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ECL Ecolab

Filed: 29 Oct 21, 8:27am

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)                                                                                                                                                                                                                       

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File No. 1-9328

ECOLAB INC.

(Exact name of registrant as specified in its charter)

Delaware

41-0231510

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1 Ecolab Place, St. Paul, Minnesota 55102

(Address of principal executive offices)(Zip Code)

1-800-232-6522

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year,

if changed since last report)

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

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

2.625% Euro Notes due 2025

1.000% Euro Notes due 2024

ECL

ECL 25

ECL 24

New York Stock Exchange

New York Stock Exchange

New York Stock Exchange

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

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

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions, except per share amounts)

2021

    

2020

    

2021

    

2020

Product and equipment sales

$2,653.8

$2,426.4

$7,461.6

$7,017.5

Service and lease sales

667.0

592.2

1,906.9

1,707.4

Net sales

3,320.8

3,018.6

9,368.5

8,724.9

Product and equipment cost of sales

1,625.1

1,405.4

4,452.9

4,071.6

Service and lease cost of sales

391.6

364.2

1,119.8

1,053.9

Cost of sales (including special charges (a))

2,016.7

1,769.6

5,572.7

5,125.5

Selling, general and administrative expenses

832.0

802.6

2,548.2

2,499.5

Special (gains) and charges

6.3

35.0

36.7

120.3

Operating income

465.8

411.4

 

1,210.9

979.6

Other (income) expense (b)

(13.0)

(15.1)

(27.5)

(45.6)

Interest expense, net (c)

76.4

134.8

173.7

241.8

Income before income taxes

402.4

291.7

 

1,064.7

783.4

Provision for income taxes

73.8

42.4

226.0

103.5

Net income from continuing operations, including noncontrolling interest

328.6

249.3

838.7

679.9

Net income from continuing operations attributable to noncontrolling interest

4.1

3.1

9.8

12.8

Net income from continuing operations attributable to Ecolab

324.5

246.2

 

828.9

667.1

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

-

-

-

(2,172.5)

Net income (loss) attributable to Ecolab

$324.5

$246.2

$828.9

($1,505.4)

Earnings (loss) attributable to Ecolab per common share

Basic

Continuing operations

$ 1.13

$ 0.86

$ 2.90

$ 2.32

Discontinued operations

$ -

$ -

$ -

($ 7.56)

Earnings attributable to Ecolab

$ 1.13

$ 0.86

$ 2.90

($ 5.24)

Diluted

Continuing operations

$ 1.12

$ 0.85

$ 2.87

$ 2.29

Discontinued operations

$ -

$ -

$ -

($ 7.47)

Earnings attributable to Ecolab

$ 1.12

$ 0.85

$ 2.87

($ 5.18)

Weighted-average common shares outstanding

Basic

 

286.4

285.4

 

 

286.1

287.5

Diluted

 

289.2

 

288.4

 

 

289.0

 

290.8

(a)Cost of sales includes special (gains) and charges, net of $52.9 and $9.5 in the third quarter of 2021 and 2020, respectively, and $76.2 and $45.6 in the first nine months of 2021 and 2020, respectively, which is recorded in product and equipment cost of sales.
(b)Other (income) expense includes special charges of $7.0 and $26.6 in the third quarter and first nine months of 2021, respectively.
(c)Interest expense, net includes special charges of $32.3 and $83.1 in the third quarter of 2021 and 2020, respectively, and $32.3 and $83.8 first nine months of 2021 and 2020, respectively.
(d)Net income from discontinued operations, net of tax includes noncontrolling interest of $2.2 in the first nine months of 2020.

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

2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

    

2020

2021

    

2020

Net income (loss) attributable to Ecolab

$324.5

$246.2

$828.9

($1,505.4)

Net income from continuing operations attributable to noncontrolling interest

4.1

3.1

9.8

12.8

Net income from discontinued operations attributable to noncontrolling interest

-

-

-

2.2

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

328.6

249.3

838.7

(1,490.4)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

Foreign currency translation

 

(107.2)

165.9

60.9

4.7

Separation of ChampionX

-

-

-

229.9

Gain (loss) on net investment hedges

 

35.2

(83.4)

8.8

(87.4)

Total foreign currency translation adjustments

 

(72.0)

82.5

 

69.7

 

147.2

Derivatives and hedging instruments

 

15.3

(19.1)

16.7

(14.1)

Pension and postretirement benefits

Current period net actuarial gain

 

-

-

 

109.9

 

-

Settlement charge

 

5.3

-

 

20.2

 

-

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

 

28.1

(18.5)

42.6

12.0

Total pension and postretirement benefits

 

33.4

(18.5)

 

172.7

 

12.0

Subtotal

 

(23.3)

44.9

 

259.1

 

145.1

Total comprehensive income (loss), including noncontrolling interest

 

305.3

294.2

 

1,097.8

 

(1,345.3)

Comprehensive income attributable to noncontrolling interest

 

3.7

27.1

8.0

15.0

Comprehensive income (loss) attributable to Ecolab

$301.6

$267.1

$1,089.8

($1,360.3)

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

3

CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30

December 31

(millions, except per share amounts)

    

2021

2020

ASSETS

Current assets

Cash and cash equivalents

$897.9

$1,260.2

Accounts receivable, net

 

2,384.1

2,273.8

Inventories

 

1,378.2

1,285.2

Other current assets

326.6

298.2

Total current assets

 

4,986.8

5,117.4

Property, plant and equipment, net

 

3,069.6

3,124.9

Goodwill

 

6,125.6

6,006.9

Other intangible assets, net

 

2,889.7

2,977.0

Operating lease assets

377.4

423.8

Other assets

477.1

476.0

Total assets

$17,926.2

$18,126.0

LIABILITIES AND EQUITY

Current liabilities

Short-term debt

$18.7

$17.3

Accounts payable

 

1,237.1

1,160.6

Compensation and benefits

 

452.9

469.3

Income taxes

 

68.0

96.1

Other current liabilities

1,117.8

1,188.9

Total current liabilities

 

2,894.5

2,932.2

Long-term debt

 

5,931.8

6,669.3

Postretirement health care and pension benefits

 

996.6

1,226.2

Deferred income taxes

589.4

483.9

Operating lease liabilities

263.0

300.5

Other liabilities

289.1

312.4

Total liabilities

 

10,964.4

11,924.5

Commitments and contingencies (Note 17)

Equity (a)

Common stock

 

363.7

362.6

Additional paid-in capital

 

6,399.8

6,235.0

Retained earnings

 

8,659.8

8,243.0

Accumulated other comprehensive loss

 

(1,733.5)

(1,994.4)

Treasury stock

 

(6,756.3)

(6,679.7)

Total Ecolab shareholders’ equity

 

6,933.5

6,166.5

Noncontrolling interest

 

28.3

35.0

Total equity

 

6,961.8

6,201.5

Total liabilities and equity

$17,926.2

$18,126.0

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

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

4

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended 

September 30

(millions)

2021

2020

OPERATING ACTIVITIES

Net income (loss) including noncontrolling interest

$838.7

($1,490.4)

Less: Net loss from discontinued operations including noncontrolling interest

-

(2,170.3)

Net income from continuing operations including noncontrolling interest

838.7

679.9

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

Depreciation

453.1

443.1

Amortization

174.4

162.1

Deferred income taxes

52.7

(16.6)

Share-based compensation expense

72.5

65.1

Pension and postretirement plan contributions

(51.3)

(50.1)

Pension and postretirement plan expense, net

29.9

27.9

Restructuring charges, net of cash paid

(35.1)

(9.4)

Debt refinancing

29.4

77.1

Other, net

19.7

44.2

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

Accounts receivable

(101.0)

98.5

Inventories

(79.8)

(176.1)

Other assets

(48.1)

(22.4)

Accounts payable

71.5

11.8

Other liabilities

(5.6)

(243.1)

Cash provided by operating activities - continuing operations

1,421.0

1,092.0

Cash provided by operating activities - discontinued operations

-

118.4

Cash provided by operating activities

1,421.0

1,210.4

INVESTING ACTIVITIES

Capital expenditures

(423.8)

(362.3)

Property and other assets sold

12.3

2.5

Acquisitions and investments in affiliates, net of cash acquired

(209.9)

(487.0)

Divestiture of businesses

-

55.4

Other, net

(17.1)

(4.5)

Cash used for investing activities - continuing operations

(638.5)

(795.9)

Cash provided by investing activities - discontinued operations

-

443.2

Cash used for investing activities

(638.5)

(352.7)

FINANCING ACTIVITIES

Net issuances of commercial paper and notes payable

0.5

165.5

Long-term debt borrowings

293.7

1,855.9

Long-term debt repayments

(1,017.9)

(1,570.0)

Reacquired shares

(77.8)

(124.6)

Dividends paid

(426.5)

(421.8)

Exercise of employee stock options

94.3

199.7

Debt refinancing

(29.4)

(77.1)

Other, net

3.8

2.7

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

(1,159.3)

30.3

Cash used for financing activities - discontinued operations

-

(1.6)

Cash (used for) provided by financing activities

(1,159.3)

28.7

Effect of exchange rate changes on cash and cash equivalents

14.5

(38.1)

(Decrease) increase in cash and cash equivalents

(362.3)

848.3

Cash and cash equivalents, beginning of period - continuing operations

1,260.2

118.8

Cash and cash equivalents, beginning of period - discontinued operations

-

67.6

Cash and cash equivalents, beginning of period

1,260.2

186.4

Cash and cash equivalents, end of period - continuing operations

897.9

1,034.7

Cash and cash equivalents, end of period - discontinued operations

-

-

Cash and cash equivalents, end of period

$897.9

$1,034.7

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

5

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

Third Quarter Ended  September 30, 2021 and 2020

(millions, except per share amounts)

    

Common
Stock

    

Additional
Paid-in
Capital

    

Retained
Earnings

    

OCI
(Loss)

    

Treasury
Stock

    

Ecolab Shareholders'
Equity

    

Non-Controlling
Interest

    

Total
Equity

Balance, June 30, 2020

 

$362.0

 

$6,155.0

 

$7,967.8

 

($1,989.7)

 

($6,639.9)

 

$5,855.2

 

$35.0

 

$5,890.2

Net income

246.3

 

246.3

 

3.0

 

249.3

Other comprehensive income (loss) activity

43.8

 

43.8

 

1.1

 

44.9

Cash dividends declared (a)

(134.2)

 

(134.2)

 

(4.4)

 

(138.6)

Stock options and awards

 

0.1

22.3

1.1

 

23.5

 

23.5

Reacquired shares

(19.9)

 

(19.9)

 

(19.9)

Balance, September 30, 2020

 

$362.1

 

$6,177.3

 

$8,079.9

 

($1,945.9)

 

($6,658.7)

 

$6,014.7

 

$34.7

 

$6,049.4

Balance, June 30, 2021

 

$363.2

$6,333.3

$8,472.8

($1,710.6)

($6,749.6)

 

$6,709.1

 

$27.2

 

$6,736.3

Net income

324.5

 

324.5

 

4.1

 

328.6

Other comprehensive income (loss) activity

(22.9)

 

(22.9)

 

(0.4)

 

(23.3)

Cash dividends declared (a)

(137.5)

 

(137.5)

 

(2.6)

 

(140.1)

Stock options and awards

 

0.5

66.5

0.4

 

67.4

 

67.4

Reacquired shares

(7.1)

 

(7.1)

 

(7.1)

Balance, September 30, 2021

 

$363.7

 

$6,399.8

 

$8,659.8

 

($1,733.5)

 

($6,756.3)

 

$6,933.5

 

$28.3

 

$6,961.8

Nine Months Ended September 30, 2021 and 2020

(millions, except per share amounts)

    

Common
Stock

    

Additional
Paid-in
Capital

    

Retained
Earnings

    

OCI
(Loss)

    

Treasury
Stock

    

Ecolab Shareholders'
Equity

    

Non-Controlling
Interest

    

Total
Equity

Balance, December 31, 2019

 

$359.6

 

$5,907.1

 

$9,993.7

 

($2,089.7)

 

($5,485.4)

 

$8,685.3

 

$40.5

 

$8,725.8

New accounting guidance adoption (b)

(4.3)

 

(4.3)

 

 

(4.3)

Net (loss) income

(1,505.3)

 

(1,505.3)

 

14.9

 

(1,490.4)

Other comprehensive income (loss) activity

143.8

 

143.8

 

1.3

 

145.1

Cash dividends declared (a)

(404.2)

 

(404.2)

 

(16.2)

 

(420.4)

Separation of ChampionX

(8.5)

(1,051.4)

(1,059.9)

3.4

(1,056.5)

Changes in noncontrolling interests

17.6

17.6

(9.2)

8.4

Stock options and awards

 

 

2.5

261.1

2.7

 

266.3

 

266.3

Reacquired shares

(124.6)

 

(124.6)

 

(124.6)

Balance, September 30, 2020

$362.1

$6,177.3

$8,079.9

($1,945.9)

($6,658.7)

$6,014.7

$34.7

$6,049.4

Balance, December 31, 2020

 

$362.6

$6,235.0

$8,243.0

($1,994.4)

($6,679.7)

 

$6,166.5

 

$35.0

 

$6,201.5

Net income

828.9

828.9

9.8

838.7

Other comprehensive income (loss) activity

260.9

 

260.9

 

(1.8)

 

259.1

Cash dividends declared (a)

(412.1)

 

(412.1)

 

(14.7)

 

(426.8)

Stock options and awards

 

 

1.1

164.8

1.2

 

167.1

 

167.1

Reacquired shares

(77.8)

 

(77.8)

 

(77.8)

Balance, September 30, 2021

$363.7

$6,399.8

$8,659.8

($1,733.5)

($6,756.3)

$6,933.5

$28.3

$6,961.8

(a)Dividends declared per common share were $0.48 and $0.47 in the third quarter of 2021 and 2020, respectively, and $1.44 and $1.41 in the first nine months of 2021 and 2020, respectively.
(b)Upon adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Company reclassified the cumulative effect of applying the standard to retained earnings at the beginning of the period adopted.

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

6

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL INFORMATION

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

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

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

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

Subsequent to the separation of ChampionX, effective the third quarter of 2020, the Company no longer reports the Upstream Energy segment, which previously held the ChampionX business. The Company is aligned into 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, 2020 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.

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

7

2. SPECIAL (GAINS) AND CHARGES

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

2020

    

2021

2020

Cost of sales

Restructuring activities

$2.2

$1.0

$24.1

 

$6.6

Acquisition and integration activities

-

1.5

-

4.1

COVID-19 activities, net

50.7

1.8

51.8

8.7

Other

-

5.2

0.3

26.2

Cost of sales subtotal

52.9

9.5

76.2

 

45.6

Special (gains) and charges

Restructuring activities

0.4

26.9

6.5

 

31.4

Acquisition and integration activities

0.8

2.7

3.3

5.5

Disposal and impairment activities

-

-

-

45.9

COVID-19 activities, net

1.5

(3.0)

16.2

 

7.2

Other

3.6

8.4

10.7

 

30.3

Special (gains) and charges subtotal

6.3

35.0

36.7

 

120.3

Operating income subtotal

59.2

44.5

112.9

165.9

Interest expense, net

32.3

83.1

32.3

83.8

Other (income) expense

7.0

-

26.6

-

Total special (gains) and charges

$98.5

$127.6

$171.8

$249.7

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

Restructuring activities

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

Institutional Advancement Program

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

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

8

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

Employee

    

    

    

    

Termination

Asset

(millions)

    

Costs

    

Disposals

    

Other

    

Total

2020 Activity

Recorded expense and accrual

$25.6

$-

$9.6

$35.2

Net cash payments

 

(0.9)

-

(9.6)

(10.5)

Restructuring liability, December 31, 2020

 

24.7

-

-

24.7

2021 Activity

Recorded expense (income) and accrual

 

 

2.2

6.0

1.3

 

9.5

Net cash payments

 

 

(18.9)

-

(2.7)

 

(21.6)

Non-cash net charges

 

 

-

(6.0)

1.4

 

(4.6)

Restructuring liability, September 30, 2021

$8.0

$-

$-

$8.0

Accelerate 2020

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

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

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

    

Employee

    

    

    

    

Termination

Asset

(millions)

    

Costs

    

Disposals

    

Other

    

Total

2018-2020 Activity

Recorded expense

$212.0

$8.0

$19.2

$239.2

Net cash payments

 

(144.3)

1.2

(12.2)

 

(155.3)

Non-cash charges

 

-

(9.2)

(2.0)

 

(11.2)

Effect of foreign currency translation

 

(0.9)

-

-

 

(0.9)

Restructuring liability, December 31, 2020

66.8

-

5.0

71.8

2021 Activity

Recorded expense

2.4

0.3

0.2

2.9

Net cash payments

 

(31.6)

-

(2.1)

(33.7)

Non-cash charges

 

-

(0.3)

(0.1)

(0.4)

Restructuring liability, September 30, 2021

$37.6

$-

$3.0

$40.6

Other Restructuring Activities

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

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

9

Acquisition and integration related costs

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

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

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

Disposal and impairment charges

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

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

COVID-19 activities

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

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

Other operating activities

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

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

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

Interest expense

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

Other (income) expense

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

10

3. ACQUISITIONS AND DISPOSITIONS

Acquisitions

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

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

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

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

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

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

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

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

2020

    

2021

2020

Net tangible assets (liabilities) acquired and equity method investments

$14.8

$-

$12.4

$-

Identifiable intangible assets

Customer relationships

 

41.0

-

 

72.1

-

Trademarks

 

1.1

-

 

4.7

-

Non-compete agreements

 

3.0

 

3.0

Other technology

-

-

1.5

-

Total intangible assets

 

45.1

-

 

81.3

-

Goodwill

 

60.2

-

 

119.2

-

Total aggregate purchase price

 

120.1

-

 

212.9

-

Acquisition-related liabilities and contingent consideration (a)

 

-

-

 

(4.4)

-

Net cash paid for acquisitions, including acquisition-related

liabilities and contingent consideration

$120.1

$-

$208.5

$-

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

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

11

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

CID Lines Acquisition

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

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

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

(millions)

May 11, 2020

Tangible assets

$54.1

Identifiable intangible assets

 

Customer relationships

147.5

Trademarks

 

58.6

Acquired technologies and product registrations

47.7

Total assets acquired

 

307.9

Goodwill

274.8

Total liabilities

 

97.2

Net consideration transferred to sellers

$485.5

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

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

 

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

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

Dispositions

There were 0 business dispositions during the first nine months of 2021.

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

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

Subsequent Event

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

12

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 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)

Fair value of shares exchanged

1,051.4

Cash received from ChampionX

527.4

Consideration received less net assets

(1,907.9)

ChampionX cumulative translation adjustment ("CTA") write-off

(229.9)

Loss on separation

($2,137.8)

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

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

13

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

2021

    

2020

    

2021

    

2020

Product and equipment sales

$-

$-

$-

$858.9

Service and lease sales

-

-

-

99.6

Net sales

-

-

-

958.5

Product and equipment cost of sales

-

-

-

621.7

Service and lease cost of sales

-

-

-

80.4

Cost of sales (including special charges)

-

-

-

702.1

Selling, general and administrative expenses

-

-

-

180.5

Special (gains) and charges

-

-

-

2,221.7

Operating income

-

-

 

-

(2,145.8)

Other (income) expense

-

-

-

0.3

Interest expense (income), net

-

-

-

0.2

Income before income taxes

-

-

 

-

(2,146.3)

Provision for income taxes

-

-

-

24.0

Net loss including noncontrolling interest

-

-

 

-

(2,170.3)

Net income attributable to noncontrolling interest

-

-

-

2.2

Net loss from discontinued operations, net of tax

$-

$-

$-

($2,172.5)

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

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

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

The Company also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales, while purchases from ChampionX are recorded in inventory. Sales of product to ChampionX post-separation for the third quarter and first nine months of 2021 were $35.8 million and $103.5 million, respectively, and for the third quarter and first nine months of 2020 were $46.6 million and $58.9 million, respectively. As of September 30, 2021, the Company had an outstanding accounts receivable balance for sales of product to ChampionX of $18.0 million.

14

5. BALANCE SHEETS INFORMATION

September 30

December 31

(millions)

    

2021

2020

Accounts receivable, net

Accounts receivable

$2,460.5

$2,358.1

Allowance for doubtful accounts

(76.4)

(84.3)

Total

$2,384.1

$2,273.8

Inventories

Finished goods

$886.5

$789.6

Raw materials and parts

550.2

511.2

Inventories at FIFO cost

1,436.7

1,300.8

FIFO cost to LIFO cost difference

(58.5)

(15.6)

Total

$1,378.2

$1,285.2

Other current assets

Prepaid assets

$122.8

$99.1

Taxes receivable

158.0

168.6

Derivative assets

25.6

3.2

Other

20.2

27.3

Total

$326.6

$298.2

Property, plant and equipment, net

Land

$153.2

$159.7

Buildings and leasehold improvements

1,083.7

1,060.0

Machinery and equipment

1,828.6

1,830.1

Merchandising and customer equipment

2,714.6

2,691.0

Capitalized software

863.7

820.8

Construction in progress

279.7

219.8

6,923.5

6,781.4

Accumulated depreciation

(3,853.9)

(3,656.5)

Total

$3,069.6

$3,124.9

Other intangible assets, net

Intangible assets not subject to amortization

Trade names

$1,230.0

$1,230.0

Intangible assets subject to amortization

Customer relationships

2,593.2

2,530.9

Trademarks

348.0

348.0

Patents

499.5

492.5

Other technology

242.4

240.1

3,683.1

3,611.5

Accumulated amortization

Customer relationships

(1,432.6)

(1,319.1)

Trademarks

(169.7)

(155.0)

Patents

(266.9)

(244.6)

Other technology

(154.2)

(145.8)

(2,023.4)

(1,864.5)

Net intangible assets subject to amortization

1,659.7

1,747.0

Total

$2,889.7

$2,977.0

Other assets

Deferred income taxes

$150.8

$163.2

Pension

46.9

33.0

Derivative asset

3.2

-

Other

276.2

279.8

Total

$477.1

$476.0

15

September 30

December 31

(millions)

    

2021

2020

Other current liabilities

Discounts and rebates

$341.0

$304.1

Dividends payable

137.5

137.2

Interest payable

44.0

51.7

Taxes payable, other than income

131.7

151.8

Derivative liabilities

1.0

25.8

Restructuring

48.9

98.1

Contract liability

86.7

80.4

Operating lease liabilities

115.7

125.6

Other

211.3

214.2

Total

$1,117.8

$1,188.9

Accumulated other comprehensive loss

Unrealized loss on derivative financial instruments, net of tax

($4.4)

($21.1)

Unrecognized pension and postretirement benefit expense, net of tax

(762.5)

(935.2)

Cumulative translation, net of tax

(966.6)

(1,038.1)

Total

($1,733.5)

($1,994.4)

6. DEBT AND INTEREST

Short-term Debt

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

September 30

December 31

(millions)

2021

2020

Short-term debt

Notes payable

$16.0

$15.5

Long-term debt, current maturities

2.7

1.8

Total

$18.7

$17.3

Lines of Credit

As of September 30, 2021, the Company has a $2.0 billion multi-year credit facility which expires in April 2026. The credit facility has been established with a diverse syndicate of banks and supports the Company’s U.S. and Euro commercial paper programs. There were 0 borrowings under the Company’s credit facility as of either September 30, 2021 or December 31, 2020.

Commercial Paper

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

The Company had 0 outstanding commercial paper under its U.S. or Euro programs as of either September 30, 2021 or December 31, 2020.

Notes Payable

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

16

Long-term Debt

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

    

    

    

    

Maturity

September 30

December 31

(millions)

by Year

2021

2020

Long-term debt

Public and 144A notes (2021 principal amount)

Five year 2017 senior notes ($500 million)

2022

$-

$498.6

Seven year 2016 senior notes ($400 million)

2023

-

399.0

Seven year 2016 senior notes (€575 million)

2024

676.1

682.0

Ten year 2015 senior notes (€575 million)

2025

676.6

682.9

Ten year 2016 senior notes ($750 million)

2026

745.9

745.3

Ten year 2017 senior notes ($500 million)

2027

493.6

496.0

Ten year 2020 senior notes ($698 million)

2030

708.3

765.2

Ten year 2020 senior notes ($600 million)

2031

594.9

594.4

Thirty year 2011 senior notes ($389 million)

2041

384.2

452.2

Thirty year 2016 senior notes ($200 million)

2046

197.1

246.4

Thirty year 2017 senior notes ($484 million)

2047

424.0

611.9

Thirty year 2020 senior notes ($500 million)

2050

490.3

490.1

Thirty-four year 2021 144A notes ($685 million)

2055

534.9

-

Finance lease obligations and other

8.6

7.1

Total debt

5,934.5

6,671.1

Long-term debt, current maturities

(2.7)

(1.8)

Total long-term debt

$5,931.8

$6,669.3

Public and 144A Notes

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

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

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

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

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

Covenants

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

17

Net Interest Expense

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

2020

2021

2020

Interest expense

$78.3

$139.0

$183.8

$253.4

Interest income

 

(1.9)

(4.2)

 

(10.1)

(11.6)

 

Interest expense, net

$76.4

$134.8

$173.7

$241.8

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

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

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

18

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

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

During the second quarter of 2021, the Company completed its annual goodwill impairment assessment for each of its 11 reporting units using discounted cash flow analyses that incorporated assumptions, including future operating performance, long-term growth, and discount rates. The Company’s goodwill impairment assessments for 2021 indicated the estimated fair values of each of its reporting units exceeded the carrying amounts of the respective reporting units by significant margins. There has been 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 period ended September 30, 2021 were as follows:

Global

Global

Global

Institutional

Healthcare &

(millions)

    

Industrial

    

& Specialty

    

Life Sciences

Other

    

Total

 

December 31, 2020

$4,287.9

$564.1

$909.8

$245.1

$6,006.9

Current year business combinations (a)

-

11.0

108.2

-

119.2

Prior year business combinations (b)

(0.9)

-

-

-

(0.9)

Effect of foreign currency translation

2.4

(0.4)

(1.5)

(0.1)

0.4

September 30, 2021

$4,289.4

$574.7

$1,016.5

$245.0

$6,125.6

(a)Represents goodwill associated with current year acquisitions.
(b)Represents purchase accounting adjustments associated with the CID Lines acquisition.

Other Intangible Assets

The Nalco trade name is the Company’s only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. During the second quarter of 2021, the Company completed its annual impairment assessment of the Nalco trade name using the relief from royalty discounted cash flow method, which incorporates assumptions, including future sales projections, royalty rates and discount rates. The Company’s Nalco tradename impairment assessment for 2021 indicated the estimated fair value of the Nalco trade name exceeded its $1.2 billion carrying amount by a significant margin. There has been 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 acquisitions. The fair value of intangible assets acquired in business acquisitions are estimated primarily using discounted cash flow valuation methods at the time of acquisition. Intangible assets are amortized on a straight-line basis over their estimated lives. Total amortization expense related to intangible assets during the third quarter of 2021 and 2020 was $57.7 million and $58.9 million, respectively. Total amortization expense related to intangible assets during the first nine months of 2021 and 2020 was $174.4 and $162.1 million, respectively. Amortization expense related to intangible assets for the remaining three-month period of 2021 is expected to be approximately $53 million.

19

8. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

September 30, 2021

(millions)

Carrying

Fair Value Measurements

    

Amount

    

Level 1

Level 2

    

Level 3

Assets

Foreign currency forward contracts

 

 

$45.0

$-

 

$45.0

 

$-

Interest rate swap agreements

2.4

-

2.4

-

 

 

Liabilities

Foreign currency forward contracts

31.6

-

31.6

-

Interest rate swap agreements

3.9

3.9

Cross-currency swap derivative contract

2.0

-

2.0

-

December 31, 2020

(millions)

Carrying

Fair Value Measurements

    

Amount

    

Level 1

Level 2

    

Level 3

Assets

Foreign currency forward contracts

 

$15.5

 

$-

 

$15.5

 

$-

Liabilities

Foreign currency forward contracts

 

69.9

 

-

 

69.9

 

-

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

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

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

20

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

September 30, 2021

December 31, 2020

Carrying

Fair

Carrying

Fair

    

Amount

    

Value

    

Amount

    

Value

Long-term debt, including current maturities

$5,934.5

$6,623.3

$6,671.1

$7,704.4

21

9. DERIVATIVES AND HEDGING TRANSACTIONS

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

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

Derivative Positions Summary

Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to net settle contracts with the same counterparties. These arrangements generally do not call for collateral and as of the applicable dates presented in the following table, 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 Sheets.

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

Derivative Assets

Derivative Liabilities

September 30

December 31

September 30

December 31

(millions)

    

2021

2020

    

2021

2020

 

Derivatives designated as hedging instruments

Foreign currency forward contracts

$17.1

$8.1

$24.1

$54.3

Interest rate swap agreements

2.4

-

3.9

-

Cross-currency swap derivative contract

-

-

2.0

-

Derivatives not designated as hedging instruments

Foreign currency forward contracts

27.9

7.4

7.5

15.6

Gross value of derivatives

47.4

15.5

37.5

69.9

Gross amounts offset in the Consolidated Balance Sheets

(18.6)

(12.3)

(18.6)

(12.3)

Net value of derivatives

$28.8

$3.2

$18.9

$57.6

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

Notional Values

September 30

December 31

(millions)

    

2021

    

2020

Foreign currency forward contracts

$ 3,819

$ 3,702

Interest rate swap agreements

750

-

Cross-currency swap derivative contract

354

-

22

Cash Flow Hedges

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

Fair Value Hedges

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

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

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

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

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

Carrying amount of the hedged liabilities

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

Third Quarter Ended 

Third Quarter Ended 

Line item in which the hedged item is included

September 30

September 30

(millions)

    

2021

2020

    

2021

2020

Long-term debt

$745.9

$-

$5.2

$-

Net Investment Hedges

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

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

23

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

2020

2021

2020

 

Revaluation gain (loss), net of tax:

Euronotes

$36.7

($83.4)

$10.3

($87.4)

Cross-currency swap derivative contract

(1.5)

-

(1.5)

-

Total revaluation gain (loss), net of tax

$35.2

($83.4)

$8.8

($87.4)

Derivatives Not Designated as Hedging Instruments

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

Effect of all Derivative Instruments on Income

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

Third Quarter Ended 

September 30

2021

2020

(millions)

COS

SG&A

Interest

    

COS

SG&A

Interest

Gain (loss) on derivatives in cash flow hedging relationship:

Foreign currency forward contracts

Amount of gain (loss) reclassified from AOCI to income

($4.6)

$42.1

$-

$3.1

($101.5)

$-

Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value

-

-

5.1

-

-

(4.9)

Interest rate swap agreements

Amount of gain (loss) reclassified from AOCI to income

-

-

(0.6)

-

-

(0.2)

Gain (loss) on derivatives not designated as hedging instruments:

Foreign currency forward contracts

Amount of gain (loss) recognized in income (a)

-

22.8

-

-

(30.2)

11.3

Total gain (loss) of all derivative instruments

($4.6)

$64.9

$4.5

$3.1

($131.7)

$6.2

Nine Months Ended 

September 30

2021

2020

(millions)

COS

SG&A

Interest

    

COS

SG&A

Interest

Gain (loss) on derivatives in cash flow hedging relationship:

Foreign currency forward contracts

Amount of gain (loss) reclassified from AOCI to income

($9.2)

$4.7

$-

$9.1

($108.8)

$-

Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value

-

-

16.4

-

-

8.6

Interest rate swap agreements

Amount of gain (loss) reclassified from AOCI to income

-

-

(1.8)

-

-

(0.7)

Gain (loss) on derivatives not designated as hedging instruments:

Foreign currency forward contracts

Amount of gain (loss) recognized in income (a)

-

28.6

-

-

(12.3)

11.3

Total gain (loss) of all derivative instruments

($9.2)

$33.3

$14.6

$9.1

($121.1)

$19.2

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

Subsequent Event

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

24

10. OTHER COMPREHENSIVE INCOME (LOSS) INFORMATION

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

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions)

    

2021

2020

    

2021

2020

Derivative and Hedging Instruments

Unrealized gain (loss) on derivative & hedging instruments

Amount recognized in AOCI

$61.2

($126.2)

$30.3

($108.3)

Loss (gain) reclassified from AOCI into income

COS

4.6

(3.1)

9.2

(9.1)

SG&A

 

(42.1)

101.5

 

(4.7)

108.8

Interest (income) expense, net

(4.5)

5.1

(14.6)

(7.9)

 

(42.0)

103.5

 

(10.1)

91.8

Other activity

 

0.5

(0.2)

 

(0.2)

(0.2)

Tax impact

 

(4.4)

3.8

 

(3.3)

2.6

Net of tax

$15.3

($19.1)

$16.7

($14.1)

Pension and Postretirement Benefits

Amount recognized in AOCI

Current period net actuarial gain

$-

$-

$145.0

$-

Amount reclassified from AOCI into income

Settlement charge

7.0

-

26.6

-

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

16.3

15.0

59.8

44.3

 

23.3

15.0

231.4

44.3

Other activity

15.6

(29.8)

(2.8)

(21.5)

Tax impact

 

(5.5)

(3.7)

 

(55.9)

(10.8)

Net of tax

$33.4

($18.5)

$172.7

$12.0

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

    

2021

2020

    

2021

2020

(millions)

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

($31.9)

$78.2

($7.7)

$69.4

Pension and postretirement benefits amortization of net actuarial losses

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

33.4

(18.5)

62.8

12.0

25

11. SHAREHOLDERS’ EQUITY

Share Repurchase Authorization

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

Share Repurchases

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

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

Separation of ChampionX

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

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

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

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

Third Quarter Ended 

Nine Months Ended 

September 30

September 30

(millions, except per share)

    

2021

    

2020

    

2021

2020

Net income from continuing operations attributable to Ecolab

$324.5

$246.2

$828.9

$667.1

Net loss from discontinued operations

-

-

-

(2,172.5)

Net income (loss) attributable to Ecolab

$324.5

$246.2

$828.9

($1,505.4)

Weighted-average common shares outstanding

Basic

 

286.4

285.4

 

286.1

287.5

Effect of dilutive stock options and units

 

2.8

3.0

 

2.9

3.3

Diluted

 

289.2

288.4

289.0

290.8

 

Earnings (loss) attributable to Ecolab per common share

Basic EPS

 

Continuing operations

$ 1.13

$ 0.86

$ 2.90

$ 2.32

Discontinued operations

$ -

$ -

$ -

($ 7.56)

Earnings (loss) attributable to Ecolab

$ 1.13

$ 0.86

$ 2.90

($ 5.24)

Diluted EPS

Continuing operations

$ 1.12

$ 0.85

$ 2.87

$ 2.29

Discontinued operations

$ -

$ -

$ -

($ 7.47)

Earnings (loss) attributable to Ecolab

$ 1.12

$ 0.85

$ 2.87

($ 5.18)

Anti-dilutive securities excluded from the computation of diluted EPS

 

1.0

1.0

 

1.0

1.0

Amounts do not necessarily sum due to rounding.

26

13. INCOME TAXES

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

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

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

14. PENSION AND POSTRETIREMENT PLANS

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

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

U.S.

International

U.S. Postretirement

Pension

Pension

Health Care

(millions)

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