit limits and by selecting major global banks and financial institutions as counterparties. The Company does not anticipate nonperformance by any of these counterparties, and therefore, recording a valuation allowance against the Company’s derivative balance is not considered necessary.

Derivative Positions Summary

Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to net settle contracts with the same counterparties. These arrangements generally do not call for collateral and as of the applicable dates presented in the following table, no cash collateral had been received or pledged related to the underlying derivatives.

The respective net amounts are included in other current assets, other assets, other current liabilities and other liabilities on the Consolidated Balance Sheets.

The following table summarizes the gross fair value and the net value of the Company’s outstanding derivatives.

Derivative Assets

Derivative Liabilities

September 30

December 31

September 30

December 31

(millions)

2021

2020

2021

2020

Derivatives designated as hedging instruments

Foreign currency forward contracts

$17.1

$8.1

$24.1

$54.3

Interest rate swap agreements

2.4

3.9

Cross-currency swap derivative contract

2.0

Derivatives not designated as hedging instruments

Foreign currency forward contracts

27.9

7.4

7.5

15.6

Gross value of derivatives

47.4

15.5

37.5

69.9

Gross amounts offset in the Consolidated Balance Sheets

(18.6)

(12.3)

(18.6)

(12.3)

Net value of derivatives

$28.8

$3.2

$18.9

$57.6

The following table summarizes the notional values of the Company’s outstanding derivatives.


	Notional Values
		September 30	December 31
(millions)		2021	2020

Foreign currency forward contracts		$ 3,819		$ 3,702
Interest rate swap agreements		750		-
Cross-currency swap derivative contract		354		-

Cash Flow Hedges

The Company utilizes foreign currency forward contracts to hedge the effect of foreign currency exchange rate fluctuations on forecasted foreign currency transactions, including inventory purchases and intercompany royalty, management fee and other payments. These forward contracts are designated as cash flow hedges. The changes in fair value of these contracts are recorded in accumulated other comprehensive income (“AOCI”) until the hedged items affect earnings, at which time the gain or loss is reclassified into the same line item on the Consolidated Statements of Income as the underlying exposure being hedged. Cash flow hedged transactions impacting AOCI are forecasted to occur within the next three years. For forward contracts designated as hedges of foreign currency exchange rate risk associated with forecasted foreign currency transactions, the Company excludes the changes in fair value attributable to time value from the assessment of hedge effectiveness. The initial value of the excluded component (i.e., the forward points) is amortized on a straight-line basis over the life of the hedging instrument and recognized in the same line item on the Consolidated Statements of Income as the underlying exposure being hedged for intercompany loans. For all other cash flow hedge types, the forward points are marked-to-market monthly and recognized in the same line item on the Consolidated Statements of Income as the underlying exposure being hedged. The difference between fair value changes of the excluded component and the amount amortized on the Consolidated Statements of Income is recorded in AOCI.

Fair Value Hedges

The Company manages interest expense using a mix of fixed and floating rate debt. To help manage exposure to interest rate movements and to reduce borrowing costs, the Company may enter into interest rate swaps under which the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed upon notional principal amount. The mark-to-market of these fair value hedges is offset against the underlying debt instrument. These fair value hedges are highly effective.

In March 2021, the Company entered into an interest rate swap agreement that converted $250 million of its 3.25% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge.

In July 2021, the Company entered into an interest rate swap agreement that converted the remaining $250 million of its 3.25% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge.

In September 2021, the Company entered into an interest rate swap agreement that converted $250 million of its 4.80% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge

The following amounts were recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:

Carrying amount of the hedged liabilities

Cumulative amount of the fair value hedging adjustment included in the carrying amount of the hedged liabilities

Third Quarter Ended

Line item in which the hedged item is included

September 30

(millions)

2021

2020

2021

2020

Long-term debt

$745.9

$5.2

Net Investment Hedges

The Company designates its outstanding €1,150 million ($1,353 million at the end of the third quarter of 2021) senior notes (“Euronotes”) and related accrued interest as hedges of its Euro denominated exposures from the Company’s investments in certain of its Euro denominated functional currency subsidiaries.

In July 2021, the Company entered into a cross-currency swap derivative contract with a notional amount of €300 million maturing in 2030. The cross-currency swap derivative contract is designated as a net investment hedge of its Euro denominated exposures from the Company’s investments in certain of its Euro denominated functional currency subsidiaries. The cross-currency swap derivative contract exchanges fixed-rate payments in one currency for fixed-rate payments in another currency. As of September 30, 2021, the Company had a €300 million ($354 million) cross-currency swap derivative contract outstanding as a hedge of the Company’s net investment in foreign operations. The changes in the spot rate of these instruments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive income (loss). Any ineffective portions of net investment hedges are reclassified from accumulated other comprehensive income (loss) into earnings during the period of change. The interest income or expense from these swaps are recorded in interest expense on the accompanying Consolidated Statements of Income consistent with the classification of interest expense attributable to the underlying debt.

The revaluation gains and losses on the Euronotes and cross-currency swap derivative contract, which are designated and effective as hedges of the Company’s net investments, have been included as a component of the cumulative translation adjustment account, and were as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Revaluation gain (loss), net of tax:

Euronotes

$36.7

($83.4)

$10.3

($87.4)

Cross-currency swap derivative contract

(1.5)

Total revaluation gain (loss), net of tax

$35.2

($83.4)

$8.8

($87.4)

Derivatives Not Designated as Hedging Instruments

The Company also uses foreign currency forward contracts to offset its exposure to the change in value of certain foreign currency denominated assets and liabilities held at foreign subsidiaries, primarily receivables and payables, which are remeasured at the end of each period. Although the contracts are effective economic hedges, they are not designated as accounting hedges. Therefore, changes in the value of these derivatives are recognized immediately in earnings, thereby offsetting the current earnings effect of the related foreign currency denominated assets and liabilities.

Effect of all Derivative Instruments on Income

The gain (loss) of all derivative instruments recognized in product and equipment cost of sales (“COS”), selling, general and administrative expenses (“SG&A”) and interest expense, net (“interest”) is summarized below:


	Third Quarter Ended
	September 30
	2021				2020
(millions)		COS	SG&A	Interest		COS	SG&A	Interest
Gain (loss) on derivatives in cash flow hedging relationship:
Foreign currency forward contracts
Amount of gain (loss) reclassified from AOCI to income		($4.6)	$42.1	$-		$3.1	($101.5)	$-
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value		-	-	5.1		-	-	(4.9)
Interest rate swap agreements
Amount of gain (loss) reclassified from AOCI to income		-	-	(0.6)		-	-	(0.2)

Gain (loss) on derivatives not designated as hedging instruments:
Foreign currency forward contracts
Amount of gain (loss) recognized in income (a)		-	22.8	-		-	(30.2)	11.3
Total gain (loss) of all derivative instruments		($4.6)	$64.9	$4.5		$3.1	($131.7)	$6.2

	Nine Months Ended
	September 30
	2021				2020
(millions)		COS	SG&A	Interest		COS	SG&A	Interest
Gain (loss) on derivatives in cash flow hedging relationship:
Foreign currency forward contracts
Amount of gain (loss) reclassified from AOCI to income		($9.2)	$4.7	$-		$9.1	($108.8)	$-
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value		-	-	16.4		-	-	8.6
Interest rate swap agreements
Amount of gain (loss) reclassified from AOCI to income		-	-	(1.8)		-	-	(0.7)

Gain (loss) on derivatives not designated as hedging instruments:
Foreign currency forward contracts
Amount of gain (loss) recognized in income (a)		-	28.6	-		-	(12.3)	11.3
Total gain (loss) of all derivative instruments		($9.2)	$33.3	$14.6		$9.1	($121.1)	$19.2

(a)

Gain (loss) on derivatives not designated as hedging instruments recognized in income recorded in SG&A includes discontinued operations of ($2.5) in the first nine months of 2020.

Subsequent Event

In October 2021, the Company entered into an interest rate swap agreement that converted $250 million of its 2.70% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge.

10. OTHER COMPREHENSIVE INCOME (LOSS) INFORMATION

Other comprehensive income (loss) includes net income, foreign currency translation adjustments, defined benefit pension and postretirement plan adjustments, gains and losses on derivative instruments designated and effective as cash flow hedges and non-derivative instruments designated and effective as foreign currency net investment hedges that are charged or credited to the accumulated other comprehensive loss account in shareholders’ equity.

The following tables provide other comprehensive income information related to the Company’s derivatives and hedging instruments and pension and postretirement benefits. Refer to Note 9 for additional information related to the Company’s derivatives and hedging transactions. Refer to Note 14 for additional information related to the Company’s pension and postretirement benefits activity.

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Derivative and Hedging Instruments

Unrealized gain (loss) on derivative & hedging instruments

Amount recognized in AOCI

$61.2

($126.2)

$30.3

($108.3)

Loss (gain) reclassified from AOCI into income

COS

4.6

(3.1)

9.2

(9.1)

SG&A

(42.1)

101.5

(4.7)

108.8

Interest (income) expense, net

(4.5)

5.1

(14.6)

(7.9)

(42.0)

103.5

(10.1)

91.8

Other activity

0.5

(0.2)

(0.2)

(0.2)

Tax impact

(4.4)

3.8

(3.3)

2.6

Net of tax

$15.3

($19.1)

$16.7

($14.1)

Pension and Postretirement Benefits

Amount recognized in AOCI

Current period net actuarial gain

$145.0

Amount reclassified from AOCI into income

Settlement charge

7.0

26.6

Amortization of net actuarial loss and prior period service credits, net

16.3

15.0

59.8

44.3

23.3

15.0

231.4

44.3

Other activity

15.6

(29.8)

(2.8)

(21.5)

Tax impact

(5.5)

(3.7)

(55.9)

(10.8)

Net of tax

$33.4

($18.5)

$172.7

$12.0

The following table summarizes the derivative and pension and postretirement benefit amounts reclassified from AOCI into income.

Third Quarter Ended

Nine Months Ended

September 30

2021

2020

2021

2020

(millions)

Derivative (gain) loss reclassified from AOCI into income, net of tax

($31.9)

$78.2

($7.7)

$69.4

Pension and postretirement benefits amortization of net actuarial losses

and prior service credits and settlement charges reclassified from AOCI into income, net of tax

33.4

(18.5)

62.8

12.0

11. SHAREHOLDERS’ EQUITY

Share Repurchase Authorization

In February 2015, the Company’s Board of Directors authorized the repurchase of up to 20,000,000 shares of its common stock, including shares to be repurchased under Rule 10b5–1. As of September 30, 2021, 5,978,499 shares remained to be repurchased under the Company’s repurchase authorization. The Company intends to repurchase all shares under its authorization, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions.

Share Repurchases

During the nine months of 2021, the Company reacquired 367,141 shares of its common stock, of which 261,447 related to share repurchases through open market and 105,694 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

During all of 2020, the Company reacquired 761,245 shares of its common stock, of which 565,064 related to share repurchases through open market or private purchases and 196,181 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

Separation of ChampionX

On June 3, 2020, the Company effected the split-off of ChampionX through the Exchange Offer and all shares of ChampionX common stock owned by Ecolab were exchanged for outstanding shares of Ecolab common stock. In the Exchange Offer, which was oversubscribed, the Company accepted 4,955,552 shares of Ecolab common stock in exchange for approximately 122,200,000 shares of ChampionX common stock.

12. EARNINGS ATTRIBUTABLE TO ECOLAB PER COMMON SHARE (“EPS”)

The difference in the weighted average common shares outstanding for calculating basic and diluted EPS is a result of the dilution associated with the Company’s equity compensation plans. As noted in the table below, certain stock options and units outstanding under these equity compensation plans were not included in the computation of diluted EPS because they would not have had a dilutive effect.

The computations of the basic and diluted EPS amounts were as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions, except per share)

2021

2020

2021

2020

Net income from continuing operations attributable to Ecolab

$324.5

$246.2

$828.9

$667.1

Net loss from discontinued operations

(2,172.5)

Net income (loss) attributable to Ecolab

$324.5

$246.2

$828.9

($1,505.4)

Weighted-average common shares outstanding

Basic

286.4

285.4

286.1

287.5

Effect of dilutive stock options and units

2.8

3.0

2.9

3.3

Diluted

289.2

288.4

289.0

290.8

Earnings (loss) attributable to Ecolab per common share

Basic EPS

Continuing operations

$ 1.13

$ 0.86

$ 2.90

$ 2.32

Discontinued operations

$ -

$ -

$ -

($ 7.56)

Earnings (loss) attributable to Ecolab

$ 1.13

$ 0.86

$ 2.90

($ 5.24)

Diluted EPS

Continuing operations

$ 1.12

$ 0.85

$ 2.87

$ 2.29

Discontinued operations

$ -

$ -

$ -

($ 7.47)

Earnings (loss) attributable to Ecolab

$ 1.12

$ 0.85

$ 2.87

($ 5.18)

Anti-dilutive securities excluded from the computation of diluted EPS

1.0

1.0

1.0

1.0

Amounts do not necessarily sum due to rounding.

13. INCOME TAXES

The Company’s tax rate was 18.3% and 14.5% for the third quarter of 2021 and 2020, respectively, and 21.2% and 13.2% for the first nine months of 2021 and 2020, respectively. The change in the Company’s tax rate for the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020 was driven primarily by the impact of discrete tax items and special (gains) and charges. Further information related to special (gains) and charges is included in Note 2.

The Company recognized net tax benefits related to discrete tax items of $6.3 million in the third quarter and $17.5 million in the first nine months of 2021. This included a tax benefit of $4.0 million in the third quarter and a net tax expense of $5.5 million in the first nine months of 2021 related to prior year returns, and a deferred tax benefit of $0.4 million and deferred tax expense of $23.8 million associated with transferring certain intangible property between affiliates in the third quarter and first nine months of 2021, respectively. Share-based compensation excess tax benefit was $9.9 million and $20.7 million in the third quarter and first nine months of 2021, respectively. The amount of this tax benefit is subject to variation in stock price and award exercises. The remaining discrete tax expense of $8.0 million and $8.9 million during the third quarter and first nine months of 2021, respectively, was primarily due to changes in tax law, reserves for uncertain tax positions, audit settlements, and other changes in estimates.

The Company recognized net tax benefits related to discrete tax items of $12.4 million and $56.8 million in the third quarter and first nine months of 2020, respectively. Share-based compensation excess tax benefit contributed $3.4 million and $49.0 million in the third quarter and first nine months of 2020, respectively. Additionally, the Company recognized a net tax benefit of $6.9 million and $2.4 million primarily related to the release of a valuation allowance, the filing of prior year foreign tax returns and other income tax adjustments in the third quarter and first nine months of 2020, respectively. The remaining discrete net tax benefit of $2.1 million and $5.4 million was due to the net release of reserves for uncertain tax positions during the third quarter and first nine months of 2020, respectively.

14. PENSION AND POSTRETIREMENT PLANS

The Company has a non-contributory, qualified defined benefit pension plan covering the majority of its U.S. employees. The Company also has U.S. non-contributory non-qualified defined benefit plans, which provide benefits in excess of limits permitted under its U.S. pension plans. Various international subsidiaries also have defined benefit pension plans. The Company provides postretirement health care benefits to certain U.S. employees and retirees. Effective January 1, 2021, the Company modified its U.S. qualified defined benefit pension plan to harmonize benefits across all plan participants, resulting in a reduction of service cost in 2021.

The components of net periodic pension and postretirement health care benefit expense for the third quarter ended September 30 are as follows:


	U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care
(millions)	2021		2020		2021		2020		2021		2020
Service cost		$11.2		$16.5		$7.9		$7.9		$0.2		$0.3
Interest cost on benefit obligation		13.3		17.7		4.4		5.5		0.7		0.8
Expected return on plan assets		(38.0)		(38.2)		(16.6)		(15.7)		(0.1)		(0.1)
Recognition of net actuarial loss (gain)		12.1		13.0		5.8		6.6		0.2		(0.1)
Amortization of prior service benefit		(1.7)		(1.6)		(0.1)		(0.1)		-		(2.9)
Curtailments and settlements (b)		7.0		-		-		-		-		-
Total expense (benefit)		$3.9		$7.4		$1.4		$4.2		$1.0		($2.0)

The components of net periodic pension and postretirement health care benefit expense for the nine months ended September 30 are as follows:


	U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care
(millions)	2021		2020		2021		2020		2021		2020
Service cost (a)		$32.8		$51.9		$24.0		$23.2		$0.6		$0.9
Interest cost on benefit obligation		38.3		52.7		13.1		16.1		2.1		2.9
Expected return on plan assets		(115.2)		(114.6)		(51.9)		(46.7)		(0.3)		(0.3)
Recognition of net actuarial (gain) loss		44.5		39.0		20.3		19.2		0.6		-
Amortization of prior service benefit		(5.1)		(5.4)		(0.5)		(0.1)		-		(8.4)
Curtailments and settlements (b)		26.6		-		-		-		-		-
Total expense (benefit)		$21.9		$23.6		$5.0		$11.7		$3.0		($4.9)

(a)

Service cost includes discontinued operations of $2.5 in the first six months of 2020.

(b)

Settlement expense was recognized as special charges in the third quarter and first nine months of 2021.

Service cost is included as employee compensation cost within either cost of sales or selling, general and administrative expenses on the Consolidated Statements of Income based on employee roles, while all other components of net periodic pension and postretirement health care benefit expense are included in other (income) expense on the Consolidated Statements of Income.

As of September 30, 2021, the Company is in compliance with all funding requirements of each of its defined benefit plans.

During the first nine months of 2021, the Company made contributions of $10 million to its U.S. non-contributory non-qualified defined benefit plans and estimates it will contribute an additional $5 million to such plans during the remainder of 2021.

During the first nine months of 2021, the Company made contributions of $33 million to its international pension plans and estimates it will contribute an additional $10 million to such plans during the remainder of 2021.

During the first nine months of 2021, the Company made contributions of $8 million to its U.S. postretirement health care plans and estimates it will contribute an additional $3 million to such plans during the remainder of 2021.

15. REVENUES

Revenue Recognition

Product and Sold Equipment

Product revenue is generated from sales of cleaning, sanitizing, water and colloidal silica products. In addition, the Company sells equipment which may be used in combination with its specialized products. Revenue recognized from product and equipment sales is recognized at the point in time when the obligations in the contract with the customer are satisfied, which generally occurs with the transfer of the product or delivery of the equipment.

Service and Lease Equipment

Service and lease equipment revenue is generated from providing services or leasing equipment to customers. Service offerings include installing or repairing certain types of equipment, activities that supplement or replace headcount at the customer location, or fulfilling deliverables included in the contract. Global Industrial segment services are associated with water treatment and paper process applications. Global Institutional & Specialty segment services include cleaning and sanitizing programs and wash process solutions. Global Healthcare & Life Sciences segment services include pharmaceutical, personal care, infection and containment control solutions. Revenues included in Other primarily relate to services designed to detect, eliminate and prevent pests. Service revenue is recognized over time utilizing an input method and aligns with when the services are provided. Typically, revenue is recognized over time using costs incurred to date because the effort provided by the field selling and service organization represents services provided, which corresponds with the transfer of control. Revenue recognized from leased equipment primarily relates to warewashing and water treatment equipment recognized on a straight-line basis over the length of the lease contract pursuant to Topic 842 Leases. In the second quarter ended June 30, 2020, the Company provided a one-time lease billing suspension of approximately $38 million to certain restaurant customers within the Institutional Segment, in recognition of the impact of the COVID-19 pandemic. There was no substantial change to the consideration expected to be received under the lease arrangement.

The Company’s operating lease revenue was as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Operating lease revenue*

$103.3

$84.9

$306.4

$258.2

*Includes immaterial variable lease revenue

The following table shows principal activities, separated by reportable segments, from which the Company generates its revenue. The reportable segments have been revised to align with the Company’s reportable segments in the current year. Corporate segment includes sales to ChampionX under the Master Cross Supply and Product Transfer agreements entered into as part of the ChampionX Separation. For more information about the Company’s reportable segments, refer to Note 16.

Net sales at public exchange rates by reportable segment are as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Global Industrial

Product and sold equipment

$1,386.0

$1,264.3

$3,941.0

$3,725.8

Service and lease equipment

217.1

205.0

637.6

600.9

Global Institutional & Specialty

Product and sold equipment

889.9

758.7

2,397.7

2,248.7

Service and lease equipment

180.7

139.7

506.3

429.9

Global Healthcare & Life Sciences

Product and sold equipment

259.4

292.3

795.4

788.1

Service and lease equipment

27.5

30.0

86.0

78.3

Other

Product and sold equipment

82.7

64.5

224.0

196.0

Service and lease equipment

241.5

217.2

676.4

598.0

Corporate

Product and sold equipment

35.8

46.6

103.5

58.9

Service and lease equipment

0.2

0.3

0.6

0.3

Total

Total product and sold equipment

$2,653.8

$2,426.4

$7,461.6

$7,017.5

Total service and lease equipment

$667.0

$592.2

$1,906.9

$1,707.4

Net sales at public exchange rates by geographic region for the third quarter ended September 30 are as follows:


	Global				Global Institutional				Global Healthcare
	Industrial				& Specialty				& Life Sciences				Other				Corporate
	2021		2020		2021		2020		2021		2020		2021		2020		2021		2020

North America		$716.8		$683.5		$776.4		$654.1		$112.6		$113.2		$201.3		$175.7		$25.7		$34.8
Europe		353.3		325.0		166.3		127.1		154.1		170.7		70.6		59.3		0.8		2.4
Asia Pacific		199.8		180.4		48.4		47.6		14.8		27.8		17.1		14.3		1.5		1.4
Latin America		141.0		117.5		34.9		32.4		-		3.5		13.0		13.4		6.7		6.6
Greater China		102.9		85.1		32.6		26.7		1.8		1.7		19.5		16.7		0.7		0.4
India, Middle East and Africa		89.3		77.8		12.0		10.5		3.6		5.4		2.7		2.3		0.6		1.3
Total		$1,603.1		$1,469.3		$1,070.6		$898.4		$286.9		$322.3		$324.2		$281.7		$36.0		$46.9

Net sales at public exchange rates by geographic region for the nine months ended September 30 are as follows:


	Global				Global Institutional				Global Healthcare
	Industrial				& Specialty				& Life Sciences				Other				Corporate
(millions)	2021		2020		2021		2020		2021		2020		2021		2020		2021		2020

North America		$2,046.0		$2,033.1		$2,133.6		$1,926.4		$320.0		$325.6		$549.8		$496.6		$73.4		$47.1
Europe		1,008.5		914.8		394.5		375.7		500.8		462.2		191.3		164.2		2.6		2.4
Asia Pacific		586.8		548.8		150.0		156.1		40.3		51.7		54.9		45.0		4.2		1.4
Latin America		400.5		362.5		97.3		103.0		1.1		6.3		37.7		35.7		19.4		6.6
Greater China		292.7		237.5		98.7		82.8		4.5		5.0		57.7		45.0		1.9		0.4
India, Middle East and Africa		244.1		230.0		29.9		34.6		14.7		15.6		9.0		7.5		2.6		1.3
Total		$4,578.6		$4,326.7		$2,904.0		$2,678.6		$881.4		$866.4		$900.4		$794.0		$104.1		$59.2

Net sales by geographic region were determined based on origin of sale. Revenues in the United States made up 52% and 52% of total during the nine months ended September 30, 2021 and 2020, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are carried at the invoiced amounts, less an allowance for doubtful accounts, and generally do not bear interest. The Company estimates the allowance for doubtful accounts for expected credit losses by analyzing accounts receivable balances by age and applying historical write-off and collection trend rates. The Company’s estimates separately consider specific circumstances and credit conditions of customer receivables, and whether it is probable balances will be collected. Account balances are written off against the allowance when it is determined the receivable will not be recovered.

The Company’s allowance for doubtful accounts balance also includes an allowance for the expected return of products shipped and credits related to pricing or quantities shipped of $20.4 million and $15.3 million as of September 30, 2021 and 2020, respectively. Returns and credit activity is recorded directly as a reduction to revenue.

The following table summarizes the activity in the allowance for doubtful accounts:


	Nine Months Ended
	September 30
(millions)	2021		2020

Beginning balance		$84.3		$55.5
Adoption of new standard		-		4.3
Bad debt expense		12.4		54.6
Write-offs		(23.7)		(25.0)
Other (a)		3.4		(1.2)
Ending balance (b)		$76.4		$88.2

(a)	Other amounts are primarily the effects of changes in currency translations and the impact of allowance for returns and credits.

(b)	The allowance for doubtful accounts balances in 2021 and 2020 reflect increased reserves, primarily due to the Institutional customer base as a result of the COVID-19 pandemic.

Contract Liability

Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Accounts receivable are recorded when the right to consideration becomes unconditional. The contract liability relates to billings in advance of performance (primarily service obligations) under the contract. Contract liabilities are recognized as revenue when the performance obligation has been performed, which primarily occurs during the subsequent quarter.


	September 30		September 30
(millions)	2021		2020

Contract liability as of beginning of the year		$80.4		$76.7

Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the year		(80.4)		(76.7)

Increases due to billings excluding amounts recognized as revenue during the period ended		86.7		84.0
Business combinations		-		0.6

Contract liability as of end of period		$86.7		$84.6

16. OPERATING SEGMENTS

The Company’s organizational structure consists of global business unit and global regional leadership teams. The Company’s operating segments follow its commercial and product-based activities and are based on engagement in business activities, availability of discrete financial information and review of operating results by the Chief Operating Decision Maker at the identified operating segment level.

The Company’s operating segments that share similar economic characteristics and future prospects, nature of the products and production processes, end-use markets, channels of distribution and regulatory environment have been aggregated into three reportable segments: Global Industrial, Global Institutional & Specialty and Global Healthcare & Life Sciences. The Company’s operating segments that do not meet the quantitative criteria to be separately reported have been combined into Other. The Company provides similar information for Other as the Company considers the information regarding its underlying operating segments as useful in understanding its consolidated results.

Comparability of Reportable Segments

The Company evaluates the performance of its non-U.S. dollar functional currency international operations based on fixed currency

exchange rates, which eliminates the impact of exchange rate fluctuations on its international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. The “Fixed Currency Rate Change” column shown in the following table reflects the impact on previously reported values related to fixed currency exchange rates established by management at the beginning of 2021 and have been updated from the 2020 rates reflected in the Company’s Form 10-K. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported within the “Effect of foreign currency translation” row in the table below. The “Other” column shown in the table reflects immaterial changes between segments, primarily cost allocations.

The impact of the preceding changes on previously reported full year 2020 reportable segment net sales and operating income is summarized as follows:


	December 31, 2020

	2020 Reported					Fixed	2020 Reported
	Valued at 2020				Currency		Valued at 2021
(millions)	Management Rates		Other		Rate Change		Management Rates
Net Sales
Global Industrial		$5,959.9		($3.7)		$92.0		$6,048.2
Global Institutional & Specialty		3,577.2		9.3		42.5		3,629.0
Global Healthcare & Life Sciences		1,189.1		3.7		48.3		1,241.1
Other		1,093.3		(9.3)		19.4		1,103.4
Corporate		102.4		-		(1.8)		100.6
Subtotal at fixed currency rates		11,921.9		-		200.4		12,122.3
Effect of foreign currency translation		(131.7)		-		(200.4)		(332.1)
Consolidated reported GAAP net sales		$11,790.2		$-		$-		$11,790.2

Operating Income
Global Industrial		$1,106.0		($0.2)		$17.3		$1,123.1
Global Institutional & Specialty		321.9		(0.3)		2.4		324.0
Global Healthcare & Life Sciences		207.6		0.7		10.0		218.3
Other		131.5		(0.2)		1.5		132.8
Corporate		(347.5)		-		(2.2)		(349.7)
Subtotal at fixed currency rates		1,419.5		-		29.0		1,448.5
Effect of foreign currency translation		(23.8)		-		(29.0)		(52.8)
Consolidated reported GAAP operating income		$1,395.7		$-		$-		$1,395.7

Reportable Segment Information

Financial information for the Company’s reportable segments, is as follows:

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

2021

2020

Net Sales

Global Industrial

$1,620.4

$1,512.9

$4,609.7

$4,476.4

Global Institutional & Specialty

1,076.6

914.4

2,914.0

2,734.6

Global Healthcare & Life Sciences

290.2

335.1

887.4

913.3

Other

326.3

288.7

904.2

817.4

Corporate

35.9

47.2

104.1

59.5

Subtotal at fixed currency rates

3,349.4

3,098.3

9,419.4

9,001.2

Effect of foreign currency translation

(28.6)

(79.7)

(50.9)

(276.3)

Consolidated reported GAAP net sales

$3,320.8

$3,018.6

$9,368.5

$8,724.9

Operating Income

Global Industrial

$268.3

$302.3

$750.8

$799.7

Global Institutional & Specialty

196.5

83.7

398.2

229.4

Global Healthcare & Life Sciences

37.3

69.0

131.2

162.0

Other

59.2

45.8

143.4

88.4

Corporate

(90.0)

(74.2)

(204.4)

(257.4)

Subtotal at fixed currency rates

471.3

426.6

1,219.2

1,022.1

Effect of foreign currency translation

(5.5)

(15.2)

(8.3)

(42.5)

Consolidated reported GAAP operating income

$465.8

$411.4

$1,210.9

$979.6

The profitability of the Company’s operating segments is evaluated by management based on operating income.

Consistent with the Company’s internal management reporting, Corporate amounts in the table above include sales to ChampionX in accordance with the long-term supply agreement entered into with the Transaction, as discussed in Note 4. Corporate also includes

intangible asset amortization specifically from the Nalco merger and special (gains) and charges, as discussed in Note 2, that are not allocated to the Company’s reportable segments.

17. COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and contingencies related to, among other things, workers’ compensation, general liability (including product liability), automobile claims, health care claims, environmental matters and lawsuits. The Company is also subject to various claims and contingencies related to income taxes. The Company also has contractual obligations including lease commitments.

The Company records liabilities when a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.

Insurance

Globally, the Company has insurance policies with varying deductible levels for property and casualty losses. The Company is insured for losses in excess of these deductibles, subject to policy terms and conditions and has recorded both a liability and an offsetting receivable for amounts in excess of these deductibles. The Company is self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. The Company determines its liabilities for claims on an actuarial basis.

Litigation and Environmental Matters

The Company and certain subsidiaries are party to various lawsuits, claims and environmental actions that have arisen in the ordinary course of business. These include from time to time antitrust, employment, commercial, patent infringement, tort, product liability and wage hour lawsuits, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other operating or closed facilities. The Company has established accruals for certain lawsuits, claims and environmental matters. The Company currently believes that there is not a reasonably possible risk of material loss in excess of the amounts accrued related to these legal matters. Because litigation is inherently uncertain, and unfavorable rulings or developments could occur, there can be no certainty that the Company may not ultimately incur charges in excess of recorded liabilities. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows in the period in which they are recorded. The Company currently believes that such future charges related to suits and legal claims, if any, would not have a material adverse effect on the Company’s consolidated financial position.

Environmental Matters

The Company is currently participating in environmental assessments and remediation at approximately 30 locations, the majority of which are in the U.S., and environmental liabilities have been accrued reflecting management’s best estimate of future costs. Potential insurance reimbursements are not anticipated in the Company’s accruals for environmental liabilities.

18. NEW ACCOUNTING PRONOUNCEMENTS


Standards that are not yet adopted:
			Required
	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements



ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01 - Reference Rate Reform (Topic 848): Scope	March 2020	LIBOR, a widely used reference rate for pricing financial products is scheduled to be discontinued on December 31, 2021. This standard provides optional expedients and exceptions if certain criteria are met when accounting for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	Application of guidance is optional until the options and expedients expire on December 31, 2022.	The Company has not elected any expedients and adoption of this standard is not expected to have a material impact on the Company's financial statements.


Standards that were adopted:
	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements

ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	December 2019	Simplifies the accounting for income taxes by removing certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and recognition of deferred tax liabilities for outside basis differences. The new standard also simplifies the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the basis of goodwill.	January 1, 2021	Adoption of this standard did not have a material impact on the Company's financial statements.

No other new accounting pronouncements issued or effective have had or are expected to have a material impact on the Company’s consolidated financial statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Ecolab Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Ecolab Inc. and its subsidiaries (the “Company”) as of September 30, 2021, and the related consolidated statements of income, comprehensive income, and equity for the three-month and nine-month periods ended September 30, 2021 and 2020, and the consolidated statements of cash flows for the nine-month periods ended September 30, 2021 and 2020, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of income, comprehensive income, equity and cash flows for the year then ended (not presented herein), and in our report dated February 26, 2021, which included a paragraph describing a change in the manner of accounting for leases in the 2019 financial statements, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.





/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
October 29, 2021

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management discussion and analysis (“MD&A”) provides information we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.

The MD&A should be read in conjunction with both the unaudited consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020. This discussion contains various Non-GAAP Financial Measures and also contains various Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled “Non-GAAP Financial Measures” and “Forward-Looking Statements” located at the end of Part I of this report.

Comparability of Results

ChampionX Transaction

On June 3, 2020, we completed the separation of our Upstream Energy business (the “ChampionX business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger of ChampionX (the “Merger”) with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”).

The ChampionX business met the criteria to be reported as discontinued operations because the separation of ChampionX business was a strategic shift in business that had a major effect on our operations and financial results. Therefore, we reported the historical results of ChampionX, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations. Unless otherwise noted, the accompanying MD&A has been revised to reflect the ChampionX business as discontinued operations and all prior year balances have been revised accordingly to reflect continuing operations only.

Fixed Currency Foreign Exchange Rates

Management evaluates the sales and operating income performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Public currency rate data provided within the “Segment Performance” section of this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period and is provided for informational purposes only.

Impact of Acquisitions and Divestitures

Acquisition adjusted growth rates exclude the results of our acquired businesses from the first twelve months post acquisition and exclude the results of our 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. 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.

OVERVIEW OF THE THIRD QUARTER ENDED SEPTEMBER 30, 2021

Sales Performance

When comparing third quarter 2021 against third quarter 2020, sales performance was as follows:

●	Reported net sales increased 10% to $3,321 million, fixed currency sales increased 8% and acquisition adjusted fixed currency sales increased 8%.

●

Fixed currency sales for our Global Industrial segment increased 7% to $1,620 million. Acquisition adjusted fixed currency sales increased 7%, as strong growth in Water and Paper, led by recovering market conditions and new business wins, along with a good gain in Food & Beverage and modest Downstream sales growth, yielded the increase.

●

Fixed currency sales for our Global Institutional & Specialty segment increased 18% to $1,077 million and acquisition adjusted fixed currency sales increased 17%. Strong growth in the Institutional operating segment reflected recovering markets in the U.S. and Europe, driven by new business wins including gains from Ecolab Science Certified programs, innovation and pricing. Specialty sales increased modestly as strong quick service sales more than offset lower food retail sales.

●

Fixed currency sales for our Global Healthcare & Life Sciences segment decreased 13% to $290 million. Acquisition adjusted fixed currency sales decreased 17% compared to a 29% increase last year when sales benefited from strong COVID-19 related demand. Underlying Healthcare sales are estimated to be growing at mid-single digit rates and Life Sciences’ sales are estimated to be growing at low double-digit rates, both driven by new business wins and increased hygiene awareness.

●	Fixed currency sales and acquisition adjusted fixed currency sales for Other increased 13% to $326 million led by strong growth in Pest Elimination as it benefited from new business wins and recovering markets.

Financial Performance

When comparing third quarter 2021 against third quarter 2020, our financial performance was as follows:

●	Reported operating income increased 13% to $466 million. Excluding the impact of special (gains) and charges from both 2021 and 2020 reported results, adjusted operating income increased 15% and our adjusted fixed currency operating income increased 13%.

●	Net income from continuing operations attributable to Ecolab increased 32% to $324 million. Excluding the impact of special (gains) and charges and discrete tax items from both 2021 and 2020 reported results, our adjusted net income from continuing operations attributable to Ecolab increased 20%.

●

Reported diluted EPS from continuing operations of $1.12 increased 32%. Excluding the impact of special (gains) and charges and discrete tax items from both 2021 and 2020 reported results, adjusted diluted EPS from continuing operations increased 20% to $1.38 in the third quarter of 2021. In the third quarter of 2021, Hurricane Ida had an estimated negative impact on reported diluted EPS and adjusted diluted EPS of $0.03.

●

Our reported tax rate was 18.3% during the third quarter of 2021, compared to 14.5% during the third quarter of 2020. Excluding the tax rate impact of special (gains) and charges and discrete tax items from both 2021 and 2020 results, our adjusted tax rate was 19.5% during the third quarter of 2021, compared to 20.0% during the third quarter of 2020.

RESULTS OF OPERATIONS

Net Sales


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
(millions)	2021		2020		Change		2021		2020		Change
Product and equipment sales		$2,653.8		$2,426.4				$7,461.6		$7,017.5
Service and lease sales		667.0		592.2				1,906.9		1,707.4
Reported GAAP net sales		$3,320.8		$3,018.6	10	%		$9,368.5		$8,724.9	7	%
Effect of foreign currency translation		28.6		79.7				50.9		276.3
Non-GAAP fixed currency sales		$3,349.4		$3,098.3	8	%		$9,419.4		$9,001.2	5	%

Product and sold equipment revenue is generated from providing cleaning, sanitizing and water treatment products or selling equipment used in combination with specialized products. Service and lease equipment revenue is generated from providing services or leasing equipment to customers. All of our sales are subject to the same economic conditions.

The percentage components of the period-over-period 2021 sales change are shown below:


	Third Quarter Ended			Nine Months Ended
	September 30			September 30
(percent)	2021			2021
Volume		6	%		2	%
Price changes		3			2
Acquisition adjusted fixed currency sales change		8			4
Acquisitions and divestitures		0			1
Fixed currency sales change		8			5
Foreign currency translation		2			3
Reported GAAP net sales change		10	%		7	%

Amounts do not necessarily sum due to rounding.

Cost of Sales (“COS”) and Gross Profit Margin

Third Quarter Ended

Nine Months Ended

September 30

2021

2020

2021

2020

Gross

(millions/percent)

COS

Margin

COS

Margin

COS

Margin

COS

Margin

Product and equipment cost of sales

$1,625.1

$1,405.4

$4,452.9

$4,071.6

Service and lease cost of sales

391.6

364.2

1,119.8

1,053.9

Reported GAAP COS and gross margin

$2,016.7

39.3

$1,769.6

41.4

$5,572.7

40.5

$5,125.5

41.3

Special (gains) and charges

52.9

9.5

76.2

45.6

Non-GAAP adjusted COS and gross margin

$1,963.8

40.9

$1,760.1

41.7

$5,496.5

41.3

$5,079.9

41.8

Our COS and corresponding gross profit margin (“gross margin”) are shown in the table above. Gross margin is defined as net sales less cost of sales divided by net sales.

Our reported gross margin was 39.3% and 41.4% for the third quarter of 2021 and 2020, respectively. Our reported gross margin was 40.5% and 41.3% for the first nine months of 2021 and 2020, respectively. Special (gains) and charges included in items impacting COS are shown within the “Special (Gains) and Charges” table on page 39. Excluding the impact of special (gains) and charges within COS, third quarter 2021 adjusted gross margin was 40.9% and our adjusted gross margin for the first nine months of 2021 was 41.3%. These percentages compared against a third quarter 2020 adjusted gross margin of 41.7% and an adjusted gross margin of 41.8% for the first nine months of 2020.

Our adjusted gross margin decreased when comparing the third quarter of 2021 against the third quarter of 2020, and when comparing the first nine months of 2021 against the first nine months of 2020, primarily reflecting accelerating pricing and increased volume that was more than offset by significantly higher delivered product costs and the impact of Hurricane Ida.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expenses as a percentage of sales were 25.1% and 27.2% for the third quarter and first nine months of 2021, respectively, compared to 26.6% and 28.6% for the third quarter and first nine months of 2020, respectively. The SG&A ratio to sales in the third quarter and first nine months of 2021 decreased as volume leverage and cost savings more than offset investments in the business.

Special (Gains) and Charges

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


	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2021		2020		2021		2020
Cost of sales
Restructuring activities		$2.2		$1.0		$24.1		$6.6
Acquisition and integration activities		-		1.5		-		4.1
COVID-19 activities, net		50.7		1.8		51.8		8.7
Other		-		5.2		0.3		26.2
Cost of sales subtotal		52.9		9.5		76.2		45.6

Special (gains) and charges
Restructuring activities		0.4		26.9		6.5		31.4
Acquisition and integration activities		0.8		2.7		3.3		5.5
Disposal and impairment activities		-		-		-		45.9
COVID-19 activities, net		1.5		(3.0)		16.2		7.2
Other		3.6		8.4		10.7		30.3
Special (gains) and charges subtotal		6.3		35.0		36.7		120.3

Operating income subtotal		59.2		44.5		112.9		165.9

Interest expense, net		32.3		83.1		32.3		83.8
Other (income) expense		7.0		-		26.6		-

Total special (gains) and charges		$98.5		$127.6		$171.8		$249.7

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with our internal management reporting.

Restructuring activities

Further details related to our restructuring charges are included in Note 2.

Institutional Advancement Program

We approved a restructuring plan in 2020 focused on the Institutional business (“the Institutional Plan”) which is intended to enhance our Institutional sales and service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging our ongoing investments in digital technology. In February 2021, we expanded the Institutional Plan. We expect that these restructuring charges will be completed by 2023, with total anticipated costs of $80 million ($60 million after tax) or $0.21 per diluted share. The costs are expected to be primarily cash expenditures for severance and facility closures. We also anticipate non-cash charges related to equipment disposals. We expect total program savings of approximately $50 million by the end of 2024. Actual costs may vary from these estimates depending on actions taken.

In the third quarter and first nine months of 2021, we have recorded total restructuring charges of $1.4 million ($1.4 million after tax) or less than $0.01 per diluted share and $9.5 million ($7.5 million after tax) or $0.03 per diluted share, respectively, primarily related to costs to support the transition to the new sales and services structure and the disposal of equipment. We have recorded $44.7 million ($33.9 million after tax), or $0.12 per diluted share of cumulative restructuring charges under the Institutional Plan. The liability related to the Institutional Plan was $8.0 million as of September 30, 2021. The majority of the pretax charges represent net cash expenditures which are expected to be paid over a period of a few months to several quarters which continue to be funded from operating activities.

The Institutional Plan has delivered $29 million of cumulative cost savings with estimated annual cost savings of $50 million in continuing operations by 2024.

Accelerate 2020

During 2018, we formally commenced a restructuring plan Accelerate 2020 (“the Plan”), to leverage technology and system investments and organizational changes. The goals of the Plan are to further simplify and automate processes and tasks, reduce complexity and management layers, consolidated facilitates and focus on key long-term growth areas by further leveraging technology and structural improvements. During 2020, we expanded the Plan for additional costs and savings to further leverage the technology and structural improvements. We now expect that the restructuring activities will be completed by the end of 2022, with total anticipated costs of $255 million ($195 million after tax), or $0.67 per diluted share, when revised for continuing operations. The remaining costs are expected to be primarily cash expenditures for severance costs and some facility closure costs relating to team reorganizations. Actual costs may vary from these estimates depending on actions taken.

We recorded restructuring charges of $1.5 million ($1.2 million after tax), or less than $0.01 per diluted share and $2.9 million ($2.8 million after tax), or $0.01 per diluted share in the third quarter and first nine months of 2021, respectively. The liability related to the Plan was $40.6 million as of the end of the third quarter of 2021. We have recorded $242.1 million ($186.6 million after tax), or $0.65 per diluted share, of cumulative restructuring charges under the Plan. The majority of the pretax charges represent net cash expenditures which are expected to be paid over a period of a few months to several quarters and continues to be funded from operating activities. The remaining liability is expected to be paid over a period of several quarters and will continue to be funded from operating activities.

The Plan has delivered $275 million of cumulative cost savings with estimated annual cost savings of $315 million in continuing operations by 2022.

Other Restructuring Activities

During the third quarter and first nine months of 2021, we incurred restructuring charges (gains) of ($0.3) million ($0.5 million after tax), or less than $0.01 per diluted share and $18.2 million ($16.9 million after tax), or $0.06 per diluted share, respectively, related to other immaterial restructuring activity. The charges primarily related to severance and asset write-offs. During the third quarter and first nine months of 2021 and 2020, net restructuring charges related to all other prior year plans were minimal.

The restructuring liability balance for all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were $4.6 million and $5.9 million as of September 30, 2021 and December 31, 2020, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Cash payments during the 2021 related to all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were $10.5 million.

Acquisition and integration related costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statements of Income include $0.8 million (0.8 million after tax) or less than $0.01 per diluted share and $3.3 million ($2.9 million after tax) or $0.01 per diluted share in the third quarter and first nine months of 2021, respectively. Charges are related to Copal Invest NV, including its primary operating entity CID Lines (collectively, “CID Lines”), and Bioquell PLC (“Bioquell”) acquisitions and consist of integration costs, advisory and legal fees.

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statements of Income include $2.7 million ($2.3 million after tax) or less than $0.01 per diluted share, and $5.5 million ($4.3 million after tax) or $0.01 per diluted share, in the third quarter and first nine months of 2020, respectively. Charges are related to CID Lines, Bioquell and the Laboratoires Anios (“Anios”) acquisitions and consist of integration costs, advisory and legal fees, and hedge activity. Acquisition and integration costs reported in product and equipment cost of sales of $1.5 million ($1.3 million after tax) or less than $0.01 per diluted share, and $4.1 million ($3.2 million after tax) or $0.01 per diluted share in the third quarter and first nine months of 2020, respectively, on the Consolidated Statements of Income relate to the recognition of fair value step-up in the CID Lines inventory, severance and the closure of a facility. We also incurred $0.7 million ($0.6 million after tax) or less than $0.01 per diluted share, of interest expense in the first nine months of 2020, none of which was incurred during the third quarter.

Disposal and impairment charges

Disposal and impairment charges reported in special (gains) and charges on the Consolidated Statements of Income include $45.9 million ($45.0 million after tax) or $0.15 per diluted share in the first nine months of 2020. During the second quarter of 2020, we recorded a $28.6 million ($28.6 million after tax) or $0.10 per diluted share impairment for a minority equity method investment due to the COVID-19 impact on the economic environment and the liquidity of the minority equity method investment. In addition, we recorded charges of $17.3 million ($16.3 million after tax) or $0.06 per diluted share related to the disposal of Holchem Group Limited (“Holchem”) for the loss on sale and related transaction fees. Further information related to our disposal is included in Note 3.

COVID-19 activities

Customer demand for sanitizer products surged at the outset of COVID-19. We worked hard to meet the rapidly increasing demand and sold the vast majority of the sanitizer inventory. However, COVID-19 variant-related delays of customer reopenings and consumer activity resulted in a small portion of excess sanitizer inventory. We have recorded inventory reserves of $50 million in the third quarter of 2021 for excess sanitizer inventory and estimated disposal costs.

During the third quarter and first nine months of 2021, we recorded charges of $2.6 million and $12.6 million, respectively, to protect the wages of certain employees directly impacted by the COVID-19 pandemic. We also recorded charges of $3.1 million and $11.5 million, respectively, during the third quarter and first nine months of 2021 related to COVID-19 testing and related expenses. In addition, we received subsidies and government assistance, which were recorded as a special (gain) of ($3.5) million and ($6.1) million during the third quarter and first nine months of 2021, respectively. COVID-19 pandemic charges are recorded in product and equipment sales, service and lease sales, and special (gains) and charges on the Consolidated Statements of Income. Total after tax net charges related to COVID-19 pandemic were $40.6 million or $0.14 per diluted share and $51.9 million or $0.18 per diluted share during the third quarter and first nine months of 2021, respectively.

During the third quarter and first nine months of 2020, we recorded charges of $4.1 million and $30.6 million, respectively, to protect wages of certain employees directly impacted by the COVID-19 pandemic. In addition, we received subsidies and government assistance, which was recorded as a special (gain) of $(5.3) million and ($14.7) million during the third quarter and first nine months of 2020, respectively. During the first nine months of 2020, COVID-19 pandemic charges of $1.2 million were recorded in product and equipment sales on the Consolidated Statements of Income, $7.5 million in service and lease sales on the Consolidated Statements of Income and $7.2 million in special (gains) and charges on the Consolidated Statements of Income. After tax-charges (gains) related to COVID-19 pandemic were ($0.9) million or less than $0.01 per diluted share and $12.3 million or $0.04 per diluted share during the third quarter and first nine months of 2020, respectively.

Other operating activities

During the third quarter and first nine months of 2020, we recorded special charges of $5.2 million ($3.5 million after tax) or $0.01 per diluted share and $26.2 million ($17.8 million after tax) or $0.06 per diluted share, respectively, recorded in product and equipment cost of sales on the Consolidated Statements of Income primarily related to a Healthcare product recall in Europe. Other special charges recorded in the first nine months of 2021 in product and equipment cost of sales were $0.3 million ($0.2 million after tax) or less than $0.01 per diluted share.

Other special charges of $3.6 million ($2.7 million after tax) or $0.01 per diluted share and $10.7 million ($8.3 million after tax) or $0.03 per diluted share recorded in the third quarter and first nine months of 2021, respectively, relate primarily to legal reserve and certain legal charges which are recorded in special (gains) and charges on the Consolidated Statements of Income.

Other special charges of $8.4 million ($7.2 million after tax) or $0.02 per diluted share and $30.3 million ($23.7 million after tax) or $0.08 per diluted share recorded in the third quarter and first nine months of 2020, respectively, relate primarily to legal reserve and certain legal charges which are recorded in special (gains) and charges on the Consolidated Statements of Income.

Interest expense

During the third quarter of 2021, we recorded special charges of $32.3 million ($28.4 million after tax) or $0.10 per diluted share in interest expense on the Consolidated Statement of Income primarily related to debt refinancing charges.

During the third quarter of 2020, we recorded special charges of $83.1 million ($64.0 million after tax) or $0.22 per diluted share in interest expense on the Consolidated Statement of Income primarily related to debt refinancing charges.

Other (income) expense

During the third quarter and first nine months of 2021, we incurred settlement expense recorded in other (income) expense on the Consolidated Statements of Income of $7.0 million ($5.3 million after tax), or $0.02 per diluted share and $26.6 million ($20.2 million after tax), or $0.07 per diluted share, respectively, related to U.S. pension plan lump-sum payments to retirees.

Operating Income and Operating Income Margin


	Third Quarter Ended								Nine Months Ended
	September 30								September 30
(millions)	2021			2020			Change		2021			2020			Change
Reported GAAP operating income		$465.8			$411.4		13	%		$1,210.9			$979.6		24	%
Special (gains) and charges		59.2			44.5					112.9			165.9
Non-GAAP adjusted operating income		525.0			455.9		15	%		1,323.8			1,145.5		16	%
Effect of foreign currency translation		5.5			15.2					8.3			42.5
Non-GAAP adjusted fixed currency operating income		$530.5			$471.1		13	%		$1,332.1			$1,188.0		12	%

	Third Quarter Ended								Nine Months Ended
	September 30								September 30
(percent)	2021			2020					2021			2020
Reported GAAP operating income margin		14.0	%		13.6	%				12.9	%		11.2	%
Non-GAAP adjusted operating income margin		15.8	%		15.1	%				14.1	%		13.1	%
Non-GAAP adjusted fixed currency operating income margin		15.8	%		15.2	%				14.1	%		13.2	%

Our operating income and corresponding operating income margin are shown in the previous tables. Operating income margin is defined as operating income divided by net sales.

Our reported operating income increased 13% and 24% in the third quarter and first nine months of 2021, respectively, versus the comparable periods of 2020. Our reported operating income for 2021 and 2020 was impacted by special (gains) and charges; excluding the impact of special (gains) and charges from 2021 and 2020 reported results, our adjusted operating income increased 15% and 16% in the third quarter and first nine months of 2021, respectively.

As shown in the previous table, foreign currency had a 2 percentage points and 4 percentage points impact on adjusted operating income growth for the third quarter and first nine months of 2021, respectively. Foreign currency had a 0 percentage points and 1 percentage points impact on adjusted operating income growth for the third quarter and first nine months of 2020, respectively.

Other (income) expense


	Third Quarter Ended						Nine Months Ended
	September 30						September 30

(millions)	2021		2020		Change		2021		2020		Change
Reported GAAP other (income) expense		($13.0)		($15.1)	(14)	%		($27.5)		($45.6)	(40)	%
Special (gains) and charges		7.0		-				26.6		-
Non-GAAP adjusted other (income) expense		($20.0)		($15.1)	32	%		($54.1)		($45.6)	19	%

Other income was $13.0 million and $15.1 million in the third quarter of 2021 and 2020, respectively. Other income was $27.5 million and $45.6 million in the first nine months of 2021 and 2020, respectively. The decrease in Other income was driven by $7.0 million and $26.6 million settlement expenses related to U.S. pension plan lump-sum payments to retirees in the third quarter and first nine months of 2021, respectively.

Interest Expense, Net

Third Quarter Ended

Nine Months Ended

September 30

(millions)

2021

2020

Change

2021

2020

Change

Reported GAAP interest expense, net

$76.4

$134.8

(43)

$173.7

$241.8

(28)

Special (gains) and charges

32.3

83.1

32.3

83.8

Non-GAAP adjusted interest expense, net

$44.1

$51.7

(15)

$141.4

$158.0

(11)

Reported net interest expense was $76.4 million and $134.8 million in the third quarter of 2021 and 2020, respectively. Reported net interest expense was $173.7 million and $241.8 million in the first nine months of 2021 and 2020, respectively. In the third quarter of 2021 and 2020, we incurred $32.3 million and $83.1 million, respectively, of expense associated with debt refinancing. Adjusted for debt refinancing costs, the decrease in interest expense when comparing 2021 against 2020 was driven primarily by a reduction in average debt levels and average interest rates.

Provision for Income Taxes

The following table provides a summary of our tax rate:


	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(percent)	2021		2020		2021		2020
Reported GAAP tax rate	18.3	%	14.5	%	21.2	%	13.2	%
Tax rate impact of:
Special (gains) and charges	-		2.6		(0.3)		1.6
Discrete tax items	1.2		2.9		(1.4)		5.5
Non-GAAP adjusted tax rate	19.5	%	20.0	%	19.5	%	20.3	%

Our reported tax rate was 18.3% and 14.5% for the third quarter of 2021 and 2020, respectively, and 21.2% and 13.2% for the first nine months of 2021 and 2020, respectively. The change in our tax rate for the third quarter and first nine months of 2021 versus the comparable period of 2020 was driven primarily by discrete tax items and special (gains) and charges. The change in our tax rate includes the tax impact of special (gains) and charges and discrete tax items, which have impacted the comparability of our historical reported tax rates, as amounts included in our special (gains) and charges are derived from tax jurisdictions with rates that vary from our tax rate, and discrete tax items are not necessarily consistent across periods. The tax impact of special (gains) and charges and discrete tax items will likely continue to impact comparability of our reported tax rate in the future.

We recognized net tax benefits related to discrete tax items of $6.3 million in the third quarter and net tax expense of $17.5 million in the first nine months of 2021, respectively. This included a tax benefit of $4.0 million in the third quarter and a net tax expense of $5.5 million in the first nine months of 2021 related to prior year returns, and a deferred tax benefit of $0.4 million and deferred tax expense of $23.8 million associated with transferring certain intangible property between affiliates in the third quarter and first nine months of 2021, respectively. Share-based compensation excess tax benefit was $9.9 million and $20.7 million in the third quarter and first nine months of 2021, respectively. The amount of this tax benefit is subject to variation in stock price and award exercises. The remaining discrete tax expense of $8.0 million and $8.9 million during the third quarter and first nine months of 2021, respectively, was primarily due to changes in tax law, reserves for uncertain tax positions, audit settlements, and other changes in estimates.

We recognized total net tax benefits related to discrete tax items of $12.4 million and $56.8 million in the third quarter and first nine months of 2020, respectively. Share-based compensation excess tax benefit contributed $3.4 million and $49.0 million in the third quarter and first nine months of 2020, respectively. Additionally, we recognized a net tax benefit of $6.9 million and $2.4 million primarily related to the release of a valuation allowance, the filing of prior year foreign tax returns and other income tax adjustments in the third quarter and first nine months of 2020, respectively. The remaining discrete net tax benefit of $2.1 million and $5.4 million was due to the net release of reserves for uncertain tax positions during the third quarter and the first nine months of 2020, respectively.

The decrease in the third quarter and first nine months of 2021 adjusted tax rate compared to 2020 was primarily due to the geographic mix of income and tax planning.

Net Income from Continuing Operations Attributable to Ecolab


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
(millions)	2021		2020		Change		2021		2020		Change
Reported GAAP net income from continuing operations attributable to Ecolab		$324.5		$246.2	32	%		$828.9		$667.1	24	%
Adjustments:
Special (gains) and charges, after tax		80.8		98.5				139.1		200.3
Discrete tax net expense (benefit)		(6.3)		(12.4)				17.5		(56.8)
Non-GAAP adjusted net income from continuing operations attributable to Ecolab		$399.0		$332.3	20	%		$985.5		$810.6	22	%

Diluted EPS from Continuing Operations


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
(dollars)	2021		2020		Change		2021		2020		Change
Reported GAAP diluted EPS from continuing operations		$1.12		$ 0.85	32	%		$2.87		$ 2.29	25	%
Adjustments:
Special (gains) and charges, after tax		0.28		0.34				0.48		0.69
Discrete tax net expense (benefit)		(0.02)		(0.04)				0.06		(0.20)
Non-GAAP adjusted diluted EPS from continuing operations		$1.38		$ 1.15	20	%		$3.41		$ 2.79	22	%

Per share amounts in the above tables do not necessary sum due to rounding.

Currency translation had a favorable impact of approximately $0.03 and $0.11 per share on diluted EPS for the third quarter and first nine months of 2021, respectively, when compared to the comparable periods of 2020.

DISCONTINUED OPERATIONS

The ChampionX business met the criteria to be reported as discontinued operations and the historical results of ChampionX, including the results of operations, are reported as discontinued operations for all periods presented. The net loss from discontinued operations, net of tax was $2,172.5 million in the first nine months of 2020.

During the second quarter of 2020, in connection with the ChampionX Separation, Ecolab received cash of $527 million and $1,051 million of non-cash consideration of approximately 5 million shares of Ecolab common stock for the ChampionX net assets, including cumulative translation adjustment, of $3,717 million, resulting in a loss.

Special (gains) and charges of $2,222.7 million in the first nine months of 2020 primarily relate to the loss on separation, transaction fees, and other professional fees incurred to support the Transaction.

SEGMENT PERFORMANCE

The non-U.S. dollar functional international amounts included within our reportable segments are based on translation into U.S. dollars at the fixed currency exchange rates used by management for 2021. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as “effect of foreign currency translation” in the following tables. All other accounting policies of the reportable segments are consistent with U.S. GAAP and the accounting policies described in Note 2 of our Annual Report on Form 10-K for the year ended December 31, 2020. Additional information about our reportable segments is included in Note 16.

Fixed currency net sales and operating income for the third quarter and first nine months of 2021 and 2020 for our reportable segments are shown in the following tables.


Net Sales	Third Quarter Ended						Nine Months Ended
	September 30						September 30
(millions)	2021		2020		Change		2021		2020		Change
Global Industrial		$1,620.4		$1,512.9	7	%		$4,609.7		$4,476.4	3	%
Global Institutional & Specialty		1,076.6		914.4	18			2,914.0		2,734.6	7
Global Healthcare & Life Sciences		290.2		335.1	(13)			887.4		913.3	(3)
Other		326.3		288.7	13			904.2		817.4	11
Corporate		35.9		47.2	(24)			104.1		59.5	75
Subtotal at fixed currency		3,349.4		3,098.3	8			9,419.4		9,001.2	5
Effect of foreign currency translation		(28.6)		(79.7)				(50.9)		(276.3)
Consolidated reported GAAP net sales		$3,320.8		$3,018.6	10	%		$9,368.5		$8,724.9	7	%

Operating Income	Third Quarter Ended						Nine Months Ended
	September 30						September 30
(millions)	2021		2020		Change		2021		2020		Change
Global Industrial		$268.3		$302.3	(11)	%		$750.8		$799.7	(6)	%
Global Institutional & Specialty		196.5		83.7	135			398.2		229.4	74
Global Healthcare & Life Sciences		37.3		69.0	(46)			131.2		162.0	(19)
Other		59.2		45.8	29			143.4		88.4	62
Corporate		(90.0)		(74.2)	21			(204.4)		(257.4)	(21)
Subtotal at fixed currency		471.3		426.6	10			1,219.2		1,022.1	19
Effect of foreign currency translation		(5.5)		(15.2)				(8.3)		(42.5)
Consolidated reported GAAP operating income		$465.8		$411.4	13	%		$1,210.9		$979.6	24	%

The following tables reconcile the impact of acquisitions and divestitures within our reportable segments.

Third Quarter Ended

September 30

Net Sales

2021

2020

(millions)

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Global Industrial

$1,620.4

$1,512.9

Global Institutional & Specialty

1,076.6

(4.1)

1,072.5

914.4

Global Healthcare & Life Sciences

290.2

(11.7)

278.5

335.1

(0.3)

334.8

Other

326.3

288.7

Corporate

35.9

(35.9)

47.2

(47.2)

Subtotal at fixed currency

3,349.4

(51.7)

3,297.7

3,098.3

(47.5)

3,050.8

Effect of foreign currency translation

(28.6)

(79.7)

Total reported net sales

$3,320.8

$3,018.6

Operating Income

2021

2020

(millions)

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Global Industrial

$268.3

$302.3

Global Institutional & Specialty

196.5

0.2

196.7

83.7

Global Healthcare & Life Sciences

37.3

2.1

39.4

69.0

Other

59.2

45.8

Corporate

(30.8)

(29.7)

Non-GAAP adjusted fixed currency operating income

530.5

2.3

532.8

471.1

Special (gains) and charges

59.2

44.5

Subtotal at fixed currency

471.3

426.6

Effect of foreign currency translation

(5.5)

(15.2)

Total reported operating income

$465.8

$411.4

Nine Months Ended

September 30

Net Sales

2021

2020

(millions)

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Global Industrial

$4,609.7

(59.4)

$4,550.3

$4,476.4

(36.9)

$4,439.5

Global Institutional & Specialty

2,914.0

(10.2)

2,903.8

2,734.6

Global Healthcare & Life Sciences

887.4

(20.8)

866.6

913.3

(0.9)

912.4

Other

904.2

817.4

Corporate

104.1

(104.1)

59.5

(59.5)

Subtotal at fixed currency

9,419.4

(194.5)

9,224.9

9,001.2

(97.3)

8,903.9

Effect of foreign currency translation

(50.9)

(276.3)

Total reported net sales

$9,368.5

$8,724.9

Operating Income

2021

2020

(millions)

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Fixed
Currency

Impact of Acquisitions and Divestitures

Acquisition Adjusted

Global Industrial

$750.8

(2.5)

$748.3

$799.7

(2.5)

$797.2

Global Institutional & Specialty

398.2

1.8

400.0

229.4

Global Healthcare & Life Sciences

131.2

2.3

133.5

162.0

(0.1)

161.9

Other

143.4

88.4

Corporate

(91.5)

(91.5)

Non-GAAP adjusted fixed currency operating income

1,332.1

1.6

1,333.7

1,188.0

(2.6)

1,185.4

Special (gains) and charges

112.9

165.9

Subtotal at fixed currency

1,219.2

1,022.1

Effect of foreign currency translation

(8.3)

(42.5)

Total reported operating income

$1,210.9

$979.6

Unless otherwise noted, the following segment performance commentary compares the third quarter and first nine months of 2021 against the third quarter and first nine months of 2020.

Global Industrial


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
	2021			2020			2021			2020
Sales at fixed currency (millions)		$1,620.4			$1,512.9			$4,609.7			$4,476.4
Sales at public currency (millions)		1,603.1			1,469.3			4,578.6			4,326.7

Volume		4	%					1	%
Price changes		3	%					2	%
Acquisition adjusted fixed currency sales change		7	%					2	%
Acquisitions and divestitures		-	%					1	%
Fixed currency sales change		7	%					3	%
Foreign currency translation		2	%					3	%
Public currency sales change		9	%					6	%

Operating income at fixed currency (millions)		$268.3			$302.3			$750.8			$799.7
Operating income at public currency (millions)		264.2			293.0			743.8			770.3

Fixed currency operating income change		(11)	%					(6)	%
Fixed currency operating income margin		16.6	%		20.0	%		16.3	%		17.9	%
Acquisition adjusted fixed currency operating income change		(11)	%					(6)	%
Acquisition adjusted fixed currency operating income margin		16.6	%		20.0	%		16.4	%		18.0	%
Public currency operating income change		(10)	%					(3)	%

Percentages in the above table do not necessarily sum due to rounding.

Net Sales

Fixed currency sales for Global Industrial increased in the third quarter and first nine months of 2021, as strong growth in Water and Paper, led by recovering market conditions and new business wins, along with a good gain in Food & Beverage and modest Downstream sales growth, yielded the increase.

At an operating segment level, Water fixed currency sales increased 8% and 5% in the third quarter and first nine months of 2021, respectively, as strong new business wins and accelerating pricing leveraged recovering markets. Light industry water treatment sales had solid growth, led by good gains in food & beverage, light manufacturing and data centers. Heavy industry sales recorded a very strong increase driven by primary metals. Mining also showed strong growth benefiting from our strategic shift toward precious metals and fertilizers and away from coal. Food & Beverage fixed currency sales increased 5% and 3% (1% acquisition adjusted) in the third quarter and first nine months of 2021, respectively, primarily reflecting accelerating pricing, recovering markets and new business wins. Globally we realized strong growth in beverage, brewing and dairy plant, and modest growth in food, protein and animal health. Downstream fixed currency sales increased 2% and decreased 7% in the third quarter and first nine months of 2021, respectively, benefiting from pricing, increased refinery operating rates and new business wins. Paper fixed currency sales increased 17% and 10% in the third quarter and first nine months of 2021, respectively, driven by strong new business wins and improved market growth.

Operating Income

Fixed currency operating income and fixed currency operating income margins decreased for Global Industrial in the third quarter and first nine months of 2021.

Acquisition adjusted fixed currency operating income margins decreased 3.4 percentage points during the third quarter of 2021, as the 2.4 percentage point positive impact from higher volume and accelerating pricing was more than offset by a 5.3 percentage point negative impact of significantly higher delivered product costs, the impact from Hurricane Ida, and unfavorable mix. Acquisition adjusted fixed currency operating income margins decreased 1.6 percentage points during the first nine months of 2021, as the 1.3 percentage point positive impact from accelerating pricing was more than offset by the 2.6 percentage point negative impact of higher delivered product costs and the impact of the Texas freeze and Hurricane Ida.

Global Institutional & Specialty


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
	2021			2020			2021			2020
Sales at fixed currency (millions)		$1,076.6			$914.4			$2,914.0			$2,734.6
Sales at public currency (millions)		1,070.6			898.4			2,904.0			2,678.6

Volume		15	%					7	%
Price changes		3	%					2	%
Acquisition adjusted fixed currency sales change		17	%					6	%
Acquisitions and divestitures		-	%					-	%
Fixed currency sales change		18	%					7	%
Foreign currency translation		1	%					2	%
Public currency sales change		19	%					8	%

Operating income at fixed currency (millions)		$196.5			$83.7			$398.2			$229.4
Operating income at public currency (millions)		195.5			82.1			397.5			226.1

Fixed currency operating income change		135	%					74	%
Fixed currency operating income margin		18.3	%		9.2	%		13.7	%		8.4	%
Acquisition adjusted fixed currency operating income change		135	%					74	%
Acquisition adjusted fixed currency operating income margin		18.3	%		9.2	%		13.8	%		8.4	%
Public currency operating income change		138	%					76	%

Percentages in the above table do not necessarily sum due to rounding.

Net Sales

Fixed currency sales for Global Institutional & Specialty increased in the third quarter and first nine months of 2021. Strong growth in the Institutional operating segment reflected recovering markets in the U.S. and Europe, new business wins including gains from the Ecolab Science Certified programs, innovation and pricing. Specialty sales increased modestly as strong quick service sales more than offset lower food retail sales.

At an operating segment level, Institutional fixed currency sales increased 24% and 12% (11% acquisition adjusted) in the third quarter and first nine months of 2021, respectively, driven by continued strong gains in North America and significantly improved European sales as new business wins, product innovation and higher pricing continued to successfully leverage the broadening market recovery. Specialty fixed currency sales increased 1% and decreased 5% in the third quarter and first nine months of 2021, respectively, as strong quickservice sales more than offset lower food retail sales. Quickservice sales showed a strong gain as new business wins more than offset easing sanitizer usage from last year’s peak levels. Food retail sales declined versus the strong sanitizer demand in 2020 and customer labor shortages that has resulted in reduced in-store services and associated product usage.

Operating Income

Fixed currency operating income and fixed currency operating income margins increased for our Global Institutional & Specialty segment in the third quarter and first nine months of 2021.

Acquisition adjusted fixed currency operating income margins increased 9.1 percentage points during the third quarter of 2021, as the 10.9 percentage point positive impacts from increased volume, accelerating pricing, and favorable mix more than offset the 1.5 percentage point negative impact of higher delivered product costs. Acquisition adjusted fixed currency operating income margins increased 5.4 percentage points during the first nine months of 2021 driven by accelerating pricing, higher volume, and lower bad debt.

Global Healthcare & Life Sciences


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
	2021			2020			2021			2020
Sales at fixed currency (millions)		$290.2			$335.1			$887.4			$913.3
Sales at public currency (millions)		286.9			322.3			881.4			866.4

Volume		(19)	%					(6)	%
Price changes		2	%					2	%
Acquisition adjusted fixed currency sales change		(17)	%					(5)	%
Acquisitions and divestitures		3	%					2	%
Fixed currency sales change		(13)	%					(3)	%
Foreign currency translation		3	%					5	%
Public currency sales change		(11)	%					2	%

Operating income at fixed currency (millions)		$37.3			$69.0			$131.2			$162.0
Operating income at public currency (millions)		36.9			66.0			130.5			151.5

Fixed currency operating income change		(46)	%					(19)	%
Fixed currency operating income margin		12.9	%		20.6	%		14.8	%		17.7	%
Acquisition adjusted fixed currency operating income change		(43)	%					(18)	%
Acquisition adjusted fixed currency operating income margin		14.1	%		20.6	%		15.4	%		17.7	%
Public currency operating income change		(44)	%					(14)	%

Percentages in the above table do not necessarily sum due to rounding.

Net Sales

Fixed currency sales for the Global Healthcare & Life Sciences decreased in the third quarter of 2021 compared to a 29% increase last year when sales benefited from strong COVID-19 related demand and decreased in the first nine months of 2021; however, underlying Healthcare sales are estimated to be growing at mid-single digit rates and Life Sciences’ sales are estimated to be growing at low double-digit rates, both driven by new business wins and increased hygiene awareness.

At an operating segment level, Healthcare fixed currency sales decreased 15% (19% acquisition adjusted) and 3% (6% acquisition adjusted) in the third quarter and first nine months of 2021, respectively, reflecting the comparison against strong 2020 COVID-19 related hand and surface disinfection sales that drove a sales increase of 29% and 17% in the third quarter and first nine months of 2020, respectively, as well as softer elective surgical procedure activity in 2021 due to the rise in COVID variants during the quarter. Life Sciences fixed currency sales decreased 10% and 5% in the third quarter and first nine months of 2021, respectively, reflecting comparison versus the very strong third quarter and nine months of 2020, when sales increased 47% and 42% respectively, driven by extraordinary COVID-19 demand last year.

Operating Income

Fixed currency operating income and fixed currency operating income margins for our Global Healthcare & Life Sciences segment decreased in the third quarter and first nine months of 2021.

Acquisition adjusted fixed currency operating income margins decreased 6.5 percentage points during the third quarter of 2021, primarily reflecting the comparison to the very strong sales volume last year when operating income grew 82%, partially offset by favorable pricing. Acquisition adjusted fixed currency operating income margins decreased 2.3 percentage points during the first nine months of 2021 primarily reflecting the comparison to the very strong sales volume last year when operating income grew 68%.

Other


	Third Quarter Ended						Nine Months Ended
	September 30						September 30
	2021			2020			2021			2020
Sales at fixed currency (millions)		$326.3			$288.7			$904.2			$817.4
Sales at public currency (millions)		324.2			281.7			900.4			794.0

Volume		11	%					9	%
Price changes		2	%					2	%
Acquisition adjusted fixed currency sales change		13	%					11	%
Acquisitions and divestitures		-	%					-	%
Fixed currency sales change		13	%					11	%
Foreign currency translation		2	%					2	%
Public currency sales change		15	%					13	%

Operating income at fixed currency (millions)		$59.2			$45.8			$143.4			$88.4
Operating income at public currency (millions)		59.0			44.6			143.0			86.8

Fixed currency operating income change		29	%					62	%
Fixed currency operating income margin		18.1	%		15.9	%		15.9	%		10.8	%
Acquisition adjusted fixed currency operating income change		29	%					62	%
Acquisition adjusted fixed currency operating income margin		18.1	%		15.9	%		15.9	%		10.8	%
Public currency operating income change		32	%					65	%

Percentages in the above table do not necessarily sum due to rounding.

Net Sales

Fixed currency sales for Other increased in the third quarter and first nine months of 2021, led by strong growth in Pest Elimination as it benefited from new business wins and recovering markets.

At an operating segment level, Pest Elimination fixed currency sales increased 9% and 12% in the third quarter and first nine months of 2021, respectively, reflecting strong growth in food and beverage plants, restaurants and hospitality markets. Textile Care fixed currency sales increased 23% and 7% in the third quarter and first nine months of 2021, respectively. Colloidal Technologies Group fixed currency sales increased 24% and 13% in the third quarter and first nine months of 2021, respectively.

Operating Income

Fixed currency operating income and fixed currency operating income margins for Other increased in the third quarter and first nine months of 2021.

Acquisition adjusted fixed currency operating income margins increased 2.2 percentage points during the third quarter of 2021 driven by strong volume growth and favorable pricing, partially offset by higher delivered product costs. Acquisition adjusted fixed currency operating income margins increased 5.1 percentage points during the first nine months of 2021 driven by higher volume and accelerating pricing.

Corporate

Consistent with our internal management reporting, Corporate amounts in the table on page 44 include sales to ChampionX in accordance with the long-term supply agreement entered into with the Transaction post-separation, as discussed in Note 4, intangible asset amortization specifically from the Nalco merger and special (gains) and charges that are not allocated to our reportable segments. Items included within special (gains) and charges are shown in the table on page 39.

FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY

Financial Position

Total assets were $17.9 billion as of September 30, 2021 compared to total assets of $18.1 billion as of December 31, 2020.

Total liabilities were $11.0 billion as of September 30, 2021 compared to total liabilities of $11.9 billion as of December 31, 2020. Total debt was $6.0 billion as of September 30, 2021 and $6.7 billion as of December 31, 2020. See further discussion of our debt activity within the “Liquidity and Capital Resources” section of this MD&A.

Our net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) is shown in the following table. EBITDA is a non-GAAP measures discussed further in the “Non-GAAP Financial Measures” section of this MD&A.

The inputs to EBITDA reflect the trailing twelve months of activity for the period presented.



	September 30, 2021		December 31, 2020
(ratio)
Net debt to EBITDA		2.0		2.4

(millions)
Total debt		$5,950.5		$6,686.6
Cash		897.9		1,260.2
Net debt		$5,052.6		$5,426.4

Net income including noncontrolling interest		$1,143.6		$984.8
Provision for income taxes		299.1		176.6
Interest expense, net		222.1		290.2
Depreciation		604.3		594.3
Amortization		230.7		218.4
EBITDA		$2,499.8		$2,264.3

Cash Flows

Operating Activities

Nine Months Ended

September 30

(millions)

2021

2020

Change

Cash provided by operating activities

$1,421.0

$1,092.0

$329.0

We continue to generate cash flow from operations amidst the COVID-19 pandemic, allowing us to fund our ongoing operations, acquisitions, investments in the business and pension obligations along with returning cash to our shareholders through dividend payments and share repurchases. Cash provided by operating activities increased $329 million in the first nine months of 2021 compared to the first nine months of 2020, driven primarily by $191 million in higher tax expense accruals combined with lower tax payments, approximately $100 million reduction in variable compensation, and an increase in net income from continuing operations, partially offset by $44 million of increased investment in working capital driven by increased sales volume, partially offset by improved collections and raw material price increases.

Investing Activities

Nine Months Ended

September 30

(millions)

2021

2020

Change

Cash used for investing activities

($638.5)

($795.9)

$157.4

Cash used for investing activities is primarily impacted by the timing of business acquisitions and dispositions as well as capital investments in the business.

Total cash paid for acquisitions, net of cash acquired along with net cash received from dispositions, during the first nine months of 2021 and 2020, was $210 million and $432 million, respectively. Our acquisitions and divestitures are discussed further in Note 3. We continue to target strategic business acquisitions which complement our growth strategy and expect to continue to make capital investments and acquisitions in the future to support our long-term growth.

We continue to make capital investments in the business, including merchandising equipment, manufacturing equipment and facilities. Total capital expenditures were $424 million and $362 million in the first nine months of 2021 and 2020, respectively.

Financing Activities

Nine Months Ended

September 30

(millions)

2021

2020

Change

Cash (used for) provided by financing activities

($1,159.3)

$30.3

($1,189.6)

Our cash flows from financing activities primarily reflect the issuances and repayment of debt, common stock repurchases, proceeds from common stock issuances related to our equity incentive programs and dividend payments.

We issued $300 million par value and received $294 million in proceeds of long-term debt and repaid $900 million of long-term debt in the first nine months of 2021. We issued $1,850 million par value and received $1,856 million in proceeds of long-term debt and repaid $1,570 million of long-term debt in the first nine months of 2020. The proceeds received from the debt issuances were used for repayment of outstanding debt, repayment of commercial paper and general corporate purposes. In addition, we issued $1 million and $166 million of commercial paper and notes payable in the first nine months of 2021 and 2020, respectively.

Shares are repurchased for the purpose of partially offsetting the dilutive effect of our equity compensation plans and stock issued in acquisitions, to manage our capital structure and to efficiently return capital to shareholders. We reacquired a total of $78 million and $125 million of shares in the first nine months of 2021 and 2020, respectively. Cash proceeds and tax benefits from stock option exercises provide a portion of the funding for repurchase activity.

We paid dividends of $427 million and $422 million in in the first nine months of 2021 and 2020 respectively.

The impact on financing cash flows of commercial paper and notes payable issuances and long-term debt borrowings and repayments are shown in the following table:

Nine Months Ended

September 30

(millions)

2021

2020

Change

Net issuances of commercial paper and notes payable

$0.5

$165.5

($165.0)

Long-term debt borrowings

293.7

1,855.9

(1,562.2)

Long-term debt repayments

(1,017.9)

(1,570.0)

552.1

Liquidity and Capital Resources

We currently expect to fund the cash requirements which are reasonably foreseeable for the next twelve months, including scheduled debt repayments, new investments in the business, share repurchases, dividend payments, possible business acquisitions and pension and postretirement contributions with cash from operating activities, and as needed, additional short-term and/or long-term borrowings. We continue to expect our operating cash flow to remain strong.

As of September 30, 2021, we had $898 million of cash and cash equivalents on hand, of which $272 million was held outside of the U.S. We will continue to evaluate our cash position in light of future developments.

As of September 30, 2021, we have a $2.0 billion multi-year credit facility which expires in April 2026. The credit facility has been established with a diverse syndicate of banks and supports our U.S. and Euro commercial paper programs. The maximum aggregate amount of commercial paper that may be issued under our U.S. commercial paper program and our Euro commercial paper program may not exceed $2.0 billion. At the end of the third quarter of 2021, we had no outstanding commercial paper under our U.S. or Euro programs. There were no borrowings under our credit facility as of September 30, 2021 or 2020. As of September 30, 2021, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.

Our long-term debt issuance and repayment activity through the first nine months of 2021 and 2020 is discussed in the Cash Flows – Financing Activities section of this MD&A.

We are in compliance with our debt covenants and believe we have sufficient borrowing capacity to meet our foreseeable operating activities, as needed.

The schedule of contractual obligations included in the Financial Position and Liquidity section of our Form 10-K for the year ended December 31, 2020 disclosed total notes payable and long-term debt due within one year of $17 million. As of September 30, 2021, the total notes payable and long-term debt due within one year was $19 million. There was no commercial paper outstanding as of September 30, 2021 or December 31, 2020.

Our gross liability for uncertain tax positions was $23 million as of September 30, 2021 and $21 million as of December 31, 2020. We are not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, we do not expect significant payments related to these obligations within the next year.

GLOBAL ECONOMIC ENVIRONMENT

Coronavirus disease 2019 (COVID-19)

In March 2020, the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization. The COVID-19 pandemic is continuing to affect major economic and financial markets and industries are facing the challenges with the economic conditions resulting from efforts to address the pandemic, including supply shortages, inflation and other challenges, such as those resulting from the introduction of vaccination mandates. While many government restrictions in the U.S. have eased through the third quarter, restrictions on activities continue in many other regions, particularly those where vaccination rates lag, continuing to impact consumer activity in those regions. Concerns remain that our markets could see a resurgence of cases triggering additional government mandated lockdowns or similar restrictions on activity, for example due to the emergence of a variant against which existing vaccines are not as effective or which may be more easily transmitted, particularly to those unvaccinated. These conditions have had and will continue to have a negative impact on market conditions and customer demand throughout the world.

We expect continued, if uneven, recovery in the U.S. and European markets, with the rest of the world following. We have also experienced continued substantial delivered product cost inflation. We expect fourth quarter earnings to grow double digits, though not as strongly as the third quarter.

Global Economies

Approximately half of our sales are outside of the U.S. Our international operations subject us to changes in economic conditions and foreign currency exchange rates as well as political uncertainty in some countries which could impact future operating results.

Argentina has continued to experience negative economic trends, evidenced by multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. Argentina is classified as a highly inflationary economy in accordance with U.S. GAAP, and the U.S. dollar is the functional currency for our subsidiaries in Argentina. During the first nine months of 2021, sales in Argentina represented less than 1% of our consolidated sales. Assets held in Argentina at the end of the third quarter of 2021 represented less than 1% of our consolidated assets.

NEW ACCOUNTING PRONOUNCEMENTS

For information on new accounting pronouncements, refer to Note 18 to the Consolidated Financial Statements.

SUBSEQUENT EVENTS

On October 28, 2021, we entered into an agreement to acquire Purolite Corporation for $3.7 billion, subject to certain adjustments. Purolite is a leading, fast growing global provider of high-end ion exchange resins for separation and purification solutions that are highly complementary to our current offering and critical to high quality, safe drug production and biopharma products purification in the life sciences industries. It also provides ultra-pure water solutions for critical industrial markets like microelectronics, nuclear power and food and beverage.

In October 2021, we entered into an interest rate swap agreement that converted $250 million of our 2.70% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge.

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 2, contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP 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 operating income margin

●

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 interest expense, net

●

EBITDA

●

Adjusted tax rate

●

Adjusted net income attributable to Ecolab

●

Adjusted diluted EPS

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 cost of sales, gross margin and operating income exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted EPS 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.

EBITDA is defined as the sum of net income including noncontrolling interest, provision for income taxes, net interest expense, depreciation and amortization. EBITDA is used in our net debt to EBITDA ratio, which we view as important indicators of the operational and financial health of our organization.

We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency amounts included in this Form 10-Q are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2021.

Acquisition adjusted growth rates exclude the results of our acquired businesses from the first twelve months post acquisition, exclude the results of our divested businesses from the twelve months prior to divestiture.

These non-GAAP measures are not in accordance with, or an alternative to U.S. 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 U.S. GAAP measures included in this MD&A and we have provided reconciliations of reported U.S. GAAP amounts to the non-GAAP amounts.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include the COVID-19 pandemic outlook; business performance and prospects; expectations concerning timing, amount and type of restructuring costs and savings from restructuring activities; tax deductibility of goodwill; capital investments and acquisitions; amortization expense; non-performance of financial counterparties; payments and contributions to pension and postretirement health care benefit plans; the impact of lawsuits, claims and environmental matters; impact of new accounting pronouncements; cash flows, borrowing capacity and funding of cash requirements; payments related to uncertain tax positions; and implementation of ERP system upgrade.

Without limiting the foregoing, words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project” (including the negative or variations thereof) or similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent our expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. In particular, the effects of the COVID-19 pandemic depend on numerous factors, including the severity of the disease, the duration of the outbreak, the distribution and efficacy of vaccines, the likelihood of a resurgence of the outbreak, including as result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy, and other unintended consequences. Further, 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. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made.

Some of the factors which could cause results to differ materially from those expressed in any forward-looking statements are set forth under Item 1A of our most recent Form 10-K, as updated by Item 1A of this Form 10-Q, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; the vitality of the markets we serve; 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; information technology infrastructure failures or breaches in data security; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; 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 or vendors; the costs and effects of complying with laws and regulations, including those relating to the environment, and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; 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 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; and other uncertainties or risks reported from time to time in our reports to the SEC. There can be no assurances that our earnings levels will meet investors’ expectations. Except as may be required under applicable law, we do not undertake, and expressly disclaim, any duty to update our Forward-Looking Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We use foreign currency forward contracts, interest rate swap agreements and foreign currency debt to manage risks associated with foreign currency exchange rates, interest rates and net investments in our foreign operations. We do not hold derivative financial instruments of a speculative nature or for trading purposes. For a more detailed discussion of derivative instruments, refer to Note 9, entitled “Derivatives and Hedging Transactions”, of the consolidated financial statements located under Part I, Item 1 of this quarterly report on Form 10-Q.

Item 4. Controls and Procedures

As of September 30, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the period July 1, 2021 through September 30, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are continuing our implementation of our enterprise resource planning (“ERP”) system upgrades, which are expected to occur in phases over the next several years. These upgrades, which include supply chain and certain finance functions, are expected to improve the efficiency of certain financial and related transactional processes. These upgrades of the ERP systems will affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Note 17, entitled “Commitments and Contingencies” located under Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

In our report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 26, 2021, we identify under Item 1A important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Form 10-Q. See the section entitled Forward-Looking Statements located on page 54 of this Form 10-Q. We may also refer to such disclosure to identify factors that may cause results to differ from those expressed in other forward-looking statements made in oral presentations, including telephone conferences and/or webcasts open to the public.

The discussion below provides updates and additions to the risk factors and should be read together with the full list of risk factors set forth in the Form 10-K.

The COVID-19 pandemic and measures taken in response thereto have materially and adversely impacted, and we expect may continue to materially and adversely impact, our business and results of operations, and the full impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.

Beginning in March 2020, the COVID-19 pandemic had a rapid and significant negative impact on the global economy, including a significant downturn in the foodservice, hospitality and travel industries. Measures taken to alleviate the pandemic (such as stay-at-home orders and other responsive measures) significantly impacted our restaurant and hospitality customers and negatively affected demand for our products and services in these segments, resulting in a material adverse effect on our business and results of operations. While many of these measures have eased in the U.S. through the third quarter driving increased consumer traffic and in-unit dining, restrictions on activities continue in many other regions, particularly those where vaccination rates lag, continuing to impact consumer activity in those regions. Concerns remain that our markets could see a prolonged resurgence of cases triggering additional government mandated lockdowns or similar restrictions, for example due to the emergence of new variants against which existing vaccines are not as effective or which may be more easily transmitted, particularly to those unvaccinated. In addition, the COVID-19 pandemic continues to have a material effect on the macroeconomic environment, and there is continued uncertainty around its duration and ultimate impact.

We expect the full impact of the COVID-19 pandemic, including the extent of its effect on our business, results of operations and financial condition, to be dictated by future developments which remain uncertain and cannot be predicted, such as the severity of the disease, the duration of the outbreak, the distribution, acceptance and efficacy of vaccines, the likelihood of a resurgence of the outbreak, including as a result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic or to stimulate the economy and other unintended consequences. In addition to the reduction in the demand for our products and services, the COVID-19 pandemic has had, and we expect will continue to have, certain negative impacts on our business, including, but not limited to, the following:

●

We rely on a global workforce and take measures to protect the health and safety of our employees, customers and others with whom we do business while continuing to effectively manage our employees and maintain business operations. We have taken additional measures and incurred additional expenses to protect the health and safety of our employees to comply with applicable government requirements and safety guidance. Additionally, our business operations may be disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions or other restrictions or measures responsive to the pandemic, or if members of senior management or our Board of Directors are unable to perform their duties for an extended period of time. A significant outbreak in one of our manufacturing facilities could

adversely impact our ability to make and ship products in a timely manner. Measures taken across our business operations to address health and safety may not be sufficient to prevent the spread of COVID-19 among our employee base, customers and others. Therefore, we could face operational disruptions and incur additional expenses, including devoting additional resources to assisting employees diagnosed with COVID-19 and further changing health and safety protocols and processes, that could adversely affect our business and results of operations.

●

A significant number of our employees, as well as customers and others with whom we do business, continue to work remotely in response to the COVID-19 pandemic. Our business operations may be disrupted, and we may experience increased risk of adverse effects to our business, if our business operations are negatively impacted as a result of remote work arrangements, including due to cybersecurity risks or other disruption to our technology infrastructure. Further, if our key operating facilities experience closures or worker shortages as a result of COVID-19, whether temporary or sustained, our business operations could be significantly disrupted.

●

We are subject to the mandatory vaccination and workplace safety protocols of Executive Order 14042 issued on September 9, 2021 and subsequent guidance issued thereunder by the Safer Federal Workforce Task Force. This mandate applies broadly to require covered federal contractor employees on covered contracts, those who perform duties in connection with a covered contract, and those working at the same workplace as covered employees, to be fully vaccinated for COVID-19 by December 8, 2021, except for those that are legally entitled to an accommodation under applicable law. We may similarly be required to flow-down our obligations to certain of our subcontractors and suppliers. The guidance remains subject to the interpretation of various government agencies and other entities, and questions remain regarding the specific application of the Executive Order and related guidance. As a result, if our understanding of its application to our workforce differs from our federal customers’ interpretation, or many of our covered employees are unwilling to comply with the mandate, we may experience increased costs, business disruptions and attrition as a result of the mandate. Additionally, we may be subject to potential breach of contract claims, loss of business and assessment of fines if we or our affected subcontractors and suppliers are not able to fully comply in the time frame provided or if such subcontractors and suppliers choose to terminate their contract rather than comply.

●

Cost management and various cost-containment actions implemented across our business in response to the COVID-19 pandemic could hinder execution of our business strategy, including the deferral of planned capital expenditures, and could adversely affect our business and results of operations.

●

We believe that we appropriately reserve for expected credit losses, however we cannot be certain that loss or delay in the collection of accounts receivable will not have a material adverse effect on our results of operations and financial condition.

We are subject to information technology system failures, network disruptions and breaches in data security.

We rely to a large extent upon information technology systems and infrastructure to operate our business. The size and complexity of our information technology systems make them vulnerable to failure, malicious intrusion and random attack. Acquisitions have resulted in further de-centralization of systems and additional complexity in our systems infrastructure. Likewise, data security breaches by employees or others with permitted access to our systems pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we have invested in protection of data and information technology, we have experienced immaterial cybersecurity attacks and incidents, and there can be no assurance that our efforts will prevent failures, cybersecurity attacks or breaches in our systems that could cause reputational damage, business disruption or legal and regulatory costs; could result in third-party claims; could result in compromise or misappropriation of our intellectual property, trade secrets or sensitive information; or could otherwise adversely affect our business. Certain of our customer offerings include digital components, such as remote monitoring of certain customer operations. A breach of those remote monitoring systems could expose customer data giving rise to potential third-party claims and reputational damage. There may be other related challenges and risks as we complete implementation of our ERP system upgrade.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


						Number of shares		Maximum number of
	Total					purchased as part		shares that may
	number of		Average price			of publicly		yet be purchased
	shares		paid per			announced plans		under the plans
Period	purchased	⁽¹⁾	share		⁽²⁾	or programs	⁽³⁾	or programs	⁽³⁾
July 1-31, 2021	241		$	221.2800		-		6,008,299
August 1-31, 2021	1,865			221.0368		-		6,008,299
September 1-30, 2021	31,345			214.4096		29,800		5,978,499
Total	33,451		$	214.8286		29,800		5,978,499

(1)	Includes 3,651 shares reacquired from employees and/or directors as swaps for the cost of stock options, or shares surrendered to satisfy minimum statutory tax obligations under our stock incentive plans.

(2)	The average price paid per share includes brokerage commissions associated with publicly announced plan purchases plus the value of such other reacquired shares.

(3)

As announced on February 24, 2015, our Board of Directors authorized the repurchase of up to 20,000,000 shares. Subject to market conditions, we expect to repurchase all shares under the open authorizations, for which no expiration date has been established, in open market or privately negotiated transactions, including pursuant to Rule 10b5-1.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits


Exhibit No.	Document	Method of Filing

(a)	The following documents are filed as exhibits to this report:
(4.2)	Tenth Supplemental Indenture, dated August 18, 2021, between the Company and Wells Fargo Bank, National Association.	Incorporated by reference to Exhibit (4.2) of our Form 8-K dated August 9, 2021 (File No. 001-9328)
(4.3)	Form of 2055 Notes.	Included in Exhibit 4.2 above.
(4.4)	Registration Rights Agreement, dated August 18, 2021, by and among the Company, J.P. Morgan Securities LLC, Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, BofA Securities, Inc., Citigroup Global Markets Inc. and MUFG Securities Americas Inc.	Incorporated by reference to Exhibit (4.4) of our Form 8-K dated August 9, 2021 (File No. 001-9328)
(15.1)	Letter regarding unaudited interim financial information.	Filed herewith electronically.
(31.1)	Rule 13a - 14(a) CEO Certification.	Filed herewith electronically.
(31.2)	Rule 13a - 14(a) CFO Certification.	Filed herewith electronically.
(32.1)	Section 1350 CEO and CFO Certifications.	Filed herewith electronically.
(101.INS)	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	Filed herewith electronically.
(101.SCH)	Inline XBRL Taxonomy Extension Schema.	Filed herewith electronically.
(101.CAL)	Inline XBRL Taxonomy Extension Calculation Linkbase.	Filed herewith electronically.
(101.DEF)	Inline XBRL Taxonomy Extension Definition Linkbase.	Filed herewith electronically.
(101.LAB)	Inline XBRL Taxonomy Extension Label Linkbase.	Filed herewith electronically.
(101.PRE)	Inline XBRL Taxonomy Extension Presentation Linkbase.	Filed herewith electronically.
(104)	Cover Page Interactive Data File.	Formatted as Inline XBRL and contained in Exhibit 101.

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 thereunto duly authorized.


	ECOLAB INC.


Date: October 29, 2021	By:	/s/ Scott D. Kirkland

		Scott D. Kirkland
		Senior Vice President and Corporate Controller
		(duly authorized officer and
		Chief Accounting Officer)