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~~June 30, ~~2020~~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~~June 30, ~~2020: 285,445,183~~2021: 286,087,223 shares, par value $1.00 per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF INCOME

~~(unaudited)~~

Third Quarter Ended

Nine Months Ended

September 30

September 30

(millions, except per share amounts)

2020

2019

2020

2019

Product and equipment sales

$2,426.4

$2,591.8

$7,017.5

$7,511.6

Service and lease sales

592.2

632.2

1,707.4

1,806.2

Net sales

3,018.6

3,224.0

8,724.9

9,317.8

Product and equipment cost of sales

1,405.4

1,413.0

4,071.6

4,175.7

Service and lease cost of sales

364.2

367.9

1,053.9

1,061.0

Cost of sales (including special charges (a))

1,769.6

1,780.9

5,125.5

5,236.7

Selling, general and administrative expenses

802.6

869.2

2,499.5

2,665.3

Special (gains) and charges

35.0

24.9

120.3

88.8

Operating income

411.4

549.0

979.6

1,327.0

Other (income) expense

(15.1)

(20.8)

(45.6)

(62.9)

Interest expense, net (b)

134.8

46.1

241.8

144.6

Income before income taxes

291.7

523.7

783.4

1,245.3

Provision for income taxes

42.4

83.4

103.5

202.1

Net income from continuing operations, including noncontrolling interest

249.3

440.3

679.9

1,043.2

Net income from continuing operations attributable to noncontrolling interest

3.1

4.4

12.8

12.3

Net income from continuing operations attributable to Ecolab

246.2

435.9

667.1

1,030.9

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

-

28.3

(2,172.5)

98.4

Net (loss) income attributable to Ecolab

$246.2

$464.2

$(1,505.4)

$1,129.3

Earnings (loss) attributable to Ecolab per common share

Basic

Continuing operations

$ 0.86

$ 1.51

$ 2.32

$ 3.58

Discontinued operations

$ -

$ 0.10

$ (7.56)

$ 0.34

Earnings (loss) attributable to Ecolab

$ 0.86

$ 1.61

$ (5.24)

$ 3.92

Diluted

Continuing operations

$ 0.85

$ 1.49

$ 2.29

$ 3.52

Discontinued operations

$ -

$ 0.10

$ (7.47)

$ 0.34

Earnings (loss) attributable to Ecolab

$ 0.85

$ 1.59

$ (5.18)

$ 3.86

Weighted-average common shares outstanding

Basic

285.4

��

288.1

287.5

288.0

Diluted

288.4

292.8

290.8

292.5

~~(a)~~

Cost of sales includes special (gains) and charges, net of $9.5 and $11.4 in the third quarter of 2020 and 2019, respectively, and $45.6 and $22.8 in the first nine months of 2020 and 2019, respectively, which is recorded in product and equipment cost of sales.

~~(b)~~

~~Interest expense, net includes special charges of $83.1 in the third quarter of 2020 and $83.8 and $0.2 in the first nine months of 2020 and 2019, respectively.~~

~~(c)~~

~~Net income from discontinued operations, net of tax includes noncontrolling interest of $0.7 in the third quarter of 2019 and $2.2 and $0.3 in the first nine months of 2020 and 2019, respectively.~~

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

~~CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME~~

~~(unaudited)~~

Third Quarter Ended

Nine Months Ended

September 30

September 30

(millions)

2020

2019

2020

2019


Net (loss) income attributable to Ecolab

$246.2

$464.2

$(1,505.4)

$1,129.3

Net income from continuing operations attributable to noncontrolling interest

3.1

4.4

12.8

12.3

Net income from discontinued operations attributable to noncontrolling interest

-

0.7

2.2

0.3

Net (loss) income attributable to Ecolab, including noncontrolling interest

$249.3

$469.3

$(1,490.4)

$1,141.9

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

Foreign currency translation

165.9

(73.5)

4.7

(102.7)

Separation of ChampionX

-

-

229.9

-

(Loss) gain on net investment hedges

(83.4)

20.9

(87.4)

37.0

Total foreign currency translation adjustments

82.5

(52.6)

147.2

(65.7)

Derivatives and hedging instruments

(19.1)

(0.9)

(14.1)

(2.9)

Pension and postretirement benefits

Amortization of net actuarial loss and prior service costs included in

net periodic pension and postretirement costs

(18.5)

5.8

12.0

9.2

Total pension and postretirement benefits

(18.5)

5.8

12.0

9.2

Subtotal

44.9

(47.7)

145.1

(59.4)

Total comprehensive income (loss), including noncontrolling interest

294.2

421.6

(1,345.3)

1,082.5

Comprehensive income attributable to noncontrolling interest

27.1

5.7

15.0

15.0

Comprehensive income (loss) attributable to Ecolab

$267.1

$415.9

$(1,360.3)

$1,067.5

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

~~CONSOLIDATED BALANCE SHEET~~

(unaudited)

Second Quarter Ended

Six Months Ended

June 30

(millions, except per share amounts)

2021

2020

2021

2020

Product and equipment sales

$2,514.4

$2,167.1

$4,807.8

$4,591.1

Service and lease sales

648.3

518.6

1,239.9

1,115.2

Net sales

3,162.7

2,685.7

6,047.7

5,706.3

Product and equipment cost of sales

1,464.9

1,301.5

2,827.8

2,666.2

Service and lease cost of sales

379.1

334.2

728.2

689.7

Cost of sales (including special charges (a))

1,844.0

1,635.7

3,556.0

3,355.9

Selling, general and administrative expenses

853.3

788.6

1,716.2

1,696.9

Special (gains) and charges

17.6

69.4

30.4

85.3

Operating income

447.8

192.0

745.1

568.2

Other expense (income) (b)

2.5

(15.1)

(14.5)

(30.5)

Interest expense, net (c)

45.6

58.7

97.3

107.0

Income before income taxes

399.7

148.4

662.3

491.7

Provision for income taxes

86.1

14.1

152.2

61.1

Net income from continuing operations, including noncontrolling interest

313.6

134.3

510.1

430.6

Net income from continuing operations attributable to noncontrolling interest

2.8

5.4

5.7

9.7

Net income from continuing operations attributable to Ecolab

310.8

128.9

504.4

420.9

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

(2,163.9)

(2,172.5)

Net income (loss) attributable to Ecolab

$310.8

($2,035.0)

$504.4

($1,751.6)

Earnings (loss) attributable to Ecolab per common share

Basic

Continuing operations

$ 1.09

$ 0.45

$ 1.76

$ 1.46

Discontinued operations

$ -

($ 7.51)

$ -

($ 7.53)

Earnings attributable to Ecolab

$ 1.09

($ 7.06)

$ 1.76

($ 6.07)

Diluted

Continuing operations

$ 1.08

$ 0.44

$ 1.75

$ 1.44

Discontinued operations

$ -

($ 7.42)

$ -

($ 7.44)

Earnings attributable to Ecolab

$ 1.08

($ 6.98)

$ 1.75

($ 6.00)

Weighted-average common shares outstanding

Basic

286.0

288.2

286.0

288.5

Diluted

288.8

291.5

288.9

292.0

(a)	Cost of sales includes special (gains) and charges, net of $3.7 and $27.0 in the second quarter of 2021 and 2020, respectively, and $23.3 and $36.1 in the first six months of 2021 and 2020, respectively, which is recorded in product and equipment cost of sales.

(b)	Other expense (income) includes special charges of $19.6 in the second quarter and first six months of 2021.

(c)	Interest expense, net includes special charges of $0.7 in the second quarter and first six months of 2020.

(d)	Net income (loss) from discontinued operations, net of tax includes noncontrolling interest of ($0.3) in the second quarter of 2020 and $2.2 in the first six months of 2020.

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

September 30

December 31

(millions, except per share amounts)

2020

2019

ASSETS

Current assets

Cash and cash equivalents

$1,034.7

$118.8

Accounts receivable, net

2,320.7

2,382.0

Inventories

1,287.8

1,081.6

Other current assets

348.8

295.2

Current assets of discontinued operations

-

950.8

Total current assets

4,992.0

4,828.4

Property, plant and equipment, net

3,146.2

3,228.3

Goodwill

5,958.0

5,569.1

Other intangible assets, net

3,023.4

2,927.5

Operating lease assets

433.9

466.7

Other assets

543.6

516.3

Long-term assets of discontinued operations

-

3,332.8

Total assets

$18,097.1

$20,869.1

LIABILITIES AND EQUITY

Current liabilities

Short-term debt

$247.3

$380.5

Accounts payable

1,108.4

1,075.3

Compensation and benefits

456.0

565.7

Income taxes

53.3

136.9

Other current liabilities

1,241.4

1,110.7

Current liabilities of discontinued operations

-

361.5

Total current liabilities

3,106.4

3,630.6

Long-term debt

6,667.7

5,973.1

Postretirement health care and pension benefits

1,081.2

1,084.4

Deferred income taxes

580.6

537.3

Operating lease liabilities

310.7

346.0

Other liabilities

301.1

269.8

Long-term liabilities of discontinued operations

-

302.1

Total liabilities

12,047.7

12,143.3

Commitments and contingencies (Note 17)

Equity (a)

Common stock

362.1

359.6

Additional paid-in capital

6,177.3

5,907.1

Retained earnings

8,079.9

9,993.7

Accumulated other comprehensive loss

(1,945.9)

(2,089.7)

Treasury stock

(6,658.7)

(5,485.4)

Total Ecolab shareholders’ equity

6,014.7

8,685.3

Noncontrolling interest

34.7

40.5

Total equity

6,049.4

8,725.8

Total liabilities and equity

$18,097.1

$20,869.1


	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2021		2020		2021		2020

Net income (loss) attributable to Ecolab		$310.8		($2,035.0)		$504.4		($1,751.6)
Net income from continuing operations attributable to noncontrolling interest		2.8		5.4		5.7		9.7
Net income (loss) from discontinued operations attributable to noncontrolling interest		-		(0.3)		-		2.2
Net income (loss) attributable to Ecolab, including noncontrolling interest		313.6		(2,029.9)		510.1		(1,739.7)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments
Foreign currency translation		83.2		(122.9)		168.1		(161.2)
Separation of ChampionX		-		229.9		-		229.9
Loss on net investment hedges		(14.2)		(2.9)		(26.4)		(4.0)
Total foreign currency translation adjustments		69.0		104.1		141.7		64.7

Derivatives and hedging instruments		0.8		2.1		1.4		5.0

Pension and postretirement benefits
Current period net actuarial gain		109.9		-		109.9		-
Settlement charge		14.9		-		14.9		-
Amortization of net actuarial loss and prior period service credits, net		8.6		17.6		14.5		30.5
Total pension and postretirement benefits		133.4		17.6		139.3		30.5

Subtotal		203.2		123.8		282.4		100.2

Total comprehensive income (loss), including noncontrolling interest		516.8		(1,906.1)		792.5		(1,639.5)
Comprehensive income (loss) attributable to noncontrolling interest		2.1		(19.4)		4.3		(12.1)
Comprehensive income (loss) attributable to Ecolab		$514.7		($1,886.7)		$788.2		($1,627.4)

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

CONSOLIDATED BALANCE SHEETS

(unaudited)



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

ASSETS
Current assets
Cash and cash equivalents		$1,402.4		$1,260.2
Accounts receivable, net		2,331.0		2,273.8
Inventories		1,418.5		1,285.2
Other current assets		335.5		298.2
Total current assets		5,487.4		5,117.4
Property, plant and equipment, net		3,077.9		3,124.9
Goodwill		6,172.4		6,006.9
Other intangible assets, net		2,925.4		2,977.0
Operating lease assets		391.5		423.8
Other assets		479.1		476.0
Total assets		$18,533.7		$18,126.0

LIABILITIES AND EQUITY
Current liabilities
Short-term debt		$17.3		$17.3
Accounts payable		1,213.3		1,160.6
Compensation and benefits		430.3		469.3
Income taxes		48.9		96.1
Other current liabilities		1,170.5		1,188.9
Total current liabilities		2,880.3		2,932.2
Long-term debt		6,708.9		6,669.3
Postretirement health care and pension benefits		1,046.6		1,226.2
Deferred income taxes		567.3		483.9
Operating lease liabilities		273.8		300.5
Other liabilities		320.5		312.4
Total liabilities		11,797.4		11,924.5
Commitments and contingencies (Note 17)

Equity (a)
Common stock		363.2		362.6
Additional paid-in capital		6,333.3		6,235.0
Retained earnings		8,472.8		8,243.0
Accumulated other comprehensive loss		(1,710.6)		(1,994.4)
Treasury stock		(6,749.6)		(6,679.7)
Total Ecolab shareholders’ equity		6,709.1		6,166.5
Noncontrolling interest		27.2		35.0
Total equity		6,736.3		6,201.5
Total liabilities and equity		$18,533.7		$18,126.0

(a)	Common stock, 800.0 shares authorized, $1.00 par value per share, ~~285.4~~286.1 shares outstanding at ~~September~~June 30, ~~2020~~2021 and ~~288.4~~285.7 shares outstanding at December 31, ~~2019.~~2020. Shares outstanding are net of treasury stock.

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

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended

September 30

(millions)

2020

2019

OPERATING ACTIVITIES

Net (loss) income including noncontrolling interest

$(1,490.4)

$1,141.9

Less: Net (loss) income from discontinued operations including noncontrolling interest

(2,170.3)

98.7

Net income from continuing operations including noncontrolling interest

$679.9

$1,043.2

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation

443.1

423.9

Amortization

162.1

155.1

Deferred income taxes

(16.6)

34.9

Share-based compensation expense

65.1

67.7

Pension and postretirement plan contributions

(50.1)

(164.0)

Pension and postretirement plan expense

27.9

10.7

Restructuring charges, net of cash paid

(9.4)

25.4

Debt refinancing

77.1

-

Other, net

44.2

11.1

Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable

98.5

(118.3)

Inventories

(176.1)

(42.2)

Other assets

(22.4)

(115.0)

Accounts payable

11.8

(3.5)

Other liabilities

(243.1)

(30.0)

Cash provided by operating activities - continuing operations

1,092.0

1,299.0

Cash provided by operating activities - discontinued operations

118.4

300.7

Cash provided by operating activities

1,210.4

1,599.7

INVESTING ACTIVITIES

Capital expenditures

(362.3)

(504.3)

Property and other assets sold

2.5

6.9

Acquisitions and investments in affiliates, net of cash acquired

(487.0)

(386.6)

Divestiture of businesses

55.4

6.8

Other, net

(4.5)

(3.9)

Cash used for investing activities - continuing operations

(795.9)

(881.1)

Cash provided by (used for) investing activities - discontinued operations

443.2

(48.1)

Cash used for investing activities

(352.7)

(929.2)

FINANCING ACTIVITIES

Net issuances of commercial paper and notes payable

165.5

149.5

Long-term debt borrowings

1,855.9

-

Long-term debt repayments

(1,570.0)

(400.6)

Reacquired shares

(124.6)

(348.6)

Dividends paid

(421.8)

(416.1)

Exercise of employee stock options

199.7

171.7

Acquisition related liabilities and contingent consideration

(3.5)

(1.5)

Debt refinancing

(77.1)

-

Other, net

6.2

1.0

Cash provided by (used for) financing activities - continuing operations

30.3

(844.6)

Cash used for financing activities - discontinued operations

(1.6)

(2.9)

Cash provided by (used for) financing activities

28.7

(847.5)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(38.1)

18.9

Increase (decrease) in cash, cash equivalents and restricted cash

848.3

(158.1)

Cash, cash equivalents and restricted cash, beginning of period - continuing operations (a)

118.8

230.1

Cash, cash equivalents and restricted cash, beginning of period - discontinued operations

67.6

63.9

Cash, cash equivalents and restricted cash, beginning of period (a)

186.4

294.0

Cash, cash equivalents and restricted cash, end of period - continuing operations (b)

1,034.7

58.3

Cash, cash equivalents and restricted cash, end of period - discontinued operations

-

77.6

Cash, cash equivalents and restricted cash, end of period (b)

$1,034.7

$135.9

~~(a)~~

~~Restricted cash was $179.3 as of December 31, 2018 and included in~~ ~~Other assets~~ ~~on the Consolidated Balance Sheet.~~

~~(b)~~

~~There was 0 restricted cash as of September 30, 2020 and 2019.~~


	Six Months Ended
	June 30
(millions)	2021		2020

OPERATING ACTIVITIES
Net income (loss) including noncontrolling interest		$510.1		($1,739.7)
Less: Net loss from discontinued operations including noncontrolling interest		-		(2,170.3)
Net income from continuing operations including noncontrolling interest		510.1		430.6
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		303.9		293.0
Amortization		116.7		103.2
Deferred income taxes		39.5		(25.0)
Share-based compensation expense		58.9		53.7
Pension and postretirement plan contributions		(36.5)		(34.1)
Pension and postretirement plan expense, net		23.6		17.1
Restructuring charges, net of cash paid		(15.9)		(23.3)
Other, net		12.0		53.8
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(19.1)		96.1
Inventories		(103.5)		(151.9)
Other assets		(53.8)		(49.3)
Accounts payable		33.5		20.1
Other liabilities		(71.1)		(143.8)
Cash provided by operating activities - continuing operations		798.3		640.2
Cash provided by operating activities - discontinued operations		-		118.4
Cash provided by operating activities		798.3		758.6

INVESTING ACTIVITIES
Capital expenditures		(245.6)		(250.6)
Property and other assets sold		0.3		1.7
Acquisitions and investments in affiliates, net of cash acquired		(89.8)		(486.8)
Divestiture of businesses		-		55.4
Other, net		(12.7)		(9.4)
Cash used for investing activities - continuing operations		(347.8)		(689.7)
Cash provided by investing activities - discontinued operations		-		443.2
Cash used for investing activities		(347.8)		(246.5)

FINANCING ACTIVITIES
Net issuances of commercial paper and notes payable		(1.0)		454.4
Long-term debt borrowings		-		768.9
Long-term debt repayments		-		(300.0)
Reacquired shares		(70.6)		(104.7)
Dividends paid		(286.6)		(283.2)
Exercise of employee stock options		40.4		188.7
Other, net		(0.5)		(3.5)
Cash (used for) provided by financing activities - continuing operations		(318.3)		720.6
Cash used for financing activities - discontinued operations		-		(1.6)
Cash (used for) provided by financing activities		(318.3)		719.0

Effect of exchange rate changes on cash and cash equivalents		10.0		(48.5)

Increase in cash and cash equivalents		142.2		1,182.6
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		1,402.4		1,369.0
Cash and cash equivalents, end of period - discontinued operations		-		-
Cash and cash equivalents, end of period		$1,402.4		$1,369.0

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

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

(unaudited)

Third Quarter Ended September 30, 2020 and 2019

(millions, except shares and 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, 2019

$358.9

$5,815.7

$9,368.0

$(1,836.4)

$(5,480.8)

$8,225.4

$44.0

$8,269.4

Net income

464.2

464.2

5.1

469.3

Other comprehensive income (loss) activity

(48.3)

(48.3)

0.6

(47.7)

Cash dividends declared (b)

(132.5)

(132.5)

(5.0)

(137.5)

Stock options and awards

0.5

58.4

1.2

60.1

60.1

Reacquired shares

(1.2)

(1.2)

(1.2)

Balance, September 30, 2019

$359.4

$5,874.1

$9,699.7

$(1,884.7)

$(5,480.8)

$8,567.7

$44.7

$8,612.4

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 (b)

(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

Nine Months Ended September 30, 2020 and 2019

(millions, except shares and 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, 2018

$357.0

$5,633.2

$8,909.5

$(1,761.7)

$(5,134.8)

$8,003.2

$50.4

$8,053.6

New accounting guidance adoption (a)

58.4

(61.2)

(2.8)

(2.8)

Net income

1,129.3

1,129.3

12.6

1,141.9

Other comprehensive income (loss) activity

(61.8)

(61.8)

2.4

(59.4)

Cash dividends declared (b)

(397.5)

(397.5)

(20.7)

(418.2)

Stock options and awards

2.4

240.9

2.6

245.9

245.9

Reacquired shares

(348.6)

(348.6)

(348.6)

Balance, September 30, 2019

$359.4

$5,874.1

$9,699.7

$(1,884.7)

$(5,480.8)

$8,567.7

$44.7

$8,612.4

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 (c)

(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 (b)

(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


	Second Quarter Ended June 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, March 31, 2020		$360.8		$6,018.1		$10,136.9		($2,113.7)		($5,580.0)		$8,822.1		$38.5		$8,860.6

Net (loss) income						(2,035.0)						(2,035.0)		5.1		(2,029.9)
Other comprehensive income (loss) activity								124.0				124.0		(0.2)		123.8
Cash dividends declared (a)						(134.1)						(134.1)		(1.8)		(135.9)
Separation of ChampionX				(8.5)						(1,051.4)		(1,059.9)		3.4		(1,056.5)
Changes in noncontrolling interests				17.6								17.6		(10.0)		7.6
Stock options and awards		1.2		127.8						1.2		130.2				130.2
Reacquired shares										(9.7)		(9.7)				(9.7)
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

Balance, March 31, 2021		$363.0		$6,285.7		$8,299.3		($1,914.5)		($6,741.2)		$6,292.3		$27.8		$6,320.1

Net income						310.8						310.8		2.8		313.6
Other comprehensive income (loss) activity								203.9				203.9		(0.7)		203.2
Cash dividends declared (a)						(137.3)						(137.3)		(2.7)		(140.0)
Stock options and awards		0.2		47.6						0.4		48.2				48.2
Reacquired shares										(8.8)		(8.8)				(8.8)
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

	Six Months Ended June 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						(1,751.6)						(1,751.6)		11.9		(1,739.7)
Other comprehensive income (loss) activity								100.0				100.0		0.2		100.2
Cash dividends declared (a)						(270.0)						(270.0)		(11.7)		(281.7)
Separation of ChampionX				(8.5)						(1,051.4)		(1,059.9)		3.4		(1,056.5)
Changes in noncontrolling interests				17.6								17.6		(9.3)		8.3
Stock options and awards		2.4		238.8						1.6		242.8				242.8
Reacquired shares										(104.7)		(104.7)				(104.7)
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

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						504.4						504.4		5.7		510.1
Other comprehensive income (loss) activity								283.8				283.8		(1.4)		282.4
Cash dividends declared (a)						(274.6)						(274.6)		(12.1)		(286.7)
Stock options and awards		0.6		98.3						0.7		99.6				99.6
Reacquired shares										(70.6)		(70.6)				(70.6)
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

(a)

Upon adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, the Company reclassified stranded tax effects resulting from the Tax Cut and Jobs Act from accumulated other comprehensive income to retained earnings. Also, upon adoption of ASU 2016-02, Leases (Topic 842), the Company has established right-of-use assets and lease liabilities for operating leases and the cumulative effect of applying the standard is recognized in retained earnings at the beginning of the period adopted.

~~(b)~~

Dividends declared per common share were ~~$0.47~~$0.48 and ~~$0.46~~$0.47 in the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$1.41~~$0.96 and ~~$1.38~~$0.94 in the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, respectively.

~~(c)~~(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.

~~Refer to Note 18 for additional information regarding adoption~~The accompanying notes are an integral part of ~~new accounting guidance.~~the consolidated financial statements.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the ~~third~~second quarter ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~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 ~~(“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 ~~previously announced~~ 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 itthe 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 ~~reports~~reported the historical results of ChampionX, including the results of operations, cash flows, and related assets and liabilities, as discontinued ~~operations for all periods presented herein.~~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 second quarter of 2020, the Company no longer reports the Upstream Energy segment, which previously held the ChampionX business. The Company is aligned into 3 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, ~~2019 reflects discontinued operations as discussed further in Note 4~~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, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2020 and the Company’s Current Report on Form 8-K, which was filed with the SEC on September 25, 2020 to reflect certain retrospective revisions relating to the ChampionX business as discontinued operations and the changes in the Company’s reportable segments described in Note 16.26, 2021.

With respect to the unaudited financial information of the Company for the ~~third~~second quarter ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~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 30, 2020~~August 5, 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 ~~Statement~~Statements of Income include the following:



	Third Quarter Ended				Nine Months Ended				Second Quarter Ended				Six Months Ended
	September 30				September 30				June 30				June 30
(millions)	2020		2019		2020		2019		2021		2020		2021		2020
Cost of sales
Restructuring activities		$1.0		$6.3		$6.6		$16.2		$3.7		$2.6		$21.9		$5.6
Acquisition and integration activities		1.5		5.1		4.1		6.6		-		2.2		-		2.6
COVID-19 activities, net										-		6.9		1.1		6.9
Other		7.0		-		34.9		-		-		15.3		0.3		21.0
Cost of sales subtotal		9.5		11.4		45.6		22.8		3.7		27.0		23.3		36.1

Special (gains) and charges
Restructuring activities		26.9		19.3		31.4		70.2		2.5		0.3		6.1		4.5
Acquisition and integration activities		2.7		2.0		5.5		4.9		1.3		(2.6)		2.5		2.8
Disposal and impairment activities		-		-		45.9		-		-		44.7		-		45.9
COVID-19 activities, net										8.3		10.2		14.7		10.2
Other		5.4		3.6		37.5		13.7		5.5		16.8		7.1		21.9
Special (gains) and charges subtotal		35.0		24.9		120.3		88.8		17.6		69.4		30.4		85.3

Operating income subtotal		44.5		36.3		165.9		111.6		21.3		96.4		53.7		121.4

Interest expense, net		83.1		-		83.8		0.2		-		0.7		-		0.7
Other expense (income)										19.6		-		19.6		-

Total special (gains) and charges		$127.6		$36.3		$249.7		$111.8		$40.9		$97.1		$73.3		$122.1

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, ~~(described below) and other restructuring (described on the following page).~~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 ~~Statement~~Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance ~~Sheet. Restructuring charges directly related to the ChampionX business were recorded as discontinued operations, refer to Note 4.~~Sheets.

~~Accelerate 2020~~Institutional Advancement Program

~~During the third quarter of 2018, the~~The Company ~~formally commenced~~approved a restructuring plan ~~Accelerate~~in 2020 focused on the Institutional business (“the Institutional Plan”), which is intended to ~~leverage technology~~enhance our Institutional sales and ~~system~~service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging our ongoing investments and organizational changes. The goals of the Plan is 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.in digital technology. In ~~the third quarter of 2020,~~February 2021, the Company expanded the ~~Plan for additional costs and savings to further leverage the technology and structural improvements.~~Institutional Plan. The Company ~~now~~ expects that ~~the~~these restructuring ~~activities~~charges will be completed by ~~the end of 2022,~~2023, with total anticipated costs of ~~$275~~$80 million ($~~210~~60 million after tax) ~~over this period of time, when revised for continuing operations.~~. The costs are expected to be primarily cash expenditures for severance and facility closures. The Company also anticipates non-cash costs ~~and some facility closure costs relating~~related to ~~team reorganizations.~~equipment disposals. Actual costs may vary from these estimates depending on actions taken.

~~The~~During the second quarter and first six months of 2021, the Company recorded restructuring charges of ~~$27.9~~$2.2 million ($~~21.2~~1.6 million after tax) and ~~$37.0~~$8.1 million ($~~28.9~~6.1 million after tax) ~~in the third quarter and first nine months of 2020,~~, respectively, primarily related to ~~severance. The liability related~~costs to support the transition to the ~~Plan was $87.4 million as~~new sales and service structure, and the disposal of ~~the end of the third quarter of 2020.~~equipment. The Company has recorded ~~$243.5~~$43.3 million ~~($187.5~~($32.5 million after tax) of cumulative restructuring charges under the Institutional Plan. The ~~remaining~~ liability related to the Institutional Plan was $11.5 million as of June 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. ~~Cash payments during 2020 related to the Plan were $45.3 million.~~

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



	Employee								Employee
	Termination		Asset						Termination		Asset
(millions)	Costs		Disposals		Other		Total		Costs		Disposals		Other		Total
2018 - 2019 Activity
Recorded expense		$182.5		$0.2		$14.7		$197.4
2020 Activity
Recorded expense and accrual										$25.6		$-		$9.6		$35.2
Net cash payments		(87.5)		1.2		(11.2)		(97.5)		(0.9)		-		(9.6)		(10.5)
Non-cash charges		-		(1.4)		(2.0)		(3.4)
Effect of foreign currency translation		(1.0)		-		-		(1.0)
Restructuring liability, December 31, 2019		94.0		-		1.5		95.5
Restructuring liability, December 31, 2020										24.7		-		-		24.7

2020 Activity
Recorded expense		34.1		-		2.9		37.0
2021 Activity
Recorded expense (income) and accrual										1.3		4.5		2.3		8.1
Net cash payments		(41.9)		-		(3.4)		(45.3)		(14.7)		-		(2.3)		(17.0)
Non-cash charges		-		-		-		-
Effect of foreign currency translation		0.2		-		-		0.2
Restructuring liability, September 30, 2020		$86.4		$-		$1.0		$87.4
Non-cash net charges										-		(4.5)		0.2		(4.3)
Restructuring liability, June 30, 2021										$11.3		$-		$0.2		$11.5

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 (gains) of ($0.3) million ($0.2 million after tax) and $1.4 million ($1.6 million after tax) in the second quarter and first six months of 2021, respectively, primarily related to severance. The liability related to the Plan was $47.3 million as of the end of the second quarter of 2021. The Company has recorded $240.6 million ($185.4 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		1.0		-		0.4		1.4
Net cash payments		(25.3)		-		(0.6)		(25.9)
Non-cash charges		-		-		(0.1)		(0.1)
Effect of foreign currency translation		0.1		-		-		0.1
Restructuring liability, June 30, 2021		$42.6		$-		$4.7		$47.3

Other Restructuring Activities

During the ~~first nine~~second quarter and six months of ~~2020,~~2021, the Company incurred restructuring charges of ~~$1.0~~$4.3 million ($~~0.6~~5.6 million after tax) and $18.5 million ($16.4 million after tax), ~~none of which was incurred during the third quarter,~~respectively, related to another immaterial restructuring ~~plan.~~activity. The charges are primarily related to ~~severance. Prior to 2018, the Company engaged in a number of restructuring plans.~~severance and asset write-offs. During the ~~third~~second quarters and first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, net restructuring charges related to prior year plans were minimal. The restructuring liability balance for all plans other than the Accelerate 2020 ~~was $6.1~~and Institutional Plan were $16.8 million and ~~$7.7~~$5.9 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The ~~reduction~~increase in liability was driven primarily by severance ~~payments.~~accruals. 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 ~~2020~~2021 related to all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were ~~$2.5~~$1.1 million.

Acquisition and integration related costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income include ~~$2.7~~$1.3 million ($~~2.3~~1.0 million after tax) and ~~$5.5~~$2.5 million ($~~4.3~~2.1 million after tax) in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively. Charges are related to ~~the~~ 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 ($2.6) million ($1.7 million after tax) and $2.8 million ($2.1 million after tax) in the second quarter and first six 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~~$2.2 million ($~~1.3~~1.7 million after tax) and ~~$4.1~~$2.6 million ($~~3.2~~1.9 million after tax) on the Consolidated ~~Statement~~Statements of Income in the ~~third~~second quarter and first ~~nine~~six 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~~0.5 million after tax) of interest expense in the ~~first nine months~~second quarter of ~~2020, none of which was incurred during the third quarter.~~

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statement of Income include $2.0 million ($1.5 million after tax) and $4.9 million ($3.6 million after tax) in the third quarter and first nine months of 2019, respectively. Charges are related to Bioquell and the Anios acquisitions and consist of integration costs, advisory and legal fees. Acquisition and integration costs reported in product and equipment cost of sales of $5.1 million ($3.8 million after tax) and $6.6 million ($4.9 million after tax) on the Consolidated Statement of Income in the third quarter and first nine months of 2019, respectively, relate to the recognition of fair value step-up in the Bioquell inventory and severance related to the closure of a facility. The Company also incurred $0.2 million ($0.1 million after tax) of interest expense in the first nine months of 2019.2020.

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 ~~Statement~~Statements of Income include $44.7 million ($44.1 million after tax) and $45.9 million ($45.0 million after tax) in the second quarter and first ~~nine~~six months of ~~2020.~~2020, respectively. 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~~$16.1 million ($~~16.3~~15.5 million after tax) ~~in the first six months of 2020~~ related to transaction fees associated with the ~~disposal~~sale of Holchem Group Limited (“Holchem”) ~~for the loss on sale and related transaction fees.~~.

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

~~Other~~COVID-19 activities

~~During the third quarter and first nine months of 2020, the~~The Company recorded charges of $4.1 million and ~~$30.6~~$26.5 million during the second quarter of 2021 and 2020, respectively, and $10.0 million and $26.5 million during the first six months of 2021 and 2020, respectively, to protect the ~~pay~~wages for certain employees directly impacted by the COVID-19 pandemic. The Company also recorded charges during the second quarter and first six months of 2021 of $4.9 million and $8.4 million, respectively, related to COVID-19 testing and related expenses. In addition, the Company received subsidies and government assistance, which ~~was~~were recorded as a special (gain) of ($~~5.3)~~0.7) million and ($~~14.7)~~9.4) million during the ~~third~~second quarter of 2021 and 2020, respectively, and ($2.6) million and ($9.4) million during the first ~~nine~~six 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 ~~Statement~~Statements of Income. After tax net charges ~~(gains)~~ related to the COVID-19 pandemic were ~~($0.9)~~$6.4 million and ~~$12.3~~$13.2 million during the ~~third~~second quarter of 2021 and 2020, respectively, and $11.3 million and $13.2 million during the first ~~nine~~six months of 2021 and 2020, respectively.

Other

Other special charges recorded in the first six months of 2021 in product and equipment cost of sales were $0.3 million ($0.2 million after tax). During the ~~third~~second quarter and first ~~nine~~six months of 2020, the Company recorded special charges of ~~$5.2~~$15.3 million ($~~3.5~~10.5 million after tax) and ~~$26.2~~$21.0 million ~~($17.8~~(14.3 million after tax), respectively, in product and equipment cost of sales on the Consolidated ~~Statement~~Statements of Income ~~primarily~~ related to a Healthcare product recall in Europe.

~~During the third quarter of 2020, the Company recorded~~Other special charges of ~~$83.1~~$5.5 million ($~~64.0~~4.4 million after tax) and $7.1 million ($5.6 million after tax) recorded in ~~interest expense on~~ the ~~Consolidated Statement~~second quarter and first six months of ~~Income~~2021, respectively, relate primarily ~~related~~ to ~~debt refinancing charges.~~legal reserve and certain legal charges and tax consulting fees associated with the ChampionX separation.

Other special charges of ~~$8.4~~$16.8 million ($~~7.2~~12.6 million after tax) and ~~$30.3~~$21.9 million ($~~23.7~~16.5 million after tax), respectively, recorded in the ~~third~~second quarter and first ~~nine~~six months of 2020 relate primarily to ~~a specific~~ legal reserve and ~~related~~certain legal charges which are recorded in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income.

During the third quarter and first nine months of 2019, the Company recorded other special gains in special (gains) and charges on the Consolidated Statement of Income, of $3.6 million ($2.7 million after tax) and $13.7 million ($10.3 million after tax), respectively, which primarily related to legal charges.Other expense (income)

During the second quarter and first six months of 2021, the Company incurred settlement expense recorded in other expense (income) on the Consolidated Statements of Income of $19.6 million ($14.9 million after tax) 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 ~~Sheet~~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 ~~paid.~~transferred. Purchase consideration transferred is reduced by the amount of cash or cash equivalents acquired.

There were 0 acquisitions during the second quarter of 2021. Acquisitions during the first ~~nine~~six months of ~~2020~~2021 and ~~2019~~2020 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

During the first quarter of 2021, the Company acquired VanBaerle Hygiene AG (“VanBaerle”), an institutional business which sells cleaning products and related services to restaurants, long-term care facilities, hotels and laundries. 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 June 30, 2021.

Also, during the first quarter of 2021, the Company acquired TechTex Holdings Limited (“TechTex”), a healthcare business which sells wet and dry wipes and other nonwovens products to the Life Sciences and Healthcare industries. TechTex became part of the Global Healthcare and Life Sciences reporting segment. The purchase price included an immaterial holdback that is recorded within other liabilities on the Consolidated Balance Sheets as of June 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 adjustments. The Company does not expect any of the goodwill related to its acquisitions of VanBaerle or TechTex to be tax deductible.

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 six months of 2021 and 2020.


	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2021		2020		2021		2020
Net tangible assets (liabilities) acquired and equity method investments		$-		$-		($2.4)		$-

Identifiable intangible assets
Customer relationships		-		-		31.1		-
Trademarks		-		-		3.6		-
Other technology		-		-		1.5		-
Total intangible assets		-		-		36.2		-

Goodwill		-		-		59.0		-
Total aggregate purchase price		-		-		92.8		-

Acquisition-related liabilities and contingent consideration (a)		-		-		(4.4)		-
Net cash paid for acquisitions, including acquisition-related
liabilities and contingent consideration		$-		$-		$88.4		$-

(a)

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

During the first six months of 2020, the Company made $2.5 million of acquisition-related payments associated with prior transactions closed during 2019. The payments primarily consist of the release of holdback liabilities and payment of contingent consideration.

The weighted average useful life of identifiable intangible assets acquired during the first six months of 2021 was 13 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 CID Lines acquisition has been accounted for using the acquisition method, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. Certain estimated values are not yet finalized and are subject to change. Measurement of certain carry over tax attributes, deferred income taxes, income tax uncertainties, certain tangible and intangible assets, and goodwill are not yet finalized and are subject to changes as the information necessary to complete the analyses is obtained and analyzed. The Company expects to finalize its purchase accounting within the year.

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

The following table summarizes the ~~preliminary~~acquisition date fair value of ~~CID Lines~~net assets acquired ~~and liabilities assumed as~~from the Company’s acquisition of ~~the acquisition date.~~CID Lines.

(millions)

May 11, 2020

~~(millions)~~

~~2020~~

Tangible assets

$~~54.2~~54.1

Identifiable intangible assets

Customer relationships

147.5

Trademarks

58.6

Acquired technologies and product registrations

47.7

Total assets acquired

~~308.0~~307.9

Goodwill

~~270.7~~274.8

Total liabilities

~~93.2~~97.2

Net consideration transferred to sellers

$485.5

Tangible assets ~~acquired~~are primarily comprised of accounts receivable of ~~$30.3~~$30.1 million, property, plant and equipment of ~~$7.4~~$7.7 million and inventory of $16.3 million. Liabilities ~~assumed~~ primarily consist of deferred tax liabilities of ~~$63.8~~$64.8 million and current liabilities of ~~$29.4~~$32.4 million. ~~Identified intangible assets primarily consist of customer~~

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

Goodwill of ~~$270.7~~$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 Food and Beverage industries. This acquired business became part of the Global Industrial reportable segment. None of the goodwill recognized is expected to be deductible for income tax purposes.

Other ~~Acquisitions~~

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

During the first quarter of 2019, the Company acquired Bioquell, a life sciences business which sells bio-decontamination products and services to the Life Sciences and Healthcare industries. Effective with changes to the Company’s reporting structure in the first quarter 2020, this acquired business became part of the Global Healthcare & Life Sciences reportable segment.~~During 2018, the Company deposited $179.3 million (~~£~~140.5 million) in an escrow account that was released to the Company upon closing of the transaction in February 2019.~~

Also, during the first quarter of 2019, the Company acquired Lobster Ink, a leading provider of end-to-end online customer training solutions. This acquired business became part of the Global Institutional & Specialty reportable segment. The purchase price included an earn-out based on the achievement of certain revenue thresholds in any of the three years following the acquisition. The acquisition date fair value of the earn-out was reflected in the total purchase consideration exchanged for Lobster Ink and recorded as contingent consideration liability. The earn-out has not yet been paid or settled and the contingent consideration liability is recorded within other liabilities as of September 30, 2020 at its current fair value.

During the third quarter of 2019, the Company acquired Chemstar Corporation, a leading provider of cleaning and sanitizing products for the retail industry with a focus on cleaning chemicals and food safety. This acquired business became part of the Global Institutional reportable segment.

These acquisitions have been accounted for using the acquisition method. The purchase accounting for both Bioquell and Lobster Ink were finalized in the first quarter of 2020 and the purchase accounting for Chemstar was finalized in the third quarter of 2020.

~~The components of the cash paid for acquisitions other than CID Lines during the third quarter and first nine~~six months of ~~2020 and 2019 are shown in the following table.~~

Third Quarter Ended

Nine Months Ended

September 30

September 30
(millions)

2020

2019

2020

2019
Net tangible assets (liabilities) acquired and equity method investments

$-

$8.0

$-

$(1.4)

Identifiable intangible assets

Customer relationships

-

37.0

-

108.9

Trademarks

-

3.0

-

23.4

Other technology

-

3.0

-

48.9

Total intangible assets

-

43.0

-

181.2

Goodwill

-

49.0

-

229.5

Total aggregate purchase price

-

100.0

-

409.3

Acquisition-related liabilities and contingent considerations

-

(2.2)

-

(22.7)

Net cash paid for acquisitions, including acquisition-related

liabilities and contingent considerations

$-

$97.8

$-

$386.6

~~During the first nine months of 2020,~~2021, the Company recorded purchase accounting adjustments ~~associated with its 2019 acquisitions. As a result~~that decreased goodwill recognized from the acquisition of ~~these~~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 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 2019 was 12 years.~~CID Lines acquisition.

Dispositions

There were 0 business dispositions during the first six 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 inon the Consolidated ~~Statement~~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 six months of 2020.

Subsequent Event

Subsequent to quarter end, the Company acquired a U.S. Healthcare business for approximately $120 million. The acquisition is not material to the Company’s consolidated financial statements.

1112

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~~1 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)~~($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)~~($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 ~~it is~~the separation of the ChampionX business was a strategic shift in business that ~~has~~had a major effect on the Company’s operations and financial results. Therefore, the results of discontinued operations for the ~~first nine months~~second quarter ended ~~September~~June 30, 2020 ~~and the third quarter and first nine months ended September 30, 2019~~ 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)

2020

2019

2020

2019

Product and equipment sales

$-

$533.4

$858.9

$1,592.0

Service and lease sales

-

60.5

99.6

172.9

Net sales

-

593.9

958.5

1,764.9

Product and equipment cost of sales

-

376.5

621.7

1,129.6

Service and lease cost of sales

-

50.0

80.4

138.9

Cost of sales (including special charges)

-

426.5

702.1

1,268.5

Selling, general and administrative expenses

-

93.3

180.5

308.2

Special (gains) and charges

-

35.5

2,221.7

61.8

Operating (loss) income

-

38.6

(2,145.8)

126.4

Other (income) expense

-

-

0.3

-

Interest expense (income), net

-

-

0.2

0.4

(Loss) income before income taxes

-

38.6

(2,146.3)

126.0

Provision for income taxes

-

9.6

24.0

27.3

Net (loss) income including noncontrolling interest

-

29.0

(2,170.3)

98.7

Net (loss) income attributable to noncontrolling interest

-

0.7

2.2

0.3

Net (loss) income from discontinued operations, net of tax

$-

$28.3

$(2,172.5)

$98.4

Special (gains) and charges of $2,221.7 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.

Special (gains) and charges of $35.5 million and $61.8 million in the third quarter and first nine months of 2019, respectively, relate to professional fees incurred to support the Transaction and restructuring charges specifically related to the ChampionX business.

1213

~~Assets and liabilities~~Summarized results of the Company’s discontinued operations are ~~summarized below:~~as follows:



	~~December 31~~
~~(millions)~~	~~2019~~

~~ASSETS~~
~~Current assets~~
~~Cash and cash equivalents~~		~~$67.6~~
~~Accounts receivable, net~~		~~414.5~~
~~Inventories~~		~~424.0~~
~~Other current assets~~		~~44.7~~
~~Total current assets~~		~~950.8~~
~~Property, plant and equipment, net~~		~~726.6~~
~~Goodwill~~		~~1,682.6~~
~~Other intangible assets, net~~		~~745.0~~
~~Operating lease assets~~		~~110.8~~
~~Other assets~~		~~67.8~~
~~Total assets~~		~~$4,283.6~~

~~LIABILITIES AND EQUITY~~
~~Current liabilities~~
~~Short-term debt~~		~~$0.1~~
~~Accounts payable~~		~~209.0~~
~~Compensation and benefits~~		~~33.8~~
~~Income taxes~~		~~5.9~~
~~Other current liabilities~~		~~112.7~~
~~Total current liabilities~~		~~361.5~~
~~Long-term debt~~		~~0.4~~
~~Postretirement health care and pension benefits~~		~~3.6~~
~~Deferred income taxes~~		~~203.1~~
~~Operating lease liabilities~~		~~79.2~~
~~Other liabilities~~		~~15.8~~
~~Total liabilities~~		~~$663.6~~


	Second Quarter Ended				Six Months Ended
	June 30				June 30
(millions)	2021		2020		2021		2020

Product and equipment sales		$-		$352.9		$-		$858.9
Service and lease sales		-		44.8		-		99.6
Net sales		-		397.7		-		958.5
Product and equipment cost of sales		-		270.5		-		621.7
Service and lease cost of sales		-		34.9		-		80.4
Cost of sales (including special charges)		-		305.4		-		702.1
Selling, general and administrative expenses		-		74.0		-		180.5
Special (gains) and charges		-		2,185.2		-		2,221.7
Operating income		-		(2,166.9)		-		(2,145.8)
Other expense (income)		-		0.1		-		0.3
Interest expense (income), net		-		0.3		-		0.2
Income before income taxes		-		(2,167.3)		-		(2,146.3)
Provision for income taxes		-		(3.1)		-		24.0
Net loss including noncontrolling interest		-		(2,164.2)		-		(2,170.3)
Net income attributable to noncontrolling interest		-		(0.3)		-		2.2
Net loss from discontinued operations, net of tax		$-		($2,163.9)		$-		($2,172.5)

AsSpecial (gains) and charges of ~~September 30,~~$2,186.1 million and $2,222.7 million in the second quarter and first six months of 2020, ~~there were 0 assets or~~ ~~liabilities~~ ~~classified~~respectively, 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 $3.2 million and $22.7 million in the second quarter and first six months of 2020, respectively, 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~~second quarter and first ~~nine~~six months of 2021 were $34.7 million and $67.7 million, respectively, and for both the second quarter and first six months of 2020 were ~~$46.6 million and $58.9 million, respectively.~~

$12.3 million. As of June 30, 2021, we had an outstanding accounts receivable balance for sales of product to ChampionX of $25.6 million.

1314

5. BALANCE ~~SHEET~~SHEETS INFORMATION

September 30

December 31

June 30

December 31

(millions)

2020

2019

2021

2020

Accounts receivable, net

Accounts receivable

$2,408.9

$2,437.5

$2,411.1

$2,358.1

Allowance for doubtful accounts

(88.2)

(55.5)

(80.1)

(84.3)

Total

$2,320.7

$2,382.0

$2,331.0

$2,273.8

Inventories

Finished goods

$781.6

$668.5

$879.9

$789.6

Raw materials and parts

531.3

437.9

578.6

511.2

Inventories at FIFO cost

1,312.9

1,106.4

1,458.5

1,300.8

FIFO cost to LIFO cost difference

(25.1)

(24.8)

(40.0)

(15.6)

Total

$1,287.8

$1,081.6

$1,418.5

$1,285.2

Other current assets

Prepaid assets

$116.5

$101.8

$135.1

$99.1

Taxes receivable

184.9

107.0

165.1

168.6

Derivative assets

9.4

53.3

9.0

3.2

Other

38.0

33.1

26.3

27.3

Total

$348.8

$295.2

$335.5

$298.2

Property, plant and equipment, net

Land

$159.1

$158.9

$159.5

$159.7

Buildings and leasehold improvements

1,036.1

965.5

1,090.7

1,060.0

Machinery and equipment

1,865.9

1,701.7

1,883.3

1,830.1

Merchandising and customer equipment

2,744.4

2,742.9

2,711.0

2,691.0

Capitalized software

815.4

750.4

851.4

820.8

Construction in progress

250.7

348.1

237.0

219.8

6,871.6

6,667.5

6,932.9

6,781.4

Accumulated depreciation

(3,725.4)

(3,439.2)

(3,855.0)

(3,656.5)

Total

$3,146.2

$3,228.3

$3,077.9

$3,124.9

Other intangible assets, net

Intangible assets not subject to amortization

Trade names

$1,230.0

$1,230.0

$1,230.0

$1,230.0

Intangible assets subject to amortization

Customer relationships

2,516.4

2,378.9

2,594.8

2,530.9

Trademarks

347.8

285.2

354.1

348.0

Patents

490.0

459.0

498.5

492.5

Other technology

240.3

214.5

241.2

240.1

3,594.5

3,337.6

3,688.6

3,611.5

Accumulated amortization

Customer relationships

(1,272.0)

(1,147.6)

(1,414.0)

(1,319.1)

Trademarks

(149.8)

(135.1)

(168.9)

(155.0)

Patents

(236.6)

(221.7)

(259.3)

(244.6)

Other technology

(142.7)

(135.7)

(151.0)

(145.8)

(1,801.1)

(1,640.1)

(1,993.2)

(1,864.5)

Net intangible assets subject to amortization

1,793.4

1,697.5

1,695.4

1,747.0

Total

$3,023.4

$2,927.5

$2,925.4

$2,977.0

Other assets

Deferred income taxes

$155.6

$136.2

$159.3

$163.2

Pension

40.2

31.1

44.3

33.0

Derivative asset

25.4

0.5

Other

347.8

323.6

275.0

279.8

Total

$543.6

$516.3

$479.1

$476.0

1415

September 30

December 31

June 30

December 31

(millions)

2020

2019

2021

2020

Other current liabilities

Discounts and rebates

$321.5

$331.4

$325.0

$304.1

Dividends payable

134.2

135.6

137.3

137.2

Interest payable

50.9

40.9

57.6

51.7

Taxes payable, other than income

162.7

102.9

142.2

151.8

Derivative liabilities

54.3

5.2

25.0

25.8

Restructuring

89.3

98.5

71.4

98.1

Contract liability

84.6

76.7

87.9

80.4

Operating lease liabilities

124.4

122.1

119.4

125.6

Other

219.5

197.4

204.7

214.2

Total

$1,241.4

$1,110.7

$1,170.5

$1,188.9

Accumulated other comprehensive loss

Unrealized gain (loss) on derivative financial instruments, net of tax

$(18.2)

$(4.1)

($19.7)

($21.1)

Unrecognized pension and postretirement benefit expense, net of tax

(811.8)

(823.8)

(795.9)

(935.2)

Cumulative translation, net of tax

(1,115.9)

(1,261.8)

(895.0)

(1,038.1)

Total

$(1,945.9)

$(2,089.7)

($1,710.6)

($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~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

September 30

December 31

June 30

December 31

(millions)

2020

2019

2021

2020

Short-term debt

Commercial paper

$225.0

$55.1

Notes payable

20.7

24.5

$14.7

$15.5

Long-term debt, current maturities

1.6

300.9

2.6

1.8

Total

$247.3

$380.5

$17.3

$17.3

Lines of Credit

As of ~~September~~June 30, ~~2020,~~2021, the Company ~~had~~has a $2.0 billion multi-year credit facility which expires in April 2026. In April 2021, the Company entered into an amended and restated revolving credit facility which extended the maturity from November ~~2022.~~2022 to 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 0 borrowings under the Company’s credit facility as of either ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019.~~

As of September 30, 2020, the Company had a $500 million 364-day revolving credit agreement which expires in April 2021. The credit agreement has been established with a diverse syndicate of banks and is to be used for general corporate purposes. There were 0 borrowings under the Company’s 364-day credit facility as of September 30, 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.

~~As of September 30, 2020, the~~The Company had ~~$225.0 million of~~0 outstanding commercial paper ~~outstanding~~ under its U.S. ~~program. As~~or Euro programs as of either June 30, 2021 or December 31, ~~2019, the Company had $55.1 million (€50.0 million) of commercial paper outstanding under its Euro program.~~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~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$20.7~~$14.7 million and ~~$24.5~~$15.5 million, respectively, outstanding under these credit lines.

1516

Long-term Debt

The following table provides the components of the Company’s long-term debt obligations, including current maturities, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.




	Maturity	September 30		December 31		Maturity	June 30		December 31
(millions)	by Year	2020		2019		by Year	2021		2020

Long-term debt
Public notes (2020 principal amount)
Five year 2015 senior notes ($300 million)	2020		$-		$300.0
Ten year 2011 senior notes ($1.02 billion)	2021		-		1,018.3
Public notes (2021 principal amount)
Five year 2017 senior notes ($500 million)	2022		498.4		497.8	2022		$499.1		$498.6
Seven year 2016 senior notes ($400 million)	2023		398.9		398.5	2023		399.2		399.0
Seven year 2016 senior notes (€575 million)	2024		681.9		628.4	2024		699.8		682.0
Ten year 2015 senior notes (€575 million)	2025		683.0		630.0	2025		700.5		682.9
Ten year 2016 senior notes ($750 million)	2026		745.1		744.5	2026		745.7		745.3
Ten year 2017 senior notes ($500 million)	2027		495.9		495.4	2027		497.4		496.0
Ten year 2020 senior notes ($750 million)	2030		765.7		-	2030		764.4		765.2
Ten year 2020 senior notes ($600 million)	2031		594.2		-	2031		594.7		594.4
Thirty year 2011 senior notes ($458 million)	2041		452.1		451.9	2041		452.3		452.2
Thirty year 2016 senior notes ($250 million)	2046		246.3		246.2	2046		246.5		246.4
Thirty year 2017 senior notes ($700 million)	2047		611.5		610.4	2047		612.7		611.9
Thirty year 2020 senior notes ($500 million)	2050		489.9		-	2050		490.2		490.1
Private notes (2020 principal amount)
Series B private placement senior notes ($250 million)	2023		-		249.6
Finance lease obligations and other			6.4		3.0			9.0		7.1
Total debt			6,669.3		6,274.0			6,711.5		6,671.1
Long-term debt, current maturities			(1.6)		(300.9)			(2.6)		(1.8)
Total long-term debt			$6,667.7		$5,973.1			$6,708.9		$6,669.3

Public Notes

In March 2020, the Company issued $750 million aggregate principal ten year fixed rate notes with a coupon rate of 4.80%, and an effective interest rate of 4.58%. The proceeds were used to repay a portion of the Company’s outstanding commercial paper and for general corporate purposes.

In August 2020, the Company issued $600 million aggregate principal ten year fixed rate notes with a coupon rate of 1.30%, and an effective interest rate of 1.39% along with $500 million aggregate principal thirty year fixed rate notes with a coupon rate of 2.13%, and an effective interest rate of 2.19%. In September 2020, the proceeds were used to prepay all of the outstanding 4.32% Series B private placement senior notes due 2023, to redeem all of the outstanding 4.350% senior notes due 2021 and to pay debt refinancing charges in connection with the transactions. Refer to Note 2 for additional information regarding the incremental fees.

The Company’s public 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 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 are senior unsecured and unsubordinated obligations of the Company and rank equally with all other senior and unsubordinated indebtedness of the Company.

~~Private Notes~~

~~In September 2020, the Company redeemed the private notes at redemption prices that included accrued and unpaid interest and a make-whole premium.~~

Covenants

The Company is in compliance with its debt covenants as of ~~September~~June 30, ~~2020.~~2021.

Net Interest Expense

Interest expense and interest income recognized during the ~~third~~second quarter and first ~~nine~~six months of ~~2020~~2021 and ~~2019~~2020 were as follows:

Third Quarter Ended

Nine Months Ended

Second Quarter Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

2020

2019

2021

2020

2021

2020

Interest expense

$139.0

$52.9

$253.4

$163.4

$51.7

$61.8

$105.5

$114.4

Interest income

(4.2)

(6.8)

(11.6)

(18.8)

(6.1)

(3.1)

(8.2)

(7.4)

Interest expense, net

$134.8

$46.1

$241.8

$144.6

$45.6

$58.7

$97.3

$107.0

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 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.17

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill arises from the Company’s acquisitions and represents the excess purchase consideration ~~paid~~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 ~~would complete~~completes an interim goodwill assessment of that reporting unit prior to the next annual assessment. If the results of a 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 ~~2020,~~2021, the Company completed its annual goodwill impairment assessment for each of its 11 reporting units ~~using quantitative analyses~~ using discounted cash flow analyses that incorporated assumptions regarding future growth rates, terminal values and discount rates. The Company’s goodwill impairment ~~assessment~~assessments for ~~2020~~2021 indicated the estimated fair values of each of its reporting units exceeded ~~their~~the carrying amounts of the respective reporting unit by a significant ~~margins.~~margin. There has been 0 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~~six-month period ended ~~September~~June 30, ~~2020~~2021 were as follows:

Global

Global

Global

Institutional

Healthcare &

Global

(millions)

Industrial

& Specialty

Life Sciences

Energy

Other

Total

December 31, 2019

$2,799.2

$1,147.7

$-

$1,417.9

$204.3

$5,569.1

Segment changes (a)

1,124.6

(599.4)

859.3

(1,417.9)

33.4

-

December 31, 2019 revised

3,923.8

548.3

859.3

-

237.7

5,569.1

Current year business combinations (b)

270.7

-

-

-

-

270.7

Prior year business combinations (c)

-

-

0.3

-

-

0.3

Dispositions

(47.6)

-

-

-

-

(47.6)

Effect of foreign currency translation

90.8

16.6

51.4

-

6.7

165.5

September 30, 2020

$4,237.7

$564.9

$911.0

$-

$244.4

$5,958.0

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)

11.1

47.9

59.0

Prior year business combinations (b)

(0.9)

Effect of foreign currency translation

68.9

7.2

27.5

3.8

107.4

June 30, 2021

$4,355.9

$582.4

$985.2

$248.9

$6,172.4

(a)

~~Relates to reclassifications made to reportable segments in the~~Represents goodwill associated with current year. The ChampionX business was previously recorded in the Global Energy reportable segment and has been reported in discontinued operations. Goodwill was assigned to ChampionX and the Downstream operating segment, which is also a reporting unit, based on a relative fair value allocation. The Downstream operating segment, which was previously included in the Global Energy reportable segment is now reported in the Global Industrial reportable segment. In addition, the Company established the Global Healthcare & Life Sciences reportable segment which is comprised of the Healthcare and Life Sciences operating segments, which were previously included in the Global Institutional the and Global Industrial reportable segments, respectively. The Healthcare and Life Sciences operating segments were identified as reporting units both before and after the changes made to the Company’s reportable segments; accordingly, goodwill allocations were not required upon the establishment of the Global Healthcare & Life Sciences reportable segment. The Company also renamed the Global Institutional reportable segment to the Global Institutional & Specialty reportable segment. Refer to Note 16 for further information.year acquisitions.

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

~~(c)~~

~~Represents purchase price allocation adjustments for acquisitions deemed preliminary as of the end of December 31, 2019.~~Lines acquisition.

Other Intangible Assets

The Nalco trade name is the Company’s only indefinite life intangible ~~asset.~~asset, which is tested for impairment on an annual basis during the second quarter. During the second quarter of ~~2020,~~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 regarding future sales projections, royalty rates and discount rates. ~~Based on this testing,~~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; therefore, no adjustment to the $1.2 billion carrying value of this asset was necessary.~~margin. There has been 0 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 ~~combinations.~~acquisitions. The fair value of intangible assets acquired in business ~~combinations is~~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~~second quarter of 2021 and 2020 ~~and 2019~~ was ~~$58.9~~$52.2 million and ~~$51.6~~$50.8 million, respectively. Total amortization expense related to intangible assets during the first ~~nine~~six months of 2021 and 2020 was $116.7 and ~~2019 was $162.1 and $155.1~~$103.2 million, respectively. Amortization expense related to intangible assets for the remaining ~~three-month~~six-month period of ~~2020~~2021 is expected to be approximately ~~$55~~$111 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 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, 2020

June 30, 2021

(millions)

Carrying

Fair Value Measurements

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

Amount

Level 1

Level 2

Level 3

Assets

Foreign currency forward contracts

$44.7

$29.2

Interest rate swap

1.1

$1.1

Liabilities

Foreign currency forward contracts

129.8

92.3

December 31, 2019

(millions)

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

Assets

Foreign currency forward contracts

$83.9

Liabilities

Foreign currency forward contracts

10.0


	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 contracts is at fair value, which is determined based on current forward interest rates 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.~~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 ~~earn-out.~~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, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Carrying

Fair

Carrying

Fair

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

Amount

Value

Amount

Value

Long-term debt, including current maturities

$6,669.3

$7,659.9

$6,274.0

$6,861.6

$6,711.5

$7,468.3

$6,671.1

$7,704.4

9. DERIVATIVES AND HEDGING TRANSACTIONS

The Company uses foreign currency forward contracts, cross currency swap agreements, interest rate swap agreements 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 onin the ~~balance sheet~~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, 0 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 ~~Sheet.~~Sheets.

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

(millions)

Derivative Assets
Derivative Liabilities

September 30

December 31

September 30

December 31

(millions)

2020

2019

2020

2019

Derivatives designated as hedging instruments

Foreign currency forward contracts

$28.7

$67.4

$83.6

$2.1

Derivatives not designated as hedging instruments

Foreign currency forward contracts (a)

16.0

16.5

46.2

7.9

Gross value of derivatives

44.7

83.9

129.8

10.0

Gross amounts offset in the Consolidated Balance Sheet

(35.3)

(4.2)

(35.3)

(4.2)

Net value of derivatives

$9.4

$79.7

$94.5

$5.8

~~(a)~~

Foreign currency forward contract derivatives not designated as hedging instruments includes discontinued operations of $1.0 million of derivative assets and $0.6 million of derivative liabilities as of December 31, 2019.

Derivative Assets

Derivative Liabilities

June 30

December 31

June 30

December 31

(millions)

2021

2020

2021

2020

Derivatives designated as hedging instruments

Foreign currency forward contracts

$3.2

$8.1

$68.8

$54.3

Interest rate swap agreement

1.1

Derivatives not designated as hedging instruments

Foreign currency forward contracts

26.0

7.4

23.5

15.6

Gross value of derivatives

30.3

15.5

92.3

69.9

Gross amounts offset in the Consolidated Balance Sheets

(20.8)

(12.3)

(20.8)

(12.3)

Net value of derivatives

$9.5

$3.2

$71.5

$57.6

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

Notional Values

September 30

December 31
(millions)

2020

2019

Foreign currency forward contracts (a)

$ 4,269

$ 4,004

~~(a)~~

~~Foreign currency forward contract notional values include discontinued operations of approximately $9 million as of December 31, 2019.~~


	Notional Values
		June 30	December 31
(millions)		2021	2020

Foreign currency forward contracts		$ 4,331		$ 3,702
Interest rate swap agreement		250		-

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 inon the Consolidated ~~Statement~~Statements of Income as the underlying exposure being hedged. Cash flow hedged transactions impacting AOCI are forecasted to occur within the next ~~four~~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 inon the Consolidated ~~Statement~~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 inon the Consolidated ~~Statement~~Statements of Income as the underlying exposure being hedged. The difference between fair value changes of the excluded component and the amount amortized inon the Consolidated ~~Statement~~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 ~~recorded as gains or losses in interest expense and is~~ offset ~~by the gain or loss of~~against the underlying debt ~~instrument, which also is recorded in interest expense.~~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.

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

Second Quarter Ended

Line item in which the hedged item is included

June 30

(millions)

2021

2020

2021

2020

Long-term debt

$249.2

$1.1

Net Investment Hedges

The Company designates its outstanding ~~$1,365~~€1,150 million ~~(€1,150~~($1,400 million at the end of the ~~third~~second quarter of ~~2020)~~2021) senior notes (“~~euronotes”~~Euronotes”) and related accrued interest as hedges of ~~existing foreign currency~~its Euro denominated exposures ~~related to~~from the Company’s investments ~~the Company has~~ in certain ~~euro~~of its Euro denominated functional currency subsidiaries. The revaluation gains and losses on the ~~euronotes and Euro commercial paper,~~Euronotes, 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

Second Quarter Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

2020

2019

2021

2020

2021

2020

Revaluation (losses) gains, net of tax

$(83.4)

$20.9

$(87.4)

$37.0

Revaluation losses, net of tax

($14.2)

($2.9)

($26.4)

($4.0)

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								Second Quarter Ended
	September 30								June 30
	2020				2019				2021				2020
(millions)		COS	SG&A	Interest		COS	SG&A	Interest		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		$3.1	$(101.5)	$-		$3.9	$2.8	$-		($3.6)	($20.2)	$-		$3.8	($6.2)	$-
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value		-	-	(4.9)		-	-	(5.9)		-	-	5.7		-	-	8.1
Interest rate swap agreements
Amount of gain (loss) reclassified from AOCI to income		-	-	(0.2)		-	-	(0.2)		-	-	(0.6)		-	-	(0.3)

Gain (loss) on derivatives not designated as hedging instruments:
Foreign currency forward contracts
Amount of gain (loss) recognized in income (a)		-	(30.2)	11.3		-	11.2	-		-	4.5	-		-	0.7	(1.2)
Total gain (loss) of all derivative instruments		$3.1	$(131.7)	$6.2		$3.9	$14.0	$(6.1)		($3.6)	($15.7)	$5.1		$3.8	($5.5)	$6.6

	Nine Months Ended								Six Months Ended
	September 30								June 30
	2020				2019				2021				2020
(millions)		COS	SG&A	Interest		COS	SG&A	Interest		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		$9.1	$(108.8)	$-		$13.0	$22.3	$-		($4.6)	($37.4)	$-		$6.0	($7.3)	$-
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value		-	-	8.6		-	-	8.4		-	-	11.3		-	-	13.5
Interest rate swap agreements
Amount of gain (loss) reclassified from AOCI to income		-	-	(0.7)		-	-	(0.7)		-	-	(1.2)		-	-	(0.5)

Gain (loss) on derivatives in fair value hedging relationship:
Interest rate swaps
Hedged items		-	-	-		-	-	0.2
Derivatives designated as hedging instruments		-	-	-		-	-	(0.2)

Gain (loss) on derivatives not designated as hedging instruments:
Foreign currency forward contracts
Amount of gain (loss) recognized in income (a)		-	(12.3)	11.3		-	25.2	-		-	5.8	-		-	17.9	-
Total gain (loss) of all derivative instruments		$9.1	$(121.1)	$19.2		$13.0	$47.5	$7.7		($4.6)	($31.6)	$10.1		$6.0	$10.6	$13.0

(a)

Gain (loss) on derivatives not designated as hedging instruments recognized in income recorded in SG&A includes discontinued operations of ~~$(0.2) million~~($2.2) and ($2.5) in the ~~third~~second quarter ~~of 2019,~~ and ~~$(2.5) million and $(1.7) million for the~~ first ~~nine~~six months of 2020, ~~and 2019,~~ respectively.

Subsequent Events

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.

Also in July 2021, the Company entered into a cross currency swap agreement with a notional amount of €300 million maturing in 2030. The cross currency swap 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.

10. OTHER COMPREHENSIVE INCOME (LOSS) INFORMATION

Other comprehensive income (loss) includes net income, foreign currency translation adjustments, ~~unrecognized gains and losses on securities,~~ 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

Second Quarter Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

2020

2019

2021

2020

2021

2020

Derivative and Hedging Instruments

Unrealized gains (losses) on derivative & hedging instruments

Unrealized (losses) gains on derivative & hedging instruments

Amount recognized in AOCI

$(126.2)

$0.1

$(108.3)

$40.2

($18.7)

$8.1

($30.9)

$17.9

(Gains) losses reclassified from AOCI into income

Losses (gains) reclassified from AOCI into income

COS

(3.1)

(3.9)

(9.1)

(13.0)

3.6

(3.8)

4.6

(6.0)

SG&A

101.5

(2.8)

108.8

(22.3)

20.2

6.2

37.4

7.3

Interest (income) expense, net

5.1

6.1

(7.9)

(7.7)

(5.1)

(7.8)

(10.1)

(13.0)

103.5

(0.6)

91.8

(43.0)

18.7

(5.4)

31.9

(11.7)

Other activity

(0.2)

(0.3)

(0.2)

(0.4)

(0.4)

(0.7)

Tax impact

3.8

(0.1)

2.6

0.3

1.2

(0.6)

1.1

(1.2)

Net of tax

$(19.1)

$(0.9)

$(14.1)

$(2.9)

$0.8

$2.1

$1.4

$5.0

Pension and Postretirement Benefits

Amount recognized in AOCI

Current period net actuarial gain

$145.0

Amount reclassified from AOCI into income

Amortization of net actuarial loss and prior service costs and benefits

15.0

44.3

0.2

Settlement charge

19.6

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

21.7

14.6

43.5

29.4

15.0

44.3

0.2

186.3

14.6

208.1

29.4

Other activity

(29.8)

6.0

(21.5)

9.3

(7.8)

6.6

(18.4)

8.3

Tax impact

(3.7)

(0.2)

(10.8)

(0.3)

(45.1)

(3.6)

(50.4)

(7.2)

Net of tax

$(18.5)

$5.8

$12.0

$9.2

$133.4

$17.6

$139.3

$30.5

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

Third Quarter Ended

Nine Months Ended

Second Quarter Ended

Six Months Ended

September 30

June 30

2020

2019

2020

2019

2021

2020

2021

2020

(millions)

Derivative (gains) losses reclassified from AOCI into income, net of tax

$78.2

$(0.5)

$69.4

$(32.5)

Derivative losses (gains) reclassified from AOCI into income, net of tax

$14.2

($4.0)

$24.2

($8.8)

Pension and postretirement benefits net actuarial losses

and prior services costs reclassified from AOCI into income, net of tax

(18.5)

5.8

12.0

9.2

Pension and postretirement benefits amortization of net actuarial losses

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

23.5

17.6

29.4

30.5

11. SHAREHOLDERS’ EQUITY

Share Repurchase Authorization

In February 2015, the Company’s Board of Directors authorized the repurchase of up to 20 million shares of its common stock, including shares to be repurchased under Rule 10b5–1. As of ~~September~~June 30, ~~2020, 6,342,568~~2021, 6,008,299 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 ~~first nine~~six months of ~~2020,~~2021, the Company reacquired ~~648,222~~333,690 shares of its common stock, of which ~~462,442~~231,647 related to share repurchases through open market ~~or private purchases,~~ and ~~185,780~~102,043 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

During all of ~~2019,~~2020, the Company reacquired ~~1,986,241~~761,245 shares of its common stock, of which ~~1,846,384~~565,064 related to share repurchases through open market or private purchases and ~~139,857~~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 122.2 million 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				Second Quarter Ended				Six Months Ended
	September 30				September 30				June 30				June 30
(millions, except per share)	2020		2019		2020		2019		2021		2020		2021		2020

Net income from continuing operations attributable to Ecolab		$246.2		$435.9		$667.1		$1,030.9		$310.8		$128.9		$504.4		$420.9
Net (loss) income from discontinued operations		-		28.3		(2,172.5)		98.4
Net (loss) income attributable to Ecolab		$246.2		$464.2		$(1,505.4)		$1,129.3
Net loss from discontinued operations										-		(2,163.9)		-		(2,172.5)
Net income (loss) attributable to Ecolab										$310.8		($2,035.0)		$504.4		($1,751.6)

Weighted-average common shares outstanding
Basic		285.4		288.1		287.5		288.0		286.0		288.2		286.0		288.5
Effect of dilutive stock options and units		3.0		4.7		3.3		4.5		2.8		3.3		2.9		3.5
Diluted		288.4		292.8		290.8		292.5		288.8		291.5		288.9		292.0

Earnings (loss) attributable to Ecolab per common share
Basic EPS
Continuing operations		$ 0.86		$ 1.51		$ 2.32		$ 3.58		$ 1.09		$ 0.45		$ 1.76		$ 1.46
Discontinued operations		$ -		$ 0.10		$ (7.56)		$ 0.34		$ -		($ 7.51)		-		(7.53)
Earnings (loss) attributable to Ecolab		$ 0.86		$ 1.61		$ (5.24)		$ 3.92		$ 1.09		($ 7.06)		$ 1.76		($ 6.07)
Diluted EPS
Continuing operations		$ 0.85		$ 1.49		$ 2.29		$ 3.52		$ 1.08		$ 0.44		$ 1.75		$ 1.44
Discontinued operations		$ -		$ 0.10		$ (7.47)		$ 0.34		$ -		($ 7.42)		-		(7.44)
Earnings (loss) attributable to Ecolab		$ 0.85		$ 1.59		$ (5.18)		$ 3.86		$ 1.08		($ 6.98)		$ 1.75		($ 6.00)

Anti-dilutive securities excluded from the computation of diluted EPS		1.0		-		1.0		-		1.1		1.0		1.1		1.0

Amounts do not necessarily sum due to rounding.

13. INCOME TAXES

The Company’s tax rate was ~~14.5%~~21.5% and ~~15.9%~~9.5% for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~13.2%~~23.0% and ~~16.2%~~12.4% for the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, respectively. The change in the Company’s tax rate for the ~~third~~second quarter and first six months of ~~2020~~2021 compared to the ~~third~~second quarter ~~of 2019 was driven primarily by the impact of special (gains)~~ and ~~charges. The change in the Company’s tax rate for the~~ first ~~nine~~six months of 2020 ~~compared to the first nine months of 2019~~ was driven primarily by the impact of discrete tax ~~items and special (gains) and charges.~~items. Further information related to special (gains) and charges is included in Note 2.

The Company recognized net tax expense related to discrete tax items of $7.7 million and $23.8 million in the second quarter and first six months of 2021, respectively. This included tax expense of $9.5 million related to prior year returns in the second quarter and first six months of 2021, and a deferred tax benefit of $0.9 million and deferred tax expense of $24.2 million associated with transferring certain intangible property between affiliates in the second quarter and first six months of 2021, respectively. Share-based compensation excess tax benefit was $4.2 million and $10.8 million in the second quarter and first six months of 2021. The amount of this tax benefit is subject to variation in stock price and award exercises. The remaining discrete tax expense of $3.3 million and $0.9 million during the quarter and first six months of 2021, respectively, was primarily due to other changes in estimates.

The Company recognized net tax benefits related to discrete tax items of ~~$12.4~~$22.5 million and ~~$56.8~~$44.4 million in the ~~third~~second quarter and first ~~nine~~six months of 2020, respectively. Share-based compensation excess tax benefit contributed ~~$3.4~~$23.3 million and ~~$49.0~~$45.6 million in the ~~third~~second quarter and first ~~nine~~six months of ~~2020, respectively.~~2020. Additionally, the Company recognized ~~a net tax benefit~~expense of ~~$6.9~~$0.6 million and ~~$2.4~~$4.5 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~~second quarter and first ~~nine~~six months of 2020, respectively. The remaining discrete ~~net tax~~expense of $0.2 million and benefit of ~~$2.1 million and $5.4~~$3.3 million was due to the ~~net release~~accrual of ~~reserves for~~interest on uncertain tax positions offset by reserves released during the ~~third~~ quarter and first ~~nine~~six months of 2020, respectively.

The Company recognized a net tax benefit related to discrete tax items of $13.6 million and $39.8 million in the third quarter and first nine months of 2019, respectively. Share-based compensation excess tax benefit contributed $7.9 million and $39.4 million in the third quarter and first nine months of 2019, respectively. The Company also recognized a net tax benefit of $4.3 million and $3.2 million in the third quarter and first nine months of 2019, respectively, due to finalization of certain estimates due to the 2018 U.S. federal tax return, for the one-time transition tax imposed by the Tax Cuts and Jobs Act (the “Act”). Additionally, the Company recognized a net tax benefit of $1.1 million related to foreign audit settlements and related reserve releases during the quarter. The remaining net discrete benefit (expense) was primarily due to changes in estimates in non-U.S. jurisdictions and from the 2018 U.S. federal tax return.

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 ~~for~~ benefits ~~to employees~~ 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 expense in 2021.

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

U.S.

International

U.S. Postretirement

Pension

Pension

Health Care

(millions)

2020

2019

2020

2019

2020

2019

Service cost (a)

$16.5

$18.2

$7.9

$7.5

$0.3

$0.3

Interest cost on benefit obligation

17.7

22.3

5.5

7.8

0.8

1.4

Expected return on plan assets

(38.2)

(37.4)

(15.7)

(14.8)

(0.1)

(0.1)

Recognition of net actuarial loss (gain)

13.0

5.9

6.6

4.1

(0.1)

(1.0)

Amortization of prior service benefit

(1.6)

(2.9)

(0.1)

(0.3)

(2.9)

(5.8)

Total expense (benefit)

$7.4

$6.1

$4.2

$4.3

$(2.0)

$(5.2)


	U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care
(millions)	2021		2020		2021		2020		2021		2020
Service cost (a)		$10.8		$17.1		$8.2		$7.7		$0.2		$0.3
Interest cost on benefit obligation		12.5		17.5		4.4		5.3		0.7		1.1
Expected return on plan assets		(38.6)		(38.2)		(17.7)		(15.4)		(0.1)		(0.1)
Recognition of net actuarial loss (gain)		16.2		13.0		7.3		6.3		0.2		-
Amortization of prior service benefit		(1.7)		(1.8)		(0.3)		-		-		(2.8)
Curtailments and settlements (b)		19.6		-		-		-		-		-
Total expense (benefit)		$18.8		$7.6		$1.9		$3.9		$1.0		($1.5)

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


	U.S.				International				U.S. Postretirement				U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care				Pension				Pension				Health Care
(millions)	2020		2019		2020		2019		2020		2019		2021		2020		2021		2020		2021		2020
Service cost (a)		$51.9		$54.6		$23.2		$22.7		$0.9		$1.0		$21.6		$34.2		$16.1		$15.3		$0.4		$0.6
Interest cost on benefit obligation		52.7		66.8		16.1		23.5		2.9		4.2		25.0		35.0		8.7		10.6		1.4		2.1
Expected return on plan assets		(114.6)		(112.2)		(46.7)		(45.1)		(0.3)		(0.3)		(77.2)		(76.4)		(35.3)		(31.0)		(0.2)		(0.2)
Recognition of net actuarial (gain) loss		39.0		17.7		19.2		12.3		-		(3.0)		32.4		26.0		14.5		-		0.4		0.1
Amortization of prior service benefit		(5.4)		(8.6)		(0.1)		(0.8)		(8.4)		(17.4)		(3.4)		(3.8)		(0.4)		12.6		-		(5.5)
Curtailments and settlements (b)														19.6		-		-		-		-		-
Total expense (benefit)		$23.6		$18.3		$11.7		$12.6		$(4.9)		$(15.5)		$18.0		$15.0		$3.6		$7.5		$2.0		($2.9)

(a)

Service cost includes discontinued operations of ~~$1.6~~$1.0 and $2.5 in the ~~third~~second quarter ~~of 2019~~ and ~~$2.5 and $4.7 for the~~ first ~~nine~~six months of 2020, ~~and 2019,~~ respectively. ~~There~~

(b)

Settlement expense was ~~no service cost included in discontinued operations~~recognized as special charges in the ~~third~~second quarter and first six months of ~~2020.~~2021.

Service cost is included as employee compensation cost within either cost of sales or selling, general and administrative expenses inon the Consolidated ~~Statement~~Statements of Income based on employee roles, while non-service components are included in other expense (income) ~~expense in~~on the Consolidated ~~Statement~~Statements of Income.

As of ~~September~~June 30, ~~2020,~~2021, the Company is in compliance with all funding requirements of each of its defined benefit plans.

During the first ~~nine~~six months of ~~2020,~~2021, the Company made contributions of $9$6 million to its U.S. non-contributory non-qualified defined benefit plans and estimates it will contribute an additional $4$8 million to such plans during the remainder of ~~2020.~~2021.

During the first ~~nine~~six months of ~~2020,~~2021, the Company made contributions of ~~$33~~$24 million to its international pension benefit plans and estimates it will contribute an additional ~~$10~~$21 million to such plans during the remainder of ~~2020.~~2021.

During the first ~~nine~~six months of ~~2020,~~2021, the Company made contributions of $8$6 million to its U.S. postretirement health care benefit plans and estimates it will contribute an additional $3$6 million to such plans during the remainder of ~~2020.~~2021.

15. REVENUES

Revenue Recognition

Product and Sold Equipment

Product revenue is generated from sales of cleaning, sanitizing, water and colloidal silica ~~products sold to customers.~~products. In addition, the Company sells equipment which may be used in combination with its specialized products. Revenue recognized from product and ~~sold~~ 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. ~~Services provided in Other primarily includes services designed to detect, eliminate and prevent pests.~~ Global Industrial segment services are associated with water treatment and paper process ~~applications,~~applications. Global Institutional & Specialty segment services include ~~water treatment~~cleaning and sanitizing programs ~~and process applications,~~ and wash process ~~solutions and~~solutions. Global Healthcare & Life Sciences segment services include pharmaceutical, personal care, infection and containment control solutions. ~~Revenue recognized from leased equipment~~Revenues included in Other primarily ~~relates~~relate to ~~warewashing~~services designed to detect, eliminate and ~~water treatment equipment.~~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 ~~for~~recognized from leased equipment ~~is accounted for under Topic 842 Leases~~primarily relates to warewashing and water treatment equipment recognized on a straight-line basis over the length of the lease ~~contract.~~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 ~~& Specialty~~ 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

Second Quarter Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

2020

2019

2021

2020

2021

2020

Operating lease revenue*

$84.9

$103.0

$258.2

$306.8

$105.6

$65.4

$203.0

$173.3

*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
September 30
(millions)

2020

2019

2020

2019

Global Industrial

Product and sold equipment

$1,265.2

$1,308.6

$3,728.5

$3,822.1

Service and lease equipment

205.0

204.0

600.9

592.7

Global Institutional & Specialty

Product and sold equipment

756.5

966.9

2,241.5

2,759.8

Service and lease equipment

139.8

181.2

429.9

519.5

Global Healthcare & Life Sciences

Product and sold equipment

291.5

220.3

785.5

660.8

Service and lease equipment

30.0

21.4

78.3

60.3

Other

Product and sold equipment

66.6

96.0

203.1

268.9

Service and lease equipment

217.1

225.6

598.0

633.7

Corporate

Product and sold equipment

46.6

-

58.9

-

Service and lease equipment

0.3

-

0.3

-

Total

Total product and sold equipment

$2,426.4

$2,591.8

$7,017.5

$7,511.6

Total service and lease equipment

$592.2

$632.2

$1,707.4

$1,806.2

2726

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

Global

Global Institutional

Global Healthcare

Second Quarter Ended

Six Months Ended

Industrial

& Specialty

& Life Sciences

Other

Corporate

June 30

(millions)

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2021

2020

2021

2020

North America

$683.6

$722.1

$654.0

$840.1

$113.1

$103.8

$175.8

$197.0

$34.9

Europe

325.2

303.3

127.0

162.8

172.4

127.9

59.2

71.4

2.4

Asia Pacific

180.4

191.5

47.0

59.2

27.8

5.0

15.0

18.9

1.4

Latin America

117.2

134.3

32.2

42.0

2.7

1.0

13.5

13.2

6.6

Greater China

86.0

81.5

26.7

30.4

0.8

0.5

16.7

16.8

0.4

Middle East and Africa

77.8

79.9

9.4

13.6

4.7

3.5

3.5

4.3

1.2

Global Industrial

Product and sold equipment

$1,327.5

$1,230.4

$2,555.0

$2,461.5

Service and lease equipment

217.0

193.9

420.5

395.9

Global Institutional & Specialty

Product and sold equipment

805.1

598.3

1,507.8

1,490.0

Service and lease equipment

170.9

111.8

325.6

290.2

Global Healthcare & Life Sciences

Product and sold equipment

272.9

272.8

536.0

495.8

Service and lease equipment

28.9

26.6

58.5

48.3

Other

Product and sold equipment

74.2

53.3

141.3

131.5

Service and lease equipment

231.3

186.3

434.9

380.8

Corporate

Product and sold equipment

34.7

12.3

67.7

12.3

Service and lease equipment

0.2

0.4

Total

$1,470.2

$1,512.6

$896.3

$1,148.1

$321.5

$241.7

$283.7

$321.6

$46.9

Total product and sold equipment

$2,514.4

$2,167.1

$4,807.8

$4,591.1

Total service and lease equipment

$648.3

$518.6

$1,239.9

$1,115.2

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


	Global				Global Institutional				Global Healthcare												Global				Global Institutional				Global Healthcare
	Industrial				& Specialty				& Life Sciences				Other				Corporate				Industrial				& Specialty				& Life Sciences				Other				Corporate
(millions)	2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
																					2021		2020		2021		2020		2021		2020		2021		2020		2021		2020

North America		$2,033.2		$2,105.9		$1,926.3		$2,392.4		$325.7		$307.0		$496.7		$551.8		$47.2		$-		$692.8		$658.0		$734.5		$492.7		$108.7		$104.4		$187.7		$152.5		$25.0		$12.3
Europe		915.0		886.1		375.6		463.5		464.5		385.3		164.2		196.5		2.4		-		342.1		308.6		120.9		106.1		171.1		171.6		62.9		45.2		1.2		-
Asia Pacific		548.8		564.6		153.0		174.4		51.7		13.2		48.2		54.9		1.4		-		197.6		184.7		50.3		46.8		14.8		13.4		19.7		14.4		1.3		-
Latin America		362.2		390.2		102.3		121.8		5.5		3.2		36.3		37.7		6.6		-		134.3		115.9		31.1		30.5		0.6		1.8		12.7		10.6		6.2		-
Greater China		240.0		238.2		82.8		89.5		2.5		1.5		45.0		48.9		1.2		-		95.5		79.0		29.9		22.4		1.5		1.8		19.3		14.8		0.6		-
Middle East and Africa		230.2		229.8		31.4		37.7		13.9		10.9		10.7		12.8		0.4		-
India, Middle East and Africa																						82.2		78.1		9.3		11.6		5.1		6.4		3.2		2.1		0.6		-
Total		$4,329.4		$4,414.8		$2,671.4		$3,279.3		$863.8		$721.1		$801.1		$902.6		$59.2		$-		$1,544.5		$1,424.3		$976.0		$710.1		$301.8		$299.4		$305.5		$239.6		$34.9		$12.3

Net sales at public exchange rates by geographic region for the six months ended June 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		$1,329.2		$1,349.6		$1,357.2		$1,272.3		$207.4		$212.4		$348.5		$320.9		$47.7		$12.3
Europe		655.2		589.8		228.2		248.6		346.7		291.5		120.7		104.9		1.8		-
Asia Pacific		387.0		368.4		101.6		108.5		25.5		23.9		37.8		30.7		2.7		-
Latin America		259.5		245.0		62.4		70.6		1.1		2.8		24.7		22.3		12.7		-
Greater China		189.8		152.4		66.1		56.1		2.7		3.3		38.2		28.3		1.2		-
India, Middle East and Africa		154.8		152.2		17.9		24.1		11.1		10.2		6.3		5.2		2.0		-
Total		$2,975.5		$2,857.4		$1,833.4		$1,780.2		$594.5		$544.1		$576.2		$512.3		$68.1		$12.3

Net sales by geographic region were determined based on origin of sale. Revenues in the United States made up 52% and ~~54%~~53% of total during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~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 $19.3 million and $14.2 million as of June 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:


	Six Months Ended
	June 30
(millions)	2021		2020

Beginning balance		$84.3		$55.5
Adoption of new standard		-		4.3
Bad debt expense		7.1		47.1
Write-offs		(8.5)		(15.6)
Other (a)		(2.8)		(5.0)
Ending balance (b)		$80.1		$86.3

(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

June 30

June 30

(millions)

2020

2019

2021

2020

Contract liability as of beginning of the year

$76.7

$67.7

$80.4

$76.7

Revenue recognized in the year from:

Revenue recognized in the period from:

Amounts included in the contract liability at the beginning of the year

(76.7)

(67.7)

(80.4)

(76.7)

Increases due to billings excluding amounts recognized as revenue during the year ended

84.0

75.1

Increases due to billings excluding amounts recognized as revenue during the period ended

87.9

73.5

Business combinations

0.6

0.2

0.5

Contract liability as of end of period

$84.6

$75.3

$87.9

$74.0

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 3 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

Effective in the first quarter of 2020, and in anticipation of the separation of the Upstream Energy business, the Company created the Upstream and Downstream operating segments and reporting units from the Global Energy operating segment and reporting unit, which was also a reportable segment. The Downstream operating segment, which was previously included in the Global Energy reportable segment has been aggregated into the Global Industrial reportable segment. The table below reflects the elimination of the Global Energy reportable segment and creation of the Downstream operating segment, which is reported in the Global Industrial reportable segment. Also, in the first quarter of 2020, the Company announced leadership changes which allow for shared oversight and focus on the Healthcare and Life Sciences operating segments and established the Global Healthcare & Life Sciences reportable segment. This segment is comprised of the Healthcare operating segment which was previously aggregated in the Global Institutional reportable segment and the Life Sciences operating segment which was previously aggregated in the Global Industrial reportable segment. Additionally, the table reflects the Textile Care operating segment being reported in Other, which had previously been aggregated in the Global Industrial reportable segment. The Company also renamed the Global Institutional reportable segment to the Global Institutional & Specialty reportable segment. The Company made other immaterial changes, including the movement of certain customers and cost allocations between reportable segments. These changes are presented in "Segment Change" columns of the table below.

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 ~~2020~~2021 and have been updated from the ~~2019~~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 ChampionX business, which includes the direct revenues, operating expenses and certain other expenses directly attributable to the ChampionX business, is reflected in the Company’s historical financial statements as discontinued operations. Allocations of overhead expenses included in historical Upstream Energy segment results are reallocated to the remaining segments. These changes are presented in the “Discontinued operations and related allocation changes” columns“Other” column shown in the table ~~below.~~

reflects immaterial changes between segments, primarily cost allocations.

2928

The impact of the preceding changes on previously reported full year ~~2019~~2020 reportable segment net sales and operating income is summarized as follows:


	December 31, 2019										December 31, 2020
									Discontinued
	2019 Reported					Fixed	2019 Reported		Operations and	2019 Revised	2020 Reported					Fixed	2020 Reported
	Valued at 2019		Segment		Currency		Valued at 2020		Related Allocation	Valued at 2020	Valued at 2020				Currency		Valued at 2021
(millions)	Management Rates		Change		Rate Change		Management Rates		Charges	Management Rates	Management Rates		Other		Rate Change		Management Rates
Net Sales
Global Industrial		$5,569.9		$479.2		$(52.7)		$5,996.4	$(1.8)	$5,994.6		$5,959.9		($3.7)		$92.0		$6,048.2
Global Institutional & Specialty		5,235.5		(800.1)		(23.3)		4,412.1	-	4,412.1		3,577.2		9.3		42.5		3,629.0
Global Healthcare & Life Sciences		-		991.7		(12.7)		979.0	-	979.0		1,189.1		3.7		48.3		1,241.1
Upstream Energy		-		2,350.0		2.9		2,352.9	(2,352.9)	-
Global Energy		3,334.0		(3,334.0)		-		-	-	-
Other		907.5		313.2		(9.0)		1,211.7	-	1,211.7		1,093.3		(9.3)		19.4		1,103.4
Corporate												102.4		-		(1.8)		100.6
Subtotal at fixed currency rates		15,046.9		-		(94.8)		14,952.1	(2,354.7)	12,597.4		11,921.9		-		200.4		12,122.3
Effect of foreign currency translation		(140.6)		-		94.8		(45.8)	10.4	(35.4)		(131.7)		-		(200.4)		(332.1)
Consolidated reported GAAP net sales		$14,906.3		$-		$-		$14,906.3	$(2,344.3)	$12,562.0		$11,790.2		$-		$-		$11,790.2

Operating Income
Global Industrial		$854.7		$133.4		$(7.5)		$980.6	$(77.9)	$902.7		$1,106.0		($0.2)		$17.3		$1,123.1
Global Institutional & Specialty		1,042.2		(93.4)		(1.5)		947.3	(7.5)	939.8		321.9		(0.3)		2.4		324.0
Global Healthcare & Life Sciences		-		136.7		(1.6)		135.1	(10.6)	124.5		207.6		0.7		10.0		218.3
Upstream Energy		-		188.2		(0.3)		187.9	(187.9)	-
Global Energy		379.1		(379.1)		-		-	-	-
Other		167.3		14.2		(0.9)		180.6	(13.6)	167.0		131.5		(0.2)		1.5		132.8
Corporate		(409.1)		-		1.2		(407.9)	128.2	(279.7)		(347.5)		-		(2.2)		(349.7)
Subtotal at fixed currency rates		2,034.2		-		(10.6)		2,023.6	(169.3)	1,854.3		1,419.5		-		29.0		1,448.5
Effect of foreign currency translation		(20.4)		-		10.6		(9.8)	0.7	(9.1)		(23.8)		-		(29.0)		(52.8)
Consolidated reported GAAP operating income		$2,013.8		$-		$-		$2,013.8	$(168.6)	$1,845.2		$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				Second Quarter Ended				Six Months Ended
	September 30				September 30				June 30				June 30
(millions)	2020		2019		2020		2019		2021		2020		2021		2020
Net Sales
Global Industrial		$1,491.1		$1,517.1		$4,410.3		$4,414.8		$1,555.4		$1,498.5		$2,989.3		$2,963.5
Global Institutional & Specialty		901.3		1,150.6		2,695.8		3,283.3		978.9		733.0		1,837.4		1,820.2
Global Healthcare & Life Sciences		320.9		243.9		875.0		723.7		303.5		321.4		597.2		578.2
Other		285.7		323.1		810.4		904.0		306.6		249.1		577.9		528.7
Corporate		48.2		-		60.5		-		35.0		12.3		68.2		12.3
Subtotal at fixed currency rates		3,047.2		3,234.7		8,852.0		9,325.8		3,179.4		2,814.3		6,070.0		5,902.9
Effect of foreign currency translation		(28.6)		(10.7)		(127.1)		(8.0)		(16.7)		(128.6)		(22.3)		(196.6)
Consolidated reported GAAP net sales		$3,018.6		$3,224.0		$8,724.9		$9,317.8		$3,162.7		$2,685.7		$6,047.7		$5,706.3

Operating Income
Global Industrial		$297.8		$249.8		$787.4		$632.1		$263.3		$287.8		$482.5		$497.4
Global Institutional & Specialty		82.6		280.9		228.0		690.1		138.6		(38.0)		201.7		145.7
Global Healthcare & Life Sciences		66.0		36.3		154.5		92.3		48.3		69.0		93.9		93.0
Other		45.2		51.4		88.1		119.0		51.3		20.8		84.2		42.6
Corporate		(74.4)		(66.5)		(255.7)		(202.6)		(51.4)		(128.1)		(114.4)		(183.2)
Subtotal at fixed currency rates		417.2		551.9		1,002.3		1,330.9		450.1		211.5		747.9		595.5
Effect of foreign currency translation		(5.8)		(2.9)		(22.7)		(3.9)		(2.3)		(19.5)		(2.8)		(27.3)
Consolidated reported GAAP operating income		$411.4		$549.0		$979.6		$1,327.0		$447.8		$192.0		$745.1		$568.2

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.

3129

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 to lease commitments.

The Company records liabilities ~~where~~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.

3230

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 ~~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~~	~~The Company is currently evaluating the impact of adoption.~~

~~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 and varies based on expedient elected.~~2022.	The Company has not elected any expedients to date and adoption of this standard is ~~currently evaluating any potential future impacts~~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 ~~2018-15~~2019-12 - ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)~~Income Taxes (Topic 740): ~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)~~Income Taxes	~~August 2018~~December 2019	~~Aligns~~Simplifies the ~~requirements~~accounting for ~~capitalizing implementation costs incurred in a hosting arrangement that is a service contract with~~income taxes by removing certain exceptions to the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments require an entity (customer) in a hosting arrangement that is a service contract to determine which implementation costs to capitalize as an assetgeneral principles related to the ~~service contract~~approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and ~~which costs to expense.~~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, ~~2020~~2021	~~The Company adopted the prospective transition method.~~ Adoption of this ~~guidance~~standard did not have a material impact on the Company's financial statements.

~~ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans~~	~~August 2018~~	Modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This includes, but is not limited to, the removal of the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, and the addition of a requirement to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.	~~January 1, 2020~~	Adoption of the standard did not impact the Company's consolidated balance sheet or income statement. Annual disclosure requirements will be updated to align with the new standard, and changes in disclosure will not be material.

~~ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~	~~January 2017~~	Simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.	~~January 1, 2020~~	The new standard changes the manner of how goodwill impairment losses are measured when the carrying amount of a reporting unit exceeds its fair value. Adoption of this standard will impact the financial statements to the extent the carrying amount of any of the Company's reporting units exceeds their fair values during future goodwill assessments.

Credit Losses ASUs: ASU 2019-11 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief ASU 2018-19 - Codification Improvements to Topic 326,	~~Various~~	Addresses the recognition, measurement, presentation and disclosure of credit losses on trade and reinsurance receivables, loans, debt securities, net investments in leases, off-balance-sheet credit exposures and certain other instruments. Amends	~~January 1, 2020~~	~~The Company adopted the standard for expected credit losses using the modified retrospective approach. The effects of adoption were reflected as a $4.3 million reduction to~~

Financial Instruments - Credit Losses ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments				guidance on reporting credit losses from an incurred model to an expected model for assets held at amortized cost, such as accounts receivable, loans and held-to-maturity debt securities. Additional disclosures will also be required.				retained earnings as of January 1, 2020 and did not materially impact the Company's consolidated balance sheet, income statement or cash flows. Additional information regarding the impact of this guidance on the Company's financial statements at the bottom of this table in note (a).

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

~~(a)~~

~~Accounts Receivable and Allowance for Doubtful Accounts~~

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 $15.3 million and $15.5 million as of September 30, 2020 and 2019, 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)

2020

2019

Beginning balance

$55.5

$52.4

Adoption of new standard

4.3

-

Bad debt expense (b)

54.6

16.9

Write-offs

(25.0)

(14.2)

Other (c)

(1.2)

(1.5)

Ending balance

$88.2

$53.6

~~(b)~~

~~Bad debt expense in 2020 reflects the impact of deteriorations and increased uncertainty in the macroeconomic outlook, primarily the Institutional customer base, as a result of the COVID-19 pandemic.~~

~~(c)~~

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

3431

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~Shareholders and~~ Board of Directors and Shareholders of Ecolab Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidatedbalance sheet ofEcolab Inc.and its subsidiaries ~~(the~~(the “Company”) as of ~~September~~June 30, ~~2020,~~2021, and the relatedconsolidated statements of income, comprehensive income, and equityfor the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, and the consolidated statements of cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~ 2020,including the related notes (collectively referred to as the “interim financialstatements”).Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financialstatementsforthem 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, ~~2019,~~2020, and the related consolidated statements of income, comprehensive income, equity and cash flowsfor the year then ended (not presented herein), and in our report dated February 28, 2020, except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of discontinued operations and the change in composition of reportable segments discussed in Note 1 of those financial statements, as to which the date is September 25, 2020,26, 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, ~~2019,~~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 30, 2020~~August 5, 2021

3532

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, ~~2019.~~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 ~~previously announced~~ separation of ~~its~~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 ~~it is~~the separation of ChampionX business was a strategic shift in business that ~~has~~had a major effect on our operations and financial results. Therefore, we ~~report~~reported the historical results of ChampionX, including the results of operations, cash flows, and related assets and liabilities, as discontinued ~~operations for all periods presented herein.~~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.

~~Comparability of Reportable Segments~~

Effective in the first quarter of 2020, and in anticipation of the separation of the Upstream Energy business, we created the Upstream and Downstream operating segments and reporting units from the Global Energy operating segment and reporting unit, which was also a reportable segment. The Downstream operating segment, which was previously included in the Global Energy reportable segment has been aggregated into the Global Industrial reportable segment. The table below reflects the elimination of the Global Energy reportable segment and creation of the Downstream operating segment. Also, in the first quarter of 2020, we announced leadership changes which allow for shared oversight and focus on the Healthcare and Life Sciences operating segments and established the Global Healthcare & Life Sciences reportable segment. This segment is comprised of the Healthcare operating segment which was previously aggregated in the Global Institutional reportable segment and the Life Sciences operating segment which was previously aggregated in the Global Industrial reportable segment. Additionally, the Textile Care operating segment being reported in Other, which had previously been aggregated in the Global Industrial reportable segment. We also renamed the Global Institutional reportable segment to the Global Institutional & Specialty reportable segment. We made other immaterial changes, including the movement of certain customers and cost allocations between reportable segments.

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 sales are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.

3633

~~CRITICAL ACCOUNTING ESTIMATES~~OVERVIEW OF THE SECOND QUARTER ENDED JUNE 30, 2021

In our report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on February 28, 2020, we disclosed our Critical Accounting Estimates. The discussion below provides an update to the Critical Accounting Estimates and should be read together with the full list of Critical Accounting Estimates set forth in the aforementioned Form 10-K.

~~Goodwill~~

~~We had total goodwill of $6.0 billion and $5.6 billion as of September 30, 2020 and December 31, 2019, respectively.~~ Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Our reporting units are our operating segments. We assess goodwill for impairment on an annual basis during the second quarter. If circumstances change significantly, we would complete an interim goodwill assessment of a reporting unit’s goodwill prior to its next annual assessment.

During the second quarter of 2020, we completed our annual goodwill impairment assessment for each of its eleven reporting units using quantitative analyses consisting of discounted cash flow approaches that incorporated assumptions regarding future growth rates, terminal values, and discount rates. If the carrying value of a reporting unit is greater than its fair value, we will recognize an impairment loss for the amount by which the reporting unit’s carrying value exceeds its fair value, but not to exceed the carrying amount of goodwill assigned to that reporting unit. Our goodwill impairment assessment for 2020 indicated the estimated fair values of each of its reporting units exceeded their carrying amounts by significant margins.

~~OVERVIEW OF THE THIRD QUARTER ENDED SEPTEMBER 30, 2020~~

Sales Performance

When comparing ~~third~~second quarter ~~2020~~2021 against ~~third~~second quarter ~~2019,~~2020, sales performance was as follows:

●	Reported net sales ~~decreased 6%~~increased 18% to ~~$3,019~~$3,163 million, fixed currency sales increased 13% and acquisition adjusted fixed currency sales ~~decreased 6% and 8%, respectively.~~increased 12%.

●

Fixed currency sales for our Global Industrial segment ~~decreased 2%~~increased 4% to ~~$1,491 million, acquisition~~$1,555 million. Acquisition adjusted fixed currency sales ~~decreased~~increased 3%, as ~~modest~~strong growth in Water and Paper, led by recovering market conditions and new business wins, as well as improving trends in Food & Beverage, ~~was~~ more than offset by lower ~~volumes in the other Industrial businesses.~~Downstream sales that reflected low-margin refinery business exits.

●

Fixed currency sales for our Global Institutional & Specialty segment ~~decreased 22%~~increased 34% to ~~$901 million. Acquisition~~$979 million and acquisition adjusted fixed currency sales ~~also decreased 22%, driven by a significant decline in the~~increased 33%. Strong growth in the Institutional operating segment reflected recovering markets, new business ~~where continued~~wins and pricing. Specialty sales declined versus last year’s strong ~~sanitizing product sales were more than offset by significantly reduced restaurant, lodging and entertainment facility demand due to the~~gain that benefited from COVID-19 ~~pandemic’s impact on travel and dining.~~related orders.

●

Fixed currency sales for our Global Healthcare & Life Sciences segment ~~increased 32%~~decreased 6% to ~~$321~~$304 million. Acquisition adjusted fixed currency sales ~~increased 29%, driven by increased~~decreased 8% compared to a 20% increase last year when sales ~~due to the~~benefited from strong COVID-19 related ~~demand in both the~~demand. Underlying Healthcare and Life Sciences ~~businesses.~~growth remained strong, driven by new business wins and increased hygiene awareness.

●

Fixed currency sales and acquisition adjusted fixed currency sales for Other ~~decreased 12%~~increased 23% to ~~$286~~$307 million ~~primarily reflecting significantly reduced Textile Care demand.~~led by strong growth in Pest Elimination that was driven by recovering markets and new business wins.

Financial Performance

When comparing ~~third~~second quarter ~~2020~~2021 against ~~third~~second quarter ~~2019,~~2020, our financial performance was as follows:

●

Reported operating income ~~decreased 25%~~increased 133% to ~~$411~~$448 million. Excluding the impact of special (gains) and charges from both ~~2020~~2021 and ~~2019~~2020 reported results, adjusted operating income ~~decreased 22%~~increased 63% and our adjusted fixed currency operating income ~~decreased 22%~~increased 53%.

●

Net income from continuing operations attributable to Ecolab ~~decreased 44%~~increased 141% to ~~$246~~$311 million. Excluding the impact of special (gains) and charges and discrete tax items from both ~~2020~~2021 and ~~2019~~2020 reported results, our adjusted net income from continuing operations attributable to Ecolab ~~decreased 26%~~increased 86%.

●

Reported diluted EPS from continuing operations of ~~$0.85 decreased 43%~~$1.08 increased 145%. Excluding the impact of special (gains) and charges and discrete tax items from both ~~2020~~2021 and ~~2019~~2020 reported results, adjusted diluted EPS from continuing operations ~~decreased 24%~~increased 88% to ~~$1.15~~$1.22 in the ~~third~~second quarter of ~~2020.~~2021.

●

Our reported tax rate was ~~14.5%~~21.5% during the ~~third~~second quarter of ~~2020,~~2021, compared to ~~15.9%~~9.5% during the ~~third~~second quarter of ~~2019.~~2020. Excluding the tax rate impact of special (gains) and charges and discrete tax items from both ~~2020~~2021 and ~~2019~~2020 results, our adjusted tax rate was ~~20.0%~~19.3% during the ~~third~~second quarter of ~~2020,~~2021, compared to ~~19.6%~~20.5% during the ~~third~~second quarter of ~~2019.~~2020.

3734

RESULTS OF OPERATIONS

Net Sales


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
(millions)	2020		2019		Change		2020		2019		Change		2021		2020		Change		2021		2020		Change
Product and equipment sales		$2,426.4		$2,591.8				$7,017.5		$7,511.6				$2,514.4		$2,167.1				$4,807.8		$4,591.1
Service and lease sales		592.2		632.2				1,707.4		1,806.2				648.3		518.6				1,239.9		1,115.2
Reported GAAP net sales		$3,018.6		$3,224.0	(6)	%		$8,724.9		$9,317.8	(6)	%		$3,162.7		$2,685.7	18	%		$6,047.7		$5,706.3	6	%
Effect of foreign currency translation		28.6		10.7				127.1		8.0				16.7		128.6				22.3		196.6
Non-GAAP fixed currency sales		$3,047.2		$3,234.7	(6)	%		$8,852.0		$9,325.8	(5)	%		$3,179.4		$2,814.3	13	%		$6,070.0		$5,902.9	3	%

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 ~~2020~~2021 sales change are shown below:



	Third Quarter Ended			Nine Months Ended			Second Quarter Ended			Six Months Ended
	September 30			September 30			June 30			June 30
(percent)	2020			2020			2021			2021
Volume		(9)	%		(8)	%		10	%		0	%
Price changes		1			2			2			2
Acquisition adjusted fixed currency sales change		(8)			(7)			12			1
Acquisitions and divestitures		2			2			1			2
Fixed currency sales change		(6)			(5)			13			3
Foreign currency translation		(1)			(1)			4			3
Reported GAAP net sales change		(6)	%		(6)	%		18	%		6	%

Amounts do not necessarily sum due to rounding.

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


	Third Quarter Ended								Nine Months Ended								Second Quarter Ended								Six Months Ended
	September 30								September 30								June 30								June 30
	2020				2019				2020				2019				2021				2020				2021				2020
			Gross				Gross				Gross				Gross				Gross				Gross				Gross				Gross
(millions/percent)	COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin
Product and equipment cost of sales		$1,405.4				$1,413.0				$4,071.6				$4,175.7				$1,464.9				$1,301.5				$2,827.8				$2,666.2
Service and lease cost of sales		364.2				367.9				1,053.9				1,061.0				379.1				334.2				728.2				689.7
Reported GAAP COS and gross margin		$1,769.6	41.4	%		$1,780.9	44.8	%		$5,125.5	41.3	%		$5,236.7	43.8	%		$1,844.0	41.7	%		$1,635.7	39.1	%		$3,556.0	41.2	%		$3,355.9	41.2	%
Special (gains) and charges		9.5				11.4				45.6				22.8				3.7				27.0				23.3				36.1
Non-GAAP adjusted COS and gross margin		$1,760.1	41.7	%		$1,769.5	45.1	%		$5,079.9	41.8	%		$5,213.9	44.0	%		$1,840.3	41.8	%		$1,608.7	40.1	%		$3,532.7	41.6	%		$3,319.8	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 ~~41.4%~~41.7% and ~~44.8%~~39.1% for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively. Our reported gross margin was 41.2% for the first ~~nine~~six months of ~~2020~~both 2021 and ~~2019 was 41.3% and 43.8%, respectively.~~2020. Special (gains) and charges included in items impacting COS are shown within the “Special (Gains) and Charges” table on page ~~39.~~36.

Excluding the impact of special (gains) and charges within COS, ~~third~~second quarter ~~2020~~2021 adjusted gross margin was ~~41.7%~~41.8% and our adjusted gross margin for the first ~~nine~~six months of ~~2020~~2021 was ~~41.8%~~41.6%. These percentages compared against a ~~third~~second quarter ~~2019~~2020 adjusted gross margin of ~~45.1%~~40.1% and an adjusted gross margin of ~~44.0%~~41.8% for the first ~~nine~~six months of ~~2019.~~2020.

Our adjusted gross margin increased when comparing the second quarter of 2021 against the second quarter of 2020, primarily reflecting the impact of increased sales volume and accelerated pricing, which more than offset increased delivered product costs, including Texas freeze impacts. Our adjusted gross margin decreased when comparing the ~~third quarter~~first six months of ~~2020~~2021 against the ~~third quarter of 2019 and decreased compared to the~~ first ~~nine~~six months of ~~2020 and 2019, which was driven primarily by lower volume leverage and unfavorable business mix which more than offset the benefits of pricing.~~2020.

3835

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expenses as a percentage of sales were ~~26.6%~~27.0% and ~~28.6%~~28.4% for the ~~third~~second quarter and first ~~nine~~six months of 2021, respectively, compared to 29.4% and 29.7% for the second quarter and first six months of 2020, ~~respectively, compared to 27.0% and 28.6% for the third quarter and first nine months of 2019,~~ respectively. The ~~third quarter~~decreased SG&A ratio to sales ~~decreased due to lower discretionary spending, lower incentive compensation~~in the second quarter and ~~cost saving initiatives. SG&A as a ratio to sales was flat for the~~ first ~~nine~~six months of ~~2020 compared to the first nine months of 2019 as the impact of~~2021 was driven primarily by sales volume leverage, lower ~~sales offset the benefits from lower incentive compensation, lower discretionary spending~~bad debt expense and cost savings, ~~initiatives.~~which more than offset higher variable compensation and investments in the business.

Special (Gains) and Charges

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



	Third Quarter Ended				Nine Months Ended				Second Quarter Ended				Six Months Ended
	September 30				September 30				June 30				June 30
(millions)	2020		2019		2020		2019		2021		2020		2021		2020
Cost of sales
Restructuring activities		$1.0		$6.3		$6.6		$16.2		$3.7		$2.6		$21.9		$5.6
Acquisition and integration activities		1.5		5.1		4.1		6.6		-		2.2		-		2.6
COVID-19 activities, net										-		6.9		1.1		6.9
Other		7.0		-		34.9		-		-		15.3		0.3		21.0
Cost of sales subtotal		9.5		11.4		45.6		22.8		3.7		27.0		23.3		36.1

Special (gains) and charges
Restructuring activities		26.9		19.3		31.4		70.2		2.5		0.3		6.1		4.5
Acquisition and integration activities		2.7		2.0		5.5		4.9		1.3		(2.6)		2.5		2.8
Disposal and impairment activities		-		-		45.9		-		-		44.7		-		45.9
COVID-19 activities, net										8.3		10.2		14.7		10.2
Other		5.4		3.6		37.5		13.7		5.5		16.8		7.1		21.9
Special (gains) and charges subtotal		35.0		24.9		120.3		88.8		17.6		69.4		30.4		85.3

Operating income subtotal		44.5		36.3		165.9		111.6		21.3		96.4		53.7		121.4

Interest expense, net		83.1		-		83.8		0.2		-		0.7		-		0.7
Other expense (income)										19.6		-		19.6		-

Total special (gains) and charges		$127.6		$36.3		$249.7		$111.8		$40.9		$97.1		$73.3		$122.1

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

Restructuring activities

Restructuring activities are primarily related to the Institutional Advancement Program and Accelerate 2020, ~~(described below). These~~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 ~~Statement~~Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance ~~Sheet. Restructuring~~Sheets.

Further details related to our restructuring charges ~~directly~~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 second quarter and first six months of 2021, we have recorded total restructuring charges of $2.2 million ($1.6 million after tax) or $0.01 per diluted share and $8.1 million ($6.1 million after tax) or $0.02 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 $43.3 million ($32.5 million after tax), or $0.11 per diluted share of cumulative restructuring charges under the Institutional Plan. The liability related to the ~~ChampionX business were recorded~~Institutional Plan was $11.5 million as ~~discontinued~~of June 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 $18 million of cumulative cost savings with estimated annual cost savings of $50 million in continuing operations ~~refer to Note 4.~~by 2024.

Accelerate 2020

During ~~the third quarter of~~ 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 isare 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. ~~In the third quarter of~~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 ~~$275~~$255 million ($~~210~~195 million after tax), or ~~$0.72~~$0.67 per diluted share, ~~over this period of time. Costs~~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 (gains) of ~~$27.9~~($0.3) million ($~~21.2~~0.2 million after tax), or ~~$0.07~~less than $0.01 per diluted share and ~~$37.0~~$1.4 million ~~(28.9~~($1.6 million after tax), or ~~$0.10~~$0.01 per diluted share in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively. The liability related to the Plan was ~~$87.4~~$47.3 million as of the end of the ~~third~~second quarter of ~~2020.~~2021. We have recorded ~~$243.5~~$240.6 million ($~~187.5~~185.4 million after tax), or ~~$0.65~~$0.64 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. ~~Cash payments during 2020 related to the Plan were $45.3 million.~~

The Plan has delivered ~~$181~~$254 million of cumulative cost savings with estimated annual cost savings of ~~$335~~$315 million in continuing operations by 2022.

Other Restructuring Activities

During the second quarter and first ~~nine~~six months of ~~2020,~~2021, we incurred restructuring charges of ~~$1.0~~$4.3 million ($~~0.6~~5.6 million after tax), or ~~less than $0.01~~$0.02 per diluted share ~~none of which was incurred during the third quarter,~~and $18.5 million ($16.4 million after tax), or $0.06 per diluted share, respectively, related to another immaterial restructuring ~~plan.~~activity. The charges primarily related to ~~severance.~~severance and asset write-offs. ~~Prior to 2018, we engaged in a number of restructuring plans.~~ During the ~~third~~second quarter and first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, net restructuring charges related to all other prior year plans were minimal.

The restructuring liability balance for all other restructuring plans ~~commencing prior to 2018 was $6.1~~excluding the Accelerate 2020 and Institutional Plan were $16.8 million and ~~$7.7~~$5.9 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The ~~reduction~~increase in liability was driven ~~primarily~~ by ~~severance payments.~~current period restructuring charges. 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 ~~2020~~the 2021 related to all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were ~~$2.5~~$1.1 million.

Acquisition and integration related costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income include ~~$2.7~~$1.3 million ($~~2.3~~1.0 million after tax) or less than $0.01 per diluted share and ~~$5.5~~$2.5 million ($~~4.3~~2.1 million after tax) or $0.01 per diluted share in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~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 ($2.6) million ($1.7 million after tax) or $0.01 per diluted share, and $2.8 million ($2.1 million after tax) or $0.01 per diluted share, in the second quarter and first six 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~~$2.6 million ($~~1.3 million after tax) or less than $0.01 per diluted share, and $4.1 million ($3.2~~1.9 million after tax) or $0.01 per diluted share in the ~~third quarter and~~ first ~~nine~~six months of 2020, ~~respectively,~~ on the Consolidated ~~Statement~~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 in the first nine months of 2020, none of which was incurred during the third quarter.~~

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statement of Income include $2.0 million ($1.5 million after tax) or less than $0.01 per diluted share, and $4.9 million ($3.6 million after tax) or $0.01 per diluted share, in the third quarter and first nine months of 2019, respectively. Charges are related to Bioquell and the Anios acquisitions and consist of integration costs, advisory and legal fees. Acquisition and integration costs reported in product and equipment cost of sales of $5.1 million ($3.8 million after tax) or $0.01 per diluted share, and $6.6 million ($4.9 million after tax) or $0.02 per diluted share, on the Consolidated Statement of Income in the third quarter and first nine months of 2019, respectively, relate to the recognition of fair value step-up in the Bioquell inventory and severance related to the closure of a facility. We also incurred $0.2 million ($0.10.5 million after tax) or less than $0.01 per diluted share, of interest expense in the first ~~nine~~six months of ~~2019.~~2020.

Disposal and impairment charges

Disposal and impairment charges reported in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income include $44.7 million ($44.1 million after tax) or $0.15 per diluted share, and $45.9 million ($45.0 million after tax) or $0.15 per diluted share in the second quarter and first ~~nine~~six months of ~~2020.~~2020, respectively. 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~~$16.1 million ($~~16.3~~15.5 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 during the first six months of 2020.~~fees. Further information related to ~~the~~our disposal is included in Note 3.

~~Other~~

COVID-19 activities

During the ~~third~~second quarter and first ~~nine~~six months of 2021, we recorded charges of $4.1 million and $10.0 million, respectively, to protect the wages of certain employees directly impacted by the COVID-19 pandemic. We also recorded charges of $4.9 million and $8.4 million, respectively, during the second quarter and first six 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 ($0.7) million and ($2.6) million during the second quarter and first six 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 $6.4 million or $0.02 per diluted share and $11.3 million or $0.04 per diluted share during the second quarter and first six months of 2021, respectively.

During the second quarter and first six months of 2020, we recorded charges of ~~$4.1~~$26.5 million ~~and $30.6 million, respectively,~~ to protect ~~the pay for~~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 ($14.7) million during the third quarter and first nine months of 2020, respectively.~~$(9.4) million. The specific COVID-19 pandemic charges of $1.1 million are recorded in product and equipment sales on the Consolidated Statements of Income, $5.8 million in service and lease sales on the Consolidated Statements of Income and $10.2 million in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income. ~~Total after tax net charges (gains)~~After tax-charges related to COVID-19 pandemic were $13.2 million or $0.05 per diluted share during the second quarter and first six months of 2020.

Other

Other special charges recorded in the first six months of 2021 in product and equipment cost of sales were $0.3 million ($~~0.9)~~0.2 million after tax) or less than $0.01 per diluted ~~share, and $12.3 million or $0.04 per diluted share during~~share. During the ~~third~~second quarter and first ~~nine months of 2020, respectively.~~

~~During the third quarter and first nine~~six months of 2020, we recorded special charges of ~~$5.2~~$15.3 million ($~~3.5~~10.5 million after tax) or ~~$0.01~~$0.04 per diluted share and ~~$26.2~~$21.0 million ($~~17.8~~14.3 million after tax) or ~~$0.06~~$0.05 per diluted share, respectively, recorded in product and equipment cost of sales on the Consolidated ~~Statement~~Statements of Income primarily related to a Healthcare product recall in Europe.

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 special charges of ~~$8.4~~$5.5 million ($~~7.2~~4.4 million after tax) or $0.02 per diluted share and ~~$30.3~~$7.1 million ($~~23.7~~5.6 million after tax) or ~~$0.08~~$0.02 per diluted share recorded in the ~~third~~second quarter and first ~~nine~~six months of 2021, respectively, relate primarily to legal reserve and certain legal charges and tax consulting fees associated with the ChampionX separation.

Other special charges of $16.8 million ($12.6 million after tax) or $0.04 per diluted share and $21.9 million ($16.5 million after tax) or $0.06 per diluted share recorded in the second quarter and first six months of 2020, respectively, relate primarily to ~~a specific~~ legal reserve and ~~related~~certain legal charges which are recorded in special (gains) and charges on the Consolidated ~~Statement~~Statements of Income.

Other expense (income)

During the ~~third~~second quarter and first ~~nine~~six months of ~~2019,~~2021, we incurred settlement expense recorded in other ~~special charges~~expense (income) on the Consolidated Statements of ~~$3.6~~Income of $19.6 million ($~~2.7~~14.9 million after tax), or ~~less than $0.01~~$0.05 per diluted share, ~~and $13.7 million ($10.3 million after tax) or $0.04 per diluted share, respectively, which primarily~~ related to ~~legal charges.~~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)

2020

2019

Change

2020

2019

Change
Reported GAAP operating income

$411.4

$549.0

(25)
%

$979.6

$1,327.0

(26)
%
Special (gains) and charges

44.5

36.3

165.9

111.6

Non-GAAP adjusted operating income

455.9

585.3

(22)
%

1,145.5

1,438.6

(20)
%
Effect of foreign currency translation

5.8

2.9

22.7

3.9

Non-GAAP adjusted fixed currency operating income

$461.7

$588.2

(22)
%

$1,168.2

$1,442.5

(19)
%

Third Quarter Ended

Nine Months Ended

September 30

September 30

(percent)

2020

2019

2020

2019

Reported GAAP operating income margin

13.6
%

17.0
%

11.2
%

14.2
%

Non-GAAP adjusted operating income margin

15.1
%

18.2
%

13.1
%

15.4
%

Non-GAAP adjusted fixed currency operating income margin

15.2
%

18.2
%

13.2
%

15.5
%


	Second Quarter Ended								Six Months Ended
	June 30								June 30
(millions)	2021			2020			Change		2021			2020			Change
Reported GAAP operating income		$447.8			$192.0		133	%		$745.1			$568.2		31	%
Special (gains) and charges		21.3			96.4					53.7			121.4
Non-GAAP adjusted operating income		469.1			288.4		63	%		798.8			689.6		16	%
Effect of foreign currency translation		2.3			19.5					2.8			27.3
Non-GAAP adjusted fixed currency operating income		$471.4			$307.9		53	%		$801.6			$716.9		12	%

	Second Quarter Ended								Six Months Ended
	June 30								June 30
(percent)	2021			2020					2021			2020
Reported GAAP operating income margin		14.2	%		7.1	%				12.3	%		10.0	%
Non-GAAP adjusted operating income margin		14.8	%		10.7	%				13.2	%		12.1	%
Non-GAAP adjusted fixed currency operating income margin		14.8	%		10.9	%				13.2	%		12.1	%

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 ~~decreased 25%~~increased 133% and ~~26%~~31% in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively, versus the comparable periods of ~~2019.~~2020. Our reported operating income for ~~2020~~2021 and ~~2019~~2020 was impacted by special (gains) and charges; excluding the impact of special (gains) and charges from ~~2020~~2021 and ~~2019~~2020 reported results, our adjusted operating income ~~decreased 22%~~increased 63% and ~~20%~~16% in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively.

As shown in the previous table, foreign currency had a 0%10 percentage points and 1%4 percentage points impact on adjusted operating income growth for the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively. Foreign currency had a 1%3 percentage points and 2%2 percentage points impact on adjusted operating income growth for the ~~third~~second quarter and first ~~nine~~six months of ~~2019,~~2020, respectively.

��

Other Expense (Income) ~~Expense~~


	Second Quarter Ended						Six Months Ended
	June 30						June 30

(millions)	2021		2020		Change		2021		2020		Change
Reported GAAP other expense (income)		$2.5		($15.1)	(117)	%		($14.5)		($30.5)	(52)	%
Special (gains) and charges		19.6		-				19.6		-
Non-GAAP adjusted other expense (income)		($17.1)		($15.1)	13	%		($34.1)		($30.5)	12	%

Other expense was $2.5 million in the second quarter of 2021 and Other income was $15.1 million ~~and $20.8 million~~ in the ~~third~~second quarter of ~~2020 and 2019, respectively.~~2020. Other income was ~~$45.6~~$14.5 million and ~~$62.9~~$30.5 million in the first ~~nine~~six months of 2021 and 2020, ~~and 2019,~~ respectively. The decrease in Other income ~~decreased due to amortization of prior year losses~~was driven by ~~the impact of lower discount rates on liabilities.~~a $19.6 million settlement expense related to U.S. pension plan lump-sum payments to retirees.

Interest Expense, Net


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30

(millions)	2020		2019		Change		2020		2019		Change		2021		2020		Change		2021		2020		Change
Reported GAAP interest expense, net		$134.8		$46.1	192	%		$241.8		$144.6	67	%		$45.6		$58.7	(22)	%		$97.3		$107.0	(9)	%
Special (gains) and charges		83.1		-				83.8		0.2				-		0.7				-		0.7
Non-GAAP adjusted interest expense, net		$51.7		$46.1	12	%		$158.0		$144.4	9	%		$45.6		$58.0	(21)	%		$97.3		$106.3	(8)	%

Reported net interest expense was ~~$134.8~~$45.6 million and ~~$46.1~~$58.7 million in the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively. Reported net interest expense was ~~$241.8~~$97.3 million and ~~$144.6~~$107.0 million in the first ~~nine~~six months of 2021 and 2020, ~~and 2019,~~ respectively. ~~In the third quarter of 2020, we incurred $83.1 million of expense associated with debt refinancing.~~ The ~~increase~~decrease in ~~adjusted net~~ interest expense when comparing ~~2020~~2021 against ~~2019~~2020 was driven primarily by ~~higher outstanding debt.~~a reduction in the average interest rate and average debt levels.

Provision for Income Taxes

The following table provides a summary of our tax rate:


	Third Quarter Ended				Nine Months Ended				Second Quarter Ended				Six Months Ended
	September 30				September 30				June 30				June 30
(percent)	2020		2019		2020		2019		2021		2020		2021		2020

Reported GAAP tax rate	14.5	%	15.9	%	13.2	%	16.2	%	21.5	%	9.5	%	23.0	%	12.4	%
Tax rate impact of:
Special (gains) and charges	2.6		1.2		1.6		1.0		(0.4)		1.9		(0.3)		0.9
Discrete tax items	2.9		2.5		5.5		2.9		(1.8)		9.1		(3.2)		7.2
Non-GAAP adjusted tax rate	20.0	%	19.6	%	20.3	%	20.1	%	19.3	%	20.5	%	19.5	%	20.5	%

Our reported tax rate was ~~14.5%~~21.5% and ~~15.9%~~9.5% for the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~13.2%~~23.0% and ~~16.2%~~12.4% for the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, respectively. The change in our tax rate for the ~~third~~second quarter and first ~~nine~~six months of ~~2020~~2021 versus the comparable period of ~~2019~~2020 was driven primarily by discrete tax ~~items and~~items. The change in our tax rate includes the tax impact of special (gains) and ~~charges.~~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 as amounts included in special (gains) and charges are derived from tax jurisdictions with rates that vary from our effective tax rate, and discrete tax items are not necessarily consistent across periods. Further information related to special (gains) and charges is included in Note 2. Our tax rate is based on our interpretation of existing tax rules; potential future guidance including regulations not yet issued could impact the future tax rate.future.

We recognized ~~total~~ net tax ~~benefits~~expense related to discrete tax items of ~~$12.4~~$7.7 million and ~~$56.8~~$23.8. million in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively. This included tax expense of $9.5 million related to prior year returns in the second quarter and first six months of 2021, and a deferred tax benefit of $0.9 million and deferred tax expense $24.2 million associated with transferring certain intangible property between affiliates in the second quarter and first six months of 2021, respectively. Share-based compensation excess tax benefit ~~contributed $3.4~~was $4.2 million and ~~$49.0~~$10.8 million in the ~~third~~second quarter and first ~~nine~~six months of 2021. The amount of this tax benefit is subject to variation in stock price and award exercises. The remaining discrete tax expense of $3.3 million and $0.9 million during the quarter and first six months of 2021, respectively, was primarily due to other changes in estimates.

We recognized net discrete tax benefits of $22.5 million and $44.4 million in the second quarter and first six months of 2020, respectively. This includes share-based compensation excess tax benefit of $23.3 million and $45.6 million in the second quarter and first six months of 2020, respectively. Additionally, we recognized ~~a net tax benefit~~expense of ~~$6.9~~$0.6 million and ~~$2.4~~$4.5 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~~second quarter and first ~~nine~~six months of 2020, respectively. The remaining discrete ~~net tax~~expense of $0.2 million and benefit of ~~$2.1 million and $5.4~~$3.3 million was due to the ~~net release~~accrual of ~~reserves for~~interest on uncertain tax positions offset by reserve released during the ~~third~~ quarter and the first ~~nine~~six months of 2020, respectively.

~~We recognized total net tax benefits related to discrete tax items of $13.6 million and $39.8 million~~The decrease in the ~~third~~second quarter and first ~~nine~~six months of ~~2019, respectively. Share-based compensation excess~~2021 adjusted tax benefit contributed $7.9 million and $39.4 million in the third quarter and first nine months of 2019, respectively. We also recognized a net tax benefit of $4.3 million and $3.2 million in the third quarter and first nine months of 2019, respectively, duerate compared to finalization of certain estimates due to the 2018 U.S. federal tax return for the one-time transition tax imposed by the Tax Cuts and Jobs Act (the “Act”). Additionally, we recognized a net tax benefit of $1.1 million related to foreign audit settlements and related reserve releases during the quarter. The remaining net discrete benefit (expense)2020 was primarily due to ~~changes in estimates in non-U.S. jurisdictions~~the geographic mix of income and ~~from the 2018 U.S. federal~~ tax ~~return.~~planning.

Net Income from Continuing Operations Attributable to Ecolab


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
(millions)	2020		2019		Change		2020		2019		Change		2021		2020		Change		2021		2020		Change
Reported GAAP net income from continuing operations attributable to Ecolab		$246.2		$435.9	(44)	%		$667.1		$1,030.9	(35)	%		$310.8		$128.9	141	%		$504.4		$420.9	20	%
Adjustments:
Special (gains) and charges, after tax		98.5		23.8				200.3		80.9				34.1		83.3				58.3		101.8
Discrete tax net expense (benefit)		(12.4)		(13.6)				(56.8)		(39.8)				7.7		(22.5)				23.8		(44.4)
Non-GAAP adjusted net income from continuing operations attributable to Ecolab		$332.3		$446.1	(26)	%		$810.6		$1,072.0	(24)	%		$352.6		$189.7	86	%		$586.5		$478.3	23	%

Diluted EPS from Continuing Operations


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
(dollars)	2020		2019		Change		2020		2019		Change		2021		2020		Change		2021		2020		Change
Reported GAAP diluted EPS from continuing operations		$0.85		$ 1.49	(43)	%		$2.29		$ 3.52	(35)	%		$1.08		$ 0.44	145	%		$1.75		$ 1.44	22	%
Adjustments:
Special (gains) and charges		0.34		0.08				0.69		0.28
Special (gains) and charges, after tax														0.12		0.29				0.20		0.35
Discrete tax net expense (benefit)		(0.04)		(0.05)				(0.20)		(0.14)				0.02		(0.08)				0.08		(0.15)
Non-GAAP adjusted diluted EPS from continuing operations		$1.15		$ 1.52	(24)	%		$2.79		$ 3.66	(24)	%		$1.22		$ 0.65	88	%		$2.03		$ 1.64	24	%

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

Currency translation had ~~an unfavorable~~a favorable impact of approximately ~~$0.01~~$0.06 and ~~$0.06~~$0.08 per share on diluted EPS for the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively, when compared to the comparable periods of ~~2019.~~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 $2,163.9 million and $2,172.5 million in the ~~first nine months of 2020. Net income from discontinued operations, net of tax was $28.3 million and $98.4 million in the third~~second quarter and first ~~nine~~six months of ~~2019,~~2020, respectively.

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 ~~5.0~~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 $2,186.1 million and $2,222.7 million in the second quarter and first ~~nine~~six months of 2020, respectively primarily relate to the loss on separation, transaction fees, and other professional fees incurred to support the Transaction. Special (gains) and charges of $35.5 million and $61.8 million in the third quarter and first nine months of 2019, respectively, primarily relate to restructuring charges and 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 ~~2020.~~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, ~~2019.~~2020. Additional information about our reportable segments is included in Note 16.

Fixed currency net sales and operating income for the ~~third~~second quarter and first ~~nine~~six months of ~~2020~~2021 and ~~2019~~2020 for our reportable segments are shown in the following tables.


Net Sales	Third Quarter Ended						Nine Months Ended						Second Quarter Ended							Six Months Ended
	September 30						September 30						June 30							June 30
(millions)	2020		2019		Change		2020		2019		Change		2021			2020		Change		2021		2020		Change
Global Industrial		$1,491.1		$1,517.1	(2)	%		$4,410.3		$4,414.8	(0)	%		$1,555.4			$1,498.5	4	%		$2,989.3		$2,963.5	1	%
Global Institutional & Specialty		901.3		1,150.6	(22)			2,695.8		3,283.3	(18)			978.9			733.0	34			1,837.4		1,820.2	1
Global Healthcare & Life Sciences		320.9		243.9	32			875.0		723.7	21			303.5			321.4	(6)			597.2		578.2	3
Other		285.7		323.1	(12)			810.4		904.0	(10)			306.6			249.1	23			577.9		528.7	9
Corporate		48.2		-	100			60.5		-	100			35.0	��		12.3	185			68.2		12.3	454
Subtotal at fixed currency		3,047.2		3,234.7	(6)			8,852.0		9,325.8	(5)			3,179.4			2,814.3	13			6,070.0		5,902.9	3
Effect of foreign currency translation		(28.6)		(10.7)				(127.1)		(8.0)				(16.7)			(128.6)				(22.3)		(196.6)
Consolidated reported GAAP net sales		$3,018.6		$3,224.0	(6)	%		$8,724.9		$9,317.8	(6)	%		$3,162.7			$2,685.7	18	%		$6,047.7		$5,706.3	6	%

Operating Income	Third Quarter Ended						Nine Months Ended						Second Quarter Ended							Six Months Ended
	September 30						September 30						June 30							June 30
(millions)	2020		2019		Change		2020		2019		Change		2021			2020		Change		2021		2020		Change
Global Industrial		$297.8		$249.8	19	%		$787.4		$632.1	25	%		$263.3			$287.8	(9)	%		$482.5		$497.4	(3)	%
Global Institutional & Specialty		82.6		280.9	(71)			228.0		690.1	(67)			138.6			(38.0)	*			201.7		145.7	38
Global Healthcare & Life Sciences		66.0		36.3	82			154.5		92.3	67			48.3			69.0	(30)			93.9		93.0	1
Other		45.2		51.4	(12)			88.1		119.0	(26)			51.3			20.8	147			84.2		42.6	98
Corporate		(74.4)		(66.5)				(255.7)		(202.6)				(51.4)			(128.1)	(60)			(114.4)		(183.2)	(38)
Subtotal at fixed currency		417.2		551.9	(24)			1,002.3		1,330.9	(25)			450.1			211.5	113			747.9		595.5	26
Effect of foreign currency translation		(5.8)		(2.9)				(22.7)		(3.9)				(2.3)			(19.5)				(2.8)		(27.3)
Consolidated reported GAAP operating income		$411.4		$549.0	(25)	%		$979.6		$1,327.0	(26)	%		$447.8			$192.0	133	%		$745.1		$568.2	31	%

* Not meaningful.

4341

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


	Third Quarter Ended						Second Quarter Ended
	September 30						June 30
Net Sales	2020			2019			2021			2020
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$1,491.1	$(36.2)	$1,454.9	$1,517.1	$(16.7)	$1,500.4	$1,555.4	($26.2)	$1,529.2	$1,498.5	($19.5)	$1,479.0
Global Institutional & Specialty	901.3	(4.3)	897.0	1,150.6	-	1,150.6	978.9	(3.2)	975.7	733.0	-	733.0
Global Healthcare & Life Sciences	320.9	(6.5)	314.4	243.9	(0.5)	243.4	303.5	(6.6)	296.9	321.4	(0.2)	321.2
Other	285.7	-	285.7	323.1	-	323.1	306.6	-	306.6	249.1	-	249.1
Corporate	48.2	(48.2)	-	-	-	-	35.0	(35.0)	-	12.3	(12.3)	-
Subtotal at fixed currency	3,047.2	(95.2)	2,952.0	3,234.7	(17.2)	3,217.5	3,179.4	(71.0)	3,108.4	2,814.3	(32.0)	2,782.3
Effect of foreign currency translation	(28.6)			(10.7)			(16.7)			(128.6)
Total reported net sales	$3,018.6			$3,224.0			$3,162.7			$2,685.7

Operating Income	2020			2019			2021			2020
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$297.8	$(4.4)	$293.4	$249.8	$(1.1)	$248.7	$263.3	($1.2)	$262.1	$287.8	($2.3)	$285.5
Global Institutional & Specialty	82.6	(0.8)	81.8	280.9	-	280.9	138.6	0.6	139.2	(38.0)	-	(38.0)
Global Healthcare & Life Sciences	66.0	(0.2)	65.8	36.3	(0.1)	36.2	48.3	0.2	48.5	69.0	(0.1)	68.9
Other	45.2	-	45.2	51.4	-	51.4	51.3	-	51.3	20.8	-	20.8
Corporate	(29.9)	-	(29.9)	(30.2)	-	(30.2)	(30.1)	-	(30.1)	(31.7)	-	(31.7)
Non-GAAP adjusted fixed currency operating income	461.7	(5.4)	456.3	588.2	(1.2)	587.0	471.4	(0.4)	471.0	307.9	(2.4)	305.5
Special (gains) and charges	44.5			36.3			21.3			96.4
Subtotal at fixed currency	417.2			551.9			450.1			211.5
Effect of foreign currency translation	(5.8)			(2.9)			(2.3)			(19.5)
Total reported operating income	$411.4			$549.0			$447.8			$192.0

	Nine Months Ended						Six Months Ended
	September 30						June 30
Net Sales	2020			2019			2021			2020
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$4,410.3	(45.0)	$4,365.3	$4,414.8	(17.4)	$4,397.4	$2,989.3	(59.3)	$2,930.0	$2,963.5	(36.7)	$2,926.8
Global Institutional & Specialty	2,695.8	(31.3)	2,664.5	3,283.3	-	3,283.3	1,837.4	(6.0)	1,831.4	1,820.2	-	1,820.2
Global Healthcare & Life Sciences	875.0	(21.9)	853.1	723.7	(0.9)	722.8	597.2	(9.1)	588.1	578.2	(0.6)	577.6
Other	810.4	(1.0)	809.4	904.0	(0.1)	903.9	577.9	-	577.9	528.7	-	528.7
Corporate	60.5	(60.5)	-	-	-	-	68.2	(68.2)	-	12.3	(12.3)	-
Subtotal at fixed currency	8,852.0	(159.7)	8,692.3	9,325.8	(18.4)	9,307.4	6,070.0	(142.6)	5,927.4	5,902.9	(49.6)	5,853.3
Effect of foreign currency translation	(127.1)			(8.0)			(22.3)			(196.6)
Total reported net sales	$8,724.9			$9,317.8			$6,047.7			$5,706.3

Operating Income	2020			2019			2021			2020
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$787.4	(5.4)	$782.0	$632.1	(1.0)	$631.1	$482.5	(2.4)	$480.1	$497.4	(2.4)	$495.0
Global Institutional & Specialty	228.0	(2.2)	225.8	690.1	-	690.1	201.7	1.6	203.3	145.7	-	145.7
Global Healthcare & Life Sciences	154.5	0.4	154.9	92.3	(0.1)	92.2	93.9	0.2	94.1	93.0	(0.1)	92.9
Other	88.1	(0.2)	87.9	119.0	(0.1)	118.9	84.2	-	84.2	42.6	-	42.6
Corporate	(89.8)	-	(89.8)	(91.0)	-	(91.0)	(60.7)	-	(60.7)	(61.8)	-	(61.8)
Non-GAAP adjusted fixed currency operating income	1,168.2	(7.4)	1,160.8	1,442.5	(1.2)	1,441.3	801.6	(0.6)	801.0	716.9	(2.5)	714.4
Special (gains) and charges	165.9			111.6			53.7			121.4
Subtotal at fixed currency	1,002.3			1,330.9			747.9			595.5
Effect of foreign currency translation	(22.7)			(3.9)			(2.8)			(27.3)
Total reported operating income	$979.6			$1,327.0			$745.1			$568.2

4442

Unless otherwise noted, the following segment performance commentary compares the ~~third~~second quarter and first ~~nine~~six months of ~~2020~~2021 against the ~~third~~second quarter and first ~~nine~~six months of ~~2019.~~2020.

Global Industrial


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
	2020			2019			2020			2019			2021			2020			2021			2020
Sales at fixed currency (millions)		$1,491.1			$1,517.1			$4,410.3			$4,414.8			$1,555.4			$1,498.5			$2,989.3			$2,963.5
Sales at public currency (millions)		1,470.2			1,512.6			4,329.4			4,414.8			1,544.5			1,424.3			2,975.5			2,857.4

Volume		(4)	%					(2)	%					2	%					(1)	%
Price changes		1	%					2	%					1	%					1	%
Acquisition adjusted fixed currency sales change		(3)	%					(1)	%					3	%					0	%
Acquisitions and divestitures		1	%					1	%					-	%					1	%
Fixed currency sales change		(2)	%					0	%					4	%					1	%
Foreign currency translation		(1)	%					(2)	%					4	%					3	%
Public currency sales change		(3)	%					(2)	%					8	%					4	%

Operating income at fixed currency (millions)		$297.8			$249.8			$787.4			$632.1			$263.3			$287.8			$482.5			$497.4
Operating income at public currency (millions)		293.4			248.1			770.5			631.0			260.8			272.5			479.6			477.3

Fixed currency operating income change		19	%					25	%					(9)	%					(3)	%
Fixed currency operating income margin		20.0	%		16.5	%		17.9	%		14.3	%		16.9	%		19.2	%		16.1	%		16.8	%
Acquisition adjusted fixed currency operating income change		18	%					24	%					(8)	%					(3)	%
Acquisition adjusted fixed currency operating income margin		20.2	%		16.6	%		17.9	%		14.4	%		17.1	%		19.3	%		16.4	%		16.9	%
Public currency operating income change		18	%					22	%					(4)	%					0	%

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

Net Sales

Fixed currency sales for Global Industrial ~~decreased~~increased in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, as ~~lower volume~~strong growth in Water and Paper, led by recovering market conditions and new business wins, as well as improving trends in Food & Beverage, more than offset ~~pricing. In the third quarter and first nine months, declines in North America more than offset gains in other regions.~~lower Downstream sales that reflected low-margin refinery business exits.

At an operating segment level, Water fixed currency sales ~~decreased 2%~~increased 7% and 4% in ~~both~~ the ~~third~~second quarter and first ~~nine~~six months of ~~2020.~~2021, respectively,as strong new business wins leveraged recovering markets. Light industry water treatment sales showed ~~modest~~very strong growth, ~~as improving commercial building water treatment demand, along with additional water hygiene programs as they reopen~~led by good gains in food & beverage, light manufacturing and ~~new business gains more than offset the impact of reduced transportation industry production versus last year.~~data centers. Heavy industry sales ~~declined moderately as a slower recovery~~saw good growth driven by strong performance in primary ~~metals and chemical production continued to impact our sales to those industries.~~metals. Mining declined modestly as ~~gains in~~good results from our strategic shift toward precious metals and fertilizers were more than offset by ~~weak~~soft legacy coal and alumina markets. Food & Beverage fixed currency sales increased ~~5% (0%~~2% (1% acquisition adjusted) and ~~5% (3%~~2% (0% acquisition adjusted) in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively, ~~led by good growth~~reflecting new business wins and recovering markets. Globally we realized strong recovery in ~~the food business reflecting steady end market trends. Beverage~~beverage and brewing, ~~was flat~~stable dairy plant and protein ~~declined reflecting unfavorable COVID-related effects on consumption.~~sales, and declines in food and animal health as good underlying sales compared against COVID-19 related buying surges last year. Downstream fixed currency sales decreased ~~11%~~6% and 12% in the ~~third~~second quarter and first six months of 2021, respectively, as petrochemical sales growth, rising refinery operating rates and increased business wins were more than offset by low-margin refinery business exits. Paper fixed currency sales increased 10% and 6% in the second quarter and first six months of 2021, respectively, driven by improved end markets and strong new business wins. Board & packaging showed very strong growth and graphics recovered from last year’s sharp decline as market trends stabilized; these more than offset lower tissue sales which compared to very strong COVID-19 surge demand last year.

Operating Income

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

Acquisition adjusted fixed currency operating income margins decreased 2.2 percentage points during the second quarter of ~~2020 and 5%~~2021, as accelerating pricing generally offset increased delivered product cost in the ~~first nine months of 2020as steady petrochemical demand~~quarter while the 0.7 percentage point positive impact from volume growth was more than offset by the 2.2 percentage point negative impact of ~~lower global transportation fuel demand on refineries~~higher variable compensation and Texas freeze impact. Acquisition adjusted fixed currency operating income margins decreased 0.5 percentage points during the ~~use~~first six months of ~~lighter crudes.~~2021, as the 2.1 percentage point positive impacts from cost savings and favorable pricing were more than offset by the 2.5 percentage point negative impact of higher delivered product costs including the Texas Freeze and increased variable compensation.

Global Institutional & Specialty


	Second Quarter Ended						Six Months Ended
	June 30						June 30
	2021			2020			2021			2020
Sales at fixed currency (millions)		$978.9			$733.0			$1,837.4			$1,820.2
Sales at public currency (millions)		976.0			710.1			1,833.4			1,780.2

Volume		31	%					4	%
Price changes		2	%					2	%
Acquisition adjusted fixed currency sales change		33	%					1	%
Acquisitions and divestitures		-	%					-	%
Fixed currency sales change		34	%					1	%
Foreign currency translation		3	%					2	%
Public currency sales change		37	%					3	%

Operating income at fixed currency (millions)		$138.6			($38.0)			$201.7			$145.7
Operating income at public currency (millions)		138.8			(38.0)			202.0			144.0

Fixed currency operating income change		*						38	%
Fixed currency operating income margin		14.2	%		(5.2)	%		11.0	%		8.0	%
Acquisition adjusted fixed currency operating income change		*						40	%
Acquisition adjusted fixed currency operating income margin		14.3	%		(5.2)	%		11.1	%		8.0	%
Public currency operating income change		*						40	%

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

* Not meaningful

Net Sales

Fixed currency sales for Global Institutional & Specialty increased in the second quarter and first six months of 2021. Strong growth in the Institutional operating segment reflected recovering markets, new business wins and pricing. Specialty sales declined versus last year’s strong gain that benefited from COVID-19 related orders.

At an operating segment level, ~~Paper~~Institutional fixed currency sales increased 61% and 6% (5% acquisition adjusted) in the second quarter and first six months of 2021, respectively, as the U.S. market showed an ongoing recovery in restaurant traffic. This recovery, along with recent business wins and sales initiatives, drove the strong results. While social distancing mandates eased in the U.S. through the second quarter and drove increased consumer traffic and in-unit dining, such mandates continued in many other regions as they lagged in their vaccinations and infection rate reductions, continuing to impact consumer activity. Specialty fixed currency sales decreased 4%6% and 8% in the ~~third~~second quarter ~~of 2020~~ and ~~were flat in the~~ first ~~nine~~six months of 2021, respectively, reflecting comparison to the very strong second quarter 2020 for food retail, where strong COVID-19 driven buying significantly boosted sales. Quickservice sales increased modestly as ~~slower industrial packaging trends and declines in graphic paper~~recovering global traffic more than offset ~~moderate gains~~sanitizer use declines from last year’s peak levels. Food retail sales declined versus the very strong demand in ~~tissue.~~2020.

Operating Income

Fixed currency operating income and fixed currency operating income margins increased for our Global ~~Industrial~~Institutional & Specialty segment in the ~~third~~second quarter and first ~~nine~~six months of ~~2020.~~2021.

Acquisition adjusted fixed currency operating income margins increased ~~3.6 and 3.5~~19.5 percentage points during the ~~third~~second quarter ~~and first nine months~~ of ~~2020, respectively,~~2021, as the 21.6 percentage point positive impacts from significant volume improvement, lower bad debt expense and ~~were positively impacted approximately 4.6 and 4.0 percentage points in the third quarter and first nine months of 2020, respectively, by~~ favorable pricing ~~lower discretionary spending and cost savings initiatives, and lower delivered product costs, which~~ more than offset the ~~1.2 and 0.7~~2.4 percentage point negative impact of ~~reduced operating leverage and lower volume during the third quarter and first nine months of 2020, respectively.~~

~~Global Institutional & Specialty~~

Third Quarter Ended

Nine Months Ended

September 30

September 30


2020

2019

2020

2019

Sales at fixed currency (millions)

$901.3

$1,150.6

$2,695.8

$3,283.3

Sales at public currency (millions)

896.3

1,148.1

2,671.4

3,279.3

Volume

(23)
%

(20)
%

Price changes

1
%

2
%

Acquisition adjusted fixed currency sales change

(22)
%

(19)
%

Acquisitions and divestitures

0
%

1
%

Fixed currency sales change

(22)
%

(18)
%

Foreign currency translation

0
%

(1)
%

Public currency sales change

(22)
%

(19)
%

Operating income at fixed currency (millions)

$82.6

$280.9

$228.0

$690.1

Operating income at public currency (millions)

82.0

280.4

225.9

688.6

Fixed currency operating income change

(71)
%

(67)
%

Fixed currency operating income margin

9.2
%

24.4
%

8.5
%

21.0
%

Acquisition adjusted fixed currency operating income change

(71)
%

(67)
%

Acquisition adjusted fixed currency operating income margin

9.1
%

24.4
%

8.5
%

21.0
%

Public currency operating income change

(71)
%

(67)
%

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

~~Net Sales~~

Fixed currency sales for Global Institutional & Specialty decreased in the third quarter and first nine months of 2020, driven by a decline in the Institutional business. At a regional level, the third quarter and first nine months of 2020 fixed currency sales decreased in all major regions.

~~At an operating segment level,~~ ~~Institutional~~ fixed currency sales decreased 28% and 27% in the third quarter and first nine months of 2020, respectively, reflecting strong hand and surface hygiene sales that were more than offset by mandated reductions for in-unit dining and domestic and international travel that significantly impacted foot traffic at full-service restaurants, occupancy rates at hotels and a reduction of customer visits to other entertainment facilities through the quarter. All geographic regions declined. ~~Specialty~~ ~~fixed currency sales~~ increased 1% (0% acquisition adjusted) and 12% (7% acquisition adjusted) in the third quarter and first nine months of 2020, respectively, as good food retail sales growth was offset by moderately lower quickservice sales for the quarter. Food retail sales benefited from continued expanded cleaning protocols and frequency in the grocery stores in response to COVID-19, new customer additions and product and program introductions. Global quickservice sales declined moderately as strong hand and surface sanitizer sales offset by COVID-19 related impacts on restaurant volumes.

~~Operating Income~~

~~Fixed currency operating income and fixed currency operating income margins decreased for our Global Institutional & Specialty segment in the third quarter and first nine months of 2020.~~

variable compensation. Acquisition adjusted fixed currency operating income margins ~~decreased 15.3 and 12.5~~increased 3.1 percentage points during the ~~third quarter and~~ first ~~nine~~six months of ~~2020, respectively. Margins were negatively impacted approximately 15.8~~2021 as the 4.7 percentage point positive impacts from favorable pricing, lower bad debt expense and ~~13.0 percentage points in the third quarter and first nine months of 2020, respectively, from volume declines, reduced operating leverage and unfavorable mix, which~~cost savings more than offset the ~~1.1 and 1.2~~1.4 percentage point ~~positive~~negative impact ~~cost savings initiatives and lower discretionary spending during the third quarter and first nine months~~ of ~~2020, respectively.~~increased variable compensation.

4644

Global Healthcare & Life Sciences


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
	2020			2019			2020			2019			2021			2020			2021			2020
Sales at fixed currency (millions)		$320.9			$243.9			$875.0			$723.7			$303.5			$321.4			$597.2			$578.2
Sales at public currency (millions)		321.5			241.7			863.8			721.1			301.8			299.4			594.5			544.1

Volume		29	%					17	%					(10)	%					1	%
Price changes		1	%					1	%					3	%					2	%
Acquisition adjusted fixed currency sales change		29	%					18	%					(8)	%					2	%
Acquisitions and divestitures		2	%					3	%					2	%					1	%
Fixed currency sales change		32	%					21	%					(6)	%					3	%
Foreign currency translation		1	%					(1)	%					7	%					6	%
Public currency sales change		33	%					20	%					1	%					9	%

Operating income at fixed currency (millions)		$66.0			$36.3			$154.5			$92.3			$48.3			$69.0			$93.9			$93.0
Operating income at public currency (millions)		65.7			35.7			151.2			91.5			48.2			63.0			93.6			85.5

Fixed currency operating income change		82	%					67	%					(30)	%					1	%
Fixed currency operating income margin		20.6	%		14.9	%		17.7	%		12.8	%		15.9	%		21.5	%		15.7	%		16.1	%
Acquisition adjusted fixed currency operating income change		82	%					68	%					(30)	%					1	%
Acquisition adjusted fixed currency operating income margin		20.9	%		14.9	%		18.2	%		12.8	%		16.3	%		21.5	%		16.0	%		16.1	%
Public currency operating income change		84	%					65	%					(23)	%					9	%

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 second quarter of 2021 compared to a 22% increase last year when sales benefited from strong COVID-19 related demand and increased in the ~~third quarter and~~ first ~~nine~~six months of ~~2020,~~2021; however, underlying Healthcare and Life Sciences sales growth remained strong, driven by ~~volume gains. At a regional level, the third quarter~~new business wins and ~~first nine months of 2020 fixed currency sales~~ increased ~~in all regions.~~hygiene awareness.

At an operating segment level, Healthcare fixed currency sales ~~increased 29% (25% acquisition adjusted) and 17% (14%~~decreased 3% (6% acquisition adjusted) in the ~~third~~second quarter of 2021 and increased 4% (2% acquisition adjusted) in the first six months of 2021, reflecting the comparison against large 2020 COVID-19 sales that drove a sales increase of 15% and 11% in the second quarter and first ~~nine~~six months of 2020, ~~respectively, as strong COVID-19 related hand and surface disinfection sales growth more than offset the unfavorable effects of delayed elective surgical procedures.~~respectively. Life Sciences fixed currency sales ~~increased 47% (48% acquisition adjusted)~~decreased 17% and ~~42% (40% acquisition adjusted)~~3% in the ~~third~~second quarter and first ~~nine~~six months of 2021, respectively, reflecting comparison versus the very strong second quarter and six months of 2020, when sales increased 52% and 39% respectively, driven by ~~significant demand for our Bioquell biodecontamination systems due to~~2020’s extraordinary COVID-19 ~~concerns and increased cleaning standards, which bolstered our ongoing business wins and pricing.~~demand.

Operating Income

Fixed currency operating income and fixed currency operating income margins for our Global Healthcare & Life Sciences segment ~~increased~~decreased in the ~~third~~second quarter ~~and~~of 2021. In the first ~~nine~~six months of ~~2020.~~2021, fixed currency operating income increased, whereas fixed currency operating income margins decreased.

Acquisition adjusted fixed currency operating income margins ~~increased 6.0 and 5.4~~decreased 5.2 percentage points during the ~~third~~second quarter ~~and~~of 2021,primarily reflecting the comparison to the very strong sales volume last year when operating income grew 110%. Acquisition adjusted fixed currency operating income margins were flat during the first ~~nine~~six months of ~~2020, respectively. Strong volume gains,~~2021 as the 1.9 percentage point positive impact from favorable pricing was offset by the 1.8 percentage point negative impact of unfavorable business mix ~~improved pricing~~ and ~~cost savings initiatives impacted margins by approximately 7.4 and 6.0 percentage points during the third quarter and first nine months of 2020, respectively, which more than offset~~ higher delivered product ~~costs which negatively impacted margins by 1.7 and 0.9 percentage points during the third quarter and first nine months of 2020, respectively.~~costs.

4745

Other


	Third Quarter Ended						Nine Months Ended						Second Quarter Ended						Six Months Ended
	September 30						September 30						June 30						June 30
	2020			2019			2020			2019			2021			2020			2021			2020
Sales at fixed currency (millions)		$285.7			$323.1			$810.4			$904.0			$306.6			$249.1			$577.9			$528.7
Sales at public currency (millions)		283.7			321.6			801.1			902.6			305.5			239.6			576.2			512.3

Volume		(13)	%					(12)	%					21	%					8	%
Price changes		1	%					2	%					2	%					2	%
Acquisition adjusted fixed currency sales change		(12)	%					(10)	%					23	%					9	%
Acquisitions and divestitures		0	%					0	%					-	%					-	%
Fixed currency sales change		(12)	%					(10)	%					23	%					9	%
Foreign currency translation		0	%					(1)	%					4	%					3	%
Public currency sales change		(12)	%					(11)	%					28	%					12	%

Operating income at fixed currency (millions)		$45.2			$51.4			$88.1			$119.0			$51.3			$20.8			$84.2			$42.6
Operating income at public currency (millions)		44.7			51.2			87.1			118.7			51.2			20.9			84.0			42.2

Fixed currency operating income change		(12)	%					(26)	%					147	%					98	%
Fixed currency operating income margin		15.8	%		15.9	%		10.9	%		13.2	%		16.7	%		8.4	%		14.6	%		8.1	%
Acquisition adjusted fixed currency operating income change		(12)	%					(26)	%					147	%					98	%
Acquisition adjusted fixed currency operating income margin		15.8	%		15.9	%		10.9	%		13.2	%		16.7	%		8.4	%		14.6	%		8.1	%
Public currency operating income change		(13)	%					(27)	%					145	%					99	%

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

Net Sales

Fixed currency sales for Other ~~decreased~~increased in the ~~third~~second quarter and first ~~nine~~six months of ~~2020 due to the impact of COVID-19 on partial~~2021, led by strong growth in Pest Elimination that was driven by recovering markets and ~~full customer closures along with limited vendor access. At a regional level, the decline in third quarter and first nine months of 2020 sales results mostly impacted North America and Europe.~~new business wins.

At an operating segment level, Pest Elimination fixed currency sales ~~decreased 2%~~increased 21% and ~~3% (4% acquisition adjusted)~~13% in the ~~third~~second quarter and first ~~nine~~six months of ~~2020, respectively. Sales~~2021, respectively, compared against COVID impacted sales a year-ago, as strong growth in food and beverage plants, grocery stores and ~~healthcare facilities was offset by the impact of lower~~quick-service restaurants leveraged a strong recovery in hospitality and full-service restaurant ~~and hospitality volumes.~~markets as restrictions ease. Textile Care fixed currency sales ~~decreased 32% and 27%~~increased 34% in the ~~third~~second quarter of 2021 and decreased 1% in the first ~~nine~~six months of ~~2020, respectively.~~2021. Colloidal Technologies Group fixed currency sales ~~decreased 30%~~increased 25% and ~~18%~~8% in the ~~third~~second quarter and first ~~nine~~six months of ~~2020,~~2021, respectively.

Operating Income

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

Acquisition adjusted fixed currency operating income margins ~~for Other decreased 0.1 and 2.3~~increased 8.3 percentage points during the ~~third~~second quarter ~~and~~of 2021 driven by strong volume growth. Acquisition adjusted fixed currency operating income margins increased 6.5 percentage points during the first ~~nine~~six months of ~~2020, respectively. Lower~~2021 driven by increased volume, and reduced operating leverage negatively impacted margins by approximately 3.6 and 4.5 percentage points for the third quarter and first nine months of 2020, respectively. These margin declines were partially offset by lower discretionary spending, improved pricing and cost savings ~~initiatives which positively impacted margins by approximately 3.4~~ and ~~2.7 percentage points for the third quarter and first nine months of 2020, respectively.~~favorable pricing.

Corporate

Consistent with our internal management reporting, Corporate amounts in the table on page 4340 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.~~36.

4846

FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY

Financial Position

Total assets were ~~$18.1~~$18.5 billion as of ~~September~~June 30, ~~2020~~2021 compared to total assets of ~~$20.9~~$18.1 billion as of December 31, ~~2019. The decrease in total assets reflects the separation of ChampionX.~~2020.

Total liabilities were ~~$12.0~~$11.8 billion as of ~~September~~June 30, ~~2020~~2021 compared to total liabilities of ~~$12.1~~$11.9 billion as of December 31, ~~2019.~~2020. Total debt was ~~$6.9~~$6.7 billion as of ~~September~~June 30, ~~2020~~2021 and ~~$6.4~~$6.7 billion as of December 31, ~~2019.~~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.

2020

2019

2021

2020

(ratio)

Net debt to EBITDA

2.5

2.3

2.2

2.4

(millions)

Total debt

$6,915.0

$6,353.6

$6,726.2

$6,686.6

Cash

1,034.7

118.8

1,402.4

1,260.2

Net debt

$5,880.3

$6,234.8

$5,323.8

$5,426.4

Net income including noncontrolling interest

$1,079.5

$1,442.9

$1,064.3

$984.8

Provision for income taxes

190.1

288.6

267.7

176.6

Interest expense, net

287.9

190.8

280.5

290.2

Depreciation

588.3

569.1

605.2

594.3

Amortization

213.1

206.2

231.9

218.4

EBITDA

$2,358.9

$2,697.6

$2,449.6

$2,264.3

Cash Flows

Operating Activities

Nine Months Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

Change

2021

2020

Change

Cash provided by operating activities

$1,092.0

$1,299.0

$(207.0)

$798.3

$640.2

$158.1

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 ~~decreased $207~~increased $158 million in the first ~~nine~~six months of ~~2020~~2021 compared to the first ~~nine~~six months of ~~2019,~~2020, driven primarily by a ~~$363~~$37 million ~~reduction~~increase in net income from continuing operations including noncontrolling interest excluding disposal and ~~$35~~impairment charges, $106 million ~~higher~~decreased annual bonus payouts, $65 million net ~~cash payments for restructuring,~~favorable fluctuations in deferred taxes, partially offset by ~~$114~~$53 million ~~due to lower pension and post retirement plan contributions and $98 million due to favorable~~net unfavorable fluctuations in accounts receivable, inventories and accounts payable (“working capital”). The cash flow impact from working capital accounts was primarily driven by ~~lower~~increased sales volume, partially offset by ~~lower accounts receivable~~improved days sales outstanding and improved inventory ~~turnover.~~days on hand.

~~Investing Activities~~

Nine Months Ended

September 30

(millions)

2020

2019

Change

Cash used for investing activities

$(795.9)

$(881.1)

$85.2

4947

Investing Activities

Six Months Ended

June 30

(millions)

2021

2020

Change

Cash used for investing activities

($347.8)

($689.7)

$341.9

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~~six months of 2021 and 2020, ~~and 2019,~~ was ~~$432~~$90 million and ~~$380~~$431 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 ~~customer~~equipment, manufacturing equipment and ~~manufacturing~~ facilities. Total capital expenditures were ~~$362~~$246 million and ~~$504~~$251 million in the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, respectively.

Financing Activities

Nine Months Ended

Six Months Ended

September 30

June 30

(millions)

2020

2019

Change

2021

2020

Change

Cash provided by (used for) financing activities

$30.3

$(844.6)

$874.9

Cash (used for) provided by financing activities

($318.3)

$720.6

($1,038.9)

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 ~~$1,850~~$750 million par value and received ~~$1,856~~$769 million in proceeds of long-term debt ~~in the first nine months of 2020. We~~and repaid ~~$1,570 million and $401~~$300 million of long-term debt in the first ~~nine~~six months of ~~2020 and 2019, respectively.~~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 ~~had net issuances~~paid down $1 million and issued $454 million of commercial paper ~~of $166 million~~ and ~~$150 million~~notes payable in the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~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 ~~repurchased~~reacquired a total of ~~$125~~$71 million and ~~$349~~$105 million of shares in the first ~~nine~~six months of ~~2020~~2021 and ~~2019,~~2020, respectively. Cash proceeds and tax benefits from stock option exercises provide a portion of the funding for repurchase activity.

We paid dividends of $287 million and $283 million in in the first six 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

Six Months Ended

September 30

June 30

(millions)

2020

2019

Change

2021

2020

Change

Net issuances of commercial paper and notes payable

$165.5

$149.5

$16.0

($1.0)

$454.4

($455.4)

Long-term debt borrowings

1,855.9

768.9

(768.9)

Long-term debt repayments

(1,570.0)

(400.6)

(1,169.4)

(300.0)

300.0

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~~June 30, ~~2020,~~2021, we had ~~$1,035~~$1,402 million of cash and cash equivalents on hand, of which ~~$218~~$44 million was held outside of the U.S. We ~~have~~continue to carry increased ~~our available~~levels of cash on hand ~~during the third quarter~~ to meet current and any future potential operational cash needs as a result of the COVID-19 pandemic. We will continue to evaluate our cash position in light of future developments.

As of ~~September~~June 30, ~~2020,~~2021, we have a $2.0 billion multi-year credit facility which expires in April 2026. In April 2021, we entered into an amended and restated revolving credit facility which extended the maturity from November ~~2022.~~2022 to 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~~second quarter of ~~2020,~~2021, we had ~~$225 million of~~no outstanding commercial paper ~~outstanding~~ under our U.S. ~~program.~~

or Euro programs. There were no borrowings under our credit facility as of ~~September~~June 30, ~~2020~~2021 or ~~2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.

As of September 30, 2020, we have a $500 million 364-day revolving credit agreement to be used for general corporate purposes with a diverse syndicate of banks to provide for further liquidity over the next twelve months in response to the coronavirus pandemic. There were no borrowings under this revolving credit agreement as of September 30, 2020. In addition, we executed a $305 million term credit agreement in April 2020, which we drew on and repaid $303 million during the second quarter of 2020.

Our long-term debt issuance and repayment activity through the first ~~nine~~six months of ~~2020~~2021 and ~~2019~~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, ~~2019~~2020 disclosed total notes payable and long-term debt due within one year of ~~$326~~$17 million. As of ~~September~~June 30, ~~2020,~~2021, the total notes payable and long-term debt due within one year ~~decreased to $22~~was $17 million. ~~The~~There was no commercial paper outstanding as of ~~September~~June 30, ~~2020 increased to $225 million. The commercial paper outstanding as of~~2021 or December 31, ~~2019 was $55 million.~~2020.

Our gross liability for uncertain tax positions was ~~$25~~$19 million as of ~~September~~June 30, ~~2020~~2021 and ~~$28~~$21 million as of December 31, ~~2019.~~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 ~~while~~and industries are facing the challenges with the economic conditions resulting from efforts to address the ~~pandemic. As~~pandemic, including supply shortages and inflation. While many government restrictions in the ~~spread~~U.S. have eased through the second 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 ~~pandemic continues, many countries have required companies~~emergence of a variant against which existing vaccines are not as effective or which may be more easily transmitted, particularly to ~~limit or suspend business operations and have implemented travel restrictions.~~those unvaccinated. These conditions have had and will continue to have a negative impact on market conditions and customer demand throughout the world. We anticipate continued adverse impacts and disruptions in our restaurant, hospitality and entertainment-related business operations, with modest impact on our Industrial segment businesses and limited or no adverse impacts on certain other parts of our business from COVID-19 restrictions; certain of our business will benefit from increased cleaning and sanitizing product demand. The ongoing effects of the global COVID-19 outbreak could result in a global recession.

We ~~anticipate a reduction~~expect the U.S. recovery to continue, Europe to reopen as forecasted, and the rest of the world to follow soon after, and we have implemented pricing actions that will build through the second half to manage inflation and rising delivered product costs. With this outlook, we expect continued strong year-on-year performance in the second half of 2021. We remain confident in our ~~2020 results of operations~~long-term outlook and ~~operating cash flows versus prior year levels due to lower market demand, but~~believe we are not yet able to estimate the full impact of the coronavirus outbreak as it continues to spread globally. While we continue to provide cleaning, disinfection programs and increased sanitizing protocols in response to the COVID-19 pandemic in healthcare, quick-service and food and beverage plant customers, we anticipate products and services provided to the full-service restaurant, hospitality, lodging and entertainment industries will continue to be negatively impactedwell-positioned for the remainder of the year due to the regulatory and organizational mandates that have been put in place. We have taken, and are continuing to take, steps to reduce costs, including reductions in capital expenditures, as well as other ongoing cost initiatives.continued future growth.

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~~six months of ~~2020,~~2021, sales in Argentina represented less than 1% of our consolidated sales. Assets held in Argentina at the end of the ~~third~~second quarter of 2021 represented less than 1% of our consolidated assets.

~~Brexit Referendum~~

Effective January 31, 2020, the U.K. left the European Union. The U.K.’s relationship with the EU will no longer be governed by the EU Treaties, but instead by the terms of the Withdrawal Agreement agreed between the U.K. and the EU in late 2019. The Withdrawal Agreement provides for a “transition” period, which commenced the moment the U.K. left the EU and is currently set to end on December 31, 2020. At the end of the transition period, there may be significant changes to the U.K.’s business environment. While the effects of Brexit will depend on any agreements the U.K. makes to retain access to EU markets or the failure to reach such agreements, the uncertainties created by Brexit, any resolution between the U.K. and EU countries or the failure to reach any such resolutions, could adversely affect our relationships with customers, suppliers and employees and could adversely affect our business.

NEW ACCOUNTING PRONOUNCEMENTS

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

SUBSEQUENT EVENTS

Subsequent to quarter end, we acquired a US Healthcare business for approximately $120 million. The acquisition is not material to our consolidated financial statements.

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

Also in July 2021, we entered into a cross currency swap agreement with a notional amount of €300 million maturing in 2030. The cross currency swap is designated as a net investment hedge of our Euro denominated exposures from our investments in certain of our Euro denominated functional currency subsidiaries.

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 ~~2020.~~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 ~~effects of the~~ COVID-19 ~~pandemic;~~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 ~~extent~~severity of the disease, the duration of the outbreak, the distribution and efficacy of vaccines, the likelihood of a resurgence of the outbreak, actions that may be taken by governmental authorities intended to ~~which~~minimize the ~~COVID-19~~spread of the pandemic ~~continues~~or to ~~spread, actions by various governments to address~~stimulate the ~~COVID-19 pandemic, such as stay-at-home orders~~economy and restrictions on gatherings and travel, scientific advances to combat COVID-19, the time it takes for our key end markets to recover, the financial health of our customers and channel partners, potential supply chain disruptions, and the health and welfare of our employees; andother 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 of the ~~coronavirus (COVID-19)~~COVID-19 pandemic; 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; potential 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;~~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, ~~and to labor and employment,~~ as well as to the conduct of our business ~~generally;~~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 ~~the~~ 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~~June 30, ~~2020,~~2021, we carried out an evaluation, under the supervision and with the participation of our management, including ~~the Chairman of the Board~~our President and Chief Executive Officer and ~~the~~our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our ~~Chairman of the Board~~President and Chief Executive Officer and ~~the~~our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the period ~~July~~April 1, 2021 through ~~September~~June 30, ~~2020,~~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. ~~We also made changes to our system in order to support our separation of the ChampionX business.~~ 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 ~~this item 1A,~~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 5351 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 below are, with the exception of limited updates to the risk factor relating to our outstanding indebtedness, the same as the risk factors disclosed under the heading “Item 1A. Risk Factors” in Exhibit 99.1 to our current report on Form 8-K filed with the SEC on September 25, 2020 (the “September 25 8-K”), which we filed to reflect certain retrospective revisions relating to the ChampionX business as discontinued operations and to reflect the changes in our reportable segments described in Note 16 entitled “Operating Segments” in the ~~Condensed Notes to Consolidated Financial Statements included in Part I, Item 1 of this~~ Form 10-Q. The risk factors set forth below update and supersede the risk factors disclosed in Item 1A of our annual report on Form 10-K for the year ended December 31, 2019, in Part II, Item 1A of our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, and under the heading “Item 1A. Risk Factors” in Exhibit 99.1 to the September 25 8-K.10-K.

The COVID-19 pandemic ~~has~~and measures taken in response thereto have materially and adversely impacted, and we expect ~~will~~may continue to materially and adversely impact, our ~~business.~~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.

~~The~~Beginning in March 2020, the COVID-19 pandemic ~~has~~ 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) ~~have~~ 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. ~~Prolonged economic weakness, including an extended period~~While many of ~~elevated levels of unemployment~~these measures have significantly eased in the ~~key countries we serve,~~U.S. through the second 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 ~~further reduce discretionary consumer spending and consumer confidence,~~see a prolonged resurgence of cases triggering additional government mandated lockdowns or similar restrictions, for example due to the emergence of a variant against which ~~could~~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 ~~further adverse~~material effect on ~~our business~~the macroeconomic environment, and ~~results of operations.~~ 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 ~~its~~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 ~~success of efforts~~pandemic or to ~~contain it,~~stimulate the ~~possibility of subsequent widespread outbreaks~~economy and ~~the impact of actions taken in response.~~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 ~~our business demands we~~ 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 ~~a significant portion of~~ our ~~workforce or certain~~ 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.

●

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.

~~Our results depend upon the continued vitality of the markets we serve.~~

Economic downturns, and in particular downturns in our larger markets including the foodservice, hospitality, travel, health care, food processing, refining, pulp and paper, mining and steel industries, can adversely impact our end-users. This year we are experiencing the negative impact of the COVID-19 pandemic on the demand for our products and services provided to customers in the full-service restaurant, hospitality, lodging and entertainment industries. In recent years, the weaker global economic environment, particularly in Europe, has also negatively impacted certain of our end-markets. During these periods of weaker economic activity, our customers and potential customers may reduce or discontinue their volume of purchases of cleaning and sanitizing products and water treatment and process chemicals, which has had, and may continue to have, a material adverse effect on our business, financial condition, results of operation or cash flows.

~~Our results are impacted by general worldwide economic factors.~~

Economic factors such as the worldwide economy, capital flows, interest rates and currency movements, including, in particular, our exposure to foreign currency risk, have affected our business in the past and may have a material adverse impact on our business in the future. For example, in 2011 and 2012, the European Union’s sovereign debt crisis negatively impacted economic activity in that region as well as the strength of the euro versus the U.S. dollar. Additionally, the June 2016 Brexit vote resulted in a sharp decline in the value of the British pound, as compared to the U.S. dollar and other currencies, and has caused increased fluctuations and unpredictability in foreign currency exchange rates. The possibility for referendum by other EU member states may lead to further market volatility. Other regions of the world, including emerging market areas, also expose us to foreign currency risk. As a result of increasing currency controls, importation restrictions, workforce regulations, pricing constraints and local capitalization requirements, we deconsolidated our Venezuelan subsidiaries effective as of the end of the fourth quarter of 2015. Prior to deconsolidation, across the second through fourth quarters of 2015, we devalued our Venezuelan bolivar operations within various of our operating segments, including Water, Paper, Food & Beverage and Institutional. Similar currency devaluations, credit market disruptions or other economic turmoil in other countries could have a material adverse impact on our consolidated results of operations, financial position and cash flows by negatively impacting economic activity, including in our key end-markets, and by further weakening the local currency versus the U.S. dollar, resulting in reduced sales and earnings from our foreign operations, which are generated in the local currency, and then translated to U.S. dollars.

If we are unsuccessful in executing on key business initiatives, including restructurings and our Enterprise Resource Planning (“ERP”) system upgrades, our business could be materially and adversely affected.

We continue to execute key business initiatives, including restructurings and investments to develop business systems, as part of our ongoing efforts to improve our efficiency and returns. In particular, we are undertaking the Accelerate 2020 plan to simplify and automate processes and tasks, reduce complexity and management layers, consolidate facilities and focus on key long-term growth areas by leveraging technology and structural improvements as discussed under Note 2 entitled “Special (Gains) and Charges” of this Form 10-Q.

Additionally, we are continuing implementation of our ERP system upgrades, which are expected to continue in phases over the next several years. These upgrades, which include sales, supply chain and certain finance functions, are expected to improve the efficiency of certain financial and related transactional processes. These upgrades involve complex business process design and a failure of certain of these processes could result in business disruption. We also made changes to our system in order to support our separation of the ChampionX business. If the projects in which we are investing or the initiatives which we are pursuing are not successfully executed, our consolidated results of operations, financial position or cash flows could materially and adversely be affected.

~~We may be 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 potentially 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 may 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, 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.

If the separation and split-off of our Upstream Energy business or certain internal transactions undertaken in anticipation of the divestiture are determined to be taxable in whole or in part, we and our stockholders may incur significant tax liabilities.

In connection with the separation and split-off of our Upstream Energy business that was consummated on June 3, 2020, we obtained opinions of outside tax counsel that the merger and exchange offer will qualify as tax-free transactions to us and our stockholders, except to the extent that cash was paid to Ecolab stockholders in lieu of fractional shares. We have not sought or obtained a ruling from the Internal Revenue Service (IRS) on the tax consequences of these transactions. An opinion of counsel is not binding on the IRS or the courts, which may disagree with the opinion. Even if the merger and exchange offer otherwise qualified as tax-free transactions, they may become taxable to us if certain events occur that affect either Ecolab or ChampionX Corporation. While ChampionX Corporation has agreed not to take certain actions that could cause the transactions not to qualify as tax-free transactions and is generally obligated to indemnify us against any tax consequences if it breaches this agreement, the potential tax liabilities could have a material adverse effect on us if we were not entitled to indemnification or if the indemnification obligations were not fulfilled. If the merger or exchange offer were determined to be taxable, we could be subject to a substantial tax liability, and each U.S. holder of our common stock who participated in the exchange offer could be treated as exchanging the Ecolab shares surrendered for ChampionX Corporation shares in a taxable transaction.

~~Potential indemnification liabilities pursuant to the separation and split-off of our Upstream Energy business could materially and adversely affect our business and financial statements.~~

With respect to the separation and subsequent split-off of our Upstream Energy business, we entered into a separation and distribution agreement with ChampionX Holding Inc. and ChampionX Corporation (f/k/a Apergy Corporation and taken together with ChampionX Holding Inc., “ChampionX”) as well as certain other agreements to govern the separation and related transactions and our relationship with ChampionX going forward. These agreements provide for specific indemnity and certain other obligations of each party and could lead to disputes between ChampionX and us. If we are required to indemnify ChampionX under the circumstances set forth in these agreements, we may be subject to substantial related liabilities. In addition, with respect to the liabilities for which ChampionX has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against ChampionX will be sufficient to protect us against the full amount of such liabilities, or that ChampionX will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our business and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.

~~We depend on key personnel to lead our business.~~

Our continued success will largely depend on our ability to attract, retain and develop a high caliber of talent and on the efforts and abilities of our executive officers and certain other key employees, particularly those with sales and sales management responsibilities to drive business growth, development and profitability. As we continue to grow our business, make acquisitions, expand our geographic scope and offer new products and services, we need the organizational talent necessary to ensure effective succession for executive officer and key employee roles in order to meet the growth, development and profitability goals of our business. Our operations could be materially and adversely affected if for any reason we were unable to attract, retain or develop such officers or key employees and successfully execute organizational change and management transitions at leadership levels.

~~Our growth depends upon our ability to successfully compete with respect to value, innovation and customer support~~.

We have numerous global, national, regional and local competitors. Our ability to compete depends in part on providing high quality and high value-added products, technology and service. We must also continue to identify, develop and commercialize innovative, profitable and high value-added products for niche applications and commercial digital applications. We have made significant investments in

commercial digital product offerings, and our culture and expertise must continue to evolve to develop, support and profitably deploy commercial digital offerings, which are becoming an increasingly important part of our business. There can be no assurance that we will be able to accomplish our technology development goals or that technological developments by our competitors will not place certain of our products, technology or services at a competitive disadvantage in the future. In addition, certain of the new products that we have under development will be offered in markets in which we do not currently compete, and there can be no assurance that we will be able to compete successfully in those new markets. If we fail to introduce new technologies or commercialize our digital offerings on a timely and profitable basis, we may lose market share and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.

~~Our significant non-U.S. operations expose us to global economic, political and legal risks that could impact our profitability.~~

We have significant operations outside the United States, including joint ventures and other alliances. We conduct business in approximately 170 countries and, in 2019, approximately 46% of our net sales originated outside the United States. There are inherent risks in our international operations, including:

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~~exchange controls and currency restrictions;~~

●

~~currency fluctuations and devaluations;~~

●

~~tariffs and trade barriers;~~

●

~~export duties and quotas;~~

●

~~changes in the availability and pricing of raw materials, energy and utilities;~~

●

~~changes in local economic conditions;~~

●

~~changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions;~~

●

~~impact from Brexit and the possibility of similar events in other EU member states;~~

●

~~difficulties in managing international operations and the burden of complying with international and foreign laws;~~

●

~~requirements to include local ownership or management in our business;~~

●

~~economic and business objectives that differ from those of our joint venture partners;~~

●

~~exposure to possible expropriation, nationalization or other government actions;~~

●

~~restrictions on our ability to repatriate dividends from our subsidiaries;~~

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~~unsettled political conditions, military action, civil unrest, acts of terrorism, force majeure, war or other armed conflict; and~~

●

~~countries whose governments have been hostile to U.S.-based businesses.~~

Effective January 31, 2020, the U.K. has formally left the European Union. The U.K.’s relationship with the EU will no longer be governed by the EU Treaties, but instead by the terms of the Withdrawal Agreement agreed between the U.K. and the EU in late 2019. The Withdrawal Agreement provides for a “transition” period, which commenced the moment the U.K. left the EU and is currently set to end on December 31, 2020. At the end of the transition period, there may be significant changes to the U.K.’s business environment. While the effects of Brexit will depend on any agreements the U.K. makes to retain access to EU markets or the failure to reach such agreements, the uncertainties created by Brexit, any resolution between the U.K. and EU countries or the failure to reach any such resolutions, could adversely affect our relationships with customers, suppliers and employees and could have a material adverse effect our business.

In addition, changes in U.S. or foreign government policy on international trade, including the imposition or continuation of tariffs, could materially and adversely affect our business. In 2018, the U.S. imposed tariffs on certain imports from China and other countries, resulting in retaliatory tariffs by China and other countries. While the U.S. and China signed what is being known as the Phase One Deal in January 2020, which included the suspension and rollback of tariffs, any new tariffs imposed by the U.S., China or other countries or any additional retaliatory measures by any of these countries, could increase our costs, reduce our sales and earnings or otherwise have an adverse effect on our operations.

Also, because of uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights, we face risks in some countries that our intellectual property rights and contract rights would not be enforced by local governments. We are also periodically faced with the risk of economic uncertainty, which has impacted our business in some countries. Other risks in international business also include difficulties in staffing and managing local operations, including managing credit risk to local customers and distributors.

Further, our operations outside the United States require us to comply with a number of United States and international regulations, including anti-corruption laws such as the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act, as well as U.S. and international economic sanctions regulations. We have internal policies and procedures relating to such regulations; however, there is risk that such policies and procedures will not always protect us from the misconduct or reckless acts of employees or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures. Violations of such laws and regulations could result in disruptive investigations, significant fines and sanctions, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social, legal and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

~~Our results could be materially and adversely affected by difficulties in securing the supply of certain raw materials or by fluctuations in the cost of raw materials~~.

The prices of raw materials used in our business can fluctuate from time to time, and in recent years we have experienced periods of increased raw material costs. Changes in raw material prices, unavailability of adequate and reasonably priced raw materials or substitutes for those raw materials, or the inability to obtain or renew supply agreements on favorable terms can materially and adversely affect our consolidated results of operations, financial position or cash flows. In addition, volatility and disruption in economic activity and conditions could disrupt or delay the performance of our suppliers and thus impact our ability to obtain raw materials at favorable prices or on favorable terms, which may materially and adversely affect our business.

~~Consolidation of our customers and vendors could materially and adversely affect our results.~~

Customers and vendors in the foodservice, hospitality, travel, healthcare, food processing, refining and pulp and paper industries, as well as other industries we serve, have consolidated in recent years and that trend may continue. This consolidation could have a material adverse impact on our ability to retain customers and on our pricing, margins and consolidated results of operations.

~~Our business depends on our ability to comply with laws and governmental regulations, and we may be materially and adversely affected by changes in laws and regulations~~.

Our business is subject to numerous laws and regulations relating to the environment, including evolving climate change standards, and to the manufacture, storage, distribution, sale and use of our products as well as to the conduct of our business generally, including employment and labor laws. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. Regulation of our products and operations continues to increase with more stringent standards, causing increased costs of operations and potential for liability if a violation occurs. The potential cost to us relating to environmental and product registration laws and regulations is uncertain due to factors such as the unknown magnitude and type of possible contamination and clean-up costs, the complexity and evolving nature of laws and regulations and the timing and expense of compliance. Changes to current laws (including tax laws), regulations and policies could impose new restrictions, costs or prohibitions on our current practices which would have a material adverse effect on our consolidated results of operations, financial position or cash flows. Changes to labor and employment laws and regulations, as well as related rulings by courts and administrative bodies, could materially and adversely affect our operations and expose us to potential financial liability.

~~We enter into multi-year contracts with customers that could impact our results.~~

Our multi-year contracts with some of our customers include terms affecting our pricing flexibility. There can be no assurance that these restraints will not have a material adverse impact on our margins and consolidated results of operations.

~~If we are unsuccessful in integrating acquisitions, our business could be materially and adversely affected~~.

As part of our long-term strategy, we seek to acquire complementary businesses. There can be no assurance that we will find attractive acquisition candidates or succeed at effectively managing the integration of acquired businesses into existing businesses. If the underlying business performance of such acquired businesses deteriorates, the expected synergies from such transactions do not materialize or we fail to successfully integrate new businesses into our existing businesses, our consolidated results of operations, financial position or cash flows could be materially and adversely affected.

~~Changes in tax laws and unanticipated tax liabilities could materially and adversely affect the taxes we pay and our profitability.~~

We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or related authoritative interpretations in the United States, including tax reform under the 2017 Tax Cuts and Jobs Act (the “Tax Act”), which includes broad and complex changes to the United States tax code, and the state tax response to the Tax Act, including, but not limited to, variability in our future tax rate. We are also subject to changes in tax law outside the United States. In addition, we are impacted by settlements of pending or any future adjustments proposed by the IRS or other taxing authorities in connection with our tax audits, all of which will depend on their timing, nature and scope. Increases in income tax rates, changes in income tax laws (including regulations which interpret the Tax Act) or unfavorable resolution of tax matters could have a material adverse impact on our financial results.

Future events may impact our deferred tax position, including the utilization of foreign tax credits and undistributed earnings of international affiliates that are considered to be reinvested indefinitely.

We evaluate the recoverability of deferred tax assets and the need for deferred tax liabilities based on available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we evaluate all positive and negative evidence as of the end of each reporting period. Future adjustments (either increases or decreases), to the deferred tax asset valuation allowance are determined based upon changes in the expected realization of the net deferred tax assets. The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry-back or carry-forward periods under the tax

law. Due to significant estimates used to establish the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record adjustments to the valuation allowance in future reporting periods. Changes to the valuation allowance or the amount of deferred tax liabilities could have a material adverse effect on our consolidated results of operations or financial position. Further, should we change our assertion regarding the permanent reinvestment of the undistributed earnings of international affiliates, a deferred tax liability may need to be established.

Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could materially and adversely affect our liquidity and financial results.

As of September 30, 2020, we had approximately $6.9 billion in outstanding indebtedness, with approximately $0.2 billion in the form of floating rate debt. Our debt level and related debt service obligations may have negative consequences, including:

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requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which reduces the funds we have available for other purposes such as acquisitions and capital investment;

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~~reducing our flexibility in planning for or reacting to changes in our business and market conditions;~~

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exposing us to interest rate risk since a portion of our debt obligations are at variable rates. For example, a one percentage point increase in the average interest rate on our floating rate debt at September 30, 2020 would increase future interest expense by approximately $2 million per year; and

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increasing our cost of funds and materially and adversely affecting our liquidity and access to the capital markets should we fail to maintain the credit ratings assigned to us by independent rating agencies.

~~If we add new debt, the risks described above could increase.~~

~~Severe public health outbreaks may materially and adversely impact our business.~~

Our business could be adversely affected by the effect of a public health epidemic. Besides the COVID-19 pandemic, the United States and other countries have experienced, and may experience in the future, public health outbreaks such as Zika virus, Avian Flu, SARS and H1N1 influenza. A prolonged occurrence of a contagious disease such as these could result in a significant downturn in the foodservice, hospitality and travel industries and also may result in health or other government authorities imposing restrictions on travel further impacting our end markets. Any of these events could result in a significant drop in demand for some of our products and services and materially and adversely affect our business. Uncertainty with respect to the impact on our financial results of the coronavirus outbreak is discussed further in Management Discussion & Analysis located at Part I, Item 2, of this Form 10-Q under the heading “Global Economic Environment.”

We incur significant expenses related to the amortization of intangible assets and may be required to report losses resulting from the impairment of goodwill or other assets recorded in connection with the Nalco transaction and other acquisitions.

We expect to continue to complete selected acquisitions and joint venture transactions in the future. In connection with acquisition and joint venture transactions, applicable accounting rules generally require the tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values. Intangible assets other than goodwill are required to be amortized over their estimated useful lives and this expense may be significant. Any excess in the purchase price paid by the acquiring company over the fair value of tangible and intangible assets of the acquired business is recorded as goodwill. If it is later determined that the anticipated future cash flows from the acquired business may be less than the carrying values of the assets and goodwill of the acquired business, the assets or goodwill may be deemed to be impaired. In this case, the acquiring company may be required under applicable accounting rules to write down the value of the assets or goodwill on its balance sheet to reflect the extent of the impairment. This write-down of assets or goodwill is generally recognized as a non-cash expense in the statement of operations of the acquiring company for the accounting period during which the write down occurs. As of December 31, 2019, we had goodwill of $5.6 billion which is maintained in various reporting units, including goodwill from the Nalco transaction. If we determine that any of the assets or goodwill recorded in connection with the Nalco transaction or any other prior or future acquisitions or joint venture transactions have become impaired, we will be required to record a loss resulting from the impairment. Impairment losses could be significant and could have a material adverse effect on our consolidated results of operations and financial position.

~~A chemical spill or release could materially and adversely impact our business~~.

As a manufacturer and supplier of chemical products, there is a potential for chemicals to be accidentally spilled, released or discharged, either in liquid or gaseous form, during production, transportation, storage or use. Such a release could result in environmental contamination as well as a human or animal health hazard. Accordingly, such a release could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

~~Extraordinary events may significantly impact our business.~~

The occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) repeated or prolonged federal government shutdowns or similar events, (d) war (including acts of terrorism or hostilities which impact our markets), (e) natural or

~~manmade disasters, (f) water shortages or (g) severe weather conditions affecting our operations or industries we serve may have a material adverse effect on our business.~~

Defense of litigation, particularly certain types of actions such as antitrust, patent infringement, personal injury, product liability and wage hour lawsuits, including class actions and arbitration proceedings, can be costly and time consuming even if ultimately successful, and if not successful could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

While we have a diverse customer base and no customer or distributor constitutes 10 percent or more of our consolidated revenues, we do have customers and independent, third-party distributors, the loss of which could have a material adverse effect on our consolidated results of operations or cash flows for the affected earnings periods.

Federal government shutdowns can have a material adverse effect on our consolidated results of operations or cash flows by disrupting or delaying new product launches, renewals of registrations for existing products and receipt of import or export licenses for raw materials or products.

War (including acts of terrorism or hostilities), natural or manmade disasters, water shortages or severe weather conditions affecting the foodservice, hospitality, travel, health care, food processing, refining, pulp and paper, mining, steel and other industries can cause a downturn in the business of our customers, which in turn can have a material adverse effect on our consolidated results of operations, financial position or cash flows. In particular, the U.S. Gulf Coast is a region with significant refining, petrochemicals and chemicals operations which provide us raw materials, as well as being an important customer base for our Water and Downstream operating segments. Hurricanes or other severe weather events impacting the Gulf Coast could materially and adversely affect our ability to obtain raw materials at reasonable cost, or at all, and could adversely affect our business with our customers in the region.

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


					Number of shares		Maximum number of							Number of shares		Maximum number of
	Total				purchased as part		shares that may		Total					purchased as part		shares that may
	number of		Average price		of publicly		yet be purchased		number of		Average price			of publicly		yet be purchased
	shares		paid per		announced plans		under the plans		shares		paid per			announced plans		under the plans
Period	purchased	⁽¹⁾	share	⁽²⁾	or programs	⁽³⁾	or programs	⁽³⁾	purchased	⁽¹⁾	share		⁽²⁾	or programs	⁽³⁾	or programs	⁽³⁾
July 1-31, 2020	3,112		$198.5687		-		6,432,246
August 1-31, 2020	84,725		191.4852		77,853		6,354,393
September 1-30, 2020	15,729		196.5785		11,825		6,342,568
April 1-30, 2021									41,024		$	214.7972		41,024		6,008,299
May 1-31, 2021									80			224.2200		-		6,008,299
June 1-30, 2021									-			-		-		6,008,299
Total	103,566		$192.4716		89,678		6,342,568		41,104		$	214.8155		41,024		6,008,299

(1)	Includes ~~13,888~~80 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.

6153

Item 6. Exhibits


Exhibit No.	Document	Method of Filing

(a)	The following documents are filed as exhibits to this report:
~~(4.2)~~(10.1)	~~Ninth Supplemental Indenture,~~Third Amended and Restated $2.0 billion 5-Year Revolving Credit Facility, dated as of ~~August 13, 2020, between~~April 16, 2021, among Ecolab Inc., the lenders party thereto, the issuing lenders party thereto, Bank of America, N.A., as administrative agent and ~~Wells Fargo~~swing line bank, and Citibank, N.A., JPMorgan Chase Bank, ~~National Association.~~N.A. and MUFG Bank, Ltd., as co-syndication agents.	Incorporated by reference to ~~the Current Report on~~Exhibit (10.1) of our Form 8-K ~~filed by Ecolab Inc. with the SEC on August 13, 2020.~~ dated April 20, 2021 (File No. 001-9328)
~~(4.3)~~(10.2)	~~Form~~Amendment No. 2 to Ecolab Mirror Pension Plan (as Amended and Restated Effective January 1, 2014), effective as of ~~1.300% Notes due 2031.~~May 5, 2021.	~~Included in Exhibit (4.2) above.~~Filed herewith electronically.
~~(4.4)~~(10.3)(i)	~~Form of 2.125% Notes due 2050.~~	~~Included in Exhibit (4.2) above.~~
~~(10.1)~~	~~Amended~~Issuing and ~~Restated Dealer~~Paying Agency Agreement, dated ~~9 June~~September 18, 2017, between Ecolab Inc.~~, Ecolab Lux 1 S.À R.L., Ecolab Lux 2 S.À R.L., Ecolab NL 10 B.V.~~ and ~~Ecolab NL 11 B.V.~~U.S. Bank National Association, as Issuing and Paying Agent (as ~~Issuers), Ecolab Inc. (as Guarantor in respect~~successor, effective as of ~~the notes issued by Ecolab Lux 1 S.À R.L., Ecolab Lux 2 S.À R.L. and Ecolab NL 10 B.V. and Ecolab NL 11 B.V.~~June 7, 2021, to MUFG Union Bank, N.A.), Credit Suisse Securities (Europe) Limited (as Arranger), and Citibank Europe plc, UK Branch, Credit Suisse Securities (Europe) Limited, Citigroup Global Markets Europe AG, Credit Suisse Securities Sociedad de Valores S.A. and Credit Suisse International (as Dealers).	Incorporated by reference to Exhibit (10.1)(a) of our Form 10-Q for the quarter ended ~~June~~September 30, 2017. (File No. 001-9328)
(10.3)(ii)	Corporate Commercial Paper – Master Note, dated June 7, 2021, together with annex thereto.	Filed herewith electronically.
(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.

6254

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 30, 2020~~August 5, 2021	By:	/s/ Scott D. Kirkland

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

6355


	Third Quarter Ended September 30, 2020 and 2019
(millions, except shares and 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, 2019		$358.9		$5,815.7		$9,368.0		$(1,836.4)		$(5,480.8)		$8,225.4		$44.0		$8,269.4

Net income						464.2						464.2		5.1		469.3
Other comprehensive income (loss) activity								(48.3)				(48.3)		0.6		(47.7)
Cash dividends declared (b)						(132.5)						(132.5)		(5.0)		(137.5)
Stock options and awards		0.5		58.4						1.2		60.1				60.1
Reacquired shares										(1.2)		(1.2)				(1.2)
Balance, September 30, 2019		$359.4		$5,874.1		$9,699.7		$(1,884.7)		$(5,480.8)		$8,567.7		$44.7		$8,612.4

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 (b)						(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

	Nine Months Ended September 30, 2020 and 2019
(millions, except shares and 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, 2018		$357.0		$5,633.2		$8,909.5		$(1,761.7)		$(5,134.8)		$8,003.2		$50.4		$8,053.6

New accounting guidance adoption (a)						58.4		(61.2)				(2.8)				(2.8)
Net income						1,129.3						1,129.3		12.6		1,141.9
Other comprehensive income (loss) activity								(61.8)				(61.8)		2.4		(59.4)
Cash dividends declared (b)						(397.5)						(397.5)		(20.7)		(418.2)
Stock options and awards		2.4		240.9						2.6		245.9				245.9
Reacquired shares										(348.6)		(348.6)				(348.6)
Balance, September 30, 2019		$359.4		$5,874.1		$9,699.7		$(1,884.7)		$(5,480.8)		$8,567.7		$44.7		$8,612.4

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 (c)						(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 (b)						(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