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

​

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

​

The MD&A should be read in conjunction with both the unaudited consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022. 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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Impact of Acquisitions and Divestitures

​

Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude the impact of special (gains) and charges, the results of our acquired businesses from the first twelve months post acquisition and the results of divested businesses from the twelve months prior to divestiture. As part of the separation of ChampionX in 2020, we entered into a Master Cross Supply and Product Transfer agreement with ChampionX to provide, receive or transfer certain products for a period of 36 months and for a small set of products with limited suppliers over the next few years. 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.

​

Comparability of Reportable Segments

​

Effective January 1, 2023, our former Downstream operating segment is now part of the Water operating segment. This change did not have any impact on the Global Industrial reportable segment.

​

Fixed Currency Foreign Exchange Rates

​

Management evaluates the sales and operating income performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Public currency rate data provided within the “Segment Performance” section of this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period and is provided for informational purposes only.

​

​

OVERVIEW OF THE THIRD QUARTER ENDED SEPTEMBER 30, 2023

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Sales Performance

​

When comparing third quarter 2023 against third quarter 2022, sales performance was as follows:

​

●	Reported net sales increased 8% to $3,958.1 million and organic sales increased 7%.

●	Organic sales for our Global Industrial segment increased 4% to $1,826.9 million, led by growth in Food & Beverage and Water which more than offset the expected decline in Paper sales

●	Organic sales for our Global Institutional & Specialty segment increased 11% to $1,291.4 million with double-digit growth in both Institutional and Specialty.

●	Organic sales for our Global Healthcare & Life Sciences segment increased 11% to $400.7 million driven by improved growth in Healthcare and Life Sciences.

●	Organic sales for Other increased 8% to $380.3 million led by double-digit growth in Pest Elimination.

​

​

Financial Performance

​

When comparing third quarter 2023 against third quarter 2022, our financial performance was as follows:

​

●	Reported operating income increased 17% to $566.0 million. Organic operating income increased 20%.

●	Net income attributable to Ecolab increased 16% to $404.0 million. Excluding the impact of special (gains) and charges and discrete tax items from both 2023 and 2022 reported results, our adjusted net income attributable to Ecolab increased 19%.

●	Reported diluted EPS increased 17% to $1.41. Excluding the impact of special (gains) and charges and discrete tax items from both 2023 and 2022 reported results, adjusted diluted EPS increased 18% to $1.54 in the third quarter of 2023.

●	Our reported tax rate was 19.1% during the third quarter of 2023, compared to 14.6% during the third quarter of 2022. Excluding the tax rate impact of special (gains) and charges and discrete tax items from both 2023 and 2022 results, our adjusted tax rate was 18.5% during the third quarter of 2023, compared to 18.3% during the third quarter of 2022.

​

​

RESULTS OF OPERATIONS

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Net Sales

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	​	Nine Months Ended
​	​	September 30									​	​	September 30
(millions)	​	2023			​	2022		​	Change		​	​	2023			​	2022		​	Change
Product and equipment sales	​	​	$3,170.9	​	​	​	$2,963.0	​	​	​	​	​	​	$9,152.0	​	​	​	$8,473.9	​	​	​
Service and lease sales	​	​	787.2	​	​	​	706.3	​	​	​	​	​	​	2,229.8	​	​	​	2,042.7	​	​	​
Reported GAAP net sales	​	​	$3,958.1	​	​	​	$3,669.3	​	8	%	​	​	​	$11,381.8	​	​	​	$10,516.6	​	8	%
Effect of foreign currency translation	​		(26.5)	​	​	​	(1.6)	​	​	​	​	​		(61.8)	​	​	​	(154.4)	​	​	​
Non-GAAP fixed currency sales	​	​	$3,931.6	​	​	​	$3,667.7	​	7	%	​	​	​	$11,320.0	​	​	​	$10,362.2	​	9	%
Effect of acquisitions and divestitures	​	​	(32.3)	​	​	​	(27.7)	​	​	​	​	​	​	(79.0)	​	​	​	(96.1)	​	​	​
Non-GAAP organic sales	​	​	$3,899.3	​	​	​	$3,640.0	​	7	%	​	​	​	$11,241.0	​	​	​	$10,266.1	​	9	%

​

​

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

​

The percentage components of the period-over-period 2023 sales change are shown below:

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended					​	Nine Months Ended
​	​	September 30					​	September 30
(percent)		2023						2023
Volume		​	​	-	%	​	​		​	-	%	​
Price changes		​	​	7	​	​	​		​	10	​	​
Organic sales change		​	​	7	​	​	​		​	9	​	​
Acquisitions and divestitures		​	​	-	​	​	​		​	-	​	​
Fixed currency sales change		​	​	7	​	​	​		​	9	​	​
Foreign currency translation		​	​	1	​	​	​		​	(1)	​	​
Reported GAAP net sales change		​	​	8	%	​	​		​	8	%	​

​

Amounts do not necessarily sum due to rounding.

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	Third Quarter Ended													​	Nine Months Ended
​	September 30													​	September 30
​	2023						​	2022						​	2023						​	2022
​					Gross		​					Gross		​					Gross		​					Gross
(millions/percent)	COS			​	Margin		​	COS			​	Margin		​	COS			​	Margin		​	COS			​	Margin
Product and equipment cost of sales	​	$1,868.1	​	​	​	​	​	​	$1,877.1	​	​	​	​	​	​	$5,561.7	​	​	​	​	​	​	$5,371.7	​	​	​	​
Service and lease cost of sales	​	462.4	​	​	​	​	​	​	414.5	​	​	​	​	​	​	1,308.8	​	​	​	​	​	​	1,204.4	​	​	​	​
Reported GAAP COS and gross margin	​	$2,330.5	​	​	41.1	%	​	​	$2,291.6	​	​	37.5	%	​	​	$6,870.5	​	​	39.6	%	​	​	$6,576.1	​	​	37.5	%
Special (gains) and charges	​	5.9	​		​	​	​	​	7.1	​		​	​	​	​	17.2	​		​	​	​	​	61.7	​		​	​
Non-GAAP adjusted COS and gross margin	​	$2,324.6	​	​	41.3	%	​	​	$2,284.5	​	​	37.7	%	​	​	$6,853.3	​	​	39.8	%	​	​	$6,514.4	​	​	38.1	%

​

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

​

​

Our reported gross margin was 41.1% and 37.5% for the third quarter of 2023 and 2022, respectively. Our reported gross margin was 39.6% and 37.5% for the first nine months of 2023 and 2022, respectively. Special (gains) and charges included in items impacting cost of sales are shown within the “Special (Gains) and Charges” table below.

​

Excluding the impact of special (gains) and charges within COS, third quarter 2023 and 2022 adjusted gross margin was 41.3% and 37.7%, respectively, and for the first nine months of 2023 and 2022 was 39.8% and 38.1%, respectively.

​

Our adjusted gross margin increased when comparing the third quarter of 2023 against the third quarter of 2022 reflecting strong pricing and slightly lower delivered product costs.

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Selling, General and Administrative Expense

​

Selling, general and administrative (“SG&A”) expenses as a percentage of sales were 25.9% and 26.6% for the third quarter and first nine months of 2023, respectively, compared to 23.9% and 26.0% for the third quarter and first nine months of 2022, respectively. The SG&A ratio to sales in the third quarter of 2023 increased as sales leverage and cost savings were offset by investments in the business including incentive compensation.

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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)		2023			​	2022			2023			​	2022		​
Cost of sales	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Restructuring activities	​	​	$5.9	​	​	​	$2.1	​	​	$17.2	​	​		$5.5	​
Acquisition and integration activities	​	​	-	​	​	​	4.2	​	​	-	​	​	​	32.7	​
Russia/Ukraine	​	​	-	​	​	​	0.8	​	​	-	​	​	​	7.2	​
Other	​	​	-	​	​	​	-	​	​	-	​	​	​	16.3	​
Cost of sales subtotal	​	​	5.9	​	​	​	7.1	​	​	17.2	​	​		61.7	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Special (gains) and charges	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Restructuring activities	​	​	20.0	​	​	​	(0.3)	​	​	46.3	​	​		0.8	​
Acquisition and integration activities	​	​	3.0	​	​	​	4.1	​	​	11.5	​	​	​	15.0	​
Russia/Ukraine	​	​	0.5	​	​	​	-	​	​	1.1	​	​	​	5.9	​
Other	​	​	13.2	​	​	​	14.0	​	​	23.3	​	​		23.8	​
Special (gains) and charges subtotal	​	​	36.7	​	​	​	17.8	​	​	82.2	​	​		45.5	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income subtotal	​	​	42.6	​	​	​	24.9	​	​	99.4	​	​	​	107.2	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other (income) expense	​	​	-	​	​	​	24.8	​	​	-	​	​	​	24.8	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total special (gains) and charges	​	​	$42.6	​	​	​	$49.7	​	​	$99.4	​	​	​	$132.0	​

​

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

​

Restructuring activities

​

Restructuring activities are primarily related to the Combined Program which are described below. These activities have been included as a component of 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.

​

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

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Combined Program

​

In November 2022, we approved a Europe cost savings program. In connection with these actions, we expected to incur pre-tax charges of $130 million ($110 million after tax) or $0.38 per diluted share. In February 2023, we expanded our previously announced Europe cost savings program to focus on its Institutional and Healthcare businesses in other regions. In connection with the expanded program (“Combined Program”), we expect to incur total pre-tax charges of $195 million ($150 million after tax) or $0.52 per diluted share. We expect that these restructuring charges will be completed by the end of 2024. Program actions include headcount reductions from terminations, not filling certain open positions, and facility closures. The Combined Program charges are expected to be primarily cash expenditures related to severance and asset disposals.

​

​

In anticipation of this Combined Program, a limited number of actions were taken in the fourth quarter of 2022. As a result, we reclassified $19.3 million ($14.5 million after tax) or $0.05 per diluted share from other restructuring to the Combined Program in the first quarter of 2023.

​

During the third quarter and first nine months of 2023 we recorded total Combined Program restructuring charges of $24.2 million ($20.5 million after tax) or $0.07 per diluted share and $57.3 million ($46.9 million after tax) or $0.16 per diluted share, respectively, primarily related to severance. The net liability related to the Combined Program was $58.4 million and $62.0 million as of September 30, 2023 and December 31, 2022, 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.

​

The Combined Program has delivered $104 million of cumulative cost savings with estimated annualized cost savings of $175 million in continuing operations by 2024.

​

Institutional Advancement Program

​

We approved a restructuring plan in 2020 focused on the Institutional business (“the Institutional Plan”) which is intended to enhance our Institutional sales and service structure and allow the sales team to capture share and penetration while maximizing service effectiveness by leveraging our ongoing investments in digital technology. In February 2021, we expanded the Institutional Plan, and we expect that these restructuring charges will be completed by the end of 2023, with total anticipated costs of $70 million ($55 million after tax) or $0.19 per diluted share. The remaining costs are expected to be primarily non-cash charges related to equipment disposals. Actual costs may vary from these estimates depending on actions taken.

​

In the third quarter and first nine months of 2023, we recorded restructuring charges of $1.7 million ($1.2 million after tax) or $0.01 per diluted share and $6.2 million ($4.6 million after tax) or $0.02 per diluted share, respectively, primarily related to disposals of equipment. We have recorded $60.3 million ($40.6 million after tax), or $0.14 per diluted share of cumulative restructuring charges under the Institutional Plan. Net cash payments were $0 million and $3.1 million and non-cash net charges were $1.7 million and $5.0 million for the third quarter and first nine months of 2023, respectively. The liability related to the Institutional Plan was $0 million and $1.9 million as of September 30, 2023 and December 31, 2022, respectively.

​

The Institutional Plan has delivered $54 million of annual cost savings.

​

Accelerate 2020

​

During 2018, we formally commenced a restructuring plan Accelerate 2020 (“the A2020 Plan”), to leverage technology and system investments and organizational changes. The goals of the Plan were to further 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. The restructuring activities were completed at the end of 2022, with total costs of $254 million ($198 million after tax), or $0.69 per diluted share.

​

Net cash payments were $1.9 million and $11.4 million for the third quarter and first nine months of 2023, respectively. The liability related to the Plan was $6.7 million and $18.1 million as of September 30, 2023 and December 31, 2022, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters which continue to be funded from operating activities.

​

The A2020 Plan has delivered $315 million of cumulative cost savings.

​

Other Restructuring Activities

​

During the third quarter and first nine months of 2022, we incurred restructuring charges of $0.6 million ($0.5 million after tax), or less than $0.01 per diluted share and $2.6 million ($2.0 million after tax), or less than $0.01 per diluted share, respectively, related to other immaterial restructuring activity.

​

The restructuring liability balance for all other restructuring plans excluding the Combined Program, the A2020 Plan and the Institutional Plan was $3.7 million and $23.2 million as of September 30, 2023 and December 31, 2022, respectively. The decrease in liability was driven primarily by the reclass of $19.3 million from other restructuring to the Combined Program in the first nine months of 2023. Cash payments during the third quarter and first nine months of 2023 related to all other restructuring plans excluding the Combined Program, the A2020 Plan and the Institutional Plan were $0 million and $0.2 million, respectively.

​

​

​

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 third quarter and first nine months of 2022 include $4.2 million ($3.9 million after tax) or $0.01 per diluted share and $32.7 million ($25.8 million after tax) or $0.09 per diluted share, respectively, related primarily to the recognition of fair value step-up in the Purolite Corporation (“Purolite”) inventory.

​

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income include $3.0 million ($2.2 million after tax) or $0.01 per diluted share and $11.5 million ($8.6 million after tax) or $0.03 per diluted share in the third quarter and first nine months of 2023, respectively. Charges are integration related costs primarily related to the Purolite acquisition.

​

Russia/Ukraine activities

​

In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, we have made the determination that we will limit our Russian business to operations that are essential to life, providing minimal support for our healthcare, life sciences, food and beverage and certain water businesses. We incurred charges of $0.5 million ($0.4 million after tax) or less than $0.01 per diluted share and charges of $0.8 million ($0.7 million after tax) or less than $0.01 per diluted share in the third quarter of 2023 and 2022, respectively, and charges of $1.1 million ($0.9 million after tax) or less than $0.01 per diluted share and charges of $13.1 million ($14.0 million after tax) or $0.05 per diluted share in the first nine months of 2023 and 2022, respectively, primarily related to recoverability risk of certain assets in both Russia and Ukraine.

​

Other operating activities

​

Other special charges recorded in product and equipment cost of sales and special (gains) and charges on the Consolidated Statements of Income in the third quarter of 2023 and 2022 were $13.2 million ($9.9 million after tax) or $0.03 per diluted share and $14.0 million ($10.8 million after tax) or $0.04 per diluted share, respectively, and in the first nine months of 2023 and 2022 were $23.3 million ($17.6 million after tax) or $0.06 per diluted share and $40.1 million ($30.5 million after tax) or $0.11 per diluted share, respectively, primarily related to certain legal charges and 2022 COVID-19 related inventory charges.

​

Other (income) expense

​

We incurred settlement expense recorded in other (income) expense on the Consolidated Statements of Income of $24.8 million ($18.8 million after tax) or $0.07 per diluted share during the third quarter and first nine months of 2022. Expenses are related to U.S. pension plan lump-sum payments to retirees.

​

Operating Income and Operating Income Margin

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended
​	​	September 30									​	September 30
(millions)	​	2023				2022		​	​		​	2023				2022		​	​
Reported GAAP operating income	​	​	$566.0	​	​	​	$483.0	​	17	%	​	​	$1,402.3	​	​	​	$1,163.3	​	21	%
Special (gains) and charges	​		42.6	​	​		24.9	​	​	​	​		99.4	​	​		107.2	​	​	​
Non-GAAP adjusted operating income	​		608.6	​	​		507.9	​	20	%	​		1,501.7	​	​		1,270.5	​	18	%
Effect of foreign currency translation	​		(4.6)	​	​		(2.1)	​	​	​	​		(10.5)	​	​		(27.9)	​	​	​
Non-GAAP adjusted fixed currency operating income	​	​	604.0	​	​	​	505.8	​	19	%	​	​	1,491.2	​	​	​	1,242.6	​	20	%
Effect of acquisitions and divestitures	​	​	0.1	​	​	​	(0.4)	​	​	​	​	​	(1.9)	​	​	​	(0.4)	​	​	​
Non-GAAP organic operating income	​	​	$604.1	​	​	​	$505.4	​	20	%	​	​	$1,489.3	​	​	​	$1,242.2	​	20	%
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	​	​	Nine Months Ended							​	​
​	​	September 30							​	​	​	September 30							​	​
(percent)	​	2023			​	2022			​	​	​	2023			​	2022			​	​
Reported GAAP operating income margin	​	​	14.3	%	​	​	13.2	%	​	​	​	​	12.3	%	​	​	11.1	%	​	​
Non-GAAP adjusted operating income margin	​	​	15.4	%	​	​	13.8	%	​	​	​	​	13.2	%	​	​	12.1	%	​	​
Non-GAAP adjusted fixed currency operating income margin	​	​	15.4	%	​	​	13.8	%	​	​	​	​	13.2	%	​	​	12.0	%	​	​
Non-GAAP organic operating income margin	​	​	15.5	%	​	​	13.9	%	​	​	​	​	13.2	%	​	​	12.1	%	​	​

​

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

​

Our reported operating income increased 17% and 21% in the third quarter and first nine months of 2023, respectively, versus the comparable periods of 2022. Our reported operating income for 2023 and 2022 was impacted by special (gains) and charges; excluding the impact of special (gains) and charges from 2023 and 2022 reported results, our adjusted operating income increased 20% and 18% in the third quarter and first nine months of 2023.

​

​

As shown in the previous table, foreign currency had a 1 and (2) percentage point impact on adjusted operating income growth for the third quarter and first nine months of 2023, respectively. Foreign currency had a 5 and 4 percentage points impact on adjusted operating income growth for the third quarter and first nine months of 2022.

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Other (Income) Expense

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended									​
​	​	September 30									​	September 30									​
(millions)	​	2023				2022			Change		​	2023				2022			Change		​
Reported GAAP other (income) expense	​	​	($14.5)	​	​	​	$5.7	​	(354)	%	​	​	($42.0)	​	​	​	($32.6)	​	29	%	​
Special (gains) and charges	​	​	-	​	​		24.8	​	​	​	​	​	-	​	​		24.8	​	​	​	​
Non-GAAP adjusted other (income) expense	​	​	($14.5)	​	​	​	($19.1)	​	(24)	%	​	​	($42.0)	​	​	​	($57.4)	​	(27)	%	​

​

Reported other (income) expense increased to ($14.5) million from $5.7 million in the third quarter of 2023 compared to the third quarter of 2022, respectively. Reported other income increased to $42.0 million from $32.6 million in the first nine months of 2023 compared to the first nine months of 2022, respectively. We recognized pension settlement expense of $24.8 million in special (gains) and charges in third quarter and first nine months of 2022. Other income in the third quarter of 2023 increased as modestly higher pension costs were more than offset by the 2022 $24.8 million settlement expense related to U.S. pension plan lump-sum payments to retirees.

​

​

Interest Expense, Net

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended									​	Nine Months Ended						​	​
​	​	September 30									​	September 30						​	​
(millions)	​	2023				2022			Change		​	2023				2022			Change
Reported GAAP interest expense, net	​	​	$74.3	​	​	​	$65.1	​	14	%	​	​	$226.3	​	​	​	$174.1	​	30	%

​

Reported net interest expense was $74.3 million and $65.1 million in the third quarter of 2023 and 2022, respectively, and $226.3 million and $174.1 million in the first nine months of 2023 and 2022, respectively. The increase in interest expense reflected the impact from higher average interest rates on outstanding debt.

​

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)		2023		​	2022			2023		​	2022
Reported GAAP tax rate	​	19.1	%	​	14.6	%	​	19.4	%	​	17.9	%
Tax rate impact of:	​	​	​	​	​	​	​	​	​	​	​	​
Special (gains) and charges		0.1	​	​	0.6	​	​	0.1	​	​	0.2
Discrete tax items		(0.7)	​	​	3.1	​	​	(0.2)	​	​	0.8
Non-GAAP adjusted tax rate		18.5	%	​	18.3	%		19.3	%	​	18.9	%

​

Our reported tax rate was 19.1% and 14.6% for the third quarter of 2023 and 2022, respectively and 19.4% and 17.9% for the first nine months of 2023 and 2022, respectively. The change in our tax rate for the third quarter and first nine months of 2023 versus the comparable periods of 2022 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 expense related to discrete tax items of $3.5 million and $2.3 million in the third quarter and first nine months of 2023, respectively. This included share-based compensation excess tax benefits of $0.8 million and $2.7 million in the third quarter and first nine months of 2023, respectively. Additionally, we recognized net tax expense related to discrete tax items of $4.3 million and $5.0 million in the third quarter and first nine months of 2023, respectively, primarily due to prior year adjustments, changes in estimates, audit settlements, uncertain tax positions, and repricing of deferred tax balances.

​

We recognized a net tax benefit related to discrete tax items of $14.2 million and $9.5 million in the third quarter and first nine months of 2022, respectively. This included a deferred tax benefit of $14.6 million associated with utilization of tax attributes as a result of legal entity rationalization and share-based compensation excess tax benefits of $0.7 million and $4.3 million in the third quarter and first nine months of 2022, respectively. Additionally, we recognized discrete tax expense of $1.1 million and $9.4 million in the third quarter and first nine months of 2022, respectively, primarily due to audit settlements, uncertain tax positions, prior year return adjustments, repricing of deferred tax balances, and other changes in estimates.

​

Net Income Attributable to Ecolab

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended											​	Nine Months Ended
​	​	September 30											​	September 30
(millions)		2023				2022			Change					2023				2022			Change
Reported GAAP net income attributable to Ecolab	​	​	$404.0	​	​	​	$347.1	​	​	16	%	​	​	​	$967.1	​	​	​	$827.3	​	​	17	%	​
Adjustments:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Special (gains) and charges, after tax	​		34.2	​	​	​	39.6	​	​	​	​	​	​	​	78.6	​	​	​	105.8	​	​	​	​	​
Discrete tax net expense	​		3.5	​	​	​	(14.2)	​	​	​	​	​	​	​	2.3	​	​	​	(9.5)	​	​	​	​	​
Non-GAAP adjusted net income attributable to Ecolab	​	​	$441.7	​	​	​	$372.5	​	​	19	%	​	​	​	$1,048.0	​	​	​	$923.6	​	​	13	%	​

​

Diluted EPS

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended											​	Nine Months Ended
​	​	September 30											​	September 30
(dollars)		2023				2022			Change					2023				2022			Change
Reported GAAP diluted EPS	​	​	$1.41	​	​	​	$ 1.21	​	​	17	%	​	​	​	$3.38	​	​	​	$ 2.88	​	​	17	%	​
Adjustments:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Special (gains) and charges, after tax	​		0.12	​	​	​	0.14	​	​	​	​	​	​	​	0.27	​	​	​	0.37	​	​	​	​	​
Discrete tax net expense	​		0.01	​	​	​	(0.05)	​	​	​	​	​	​	​	0.01	​	​	​	(0.03)	​	​	​	​	​
Non-GAAP adjusted diluted EPS	​	​	$1.54	​	​	​	$ 1.30	​	​	18	%	​	​	​	$3.66	​	​	​	$ 3.22	​	​	14	%	​

​

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

​

Currency translation had an unfavorable impact of approximately ($0.00) and ($0.08) per share on diluted EPS for the third quarter and first nine months of 2023, when compared to the comparable periods of 2022.

​

​

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 2023. 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, 2022. Additional information about our reportable segments is included in Note 15.

​

Fixed currency net sales and operating income for the third quarter and first nine months of 2023 and 2022 for our reportable segments are shown in the following tables:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net Sales	​	Third Quarter Ended										​	Nine Months Ended
​	​	September 30										​	September 30
(millions)		2023				2022		​	​	Change			2023				2022		​	​	Change
Global Industrial	​	​	$1,826.9	​		​	$1,763.4		​	4	%	​	​	$5,321.8	​		​	$4,928.1		​	8	%
Global Institutional & Specialty		​	1,308.7	​	​		1,165.7	​	​	12	​		​	3,703.9	​	​		3,275.2	​	​	13	​
Global Healthcare & Life Sciences	​	​	400.7	​	​	​	360.1	​	​	11	​	​	​	1,166.8	​	​	​	1,092.7	​	​	7	​
Other	​	​	380.3	​	​	​	350.8	​	​	8	​	​	​	1,072.2	​	​	​	970.1	​	​	11	​
Corporate		​	15.0	​	​		27.7	​	​	(46)	​		​	55.3	​	​		96.1	​	​	(42)	​
Subtotal at fixed currency		​	3,931.6	​	​		3,667.7	​	​	7	​		​	11,320.0	​	​		10,362.2	​	​	9	​
Effect of foreign currency translation		​	26.5	​	​		1.6	​	​	​	​		​	61.8	​	​		154.4	​	​	​	​
Consolidated reported GAAP net sales		​	$3,958.1	​	​	​	$3,669.3	​	​	8	%		​	$11,381.8	​	​	​	$10,516.6	​	​	8	%
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	Third Quarter Ended										​	Nine Months Ended
​	​	September 30										​	September 30
(millions)	​	2023				2022		​	​	Change		​	2023				2022		​	​	Change
Global Industrial			$287.5	​		​	$266.6		​	8	%	​		$758.5	​		​	$663.3		​	14	%
Global Institutional & Specialty		​	249.9	​	​		195.2		​	28	​	​	​	584.3	​	​		452.4		​	29	​
Global Healthcare & Life Sciences	​	​	44.0	​	​	​	32.0	​	​	38	​	​	​	111.7	​	​	​	129.1	​	​	(13)	​
Other		​	72.9	​	​		63.3		​	15	​	​	​	186.4	​	​		152.0		​	23	​
Corporate		​	(92.2)	​	​		(76.6)	​	​	(20)	​	​	​	(248.4)	​	​		(263.0)	​	​	6	​
Subtotal at fixed currency		​	562.1	​	​		480.5		​	17	​	​	​	1,392.5	​	​		1,133.8		​	23	​
Effect of foreign currency translation		​	3.9	​	​		2.5	​	​	​	​	​	​	9.8	​	​		29.5	​	​	​	​
Consolidated reported GAAP operating income			$566.0	​	​	​	$483.0		​	17	%	​		$1,402.3	​	​	​	$1,163.3		​	21	%

​

​

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended												​
​	​	September 30												​
Net Sales	​	2023					​	​	2022					​
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​
Global Industrial	​	$1,826.9	​	$-	​	$1,826.9	​	​	$1,763.4	​	$-	​	$1,763.4	​
Global Institutional & Specialty		1,308.7	​	(17.3)	​	1,291.4	​	​	1,165.7	​	-	​	1,165.7	​
Global Healthcare & Life Sciences	​	400.7	​	-	​	400.7	​	​	360.1	​	-	​	360.1	​
Other		380.3	​	-	​	380.3	​	​	350.8	​	-	​	350.8	​
Corporate		15.0	​	(15.0)	​	-	​	​	27.7	​	(27.7)	​	-	​
Subtotal at fixed currency		3,931.6	​	(32.3)	​	3,899.3	​	​	3,667.7	​	(27.7)	​	3,640.0	​
Effect of foreign currency translation		26.5	​	​	​	​	​	​	1.6	​	​	​	​	​
Consolidated reported GAAP net sales		$3,958.1	​	​	​	​	​	​	$3,669.3	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	2023					​	​	2022					​
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​
Global Industrial	​	$287.5	​	$-	​	$287.5	​	​	$266.6	​	$-	​	$266.6	​
Global Institutional & Specialty		249.9	​	(0.1)	​	249.8	​	​	195.2	​	-	​	195.2	​
Global Healthcare & Life Sciences	​	44.0	​	-	​	44.0	​	​	32.0	​	-	​	32.0	​
Other		72.9	​	-	​	72.9	​	​	63.3	​	-	​	63.3	​
Corporate		(50.3)	​	0.2	​	(50.1)	​	​	(51.3)	​	(0.4)	​	(51.7)	​
Non-GAAP adjusted fixed currency operating income		604.0	​	0.1	​	604.1	​	​	505.8	​	(0.4)	​	505.4	​
Special (gains) and charges		41.9	​	​	​	​	​	​	25.3	​	​	​	​	​
Subtotal at fixed currency		562.1	​	​	​	​	​	​	480.5	​	​	​	​	​
Effect of foreign currency translation		3.9	​	​	​	​	​	​	2.5	​	​	​	​	​
Consolidated reported GAAP operating income		$566.0	​	​	​	​	​	​	$483.0	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended												​
​	​	September 30												​
Net Sales	​	2023					​	​	2022					​
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​
Global Industrial	​	$5,321.8	​	$-	​	$5,321.8	​	​	$4,928.1	​	$-	​	$4,928.1	​
Global Institutional & Specialty		3,703.9	​	(23.7)	​	3,680.2	​	​	3,275.2	​	-	​	3,275.2	​
Global Healthcare & Life Sciences	​	1,166.8	​	-	​	1,166.8	​	​	1,092.7	​	-	​	1,092.7	​
Other		1,072.2	​	-	​	1,072.2	​	​	970.1	​	-	​	970.1	​
Corporate	​	55.3	​	(55.3)	​	-	​	​	96.1	​	(96.1)	​	-	​
Subtotal at fixed currency		11,320.0	​	(79.0)	​	11,241.0	​	​	10,362.2	​	(96.1)	​	10,266.1	​
Effect of foreign currency translation		61.8	​	​	​	​	​	​	154.4	​	​	​	​	​
Consolidated reported GAAP net sales		$11,381.8	​	​	​	​	​	​	$10,516.6	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating Income	​	2023					​	​	2022					​
(millions)		Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​	​	Fixed Currency	​	Impact of Acquisitions and Divestitures	​	Organic	​
Global Industrial	​	$758.5	​	$-	​	$758.5	​	​	$663.3	​	$-	​	$663.3	​
Global Institutional & Specialty		584.3	​	(0.8)	​	583.5	​	​	452.4	​	-	​	452.4	​
Global Healthcare & Life Sciences		111.7	​	-	​	111.7	​	​	129.1	​	-	​	129.1	​
Other	​	186.4	​	-	​	186.4	​	​	152.0	​	-	​	152.0	​
Corporate		(149.7)	​	(1.1)	​	(150.8)	​	​	(154.2)	​	(0.4)	​	(154.6)	​
Non-GAAP adjusted fixed currency operating income		1,491.2	​	(1.9)	​	1,489.3	​	​	1,242.6	​	(0.4)	​	1,242.2	​
Special (gains) and charges		98.7	​	​	​	​	​	​	108.8	​	​	​	​	​
Subtotal at fixed currency		1,392.5	​	​	​	​	​	​	1,133.8	​	​	​	​	​
Effect of foreign currency translation		9.8	​	​	​	​	​	​	29.5	​	​	​	​	​
Consolidated reported GAAP operating income		$1,402.3	​	​	​	​	​	​	$1,163.3	​	​	​	​	​

​

​

​

Unless otherwise noted, the following segment performance commentary compares the third quarter and first nine months of 2023 against the third quarter and first nine months of 2022.

​

​

Global Industrial

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2023			​	2022				2023			​	2022
Sales at fixed currency (millions)	​	​	$1,826.9	​	​	​	$1,763.4	​	​	​	$5,321.8	​	​	​	$4,928.1	​
Sales at public currency (millions)	​	​	1,841.8	​	​	​	1,769.6	​	​	​	5,359.7	​	​	​	5,025.2	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		(3)	%	​		​	​	​		(2)	%	​		​	​
Price changes	​		6	%	​		​	​	​		11	%	​		​	​
Organic sales change	​	​	4	%	​	​	​	​	​	​	8	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		-	%	​		​	​
Fixed currency sales change	​		4	%	​		​	​	​		8	%	​		​	​
Foreign currency translation	​	​	-	%	​	​	​	​	​	​	(1)	%	​	​	​	​
Public currency sales change	​		4	%	​		​	​	​		7	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$287.5	​	​	​	$266.6	​	​	​	$758.5	​	​	​	$663.3	​
Operating income at public currency (millions)	​	​	289.8	​	​	​	269.0	​	​	​	765.1	​	​	​	684.2	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	8	%	​	​	​	​	​	​	14	%	​	​	​	​
Fixed currency operating income margin	​		15.7	%	​		15.1	%	​		14.3	%	​		13.5	%
Organic operating income change	​		8	%	​		​	​	​		14	%	​		​	​
Organic operating income margin	​		15.7	%	​		15.1	%	​		14.3	%	​		13.5	%
Public currency operating income change	​	​	8	%	​	​	​	​	​	​	12	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

Organic sales for Global Industrial increased in the third quarter and first nine months of 2023, led by growth in Food & Beverage and Water which more than offset the expected decline in third quarter Paper sales.

​

Water organic sales increased 5% and 9% in the third quarter and first nine months of 2023, respectively, driven by pricing and new business wins. Light industry reported good sales growth led by continued strong performance across data centers and microelectronics. Heavy industry recorded strong sales growth led by primary metals while power and chemicals​ sales showed solid growth. Downstream industry reported strong sales growth driven by water treatment. Food ​**& Beverage** organic sales increased 7% and 11% in the third quarter and first nine months of 2023, respectively, reflecting strong sales growth driven by pricing and new business. Paper organic sales decreased 7% and remained flat in the third quarter and first nine months of 2023, respectively, reflecting pricing and new business wins that were more than offset by easing customer production rates.

​

Operating Income

​

Organic operating income and organic operating income margins increased for Global Industrial in both the third quarter and first nine months of 2023, respectively.

​

Organic operating income margins increased 0.6 percentage points during the third quarter of 2023, as the 4.9 percentage point positive impact of pricing overcame the 4.0 percentage point negative impacts of investments in the business including incentive compensation, and lower volume. Organic operating income margins increased 0.8 percentage points during the first nine months of 2023, as the 8.2 percentage point positive impact of pricing overcame the 6.8 percentage point negative impacts of investments in the business including incentive compensation, lower volume, and higher delivered product costs.

​

​

​

​

Global Institutional & Specialty

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2023			​	2022				2023			​	2022
Sales at fixed currency (millions)	​	​	$1,308.7	​	​	​	$1,165.7	​	​	​	$3,703.9	​	​	​	$3,275.2	​
Sales at public currency (millions)	​	​	1,313.0	​	​	​	1,166.0	​	​	​	3,714.0	​	​	​	3,304.7	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		3	%	​		​	​	​		2	%	​		​	​
Price changes	​		8	%	​		​	​	​		11	%	​		​	​
Organic sales change	​	​	11	%	​	​	​	​	​	​	12	%	​	​	​	​
Acquisitions and divestitures	​		1	%	​		​	​	​		1	%	​		​	​
Fixed currency sales change	​		12	%	​		​	​	​		13	%	​		​	​
Foreign currency translation	​	​	-	%	​	​	​	​	​	​	(1)	%	​	​	​	​
Public currency sales change	​		13	%	​		​	​	​		12	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$249.9	​	​	​	$195.2	​	​	​	$584.3	​	​	​	$452.4	​
Operating income at public currency (millions)	​	​	250.8	​	​	​	196.1	​	​	​	585.9	​	​	​	457.6	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	28	%	​	​	​	​	​	​	29	%	​	​	​	​
Fixed currency operating income margin	​		19.1	%	​		16.7	%	​		15.8	%	​		13.8	%
Organic operating income change	​		28	%	​		​	​	​		29	%	​		​	​
Organic operating income margin	​		19.3	%	​		16.7	%	​		15.9	%	​		13.8	%
Public currency operating income change	​	​	28	%	​	​	​	​	​	​	28	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

Organic sales for Global Institutional & Specialty increased in the third quarter and first nine months of 2023, with double-digit growth in both the Institutional and Specialty divisions.

​

At an operating segment level, Institutional organic sales increased 10% and 12% in the third quarter and first nine months of 2023, respectively, reflecting strong sales growth driven by pricing and new business wins. Specialty organic sales increased 12% and 13% in the third quarter and first nine months of 2023, respectively, reflecting sales growth driven by pricing and new business wins.

​

Operating Income

​

Organic operating income and organic operating income margin increased in both the third quarter and first nine months of 2023 for our Global Institutional & Specialty segment.

​

Organic operating income margins increased 2.6 percentage points during the third quarter of 2023, as the 5.7 percentage point positive impact from pricing overcame 3.5 percentage point negative impacts from investments in the business including incentive compensation. Organic operating income margins increased 2.1 percentage points during the first nine months of 2023, as the 7.2 percentage point positive impact from pricing overcame 5.3 percentage point negative impacts from investments in the business including incentive compensation and higher supply chain costs.

​

​

​

Global Healthcare & Life Sciences

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2023			​	2022			​	2023			​	2022
Sales at fixed currency (millions)	​	​	$400.7	​	​	​	$360.1	​	​	​	$1,166.8	​	​	​	$1,092.7	​
Sales at public currency (millions)	​	​	406.2	​	​	​	356.6	​	​	​	1,176.7	​	​	​	1,110.3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		7	%	​		​	​	​		-	%	​		​	​
Price changes	​		4	%	​		​	​	​		8	%	​		​	​
Organic sales change	​	​	11	%	​	​	​	​	​	​	7	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		-	%	​		​	​
Fixed currency sales change	​		11	%	​		​	​	​		7	%	​		​	​
Foreign currency translation	​	​	3	%	​	​	​	​	​	​	(1)	%	​	​	​	​
Public currency sales change	​		14	%	​		​	​	​		6	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$44.0	​	​	​	$32.0	​	​	​	$111.7	​	​	​	$129.1	​
Operating income at public currency (millions)	​	​	45.2	​	​	​	31.3	​	​	​	113.7	​	​	​	132.2	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	38	%	​	​	​	​	​	​	(13)	%	​	​	​	​
Fixed currency operating income margin	​		11.0	%	​		8.9	%	​		9.6	%	​		11.8	%
Organic operating income change	​		38	%	​		​	​	​		(13)	%	​		​	​
Organic operating income margin	​		11.0	%	​		8.9	%	​		9.6	%	​		11.8	%
Public currency operating income change	​	​	44	%	​	​	​	​	​	​	(14)	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

Organic sales for Global Healthcare & Life Sciences increased in both the third quarter and first nine months of 2023 reflecting improved growth in Healthcare and Life Sciences.

​

At an operating segment level, Healthcare organic sales increased 15% and 8% in the third quarter and first nine months of 2023, respectively, reflecting pricing and new business wins across both North America and Europe. Life Sciences organic sales increased 7% and 5% in third quarter and first nine months of 2023 as growth improved led by new business wins and pricing, which more than offset soft near-term industry demand.​

​

Operating Income

​

Organic operating income and organic operating income margins both increased in the third quarter of 2023 and both decreased for the first nine months of 2023 for our Global Healthcare & Life Sciences segment.

​

Organic operating income margins increased 2.1 percentage points during the third quarter of 2023, as the 5.3 percentage point positive impact from pricing, higher volume, and cost savings overcame the 3.5 percentage point negative impacts from targeted investments in the business including incentive compensation. Organic operating income margins decreased 2.2 percentage points during the first nine months of 2023, as the 5.2 percentage point positive impact from pricing was more than offset by the 7.0 percentage point negative impacts from lower volume and targeted investments in the business.

​

​

​

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Other

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​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Third Quarter Ended							​	Nine Months Ended
​	​	September 30							​	September 30
​		2023			​	2022				2023			​	2022
Sales at fixed currency (millions)	​	​	$380.3	​	​	​	$350.8	​	​	​	$1,072.2	​	​	​	$970.1	​
Sales at public currency (millions)	​	​	382.1	​	​	​	349.4	​	​	​	1,076.0	​	​	​	980.0	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Volume	​		2	%	​		​	​	​		2	%	​		​	​
Price changes	​		6	%	​		​	​	​		8	%	​		​	​
Organic sales change	​	​	8	%	​	​	​	​	​	​	11	%	​	​	​	​
Acquisitions and divestitures	​		-	%	​		​	​	​		-	%	​		​	​
Fixed currency sales change	​		8	%	​		​	​	​		11	%	​		​	​
Foreign currency translation	​	​	1	%	​	​	​	​	​	​	(1)	%	​	​	​	​
Public currency sales change	​		9	%	​		​	​	​		10	%	​		​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income at fixed currency (millions)	​	​	$72.9	​	​	​	$63.3	​	​	​	$186.4	​	​	​	$152.0	​
Operating income at public currency (millions)	​	​	72.9	​	​	​	63.1	​	​	​	186.6	​	​	​	153.2	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fixed currency operating income change	​	​	15	%	​	​	​	​	​	​	23	%	​	​	​	​
Fixed currency operating income margin	​		19.2	%	​		18.0	%	​		17.4	%	​		15.7	%
Organic operating income change	​		15	%	​		​	​	​		23	%	​		​	​
Organic operating income margin	​		19.2	%	​		18.0	%	​		17.4	%	​		15.7	%
Public currency operating income change	​	​	16	%	​	​	​	​	​	​	22	%	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

​

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

​

Net Sales

​

Organic sales for Other increased in both the third quarter and first nine months of 2023 led by double-digit growth in Pest Elimination.

​

At an operating segment level, Pest Elimination organic sales increased 10% and 11% in the third quarter and first nine months of 2023, respectively, reflecting strong sales growth led by double-digit gains in restaurants, food & beverage, food retail, and healthcare​. Textile Care organic sales increased 6% and 10% in the third quarter and first nine months of 2023, respectively. Colloidal Technologies Group organic sales increased 2% and 7% in the third quarter and first nine months of 2023, respectively.

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Operating Income

​

Organic operating income and organic operating income margins increased for Other in both the third quarter and first nine months of 2023.

​

Organic operating income margins increased 1.2 percentage points during the third quarter of 2023, as the 4.7 percentage point positive impact from pricing overcame the 4.2 percentage point negative impacts of investments in the business including incentive compensation. Organic operating income margins increased 1.7 percentage points during the first nine months of 2023, as the 6.3 percentage point positive impact from pricing overcame the 4.8 percentage point negative impacts of investments in the business including incentive compensation and unfavorable mix.

​

​

Corporate

​

Consistent with our internal management reporting, Corporate amounts in the table on page 36 include sales to ChampionX in accordance with the long-term supply agreement entered into with the Transaction post-separation, as discussed in Note 14, intangible asset amortization specifically from the Nalco and Purolite transactions 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 32.

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FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY

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Financial Position

​

Total assets were $21.9 billion as of September 30, 2023, compared to total assets of $21.5 billion as of December 31, 2022.

​

Total liabilities were $14.0 billion as of September 30, 2023, compared to total liabilities of $14.2 billion as of December 31, 2022. Total debt was $8.6 billion as of September 30, 2023 and $8.6 billion as of December 31, 2022. 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 measure 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, 2023				December 31, 2022
(ratio)	​	​	​	​	​	​	​	​
Net debt to EBITDA		​	2.8	​		​	3.2	​
​	​	​	​	​	​	​	​	​
(millions)		​	​	​	​	​	​	​
Total debt	​	​	$8,616.2	​	​	​	$8,580.4	​
Cash	​		1,001.3	​	​	​	598.6	​
Net debt	​	​	$7,614.9	​	​	​	$7,981.8	​
​	​	​	​	​	​	​	​	​
Net income including noncontrolling interest	​	​	$1,251.7	​	​	​	$1,108.9	​
Provision for income taxes	​		287.9	​	​	​	234.5	​
Interest expense, net	​		295.8	​	​	​	243.6	​
Depreciation	​		618.4	​	​	​	618.5	​
Amortization	​		311.2	​	​	​	320.2	​
EBITDA	​		$2,765.0	​	​	​	$2,525.7	​

​

Cash Flows

​

Operating Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2023			​	2022				Change
Cash provided by operating activities	​	​	$1,559.3	​	​	​	$929.2	​	​	​	$630.1	​

​

We continue to generate cash flow from operations, 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 $630 million in the first nine months of 2023 compared to the first nine months of 2022, driven primarily by a $408 million net favorable change in working capital and $143 million increase in net income. The cash flow impact from working capital was primarily driven by improvement in inventory and receivables offset by a decrease in accounts payable.

​

Investing Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2023			​	2022				Change
Cash used for investing activities	​	​	($642.1)	​	​	​	($506.4)	​	​	​	($135.7)	​

​

Cash used for investing activities is primarily impacted by capital investments in the business.

​

We continue to make capital investments in the business, including merchandising equipment, manufacturing equipment and facilities. Total capital expenditures were $512 million and $510 million in the first nine months of 2023 and 2022, respectively.

​

Total cash paid for acquisitions, net of cash acquired along with net cash received from dispositions, during the first nine months of 2023 and 2022, was $107 million and $7 million, respectively. Our acquisitions 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.

​

​

Financing Activities

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine Months Ended
​	​	September 30
(millions)		2023			​	2022				Change
Cash used for financing activities	​	​	($469.2)	​	​	​	($675.6)	​	​	​	$206.4	​

​

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 had net issuances of commercial paper and notes payable of $88 million in the first nine months of 2022.

Shares are repurchased for the purpose of partially offsetting the dilutive effect of our equity compensation plans, to manage our capital structure and to efficiently return capital to shareholders. We reacquired a total of $12 million and $445 million of shares in the first nine months of 2023 and 2022, respectively. Cash proceeds and tax benefits from stock option exercises provide a portion of the funding for repurchase activity.

There was no long-term debt issuance or repayment activity through the first nine months of 2023 or 2022.

We paid dividends of $463 million and $445 million in the first nine months of 2023 and 2022, respectively.

​

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, 2023, we had $1,001 million of cash and cash equivalents on hand, of which $585 million was held outside of the U.S. Our cash balance is intended to fund current maturities of long-term debt. We will continue to evaluate our cash position in light of future developments.

​

As of September 30, 2023, 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 2023, we had no outstanding commercial paper under our U.S. program nor our Euro program. At the end of the third quarter of 2022, we had $485 million outstanding commercial paper under our U.S. program and no outstanding commercial paper under our Euro program. There were no borrowings under our credit facility as of September 30, 2023 or 2022. As of September 30, 2023, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.

​

There was no long-term debt issuance or repayment activity through the first nine months of 2023.

​

We are in compliance with our debt covenants and other requirements of our credit agreements and indentures. We 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, 2022 disclosed total notes payable and long-term debt due within one year of $505 million. As of September 30, 2023, the total notes payable and long-term debt due within one year was $1.1 billion. We had no outstanding commercial paper under our U.S. program as of September 30, 2023 and as of December 31, 2022.

​

Our gross liability for uncertain tax positions was $21 million as of September 30, 2023 and $25 million as of December 31, 2022. 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

​

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. We expect a more challenging macroeconomic environment, especially in Europe, as the war and weak economic growth are having a significant impact on costs and demand. We also assume slightly lower delivered product cost inflation and for interest rates to remain high through 2023.

​

Argentina and Turkey are classified as highly inflationary economies in accordance with U.S. GAAP, and the U.S. dollar is the functional currency for our subsidiaries in Argentina and Turkey. During the first nine months of 2023, sales in Argentina represented less than 1% of our consolidated sales. Assets held in Argentina at the end of the first nine months of 2023 represented less than 1% of our

​

consolidated assets. During the first nine months of 2023, sales in Turkey represented less than 1% of our consolidated sales. Assets held in Turkey at the end of the first nine months of 2023 represented less than 1% of our consolidated assets.

​

In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, we have made the determination that we will limit our Russian business to operations that are essential to life, providing minimal support for our healthcare, life sciences, food and beverage and certain water businesses. We may further narrow our presence in Russia depending on future developments. During the first nine months of 2023, our Russian and Ukraine operations represented approximately 1% of our 2023 consolidated net sales.

​

​

NEW ACCOUNTING PRONOUNCEMENTS

​

For information on new accounting pronouncements, refer to Note 17 to the Consolidated Financial Statements.

​

​

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

	●	Organic sales, formerly known as 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

	●	Organic operating income, formerly known as acquisition adjusted fixed currency operating income

	●	Organic operating income margin, formerly known as acquisition adjusted fixed currency operating income margin

	●	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 adjusted cost of sales, adjusted gross margin and adjusted operating income exclude the impact of special (gains) and charges and our non-GAAP financial measures for adjusted tax rate, adjusted net income attributable to Ecolab and adjusted diluted earnings per share 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 2023. We also provide our segment results based on public currency rates for informational purposes.

​

Our reportable segments do not include the impact of intangible asset amortization from the Nalco and Purolite transactions or the impact of special (gains) and charges as these are not allocated to our reportable segments.

​

Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude the impact of special (gains) and charges, the results of our acquired businesses from the first twelve months post acquisition and the results of divested businesses from the twelve months prior to divestiture. As part of the separation of ChampionX in 2020, we 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 and for a small set of products with limited suppliers over the next few years. 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.

​

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 our business performance and prospects; expectations concerning timing, amount and type of restructuring costs and savings from restructuring activities; macroeconomic environment, delivered product cost inflation and interest rates; Russian operations; working capital; capital investments, acquisitions and share repurchases; 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 and tax laws; cash flows, borrowing capacity and funding of cash requirements, including current maturities of long-term debt; payments related to uncertain tax positions; and implementation of ERP system upgrade.

​

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

​

Some of the factors which could cause results to differ materially from those expressed in any forward-looking statements are set forth under Item 1A of our most recent Form 10-K and our other public filings with the Securities and Exchange Commission (the "SEC"), and include the impact of economic factors such as the worldwide economy, capital flows, interest rates, foreign currency risk, reduced sales and earnings in our international operations resulting from the weakening of local currencies versus the U.S. dollar, demand uncertainty, supply chain challenges and inflation; the vitality of the markets we serve; exposure to global economic, political and legal risks related to our international operations, including geopolitical instability, the impact of sanctions or other actions taken by the U.S. or other countries, and retaliatory measures taken by Russia in response, in connection with the conflict in Ukraine; difficulty in procuring raw materials or fluctuations in raw material costs; our ability to attract, retain and develop high caliber management talent to lead our business and successfully execute organizational change and changing labor market dynamics; information technology infrastructure failures or breaches in data security; the effects and duration of the COVID-19 pandemic or other public health outbreaks, epidemics or pandemics; our ability to acquire complementary businesses and to effectively integrate such businesses, including Purolite; our ability to execute key business initiatives, including restructurings and our Enterprise Resource Planning system upgrades; our ability to successfully compete with respect to value, innovation and customer support; pressure on operations from consolidation of customers or vendors; restraints on pricing flexibility due to contractual obligations and our ability to meet our contractual commitments; the costs and effects of complying with laws and regulations, including those relating to the environment, climate change standards, and to the manufacture, storage, distribution, sale and use of our products, as well as to the conduct of our business generally, including labor and employment and anti-corruption; potential chemical spill or release; our commitments, goals, targets, objectives and initiatives related to sustainability; potential to incur significant tax liabilities or indemnification liabilities relating to the separation and split-off of our ChampionX business; 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; 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; potential losses arising from the impairment of goodwill or other assets; 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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