filings.toolsEcolab 10-K 2022-12-31
Filed 2023-02-24. 23 sections, 573K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the fiscal year ended December 31, 2022 |
OR
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| ☐ | 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)
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| Delaware | | 41-0231510 | ||
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | ||
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| 1 Ecolab Place**,** St. Paul**,** Minnesota 55102 | ||||
| (Address of principal executive offices) (Zip Code) | ||||
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| Registrant’s telephone number, including area code: **1-800-**232-6522 | ||||
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| Securities registered pursuant to Section 12(b) of the Act: | ||||
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| 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 |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ⌧ Yes ◻ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ◻ Yes ⌧ No
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.
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| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO
Aggregate market value of voting and non-voting common equity held by non-affiliates of registrant on June 30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter: $43,775,885,223 (see Item 12, under Part III hereof), based on a closing price of registrant’s Common Stock of $153.76 per share.
The number of shares of registrant’s Common Stock, par value $1.00 per share, outstanding as of January 31, 2023: 284,462,087 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 4, 2023, and to be filed within 120 days after the registrant’s fiscal year ended December 31, 2022 (hereinafter referred to as “Proxy Statement”), are incorporated by reference into Part III.
ECOLAB INC.
FORM 10-K
For the Year Ended December 31, 2022
TABLE OF CONTENTS
PART I
Except where the context otherwise requires, references in this Form 10-K to (i) “Ecolab,” “Company,” “we” and “our” are to Ecolab Inc. and its subsidiaries, collectively; (ii) “Nalco” are to Nalco Company LLC, a wholly-owned subsidiary of the Company; (iii) “Nalco transaction” and “Nalco merger” are to the merger of Ecolab and Nalco Holding Company completed in December 2011; (iv) “Purolite” are to Purolite LLC, a wholly-owned subsidiary of the Company and its subsidiaries, collectively; and (v) “Purolite transaction” are to the Company’s acquisition of the shares of the subsidiaries and certain other affiliated entities of Purolite Corporation and substantially all of the assets of Purolite Corporation used or held for use in connection with its filtration and purification resins business in December 2021.
Item 1. Business.
General Development of Business.
Ecolab was incorporated as a Delaware corporation in 1924. Our fiscal year is the calendar year ending December 31. International subsidiaries are included in the consolidated financial statements on the basis of their U.S. GAAP (accounting principles generally accepted in the United States of America) November 30 fiscal year ends to facilitate the timely inclusion of such entities in our consolidated financial reporting.
In June 2020, we completed the separation of our Upstream Energy business (the “ChampionX business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX business, followed immediately by the merger (the “Merger”) of ChampionX with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”).
As discussed in Note 5 Discontinued Operations, the ChampionX business met the criteria to be reported as discontinued operations in 2020 because the separation of ChampionX was a strategic shift in business that had a major effect on our operations and financial results. Therefore, we reported the historical results of ChampionX, including the results of operations and cash flows as discontinued operations, and related assets and liabilities were retrospectively reclassified for all periods presented herein. Unless otherwise noted, the accompanying financial information has been revised to reflect the effect of the separation of ChampionX and prior year balances have been revised accordingly to reflect continuing operations only.
On December 1, 2021, we acquired Purolite for total consideration of $3.7 billion in cash, net of cash acquired. Purolite is a leading and fast-growing global provider of high-end ion exchange resins for the separation and purification of solutions that is highly complementary to our current offering and critical to safe, high quality drug production and biopharma product purification in the life sciences industries. It also provides purification and separation solutions for critical industrial markets like microelectronics, nuclear power and food and beverage. Headquartered in King of Prussia, Pennsylvania, Purolite operates in more than 30 countries. Purolite is reported within our Life Sciences operating segment.
Narrative Description of Business.
General
A trusted partner for millions of customers, we are a global sustainability leader offering water, hygiene and infection prevention solutions and services that protect people and the resources vital to life. Building on a century of innovation, we have annual sales of $14 billion, employ more than 47,000 associates and operate in more than 170 countries around the world. We deliver comprehensive science-based solutions, data-driven insights and world-class service to advance food safety, maintain clean and safe environments, and optimize water and energy use. Our innovative solutions improve operational efficiencies and sustainability for customers in the food, healthcare, life sciences, hospitality and industrial markets.
We pursue a “Circle the Customer – Circle the Globe” strategy by providing an array of innovative programs, products and services designed to meet the specific operational and sustainability needs of our customers throughout the world. Through this strategy and our varied product and service mix, one customer may utilize the offerings of several of our operating segments. Important in our business proposition for customers is our ability to produce improved results while reducing their water and energy use. With that in mind, we focus on continually innovating to optimize both our own operations and the solutions we provide to customers, aligning with our corporate strategy to address some of the world’s most pressing and complex sustainability challenges such as water scarcity and climate change. The work we do matters, and the way we do it matters to our employees, customers, investors and the communities in which we and our customers operate.
Sustainability is core to our business strategy. We deliver sustainable solutions that help companies around the world achieve their business goals while reducing environmental impacts. We partner with customers around the world to reduce water and energy use as well as greenhouse gas emissions through our high-efficiency solutions. By partnering with our customers to help them do more with less through the use of our innovative and differentiated solutions, we aim to help our customers conserve more than 300 billion gallons of water annually by 2030. In 2021, we helped our customers conserve more than 215 billion gallons of water and avoid more than 3.5 million metric tons of greenhouse gas emissions.
The following description of our business is based upon our reportable segments as reported in our consolidated financial statements for the year ended December 31, 2022, which are located in Item 8 of Part II of this Form 10-K. Operating segments that share similar economic characteristics and future prospects, including the nature of the products and production processes, end-use markets, channels of distribution and regulatory environment, have been aggregated into three reportable segments: Global Industrial, Global Institutional & Specialty and Global Healthcare & Life Sciences. Operating segments that were not aggregated and do not exceed the quantitative criteria to be separately reported have been combined into Other. We provide similar information for Other as compared to our three reportable segments as we consider the information regarding its underlying operating segments useful in understanding our consolidated results.
Global Industrial
This reportable segment consists of the Water, Food & Beverage, Downstream and Paper operating segments, which provide water treatment and process applications, and cleaning and sanitizing solutions, primarily to large industrial customers within the manufacturing, food and beverage processing, transportation, chemical, primary metals and mining, power generation, global refining, petrochemical, pulp and paper industries. The underlying operating segments exhibit similar manufacturing processes, distribution methods and economic characteristics. Descriptions of the four operating segments which comprise our Global Industrial reportable segment follow below.
Water
Water serves customers across industrial and institutional markets. Within Water, our light industry markets include food and beverage, manufacturing and transportation, institutional clients including commercial buildings, hospitals, universities and hotels, and global high technology serving customers including data centers and microelectronics. Heavy industries served include power, chemicals and primary metals and mining.
Water provides water treatment products and technology programs for cooling water, wastewater, boiler water and process water applications. Our cooling water treatment programs are designed to control challenges associated with cooling water systems — corrosion, scale and microbial fouling and contamination — in open recirculating, once-through and closed systems. Our wastewater products and programs focus on improving overall plant economics, addressing compliance issues, optimizing equipment efficiency and improving operator capabilities and effectiveness. We provide integrated chemical and digitally-based solutions, process improvements and mechanical component modifications to optimize boiler performance and control corrosion and scale build-up. Our programs assist in more effectively managing water use for plant processes by optimizing the performance of treatment chemicals and equipment in order to minimize costs and maximize returns on investment.
Our offerings include specialty prod
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Item 1A. Risk Factors.
The following are 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-K. See the section entitled “Forward-Looking Statements” set forth above.
We may also refer to this disclosure to identify factors that may cause results to differ materially from those expressed in other forward-looking statements including those made in oral presentations, including telephone conferences and/or webcasts open to the public.
Economic & Operational Risks
Our results are impacted by general worldwide economic factors.
The COVID pandemic, geopolitical instability, including the conflict between Russia and Ukraine, and other global events have significantly increased economic and demand uncertainty. Some of the results of these events, including supply chain challenges, inflation, high interest rates, foreign currency exchange volatility, and volatility in global capital markets, have affected our business in the past and could continue to have a material adverse impact on our business in the future. Countries such as Russia, Turkey and Argentina have recently experienced economic upheaval and similar upheaval in other countries with Ecolab operations 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.
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 customers. In particular, we expect a more challenging macroeconomic environment, especially in Europe, as the war and the energy crisis are having a significant impact on costs and demand. Additionally, the last three years we have experienced 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 prior years, the weaker global economic environment 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 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 more than 170 countries and, in 2022, approximately 47% of our net sales originated outside the United States. There are inherent risks in our international operations, including:
| ● | exchange controls and currency restrictions; |
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| ● | currency fluctuations and devaluations; |
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| ● | tariffs and trade barriers; |
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| ● | export duties and quotas; |
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| ● | changes in the availability and pricing of raw materials, energy and utilities; |
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| ● | changes in local economic conditions; |
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| ● | changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions; |
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| ● | difficulties in managing international operations and the burden of complying with international and foreign laws; |
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| ● | requirements to include local ownership or management in our business; |
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| ● | economic and business objectives that differ from those of our joint venture partners; |
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| ● | exposure to possible expropriation, nationalization or other government actions; |
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| ● | 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 |
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| ● | countries whose governments have been hostile to U.S.-based businesses. |
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In light of Russia’s invasion of Ukraine and the United States’ and other countries’ sanctions against Russia, we announced in April 2022 that we will focus our Russian business on operations that are essential to life, providing minimal support for our healthcare, life sciences, food and beverage and certain water businesses. We may further narrow our presence in Russia depending on developments in the conflict or otherwise. Our Russian operations represented approximately 1% for both our 2022 and 2021 annual sales. During 2022 we recorded pre-tax charges of $13.1 million related to recoverability risk of certain assets in both Russia and Ukraine. Depending on developments, we may incur further charges relating to our Russia and Ukraine businesses. The conflict in Ukraine may escalate and/or expand in scope and the broader consequences of this conflict, which have included and/or may in the future include sanctions, embargoes, regional instability and geopolitical shifts; potential retaliatory action by the Russian government against companies, including us, such as nationalization of foreign businesses in Russia; and increased tensions between the United States and countries in which we operate cannot be predicted, nor can we predict the conflict’s impact on the global economy and on our business and financial results. The Russia and Ukraine conflict may also heighten many other risks disclosed in our report on Form 10-K, any of which could
materially and adversely affect our business and financial results. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets.
Additionally, 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 a Phase One trade agreement in January 2020, which included the suspension and rollback of tariffs, the CHIPS and Science Act of 2022 with objectives including countering China’s technical ambitions was signed into law in August 2022. Any new tariffs or policies 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.
Further, our operations outside the United States require us to comply with a number of United States and non-U.S. laws and 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 non-U.S. economic sanctions regulations. We have internal policies and procedures relating to such laws and 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.
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.
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 fluctuate, and in recent years we have experienced periods of significant 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 has materially and adversely affected our business and can in the future 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.
We depend on key personnel to lead our business; the labor market is very dynamic.
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. More generally, in the wake of the COVID-19 pandemic, expectations from qualified talent in many areas of the labor market have evolved. In light of this, if we are unable to attract and retain employees on terms and conditions that are consistent with our historical operating model, our business could be disrupted or our costs could increase, which may materially and adversely affect our business
We are subject to information technology system failures, network disruptions and breaches in data security.
We rely to a large extent upon information technology systems and infrastructure to operate our business. The size and complexity of our information technology systems and those of strategic vendors make them vulnerable to failure, malicious intrusion and random attack. Acquisitions have resulted in further de-centralization of systems and additional complexity in our systems infrastructure. Likewise, data security breaches by employees or others with permitted access to our systems or to the systems of strategic vendors pose a risk that sensitive data may be exposed to unauthorized persons or to the public. Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity attacks. While we have invested in protection of data and information technology, we have experienced immaterial cybersecurity attacks and incidents, and there can be no assurance that our efforts will prevent failures, cybersecurity attacks or breaches in our systems or in the systems of strategic vendors 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.
The COVID-19 pandemic and measures taken in response thereto have materially and adversely impacted, and we expect may continue to materially and adversely impact, our business and results of operations, and the full impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.
Beginning in March 2020, the COVID-19 pandemic had a rapid and significant negative impact on the global economy, including a significant downturn in the foodservice, hospitality and travel industries. Measures taken to alleviate the pandemic (such as stay-at-home orders and other responsive measures) significantly impacted our restaurant and hospitality customers and negatively affected demand for our products and services in these segments, resulting in a material adverse effect on our business and results of operations. There is continued uncertainty regarding the duration, scope and severity of the pandemic, particularly with the emergence of new variants of COVID-19 and periodic spikes in COVID-19 cases in various geographic regions, and the impacts on our business and the global economy from the effects of the pandemic and response measures. Travel and logistics restrictions, lockdowns, vaccine requirements and other measures from time to time implemented by foreign and domestic authorities have resulted in, and may continue to result in, supply chain and transportation disruptions, production delays and capacity limitations at Ecolab and some of its customers and suppliers, as well as reduced workforce availability or productivity at Ecolab and customer sites, and additional data, information and cyber security risks associated with an extensive workforce working remotely.
The degree to which the pandemic ultimately impacts our business, financial condition and results of operations and the global economy will depend on future developments beyond our control, which are highly uncertain and difficult to predict, including the severity, duration and any resurgence of the pandemic, the extent, duration and effectiveness of periodic lockdowns and other containment actions, the availability, public adoption and efficacy of COVID vaccines, how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of resulting global economic volatility.
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.
Strategic Risks
If we are unsuccessful in integrating acquisitions, including Purolite, our business could be materially and adversely affected.
In December 2021 we acquired Purolite, which operates in the highly regulated life sciences, pharma and biopharma industries and has extensive international operations which complicate integration execution. If we have difficulty integrating Purolite operations or lose key employees or customers, our business could be materially and adversely affected. Additionally, 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.
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 three restructuring plans, i.e. the Europe Program, the Institutional Advancement Program and 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 3 entitled “Special (Gains) and Charges” of this Form 10-K. 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. 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.
Our growth depends upon our ability to compete successfully 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.
Consolidation of our customers and vendors could materially and adversely affect our results.
Customers and vendors in the foodservice, hospitality, travel, healthcare, energy, life sciences, food processing 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.
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.
Legal, Regulatory & Compliance Risks
Our business depends on our ability to comply with laws and governmental regulations and meet our contractual commitments and failure to do so could materially and adversely impact our business; 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 and anti-corruption laws. Furthermore, increasing public and governmental awareness and concern regarding the effects of climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions and will likely result in further environmental and climate change laws and regulations. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. A violation of these laws and regulations could expose us to financial liability that may have a material adverse effect on our results of operations and cash flows. 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.
Defense of litigation, particularly certain types of actions such as antitrust, patent infringement, personal injury, product liability, breach of contract, wage hour and class action lawsuits, 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.
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.
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.
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 the energy, foodservice, hospitality and travel industries may have a material adverse effect on our business.
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.
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, including the effects of climate change, affecting the energy, foodservice, hospitality, travel, health care, food processing, 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 Downstream and Water operating segments. Hurricanes or other severe weather events impacting the Gulf Coast, such as the winter freeze in Texas and the Gulf Coast in February 2021, can 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.
Our commitments, goals, targets, objectives and initiatives related to sustainability, and our public statements and disclosures regarding them, expose us to numerous risks.
We have developed, and will continue to establish, goals, targets, and other objectives related to sustainability matters, including our sustainability goals in alignment with the United Nations Global Compact’s Business Ambition for 1.5⁰C and our commitments to science-based targets addressing Scope 1, 2 and 3 GHG emissions, discussed in Item 1 of Part I of this Form 10-K, entitled “Business.” Achieving these goals and commitments will require evolving our business, capital investment and the development of technology that might not currently exist. We might incur additional expense or be required to recognize impairment charges in connection with our efforts. These commitments, goals, targets and other objectives reflect our current plans and there is no guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these commitments, goals, targets, and objectives expose us to operational, reputational, financial, legal, and other risks. Our ability to achieve any stated commitment, goal, target, or objective is subject to factors and conditions, many of which are outside of our control, including the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.
Our business may face increased scrutiny from the investment community, other stakeholders, regulators, and the media related to our sustainability activities, including our commitments, goals, targets, and objectives, and our methodologies and timelines for pursuing them. If our sustainability practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our commitments, goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy reporting standards with respect to these matters, within the timelines we announce, or at all, could have operational, reputational, financial and legal impacts.
Financial Risks
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 related 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.
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, such as the Inflation Reduction Act (IRA) signed into law on August 16, 2022, which includes a corporate alternative minimum tax on certain large corporations, incentives to address climate change mitigation and other non-income tax provisions, including an excise tax on the repurchase of corporate stock. We are also subject to changes in tax law outside the United States and actions taken with respect to tax-related matters by associations such as the Organization for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries, and the European Commission which influence tax policies in countries where we operate. For example, approximately 140 countries have agreed to the OECD’s two-pillar base erosion and profit shifting project (“BEPS”). This framework, which could be implemented in some countries as early as 2023, is focused on a number of issues, including shifting taxing rights on income from residence countries to source countries and establishing a minimum 15% global tax rate. Some of the BEPS and related proposals, if enacted into law in the United States and in the foreign countries where we do business, could increase the burden and costs of our tax compliance, the amount of taxes we incur in those jurisdictions and our global effective tax rate. 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 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 statements.
As of December 31, 2022, we had approximately $8.6 billion in outstanding indebtedness, with approximately $1.5 billion in the form of floating rate debt. Our debt level and related debt service obligations may have negative consequences, including:
| ● | 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 December 31, 2022 would increase future interest expense by approximately $15 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. |
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If we add new debt, the risks described above could increase.
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 and Purolite transactions 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, 2022, we had goodwill of $8.0 billion which
is maintained in various reporting units, including goodwill from the Nalco and Purolite transactions. 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.
Item 1B. Unresolved Staff Comments.
We have no unresolved comments from the staff of the Securities and Exchange Commission.
Item 2. Properties.
Our manufacturing philosophy is to manufacture products wherever an economic, process or quality assurance advantage exists or where proprietary manufacturing techniques dictate in-house production. Currently, most products that we sell are manufactured at our facilities. We position our manufacturing locations and warehouses in a manner to permit ready access to our customers.
Our manufacturing facilities produce chemical products as well as medical devices and equipment for all of our operating segments, although Pest Elimination purchases the majority of their products and equipment from outside suppliers. Our chemical production process consists of blending purchased raw materials into finished products in powder, liquid, and solid form. Additionally, intermediates from reaction chemistries are used in some of the blends and are also packaged directly into finished goods. Our devices and equipment manufacturing operations consist of producing chemical product dispensers and injectors and other mechanical equipment, medical devices, dishwasher racks, related sundries, dish machine refurbishment and water monitoring and maintenance equipment system from purchased components and subassemblies.
The following table profiles our more significant physical properties with approximately 70,000 square feet or more with ongoing production activities, as well as certain other facilities important in terms of specialization and sources of supply. In general, manufacturing facilities located in the United States serve our U.S. markets and facilities located outside of the United States serve our international markets. However, most of the United States facilities do manufacture products for export.
PLANT PROFILES
| Location | Approximate Size (Sq. Ft.) | Segment | Majority Owned or Leased | |||
| Joliet, IL USA | 610,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Asheville, NC USA | | 478,000 | | Global Industrial, Global Healthcare & Life Sciences | | Leased |
| Tai Cang, CHINA | 468,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Hongzhou, CHINA | | 430,125 | | Global Healthcare & Life Sciences | | Owned |
| Sainghin, FRANCE | 360,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Mandras, GREECE | | 355,435 | | Global Industrial, Global Healthcare & Life Sciences | | Owned |
| Victoria, ROMANIA | | 343,605 | | Global Healthcare & Life Sciences | | Owned |
| South Beloit, IL USA | 313,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences, Other | Owned | |||
| Jianghai, CHINA | 296,000 | Global Industrial | Owned | |||
| Chalons, FRANCE | 280,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Clearing, IL USA | 270,000 | Global Industrial, Global Healthcare & Life Sciences, Other (Colloidal) | Owned | |||
| Nanjing, CHINA | 240,000 | Global Industrial | Owned | |||
| Garland, TX USA | 239,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Philadelphia, PA USA | | 232,000 | | Global Healthcare & Life Sciences | | Owned |
| Martinsburg, WV USA | 228,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Elwood City, PA USA | 222,000 | Global Industrial | Owned | |||
| Weavergate, UNITED KINGDOM | 222,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Celra, SPAIN | 218,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Greensboro, NC USA | 193,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Owned |
| Location | Approximate Size (Sq. Ft.) | Segment | Majority Owned or Leased | |||
| Fresno, TX USA | 192,000 | Global Industrial | Owned | |||
| Santiago, CHILE | | 188,000 | | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | | Owned |
| Las Americas, DOMINICAN REPUBLIC | 182,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Owned | |||
| Jacksonville, FL USA | 181,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Leased | |||
| Garyville, LA USA | 178,000 | Global Industrial | Owned | |||
| Gul Lane, SINGAPORE | | 169,000 | | Global Industrial | Owned | |
| Nieuwegein, NETHERLANDS | 168,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| La Romana, DOMINICAN REPUBLIC | 160,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Leased | |||
| Middleton, UNITED KINGDOM | | 157,575 | | Global Industrial, Global Healthcare & Life Sciences | | Owned |
| Tessenderlo, BELGIUM | 153,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Cheltenham, AUSTRALIA | 145,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Suzano, BRAZIL | 142,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| McDonough, GA USA | 141,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Darra, AUSTRALIA | 138,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Burlington, ON CANADA | 136,000 | Global Industrial | Owned | |||
| Eagan, MN USA | 133,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences, Other | Owned | |||
| Huntington, IN USA | 127,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Rozzano, ITALY | 126,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| City of Industry, CA USA | 125,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Mississauga, ON CANADA | 120,000 | Global Institutional & Specialty, Global Industrial | Leased | |||
| Elk Grove Village, IL USA | 115,000 | Global Institutional & Specialty | Leased | |||
| Biebesheim, GERMANY | 109,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Fort Worth, TX USA | 101,000 | Global Institutional & Specialty | Leased | |||
| Johannesburg, SOUTH AFRICA | 100,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Andover, UNITED KINGDOM | | 99,762 | | Global Industrial, Global Healthcare & Life Sciences | | Owned |
| Pilar, ARGENTINA | | 96,000 | | Global Institutional & Specialty, Global Industrial | | Owned |
| Hamilton, NEW ZEALAND | 96,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Konnagar, INDIA | | 88,000 | | Global Industrial | Owned | |
| Kwinana, AUSTRALIA | 87,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Yangsan, KOREA | 85,000 | Global Industrial | Owned | |||
| Cuautitlan, MEXICO | 76,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned | |||
| Barueri, BRAZIL | 75,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Leased | |||
| Citereup, INDONESIA | | 74,000 | | Global Industrial | | Owned |
| King of Prussia, PA | | 74,000 | | Global Healthcare & Life Sciences | | Owned |
| Mullingar, IRELAND | 74,000 | Global Institutional & Specialty, Global Industrial | Leased | |||
| Mosta, MALTA | 73,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Leased | |||
| Aubagne, FRANCE | 65,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Leased | |||
| Siegsdorf, GERMANY | 56,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned |
| Location | Approximate Size (Sq. Ft.) | Segment | Majority Owned or Leased | |||
| Verona, ITALY | 55,000 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Owned | |||
| Guangzhou, CHINA | 55,000 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Navanakorn, THAILAND | 53,000 | Global Institutional & Specialty, Global Industrial | Leased | |||
| Lerma, MEXICO | 49,000 | Global Industrial | Owned | |||
| Maribor, SLOVENIA | 46,400 | Global Institutional & Specialty, Global Industrial | Owned | |||
| Leeds, UNITED KINGDOM | 25,000 | Global Institutional & Specialty | Owned | |||
| Baglan, UNITED KINGDOM | 24,400 | Global Institutional & Specialty, Global Healthcare & Life Sciences | Leased | |||
| Noda, JAPAN | 22,000 | Global Institutional & Specialty, Global Industrial, Global Healthcare & Life Sciences | Owned |
Generally, our manufacturing facilities are adequate to meet our existing in-house production needs. We continue to invest in our plant sites to maintain viable operations and to add capacity as necessary to meet business imperatives.
Most of our manufacturing plants also serve as distribution centers. In addition, we operate distribution centers around the world, most of which are leased, and utilize third party logistics service providers to facilitate the distribution of our products and services.
Our corporate headquarters is comprised of a 17-story building that we own in St. Paul, Minnesota. We also own a 115-acre campus in Eagan, Minnesota that houses a significant research and development center, a data center and training facilities as well as several of our administrative functions. We also have a significant business presence in Naperville, Illinois, where our Water and Paper operating segments maintain their principal administrative offices and research center, as well as in Greensboro, North Carolina, where our Specialty operating segment maintains its principal administrative offices and a research center. Our Downstream operating segment leases administrative and research facilities in Sugar Land, Texas and maintains additional Company-owned research facilities in Fresno, Texas.
Significant regional administrative and/or research facilities are located in Campinas, Brazil; Leiden, Netherlands; and Pune, India, which we own, and in Dubai, UAE; Monheim, Germany; Singapore; Shanghai, China; and Zurich, Switzerland, which we lease. We also have a network of small leased sales offices in the United States and, to a lesser extent, in other parts of the world.
Item 3. Legal Proceedings.
Discussion of legal proceedings is incorporated by reference from Part II, Item 8, Note 16, “Commitments and Contingencies,” of this Form 10-K and should be considered an integral part of Part I, Item 3, “Legal Proceedings.”
Discussion of other environmental-related legal proceedings is incorporated by reference from Part I, Item 1 above, under the heading “Environmental and Regulatory Considerations.”
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is listed on the New York Stock Exchange under the symbol “ECL.” Our common stock is also traded on an unlisted basis on certain other United States exchanges.
Holders
On January 31, 2023, we had 5,031 holders of record of our Common Stock.
Issuer Purchases of Equity Securities
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | Total number of shares | | Maximum number of | |
| | | | | | | purchased as part of | | shares that may yet be | ||
| | | Total number of | | Average price paid | | publicly announced | | purchased under the | ||
| Period | | shares purchased (1) | | per share (2) | | plans or programs (3) | | plans or programs (3) | ||
| October 1-31, 2022 | 1,362 | | | $157.0872 | | - | 3,404,297 | | ||
| November 1-30, 2022 | 487,200 | | | 147.8301 | | 487,200 | 12,917,097 | | ||
| December 1-31, 2022 | 3,723 | | | 149.8621 | | - | 12,917,097 | | ||
| Total | 492,285 | | | $147.8711 | 487,200 | 12,917,097 | |
| (1) | Includes 5,085 shares reacquired from employees and/or directors to satisfy the exercise price of stock options or shares surrendered to satisfy statutory tax obligations under our stock incentive plans. |
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| (2) | The average price paid per share includes brokerage commissions associated with publicly announced plan purchases plus the value of such other reacquired shares. |
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| (3) | As announced on February 24, 2015, our Board of Directors authorized the repurchase of up to 20,000,000 common shares. As announced on November 3, 2022, our Board of Directors authorized the repurchase of up to an additional 10,000,000 shares. Subject to market conditions, we expect to repurchase all shares under these authorizations, for which no expiration date has been established, in open market or privately negotiated transactions, including pursuant to Rule 10b5-1 and accelerated share repurchase program. |
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Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management discussion and analysis (“MD&A”) provides information that 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 discussion should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Our consolidated financial statements are prepared in accordance with U.S. GAAP. 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 and information set forth in the sections entitled “Non-GAAP Financial Measures” at the end of this MD&A, and “Forward-Looking Statements” and “Risk Factors” within Items 1 and 1A of this Form 10-K. We also refer readers to the tables within the section entitled “Results of Operations” of this MD&A for reconciliation information of Non-GAAP measures to U.S. GAAP.
Comparability of Results
Purolite acquisition
In December 2021, we acquired Purolite for total consideration of $3.7 billion in cash, net of cash acquired. Purolite is a leading and fast-growing global provider of high-end ion exchange resins for the separation and purification of solutions for pharmaceutical and industrial applications. Headquartered in King of Prussia, Pennsylvania, Purolite operates in more than 30 countries. Purolite is reported within our Life Sciences operating segment. Acquisition and integration charges are recorded within special (gains) and charges. The 2021 impacts of the Purolite acquisition including operating results, acquisition-related amortization and interest expense related to the transaction were also excluded from 2021 adjusted results.
ChampionX Transaction
In June 2020, we completed the previously announced separation of our Upstream Energy business (the “ChampionX business”) in a Reverse Morris Trust transaction (the “Transaction”) through the split-off of ChampionX Holding Inc. (“ChampionX”), formed by Ecolab as a wholly owned subsidiary to hold the ChampionX Business, followed immediately by the merger of ChampionX (the “Merger”) with a wholly owned subsidiary of ChampionX Corporation (f/k/a Apergy Corporation, “Apergy”).
The ChampionX business met the criteria to be reported as discontinued operations because the separation of ChampionX was a strategic shift in business that had a major effect on our operations and financial results. Therefore, we reported the historical results of ChampionX, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations for 2020. Unless otherwise noted, the accompanying MD&A has been revised to reflect the ChampionX business as discontinued operations and 2020 balances have been revised accordingly to reflect continuing operations only.
Comparability of Reportable Segments
We have also made immaterial changes to our segment reporting, 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, the results of our divested businesses from the twelve months prior to divestiture. Further, we have excluded the results of our Purolite business for all of 2022 to remain comparable to 2021 when Purolite’s results were excluded from adjusted results. As part of the separation of the ChampionX business, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
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.
EXECUTIVE SUMMARY
In 2022, we delivered double-digit sales growth as we accelerated our pricing and drove volume growth. Our strong pricing increases offset continued significant delivered product cost increases on a dollar basis. Our team generated double-digit sales growth in the Institutional & Specialty, Industrial and Other segments while Healthcare & Life Sciences segment sales were stable. Operating income was stable, as accelerating pricing was offset by higher delivered product costs and investments in the business.
Sales
Reported sales increased 11% to $14.2 billion in 2022 from $12.7 billion in 2021. When measured in fixed rates of foreign currency exchange, fixed currency sales increased 16% compared to the prior year. Acquisition adjusted fixed currency sales increased 13% compared to the prior year.
Gross Margin
Our reported gross margin was 37.8% of sales for 2022, compared to our 2021 reported gross margin of 40.2%. Excluding the impact of special (gains) and charges and the 2021 impacts from the Purolite transaction included in cost of sales, our adjusted gross margin was 38.2% in 2022 and 40.9% in 2021. Our gross profit increased as our strong pricing exceeded substantial delivered product cost inflation.
Operating Income
Reported operating income remained stable at $1.6 billion in 2022, compared to $1.6 billion in 2021. Adjusted operating income, excluding the impact of special (gains) and charges and the 2021 impacts of the Purolite transaction, decreased 1% in 2022, as strong pricing offset substantial delivered product inflation and investments in the business. When measured in fixed rates of foreign currency exchange, adjusted fixed currency operating income increased 4% in 2022.
Earnings from Continuing Operations Attributable to Ecolab Per Common Share (“EPS”)
Reported diluted EPS decreased 3% to $3.81 in 2022 compared to $3.91 in 2021. Special (gains) and charges had an impact on both years. Special (gains) and charges in 2022 were driven primarily by restructuring and pension settlement expense and 2021 was driven primarily by COVID-19 related charges, restructuring charges and pension settlement expense. Adjusted diluted EPS, which exclude the impact of special (gains) and charges, the 2021 impacts of the Purolite transaction and discrete tax items decreased 4% to $4.49 in 2022 compared to $4.69 in 2021, as unfavorable foreign currency translation and increases in interest expense further offs
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The discussion under the heading entitled "Market Risk" and “Global Economic and Political Environment” is incorporated by reference from Part II, Item 7 of this Form 10-K.
Item 8. Financial Statements and Supplementary Data.
REPORTS OF MANAGEMENT
To our Shareholders:
Management’s Responsibility for Financial Statements
Management is responsible for the integrity and objectivity of the consolidated financial statements. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, include certain amounts based on management’s best estimates and judgments.
The Board of Directors, acting through its Audit Committee composed solely of independent directors, is responsible for determining that management fulfills its responsibilities in the preparation of financial statements and maintains internal control over financial reporting. The Audit Committee recommends to the Board of Directors the appointment of the Company’s independent registered public accounting firm, subject to ratification by the shareholders. It meets regularly with management, the internal auditors and the independent registered public accounting firm.
The independent registered public accounting firm has audited the consolidated financial statements included in this annual report and have expressed their opinion regarding whether these consolidated financial statements present fairly in all material respects our financial position and results of operation and cash flows as stated in their report presented separately herein.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, an evaluation of the design and operating effectiveness of internal control over financial reporting was conducted based on the 2013 framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under the framework in Internal Control — Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2022.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 as stated in their report which is included herein.
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| Christophe Beck | Scott D. Kirkland |
| Chairman and Chief Executive Officer | Chief Financial Officer |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Ecolab Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ecolab Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, i
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of December 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended). Based upon that evaluation, our Chairman and Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Refer to page 50 of this Annual Report for “Management’s Report on Internal Control Over Financial Reporting.”
Report of Registered Public Accounting Firm
Refer to page 51 of this Annual Report for the “Report of Independent Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting.
During the period October 1 - December 31, 2022 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are continuing our implementation of our enterprise resource planning (“ERP”) system upgrades, which are expected to occur in phases over the next several years. These upgrades, which include supply chain and certain finance functions, are expected to improve the efficiency of certain financial and related transactional processes. These upgrades of the ERP systems will affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our directors is incorporated by reference from the discussion under the heading “Proposal 1: Election of Directors” located in the Proxy Statement. Information about our Audit Committee, including the members of the Committee, and our Audit Committee financial experts, is incorporated by reference from the discussion under the heading “Corporate Governance,” and sub-headings “Board Committees” and “Audit Committee,” located in the Proxy Statement. Information about our Code of Conduct is incorporated by reference from the discussion under the heading “Corporate Governance” located in the Proxy Statement. Information regarding our executive officers is presented under the heading “Information about our Executive Officers” in Part I, Item 1 of this Form 10-K, and is incorporated herein by reference.
Item 11. Executive Compensation.
Information appearing under the following headings of the Proxy Statement is incorporated herein by reference:
| ● | Director Compensation for 2022 |
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| ● | Compensation Risk Analysis |
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| ● | Compensation & Human Capital Management Committee Interlocks and Insider Participation |
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| ● | Compensation & Human Capital Management Committee Report |
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| ● | Compensation Discussion and Analysis |
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| ● | Summary Compensation Table for 2022 |
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| ● | Grants of Plan-Based Awards for 2022 |
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| ● | Outstanding Equity Awards at Fiscal Year End for 2022 |
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| ● | Option Exercises and Stock Vested for 2022 |
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| ● | Pension Benefits for 2022 |
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| ● | Non-Qualified Deferred Compensation for 2022 |
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| ● | Potential Payments Upon Termination or Change in Control |
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| ● | Pay Ratio Disclosure |
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information appearing under the heading entitled “Security Ownership” located in the Proxy Statement is incorporated herein by reference. Information appearing under the heading entitled “Equity Compensation Plan Information” located in the Proxy Statement is incorporated herein by reference.
A total of 286,521 shares of Common Stock held by our directors and executive officers, some of whom may be deemed to be “affiliates” of the Company, have been excluded from the computation of market value of our Common Stock on the cover page of this Form 10-K. This total represents that portion of the shares reported as beneficially owned by our directors and executive officers as of June 30, 2022 which are actually issued and outstanding.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information appearing under the headings entitled “Director Independence Standards and Determinations” and “Related Person Transactions” located in the Proxy Statement is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
Information appearing under the heading entitled “Audit Fees” located in the Proxy Statement is incorporated herein by reference.
PART IV
Item 15. Exhibit and Financial Statement Schedules.
| Do | | | |
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| | The following information required under this item is filed as part of this report: | ||
| (a)(1) | Financial Statements. | | |
| | Document: | Page: | |
| | (i) | Report of Independent Registered Public Accounting Firm. (PCAOB ID 238) | 51 |
| | (ii) | Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020. | 53 |
| | (iii) | Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020. | 54 |
| | (iv) | Consolidated Balance Sheets at December 31, 2022 and 2021. | 55 |
| | (v) | Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020. | 56 |
| | (vi) | Consolidated Statements of Equity for the years ended December 31, 2022, 2021 and 2020. | 57 |
| | (vii) | Notes to Consolidated Financial Statements. | 58 |
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| Exhibit No.: | Document: | Method of Filing: | ||||
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| (a)(2) | | Financial Statement Schedules. | ||||
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| | | All financial statement schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the accompanying notes to the consolidated financial statements. The separate financial statements and summarized financial information of subsidiaries not consolidated and of fifty percent or less owned persons have been omitted because they do not satisfy the requirements for inclusion in this Form 10-K. | ||||
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| (a)(3) | | The documents below are filed as exhibits to this Report. We will, upon request and payment of a fee not exceeding the rate at which copies are available from the Securities and Exchange Commission, furnish copies of any of the following exhibits to stockholders. | ||||
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| (2.1) | | Agreement and Plan of Merger and Reorganization, dated December 18, 2019, by and among Ecolab Inc., ChampionX Holding Inc., Apergy Corporation and Athena Merger Sub, Inc. | | Incorporated by reference to Exhibit (2.1) of our Form 8-K, dated December 18, 2019. (File No. 001-9328) | ||
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| (2.2) | | Separation and Distribution Agreement, dated December 18, 2019, by and among Ecolab Inc., ChampionX Holding Inc. and Apergy Corporation. | | Incorporated by reference to Exhibit (2.2) of our Form 8-K, dated December 18, 2019. (File No. 001-9328) | ||
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| (2.3) | | Stock and Asset Purchase Agreement, dated October 28, 2021, by and among Ecolab Inc., Purolite Corporation, a Delaware corporation (“Purolite”), Stefan E. Brodie and Don B. Brodie (the “Founder Sellers” and together with Purolite, the “Sellers”) and Stefan E. Brodie, solely in his capacity as the representative of the Sellers. | | Incorporated by reference to Exhibit (2.1) of our Form 8-K, dated December 1, 2021. (File No. 001-9328) | ||
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| (3.1) | | Restated Certificate of Incorporation of Ecolab Inc., dated January 2, 2013. | | Incorporated by reference to Exhibit (3.2) of our Form 8-K, dated January 2, 2013. (File No. 001-9328) | ||
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| (3.2) | | By-Laws, as amended through December 3, 2015. | | Incorporated by reference to Exhibit (3.1) of our Form 8-K, dated December 3, 2015. (File No. 001-9328) |
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|---|---|---|---|---|---|---|
| Exhibit No.: | Document: | Method of Filing: | ||||
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| (4.17) | | Ninth Supplemental Indenture, dated August 13, 2020, between Ecolab Inc. and Computershare Trust Company, N.A. (as successor to Wells Fargo Bank, National Association), as Trustee. | | Incorporated by reference to Exhibit (4.2) of our Form 8-K filed by Ecolab Inc. on August 13, 2020. (File No. 001-9328) | ||
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| (4.18) | | Form of 1.300% Notes due 2031. | | Included in Exhibit (4.17) above. | ||
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| (4.19) | | Form of 2.125% Notes due 2050. | | Included in Exhibit (4.17) above. | ||
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| (4.20) | | Tenth Supplemental Indenture, dated August 18, 2021, between Ecolab Inc. and Computershare Trust Company, N.A. (as successor to Wells Fargo Bank, National Association), as Trustee. | | Incorporated by reference to Exhibit (4.2) of our Form 8-K filed on August 19, 2021. (File No. 001-9328) | ||
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| (4.21) | | Form of 2.750% Notes due 2055. | | Included in Exhibit (4.20) above. | ||
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| (4.22) | | Eleventh Supplemental Indenture, dated December 15, 2021, between Ecolab Inc. and Computershare Trust Company, N.A., as Trustee. | | Incorporated by reference to Exhibit (4.2) of our Form 8-K filed by Ecolab Inc. on December 15, 2021. (File No. 001-9328) | ||
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| (4.23) | | Form of 0.900% Notes due 2023. | | Included in Exhibit (4.22) above. | ||
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| (4.24) | | Form of 1.650% Notes due 2027. | | Included in Exhibit (4.22) above. | ||
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| (4.25) | | Form of 2.125% Notes due 2032. | | Included in Exhibit (4.22) above. | ||
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| (4.26) | | Form of 2.700% Notes due 2051. | | Included in Exhibit (4.22) above. | ||
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| (4.27) | | Twelfth Supplemental Indenture, dated as of November 17, 2022, between Ecolab Inc. and Computershare Trust Company, N.A., as Trustee. | | Incorporated by reference to Exhibit (4.2) of our Form 8-K filed by Ecolab Inc. on November 17, 2022. (File No. 001 9328) | ||
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| (4.28) | | Form of 5.250% Notes due 2028. | | Included in Exhibit (4.27) above. | ||
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| (4.29) | | Description of Securities. | | Incorporated by reference to Exhibit (4.20) of our Form 10-K Annual Report for the year ended December 31, 2019. (File No. 001-9328) | ||
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| | | Copies of other constituent instruments defining the rights of holders of our long-term debt are not filed herewith, pursuant to Section (b)(4)(iii) of Item 601 of Regulation S-K, because the aggregate amount of securities authorized under each of such instruments is less than 10% of our total assets on a consolidated basis. We will, upon request by the Securities and Exchange Commission, furnish to the Commission a copy of each such instrument. | ||||
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| (10.1) | | Third Amended and Restated $2.0 billion 5-Year Revolving Credit Facility, dated as of April 16, 2021, among Ecolab Inc., the lenders party thereto, the issuing lenders party thereto, Bank of America, N.A., as administrative agent and swing line bank, and Citibank, N.A., JPMorgan Chase Bank, N.A. and MUFG Bank, Ltd., as co-syndication agents. | | Incorporated by reference to Exhibit (10.1) of our Form 8-K, dated April 20, 2021. (File No. 001-9328) | ||
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|---|---|---|---|---|---|---|
| Exhibit No.: | Document: | Method of Filing: | ||||
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| | † | (ii) | Declaration of Amendment, dated May 5, 2016, to Ecolab Inc. 2001 Non-Employee Director Stock Option and Deferred Compensation Plan, as amended and restated, effective as of August 1, 2013. | | Incorporated by reference to Exhibit (10.1) of our Form 10-Q for the quarter ended June 30, 2016. (File No. 001-9328) | |
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| | † | (iii) | Master Agreement Relating to Periodic Options, as amended, effective as of May 1, 2004. | | Incorporated by reference to Exhibit (10)D(ii) of our Form 10-Q for the quarter ended June 30, 2004. (File No. 001-9328) | |
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| | † | (iv) | Amendment No. 1 to Master Agreement Relating to Periodic Options, as amended, effective as of May 2, 2008. | | Incorporated by reference to Exhibit (10)B of our Form 10-Q for the quarter ended September 30, 2008. (File No. 001-9328) | |
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| (10.4) | † | Form of Director Indemnification Agreement. Substantially identical agreements are in effect as to each of our directors. | | Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2003. (File No. 001-9328) | ||
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| (10.5) | † | (i) | Ecolab Executive Death Benefits Plan, as amended and restated, effective as of March 1, 1994. | | Incorporated by reference to Exhibit (10)H(i) of our Form 10-K Annual Report for the year ended December 31, 2006. See also Exhibit (10.12) hereof. (File No. 001-9328) | |
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| | † | (ii) | Amendment No. 1 to Ecolab Executive Death Benefits Plan, effective as of July 1, 1997. | | Incorporated by reference to Exhibit (10)H(ii) of our Form 10-K Annual Report for the year ended December 31, 1998. (File No. 001-9328) | |
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| | † | (iii) | Second Declaration of Amendment to Ecolab Executive Death Benefits Plan, effective as of March 1, 1998. | | Incorporated by reference to Exhibit (10)H(iii) of our Form 10-K Annual Report for the year ended December 31, 1998. (File No. 001-9328) | |
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| | † | (iv) | Amendment No. 3 to the Ecolab Executive Death Benefits Plan, effective as of August 12, 2005. | | Incorporated by reference to Exhibit (10)B of our Form 8-K, dated December 13, 2005. (File No. 001-9328) | |
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| | † | (v) | Amendment No. 4 to the Ecolab Executive Death Benefits Plan, effective as of January 1, 2005. | | Incorporated by reference to Exhibit (10)H(v) of our Form 10-K Annual Report for the year ended December 31, 2009. (File No. 001-9328) | |
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| | † | (vi) | Amendment No. 5 to the Ecolab Executive Death Benefits Plan, effective as of May 6, 2015. | | Incorporated by reference to Exhibit 10.2 of our Form 10-Q for the quarter ended June 30, 2015. (File No. 001-9328) | |
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| | † | (vii) | Amendment No. 6 to the Ecolab Executive Death Benefits Plan, effective as of June 23, 2017. | | Incorporated by reference to Exhibit 10.1(vii) of Ecolab’s Form 8-K dated June 23, 2017. (File No. 001-9328) | |
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| (10.6) | † | (i) | Ecolab Executive Long-Term Disability Plan, as amended and restated, effective as of January 1, 1994. | | Incorporated by reference to Exhibit (10)I of our Form 10-K Annual Report for the year ended December 31, 2004. See also Exhibit (10.12) hereof. (File No. 001-9328). | |
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| | † | (ii) | Amendment No. 1 to the Ecolab Executive Long-Term Disability Plan, effective as of August 21, 2015. | | Incorporated by reference to Exhibit 10.1 of our Form 10-Q for the quarter ended September 30, 2015. (File No. 001-9328) | |
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| (10.7) | † | (i) | Ecolab Supplemental Executive Retirement Plan, as amended and restated, effective as of January 1, 2022. | | Incorporated by reference to Exhibit (10.7)(i) of our Form 10-K Annual Report for the year ended December 31, 2021. (File No. 001 9328). | |
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| (10.8) | † | (i) | Ecolab Mirror Savings Plan, as amended and restated, effective as of January 1, 2022. | | Incorporated by reference to Exhibit (10.8)(i) of our Form 10-K Annual Report for the year ended December 31, 2021. (File No. 001 9328). | |
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|---|---|---|---|---|---|---|
| Exhibit No.: | Document: | Method of Filing: | ||||
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| (10.9) | † | (i) | Ecolab Mirror Pension Plan, as amended and restated, effective as of January 1, 2022. | | Incorporated by reference to Exhibit (10.9)(i) of our Form 10-K Annual Report for the year ended December 31, 2021. (File No. 001 9328). | |
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| (10.10) | † | (i) | Ecolab Inc. Administrative Document for Non-Qualified Plans, as amended and restated, effective as of January 1, 2022. | | Incorporated by reference to Exhibit (10.10)(i) of our Form 10-K Annual Report for the year ended December 31, 2021. (File No. 001 9328). | |
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| (10.11) | † | (i) | Ecolab Inc. Change in Control Severance Compensation Policy, as amended and restated, effective as of February 26, 2010. | | Incorporated by reference to Exhibit (10) of our Form 8-K, dated February 26, 2010. (File No. 001-9328) | |
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| | † | (ii) | Amendment No. 1 to Ecolab Inc. Change-in-Control Severance Policy, as amended and restated, effective as of February 26, 2010. | | Incorporated by reference to Exhibit (10.18)(ii) of our Form 10-K Annual Report for the year ended December 31, 2011. (File No. 001-9328) | |
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| (10.12) | † | Description of Ecolab Management Incentive Plan. | | Incorporated by reference to Exhibit (10.16) of our Form 10-K Annual Report for the year ended December 31, 2015. (File No. 001-9328) | ||
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| (10.13) | † | (i) | Ecolab Inc. 2010 Stock Incentive Plan, as amended and restated, effective as of May 2, 2013. | | Incorporated by reference to Exhibit (10.1) of our Form 8-K, dated May 2, 2013. (File No. 001-9328) | |
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| | † | (ii) | Declaration of Amendment, effective as of February 22, 2019, to Ecolab Inc. 2010 Stock Incentive Plan, as amended and restated, effective as of May 2, 2013. | | Incorporated by reference to Exhibit (10.3) of our Form 10-Q, dated May 2, 2019. (File No. 001-9328) | |
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| | † | (iii) | Sample form of Non-Statutory Stock Option Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted May 6, 2010. | | Incorporated by reference to Exhibit (10)B of our Form 8-K, dated May 6, 2010. (File No. 001-9328) | |
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| | † | (iv) | Sample form of Restricted Stock Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted May 6, 2010. | | Incorporated by reference to Exhibit (10)C of our Form 8-K, dated May 6, 2010. (File No. 001-9328) | |
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| | † | (v) | Sample form of Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted August 4, 2010. | | Incorporated by reference to Exhibit (10)A of our Form 10-Q, for the quarter ended September 30, 2010. (File No. 001-9328) | |
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| | † | (vi) | Sample form of Performance-Based Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted December 3, 2019. | | Incorporated by reference to Exhibit (10.15)(ix) of our Form 10-K Annual Report for the year ended December 31, 2019. (File No. 001-9328) | |
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| | † | (vii) | Sample form of Performance-Based Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted December 3, 2020. | | Incorporated by reference to Exhibit (10.13)(ix) of our Form 10-K Annual Report for the year ended December 31, 2020. (File No. 001-9328) | |
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| | † | (viii) | Sample form of Performance-Based Restricted Stock Unit Award Agreement under the Ecolab Inc. 2010 Stock Incentive Plan, adopted December 1, 2021. | | Incorporated by reference to Exhibit (10.13)(ix) of our Form 10-K Annual Report for the year ended December 31, 2021. (File No. 001 9328). | |
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| (10.14) | † | Policy on Reimbursement of Incentive Payments, as amended February 22, 2019. | | Incorporated by reference to Exhibit (10.16) of our Form 10-K Annual Report for the year ended December 31, 2018. (File No. 001-9328) | ||
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| (10.15) | † | Form of Nalco Company Death Benefit Agreement and Addendum to Death Benefit Agreement. | | Incorporated by reference from Exhibit (99.2) on Form 8-K of Nalco Holding Company filed on May 11, 2005. (File No. 001-32342) | ||
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| Exhibit No.: | Document: | Method of Filing: | ||||
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| (10.16) | † | Employment Transition Severance Agreement, dated November 16, 2022 between Ecolab Inc. and Timothy Mulhere. | | Filed herewith electronically. | ||
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| (21.1) | | List of Subsidiaries. | | Filed herewith electronically. | ||
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| (23.1) | | Consent of Independent Registered Public Accounting Firm. | | Filed herewith electronically. | ||
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| (24.1) | | Powers of Attorney. | | Filed herewith electronically. | ||
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| (31.1) | | Rule 13a-14(a) CEO Certification. | | Filed herewith electronically. | ||
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| (31.2) | | Rule 13a-14(a) CFO Certification. | | Filed herewith electronically. | ||
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| (32.1) | | Section 1350 CEO and CFO Certifications. | | Filed herewith electronically. | ||
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| (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. | ||
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| (101.SCH) | | Inline XBRL Taxonomy Extension Schema. | | Filed herewith electronically. | ||
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| (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. | ||
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| (101.PRE) | | Inline XBRL Taxonomy Extension Presentation Linkbase. | | Filed herewith electronically. | ||
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| (104) | | Cover Page Interactive Data File. | | Formatted as Inline XBRL and contained in Exhibit 101. |
† This exhibit is an executive compensation plan or arrangement.
Item 16. Form 10-K Summary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ecolab Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 24th day of February, 2023.
| | ECOLAB INC. | |
|---|---|---|
| | (Registrant) | |
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| | By: | /s/ Christophe Beck |
| | | Christophe Beck |
| | | Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Ecolab Inc. and in the capacities indicated, on the 24th day of February, 2023.
| /s/ Christophe Beck | | Chairman and Chief Executive Officer |
|---|---|---|
| Christophe Beck | | (Principal Executive Officer and Director) |
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| /s/ Scott D. Kirkland | | Chief Financial Officer |
| Scott D. Kirkland | | (Principal Financial Officer) |
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| /s/ Jennifer J. Bradway | | Senior Vice President and Corporate Controller |
| Jennifer J. Bradway | | (duly authorized officer and Principal Accounting Officer) |
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| /s/ Lanesha T. Minnix | | Directors |
| Lanesha T. Minnix | | |
| | | |
| as attorney-in-fact for: | | |
| Shari L. Ballard, Barbara J. Beck, Jeffrey M. Ettinger, Eric M. Green, Arthur J. Higgins, Michael Larson, David W. MacLennan, Tracy B. McKibben, Lionel L. Nowell, III, Victoria J. Reich, Suzanne M. Vautrinot and John J. Zillmer | | |