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

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

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

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Comparability of Results

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ChampionX Transaction

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

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

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Fixed Currency Foreign Exchange Rates

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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.

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Impact of Acquisitions and Divestitures

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Acquisition adjusted growth rates exclude the results of our acquired businesses from the first twelve months post acquisition and exclude the results of our divested businesses from the twelve months prior to divestiture. In addition, as part of the separation, we also entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.

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OVERVIEW OF THE THIRD QUARTER ENDED SEPTEMBER 30, 2021

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Sales Performance

​

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

​

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

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

●

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

●

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

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

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Financial Performance

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

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

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

●

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

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

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RESULTS OF OPERATIONS

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Net Sales

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

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

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

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

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Amounts do not necessarily sum due to rounding.

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

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​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	Third Quarter Ended													​	Nine Months Ended
​	September 30													​	September 30
​	2021						​	2020						​	2021						​	2020
​					Gross		​					Gross		​					Gross		​					Gross
(millions/percent)	COS			​	Margin		​	COS			​	Margin		​	COS			​	Margin		​	COS			​	Margin
Product and equipment cost of sales	​	$1,625.1	​	​	​	​	​	​	$1,405.4	​	​	​	​	​	​	$4,452.9	​	​	​	​	​	​	$4,071.6	​	​	​	​
Service and lease cost of sales	​	391.6	​	​	​	​	​	​	364.2	​	​	​	​	​	​	1,119.8	​	​	​	​	​	​	1,053.9	​	​	​	​
Reported GAAP COS and gross margin	​	$2,016.7	​	​	39.3	%	​	​	$1,769.6	​	​	41.4	%	​	​	$5,572.7	​	​	40.5	%	​	​	$5,125.5	​	​	41.3	%
Special (gains) and charges	​	52.9	​		​	​	​	​	9.5	​		​	​	​	​	76.2	​		​	​	​	​	45.6	​		​	​
Non-GAAP adjusted COS and gross margin	​	$1,963.8	​	​	40.9	%	​	​	$1,760.1	​	​	41.7	%	​	​	$5,496.5	​	​	41.3	%	​	​	$5,079.9	​	​	41.8	%

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

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

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

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Selling, General and Administrative Expense

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

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Special (Gains) and Charges

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

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended						​	Nine Months Ended
​	​	September 30						​	September 30
(millions)		2021			​	2020			2021			​	2020
Cost of sales	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Restructuring activities	​	​	$2.2	​	​	​	$1.0	​	​	$24.1	​	​		$6.6
Acquisition and integration activities	​	​	-	​	​	​	1.5	​	​	-	​	​	​	4.1
COVID-19 activities, net	​	​	50.7	​	​	​	1.8	​	​	51.8	​	​	​	8.7
Other	​	​	-	​	​	​	5.2	​	​	0.3	​	​	​	26.2
Cost of sales subtotal	​	​	52.9	​	​	​	9.5	​	​	76.2	​	​		45.6
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Special (gains) and charges	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Restructuring activities	​	​	0.4	​	​	​	26.9	​	​	6.5	​	​		31.4
Acquisition and integration activities	​	​	0.8	​	​	​	2.7	​	​	3.3	​	​	​	5.5
Disposal and impairment activities	​	​	-	​	​	​	-	​	​	-	​	​	​	45.9
COVID-19 activities, net	​	​	1.5	​	​	​	(3.0)	​	​	16.2	​	​		7.2
Other	​	​	3.6	​	​	​	8.4	​	​	10.7	​	​		30.3
Special (gains) and charges subtotal	​	​	6.3	​	​	​	35.0	​	​	36.7	​	​		120.3
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income subtotal	​	​	59.2	​	​	​	44.5	​	​	112.9	​	​	​	165.9
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Interest expense, net	​	​	32.3	​	​	​	83.1	​	​	32.3	​	​	​	83.8
Other (income) expense	​	​	7.0	​	​	​	-	​	​	26.6	​	​	​	-
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total special (gains) and charges	​	​	$98.5	​	​	​	$127.6	​	​	$171.8	​	​	​	$249.7

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

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Restructuring activities

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

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

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Institutional Advancement Program

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

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

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

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Accelerate 2020

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

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

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

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Other Restructuring Activities

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

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

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

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Acquisition and integration related costs

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

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

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Disposal and impairment charges

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

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COVID-19 activities

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

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

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

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Other operating activities

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

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

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

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Interest expense

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

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

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Other (income) expense

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

​

​

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Operating Income and Operating Income Margin

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​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended
​	​	September 30									​	September 30
(millions)	​	2021				2020		​	Change		​	2021				2020		​	Change
Reported GAAP operating income	​	​	$465.8	​	​	​	$411.4	​	13	%	​	​	$1,210.9	​	​	​	$979.6	​	24	%
Special (gains) and charges	​		59.2	​	​		44.5	​	​	​	​		112.9	​	​		165.9	​	​	​
Non-GAAP adjusted operating income	​		525.0	​	​		455.9	​	15	%	​		1,323.8	​	​		1,145.5	​	16	%
Effect of foreign currency translation	​		5.5	​	​		15.2	​	​	​	​		8.3	​	​		42.5	​	​	​
Non-GAAP adjusted fixed currency operating income	​	​	$530.5	​	​	​	$471.1	​	13	%	​	​	$1,332.1	​	​	​	$1,188.0	​	12	%
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	​	​	Nine Months Ended							​	​
​	​	September 30							​	​	​	September 30							​	​
(percent)	​	2021			​	2020			​	​	​	2021			​	2020			​	​
Reported GAAP operating income margin	​	​	14.0	%	​	​	13.6	%	​	​	​	​	12.9	%	​	​	11.2	%	​	​
Non-GAAP adjusted operating income margin	​	​	15.8	%	​	​	15.1	%	​	​	​	​	14.1	%	​	​	13.1	%	​	​
Non-GAAP adjusted fixed currency operating income margin	​	​	15.8	%	​	​	15.2	%	​	​	​	​	14.1	%	​	​	13.2	%	​	​

​

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

​

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

​

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

​

Other (income) expense

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended						​	​
​	​	September 30									​	September 30						​	​
(millions)	​	2021				2020			Change		​	2021				2020			Change
Reported GAAP other (income) expense	​	​	($13.0)	​	​	​	($15.1)	​	(14)	%	​	​	($27.5)	​	​	​	($45.6)	​	(40)	%
Special (gains) and charges	​	​	7.0	​	​		-	​	​	​	​	​	26.6	​	​		-	​	​	​
Non-GAAP adjusted other (income) expense	​	​	($20.0)	​	​	​	($15.1)	​	32	%	​	​	($54.1)	​	​	​	($45.6)	​	19	%

​

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

​

Interest Expense, Net

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended						​	​
​	​	September 30									​	September 30						​	​
(millions)	​	2021				2020			Change		​	2021				2020			Change
Reported GAAP interest expense, net	​	​	$76.4	​	​	​	$134.8	​	(43)	%	​	​	$173.7	​	​	​	$241.8	​	(28)	%
Special (gains) and charges	​	​	32.3	​	​		83.1	​	​	​	​	​	32.3	​	​		83.8	​	​	​
Non-GAAP adjusted interest expense, net	​	​	$44.1	​	​	​	$51.7	​	(15)	%	​	​	$141.4	​	​	​	$158.0	​	(11)	%

​

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

​

​

​

Provision for Income Taxes

​

The following table provides a summary of our tax rate:

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

​

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

​

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

​

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

​

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

​

Net Income from Continuing Operations Attributable to Ecolab

​

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

​

​

​

Diluted EPS from Continuing Operations

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

​

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

​

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

​

​

DISCONTINUED OPERATIONS

​

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

​

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

​

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

​

​

SEGMENT PERFORMANCE

​

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

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net Sales	​	Third Quarter Ended										​	Nine Months Ended
​	​	September 30										​	September 30
(millions)		2021				2020		​	​	Change			2021				2020		​	​	Change
Global Industrial	​	​	$1,620.4	​		​	$1,512.9		​	7	%	​	​	$4,609.7	​		​	$4,476.4		​	3	%
Global Institutional & Specialty		​	1,076.6	​	​		914.4	​	​	18	​		​	2,914.0	​	​		2,734.6	​	​	7	​
Global Healthcare & Life Sciences	​	​	290.2	​	​	​	335.1	​	​	(13)	​	​	​	887.4	​	​	​	913.3	​	​	(3)	​
Other	​	​	326.3	​	​	​	288.7	​	​	13	​	​	​	904.2	​	​	​	817.4	​	​	11	​
Corporate		​	35.9	​	​		47.2	​	​	(24)	​		​	104.1	​	​		59.5	​	​	75	​
Subtotal at fixed currency		​	3,349.4	​	​		3,098.3	​	​	8	​		​	9,419.4	​	​		9,001.2	​	​	5	​
Effect of foreign currency translation		​	(28.6)	​	​		(79.7)	​	​	​	​		​	(50.9)	​	​		(276.3)	​	​	​	​
Consolidated reported GAAP net sales		​	$3,320.8	​	​	​	$3,018.6	​	​	10	%		​	$9,368.5	​	​	​	$8,724.9	​	​	7	%
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	Third Quarter Ended										​	Nine Months Ended
​	​	September 30										​	September 30
(millions)	​	2021				2020		​	​	Change		​	2021				2020		​	​	Change
Global Industrial			$268.3	​		​	$302.3		​	(11)	%	​		$750.8	​		​	$799.7		​	(6)	%
Global Institutional & Specialty		​	196.5	​	​		83.7		​	135	​	​	​	398.2	​	​		229.4		​	74	​
Global Healthcare & Life Sciences	​	​	37.3	​	​	​	69.0	​	​	(46)	​	​	​	131.2	​	​	​	162.0	​	​	(19)	​
Other		​	59.2	​	​		45.8		​	29	​	​	​	143.4	​	​		88.4		​	62	​
Corporate		​	(90.0)	​	​		(74.2)	​	​	21	​	​	​	(204.4)	​	​		(257.4)	​	​	(21)	​
Subtotal at fixed currency		​	471.3	​	​		426.6		​	10	​	​	​	1,219.2	​	​		1,022.1		​	19	​
Effect of foreign currency translation		​	(5.5)	​	​		(15.2)	​	​	​	​	​	​	(8.3)	​	​		(42.5)	​	​	​	​
Consolidated reported GAAP operating income			$465.8	​	​	​	$411.4		​	13	%	​		$1,210.9	​	​	​	$979.6		​	24	%

​

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended
​	​	September 30
Net Sales	​	2021					​	2020
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted
Global Industrial	​	$1,620.4	​	$-	​	$1,620.4	​	$1,512.9	​	$-	​	$1,512.9
Global Institutional & Specialty		1,076.6	​	(4.1)	​	1,072.5	​	914.4	​	-	​	914.4
Global Healthcare & Life Sciences	​	290.2	​	(11.7)	​	278.5	​	335.1	​	(0.3)	​	334.8
Other		326.3	​	-	​	326.3	​	288.7	​	-	​	288.7
Corporate		35.9	​	(35.9)	​	-	​	47.2	​	(47.2)	​	-
Subtotal at fixed currency		3,349.4	​	(51.7)	​	3,297.7	​	3,098.3	​	(47.5)	​	3,050.8
Effect of foreign currency translation		(28.6)	​	​	​	​	​	(79.7)	​	​	​	​
Total reported net sales		$3,320.8	​	​	​	​	​	$3,018.6	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	2021					​	2020
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted
Global Industrial	​	$268.3	​	$-	​	$268.3	​	$302.3	​	$-	​	$302.3
Global Institutional & Specialty		196.5	​	0.2	​	196.7	​	83.7	​	-	​	83.7
Global Healthcare & Life Sciences	​	37.3	​	2.1	​	39.4	​	69.0	​	-	​	69.0
Other		59.2	​	-	​	59.2	​	45.8	​	-	​	45.8
Corporate		(30.8)	​	-	​	(30.8)	​	(29.7)	​	-	​	(29.7)
Non-GAAP adjusted fixed currency operating income		530.5	​	2.3	​	532.8	​	471.1	​	-	​	471.1
Special (gains) and charges		59.2	​	​	​	​	​	44.5	​	​	​	​
Subtotal at fixed currency		471.3	​	​	​	​	​	426.6	​	​	​	​
Effect of foreign currency translation		(5.5)	​	​	​	​	​	(15.2)	​	​	​	​
Total reported operating income		$465.8	​	​	​	​	​	$411.4	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
Net Sales	​	2021					​	2020
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted
Global Industrial	​	$4,609.7	​	(59.4)	​	$4,550.3	​	$4,476.4	​	(36.9)	​	$4,439.5
Global Institutional & Specialty		2,914.0	​	(10.2)	​	2,903.8	​	2,734.6	​	-	​	2,734.6
Global Healthcare & Life Sciences	​	887.4	​	(20.8)	​	866.6	​	913.3	​	(0.9)	​	912.4
Other		904.2	​	-	​	904.2	​	817.4	​	-	​	817.4
Corporate	​	104.1	​	(104.1)	​	-	​	59.5	​	(59.5)	​	-
Subtotal at fixed currency		9,419.4	​	(194.5)	​	9,224.9	​	9,001.2	​	(97.3)	​	8,903.9
Effect of foreign currency translation		(50.9)	​	​	​	​	​	(276.3)	​	​	​	​
Total reported net sales		$9,368.5	​	​	​	​	​	$8,724.9	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	2021					​	2020
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Acquisition Adjusted
Global Industrial	​	$750.8	​	(2.5)	​	$748.3	​	$799.7	​	(2.5)	​	$797.2
Global Institutional & Specialty		398.2	​	1.8	​	400.0	​	229.4	​	-	​	229.4
Global Healthcare & Life Sciences		131.2	​	2.3	​	133.5	​	162.0	​	(0.1)	​	161.9
Other	​	143.4	​	-	​	143.4	​	88.4	​	-	​	88.4
Corporate		(91.5)	​	-	​	(91.5)	​	(91.5)	​	-	​	(91.5)
Non-GAAP adjusted fixed currency operating income		1,332.1	​	1.6	​	1,333.7	​	1,188.0	​	(2.6)	​	1,185.4
Special (gains) and charges		112.9	​	​	​	​	​	165.9	​	​	​	​
Subtotal at fixed currency		1,219.2	​	​	​	​	​	1,022.1	​	​	​	​
Effect of foreign currency translation		(8.3)	​	​	​	​	​	(42.5)	​	​	​	​
Total reported operating income		$1,210.9	​	​	​	​	​	$979.6	​	​	​	​

​

​

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

​

Global Industrial

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2021			​	2020				2021			​	2020
Sales at fixed currency (millions)	​	​	$1,620.4	​	​	​	$1,512.9	​	​	​	$4,609.7	​	​	​	$4,476.4	​
Sales at public currency (millions)	​	​	1,603.1	​	​	​	1,469.3	​	​	​	4,578.6	​	​	​	4,326.7	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		4	%	​		​	​	​		1	%	​		​	​
Price changes	​		3	%	​		​	​	​		2	%	​		​	​
Acquisition adjusted fixed currency sales change	​	​	7	%	​	​	​	​	​	​	2	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		1	%	​		​	​
Fixed currency sales change	​		7	%	​		​	​	​		3	%	​		​	​
Foreign currency translation	​	​	2	%	​	​	​	​	​	​	3	%	​	​	​	​
Public currency sales change	​		9	%	​		​	​	​		6	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$268.3	​	​	​	$302.3	​	​	​	$750.8	​	​	​	$799.7	​
Operating income at public currency (millions)	​	​	264.2	​	​	​	293.0	​	​	​	743.8	​	​	​	770.3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	(11)	%	​	​	​	​	​	​	(6)	%	​	​	​	​
Fixed currency operating income margin	​		16.6	%	​		20.0	%	​		16.3	%	​		17.9	%
Acquisition adjusted fixed currency operating income change	​		(11)	%	​		​	​	​		(6)	%	​		​	​
Acquisition adjusted fixed currency operating income margin	​		16.6	%	​		20.0	%	​		16.4	%	​		18.0	%
Public currency operating income change	​	​	(10)	%	​	​	​	​	​	​	(3)	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

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

​

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

​

Operating Income

​

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

​

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

​

​

Global Institutional & Specialty

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2021			​	2020				2021			​	2020
Sales at fixed currency (millions)	​	​	$1,076.6	​	​	​	$914.4	​	​	​	$2,914.0	​	​	​	$2,734.6	​
Sales at public currency (millions)	​	​	1,070.6	​	​	​	898.4	​	​	​	2,904.0	​	​	​	2,678.6	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		15	%	​		​	​	​		7	%	​		​	​
Price changes	​		3	%	​		​	​	​		2	%	​		​	​
Acquisition adjusted fixed currency sales change	​	​	17	%	​	​	​	​	​	​	6	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		-	%	​		​	​
Fixed currency sales change	​		18	%	​		​	​	​		7	%	​		​	​
Foreign currency translation	​	​	1	%	​	​	​	​	​	​	2	%	​	​	​	​
Public currency sales change	​		19	%	​		​	​	​		8	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$196.5	​	​	​	$83.7	​	​	​	$398.2	​	​	​	$229.4	​
Operating income at public currency (millions)	​	​	195.5	​	​	​	82.1	​	​	​	397.5	​	​	​	226.1	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	135	%	​	​	​	​	​	​	74	%	​	​	​	​
Fixed currency operating income margin	​		18.3	%	​		9.2	%	​		13.7	%	​		8.4	%
Acquisition adjusted fixed currency operating income change	​		135	%	​		​	​	​		74	%	​		​	​
Acquisition adjusted fixed currency operating income margin	​		18.3	%	​		9.2	%	​		13.8	%	​		8.4	%
Public currency operating income change	​	​	138	%	​	​	​	​	​	​	76	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

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

​

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

​

Operating Income

​

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

​

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

​

​

​

Global Healthcare & Life Sciences

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2021			​	2020			​	2021			​	2020
Sales at fixed currency (millions)	​	​	$290.2	​	​	​	$335.1	​	​	​	$887.4	​	​	​	$913.3	​
Sales at public currency (millions)	​	​	286.9	​	​	​	322.3	​	​	​	881.4	​	​	​	866.4	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		(19)	%	​		​	​	​		(6)	%	​		​	​
Price changes	​		2	%	​		​	​	​		2	%	​		​	​
Acquisition adjusted fixed currency sales change	​	​	(17)	%	​	​	​	​	​	​	(5)	%	​	​	​	​
Acquisitions and divestitures	​		3	%	​		​	​	​		2	%	​		​	​
Fixed currency sales change	​		(13)	%	​		​	​	​		(3)	%	​		​	​
Foreign currency translation	​	​	3	%	​	​	​	​	​	​	5	%	​	​	​	​
Public currency sales change	​		(11)	%	​		​	​	​		2	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$37.3	​	​	​	$69.0	​	​	​	$131.2	​	​	​	$162.0	​
Operating income at public currency (millions)	​	​	36.9	​	​	​	66.0	​	​	​	130.5	​	​	​	151.5	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	(46)	%	​	​	​	​	​	​	(19)	%	​	​	​	​
Fixed currency operating income margin	​		12.9	%	​		20.6	%	​		14.8	%	​		17.7	%
Acquisition adjusted fixed currency operating income change	​		(43)	%	​		​	​	​		(18)	%	​		​	​
Acquisition adjusted fixed currency operating income margin	​		14.1	%	​		20.6	%	​		15.4	%	​		17.7	%
Public currency operating income change	​	​	(44)	%	​	​	​	​	​	​	(14)	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

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

​

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

​

Operating Income

​

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

​

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

​

​

Other

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2021			​	2020				2021			​	2020
Sales at fixed currency (millions)	​	​	$326.3	​	​	​	$288.7	​	​	​	$904.2	​	​	​	$817.4	​
Sales at public currency (millions)	​	​	324.2	​	​	​	281.7	​	​	​	900.4	​	​	​	794.0	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		11	%	​		​	​	​		9	%	​		​	​
Price changes	​		2	%	​		​	​	​		2	%	​		​	​
Acquisition adjusted fixed currency sales change	​	​	13	%	​	​	​	​	​	​	11	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		-	%	​		​	​
Fixed currency sales change	​		13	%	​		​	​	​		11	%	​		​	​
Foreign currency translation	​	​	2	%	​	​	​	​	​	​	2	%	​	​	​	​
Public currency sales change	​		15	%	​		​	​	​		13	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$59.2	​	​	​	$45.8	​	​	​	$143.4	​	​	​	$88.4	​
Operating income at public currency (millions)	​	​	59.0	​	​	​	44.6	​	​	​	143.0	​	​	​	86.8	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	29	%	​	​	​	​	​	​	62	%	​	​	​	​
Fixed currency operating income margin	​		18.1	%	​		15.9	%	​		15.9	%	​		10.8	%
Acquisition adjusted fixed currency operating income change	​		29	%	​		​	​	​		62	%	​		​	​
Acquisition adjusted fixed currency operating income margin	​		18.1	%	​		15.9	%	​		15.9	%	​		10.8	%
Public currency operating income change	​	​	32	%	​	​	​	​	​	​	65	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

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

​

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

​

Operating Income

​

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

​

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

​

​

Corporate

​

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

​

​

FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY

​

Financial Position

​

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

​

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

​

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

​

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

​

​	​	​	​	​	​	​	​	​
​		​	​	​	​	​	​	​
​	​	September 30, 2021				December 31, 2020
(ratio)	​	​	​	​	​	​	​	​
Net debt to EBITDA		​	2.0	​		​	2.4	​
​	​	​	​	​	​	​	​	​
(millions)		​	​	​	​	​	​	​
Total debt	​	​	$5,950.5	​	​	​	$6,686.6	​
Cash	​		897.9	​	​	​	1,260.2	​
Net debt	​	​	$5,052.6	​	​	​	$5,426.4	​
​	​	​	​	​	​	​	​	​
Net income including noncontrolling interest	​	​	$1,143.6	​	​	​	$984.8	​
Provision for income taxes	​		299.1	​	​	​	176.6	​
Interest expense, net	​		222.1	​	​	​	290.2	​
Depreciation	​		604.3	​	​	​	594.3	​
Amortization	​		230.7	​	​	​	218.4	​
EBITDA	​		$2,499.8	​	​	​	$2,264.3	​

​

Cash Flows

​

Operating Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2021			​	2020				Change
Cash provided by operating activities	​	​	$1,421.0	​	​	​	$1,092.0	​	​	​	$329.0	​

​

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

​

​

​

Investing Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2021			​	2020				Change
Cash used for investing activities	​	​	($638.5)	​	​	​	($795.9)	​	​	​	$157.4	​

​

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

​

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

​

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

​

Financing Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2021			​	2020				Change
Cash (used for) provided by financing activities	​	​	($1,159.3)	​	​	​	$30.3	​	​	​	($1,189.6)	​

​

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

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

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

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

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

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)	​	2021			​	2020				Change
Net issuances of commercial paper and notes payable	​	​	$0.5	​	​	​	$165.5	​	​	​	($165.0)	​
Long-term debt borrowings	​	​	293.7	​	​	​	1,855.9	​	​	​	(1,562.2)	​
Long-term debt repayments	​	​	(1,017.9)	​	​	​	(1,570.0)	​	​	​	552.1	​

​

Liquidity and Capital Resources

​

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

​

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

​

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

​

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

​

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

​

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

​

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

​

​

GLOBAL ECONOMIC ENVIRONMENT

​

Coronavirus disease 2019 (COVID-19)

​

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

​

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

​

Global Economies

​

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

​

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

​

​

NEW ACCOUNTING PRONOUNCEMENTS

​

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

​

​

SUBSEQUENT EVENTS

​

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

​

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

​

​

NON-GAAP FINANCIAL MEASURES

​

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

	●	Fixed currency sales

	●	Acquisition adjusted fixed currency sales

	●	Adjusted cost of sales

	●	Adjusted gross margin

	●	Fixed currency operating income

	●	Fixed currency operating income margin

	●	Adjusted operating income

	●	Adjusted operating income margin

	●	Adjusted fixed currency operating income

	●	Adjusted fixed currency operating income margin

	●	Acquisition adjusted fixed currency operating income

	●	Acquisition adjusted fixed currency operating income margin

	●	Adjusted interest expense, net

	●	EBITDA

	●	Adjusted tax rate

	●	Adjusted net income attributable to Ecolab

	●	Adjusted diluted EPS

​

We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.

​

Our non-GAAP financial measures for cost of sales, gross margin and operating income exclude the impact of special (gains) and charges, and our non-GAAP measures for tax rate, net income attributable to Ecolab and diluted EPS further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results. After tax special (gains) and charges are derived by applying the applicable local jurisdictional tax rate to the corresponding pre-tax special (gains) and charges.

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

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

​

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

​

These non-GAAP measures are not in accordance with, or an alternative to U.S. GAAP, and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the U.S. GAAP measures included in this MD&A and we have provided reconciliations of reported U.S. GAAP amounts to the non-GAAP amounts.

​

​

​

FORWARD-LOOKING STATEMENTS

​

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

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Without limiting the foregoing, words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “we believe,” “we expect,” “estimate,” “project” (including the negative or variations thereof) or similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent our expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. In particular, the effects of the COVID-19 pandemic depend on numerous factors, including the severity of the disease, the duration of the outbreak, the distribution and efficacy of vaccines, the likelihood of a resurgence of the outbreak, including as result of emerging variants, actions that may be taken by governmental authorities intended to minimize the spread of the pandemic, including vaccination mandates, or to stimulate the economy, and other unintended consequences. Further, the ultimate results of any restructuring or efficiency initiative, integration and business improvement actions, including cost synergies, depend on a number of factors, including the development of final plans, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring or efficiency initiative and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made.

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Some of the factors which could cause results to differ materially from those expressed in any forward-looking statements are set forth under Item 1A of our most recent Form 10-K, as updated by Item 1A of this Form 10-Q, and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the effects and duration of the COVID-19 pandemic, including the impact of vaccination mandates; the vitality of the markets we serve; the impact of economic factors such as the worldwide economy, capital flows, interest rates, foreign currency risk and reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; information technology infrastructure failures or breaches in data security; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change; our ability to successfully compete with respect to value, innovation and customer support; exposure to global economic, political and legal risks related to our international operations; difficulty in procuring raw materials or fluctuations in raw material costs; pressure on operations from consolidation of customers or vendors; the costs and effects of complying with laws and regulations, including those relating to the environment, and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; restraints on pricing flexibility due to contractual obligations; our ability to acquire complementary businesses and to effectively integrate such businesses; changes in tax laws and unanticipated tax liabilities; potential loss of deferred tax assets; our indebtedness, and any failure to comply with covenants that apply to our indebtedness; public health outbreaks, epidemics or pandemics, such as the current outbreak of COVID-19; potential losses arising from the impairment of goodwill or other assets; potential chemical spill or release; the occurrence of litigation or claims, including class action lawsuits; the loss or insolvency of a major customer or distributor; repeated or prolonged government and/or business shutdowns or similar events; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; and other uncertainties or risks reported from time to time in our reports to the SEC. There can be no assurances that our earnings levels will meet investors’ expectations. Except as may be required under applicable law, we do not undertake, and expressly disclaim, any duty to update our Forward-Looking Statements.

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