Item 1. Financial Statements

​

​

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions, except per share amounts)	​	2022				2021
​	​	​	​	​	​	​	​
Product and equipment sales	​	​	$2,624.1	​	​	​	$2,293.4
Service and lease sales	​	​	642.6	​	​	​	591.6
Net sales	​	​	3,266.7	​	​	​	2,885.0
Product and equipment cost of sales	​	​	1,695.6	​	​	​	1,362.9
Service and lease cost of sales	​	​	377.8	​	​	​	349.1
Cost of sales (including special charges (a))	​	​	2,073.4	​	​	​	1,712.0
Selling, general and administrative expenses	​	​	914.7	​	​	​	862.9
Special (gains) and charges	​	​	24.1	​	​	​	12.8
Operating income	​	​	254.5	​	​	​	297.3
Other (income) expense	​	​	(18.8)	​	​	​	(17.0)
Interest expense, net	​	​	53.0	​	​	​	51.7
Income before income taxes	​	​	220.3	​	​	​	262.6
Provision for income taxes	​	​	45.6	​	​	​	66.1
Net income including noncontrolling interest	​	​	174.7	​	​	​	196.5
Net income attributable to noncontrolling interest	​	​	2.8	​	​	​	2.9
Net income attributable to Ecolab	​	​	$171.9	​	​	​	$193.6
​	​	​	​	​	​	​	​
Earnings attributable to Ecolab per common share	​	​	​	​	​	​	​
Basic	​	​	$ 0.60	​	​	​	$ 0.68
Diluted	​	​	$ 0.60	​	​	​	$ 0.67
​	​	​	​	​	​	​	​
Weighted-average common shares outstanding	​	​	​	​	​	​	​
Basic			286.2	​	​	​	286.0
Diluted			288.1	​	​	​	288.8
​	​	​	​	​	​	​	​

​

(a)	Cost of sales includes special (gains) and charges of $52.9 and $19.6 in the first quarter of 2022 and 2021, respectively, which is recorded in product and equipment cost of sales and service and lease cost of sales.

​

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

​

​

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

​

​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022				2021
​	​	​	​	​	​	​	​
Net income including noncontrolling interest	​	​	$174.7	​	​	​	$196.5
​	​	​	​	​	​	​	​
Other comprehensive income (loss), net of tax	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Foreign currency translation adjustments	​	​	​	​	​	​	​
Foreign currency translation		​	42.2	​	​	​	84.9
Gain (loss) on net investment hedges		​	18.9	​	​	​	(12.2)
Total foreign currency translation adjustments		​	61.1	​	​	​	72.7
​	​	​	​	​	​	​	​
Derivatives and hedging instruments		​	(4.6)	​	​	​	0.6
​	​	​	​	​	​	​	​
Pension and postretirement benefits	​	​	​	​	​	​	​
Settlement charge		​	0.8	​	​	​	-
Amortization of net actuarial loss and prior period service credits, net	​	​	12.9	​	​	​	5.9
Total pension and postretirement benefits		​	13.7	​	​	​	5.9
​	​	​	​	​	​	​	​
Subtotal		​	70.2	​	​	​	79.2
​	​	​	​	​	​	​	​
Total comprehensive income, including noncontrolling interest		​	244.9	​	​	​	275.7
Comprehensive income attributable to noncontrolling interest		​	1.8	​	​	​	2.2
Comprehensive income attributable to Ecolab	​	​	$243.1	​	​	​	$273.5

​

​

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

​

​

CONSOLIDATED BALANCE SHEETS

(unaudited)

​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	March 31			​	December 31
(millions, except per share amounts)		2022			​	2021
​	​	​	​	​	​	​	​
ASSETS	​	​	​	​	​	​	​
Current assets	​	​	​	​	​	​	​
Cash and cash equivalents	​	​	$99.4	​	​	​	$359.9
Accounts receivable, net		​	2,508.2	​	​	​	2,478.4
Inventories		​	1,589.9	​	​	​	1,491.8
Other current assets	​	​	407.0	​	​	​	357.0
Total current assets		​	4,604.5	​	​	​	4,687.1
Property, plant and equipment, net		​	3,285.7	​	​	​	3,288.5
Goodwill		​	8,081.0	​	​	​	8,063.9
Other intangible assets, net		​	4,138.3	​	​	​	4,224.1
Operating lease assets	​	​	385.8	​	​	​	396.8
Other assets	​	​	571.9	​	​	​	546.0
Total assets	​	​	$21,067.2	​	​	​	$21,206.4
​	​	​	​	​	​	​	​
LIABILITIES AND EQUITY	​	​	​	​	​	​	​
Current liabilities	​	​	​	​	​	​	​
Short-term debt	​	​	$493.1	​	​	​	$411.0
Accounts payable		​	1,423.9	​	​	​	1,384.2
Compensation and benefits		​	469.6	​	​	​	509.5
Income taxes		​	108.6	​	​	​	104.3
Other current liabilities	​	​	1,136.1	​	​	​	1,144.2
Total current liabilities		​	3,631.3	​	​	​	3,553.2
Long-term debt		​	8,267.2	​	​	​	8,347.2
Postretirement health care and pension benefits		​	874.5	​	​	​	894.2
Deferred income taxes	​	​	619.2	​	​	​	622.0
Operating lease liabilities	​	​	275.2	​	​	​	282.6
Other liabilities	​	​	294.7	​	​	​	254.1
Total liabilities		​	13,962.1	​	​	​	13,953.3
Commitments and contingencies (Note 16)	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Equity (a)	​	​	​	​	​	​	​
Common stock		​	364.5	​	​	​	364.1
Additional paid-in capital		​	6,501.5	​	​	​	6,464.6
Retained earnings		​	8,840.4	​	​	​	8,814.5
Accumulated other comprehensive loss		​	(1,563.6)	​	​	​	(1,634.8)
Treasury stock		​	(7,061.2)	​	​	​	(6,784.2)
Total Ecolab shareholders’ equity		​	7,081.6	​	​	​	7,224.2
Noncontrolling interest		​	23.5	​	​	​	28.9
Total equity		​	7,105.1	​	​	​	7,253.1
Total liabilities and equity	​	​	$21,067.2	​	​	​	$21,206.4

​

(a)	Common stock, 800.0 shares authorized, $1.00 par value per share, 285.7 shares outstanding at March 31, 2022 and 286.9 shares outstanding at December 31, 2021. Shares outstanding are net of treasury stock.

​

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

​

​

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)	​	2022			​	2021
​	​	​	​	​	​	​	​
OPERATING ACTIVITIES	​	​	​	​	​	​	​
Net income including noncontrolling interest	​	​	$174.7	​	​	​	$196.5
Adjustments to reconcile net income to cash provided by operating activities:	​	​	​	​	​	​	​
Depreciation	​	​	155.2	​	​	​	150.7
Amortization	​	​	79.5	​	​	​	64.5
Deferred income taxes	​	​	(15.7)	​	​	​	42.9
Share-based compensation expense	​	​	28.2	​	​	​	31.3
Pension and postretirement plan contributions	​	​	(17.3)	​	​	​	(21.6)
Pension and postretirement plan (income) expense, net	​	​	(0.8)	​	​	​	1.9
Restructuring charges, net of cash paid	​	​	(9.0)	​	​	​	(4.8)
Other, net	​	​	-	​	​	​	4.4
Changes in operating assets and liabilities, net of effect of acquisitions:	​	​	​	​	​	​	​
Accounts receivable	​	​	(29.6)	​	​	​	23.6
Inventories	​	​	(94.8)	​	​	​	(45.9)
Other assets	​	​	(127.2)	​	​	​	(35.3)
Accounts payable	​	​	25.5	​	​	​	(44.6)
Other liabilities	​	​	1.4	​	​	​	(68.3)
Cash provided by operating activities	​	​	170.1	​	​	​	295.3
​	​	​	​	​	​	​	​
INVESTING ACTIVITIES	​	​	​	​	​	​	​
Capital expenditures	​	​	(148.7)	​	​	​	(102.1)
Property and other assets sold	​	​	0.3	​	​	​	0.1
Acquisitions and investments in affiliates, net of cash acquired	​	​	-	​	​	​	(88.0)
Other, net	​	​	19.2	​	​	​	(2.4)
Cash used for investing activities	​	​	(129.2)	​	​	​	(192.4)
​	​	​	​	​	​	​	​
FINANCING ACTIVITIES	​	​	​	​	​	​	​
Net issuances of commercial paper and notes payable	​	​	82.1	​	​	​	5.8
Reacquired shares	​	​	(262.1)	​	​	​	(61.8)
Dividends paid	​	​	(154.0)	​	​	​	(146.7)
Exercise of employee stock options	​	​	9.2	​	​	​	20.1
Other, net	​	​	19.5	​	​	​	(0.5)
Cash used for financing activities	​	​	(305.3)	​	​	​	(183.1)
​	​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents	​	​	3.9	​	​	​	9.5
​	​	​	​	​	​	​	​
Decrease in cash and cash equivalents	​	​	(260.5)	​	​	​	(70.7)
Cash and cash equivalents, beginning of period	​	​	359.9	​	​	​	1,260.2
Cash and cash equivalents, end of period	​	​	$99.4	​	​	​	$1,189.5
​	​	​	​	​	​	​	​

​

​

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

​

​

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended March 31, 2022 and 2021
(millions, except per share amounts)		Common Stock			Additional Paid-in Capital			Retained Earnings			OCI (Loss)			Treasury Stock			Ecolab Shareholders' Equity			Non-Controlling Interest			Total Equity
Balance, December 31, 2020	​		$362.6	​		$6,235.0	​		$8,243.0	​		($1,994.4)	​		($6,679.7)	​		$6,166.5	​		$35.0	​		$6,201.5
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income	​	​	​	​	​	​	​	​	193.6	​	​	​	​	​	​	​		193.6	​		2.9	​		196.5
Other comprehensive income (loss) activity	​	​	​	​	​	​	​	​	​	​	​	79.9	​	​	​	​		79.9	​		(0.7)	​		79.2
Cash dividends declared (a)	​	​	​	​	​	​	​	​	(137.3)	​	​	​	​	​	​	​		(137.3)	​		(9.4)	​		(146.7)
Stock options and awards			0.4	​	​	50.7	​	​	​	​	​	​	​	​	0.3	​		51.4	​	​	​	​		51.4
Reacquired shares	​	​	​	​	​	​	​	​	​	​	​	​	​	​	(61.8)	​		(61.8)	​	​	​	​		(61.8)
Balance, March 31, 2021	​	​	$363.0	​	​	$6,285.7	​	​	$8,299.3	​	​	($1,914.5)	​	​	($6,741.2)	​	​	$6,292.3	​	​	$27.8	​	​	$6,320.1
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance, December 31, 2021	​		$364.1	​	​	$6,464.6	​	​	$8,814.5	​	​	($1,634.8)	​	​	($6,784.2)	​		$7,224.2	​		$28.9	​		$7,253.1
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income	​	​	​	​	​	​	​	​	171.9	​	​	​	​	​	​	​	​	171.9	​	​	2.8	​	​	174.7
Other comprehensive income (loss) activity	​	​	​	​	​	​	​	​	​	​	​	71.2	​	​	​	​		71.2	​		(1.0)	​		70.2
Cash dividends declared (a)	​	​	​	​	​	​	​	​	(146.0)	​	​	​	​	​	​	​		(146.0)	​		(7.8)	​		(153.8)
Fair value adjustment of prior acquisition	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	-	​	​	0.6	​	​	0.6
Stock options and awards			0.4	​	​	36.9	​	​	​	​	​	​	​	​	0.1	​		37.4	​	​	​	​		37.4
Reacquired shares	​	​	​	​	​	​	​	​	​	​	​	​	​	​	(277.1)	​		(277.1)	​	​	​	​		(277.1)
Balance, March 31, 2022	​	​	$364.5	​	​	$6,501.5	​	​	$8,840.4	​	​	($1,563.6)	​	​	($7,061.2)	​	​	$7,081.6	​	​	$23.5	​	​	$7,105.1

​

​

	(a)	Dividends declared per common share were $0.51 and $0.48 in the first quarter of 2022 and 2021, respectively.

​

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

​

​

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

​

1. CONSOLIDATED FINANCIAL INFORMATION

​

The unaudited consolidated financial information for the first quarter ended March 31, 2022 and 2021 reflects, in the opinion of management, all adjustments necessary for a fair statement of the financial position, results of operations, comprehensive income, equity and cash flows of Ecolab Inc. ("Ecolab" or "the Company") for the interim periods presented. Any adjustments consist of normal recurring items.

​

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

​

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2021 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022.

​

With respect to the unaudited financial information of the Company for the first quarter ended March 31, 2022 and 2021 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated May 5, 2022 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

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2. SPECIAL (GAINS) AND CHARGES

​

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

​

​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022			​	2021
Cost of sales	​	​	​	​	​	​	​
Restructuring activities	​	​	$2.6	​	​	​	$18.2
Acquisition and integration activities	​	​	27.6	​	​	​	-
COVID-19 activities, net	​	​	16.3	​	​	​	1.1
Russia/Ukraine charges	​	​	6.4	​	​	​	-
Other	​	​	-	​	​	​	0.3
Cost of sales subtotal	​	​	52.9	​	​	​	19.6
​	​	​	​	​	​	​	​
Special (gains) and charges	​	​	​	​	​	​	​
Restructuring activities	​	​	0.8	​	​	​	3.6
Acquisition and integration activities	​	​	7.5	​	​	​	1.2
COVID-19 activities, net	​	​	1.5	​	​	​	6.4
Russia/Ukraine charges	​	​	11.6	​	​	​	-
Other	​	​	2.7	​	​	​	1.6
Special (gains) and charges subtotal	​	​	24.1	​	​	​	12.8
​	​	​	​	​	​	​	​
Total special (gains) and charges	​	​	$77.0	​	​	​	$32.4

​

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

​

Restructuring activities

​

Restructuring activities relate to the Institutional Advancement Program, Accelerate 2020 and other immaterial restructuring programs which are described below. These activities have been included as a component of cost of sales, special (gains) and charges and other (income) expense on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.

​

Institutional Advancement Program

​

The Company approved a restructuring plan in 2020 focused on the Institutional business (“the Institutional Plan”) which is intended to enhance our Institutional sales and service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging our ongoing investments in digital technology. In February 2021, the Company expanded the Institutional Plan, and expect that these restructuring charges will be completed by 2023, with total anticipated costs of $65 million ($50 million after tax). The costs are expected to be primarily cash expenditures for severance and facility closures. The Company also anticipates non-cash costs related to equipment disposals. Actual costs may vary from these estimates depending on actions taken.

​

Certain activities contemplated in this Institutional Plan were previously approved in 2020 and included as part of Accelerate 2020. These activities were reclassified to the Institutional Plan. During the first quarter of 2022 and 2021, the Company recorded restructuring charges of $1.4 million ($1.0 million after tax) and $5.9 million ($4.5 million after tax), respectively, primarily related to severance, disposals of equipment and office closures. The Company has recorded $49.2 million ($37.6 million after tax) of cumulative restructuring charges under the Institutional Plan. The liability related to the Institutional Plan was $2.0 million as of March 31, 2022 and is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

​

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Employee						​	​			​	​			​
​	​	Termination			​	Asset			​	​		​	​	​		​
(millions)		Costs				Disposals				Other				Total
2020-2021 Activity	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Recorded expense (income) and accrual	​	​	$23.8	​	​	​	$8.5	​	​	​	$15.5	​	​	​	$47.8	​
Net cash payments	​		(19.9)	​	​	​	-	​	​	​	(14.3)	​	​	​	(34.2)	​
Non-cash net charges	​		-	​	​	​	(8.5)	​	​	​	-	​	​	​	(8.5)	​
Restructuring liability, December 31, 2021	​		3.9	​	​	​	-	​	​	​	1.2	​	​	​	5.1	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
2022 Activity	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Recorded expense (income) and accrual			0.1	​	​	​	0.9	​	​	​	0.4	​	​		1.4	​
Net cash payments			(3.5)	​	​	​	-	​	​	​	(0.1)	​	​		(3.6)	​
Non-cash net charges			-	​	​	​	(0.9)	​	​	​	-	​	​		(0.9)	​
Restructuring liability, March 31, 2022	​	​	$0.5	​	​	​	$-	​	​	​	$1.5	​	​	​	$2.0	​

​

Accelerate 2020

​

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

​

The Company recorded restructuring charges of $0.3 million ($0.1 million after tax) and $1.7 million ($1.4 million after tax) in the first quarter of 2022 and 2021, respectively. The liability related to the Plan was $26.1 million as of the end of the first quarter of 2022. The Company has recorded $244.8 million ($190.1 million after tax) of cumulative restructuring charges under the Plan. The remaining liability is expected to be paid over a period of several quarters and will continue to be funded from operating activities.

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		Employee						​	​			​	​			​
​	​	Termination			​	Asset			​	​		​	​	​		​
(millions)		Costs				Disposals				Other				Total
2018-2021 Activity	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Recorded expense	​	​	$216.3	​	​	​	$8.3	​	​	​	$19.9	​	​	​	$244.5	​
Net cash payments	​		(183.4)	​	​	​	1.2	​	​	​	(17.2)	​	​		(199.4)	​
Non-cash charges	​		-	​	​	​	(9.5)	​	​	​	(2.0)	​	​		(11.5)	​
Effect of foreign currency translation	​		(0.9)	​	​	​	-	​	​	​	-	​	​		(0.9)	​
Restructuring liability, December 31, 2021	​	​	32.0	​	​	​	-	​	​	​	0.7	​	​	​	32.7	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
2022 Activity	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Recorded expense	​	​	(0.2)	​	​	​	-	​	​	​	0.5	​	​	​	0.3	​
Net cash payments	​		(6.2)	​	​	​	-	​	​	​	(0.7)	​	​	​	(6.9)	​
Non-cash charges	​		-	​	​	​	-	​	​	​	-	​	​	​	-	​
Restructuring liability, March 31, 2022	​	​	$25.6	​	​	​	$-	​	​	​	$0.5	​	​	​	$26.1	​

​

Other Restructuring Activities

​

During the first quarter of 2022 and 2021, the Company recorded restructuring charges of $1.7 million ($1.3 million after tax) and $14.2 million ($10.8 million after tax), respectively, related to other immaterial restructuring activity. The charges are primarily related to severance and asset write-offs.

​

The restructuring liability balance for all plans other than the Accelerate 2020 and Institutional Plan were $4.4 million and $4.6 million as of March 31, 2022 and December 31, 2021, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

​

Cash payments during 2022 related to all other restructuring plans excluding the Accelerate 2020 and Institutional Plan were $1.9 million.

​

Acquisition and integration related costs

​

Acquisition and integration costs reported in product and equipment cost of sales on the Consolidated Statements of Income in the first quarter of 2022 include $27.6 million ($21.4 million after tax) and are related to the recognition of fair value step-up in the Purolite Corporation (“Purolite”) inventory.

​

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statements of Income include $7.5 million ($5.5 million after tax) and $1.2 million ($1.1 million after tax) in the first quarter of 2022 and 2021, respectively. Charges are related to the Purolite, 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.

​

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

​

COVID-19 activities

​

The Company recorded $15.0 million in inventory reserves related to excess sanitizer inventory and estimated disposal costs during the first quarter of 2022. The Company recorded charges (gains) of ($0.5) million and $5.9 million during the first quarter of 2022 and 2021, respectively to protect the wages of certain employees directly impacted by the COVID-19 pandemic. The Company recorded charges of $3.4 million and $3.5 million related to employee COVID-19 testing and related expenses during the first quarter of 2022 and 2021, respectively. In addition, the Company received subsidies and government assistance, which were recorded as a special (gains) of ($0.1) million and ($1.9) million during the first quarter of 2022 and 2021, respectively. COVID-19 pandemic charges are recorded in product and equipment cost of sales, service and lease cost of sales, and special (gains) and charges on the Consolidated Statements of Income. After tax net charges (gains) related to the COVID-19 pandemic were $13.3 million and $4.9 million during the first quarter of 2022 and 2021, respectively.

​

Russia/Ukraine charges

​

In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, the Company has made the determination that it will limit its Russian business to operations that are essential to life, providing minimal support for its healthcare, life sciences, food and beverage and certain water businesses. The Company recorded charges of $18.0 million ($19.0 million after tax) related to recoverability risk of certain assets in both Russia and Ukraine.

​

Other operating activities

​

Other special charges of $2.7 million ($2.0 million after tax) recorded in the first quarter of 2022 relate primarily to certain legal charges, which are recorded in special (gains) and charges on the Consolidated Statements of Income.

​

Other special charges of $1.9 million ($1.5 million after tax) recorded in the first quarter of 2021 relate to certain legal charges and tax consulting fees associated with the ChampionX separation, which are recorded in special (gains) and charges and product and equipment cost of sales on the Consolidated Statements of Income.

​

.

3. ACQUISITIONS AND DISPOSITIONS

​

Acquisitions

​

The Company makes business acquisitions that align with its strategic business objectives. The assets and liabilities of acquired businesses are recorded in the Consolidated Balance Sheets at fair value as of their acquisition dates. The purchase price allocation is based on estimates of the fair value of assets acquired, liabilities assumed and consideration paid. Purchase consideration is reduced by the amount of cash or cash equivalents acquired. No acquisitions occurred during the first quarter of 2022 and acquisitions during the first quarter of 2021 were not significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

​

During the first quarter of 2021, the Company acquired VanBaerle Hygiene AG (“VanBaerle”), a Switzerland-based business which sells cleaning products and related services to restaurants, long-term care facilities, hotels and laundries primarily for institutional applications. VanBaerle became part of the Global Institutional & Specialty reporting segment.

​

Also, during the first quarter of 2021, the Company acquired TechTex Holdings Limited (“TechTex”), a U.K.-based business which sells wet and dry wipes and other nonwovens products primarily for life sciences and healthcare applications. TechTex became part of the Global Healthcare & Life Sciences reporting segment.

​

Purchase accounting for the VanBaerle acquisition was finalized in the fourth quarter of 2021 and no further purchase accounting adjustments will be recorded. Purchase accounting for the TechTex acquisition was finalized in the first quarter of 2022 and no further purchase accounting adjustments will be recorded. None of the goodwill related to the Company’s acquisitions of VanBaerle or TechTex is tax deductible.

​

The following table summarizes the acquisition date fair value of net assets acquired from the Company’s acquisitions during the first quarter of 2022 and 2021:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022			​	2021
Net tangible assets (liabilities) acquired	​	​	$-	​	​	​	($0.9)	​
​	​	​	​	​	​	​	​	​
Identifiable intangible assets	​	​	​	​	​	​	​	​
Customer relationships		​	-	​	​	​	31.1	​
Trademarks		​	-	​	​	​	3.6	​
Other technology	​	​	-	​	​	​	1.5	​
Total intangible assets		​	-	​	​	​	36.2	​
​	​	​	​	​	​	​	​	​
Goodwill		​	-	​	​	​	57.5	​
Total aggregate purchase price		​	-	​	​	​	92.8	​
​	​	​	​	​	​	​	​	​
Acquisition-related liabilities and contingent consideration (a)		​	-	​	​	​	(6.2)	​
Net cash paid for acquisitions, including acquisition-related	​	​	​	​	​	​	​	​
liabilities and contingent consideration	​	​	$-	​	​	​	$86.6	​

​

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

​

During the first quarter of 2022, the Company recorded purchase accounting adjustments associated with the finalization of the purchase accounting on its 2021 acquisitions. As a result of these purchase accounting adjustments, the acquisition related net liabilities increased by $2.2 million, intangible assets decreased by $5.6 million, and goodwill recognized from those acquisitions increased by $7.8 million.

​

During the first quarter of 2021, the Company recorded purchase accounting adjustments associated with the finalization of the purchase accounting on its 2020 acquisitions. As a result of these purchase accounting adjustments, the acquisition related liabilities and goodwill recognized from those acquisition decreased by $0.9 million.

​

No intangible assets were acquired during the first quarter of 2022. The weighted average useful life of identifiable intangible assets acquired during the first quarter of 2021 was 13 years.

​

​

4. BALANCE SHEETS INFORMATION

​

​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​
​	​	March 31			​	December 31
(millions)		2022			​	2021
Accounts receivable, net	​	​	​	​	​	​	​	​
Accounts receivable	​	​	$2,595.5	​	​	​	$2,549.9	​
Allowance for expected credit losses and other accruals	​	​	(87.3)	​	​	​	(71.5)	​
Total	​	​	$2,508.2	​	​	​	$2,478.4	​
​	​	​	​	​	​	​	​	​
Inventories	​	​	​	​	​	​	​	​
Finished goods	​	​	$1,039.5	​	​	​	$1,010.6	​
Raw materials and parts	​	​	687.5	​	​	​	596.1	​
Inventories at FIFO cost	​	​	1,727.0	​	​	​	1,606.7	​
FIFO cost to LIFO cost difference	​	​	(137.1)	​	​	​	(114.9)	​
Total	​	​	$1,589.9	​	​	​	$1,491.8	​
​	​	​	​	​	​	​	​	​
Other current assets	​	​	​	​	​	​	​	​
Prepaid assets	​	​	$155.7	​	​	​	$121.2	​
Taxes receivable	​	​	153.9	​	​	​	151.3	​
Derivative assets	​	​	65.6	​	​	​	61.4	​
Other	​	​	31.8	​	​	​	23.1	​
Total	​	​	$407.0	​	​	​	$357.0	​
​	​	​	​	​	​	​	​	​
Property, plant and equipment, net	​	​	​	​	​	​	​	​
Land	​	​	$167.7	​	​	​	$159.2	​
Buildings and leasehold improvements	​	​	1,145.1	​	​	​	1,134.1	​
Machinery and equipment	​	​	2,014.0	​	​	​	1,968.7	​
Merchandising and customer equipment	​	​	2,744.7	​	​	​	2,708.2	​
Capitalized software	​	​	906.0	​	​	​	884.6	​
Construction in progress	​	​	324.4	​	​	​	325.0	​
​	​	​	7,301.9	​	​	​	7,179.8	​
Accumulated depreciation	​	​	(4,016.2)	​	​	​	(3,891.3)	​
Total	​	​	$3,285.7	​	​	​	$3,288.5	​
​	​	​	​	​	​	​	​	​
Other intangible assets, net	​	​	​	​	​	​	​	​
Intangible assets not subject to amortization	​	​	​	​	​	​	​	​
Trade names	​	​	$1,230.0	​	​	​	$1,230.0	​
Intangible assets subject to amortization	​	​	​	​	​	​	​	​
Customer relationships	​	​	3,441.4	​	​	​	3,444.6	​
Trademarks	​	​	558.5	​	​	​	561.1	​
Patents	​	​	498.5	​	​	​	496.3	​
Other technology	​	​	522.9	​	​	​	527.2	​
​	​	​	5,021.3	​	​	​	5,029.2	​
Accumulated amortization	​	​	​	​	​	​	​	​
Customer relationships	​	​	(1,494.6)	​	​	​	(1,440.9)	​
Trademarks	​	​	(178.0)	​	​	​	(170.3)	​
Patents	​	​	(277.1)	​	​	​	(269.3)	​
Other technology	​	​	(163.3)	​	​	​	(154.6)	​
​	​	​	(2,113.0)	​	​	​	(2,035.1)	​
Net intangible assets subject to amortization	​	​	2,908.3	​	​	​	2,994.1	​
Total	​	​	$4,138.3	​	​	​	$4,224.1	​
​	​	​	​	​	​	​	​	​
Other assets	​	​	​	​	​	​	​	​
Deferred income taxes	​	​	$126.5	​	​	​	$120.6	​
Pension	​	​	134.7	​	​	​	114.6	​
Derivative asset	​	​	26.7	​	​	​	29.4	​
Other	​	​	284.0	​	​	​	281.4	​
Total	​	​	$571.9	​	​	​	$546.0	​

​

​

​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​
​	​	March 31			​	December 31
(millions)		2022			​	2021
Other current liabilities	​	​	​	​	​	​	​	​
Discounts and rebates	​	​	$353.5	​	​	​	$341.1	​
Dividends payable	​	​	146.0	​	​	​	146.3	​
Interest payable	​	​	62.6	​	​	​	47.7	​
Taxes payable, other than income	​	​	129.8	​	​	​	154.2	​
Restructuring	​	​	29.3	​	​	​	39.1	​
Contract liability	​	​	96.8	​	​	​	91.7	​
Operating lease liabilities	​	​	111.2	​	​	​	115.1	​
Other	​	​	206.9	​	​	​	209.0	​
Total	​	​	$1,136.1	​	​	​	$1,144.2	​
​	​	​	​	​	​	​	​	​
Accumulated other comprehensive income (loss)	​	​	​	​	​	​	​	​
Unrealized gain (loss) on derivative financial instruments, net of tax	​	​	$0.3	​	​	​	$4.9	​
Unrecognized pension and postretirement benefit expense, net of tax	​	​	(619.1)	​	​	​	(632.8)	​
Cumulative translation, net of tax	​	​	(944.8)	​	​	​	(1,006.9)	​
Total	​	​	($1,563.6)	​	​	​	($1,634.8)	​

​

​

​

​

5. DEBT AND INTEREST

​

Short-term Debt

​

The following table provides the components of the Company’s short-term debt obligations as of March 31, 2022 and December 31, 2021.

​

​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​
​	​	March 31			​	December 31
(millions)		2022			​	2021
Short-term debt	​	​	​	​	​	​	​	​
Commercial paper	​	​	$475.0	​	​	​	$400.0	​
Notes payable	​	​	15.6	​	​	​	8.5	​
Long-term debt, current maturities	​	​	2.5	​	​	​	2.5	​
Total	​	​	$493.1	​	​	​	$411.0	​

​

Lines of Credit

​

As of March 31, 2022, the Company has a $2.0 billion multi-year revolving credit facility which expires in April 2026. The credit facility has been established with a diverse syndicate of banks and supports the Company’s U.S. and Euro commercial paper programs. There were no borrowings under the Company’s credit facility as of either March 31, 2022 or December 31, 2021.

​

Commercial Paper

​

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

​

The Company had $475.0 million and $400.0 million outstanding commercial paper under its U.S. program as of March 31, 2022 and December 31, 2021, respectively.

​

Notes Payable

​

The Company’s notes payable consists of uncommitted credit lines with major international banks and financial institutions, primarily to support global cash pooling structures. As of March 31, 2022 and December 31, 2021, the Company had $15.6 million and $8.5 million, respectively, outstanding under these credit lines.

​

Long-term Debt

​

The following table provides the components of the Company’s long-term debt obligations, including current maturities, as of March 31, 2022 and December 31, 2021.

​

​	​	​	​	​	​	​	​	​	​	​
​	​					​	​			​
​	​	​	​	​	​	​	​	​	​	​
​	​	Maturity	​	March 31			​	December 31
(millions)	​	by Year	​	2022			​	2021
​	​	​	​	​	​	​	​	​	​	​
Long-term debt	​	​	​	​	​	​	​	​	​	​
Public notes (2022 principal amount)	​	​	​	​	​	​	​	​	​	​
Two year 2021 senior notes ($500 million)	​	2023	​	​	$497.6	​	​	​	$497.2	​
Seven year 2016 senior notes (€575 million)	​	2024	​	​	642.8	​	​	​	649.3	​
Ten year 2015 senior notes (€575 million)	​	2025	​	​	643.0	​	​	​	649.7	​
Ten year 2016 senior notes ($750 million)	​	2026	​	​	734.6	​	​	​	744.9	​
Ten year 2017 senior notes ($500 million)	​	2027	​	​	466.0	​	​	​	488.4	​
Six Year 2021 senior notes ($500 million)	​	2027	​	​	495.9	​	​	​	495.7	​
Ten year 2020 senior notes ($698 million)	​	2030	​	​	689.9	​	​	​	709.1	​
Ten year 2020 senior notes ($600 million)	​	2031	​	​	577.3	​	​	​	593.4	​
Eleven year 2021 senior notes ($650 million)	​	2032	​	​	644.2	​	​	​	644.0	​
Thirty year 2011 senior notes ($389 million)	​	2041	​	​	384.3	​	​	​	384.3	​
Thirty year 2016 senior notes ($200 million)	​	2046	​	​	197.2	​	​	​	197.2	​
Thirty year 2017 senior notes ($484 million)	​	2047	​	​	424.6	​	​	​	424.3	​
Thirty year 2020 senior notes ($500 million)	​	2050	​	​	490.5	​	​	​	490.4	​
Thirty year 2021 senior notes ($850 million)	​	2051	​	​	838.6	​	​	​	838.5	​
Thirty-four year 2021 senior notes ($685 million)	​	2055	​	​	535.8	​	​	​	535.3	​
Finance lease obligations and other	​	​	​	​	7.4	​	​	​	8.0	​
Total debt	​	​	​	​	8,269.7	​	​	​	8,349.7	​
Long-term debt, current maturities	​	​	​	​	(2.5)	​	​	​	(2.5)	​
Total long-term debt	​	​	​	​	$8,267.2	​	​	​	$8,347.2	​

​

Public Notes

​

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

​

Covenants

​

The Company is in compliance with all covenants under the Company’s outstanding indebtedness as of March 31, 2022.

​

Net Interest Expense

​

Interest expense and interest income recognized during the first quarter of 2022 and 2021 were as follows:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended						​
​	​	March 31						​
(millions)	​	2022			​	2021		​
Interest expense	​	​	$55.1	​	​	​	$53.8	​
Interest income		​	(2.1)	​	​	​	(2.1)
Interest expense, net	​	​	$53.0	​	​	​	$51.7	​

​

​

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

​

​

​

​

6. GOODWILL AND OTHER INTANGIBLE ASSETS

​

Goodwill

​

Goodwill arises from the Company’s acquisitions and represents the excess purchase consideration transferred over the fair value of acquired net assets. The Company’s reporting units are its operating segments. The Company assesses goodwill for impairment on an annual basis during the second quarter. If circumstances change or events occur that demonstrate it is more likely than not that the carrying amount of a reporting unit exceeds its fair value, the Company completes an interim goodwill assessment of that reporting unit prior to the next annual assessment. If the results of an annual or interim goodwill assessment demonstrate the carrying amount of a reporting unit is greater than its fair value, the Company will recognize an impairment loss for the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the carrying amount of goodwill assigned to that reporting unit. Based on the current and expected performance of the Company’s reporting units, interim goodwill impairment assessments were not performed during the first quarter of 2022. There has been no impairment of goodwill in any of the periods presented.

​

The changes in the carrying amount of goodwill for each of the Company's reportable segments during the quarter ended March 31, 2022 were as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​		​	Global		​	Global		​	​	​	​	​	​	​	​
​	​	Global		​	Institutional		​	Healthcare &		​	​	​	​	​	​	​	​
(millions)		Industrial			& Specialty			Life Sciences		​	Other			Total		​
December 31, 2021	​	​	$4,270.1	​	​	$576.5	​	​	$2,974.2	​	​	$243.1	​	​	$8,063.9	​	​
Prior year business combinations (a)	​	​	2.1	​	​	-	​	​	5.7	​	​	-	​	​	7.8	​	​
Effect of foreign currency translation	​	​	16.5	​	​	(0.6)	​	​	(6.6)	​	​	-	​	​	9.3	​	​
March 31, 2022	​	​	$4,288.7	​	​	$575.9	​	​	$2,973.3	​	​	$243.1	​	​	$8,081.0	​	​

​

(a)	Represents purchase accounting adjustments associated with 2021 acquisitions.

​

Other Intangible Assets

​

The Nalco trade name is the Company’s only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. Based on the ongoing performance of the Company’s reporting units associated with the Nalco trade name, an interim indefinite-lived intangible asset impairment assessment was not performed during the first quarter of 2022. There has been no impairment of the Nalco trade name intangible since it was acquired.

​

The Company’s intangible assets subject to amortization include customer relationships, trademarks, patents and other technology primarily acquired through business acquisitions. The fair value of intangible assets acquired in business acquisitions are estimated primarily using discounted cash flow valuation methods at the time of acquisition. Intangible assets are amortized on a straight-line basis over their estimated lives. Total amortization expense related to intangible assets during the first quarter of 2022 and 2021 was $79.5 million and $64.5 million, respectively. Amortization expense related to intangible assets for the remaining nine-month period of 2022 is expected to be approximately $237 million.

​

​

​

​

7. FAIR VALUE MEASUREMENTS

​

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

​

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

​

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

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

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

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2022
(millions)	​	Carrying			​	Fair Value Measurements
​		Amount				Level 1			​	Level 2				Level 3
Assets	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts			$102.3	​	​	​	$-	​	​		$102.3	​	​		$-	​
Cross-currency swap derivative contracts	​	​	17.9	​	​	​	-	​	​	​	$17.9	​	​	​	-	​
​			​	​	​	​	​	​	​	​	​	​	​	​	​	​
Liabilities	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	24.1	​	​	​	-	​	​	​	24.1	​	​	​	-	​
Interest rate swap agreements	​	​	73.5	​	​	​	-	​	​	​	73.5	​	​	​	-	​

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2021
(millions)	​	Carrying			​	Fair Value Measurements
​		Amount				Level 1			​	Level 2				Level 3
Assets	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts			$94.5	​	​	​	$-	​	​		$94.5	​	​		$-	​
Interest rate swap agreements	​	​	1.8	​	​	​	-	​	​	​	1.8	​	​	​	-	​
Cross-currency swap derivative contracts	​	​	9.4	​	​	​	-	​	​	​	9.4	​	​	​	-	​
​			​	​	​	​	​	​	​	​	​	​	​	​	​	​
Liabilities	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	12.6	​	​	​	-	​	​	​	12.6	​	​	​	-	​
Interest rate swap agreements	​	​	10.1	​	​	​	-	​	​	​	10.1	​	​	​	-	​
Cross-currency swap derivative contracts	​	​	1.6	​	​	​	-	​	​	​	1.6	​	​	​	-	​

​

The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date and is classified within Level 2. The carrying value of interest rate swap agreements are at fair value, which are determined based on current forward interest rates as of the balance sheet date and are classified within Level 2. The cross-currency swap derivative contracts are used to partially hedge the Company’s net investments in foreign operations against adverse movements in exchange rates between the U.S. dollar and the Euro. The carrying value of the cross-currency swap derivative contracts are at fair value, which are determined based on the income approach with the relevant interest rates and foreign currency current exchange rates and forward curves as inputs as of the balance sheet date and is classified within Level 2. For purposes of fair value disclosure above, derivative values are presented gross. Further discussion of gross versus net presentation of the Company's derivatives is included within Note 8.

​

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

​

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

​

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

​

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2022							​	December 31, 2021
​	​	Carrying			​	Fair			​	Carrying			​	Fair
​		Amount				Value				Amount				Value
Long-term debt, including current maturities	​	​	$8,269.7	​	​	​	$8,274.2	​	​	​	$8,349.7	​	​	​	$9,085.3

​

​

8. DERIVATIVES AND HEDGING TRANSACTIONS

​

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

​

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

​

Derivative Positions Summary

​

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

​

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

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	Derivative Assets							Derivative Liabilities
​	​	​	March 31			​	December 31		​	March 31			​	December 31		​
(millions)		​	2022			​	2021			2022			​	2021
Derivatives designated as hedging instruments	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	​	$52.9	​	​	​	$44.7	​	​	$4.3	​	​	​	$2.6	​
Interest rate swap agreements	​	​	​	-	​	​	​	1.8	​	​	73.5	​	​	​	10.1	​
Cross-currency swap derivative contracts	​	​	​	17.9	​	​	​	9.4	​	​	-	​	​	​	1.6	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Derivatives not designated as hedging instruments	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	​	49.4	​	​	​	49.8	​	​	19.8	​	​	​	10.0	​
Gross value of derivatives	​	​	​	120.2	​	​	​	105.7	​	​	97.6	​	​	​	24.3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gross amounts offset in the Consolidated Balance Sheets	​	​	​	(27.9)	​	​	​	(14.9)	​	​	(27.9)	​	​	​	(14.9)	​
Net value of derivatives	​	​	​	$92.3	​	​	​	$90.8	​	​	$69.7	​	​	​	$9.4	​

​

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

​

​	​	​	​	​	​	​	​	​
​	​	Notional Values
​	​	​	March 31	​	​	December 31
(millions)	​		2022	​		2021
​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	$ 4,707	​	​	​	$ 4,059	​
Interest rate swap agreements	​	​	1,250	​	​	​	1,250	​
Cross-currency swap derivative contracts	​	​	477	​	​	​	482	​

​

​

Cash Flow Hedges

​

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

​

Fair Value Hedges

​

The Company manages interest expense using a mix of fixed and floating rate debt. To help manage exposure to interest rate movements and to reduce borrowing costs, the Company may enter into interest rate swap agreements under which the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest (income) expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest (income) expense. These fair value hedges are highly effective and thus, there is no impact on earnings due to hedge ineffectiveness.

​

The Company entered into a series of interest rate swap agreements to convert an aggregate $1.3 billion of its debt from a fixed interest rate to a floating interest rate. These interest rate swap agreements are designated as fair value hedges.

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Carrying amount of the hedged liabilities						​	​	Cumulative amount of the fair value hedging adjustment included in the carrying amount of the hedged liabilities						​
​	​	First Quarter Ended						​	​	First Quarter Ended						​
Line item in which the hedged item is included	​	March 31						​	​	March 31						​
(millions)		2022			​	2021		​		2022			​	2021
Long-term debt	​	​	$1,167.7	​	​	​	$247.0	​	​	​	($80.2)	​	​	​	($2.2)	​

​

Net Investment Hedges

​

The Company designates its outstanding €1,150 million ($1,286 million at the end of the first quarter of 2022) senior notes (“Euronotes”) and related accrued interest as hedges of its Euro denominated exposures from the Company’s investments in certain of its Euro denominated functional currency subsidiaries.

​

The Company entered into a series of cross-currency swap derivative contracts maturing in 2030. The cross-currency swap derivative contracts are designated as net investment hedge of its Euro denominated exposures from the Company’s investments in certain of its Euro denominated functional currency subsidiaries. The cross-currency swap derivative contracts exchange fixed-rate payments in one currency for fixed-rate payments in another currency. As of March 31, 2022, the Company had €425 million ($477 million) cross-currency swap derivative contracts outstanding as hedges of the Company’s net investment in foreign operations. The changes in the spot rate of these instruments are recorded in AOCI in stockholders’ equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in AOCI. Any ineffective portions of net investment hedges are reclassified from AOCI into earnings during the period of change. The interest income or expense from these swaps are recorded in interest expense on the accompanying Consolidated Statements of Income consistent with the classification of interest expense attributable to the underlying debt.

​

​

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

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022			​	2021
Revaluation gain (loss), net of tax:	​	​	​	​	​	​	​	​
Euronotes	​	​	$10.3	​	​	​	($12.2)	​
Cross-currency swap derivative contracts	​	​	8.6	​	​	​	-	​
Total revaluation gain (loss), net of tax	​	​	$18.9	​	​	​	($12.2)	​

​

Derivatives Not Designated as Hedging Instruments

​

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

​

Effect of all Derivative Instruments on Income

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended														​
​	​	March 31														​
​	​	2022							​	2021						​
(millions)	​	​	COS	​	SG&A	​	Interest	​		​	COS	​	SG&A	​	Interest	​
Gain (loss) on derivatives in cash flow hedging relationship:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amount of gain (loss) reclassified from AOCI to income	​	​	$-	​	$13.9	​	$-	​	​	​	($1.0)	​	($17.2)	​	$-	​
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value	​	​	-	​	-	​	3.8	​	​	​	-	​	-	​	5.6	​
Interest rate swap agreements	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amount of gain (loss) reclassified from AOCI to income	​	​	-	​	-	​	(0.6)	​	​	​	-	​	-	​	(0.6)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Gain (loss) on derivatives not designated as hedging instruments:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Foreign currency forward contracts	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amount of gain (loss) recognized in income	​	​	-	​	14.2	​	-	​	​	​	-	​	1.3	​	-	​
Total gain (loss) of all derivative instruments	​	​	$-	​	$28.1	​	$3.2	​	​	​	($1.0)	​	($15.9)	​	$5.0	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

Subsequent Event

​

In April 2022, the Company entered into an interest rate swap agreement that converted $250 million of its 4.80% debt from a fixed interest rate to a floating interest rate. The interest rate swap is designated as a fair value hedge.

​

​

​

9. OTHER COMPREHENSIVE INCOME (LOSS) INFORMATION

​

Other comprehensive income (loss) includes net income, foreign currency translation adjustments, defined benefit pension and postretirement plan adjustments, gains and losses on derivative instruments designated and effective as cash flow hedges and non-derivative instruments designated and effective as foreign currency net investment hedges that are charged or credited to the accumulated other comprehensive loss account in shareholders’ equity. Refer to Note 8 for additional information related to the Company’s derivatives and hedging transactions. Refer to Note 13 for additional information related to the Company’s pension and postretirement benefits activity.

​

The following tables provide other comprehensive income information related to the Company’s derivatives and hedging instruments and pension and postretirement benefits:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended						​
​	​	March 31						​
(millions)		2022			​	2021
Derivative and Hedging Instruments	​	​	​	​	​	​	​	​
Unrealized gain (loss) on derivative & hedging instruments	​	​	​	​	​	​	​	​
Amount recognized in AOCI	​	​	$10.7	​	​	​	($12.2)	​
Loss (gain) reclassified from AOCI into income	​	​	​	​	​	​	​	​
COS	​	​	-	​	​	​	1.0	​
SG&A		​	(13.9)	​	​	​	17.2
Interest (income) expense, net	​	​	(3.2)	​	​	​	(5.0)	​
​		​	(17.1)	​	​	​	13.2
Other activity		​	-	​	​	​	(0.3)
Tax impact		​	1.8	​	​	​	(0.1)
Net of tax	​	​	($4.6)	​	​	​	$0.6	​
​	​	​	​	​	​	​	​	​
Pension and Postretirement Benefits	​	​	​	​	​	​	​	​
Amount reclassified from AOCI into income	​	​	​	​	​	​	​	​
Settlement charge	​	​	$0.9	​	​	​	$-	​
Amortization of net actuarial loss and prior period service credits, net	​	​	14.9	​	​	​	21.8	​
​		​	15.8	​	​	​	21.8	​
Other activity	​	​	1.1	​	​	​	(10.6)	​
Tax impact		​	(3.2)	​	​	​	(5.3)
Net of tax	​	​	$13.7	​	​	​	$5.9	​

​

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

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended						​
​	​	March 31						​
​		2022			​	2021
(millions)	​	​	​	​	​	​	​	​
Derivative (gain) loss reclassified from AOCI into income, net of tax	​	​	($12.9)	​	​	​	$10.0	​
​	​	​	​	​	​	​	​	​
Pension and postretirement benefits amortization of net actuarial losses	​	​	​	​	​	​	​	​
and prior service credits reclassified from AOCI into income, net of tax	​	​	13.7	​	​	​	5.9	​

​

​

​

10. SHAREHOLDERS’ EQUITY

​

Share Repurchase Authorization

​

In February 2015, the Company’s Board of Directors authorized the repurchase of up to 20,000,000 shares of its common stock, including shares to be repurchased under Rule 10b5–1. As of March 31, 2022, 4,387,187 shares remained to be repurchased under the Company’s repurchase authorization. The Company intends to repurchase all shares under its authorization, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions.

​

Share Repurchases

​

During the first quarter of 2022, the Company reacquired 1,546,749 shares of its common stock, of which 1,463,000 related to share repurchases through open market and 83,749 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

​

During the first quarter of 2021, the Company reacquired 292,586 shares of its common stock, of which 190,623 related to share repurchases through open market and 101,963 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

​

​

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

​

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

​

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

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions, except per share)		2022				2021
​	​	​	​	​	​	​	​	​
Net income attributable to Ecolab	​	​	$171.9	​	​	​	$193.6	​
​	​	​	​	​	​	​	​	​
Weighted-average common shares outstanding	​	​	​	​	​	​	​	​
Basic		​	286.2	​	​	​	286.0	​
Effect of dilutive stock options and units		​	1.9	​	​	​	2.8	​
Diluted		​	288.1	​	​	​	288.8	​
​	​	​	​	​	​	​	​	​
Earnings attributable to Ecolab per common share	​	​	​	​	​	​	​	​
Basic EPS	​	​	$ 0.60	​	​	​	$ 0.68	​
Diluted EPS	​	​	$ 0.60	​	​	​	$ 0.67	​
​	​	​	​	​	​	​	​	​
Anti-dilutive securities excluded from the computation of diluted EPS		​	2.6	​	​	​	1.1	​
​	​	​	​	​	​	​	​	​
Amounts do not necessarily sum due to rounding.	​	​	​	​	​	​	​	​

​

​

​

​

12. INCOME TAXES

​

The Company’s tax rate was 20.7% and 25.2% for the first quarter of 2022 and 2021, respectively. The change in the Company’s tax rate for the first quarter of 2022 compared to the first quarter of 2021 was driven primarily by the impact of discrete tax items and special (gains) and charges. Further information related to special (gains) and charges is included in Note 2.

​

The Company recognized net tax expenses related to discrete tax items of $1.0 million in the first quarter of 2022. This included share-based compensation excess tax benefits of $2.9 million. The amount of this tax benefit is subject to variation in stock price and award exercises. Additionally, the Company recognized discrete tax expense of $3.9 million primarily due to audit settlements, reserves for uncertain tax positions, prior year return adjustments, repricing of deferred tax balances, and other changes in estimates.

​

The Company recognized net tax expense related to discrete tax items of $16.1 million in the first quarter of 2021. This included a non-recurring, non-cash deferred tax charge of $25.1 million associated with transferring certain intangible property between affiliates. Share-based compensation excess tax benefit contributed $6.6 million in the first quarter of 2021. The remaining discrete net tax benefit of $2.4 million was due to other foreign and U.S. changes in estimates during the quarter.

​

​

13. PENSION AND POSTRETIREMENT PLANS

​

The Company has a non-contributory, qualified, defined benefit pension plan covering the majority of its U.S. employees. The Company also has non-contributory, non-qualified, defined benefit plans, which provide for benefits to employees in excess of limits permitted under its U.S. pension plans. Various international subsidiaries also have defined benefit pension plans. The Company provides postretirement health care benefits to certain U.S. employees and retirees.

​

The components of net periodic pension and postretirement health care benefit expense for the first quarter ended March 31 are as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	U.S.						​	International						​	U.S. Postretirement						​
​	​	Pension						​	Pension						​	Health Care						​
(millions)		2022			​	2021			2022			​	2021			2022			​	2021
Service cost	​	​	$10.5	​	​	​	$10.8	​	​	$7.3	​	​	​	$7.9	​	​	$0.2	​	​	​	$0.2	​
Interest cost on benefit obligation		​	14.1	​	​	​	12.5	​	​	5.7	​	​	​	4.3	​	​	0.8	​	​	​	0.7	​
Expected return on plan assets		​	(36.7)	​	​	​	(38.6)	​	​	(18.4)	​	​	​	(17.6)	​	​	(0.1)	​	​	​	(0.1)	​
Recognition of net actuarial loss (gain)	​	​	10.0	​	​	​	16.2	​	​	6.0	​	​	​	7.2	​	​	(0.1)	​	​	​	0.2	​
Amortization of prior service benefit	​	​	(1.0)	​	​	​	(1.7)	​	​	-	​	​	​	(0.1)	​	​	-	​	​	​	-	​
Curtailments and settlements	​	​	0.9	​	​	​	-	​	​	-	​	​	​	-	​	​	-	​	​	​	-	​
Total expense (benefit)	​	​	($2.2)	​	​	​	($0.8)	​	​	$0.6	​	​	​	$1.7	​	​	$0.8	​	​	​	$1.0	​

​

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

​

As of March 31, 2022, the Company is in compliance with all funding requirements of each of its defined benefit plans.

​

During the first quarter of 2022, the Company made contributions of $4 million to its U.S. non-contributory non-qualified defined benefit plans and estimates it will contribute an additional $11 million to such plans during the remainder of 2022.

​

During the first quarter of 2022, the Company made contributions of $11 million to its international pension plans and estimates it will contribute an additional $37 million to such plans during the remainder of 2022.

​

During the first quarter of 2022, the Company made contributions of $2 million to its U.S. postretirement health care plans and estimates it will contribute an additional $9 million to such plans during the remainder of 2022.

​

​

​

​

14. REVENUES

​

Revenue Recognition

​

Product and Sold Equipment

​

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

​

On June 3, 2020, the Company completed the separation of its Upstream Energy business (“ChampionX”). The Company entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period up to 36 months. Sales of product to ChampionX under this agreement are recorded in product and equipment sales in the Corporate segment along with the related cost of sales, while purchases from ChampionX are recorded in inventory. Sales of product to ChampionX post-separation for the first quarter of 2022 and 2021 were $34.7 million and $32.8 million, respectively. As of March 31, 2022, the Company had an outstanding accounts receivable balance for sales of product to ChampionX of $18.9 million.

​

Service and Lease Equipment

​

Service and lease equipment revenue is generated from providing services or leasing equipment to customers. Service offerings include installing or repairing certain types of equipment, activities that supplement or replace headcount at the customer location, or fulfilling deliverables included in the contract. Global Industrial segment services are associated with water treatment and paper process applications. Global Institutional & Specialty segment services include cleaning and sanitizing programs and wash process solutions. Global Healthcare & Life Sciences segment services include pharmaceutical, personal care, infection and containment control solutions. Revenues included in Other primarily relate to services designed to detect, eliminate and prevent pests. Service revenue is recognized over time utilizing an input method and aligns with when the services are provided. Typically, revenue is recognized over time using costs incurred to date because the effort provided by the field selling and service organization represents services provided, which corresponds with the transfer of control. Revenue recognized from leased equipment primarily relates to warewashing and water treatment equipment recognized on a straight-line basis over the length of the lease contract pursuant to Topic 842 Leases.

​

The Company’s operating lease revenue was as follows:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)	​	2022			​	2021
Operating lease revenue*	​	​	$112.1	​	​	​	$97.3	​

​

*Includes immaterial variable lease revenue

​

The following table shows principal activities, separated by reportable segments, from which the Company generates its revenue. Corporate segment includes sales to ChampionX under the Master Cross Supply and Product Transfer agreements entered into as part of the ChampionX Separation. For more information about the Company’s reportable segments, refer to Note 15.

​

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

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022			​	2021
Global Industrial	​	​	​	​	​	​	​	​
Product and sold equipment		​	$1,358.4	​	​	​	$1,227.5	​
Service and lease equipment		​	207.3	​	​	​	203.5	​
Global Institutional & Specialty		​	​	​	​	​	​	​
Product and sold equipment	​	​	824.6	​	​	​	702.7	​
Service and lease equipment	​	​	182.4	​	​	​	154.7	​
Global Healthcare & Life Sciences	​	​	​	​	​	​	​	​
Product and sold equipment	​	​	334.0	​	​	​	263.1	​
Service and lease equipment	​	​	28.8	​	​	​	29.6	​
Other	​	​	​	​	​	​	​	​
Product and sold equipment	​	​	72.4	​	​	​	67.1	​
Service and lease equipment	​	​	224.0	​	​	​	203.6	​
Corporate	​	​	​	​	​	​	​	​
Product and sold equipment	​	​	34.7	​	​	​	33.0	​
Service and lease equipment	​	​	0.1	​	​	​	0.2	​
Total	​	​	​	​	​	​	​	​
Total product and sold equipment	​	​	$2,624.1	​	​	​	$2,293.4	​
Total service and lease equipment	​	​	$642.6	​	​	​	$591.6	​

​

Net sales at public exchange rates by geographic region for the first quarter ended March 31 are as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Global						​	Global Institutional						​	Global Healthcare						​	​						​	​						​
​	​	Industrial						​	& Specialty						​	& Life Sciences						​	Other						​	Corporate						​
​		2022				2021			2022				2021			2022				2021			2022				2021			2022				2021		​
​	​		​		​		​	​		​		​		​			​		​		​			​		​		​			​				​	​
North America	​	​	$716.6	​	​	​	$636.4	​	​	$732.0	​	​	​	$622.7	​	​	$145.0	​	​	​	$98.7	​	​	$181.7	​	​	​	$160.8	​	​	$29.4	​	​	​	$22.7	​
Europe		​	313.5	​	​	​	313.1	​	​	136.7	​	​	​	107.3	​	​	173.3	​	​	​	175.6	​	​	62.1	​	​	​	57.8	​	​	0.6	​	​	​	0.6	​
Asia Pacific		​	205.1	​	​	​	189.4	​	​	52.7	​	​	​	51.3	​	​	19.0	​	​	​	10.7	​	​	16.6	​	​	​	18.1	​	​	1.0	​	​	​	1.4	​
Latin America		​	136.4	​	​	​	125.2	​	​	36.8	​	​	​	31.3	​	​	5.6	​	​	​	0.5	​	​	13.0	​	​	​	12.0	​	​	3.5	​	​	​	6.5	​
Greater China	​	​	110.2	​	​	​	94.3	​	​	37.8	​	​	​	36.2	​	​	14.5	​	​	​	1.2	​	​	20.3	​	​	​	18.9	​	​	0.1	​	​	​	0.6	​
India, Middle East and Africa	​	​	83.9	​	​	​	72.6	​	​	11.0	​	​	​	8.6	​	​	5.4	​	​	​	6.0	​	​	2.7	​	​	​	3.1	​	​	0.2	​	​	​	1.4	​
Total	​	​	$1,565.7	​	​	​	$1,431.0	​	​	$1,007.0	​	​	​	$857.4	​	​	$362.8	​	​	​	$292.7	​	​	$296.4	​	​	​	$270.7	​	​	$34.8	​	​	​	$33.2	​

​

Net sales by geographic region were determined based on origin of sale. Revenues in the United States made up 52% and 51% of total during the first quarter ended March 31, 2022 and 2021, respectively.

​

Accounts Receivable and Allowance for Expected Credit Losses

​

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

​

The Company’s allowance for expected return of products shipped and credits related to pricing or quantities shipped of $17.8 million and $16.8 million as of March 31, 2022 and 2021, respectively. Returns and credit activity is recorded directly as a reduction to revenue.

​

The following table summarizes the activity in the allowance for expected credit losses:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31						​
(millions)		2022				2021
​	​	​	​	​	​	​	​	​
Beginning balance	​	​	$52.8	​	​	​	$68.4	​
Bad debt expense (a)			22.3	​	​		5.4	​
Write-offs			(4.0)	​	​		(5.0)	​
Other (b)			(1.6)	​	​		0.7	​
Ending balance (c)	​	​	$69.5	​	​	​	$69.5	​

​

(a)	Bad debt expense in 2022 reflects expected credit losses related to our Russia and Ukraine businesses.

(b)	Other amounts are primarily the effects of changes in currency translations.

(c)	The allowance for expected credit losses balances in 2021 reflect increased reserves, primarily due to the Institutional customer base as a result of the COVID-19 pandemic.

​

Contract Liability

​

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

​

The following table summarizes the contract liability activity:

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended
​	​	March 31
(millions)		2022			​	2021
​	​	​	​	​	​	​	​	​
Contract liability as of beginning of the year		​	$91.7	​	​	​	$80.4
​	​	​	​	​	​	​	​	​
Revenue recognized in the period from:		​	​	​	​	​	​
Amounts included in the contract liability at the beginning of the year		​	(91.7)	​	​	​	(80.4)
​	​	​	​	​	​	​	​	​
Increases due to billings excluding amounts recognized as revenue during the period ended	​	​	96.8	​	​	​	89.6	​
​	​	​	​	​	​	​	​	​
Contract liability as of end of period	​	​	$96.8	​	​	​	$89.6	​

​

15. OPERATING SEGMENTS

​

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

​

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

​

Comparability of Reportable Segments

​

The Company evaluates the performance of its non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminates the impact of exchange rate fluctuations on its international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. The “Fixed Currency Rate Change” column shown in the following table reflects international operations at fixed currency exchange rates established by management at the beginning of 2022, rather than the 2021 establish rates. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported within the “Effect of foreign currency translation” row in the following table. The “Other” column shown in the following table reflects immaterial changes between reportable segments, including the movement of certain customers and cost allocations.

​

The impact of the preceding changes on previously reported full year 2021 reportable segment net sales and operating income is summarized as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2021
​		​				​			​		​			​		​			​
​	​	2021 Reported			​	​	​	​	​	​	​	Fixed	​	​	​	2021 Reported			​
​	​	Valued at 2021				​			​		Currency			​		Valued at 2022			​
(millions)	​	Management Rates				Other			​		Rate Change			​		Management Rates			​
Net Sales	​	​	​	​		​	​	​	​		​	​	​	​		​	​	​	​
Global Industrial	​	​	$6,304.9	​	​	​	$-	​	​	​	​	($218.1)	​	​	​	​	$6,086.8	​	​
Global Institutional & Specialty	​	​	3,978.2	​	​	​	-	​	​	​	​	(69.4)	​	​	​	​	3,908.8	​	​
Global Healthcare & Life Sciences	​	​	1,195.4	​	​	​	-	​	​	​	​	(45.8)	​	​	​	​	1,149.6	​	​
Other	​	​	1,226.9	​	​	​	-	​	​	​	​	(25.9)	​	​	​	​	1,201.0	​	​
Corporate	​	​	139.4	​	​	​	-	​	​	​	​	(2.0)	​	​	​	​	137.4	​	​
Subtotal at fixed currency rates	​	​	12,844.8	​	​	​	-	​	​	​	​	(361.2)	​	​	​	​	12,483.6	​	​
Effect of foreign currency translation	​	​	(111.7)	​	​	​	-	​	​	​	​	361.2	​	​	​	​	249.5	​	​
Consolidated reported GAAP net sales	​	​	$12,733.1	​	​	​	$-	​	​	​	​	$-	​	​	​	​	$12,733.1	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Global Industrial	​	​	$1,031.0	​	​	​	$4.0	​	​	​	​	($49.3)	​	​	​	​	$985.7	​	​
Global Institutional & Specialty	​	​	556.9	​	​	​	(3.8)	​	​	​	​	(7.4)	​	​	​	​	545.7	​	​
Global Healthcare & Life Sciences	​	​	160.9	​	​	​	(0.9)	​	​	​	​	(7.7)	​	​	​	​	152.3	​	​
Other	​	​	187.3	​	​	​	0.7	​	​	​	​	(4.0)	​	​	​	​	184.0	​	​
Corporate	​	​	(318.6)	​	​	​	​	​	​	​	​	2.0	​	​	​	​	(316.6)	​	​
Subtotal at fixed currency rates	​	​	1,617.5	​	​	​	-	​	​	​	​	(66.4)	​	​	​	​	1,551.1	​	​
Effect of foreign currency translation	​	​	(18.9)	​	​	​	​	​	​	​	​	66.4	​	​	​	​	47.5	​	​
Consolidated reported GAAP operating income	​	​	$1,598.6	​	​	​	$-	​	​	​	​	$-	​	​	​	​	$1,598.6	​	​

​

Reportable Segment Information

​

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

​

​	​	​	​	​	​	​	​	​
​	​	First Quarter Ended						​
​	​	March 31						​
(millions)		2022		​	​	2021		​
Net Sales	​	​	​	​	​	​	​	​
Global Industrial		​	$1,557.0	​	​	​	$1,384.9	​
Global Institutional & Specialty	​	​	1,005.1	​	​	​	844.1	​
Global Healthcare & Life Sciences	​	​	362.6	​	​	​	281.1	​
Other	​	​	296.0	​	​	​	265.4	​
Corporate	​	​	34.7	​	​	​	32.8	​
Subtotal at fixed currency rates	​	​	3,255.4	​	​	​	2,808.3	​
Effect of foreign currency translation	​	​	11.3	​	​	​	76.7	​
Consolidated reported GAAP net sales		​	$3,266.7	​		​	$2,885.0	​
​	​	​	​	​	​	​	​	​
Operating Income	​	​	​	​	​	​	​	​
Global Industrial		​	$189.2	​	​	​	$209.8	​
Global Institutional & Specialty	​	​	110.8	​	​	​	61.9	​
Global Healthcare & Life Sciences	​	​	44.1	​	​	​	42.6	​
Other	​	​	37.2	​	​	​	32.3	​
Corporate	​	​	(129.6)	​	​	​	(62.5)	​
Subtotal at fixed currency rates	​	​	251.7	​	​	​	284.1	​
Effect of foreign currency translation	​	​	2.8	​	​	​	13.2	​
Consolidated reported GAAP operating income		​	$254.5	​		​	$297.3	​

​

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

​

Consistent with the Company’s internal management reporting, Corporate amounts in the table above include sales to ChampionX in accordance with the long-term supply agreement entered into with the Transaction, as discussed in Note 14. Corporate also includes intangible asset amortization specifically from the Nalco and Purolite acquisitions and special (gains) and charges, as discussed in Note 2, that are not allocated to the Company’s reportable segments.

​

​

​

16. COMMITMENTS AND CONTINGENCIES

​

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

​

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

​

Insurance

​

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

​

Litigation and Environmental Matters

​

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

​

TPC Group Litigation

​

On November 27, 2019, a Butadiene production plant owned and operated by TPC Group, Inc. in Port Neches, Texas, experienced an explosion and fire that resulted in personal injuries, the release of chemical fumes and extensive property damage to the plant and surrounding areas in and near Port Neches, Texas.

​

Nalco Company LLC, a subsidiary of Ecolab, supplied process chemicals to TPC used in TPC’s production processes. Nalco did not operate, manage, maintain or control any aspect of TPC’s plant operations.

​

In connection with its provision of process chemicals to TPC, Nalco has been named in numerous lawsuits stemming from the plant explosion. Nalco has been named a defendant, along with TPC and other defendants, in multi-district litigation (“MDL”) proceedings pending in Orange County, Texas, alleging among other things claims for personal injury, property damage and business losses (In re TPC Group Litigation – A2020-0236-MDL, Orange County, Texas). In addition, numerous other lawsuits have been filed against Nalco, including TPC Group v. Nalco, E0208239, Jefferson County, Texas, a subrogation claim by TPC’s insurers seeking reimbursement for property damage losses. Over 5,000 plaintiffs (including the subrogation matter) currently have claims against Nalco.

​

All of these cases make similar allegations and seek damages for personal injury, property damage, business losses and other damages, including exemplary damages. The Company expects all these cases will be consolidated for pretrial purposes into the Orange County MDL referenced above. Due to the large number of plaintiffs, the early stage of the litigation and the fact that many of the claims do not specify an amount of damages, any estimate of any loss or range of losses cannot be made at this time.

​

The Company believes these claims asserted against Nalco Company LLC are without merit and intend to defend the claims vigorously. The Company also believes the claims should be covered by insurance subject to deductibles. However, the Company cannot predict the outcome of these lawsuits, the involvement the Company might have in these matters in the future or the potential for future litigation.

​

Environmental Matters

​

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

​

​

​

17. NEW ACCOUNTING PRONOUNCEMENTS

​

​	​	​	​	​	​	​	​	​	​
Standards that are not yet adopted:	​	​	​	​	​	​	​	​	​
​		​		​		Required		​
​	​	Date of	​	​	​	Date of	​	Effect on the	​
Standard		Issuance	​	Description		Adoption		Financial Statements	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ASU 2021-01 - Reference Rate Reform (Topic 848): Scope	​	March 2020	​	Certain LIBOR rates, widely used reference rates for pricing financial products were discontinued on December 31, 2021. This standard provides optional expedients and exceptions if certain criteria are met when accounting for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	​	Application of guidance is optional until the options and expedients expire on December 31, 2022.	​	The Company has not elected any expedients and adoption of this standard is not expected to have a material impact on the Company's financial statements.	​
​	​	​	​	​	​	​	​	​	​
ASU 2021-08 - Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	​	October 2021	​	Update to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.	​	January 1, 2023	​	The Company is currently evaluating any potential future impacts on the Company's financial statements.	​
​	​	​	​	​	​	​	​	​	​
ASU 2021 -10 - Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance	​	November 2021	​	Update to increase the transparency of government assistance including annual disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements.	​	Annual period beginning January 1, 2022.	​	The Company is currently gathering the information and evaluating the future impact on the Company's financial statement annual disclosures.	​

​

​

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

​

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the Board of Directors and Shareholders of Ecolab Inc.

​

Results of Review of Interim Financial Statements

​

We have reviewed the accompanying consolidated balance sheet of Ecolab Inc. and its subsidiaries (the “Company”) as of March 31, 2022, and the related consolidated statements of income, comprehensive income, equity and cash flows for the three-month periods ended March 31, 2022 and 2021, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

​

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of income, comprehensive income, equity and cash flows for the year then ended (not presented herein), and in our report dated February 25, 2022, which included a paragraph describing a change in the manner of accounting for leases in the 2019 financial statements, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

​

Basis for Review Results

​

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

	​
​	​
​	​
​	​
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP	​
Minneapolis, Minnesota	​
May 5, 2022	​

​

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