Ecolab(US:ECL)2025-08-07 20:16Part I - Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the second quarter and six months ended June 30, 2025, including statements of income, comprehensive income, balance sheets, cash flows, and equity, along with detailed notes explaining the basis of presentation and significant accounting policies Consolidated Financial Statements The consolidated financial statements show a year-over-year increase in net sales, operating income, and net income for the second quarter and first six months of 2025, with total assets and liabilities increasing and cash flow from operations decreasing Financial Performance | Financial Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $4,025.2 M | $3,985.8 M | $7,720.2 M | $7,737.7 M | | Operating Income | $710.1 M | $656.9 M | $1,265.4 M | $1,174.8 M | | Net Income Attributable to Ecolab | $524.2 M | $490.9 M | $926.7 M | $903.0 M | | Diluted EPS | $1.84 | $1.71 | $3.25 | $3.14 | Balance Sheet Summary | Balance Sheet Item | June 30, 2025 (Millions USD) | Dec 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Total Assets | $23,736.0 M | $22,387.8 M | | Total Liabilities | $14,385.4 M | $13,598.6 M | | Total Equity | $9,350.6 M | $8,789.2 M | Cash Flow Summary | Cash Flow Activity (Six Months Ended June 30) | 2025 (Millions USD) | 2024 (Millions USD) | | :--- | :--- | :--- | | Cash provided by operating activities | $1,071.2 M | $1,260.5 M | | Cash used for investing activities | ($448.4 M) | ($445.4 M) | | Cash provided by (used for) financing activities | $55.7 M | ($1,335.7 M) | | Increase (decrease) in cash | $664.1 M | ($529.5 M) | Notes to Consolidated Financial Statements The notes detail significant accounting events and policies, including 'One Ecolab' restructuring charges, segment reporting changes, revenue disaggregation, debt, hedging, and litigation matters - The 'One Ecolab' initiative, announced in July 2024, is a restructuring plan to leverage digital technologies and realign work into global centers of excellence. The company anticipates total restructuring costs of $175 million and special charges of $50 million by the end of 202721 Special (Gains) and Charges | Special (Gains) and Charges (Six Months Ended June 30) | 2025 (Millions USD) | 2024 (Millions USD) | | :--- | :--- | :--- | | One Ecolab | $73.2 M | - | | Other restructuring | ($12.0 M) | $27.3 M | | Sale of global surgical solutions business | $2.4 M | $13.3 M | | Acquisition and integration activities | $8.8 M | $4.8 M | | Total Special (Gains) and Charges | $61.4 M | $42.7 M | - Effective January 1, 2025, the company renamed its Global Industrial segment to Global Water and elevated Global Life Sciences to a standalone reportable segment, moving the former healthcare operating segment into Institutional58114 - In June 2025, the company issued $500 million in three-year fixed-rate notes with a 4.30% coupon, subsequently repaying €575 million ($674 million) on its 2015 senior notes in July 20254750 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2025 financial performance, highlighting a 1% net sales increase (3% organic) and an 8% diluted EPS rise, driven by strong pricing and productivity gains despite strategic investments and divestitures Overview of the Second Quarter Ecolab reported a 1% net sales increase to $4.0 billion in Q2 2025, with 3% organic growth and an 8% rise in diluted EPS to $1.84, driven by strong segment performance and a 14% increase in organic operating income Q2 2025 Performance Overview | Metric (Q2 2025 vs Q2 2024) | Reported Change | Organic Change | | :--- | :--- | :--- | | Net Sales | +1% | +3% | | Operating Income | +8% | +14% | | Net Income Attributable to Ecolab | +7% | N/A | | Diluted EPS | +8% | N/A | | Adjusted Diluted EPS | N/A | +13% | Results of Operations Q2 2025 organic sales grew 3% (1% volume, 2% pricing), with reported gross margin improving to 44.8% from 43.8% due to strong value pricing, supporting operating income growth despite business investments Sales Change Components | Sales Change Components (Q2 2025) | Percentage | | :--- | :--- | | Volume | 1% | | Pricing | 2% | | Organic Sales Change | 3% | | Acquisitions and divestitures | (2)% | | Fixed Currency Sales Change | 1% | | Foreign currency translation | 0% | | Reported GAAP Net Sales Change | 1% | - Adjusted gross margin increased to 44.8% in Q2 2025 from 43.8% in Q2 2024, primarily due to strong value pricing154 - The reported tax rate for Q2 2025 was 19.9%, up from 16.2% in Q2 2024, mainly due to the impact of discrete tax items and special charges in the prior year175 Segment Performance Global Water achieved 2% organic sales growth, Global Institutional & Specialty grew 4% organically, Global Pest Elimination increased 6%, and Global Life Sciences grew 4% with significantly improved margins Segment Performance Overview | Segment (Q2 2025 vs Q2 2024) | Organic Sales Change | Organic Operating Income Change | | :--- | :--- | :--- | | Global Water | +2% | +6% | | Global Institutional & Specialty | +4% | +16% | | Global Pest Elimination | +6% | +1% | | Global Life Sciences | +4% | +105% | - Global Institutional & Specialty's organic operating income margin expanded by 2.6 percentage points due to strong pricing, lower supply chain costs, and productivity improvements199 - Global Pest Elimination's organic operating income margin decreased by 1.0 percentage point as strategic investments more than offset positive pricing impacts204 Financial Position, Cash Flow and Liquidity As of June 30, 2025, total assets were $23.7 billion and total debt $8.2 billion, with operating cash flow decreasing to $1.1 billion due to working capital timing, while maintaining strong liquidity - Cash provided by operating activities decreased by $189 million in the first six months of 2025 compared to 2024, primarily driven by a $200 million unfavorable change in working capital, specifically the timing of accounts payable215 Debt and Liquidity Metrics | Metric | June 30, 2025 (Millions USD) | Dec 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Total Debt | $8,210.7 M | $7,564.9 M | | Cash | $1,920.9 M | $1,256.8 M | | Net Debt | $6,289.8 M | $6,308.1 M | | Net Debt to EBITDA Ratio | 1.6 | 1.7 | - In March 2025, the company amended and restated its $2.0 billion revolving credit facility, extending the maturity to March 2030, with no borrowings outstanding as of June 30, 2025225 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company uses derivative financial instruments, including foreign currency forward contracts and interest rate swaps, to manage foreign exchange and interest rate risks, not for speculation - Ecolab uses foreign currency forward contracts, interest rate swap agreements, and foreign currency debt to manage market risks, avoiding speculative derivative instruments248 Item 4. Controls and Procedures As of June 30, 2025, disclosure controls and procedures were effective, with an ongoing multi-year ERP system upgrade expected to impact internal control over financial reporting processes - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter249 - The company is undergoing a multi-year ERP system upgrade, which will affect processes related to internal control over financial reporting251 Part II - Other Information Item 1. Legal Proceedings This section incorporates by reference legal matters detailed in Note 16 of the financial statements, covering various lawsuits, claims, and environmental actions, including the TPC Group litigation - Information regarding legal proceedings is provided by reference to Note 16, 'Commitments and Contingencies,' in Part I, Item 1 of this report254 Item 1A. Risk Factors The company states there are no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024, referring readers to that filing - The company refers to its Form 10-K for the fiscal year ended December 31, 2024, for a detailed discussion of risk factors, indicating no material changes during the quarter255 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes common stock repurchases during Q2 2025, totaling 149,600 shares under the publicly announced plan Common Stock Repurchases | Period (2025) | Total Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | April | 137,600 | $244.41 | | May | 12,000 | $249.79 | | June | 0 | - | | Total | 149,600 | $244.84 | - As of June 30, 2025, 8,051,273 shares remained available for repurchase under the company's board-authorized program256257