ECL 10-K diff: FY 2024-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+22 paragraphs −20 paragraphs ~20 changed
FY 2024-12-31 (earlier)
Item 1A. Risk Factors .
The following are important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Form 10-K. See the section entitled “Forward-Looking Statements” set forth above.
We may also refer to this disclosure to identify factors that may cause results to differ materially from those expressed in other forward-looking statements including those made in oral presentations, including telephone conferences and/or webcasts open to the public.Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation" and our consolidated financial statements and the related notes, before making an investment decision. The risks described below are not the only risks or uncertainties we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition, prospects, or results of operations. In such case, the trading price of our common stock could decline, and you may lose all or part of your original investment. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.Additionally, macroeconomic and geopolitical developments, including public health crises, escalating global conflicts, supply chain disruptions, labor market constraints, rising rates of inflation and high interest rates may amplify many of the risks discussed below to which we are subject. The extent of the impact of macroeconomic and geopolitical developments, including public health crises, on our financial and operating performance depends significantly on the duration and severity of such macroeconomic and geopolitical developments, the actions taken to contain or mitigate its impact and any changes in consumer behaviors as a result thereof.
Economic & Operational Risks
Our results are impacted by general worldwide economic factors.
Over the past year, global interest rates aimed at curbing inflation, as well as implications of geopolitical situations in Europe, the Middle East and China, have resulted in economic and demand uncertainty. Previously, the COVID pandemic, geopolitical instability and other global events have resulted in supply chain challenges, inflation, high interest rates, foreign currency exchange volatility, and volatility in global capital markets, which have affected our business and could have a material adverse impact on our business in the future. Countries such as Argentina and Turkey have experienced economic upheaval and similar upheaval in other countries with Ecolab operations could have a material adverse impact on our consolidated results of operations, financial position and cash flows by negatively impacting economic activity, including in our key end-markets, and by further weakening the local currency versus the U.S. dollar, resulting in reduced sales and earnings from our foreign operations, which are generated in the local currency, and then translated to U.S. dollars.
Our results depend upon the continued vitality of the markets we serve.
Economic downturns, and in particular downturns in our larger markets including the foodservice, hospitality, travel, health care, food processing, refining, pulp and paper, mining and steel industries, can adversely impact our customers, and we may find it difficult to restore margins by maintaining pricing due to easing inflation from slowing economic growth. Recently, the war and energy crisis in Europe have resulted in a more challenging macroeconomic environment with significantly impacted costs and demand. Previously, the COVID-19 pandemic negatively impacted the demand for our products and services provided to customers in the full-service restaurant, hospitality, lodging and entertainment industries. In prior years, a weaker global economic environment has also negatively impacted certain of our other end-markets. During these periods of weaker economic activity, our customers and potential customers may reduce or discontinue their volume of purchases of cleaning and sanitizing products and water treatment and process chemicals, which has had, and may continue to have, a material adverse effect on our business, financial condition, results of operation or cash flows.
Our significant non-U.S. operations expose us to global economic, political and legal risks that could impact our profitability.
We have significant operations outside the United States, including joint ventures and other alliances. We conduct business in more than 170 countries and, in 2024, approximately 47% of our net sales originated outside the United States. There are inherent risks in our international operations, including:
● exchange controls and currency restrictions;
● currency fluctuations and devaluations;● tariffs and trade barriers;● export duties and quotas;
● changes in the availability and pricing of raw materials, energy and utilities;
● changes in local economic conditions;
● changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions;● difficulties in managing international operations and the burden of complying with international and foreign laws;
● requirements to include local ownership or management in our business;
● economic and business objectives that differ from those of our joint venture partners;16
Table of Contents● exposure to possible expropriation, nationalization or other government actions;
● restrictions on our ability to repatriate dividends from our subsidiaries;
● unsettled political conditions, military action, civil unrest, acts of terrorism, force majeure, war or other armed conflict, including the Russian invasion of Ukraine, the Israel-Hamas conflict and other hostilities in the Middle East; and
● countries whose governments have been hostile to U.S.-based businesses.
Following Russia’s invasion of Ukraine and the United States’ and other countries’ sanctions against Russia, we have limited 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, and we may further narrow our presence in Russia depending on developments in the conflict or otherwise. While our operations in Russia and areas experiencing conflict are not material to our business and financial results, the escalation of these conflicts, or the imposition of additional sanctions by the United States, may also heighten many other risks disclosed in our report on Form 10-K, any of which could materially and adversely affect our business and financial results. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets.
Additionally, changes in international trade policies by governments around the world, including the imposition or continuation of tariffs, could materially and adversely affect our business. In 2018, the U.S. imposed tariffs on certain imports from China and other countries, resulting in retaliatory tariffs by China and other countries. In February 2025, the U.S. proposed a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. These tariffs, any new tariffs or policies imposed by governments around the world, or any resulting retaliatory measures, to the extent implemented, could increase our costs, reduce our sales and earnings or otherwise have an adverse effect on our operations.
Further, our operations outside the United States require us to comply with a number of United States and non-U.S. laws and regulations, including anti-corruption laws such as the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act, as well as U.S. and non-U.S. economic sanctions regulations. We have internal policies and procedures relating to such laws and regulations; however, there is risk that such policies and procedures will not always protect us from the misconduct or reckless acts of employees or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures. Violations of such laws and regulations could result in disruptive investigations, significant fines and sanctions, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Also, because of uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights, we face risks in some countries that our intellectual property rights and contract rights would not be enforced by local governments. We are also periodically faced with the risk of economic uncertainty, which has impacted our business in some countries. Other risks in international business also include difficulties in staffing and managing local operations, including managing credit risk to local customers and distributors.
Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social, legal and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
We may experience business disruption if we fail to execute organizational change and management transitions.
Our continued success will depend on the efforts and abilities of our executive officers and certain other key employees, particularly those with sales and sales management responsibilities, to drive business growth, development and profitability. Our operations could be materially and adversely affected if for any reason we are unable to successfully execute organizational change and management transitions at leadership levels.
We are subject to information technology system failures, network disruptions and breaches in data security.
We rely to a large extent upon information technology systems and infrastructure to operate our business. The size and complexity of our information technology systems and those of strategic vendors make them vulnerable to failure, malicious intrusion and random attack. Acquisitions have resulted in further de-centralization of systems and additional complexity in our systems infrastructure. Likewise, data security breaches by employees or others with permitted access to our systems or to the systems of strategic vendors pose a risk that sensitive data may be exposed to unauthorized persons or to the public. Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity attacks. While we have continually matured our security program and capabilities and have had no material incidents to date, cyber threats continue to evolve and there can be no assurance that our efforts will prevent cybersecurity attacks or breaches in our systems or in the systems of strategic vendors, including cloud providers, that could cause reputational damage, business disruption or legal and regulatory costs; could result in third-party claims; could result in compromise or misappropriation of our intellectual property, trade secrets or sensitive information; or could otherwise materially adversely affect our business, including our business strategy, results of operations, or financial condition. Certain of our customer offerings include digital components, such as remote monitoring of certain customer operations. A breach of those remote monitoring systems could expose customer data giving rise to potential third-party claims and reputational damage. There may be other related challenges and risks as we complete implementation of our ERP system upgrade.
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Our results could be materially and adversely affected by difficulties in securing the supply of certain raw materials or by fluctuations in the cost of raw materials.
The prices of raw materials used in our business fluctuate, and in recent years we have experienced periods of significant increased raw material costs. Changes in raw material prices, unavailability of adequate and reasonably priced raw materials or substitutes for those raw materials, or the inability to obtain or renew supply agreements on favorable terms has materially and adversely affected our business and can in the future materially and adversely affect our consolidated results of operations, financial position or cash flows. In addition, volatility and disruption in economic activity and conditions could disrupt or delay the performance of our suppliers and thus impact our ability to obtain raw materials at favorable prices or on favorable terms, which may materially and adversely affect our business.
Our increasing reliance on artificial intelligence (“AI”) technologies in our products, services, and operations presents several risks that could adversely impact our business, financial condition, and results of operations.
We are increasingly incorporating AI capabilities into the development of technologies and our business operations, and into our products and services. AI technology is complex and rapidly evolving, and may subject us to significant competitive, legal, regulatory, operational and other risks, including the following:● Operational and Technical Risks : AI technologies are complex and rapidly evolving. Flaws in AI algorithms, training methodologies, or datasets may lead to unintended consequences, such as operational disruptions, erroneous decision-making, or data loss. These issues could impair the effectiveness of our AI systems and result in significant operational challenges. Additionally, software we purchase or lease from third-party vendors could become inoperable (via attack from a bad actor, network failure, code error, etc.), such that it adversely impacts Ecolab’s ability to deliver products or services to its customers, resulting in financial losses, legal liabilities, and damages to our reputation.● Legal and Regulatory Risks : The legal and regulatory landscape for AI is still developing and varies across jurisdictions. Compliance with evolving AI regulations may impose significant costs, limit our ability to incorporate AI capabilities, and expose us to legal liabilities. Additionally, new regulations could conflict with our current AI practices, requiring costly changes to our development and deployment strategies.● Reputational Risks : The use of AI raises social and ethical concerns, which could harm our reputation if not managed responsibly. Incidents related to AI, such as biased outcomes or privacy breaches, could lead to negative publicity and reduce public trust in our AI solutions.
● Competitive Risks : Our competitors may develop and implement AI technologies more effectively, gaining a competitive advantage. If we fail to keep pace with advancements in AI, our market position could be weakened, adversely affecting our business performance.
● Financial Risks : The development, testing, and deployment of AI systems are resource-intensive and may increase our operational costs. There is no assurance that our investments in AI will yield the anticipated benefits or that customers will adopt our AI-enhanced offerings, potentially impacting our financial results.
● Cybersecurity Risks : AI systems can be vulnerable to cybersecurity threats, such as data breaches and unauthorized access. These threats could result in financial losses, legal liabilities, and damage to our reputation.
We are committed to developing and using AI responsibly, but there can be no guarantee that we will successfully mitigate all associated risks. Any failure in our AI initiatives could materially harm our business, financial condition, and results of operations.
Severe public health outbreaks not limited to COVID-19 may adversely impact our business.
The COVID-19 pandemic had a rapid and significant negative impact on the global economy, including a significant downturn in the foodservice, hospitality and travel industries. Measures taken to alleviate the pandemic (such as stay-at-home orders and other responsive measures) significantly impacted our restaurant and hospitality customers and negatively affected demand for our products and services in these segments, resulting in a material adverse effect on our business and results of operations. Besides the COVID-19 pandemic, the United States and other countries have experienced, and may experience in the future, public health outbreaks such as Zika virus, Avian Flu, SARS and H1N1 influenza. A prolonged occurrence of a contagious disease such as these could result in a significant downturn in the foodservice, hospitality and travel industries and also may result in health or other government authorities imposing restrictions on travel further impacting our end markets. Any of these events could result in a significant drop in demand for some of our products and services and materially and adversely affect our business.18
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Strategic Risks
If we are unsuccessful in integrating acquisitions our business could be materially and adversely affected.
We seek to acquire complementary businesses as part of our long-term strategy. There can be no assurance that we will find attractive acquisition candidates or succeed at effectively managing the integration of acquired businesses. If the underlying business performance of such acquired businesses deteriorates, the expected synergies from such transactions do not materialize or we fail to successfully integrate new businesses into our existing businesses, our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
If we are unsuccessful in executing on key business initiatives, our business could be materially and adversely affected .
We continue to execute key business initiatives as part of our ongoing efforts to improve our efficiency and returns. In particular, we are making supply chain investments to secure supply and add new capacity in our Life Sciences business. Additionally, we are continuing implementation of our ERP system upgrades, which are expected to continue in phases over the next several years. These upgrades, which include sales, supply chain and certain finance functions, are expected to improve the efficiency of certain financial and related transactional processes. These upgrades involve complex business process design and a failure of certain of these processes could result in business disruption. We are also undertaking restructuring programs including the One Ecolab initiative leveraging our digital technologies to realign the functional work done in many countries into global centers of excellence. This program is discussed along with other restructuring activities under Note 3 of this Form 10-K. If the projects in which we are investing or the initiatives which we are pursuing are not successfully executed, our consolidated results of operations, financial position or cash flows could materially and adversely be affected.
Our growth depends upon our ability to compete successfully with respect to value, innovation and customer support .
We have numerous global, national, regional and local competitors. Our ability to compete depends in part on providing high quality and high value-added products, technology and service. We must also continue to identify, develop and commercialize innovative, profitable and high value-added products for niche applications and commercial digital applications. We have made significant investments in commercial digital product offerings, and our culture and expertise must continue to evolve to develop, support and profitably deploy commercial digital offerings, which are becoming an increasingly important part of our business. There can be no assurance that we will be able to accomplish our technology development goals or that technological developments by our competitors, including in the area of artificial intelligence, will not place certain of our products, technology or services at a competitive disadvantage in the future. In addition, certain of the new products that we have under development will be offered in markets in which we do not currently compete, and there can be no assurance that we will be able to compete successfully in those new markets. If we fail to introduce new technologies or commercialize our digital offerings on a timely and profitable basis, we may lose market share and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
Consolidation of our customers and vendors could materially and adversely affect our results.
Customers and vendors in the foodservice, hospitality, travel, healthcare, energy, life sciences, food processing and pulp and paper industries, as well as other industries we serve, have consolidated in recent years and that trend may continue. This consolidation could have a material adverse impact on our ability to retain customers and on our pricing, margins and consolidated results of operations.
We enter into multi-year contracts with customers that could impact our results.
Our multi-year contracts with some of our customers include terms affecting our pricing flexibility. There can be no assurance that these restraints will not have a material adverse impact on our margins and consolidated results of operations.
Legal, Regulatory & Compliance Risks
Our business depends on our ability to comply with laws and governmental regulations and meet our contractual commitments and failure to do so could materially and adversely impact our business; and we may be materially and adversely affected by changes in laws and regulations .
Our business is subject to numerous laws and regulations relating to the environment, including evolving climate change standards, and to the manufacture, storage, distribution, sale and use of our products as well as to the conduct of our business generally, including employment and labor laws and anti-corruption laws. Furthermore, increasing public and governmental awareness and concern regarding the effects of climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions and will likely result in further environmental and climate change laws and regulations. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. A violation of these laws and regulations could expose us to financial liability that may have a material adverse effect on our results of operations and cash flows. Regulation of our products and operations continues to increase with more stringent standards, causing increased costs of operations and potential for liability if a violation occurs. The potential cost to us relating to environmental and product registration laws and regulations is uncertain due to factors such as the unknown magnitude and type of possible contamination and clean-up costs, the complexity and evolving nature of laws and regulations, and the timing and expense of compliance. Changes to current laws (including tax laws), regulations and policies could impose new restrictions, costs or prohibitions on our current practices which would have a material adverse effect on our consolidated results of operations, financial position or cash flows. Changes to labor and employment laws and regulations, as well as related rulings by courts and administrative bodies, could materially and adversely affect our operations and expose us to potential financial liability.19
Table of ContentsDefense of litigation, particularly certain types of actions such as antitrust, patent infringement, personal injury, product liability, breach of contract, wage hour and class action lawsuits, can be costly and time consuming even if ultimately successful, and if not successful could have a material adverse effect on our consolidated results of operations, financial position or cash flows.A chemical spill or release could materially and adversely impact our business.
As a manufacturer and supplier of chemical products, there is a potential for chemicals to be accidentally spilled, released or discharged, either in liquid or gaseous form, during production, transportation, storage or use. Such a release could result in environmental contamination as well as a human or animal health hazard. Accordingly, such a release could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Potential indemnification liabilities pursuant to the separation and split-off of our Upstream Energy business could materially and adversely affect our business and financial statements.
With respect to the separation and subsequent split-off of our Upstream Energy business, we entered into a separation and distribution agreement with ChampionX Holding Inc. and ChampionX Corporation (f/k/a Apergy Corporation and taken together with ChampionX Holding Inc., “ChampionX”) as well as certain other agreements to govern the separation and related transactions and our relationship with ChampionX going forward. These agreements provide for specific indemnity and certain other obligations of each party and could lead to disputes between ChampionX and us. If we are required to indemnify ChampionX under the circumstances set forth in these agreements, we may be subject to substantial related liabilities. In addition, with respect to the liabilities for which ChampionX has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against ChampionX will be sufficient to protect us against the full amount of such liabilities, or that ChampionX will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our business and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
Extraordinary events may significantly impact our business.
The occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) repeated or prolonged federal government shutdowns or similar events, (d) war (including acts of terrorism or hostilities which impact our markets), (e) natural or manmade disasters, (f) water shortages or (g) severe weather conditions affecting our operations or the energy, foodservice, hospitality and travel industries may have a material adverse effect on our business.
While we have a diverse customer base and no customer or distributor constitutes 10 percent or more of our consolidated revenues, we do have customers and independent, third-party distributors, the loss of which could have a material adverse effect on our consolidated results of operations or cash flows for the affected earnings periods.
Government shutdowns can have a material adverse effect on our consolidated results of operations or cash flows by disrupting or delaying new product launches, renewals of registrations for existing products and receipt of import or export licenses for raw materials or products.
War (including acts of terrorism or hostilities), natural or manmade disasters, water shortages or severe weather conditions, including the effects of climate change, affecting the energy, foodservice, hospitality, travel, health care, food processing, pulp and paper, mining, steel and other industries can cause a downturn in the business of our customers, which in turn can have a material adverse effect on our consolidated results of operations, financial position or cash flows. In particular, the U.S. Gulf Coast is a region with significant refining, petrochemicals and chemicals operations which provide us raw materials, as well as being an important customer base for our Water operating segment. Hurricanes or other severe weather events impacting the Gulf Coast, such as the winter freeze in Texas and the Gulf Coast in February 2021, can materially and adversely affect our ability to obtain raw materials at reasonable cost, or at all, and could adversely affect our business with our customers in the region.
Our commitments, goals, targets, objectives and initiatives related to sustainability, and our public statements and disclosures regarding them, expose us to numerous risks.
We have developed, and will continue to establish, goals, targets, and other objectives related to sustainability matters, including our sustainability goals in alignment with the United Nations Global Compact’s Business Ambition for 1.5⁰C and our commitments to science-based targets addressing Scope 1, 2 and 3 GHG emissions, discussed in Item 1 of Part I of this Form 10-K, entitled “Business.” Achieving these goals and commitments will require evolving our business, capital investment and the development of technology that might not currently exist. We might incur additional expense or be required to recognize impairment charges in connection with our efforts. These commitments, goals, targets and other objectives reflect our current plans and there is no guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these commitments, goals, targets, and objectives expose us to operational, reputational, financial, legal, and other risks. Our ability to achieve any stated commitment, goal, target, or objective is subject to factors and conditions, many of which are outside of our control, including the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.
Our business may face increased scrutiny from the investment community, other stakeholders, regulators, and the media related to our sustainability activities, including our commitments, goals, targets, and objectives, and our methodologies and timelines for pursuing them. If our sustainability practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our commitments, goals, targets, and objectives, to20
Table of Contentscomply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy reporting standards with respect to these matters, within the timelines we announce, or at all, could have operational, reputational, financial and legal impacts.
Financial Risks
If the separation and split-off of our Upstream Energy business or certain internal transactions undertaken in anticipation of the divestiture are determined to be taxable in whole or in part, we and our stockholders may incur significant tax liabilities.
In connection with the separation and split-off of our Upstream Energy business that was consummated on June 3, 2020, we obtained opinions of outside tax counsel that the related merger and exchange offer will qualify as tax-free transactions to us and our stockholders, except to the extent that cash was paid to Ecolab stockholders in lieu of fractional shares. We have not sought or obtained a ruling from the Internal Revenue Service (“IRS”) on the tax consequences of these transactions. An opinion of counsel is not binding on the IRS or the courts, which may disagree with the opinion. Even if the merger and exchange offer otherwise qualified as tax-free transactions, they may become taxable to us if certain events occur that affect either Ecolab or ChampionX Corporation. While ChampionX Corporation has agreed not to take certain actions that could cause the transactions not to qualify as tax-free transactions and is generally obligated to indemnify us against any tax consequences if it breaches this agreement, the potential tax liabilities could have a material adverse effect on us if we were not entitled to indemnification or if the indemnification obligations were not fulfilled. If the merger or exchange offer were determined to be taxable, we could be subject to a substantial tax liability, and each U.S. holder of our common stock who participated in the exchange offer could be treated as exchanging the Ecolab shares surrendered for ChampionX Corporation shares in a taxable transaction.
Changes in tax laws and unanticipated tax liabilities could materially and adversely affect the taxes we pay and our profitability.
We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. We are also impacted by actions taken to tax-related matters by associations such as the Organization for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries, and the European Commission which influence tax policies in countries where we operate. In particular, the OECD has coordinated negotiations among more than 140 jurisdictions with the goal of achieving consensus on various substantial changes to the international tax framework, including a 15% global minimum taxation regime (“Pillar Two”). Pillar Two took effect in several jurisdictions in which we operate starting in 2024 and will increase the burden and costs of our tax compliance. We continue to monitor these legislative developments, which based on information available, have not had material impacts to the 2024 financial statements. In addition, we are impacted by settlements of pending or any future adjustments proposed by the IRS or other taxing authorities in connection with our tax audits, all of which will depend on their timing, nature and scope. Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.Future events may impact our deferred tax position, including the utilization of foreign tax credits and undistributed earnings of international affiliates that are considered to be reinvested indefinitely.
We evaluate the recoverability of deferred tax assets and the need for deferred tax liabilities based on available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we evaluate all positive and negative evidence as of the end of each reporting period. Future adjustments (either increases or decreases), to the deferred tax asset valuation allowance are determined based upon changes in the expected realization of the net deferred tax assets. The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry-back or carry-forward periods under the tax law. Due to significant estimates used to establish the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record adjustments to the valuation allowance in future reporting periods. Changes to the valuation allowance or the amount of deferred tax liabilities could have a material adverse effect on our consolidated results of operations or financial position. Further, should we change our assertion regarding the permanent reinvestment of the undistributed earnings of international affiliates, a deferred tax liability may need to be established.
Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could materially and adversely affect our liquidity and financial statements.
As of December 31, 2024, we had approximately $7.6 billion in outstanding indebtedness, with approximately $1.5 billion in the form of floating rate debt. Our debt level and related debt service obligations may have negative consequences, including:
● requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which reduces the funds we have available for other purposes such as acquisitions and capital investment;
● reducing our flexibility in planning for or reacting to changes in our business and market conditions;
● exposing us to interest rate risk since a portion of our debt obligations are at variable rates. For example, a one percentage point increase in the average interest rate on our floating rate debt at December 31, 2024 would increase future interest expense by approximately $15 million per year; and
● increasing our cost of funds and materially and adversely affecting our liquidity and access to the capital markets should we fail to maintain the credit ratings assigned to us by independent rating agencies.
If we add new debt, the risks described above could increase.21
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We incur significant expenses related to the amortization of intangible assets and may be required to report losses resulting from the impairment of goodwill or other assets recorded in connection with the Nalco and Purolite transactions and other acquisitions.We expect to continue to complete selected acquisitions and joint venture transactions in the future. In connection with acquisition and joint venture transactions, applicable accounting rules generally require the tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values. Intangible assets other than goodwill are required to be amortized over their estimated useful lives and this expense may be significant. Any excess in the purchase price paid by the acquiring company over the fair value of tangible and intangible assets of the acquired business is recorded as goodwill. If it is later determined that the anticipated future cash flows from the acquired business may be less than the carrying values of the assets and goodwill of the acquired business, the assets or goodwill may be deemed to be impaired. In this case, the acquiring company may be required under applicable accounting rules to write down the value of the assets or goodwill on its balance sheet to reflect the extent of the impairment. This write-down of assets or goodwill is generally recognized as a non-cash expense in the statement of operations of the acquiring company for the accounting period during which the write down occurs. As of December 31, 2024, we had goodwill of $7.9 billion which is maintained in various reporting units, including goodwill from the Nalco and Purolite transactions. If we determine that any of the assets or goodwill recorded in connection with the Nalco and Purolite transactions or any other prior or future acquisitions or joint venture transactions have become impaired, we will be required to record a loss resulting from the impairment. Impairment losses could be significant and could have a material adverse effect on our consolidated results of operations and financial position.
FY 2025-12-31 (later)
Item 1A. Risk Factors .
The following are important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Form 10-K. See the section entitled “Forward-Looking Statements” set forth above.
We may also refer to this disclosure to identify factors that may cause results to differ materially from those expressed in other forward-looking statements, including those made in oral presentations, such as telephone conferences and/or webcasts open to the public.Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation" and our consolidated financial statements and the related notes, before making an investment decision. The risks described below are not the only risks or uncertainties we face. The occurrence of any of the following risks, additional risks and uncertainties not presently known to us, or risks that we currently believe to be immaterial, could materially and adversely affect our business, reputation, financial condition, prospects, or results of operations. In such case, the trading price of our common stock could decline, and you may lose all or part of your original investment. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past.Additionally, macroeconomic and geopolitical developments, including public health crises, escalating global conflicts, supply chain disruptions, labor market constraints, rising rates of inflation and high interest rates, may amplify many of the risks discussed below to which we are subject. The extent of the impact of macroeconomic and geopolitical developments on our financial and operating performance depends significantly on the duration and severity of such macroeconomic and geopolitical developments, the actions taken to contain or mitigate its impact and any changes in consumer behaviors as a result thereof.
Economic & Operational Risks
Our results are impacted by general worldwide economic factors.
Over the past year, changes in global trade policies, including the imposition of tariffs, import and export restrictions, and retaliatory trade actions, as well as implications of geopolitical situations in Europe, the Middle East, China, and Russia, have resulted in economic and demand uncertainty. Previously, the COVID pandemic, geopolitical instability and other global events have resulted in supply chain challenges, inflation, high interest rates, foreign currency exchange volatility, and volatility in global capital markets, which have affected our business and could have a material adverse impact on our business in the future. Countries such as Argentina and Turkey have experienced economic upheaval and similar upheaval in other countries with Ecolab operations could have a material adverse impact on our consolidated results of operations, financial position and cash flows by negatively impacting economic activity, including in our key end-markets, and by further weakening the local currency versus the U.S. dollar, resulting in reduced sales and earnings from our foreign operations, which are generated in the local currency, and then translated to U.S. dollars.
Our results depend upon the continued vitality of the markets we serve.
Economic downturns, and in particular downturns in our larger markets, including the foodservice, hospitality, travel, health care, food processing, refining, pulp and paper, mining and steel industries, can adversely impact our customers, and we may find it difficult to restore margins by maintaining pricing due to easing inflation from slowing economic growth. Recently, the war and energy crisis in Europe have resulted in a more challenging macroeconomic environment with significantly impacted costs and demand. Previously, the COVID-19 pandemic negatively impacted the demand for our products and services provided to customers in the full-service restaurant, hospitality, lodging and entertainment industries. In prior years, a weaker global economic environment has also negatively impacted certain of our other end-markets. During these periods of weaker economic activity, our customers and potential customers may reduce or discontinue their volume of purchases of cleaning and sanitizing products and water treatment and process chemicals, which has had, and may continue to have, a material adverse effect on our business, financial condition, results of operation or cash flows.
Our significant non-U.S. operations expose us to global economic, political and legal risks that could impact our profitability.
We have significant operations outside the United States, including joint ventures and other alliances. We conduct business in more than 170 countries and, in 2025, approximately 47% of our net sales were generated from customers outside the United States. There are inherent risks in our international operations, including:
● exchange controls and currency restrictions;
● currency fluctuations and devaluations;● changes in international trade policies, including the imposition of tariffs and other trade restrictions;● export duties and quotas;
● changes in the availability and pricing of raw materials, energy and utilities;
● changes in local economic conditions;
● changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions;16
Table of Contents● difficulties in managing international operations and the burden of complying with international and foreign laws;
● requirements to include local ownership or management in our business;
● economic and business objectives that differ from those of our joint venture partners;● exposure to possible expropriation, nationalization or other government actions;
● restrictions on our ability to repatriate dividends from our subsidiaries;
● unsettled political conditions, military action, civil unrest, acts of terrorism, force majeure, war or other armed conflict, including the Russian invasion of Ukraine, the Israel-Hamas conflict and other hostilities in the Middle East; and
● countries whose governments have been hostile to U.S.-based businesses.
Following Russia’s invasion of Ukraine and the United States’ and other countries’ sanctions against Russia, we have limited 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, and we may further narrow our presence in Russia depending on developments in the conflict or otherwise. While our operations in Russia and areas experiencing conflict are not material to our business and financial results, the escalation of these conflicts, or the imposition of additional sanctions by the United States, may also heighten many other risks disclosed in our report on Form 10-K, any of which could materially and adversely affect our business and financial results. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets.
Additionally, changes in international trade policies by governments around the world, including the imposition or continuation of tariffs, could materially and adversely affect our business. During 2025, new tariffs were imposed in the U.S. for imports from a broad range of countries and materials. Several countries also implemented or proposed retaliatory tariffs on imports from the U.S., as well as other barriers to trade. Ongoing changes in U.S. trade policy through administrative action or litigation create a heightened level of uncertainty for our business. These tariffs, any new tariffs or policies imposed by governments around the world, or any resulting retaliatory measures, to the extent implemented, could increase our costs, reduce our sales and earnings or otherwise have an adverse effect on our operations.
Further, our operations outside the United States require us to comply with a number of United States and non-U.S. laws and regulations, including anti-corruption laws such as the United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act, as well as U.S. and non-U.S. economic sanctions regulations. We have internal policies and procedures relating to such laws and regulations; however, there is risk that such policies and procedures will not always protect us from the misconduct or reckless acts of employees or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures. Violations of such laws and regulations could result in disruptive investigations, significant fines and sanctions, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Also, because of uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights, we face risks in some countries that our intellectual property rights and contract rights would not be enforced by local governments. We are also periodically faced with the risk of economic uncertainty, which has impacted our business in some countries. Other risks in international business also include difficulties in staffing and managing local operations, including managing credit risk to local customers and distributors.
Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social, legal and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, which could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Our increasing reliance on artificial intelligence (“AI”) technologies in our products, services, and operations presents several risks that could adversely impact our business, financial condition, and results of operations.
We are increasingly incorporating AI capabilities into the development of technologies and our business operations, and into our products and services. AI technology is complex and rapidly evolving and may subject us to significant competitive, legal, regulatory, operational and other risks, including the following:● Operational and Technical Risks : AI technologies are complex and rapidly evolving. Flaws in AI algorithms, training methodologies, or datasets may lead to unintended consequences, such as operational disruptions, erroneous decision-making, or data loss. These issues could impair the effectiveness of our AI systems and result in significant operational challenges. Additionally, software we purchase or lease from third-party vendors could become inoperable (via an attack from a bad actor, network failure, code error, etc.), such that it adversely impacts Ecolab’s ability to deliver products or services to its customers, resulting in financial losses, legal liabilities, and damage to our reputation.● Legal and Regulatory Risks : The legal and regulatory landscape for AI is still developing and varies across jurisdictions. Compliance with evolving AI regulations may impose significant costs, limit our ability to incorporate AI capabilities, and expose us to legal liabilities. Additionally, new regulations could conflict with our current AI practices, requiring costly changes to our development and deployment strategies.17
Table of Contents● Reputational Risks : The use of AI raises social and ethical concerns, which could harm our reputation if not managed responsibly. Incidents related to AI, such as biased outcomes or privacy breaches, could lead to negative publicity and reduce public trust in our AI solutions.
● Competitive Risks : Our competitors may develop and implement AI technologies more effectively, gaining a competitive advantage. If we fail to keep pace with advancements in AI, our market position could be weakened, adversely affecting our business performance.
● Financial Risks : The development, testing, and deployment of AI systems are resource-intensive and may increase our operational costs. There is no assurance that our investments in AI will yield the anticipated benefits or that customers will adopt our AI-enhanced offerings, potentially impacting our financial results.
● Cybersecurity Risks : AI systems can be vulnerable to cybersecurity threats, such as data breaches and unauthorized access. These threats could result in financial losses, legal liabilities, and damage to our reputation.
We are committed to developing and using AI responsibly, but there can be no guarantee that we will successfully mitigate all associated risks. Any failure in our AI initiatives could materially harm our business, financial condition, and results of operations.
We are subject to information technology system failures, network disruptions and breaches in data security.
We rely to a large extent upon information technology systems and infrastructure to operate our business. The size and complexity of our information technology systems and those of strategic vendors make them vulnerable to failure, malicious intrusion and random attack. Acquisitions have resulted in further de-centralization of systems and additional complexity in our systems infrastructure. Likewise, data security breaches by employees or others with permitted access to our systems or to the systems of strategic vendors pose a risk that sensitive data may be exposed to unauthorized persons or to the public. Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity attacks. While we have continually matured our security program and capabilities and have had no material incidents to date, cyber threats continue to evolve, such as with the use of artificial intelligence, resulting in sophisticated new attack methods that are increasingly automated, targeted, and difficult to defend against, and there can be no assurance that our efforts will prevent cybersecurity attacks or breaches in our systems or in the systems of strategic vendors, including cloud providers, that could cause reputational damage, business disruption or legal and regulatory costs; could result in third-party claims; could result in compromise or misappropriation of our intellectual property, trade secrets or sensitive information; or could otherwise materially adversely affect our business, including our business strategy, results of operations, or financial condition. Certain of our customer offerings include digital components, such as remote monitoring of certain customer operations. A breach of those remote monitoring systems could expose customer data giving rise to potential third-party claims and reputational damage. Additionally, it may take considerable time for us to investigate and evaluate the full impact of cyber-attacks, particularly for sophisticated attacks, which may inhibit our ability to provide prompt, full, and reliable information about cybersecurity incidents to our customers, regulators, and the public. There may also be other related challenges and risks as we complete implementation of our ERP system upgrade, and businesses which we have acquired, or may in the future acquire, may have information technology system vulnerabilities which could increase our risk of cybersecurity attacks. Although we maintain insurance, our insurance coverage may not be sufficient in type or amount to prevent or recover losses resulting from cybersecurity attacks.
Our results could be materially and adversely affected by difficulties in securing the supply of certain raw materials or by fluctuations in the cost of raw materials.
The prices of raw materials used in our business fluctuate, and in recent years we have experienced periods of significant increased raw material costs. Changes in raw material prices, unavailability of adequate and reasonably priced raw materials or substitutes for those raw materials, or the inability to obtain or renew supply agreements on favorable terms has materially and adversely affected our business and can in the future materially and adversely affect our consolidated results of operations, financial position or cash flows. In addition, volatility and disruption in economic activity and conditions could disrupt or delay the performance of our suppliers and thus impact our ability to obtain raw materials at favorable prices or on favorable terms, which may materially and adversely affect our business.
We may experience business disruption if we fail to execute organizational change and management transitions.
Our continued success will depend on the efforts and abilities of our executive officers and certain other key employees, particularly those with sales and sales management responsibilities, to drive business growth, development and profitability. Our operations could be materially and adversely affected if for any reason we are unable to successfully execute organizational change and management transitions at leadership levels.
Severe public health outbreaks not limited to COVID-19 may adversely impact our business.
The COVID-19 pandemic had a rapid and significant negative impact on the global economy, including a significant downturn in the foodservice, hospitality and travel industries. Measures taken to alleviate the pandemic (such as stay-at-home orders and other responsive measures) significantly impacted our restaurant and hospitality customers and negatively affected demand for our products and services in these segments, resulting in a material adverse effect on our business and results of operations. Besides the COVID-19 pandemic, the United States and other countries have experienced, and may experience in the future, public health outbreaks such as Zika virus, Avian Flu, SARS and H1N1 influenza. A prolonged occurrence of a contagious disease such as these could result in a significant downturn in the foodservice, hospitality and travel industries and also may result in health or other government authorities imposing restrictions on travel further impacting our end markets. Any of these events could result in a significant drop in demand for some of our products and services and materially and adversely affect our business.18
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Strategic Risks
If we are unsuccessful in integrating acquisitions our business could be materially and adversely affected.
We seek to acquire complementary businesses as part of our long-term strategy. There can be no assurance that we will find attractive acquisition candidates or succeed at effectively managing the integration of acquired businesses. If the underlying business performance of such acquired businesses deteriorates, the expected synergies from such transactions do not materialize or we fail to successfully integrate new businesses into our existing businesses, our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
If we are unsuccessful in executing on key business initiatives, our business could be materially and adversely affected .
We continue to execute key business initiatives as part of our ongoing efforts to improve our efficiency and returns. In particular, we are making supply chain investments to secure supply and add new capacity in our Life Sciences business. Additionally, we are continuing implementation of our ERP system upgrades, which are expected to continue in phases over the next several years. These upgrades, which include sales, supply chain and certain finance functions, are expected to improve the efficiency of certain financial and related transactional processes. These upgrades involve complex business process design and a failure of certain of these processes could result in business disruption. We are also undertaking restructuring programs including the One Ecolab initiative leveraging our digital technologies to realign the functional work done in many countries into global centers of excellence. This program is discussed along with other restructuring activities under Note 3, “Special (Gains) and Charges,” of the Notes of this Form 10-K. If the projects in which we are investing or the initiatives which we are pursuing are not successfully executed, our consolidated results of operations, financial position or cash flows could materially and adversely be affected.
Our growth depends upon our ability to compete successfully with respect to value, innovation and customer support .
We have numerous global, national, regional and local competitors. Our ability to compete depends in part on providing high quality and high value-added products, technology and service. We must also continue to identify, develop and commercialize innovative, profitable and high value-added products for niche applications and commercial digital applications. We have made significant investments in commercial digital product offerings, and our culture and expertise must continue to evolve to develop, support and profitably deploy commercial digital offerings, which are becoming an increasingly important part of our business. There can be no assurance that we will be able to accomplish our technology development goals or that technological developments by our competitors, including in the area of artificial intelligence, will not place certain of our products, technology or services at a competitive disadvantage in the future. In addition, certain of the new products that we have under development will be offered in markets in which we do not currently compete, and there can be no assurance that we will be able to compete successfully in those new markets. If we fail to introduce new technologies or commercialize our digital offerings on a timely and profitable basis, we may lose market share and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
Consolidation of our customers and vendors could materially and adversely affect our results.
Customers and vendors in the foodservice, hospitality, travel, healthcare, energy, life sciences, food processing and pulp and paper industries, as well as other industries we serve, have consolidated in recent years and that trend may continue. This consolidation could have a material adverse impact on our ability to retain customers and on our pricing, margins and consolidated results of operations.
We enter into multi-year contracts with customers that could impact our results.
Our multi-year contracts with some of our customers include terms affecting our pricing flexibility. There can be no assurance that these restraints will not have a material adverse impact on our margins and consolidated results of operations.
Legal, Regulatory & Compliance Risks
Our business depends on our ability to comply with laws and governmental regulations and meet our contractual commitments and failure to do so could materially and adversely impact our business; and we may be materially and adversely affected by changes in laws and regulations .
Our business is subject to numerous laws and regulations relating to the environment, including evolving climate change standards, and to the manufacture, storage, distribution, sale and use of our products as well as to the conduct of our business generally, including employment and labor laws and anti-corruption laws. Furthermore, increasing public and governmental awareness and concern regarding the effects of climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions and will likely result in further environmental and climate change laws and regulations. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. A violation of these laws and regulations could expose us to financial liability that may have a material adverse effect on our results of operations and cash flows. Regulation of our products and operations continues to increase with more stringent standards, causing increased costs of operations and potential for liability if a violation occurs. The potential cost to us relating to environmental and product registration laws and regulations is uncertain due to factors such as the unknown magnitude and type of possible contamination and clean-up costs, the complexity and evolving nature of laws and regulations, and the timing and expense of compliance. Changes to current laws (including tax laws), regulations and policies could impose new restrictions, costs or prohibitions on our current practices which would have a material adverse effect on our consolidated results of operations, financial position or cash flows. Changes to labor and employment laws and regulations, as well as related rulings by courts and administrative bodies, could materially and adversely affect our operations and expose us to potential financial liability.Defense of litigation, particularly certain types of actions such as antitrust, patent infringement, personal injury, product liability, breach of contract, wage hour and class action lawsuits, can be costly and time consuming even if ultimately successful, and if not successful could have a material adverse effect on our consolidated results of operations, financial position or cash flows.19
Table of ContentsOur operations may present a safety risk to our employees and others.
Notwithstanding our emphasis on safety and the precautions we take related to health and safety, we may be unable to avoid safety incidents relating to our operations that result in injuries or deaths of our employees, contractors or others. Certain safety incidents may result in legal or regulatory action that could result in increased expenses or reputational damage. We maintain workers' compensation and other insurances to address the risk of incurring material liabilities for injuries or deaths, but there can be no assurance that the insurance coverage will be adequate or will continue to be available on terms acceptable to us, or at all, which could result in material liabilities to us for any injuries or deaths. Changes to federal, state, and local employee health and safety regulations, and legislative, regulatory, or societal responses to safety incidents may result in heightened regulations or public scrutiny that may increase our compliance costs or result in reputational damage.
A chemical spill or release could materially and adversely impact our business.
As a manufacturer and supplier of chemical products, there is a potential for chemicals to be accidentally spilled, released or discharged, either in liquid or gaseous form, during production, transportation, storage or use. Such a release could result in environmental contamination as well as a human or animal health hazard. Accordingly, such a release could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Potential indemnification liabilities pursuant to the separation and split-off of our Upstream Energy business could materially and adversely affect our business and financial statements.
With respect to the separation and subsequent split-off of our Upstream Energy business, we entered into a separation and distribution agreement with ChampionX Holding Inc. and ChampionX Corporation (f/k/a Apergy Corporation and taken together with ChampionX Holding Inc., “ChampionX”) as well as certain other agreements to govern the separation and related transactions and our relationship with ChampionX going forward. These agreements provide for specific indemnity and certain other obligations of each party and could lead to disputes between ChampionX and us. If we are required to indemnify ChampionX under the circumstances set forth in these agreements, we may be subject to substantial related liabilities. In addition, with respect to the liabilities for which ChampionX has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against ChampionX will be sufficient to protect us against the full amount of such liabilities, or that ChampionX will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our business and our consolidated results of operations, financial position or cash flows could be materially and adversely affected.
Extraordinary events may significantly impact our business.
The occurrence of (a) litigation or claims, (b) the loss or insolvency of a major customer or distributor, (c) repeated or prolonged federal government shutdowns or similar events, (d) war (including acts of terrorism or hostilities which impact our markets), (e) natural or manmade disasters, (f) water shortages or (g) severe weather conditions affecting our operations or the energy, foodservice, hospitality and travel industries may have a material adverse effect on our business.
While we have a diverse customer base and no customer or distributor constitutes 10 percent or more of our consolidated revenues, we do have customers and independent, third-party distributors, the loss of which could have a material adverse effect on our consolidated results of operations or cash flows for the affected earnings periods.
Government shutdowns can have a material adverse effect on our consolidated results of operations or cash flows by disrupting or delaying new product launches, renewals of registrations for existing products and receipt of import or export licenses for raw materials or products.
War (including acts of terrorism or hostilities), natural or manmade disasters, water shortages or severe weather conditions, including the effects of climate change, affecting the energy, foodservice, hospitality, travel, health care, food processing, pulp and paper, mining, steel and other industries can cause a downturn in the business of our customers, which in turn can have a material adverse effect on our consolidated results of operations, financial position or cash flows. In particular, the U.S. Gulf Coast is a region with significant refining, petrochemicals and chemicals operations which provide us raw materials, as well as being an important customer base for our Light & Heavy operating segment. Hurricanes or other severe weather events impacting the Gulf Coast, such as the winter freeze in Texas and the Gulf Coast in February 2021, can materially and adversely affect our ability to obtain raw materials at reasonable cost, or at all, and could adversely affect our business with our customers in the region.
Our commitments, goals, targets, objectives and initiatives related to sustainability, and our public statements and disclosures regarding them, expose us to numerous risks.
We have developed, and will continue to establish, goals, targets, and other objectives related to sustainability matters, including our sustainability goals in alignment with the United Nations Global Compact’s Business Ambition for 1.5⁰C and our commitments to science-based targets addressing Scope 1, 2 and 3 GHG emissions, discussed in Item 1 of Part I of this Form 10-K, entitled “Business.” Achieving these goals and commitments will require evolving our business, capital investment and the development of technology that might not currently exist. We might incur additional expense or be required to recognize impairment charges in connection with our efforts. These commitments, goals, targets and other objectives reflect our current plans and there is no guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these commitments, goals, targets, and objectives expose us to operational, reputational, financial, legal, and other risks. Our ability to achieve any stated commitment, goal, target, or objective is subject to factors and conditions, many of which are outside of our control, including the pace of changes in technology, the availability of requisite financing, and the availability of suppliers that can meet our sustainability and other standards.20
Table of ContentsOur business may face increased scrutiny from the investment community, other stakeholders, regulators, and the media related to our sustainability activities, including our commitments, goals, targets, and objectives, and our methodologies and timelines for pursuing them. If our sustainability practices do not meet the rapidly evolving, varied and often times conflicting investor or other stakeholder expectations and standards, our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, or as an acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our commitments, goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy reporting standards with respect to these matters, within the timelines we announce, or at all, could have operational, reputational, financial and legal impacts.
Financial Risks
If the separation and split-off of our Upstream Energy business or certain internal transactions undertaken in anticipation of the divestiture are determined to be taxable in whole or in part, we and our stockholders may incur significant tax liabilities.
In connection with the separation and split-off of our Upstream Energy business that was consummated on June 3, 2020, we obtained opinions of outside tax counsel that the related merger and exchange offer will qualify as tax-free transactions to us and our stockholders, except to the extent that cash was paid to Ecolab stockholders in lieu of fractional shares. We have not sought or obtained a ruling from the Internal Revenue Service (“IRS”) on the tax consequences of these transactions. An opinion of counsel is not binding on the IRS or the courts, which may disagree with the opinion. Even if the merger and exchange offer otherwise qualified as tax-free transactions, they may become taxable to us if certain events occur that affect either Ecolab or ChampionX Corporation. While ChampionX Corporation has agreed not to take certain actions that could cause the transactions not to qualify as tax-free transactions and is generally obligated to indemnify us against any tax consequences if it breaches this agreement, the potential tax liabilities could have a material adverse effect on us if we were not entitled to indemnification or if the indemnification obligations were not fulfilled. If the merger or exchange offer were determined to be taxable, we could be subject to a substantial tax liability, and each U.S. holder of our common stock who participated in the exchange offer could be treated as exchanging the Ecolab shares surrendered for ChampionX Corporation shares in a taxable transaction.
Changes in tax laws and unanticipated tax liabilities could materially and adversely affect the taxes we pay and our profitability.
We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. We are also impacted by actions taken to tax-related matters by associations such as the Organization for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries, and the European Commission which influence tax policies in countries where we operate. In particular, the OECD has coordinated negotiations among more than 140 jurisdictions with the goal of achieving consensus on various substantial changes to the international tax framework, including a 15% global minimum taxation regime (“Pillar Two”). Pillar Two took effect in several jurisdictions in which we operate starting in 2024 and will increase the burden and costs of our tax compliance. The enactment of the One Big Beautiful Bill Act (“OBBBA”) in the U.S. introduced changes to U.S. international tax provisions. These changes may interact with Pillar Two in complex ways. Statements by the Group of Seven Nations (“G7”) suggest a potential “side-by-side” framework that could exempt certain U.S. parented groups from all or certain aspects of Pillar Two rules but the final outcome remains uncertain. The evolving nature of these reforms may impact our tax profile, increase compliance costs, and create additional risks of double taxation or inconsistent treatment across jurisdictions. We continue to monitor Pillar Two legislative developments, which, based on information available, have not had material impacts on the 2025 financial statements. In addition, we are impacted by settlements of pending or any future adjustments proposed by the IRS or other taxing authorities in connection with our tax audits, all of which will depend on their timing, nature and scope. Increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. An estimate of the financial impact has been included in operating results as of December 31, 2025. While we expect certain provisions of OBBBA to change the timing of U.S. cash taxes related to the current and future periods, OBBBA did not have a material impact to the Company’s income tax expense.
Future events may impact our deferred tax position, including the utilization of foreign tax credits and undistributed earnings of international affiliates that are considered to be reinvested indefinitely.
We evaluate the recoverability of deferred tax assets and the need for deferred tax liabilities based on available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this determination, we evaluate all positive and negative evidence as of the end of each reporting period. Future adjustments (either increases or decreases), to the deferred tax asset valuation allowance are determined based upon changes in the expected realization of the net deferred tax assets. The realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry-back or carry-forward periods under the tax law. Due to significant estimates used to establish the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record adjustments to the valuation allowance in future reporting periods. Changes to the valuation allowance or the amount of deferred tax liabilities could have a material adverse effect on our consolidated results of operations or financial position. Further, should we change our assertion regarding the permanent reinvestment of the undistributed earnings of international affiliates, a deferred tax liability may need to be established.
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Table of ContentsOur indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could materially and adversely affect our liquidity and financial statements.
As of December 31, 2025, we had approximately $8.2 billion in outstanding indebtedness, with approximately $1.5 billion in the form of floating rate debt. Our debt level and related debt service obligations may have negative consequences, including:
● requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which reduces the funds we have available for other purposes such as acquisitions and capital investment;
● reducing our flexibility in planning for or reacting to changes in our business and market conditions;
● exposing us to interest rate risk since a portion of our debt obligations are at variable rates. For example, a one percentage point increase in the average interest rate on our floating rate debt at December 31, 2025 would increase future interest expense by approximately $15 million per year; and
● increasing our cost of funds and materially and adversely affecting our liquidity and access to the capital markets should we fail to maintain the credit ratings assigned to us by independent rating agencies.
If we add new debt, the risks described above could increase.We incur significant expenses related to the amortization of intangible assets and may be required to report losses resulting from the impairment of goodwill or other assets recorded in connection with the Nalco, Purolite and Ovivo Electronics transactions and other acquisitions.We expect to continue to complete selected acquisitions and joint venture transactions in the future. In connection with acquisition and joint venture transactions, applicable accounting rules generally require the tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values. Intangible assets other than goodwill are required to be amortized over their estimated useful lives and this expense may be significant. Any excess in the purchase price paid by the acquiring company over the fair value of tangible and intangible assets of the acquired business is recorded as goodwill. If it is later determined that the anticipated future cash flows from the acquired business may be less than the carrying values of the assets and goodwill of the acquired business, the assets or goodwill may be deemed to be impaired. In this case, the acquiring company may be required under applicable accounting rules to write down the value of the assets or goodwill on its balance sheet to reflect the extent of the impairment. This write-down of assets or goodwill is generally recognized as a non-cash expense in the statement of operations of the acquiring company for the accounting period during which the write down occurs. As of December 31, 2025, we had goodwill of $9.2 billion which is maintained in various reporting units, including goodwill from the Nalco, Purolite and Ovivo Electronics transactions. If we determine that any of the assets or goodwill recorded in connection with the Nalco, Purolite, and Ovivo Electronics transactions or any other prior or future acquisitions or joint venture transactions have become impaired, we will be required to record a loss resulting from the impairment. Impairment losses could be significant and could have a material adverse effect on our consolidated results of operations and financial position.
Item 7 · Management's Discussion & Analysis
+374 paragraphs −379 paragraphs ~374 changed
FY 2024-12-31 (earlier)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.
The discussion should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Our consolidated financial statements are prepared in accordance with U.S. GAAP. This discussion contains various Non-GAAP Financial Measures and also contains various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements and information set forth in the sections entitled “Non-GAAP Financial Measures” at the end of this MD&A, and “Forward-Looking Statements” and “Risk Factors” within Items 1 and 1A of this Form 10-K. We also refer readers to the tables within the section entitled “Results of Operations” of this MD&A for reconciliation information of Non-GAAP measures to U.S. GAAP.
Comparability of Results
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 an agreement with ChampionX to provide, receive or transfer certain products for a transitionary period. Transitionary period 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. The remaining sales to ChampionX are recorded in product and equipment sales in the Global Industrial segment along with the related cost of sales. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of the business for August through December 2023 from these organic measures for the year ended December 31, 2023 to remain comparable to the corresponding period in 2024. 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, 2024, the former Textile Care and Colloidal Technologies Group (“CTG”) operating segments are now part of the Water operating segment which continues to remain in the Global Industrial reportable segment. Additionally, the Pest Elimination operating segment, formerly aggregated with the Textile Care and CTG operating segments within Other, is now reported as the stand-alone Global Pest Elimination reportable segment. We made other immaterial changes, including the movement of certain customers and cost allocations between reportable segments. After these changes, we have eight operating segments.
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.
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Table of Contents
EXECUTIVE SUMMARY
In 2024, we delivered record sales, operating income margin, free cash flow, and adjusted diluted earnings per share. Our team generated high single digit sales growth in Institutional & Specialty and Pest Elimination while Industrial and Healthcare and Life Sciences generated good sales growth. Operating income grew by strong double digits, as strong value pricing, lower delivered product costs, and higher volumes overcame investments in the business.
Sales
Reported sales increased 3% to $15.7 billion in 2024 from $15.3 billion in 2023. When measured in fixed rates of foreign currency exchange, fixed currency sales increased 3% compared to the prior year. Organic sales increased 4% compared to the prior year.
Gross Margin
Our reported gross margin was 43.5% of sales for 2024, compared to our 2023 reported gross margin of 40.2%. Excluding the impact of special (gains) and charges included in cost of sales, our adjusted gross margin was 43.5% in 2024 and 40.4% in 2023. Our gross profit increase reflected strong value pricing and lower delivered product costs.
Operating Income
Reported operating income increased 41% to $2.8 billion in 2024, compared to $2.0 billion in 2023. Adjusted operating income, excluding the impact of special (gains) and charges increased 23% in 2024 as strong value pricing, lower delivered product costs, and higher volumes were partially offset by investments in the business. Organic operating income increased 26% in 2024.Earnings from Continuing Operations Attributable to Ecolab Per Common Share (“EPS”)Reported diluted EPS increased 54% to $7.37 in 2024 compared to $4.79 in 2023. Special (gains) and charges had an impact on both years. Special (gains) and charges in 2024 were driven primarily by the gain on sale of the global surgical solutions business and restructuring expense and 2023 were driven primarily by restructuring expense. Adjusted diluted EPS, which excludes the impact of special (gains) and charges and discrete tax items increased 28% to $6.65 in 2024 compared to $5.21 in 2023 which reflected solid organic sales growth, lower delivered product costs and continued investments in the business.
Balance Sheet
We remain committed to maintaining “A” range ratings metrics over the long-term, supported by our current credit ratings of A-/A3/A- by Standard & Poor’s, Moody’s Investor Services and Fitch, respectively. Our strong balance sheet has allowed us continued access to capital at attractive rates.
Cash Flow
Cash flow from operating activities was $2.8 billion in 2024 compared to $2.4 billion in 2023. We continued to generate strong cash flow from operations, allowing us to fund our ongoing operations, investments in our business, acquisitions, debt repayments, pension obligations and return cash to our shareholders through share repurchases and dividend payments.
Dividends
Dividends declared per common share in 2024 was $2.36 per share. In December 2024 we increased our quarterly cash dividend by 14% to $0.65 per share, representing our 33 rd consecutive annual dividend rate increase. We have paid cash dividends on our common shares for 88 consecutive years. Our outstanding dividend history reflects our long-term growth and development, strong cash flows, solid financial position and confidence in our business prospects for the years ahead.
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CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 2 of the Notes to the Consolidated Financial Statements (“Notes”).Preparation of our consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions to be made about matters that are highly uncertain at the time the accounting estimate is made, and (2) different estimates that we reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, have a material impact on the presentation of our financial condition or results of operations.
Besides estimates that meet the “critical” estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues or expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, even from estimates not deemed critical. Our critical accounting estimates include the following:
Revenue Recognition
Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing service. Revenue from product and sold equipment is recognized when obligations under the terms of a contract with the customer are satisfied, which generally occurs with the transfer of the product or delivery of the equipment. Revenue from service and leased equipment is recognized when the services are provided, or the customer receives the benefit from the leased equipment, which is over time. 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 for leased equipment is accounted for under Topic 842 Leases and recognized on a straight-line basis over the length of the lease contract.
Our revenue policies do not provide for general rights of return. We record estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions and other volume-based incentives based primarily on historical experience and anticipated performance over the contract period. Depending on market conditions, we may increase customer incentive offerings, which could reduce gross profit margins over the term of the incentive. We also record estimated reserves for product returns and credits based on specific circumstances and credit conditions. We record an allowance for uncollectible accounts based on our estimates of expected future credit losses.
The revenue standard can be applied to a portfolio of contracts with similar characteristics if it is reasonable that the effects of applying the standard at the portfolio would not be significantly different than applying the standard at the individual contract level. We apply the portfolio approach primarily within each operating segment by geographical region. Application of the portfolio approach was focused on those characteristics that have the most significant accounting consequences in terms of their effect on the timing of revenue recognition or the amount of revenue recognized. We determined the key criteria to assess with respect to the portfolio approach, including the related deliverables, the characteristics of the customers and the timing and transfer of goods and services, which most closely aligned within the operating segments. In addition, the accountability for the business operations, as well as the operational decisions on how to go to market and the product offerings, are performed at the operating segment level. For additional information on revenue recognition, refer to Note 17.
Litigation and Environmental Liabilities
Our business and operations are subject to extensive environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use and handling of hazardous substances, waste disposal and the investigation and remediation of soil and groundwater contamination. Some risk of environmental liability is inherent in our operations.
We record liabilities related to pending litigation, environmental claims and other contingencies when a loss is probable and can be reasonably estimated. Estimates used to record such liabilities are based on our best estimate of probable future costs. We record the amounts that represent the points in the range of estimates that we believe are most probable or the minimum amount when no amount within the range is a better estimate than any other amount. Potential insurance reimbursements generally are not anticipated in our accruals for environmental liabilities or other insured losses. Expected insurance proceeds are recorded as receivables when recovery is deemed certain. While the final resolution of litigation and environmental contingencies could result in amounts different than current accruals, and therefore have an impact on our consolidated financial results in a future reporting period, we believe the ultimate outcome will not have a significant impact on our consolidated financial position. For additional information on our commitments and contingencies, refer to Note 15.
28
Table of ContentsActuarially Determined Liabilities
Pension and Postretirement Healthcare Benefit Plans
The measurement of our pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by our actuaries in their valuations and calculations. These assumptions affect the amount and timing of future pension contributions, benefit payments and expense or income recognized.
The significant assumptions used in developing the required estimates are the discount rates, expected returns on assets, projected salary and health care cost increases and mortality tables.● The discount rate assumptions for our U.S. plans are assessed using a yield curve constructed from a subset of bonds yielding greater than the median return from a population of non-callable, corporate bonds that have an average rating of AA when averaging available Moody’s Investor Services, Standard & Poor’s and Fitch ratings. The discount rates are calculated by matching each plans’ projected cash flows to the bond yield curve. For 2024 and 2023, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. In determining our U.S. pension obligations and U.S. postretirement health care obligation for 2024, our weighted-average discount rate increased to 5.58% from 4.95% at year-end 2023.● The expected rate of return on plan assets reflects asset allocations, investment strategies and views of investment advisors, and represents our expected long-term return on plan assets. Our weighted-average expected returns on U.S. plan assets used in determining the U.S. pension and U.S. postretirement health care expenses was 8.00% for 2024, 7.75% for 2023 and 7.00% for 2022.● Projected salary is based on our long-term actual experience, the near-term outlook and assumed inflation. Our weighted-average projected salary increase used in determining the U.S. pension expenses was 3.60% for 2024 and 4.03% for 2023 and 2022.● For postretirement benefit measurement purposes as of December 31, 2024, the annual rates of increase in the per capita cost of covered health care were assumed to be 8.59% for pre-65 costs. Post-65 costs are no longer used. The rates are assumed to decrease each year until they reach 4.5% in 2035 and remain at those levels thereafter.● We use mortality tables appropriate in the circumstances, which generally are the recently available mortality tables as of the respective U.S. and international measurement dates. Our year-end U.S. valuations reflect mortality tables that estimate the impacts of COVID in an endemic state. This represents a change from prior year when the impact of COVID on future mortality could not be reasonably estimated.The effects of actual results differing from our assumptions, as well as changes in assumptions, are reflected in the unrecognized gains or losses and amortized into earnings in the future. Significant differences in actual experience or significant changes in assumptions may materially affect future pension and other postretirement obligations and income or expense. The unrecognized net losses on our U.S. qualified and non-qualified pension plans increased to $526 million as of December 31, 2024, from $495 million as of December 31, 2023 (both before tax), primarily due to lower actual return on assets partially offset by current year net actuarial gains.The effect of a decrease in the discount rate or in the expected return on assets assumption as of December 31, 2024, on the December 31, 2024 defined benefit obligation and 2025 expense is shown below, assuming no changes in benefit levels. Expense amounts reflect the accounting for gains or losses as a component of other comprehensive income or expense and recognition of the impacts into earnings over time:
Effect on U.S. Pension Plans
Increase in
Higher
Assumption
Recorded
2025(millions)
Change
Obligation
Expense
Discount rate-.25 pts
$33.5
$2.5
Expected return on assets-.25 pts
N/A
4.6
Effect on U.S. Postretirement
Health Care Benefits Plans
Increase in
Higher
Assumption
Recorded
2025(millions)
Change
Obligation
Expense
Discount rate-.25 pts$2.0$-
Expected return on assets-.25 ptsN/A
-
29
Table of ContentsOur international pension obligations and underlying plan assets represent approximately one third of our global pension plans, with the majority of the amounts held in the U.K. and Eurozone countries. We use assumptions similar to our U.S. plan assumptions to measure our international pension obligations, however, the assumptions used vary by country based on specific local country requirements and information.
Refer to Note 16 for further discussion concerning our accounting policies, estimates, funded status, contributions and overall financial positions of our pension and postretirement plan obligations.
Self-Insurance
Globally we have insurance policies with varying deductible levels for property and casualty losses. We are insured for losses in excess of these deductibles, subject to policy terms and conditions and have recorded both a liability and an offsetting receivable for amounts in excess of these deductibles. We are self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. We determine our liabilities for claims on an actuarial basis.
Income Taxes
Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities, valuation allowances recorded against net deferred tax assets and unrecognized tax benefits.
Effective Income Tax Rate
Our effective income tax rate is based on annual income, statutory tax rates and tax planning available in the various jurisdictions in which we operate. Our annual effective income tax rate includes the impact of unrecognized tax benefits. We recognize the amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority. We adjust these liabilities for unrecognized tax benefits in light of changing facts and circumstances.
Tax regulations require items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, the effective income tax rate reflected in our financial statements differs from that reported in our tax returns. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as depreciation expense.
Deferred Tax Assets and Liabilities and Valuation Allowances
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, we recognize tax assets, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not. Relevant factors in determining the realizability of deferred tax assets include historical results, sources of future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes.
Unrecognized Tax Benefits
A number of years may elapse before a particular tax matter, for which we have established a liability for unrecognized tax benefits, is audited and finally resolved. The number of tax years with open tax audits varies depending on the tax jurisdiction. The Internal Revenue Service (“IRS”) has completed examinations of our U.S. federal income tax returns through 2018 and the years 2019 through 2020 are currently under audit. In addition to the U.S. federal examinations, we have ongoing audit activity in several U.S. state and foreign jurisdictions.
The tax positions we take are based on our interpretations of tax laws and regulations in the applicable federal, state and international jurisdictions. We believe our tax returns properly reflect the tax consequences of our operations, and our liabilities for unrecognized tax benefits are appropriate and sufficient for the positions taken. Because of the uncertainty of the final outcome of these examinations, we have established a liability for potential reductions of tax benefits (including related interest and penalties) for amounts that do not meet the more-likely-than-not thresholds for recognition and measurement as required by authoritative guidance. The liability for unrecognized tax benefits is reviewed throughout the year, taking into account new legislation, regulations, case law and audit results. Settlement of any particular issue could result in offsets to other balance sheet accounts, cash payments or receipts and/or adjustments to tax expense. Liabilities for unrecognized tax benefits are presented in the Consolidated Balance Sheets within other non-current liabilities. Our gross liability for unrecognized tax benefits was $34.1 million and $24.2 million as of December 31, 2024 and 2023, respectively. For additional information on income taxes refer to Note 12.30
Table of ContentsLong-Lived Assets, Intangible Assets and Goodwill
Long-Lived and Amortizable Intangible Assets
Purchased long-lived and amortizable intangible assets not acquired as part of a business combination are recorded as of their acquisition date at cost, whereas long-lived and amortizable assets acquired as part of a business combination are recorded as of their acquisition date at their fair values based on the fair value requirements defined in U.S. GAAP. This requires us to make significant estimates and assumptions relating to the present value of its future cash flows, such as growth rates, royalty rates or discount rates.
We review our long-lived and amortizable intangible assets, the net value of which was $6.5 billion and $6.3 billion as of December 31, 2024 and 2023, respectively, for impairment when significant events or changes in business circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances may include a significant decrease in the market price of an asset or asset group, a significant adverse change in the manner in which asset or asset groups are being used or history of operating or cash flow losses associated with the use of the asset or asset group. Impairment losses could occur when the carrying amount of an asset or asset group exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s or assets group’s carrying amount over its estimated fair value.
We use the straight-line method to recognize amortization expense related to our amortizable intangible assets, including our customer relationships. We consider various factors when determining the appropriate method of amortization for our customer relationships, including projected sales data, customer attrition rates and length of key customer relationships.
Globally, we have a broad customer base. Our retention rate of significant customers has aligned with our acquisition assumptions, including the customer bases acquired from our Nalco, Laboratoires Anios (“Anios”), Copal Invest NV, including its primary operating entity CID Lines (collectively, “CID Lines”) and Purolite transactions, which make up the majority of our unamortized customer relationships. Our historical retention rates, coupled with our consistent track record of keeping long-term relationships with our customers, supports our expectation of consistent sales generation for the foreseeable future from the acquired customer bases. If our customer retention rates or other post-acquisition operational activities change materially, we would evaluate the financial impacts and significance of the events given rise to the change which could result in impairment of our customer relationship intangible assets, or absent an impairment, an acceleration of amortization expense.
In addition, we periodically reassess the estimated remaining useful lives of our long-lived and amortizable intangible assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced no significant changes in the carrying amount or estimated remaining useful lives of our long-lived or amortizable intangible assets.
Goodwill and Indefinite Life Intangible Assets
Goodwill arises from our acquisitions and represents the excess of the fair value of the purchase consideration exchanged over the fair value of net assets acquired. We had total goodwill of $7.9 billion and $8.1 billion as of December 31, 2024 and 2023, respectively. We test our goodwill for impairment at the reporting unit level. Our reporting units are our eight operating segments. We assess 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, we complete an interim goodwill impairment assessment of that reporting unit prior to the next annual assessment. If the results of an annual or interim goodwill impairment assessment demonstrate the carrying amount of a reporting unit is greater than its fair value, we 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.For our annual 2024 goodwill impairment assessment, we completed our impairment assessment for our eight reporting units using discounted cash flow analyses that incorporated assumptions regarding future growth rates, terminal values and discount rates. Our goodwill impairment assessments for 2024 indicated the estimated fair values of each of these eight reporting units exceeded the carrying amounts of the respective reporting units by a significant margin. No events were noted during the second half of 2024 that required completion of an interim goodwill impairment assessment in the second half of 2024 for any of our eight reporting units. There has been no impairment of goodwill in any of the periods presented.The Nalco trade name is our only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. For our annual 2024 indefinite life intangible asset impairment assessment, we completed our impairment assessment of the Nalco trade name using the relief from royalty discounted cash flow method, which incorporates assumptions regarding future sales projections, royalty rates and discount rates. Our Nalco tradename impairment assessment for 2024 indicated the estimated fair value of the Nalco trade name exceeded its $1.2 billion carrying amount by a significant margin. No events were noted during the second half of 2024 that required completion of an interim impairment assessment of our Nalco trade name in the second half of 2024. There has been no impairment of the Nalco trade name intangible since it was acquired.
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RESULTS OF OPERATIONS
Net Sales
Percent Change
(millions)
2024
2023
2022
2024
2023Product and equipment sales
$12,473.6
$12,316.8
$11,446.2
Service and lease sales
3,267.8
3,003.4
2,741.6
Reported GAAP net sales
15,741.4
15,320.2
14,187.8
3%
8%
Effect of foreign currency translation
131.655.3
5.0
Non-GAAP adjusted fixed currency sales
15,873.0
15,375.5
14,192.8
3%
8%
Effect of acquisitions and divestitures
(131.5)
(252.5)
*
Non-GAAP organic sales
$15,741.5
$15,123.0
*
4%
*
* Not meaningful
The percentage components of the year-over-year sales change are shown below:
(percent)
20242023Volume
2%
*
%
Price changes
2
*
Organic sales change
4
*
Acquisitions and divestitures
(1)
*
Fixed currency sales change
3
8
Foreign currency translation
-
-
Reported GAAP net sales change
3%
8%
* Not meaningful
Amounts do not necessarily sum due to rounding.
Cost of Sales (“COS”) and Gross Profit Margin (“Gross Margin”)
2024
2023
2022
Gross
Gross
Gross
(millions/percent)
COS
Margin
COS
Margin
COS
Margin
Product and equipment cost of sales
$6,990.0
$7,389.2
$7,212.8
Service and lease cost of sales
1,909.7
1,765.7
1,618.2
Reported GAAP COS and gross margin
8,899.7
43.5
%
9,154.9
40.2
%8,831.0
37.8
%
Special (gains) and charges5.3
22.5
69.9
Non-GAAP adjusted COS and gross margin
$8,894.4
43.5%
$9,132.4
40.4%
$8,761.1
38.2%
Our COS values and corresponding gross margin are shown above. Our gross margin is defined as sales less cost of sales divided by sales.
Our reported gross margin was 43.5%, 40.2%, and 37.8% for 2024, 2023 and 2022, respectively. Our 2024, 2023 and 2022 reported gross margins were negatively impacted by special (gains) and charges of $5.3 million, $22.5 million, and $69.9 million, respectively. Special (gains) and charges items impacting COS are shown within the “Special (Gains) and Charges” table below.Excluding the impact of special (gains) and charges, our 2024 adjusted gross margin was 43.5% compared against a 2023 adjusted gross margin of 40.4%. Our adjusted gross margin increased when comparing 2024 against 2023 reflecting strong value pricing and lower delivered product costs.Excluding the impact of special (gains) and charges, our adjusted gross margin was 40.4% and 38.2% for 2023 and 2022, respectively. The increase primarily reflected accelerating value pricing that overcame higher supply chain costs.Selling, General and Administrative Expenses (“SG&A”)
(percent)2024
2023
2022SG&A Ratio26.9
%
26.5
%
25.8
%The increased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2024 against 2023 was driven by growth-oriented investments in the business which was partially offset by sales productivity. The increased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2023 against 2022 was driven by higher incentive compensation compared to last year which was partially offset by strong productivity including cost savings initiatives.
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Table of ContentsSpecial (Gains) and Charges
Special (gains) and charges reported on the Consolidated Statements of Income included the following items:
(millions)
2024
2023
2022Cost of sales
One Ecolab
$1.9
$-
$-
Other restructuring
3.4
22.5
21.4
Acquisition and integration activities
-
-
25.0Other
-
-
23.5
Cost of sales subtotal
5.3
22.5
69.9
Special (gains) and charges
One Ecolab
98.3
-
-
Other restructuring
21.8
63.2
85.8Sale of global surgical solutions business
(340.3)
10.3
-Acquisition and integration activities
12.6
16.1
14.5Other
18.7
21.8
40.2Special (gains) and charges subtotal
(188.9)
111.4
140.5
Operating income subtotal(183.6)
133.9
210.4
Other (income) expense
-
-
50.6
Total special (gains) and charges
($183.6)
$133.9
$261.0
For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with our internal management reporting.
One Ecolab
On July 30, 2024, we announced the One Ecolab initiative, which will enhance our growth and margin expansion journey. As a program within this initiative, we also announced that we commenced a restructuring plan to leverage our digital technologies to realign the functional work done in many countries into global centers of excellence. We anticipate restructuring costs of $175 million ($136 million after tax) or $0.47 per diluted share and special charges of $50 million ($39 million after tax) or $0.14 per diluted share by the end of 2027. We anticipate that the restructuring costs will primarily be cash expenditures for severance costs relating to team reorganization.In anticipation of this One Ecolab initiative, a limited number of actions were taken in the first and second quarter of 2024. As a result, we reclassified $5.3 million ($4.0 million after tax) or $0.01 per diluted share from other restructuring to One Ecolab in the third quarter of 2024.In 2024 we recorded restructuring charges of $76.5 million ($59.0 million after tax), or $0.21 per diluted share primarily related to severance and professional services. In addition, we recorded non-restructuring special charges of $23.7 million ($17.9 million after tax), or $0.06 per diluted share in 2024 primarily related to professional services. We have recorded $81.8 million ($63.0 million after tax), or $0.22 per diluted share of cumulative restructuring charges and $23.7 million ($17.9 million after tax), or $0.06 per diluted share of cumulative special charges under the One Ecolab initiative. Net cash payments were $26.9 million during 2024.The net restructuring liability related to the One Ecolab initiative was $54.9 million as of December 31, 2024. 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.One Ecolab has delivered $12 million of cumulative cost savings with estimated annualized cost savings of $140 million in continuing operations by 2027.Other restructuring
Other restructuring activities are primarily related to the Combined Program which is 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 3.
Combined Program
In November 2022, we approved a Europe cost savings program. In February 2023, we expanded our previously announced Europe cost savings program to focus on our Institutional and Healthcare businesses in other regions. In connection with the expanded program (the “Combined Program”), we expected to incur total pre-tax charges of $195 million ($150 million after tax) or $0.52 per diluted share. These restructuring charges were completed at the end of 2024. Program actions included headcount reductions from terminations, not filling33
Table of Contentscertain open positions, and facility closures. The Combined Program charges were 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.In 2024, 2023 and 2022 we recorded restructuring charges of $25.2 million ($18.6 million after tax) or $0.06 per diluted share, $77.7 million ($66.4 million after tax) or $0.23 per diluted share and $67.2 million ($56.0 million after tax) or $0.20 per diluted share, respectively, primarily related to severance and professional services. Restructuring activities were completed at the end of 2024, with total costs $184.1 million ($151.5 million after tax), or $0.53 per diluted share.We reclassified $5.3 million ($4.0 million after tax) or $0.01 per diluted share from the combined restructuring program to other restructuring activities in the second quarter of 2024.The net liability related to the Combined Program was $12.8 million and $43.1 million as of December 31, 2024 and 2023, respectively. Net cash payments were $48.9 million and non-cash net charges were $1.3 million during 2024.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 our targeted $175 million of annual cost savings.Other Restructuring ActivitiesDuring 2024, we recorded restructuring charges of $10.6 million ($8.0 million after tax), or $0.03 per diluted share related to an immaterial restructuring plan approved in the second quarter. This plan became part of the One Ecolab initiative in the third quarter.During 2023 and 2022, we recorded restructuring charges of $8.0 million ($6.0 million after tax), or $0.03 per diluted share and $40.0 million ($31.1 million after tax), or $0.11 per diluted share, respectively, related to immaterial or subsequently concluded restructuring programs. The charges were primarily related to severance and asset write-offs.The restructuring liability balance for all other restructuring plans excluding the One Ecolab and Combined Program, were $6.5 million and $8.2 million as of December 31, 2024 and 2023, 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 2024 related to all other restructuring plans excluding the One Ecolab and Combined Programs were $2.2 million.
Sale of global surgical solutions businessOn April 27, 2024, we reached a definitive agreement to sell our global surgical solutions business, which closed on August 1, 2024. During 2024 we recorded a gain on sale of $355.9 million ($257.7 million after tax) or ($0.90) per diluted share, as described in Note 4. Excluding the gain on sale, we recorded charges of $15.6 million ($12.0 million after tax) or $0.05 per diluted share in 2024, which are primarily related to professional fees to support the sale. During 2023 we recorded charges of $10.3 million ($7.7 million after tax) or $0.03 per diluted share, primarily related to professional fees to support the sale.
Acquisition and integration related costs
Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2024 include $12.6 million ($9.6 million after tax) or $0.03 per diluted share, primarily related to the Purolite transaction.Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2023 include $16.1 million ($12.0 million after tax) or $0.04 per diluted share. Charges are integration related costs primarily related to the Purolite transaction.Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2022 include $14.5 million ($11.4 million after tax) or $0.04 per diluted share. Charges are related primarily to the Purolite transaction and consist of integration related costs, advisory and legal fees. Acquisition and integration related costs reported in product and equipment cost of sales on the Consolidated Statements of Income in 2022 include $25.0 million ($19.6 million after tax) or $0.07 per diluted share. Charges are related primarily to the recognition of fair value step-up in the Purolite inventory and other integration costs.
Other operating activities
During 2022, we recorded other operating activities to cost of sales on the Consolidated Statements of Income of $23.5 million ($19.6 million after tax), or $0.06 per diluted share relating primarily to COVID-19 activities.During 2024, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $18.7 million ($13.9 million after tax), or $0.05 per diluted share, relating primarily to a liability relating to a prior divestiture, COVID-19 activities, and certain legal charges. During 2023 and 2022, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $21.8 million ($16.7 million after tax), or $0.05 per diluted share, and $40.2 million ($31.4 million after tax), or $0.11 per diluted share, respectively, relating primarily to certain legal charges.34
Table of ContentsOther (income) expense
During 2022, we incurred settlement expense recorded in other (income) expense on the Consolidated Statements of Income of $50.6 million ($38.2 million after tax) or $0.13 per diluted share, respectively, related to U.S. pension plan lump-sum payments to retirees.
Operating Income and Operating Income Margin
Percent Change
(millions)202420232022
20242023Reported GAAP operating income
$2,802.4
$1,992.3
$1,562.5
41%
28%
Special (gains) and charges
(183.6)
133.9
210.4
Non-GAAP adjusted operating income
2,618.8
2,126.2
1,772.9
23
20
Effect of foreign currency translation
32.9
9.4
(5.3)
Non-GAAP adjusted fixed currency operating income
2,651.7
2,135.6
1,767.6
Effect of acquisitions and divestitures
(7.5)
(38.4)
*
Non-GAAP organic operating income
$2,644.2
$2,097.2
*
26%
*
* Not meaningful
(percent)2024
2023
2022
Reported GAAP operating income margin
17.8%
13.0%
11.0%
Non-GAAP adjusted operating income margin
16.6%
13.9%
12.5%
Non-GAAP adjusted fixed currency operating income margin
16.7%
13.9%
12.5%
Non-GAAP organic operating income margin
16.8%
13.9%
*
* Not meaningful
Our operating income and corresponding operating income margin are shown in the previous tables. Operating income margin is defined as operating income divided by sales.
Our reported operating income was $2,802.4 million, $1,992.3 million and $1,562.5 for 2024, 2023 and 2022, respectively. Our 2024, 2023 and 2022 operating incomes were negatively (positively) impacted by special (gains) and charges of ($183.6 million), $133.9 million, and $210.4 million, respectively.Excluding the impacts of special (gains) and charges, 2024 adjusted operating income increased 23% as strong value pricing, lower delivered product costs, and higher volumes were partially offset by investments in the business. Excluding the impacts of special (gains) and charges 2023 adjusted operating income increased 20% as strong pricing overcame investments in the business including incentive compensation, higher supply chain costs and unfavorable mix.
Other (Income) Expense
(millions)202420232022Reported GAAP other (income) expense
($51.3)
($59.9)
($24.5)
Special (gains) and charges
-
-
50.6
Non-GAAP adjusted other (income) expense
($51.3)
($59.9)
($75.1)Our reported other income was $51.3 million, $59.9 million and $24.5 million in 2024, 2023 and 2022, respectively. Other (income) expense decreased when comparing 2024 against 2023 primarily due to higher pension costs. Other (income) expense increased when comparing 2023 against 2022 as higher pension costs were more than offset by the comparison to last year’s $50.6 million settlement expense related to U.S. pension plan lump-sum payments to retirees. Excluding the impact of settlements and curtailments recorded in special (gains) and charges during 2024, 2023 and 2022, our adjusted other income was $51.3 million, $59.9 million and $75.1 million, respectively.Interest Expense, Net
(millions)
2024
2023
2022
Reported GAAP interest expense, net
$282.5
$296.7
$243.6
Our reported net interest expense totaled $282.5 million, $296.7 million and $243.6 million during 2024, 2023 and 2022, respectively.
The decrease in net interest expense when comparing 2024 against 2023 was driven primarily by lower interest expense from the repayment of our January 2024 note and the impact from higher interest income earned on cash balances driven by strong free cash flows and proceeds from the sale of the global surgical solutions business. The increase in interest expense when comparing 2023 against 2022 was driven primarily by the higher average interest rates on outstanding debt.
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Table of Contents
Provision for Income Taxes
The following table provides a summary of our tax rate:
(percent)202420232022Reported GAAP tax rate
17.1
%
20.6
%
17.5
%Tax rate impact of:
Special (gains) and charges(1.1)
(0.1)0.5Discrete tax items
3.3
(0.6)
0.7Non-GAAP adjusted tax rate19.3%
19.9
%18.7
%Our reported tax rate was 17.1%, 20.6%, and 17.5%, for 2024, 2023 and 2022, respectively. 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 a net tax benefit related to discrete tax items of $78.6 million during 2024. Discrete items include tax benefits of $62.1 million associated with capital losses and $30.4 million of additional basis of foreign intangible assets. The remaining net discrete tax expense of $13.9 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefit and other changes in estimates.We recognized a net tax expense related to discrete tax items of $11.2 million during 2023. The net discrete tax expense was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefits and other changes in estimates.
We recognized a net tax benefit related to discrete tax items of $11.8 million during 2022. 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 $6.0 million. The remaining discrete tax expense of $8.8 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements and other changes in estimates.The change in our adjusted tax rates from 2023 to 2024 was primarily driven by geographic income mix. Future comparability of our adjusted tax rate may be impacted by various factors, including but not limited to other changes in global tax rules, further tax planning projects and geographic income mix.
Net Income Attributable to Ecolab
Percent Change
(millions)202420232022
20242023Reported GAAP net income attributable to Ecolab
$2,112.4
$1,372.3
$1,091.754%
26%
Adjustments:
Special (gains) and charges, after tax
(126.7)
109.2
207.3
Discrete tax net (benefit) expense
(78.6)
11.2
(11.8)
Non-GAAP adjusted net income attributable to Ecolab
$1,907.1
$1,492.7
$1,287.228%
16%
Diluted EPS
Percent Change
(dollars)202420232022
20242023Reported GAAP diluted EPS
$7.37
$4.79
$3.8154%
26%
Adjustments:
Special (gains) and charges, after tax
(0.44)
0.38
0.72
Discrete tax net (benefit) expense
(0.28)
0.04
(0.04)
Non-GAAP adjusted diluted EPS
$6.65
$5.21
$4.4928%
16%
Per share amounts do not necessarily sum due to rounding.
Currency translation had an unfavorable ($0.09) impact on reported and adjusted diluted EPS when comparing 2024 to 2023 and unfavorable ($0.05) impact when comparing 2023 to 2022.
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Table of Contents
SEGMENT PERFORMANCE
The non-U.S. dollar functional currency international amounts included within our reportable segments are based on translation into U.S. dollars at the fixed currency exchange rates established by management for 2024. 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. Additional information about our reportable segments is included in Note 18.Fixed currency net sales and operating income for 2024, 2023 and 2022 for our reportable segments are shown in the following tables.
Net Sales
Percent Change
(millions)20242023202220242023
Global Industrial$7,857.2$7,640.5$7,172.6
3
%
7%
Global Institutional & Specialty
5,413.9
5,014.64,433.2
8
13Global Healthcare & Life Sciences
1,434.1
1,607.5
1,534.3(11)
5Global Pest Elimination1,167.8
1,070.2963.5
9
11
Corporate
-
42.7
89.2(100)
(52)
Subtotal at fixed currency
15,873.0
15,375.514,192.8
3
8
Effect of foreign currency translation
(131.6)
(55.3)(5.0)
Consolidated reported GAAP net sales
$15,741.4
$15,320.2
$14,187.8
3%
8%
Operating Income
Percent Change
(millions)20242023202220242023
Global Industrial$1,300.6$1,122.0$948.9
16
%
18
%Global Institutional & Specialty
1,182.7
841.8631.9
40
33Global Healthcare & Life Sciences
147.2
160.8
193.4(8)
(17)Global Pest Elimination220.4
210.4197.3
5
7
Corporate
(15.8)
(332.8)(414.3)
(95)
(20)
Subtotal at fixed currency
2,835.1
2,002.21,557.2
42
29
Effect of foreign currency translation
(32.7)
(9.9)5.3
Consolidated reported GAAP operating income
$2,802.4
$1,992.3
$1,562.5
41%
28%
The following tables reconcile the impact of acquisitions and divestitures within our reportable segments.
Year ended
December 31
Net Sales
20242023(millions)Fixed Currency
Impact of Acquisitions and Divestitures
Organic
Fixed Currency
Impact of Acquisitions and Divestitures
OrganicGlobal Industrial$7,857.2($89.3)$7,767.9$7,640.5($26.7)$7,613.8Global Institutional & Specialty5,413.9(32.0)5,381.95,014.6-5,014.6
Global Healthcare & Life Sciences
1,434.1
-
1,434.1
1,607.5
(183.1)
1,424.4Global Pest Elimination1,167.8(10.2)1,157.61,070.2-1,070.2
Corporate
-
-
-
42.7(42.7)
-Subtotal at fixed currency15,873.0(131.5)15,741.515,375.5(252.5)15,123.0Effect of foreign currency translation(131.6)
(55.3)
Consolidated reported GAAP net sales$15,741.4
$15,320.2
Operating Income
20242023(millions)Fixed Currency
Impact of Acquisitions and Divestitures
Organic
Fixed Currency
Impact of Acquisitions and Divestitures
OrganicGlobal Industrial$1,300.6($6.1)$1,294.5$1,122.0($1.3)$1,120.7Global Institutional & Specialty1,182.7(1.8)1,180.9841.8-841.8
Global Healthcare & Life Sciences
147.2-147.2160.8(35.7)125.1
Global Pest Elimination220.40.4220.8210.4
-
210.4Corporate
(199.2)
-
(199.2)(199.4)(1.4)(200.8)Non-GAAP adjusted fixed currency operating income2,651.7(7.5)2,644.22,135.6(38.4)2,097.2Special (gains) and charges(183.4)
133.4
Subtotal at fixed currency2,835.1
2,002.2
Effect of foreign currency translation(32.7)
(9.9)
Consolidated reported GAAP operating income$2,802.4
$1,992.3
37
Table of ContentsGlobal Industrial
2024
2023
2022Sales at fixed currency (millions)
$7,857.2
$7,640.5
$7,172.6
Sales at public currency (millions)
7,777.2
7,626.5
7,197.1
Organic sales change
2
%
*
Acquisitions and divestitures
1
%
*
Fixed currency sales change
3
%
7%
Foreign currency translation
(1)%
(1)%
Public currency sales change
2%
6%
Operating income at fixed currency (millions)
$1,300.6
$1,122.0
$948.9
Operating income at public currency (millions)
1,280.5
1,122.0
959.8
Fixed currency operating income change
16%
18%
Fixed currency operating income margin
16.6%
14.7%
13.2%
Organic operating income change
16%
*
Organic operating income margin
16.7%
14.7%
*
Public currency operating income change
14%
17%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Organic sales for Global Industrial increased in 2024 driven by strong new business wins and value pricing which overcame uneven end-market trends. Organic sales for Global Industrial increased in 2023 driven by strong pricing and new business wins partially offset by weaker markets.At an operating segment level, Water organic sales increased 3% in 2024 reflecting strong growth in downstream and light water. Water organic sales increased 8% in 2023 driven by strong pricing and new business wins. Light water reported strong sales growth in 2024 driven by strong performance across institutional, food & beverage and high-tech and good sales growth in 2023 driven by strong performance across high-tech and institutional. Heavy water in 2024 reported sales growth driven by new business wins that overcame softer market trends in primary metals and chemicals and good sales growth in 2023 driven by strong pricing, gains in primary metals and growth in chemicals. Downstream reported strong sales growth in 2024 driven by strong growth in refining and water management and strong growth in 2023 driven by innovative water treatment programs. Food & Beverage organic sales increased 1% in 2024 as good new business wins more than offset continued soft industry trends and comparisons to last year’s strong growth. Organic sales increased 9% in 2023 reflecting continued pricing, strong performance in dairy, and solid growth in beverage & brewing and animal health. Paper organic sales were flat in 2024 as strong new business wins were offset by soft but stabilizing customer production rates. Organic sales decreased 1% in 2023 as pricing and new business wins were offset by easing customer production rates.Operating IncomeOrganic operating income and organic operating income margins for Global Industrial increased in both 2024 and 2023 when compared to prior periods.Organic operating income margins increased 2.0 percentage points during 2024 compared to 2023, as the 4.2 percentage point positive impacts of lower delivered product costs, strong pricing, and higher volumes were partially offset by the 2.3 percentage point negative impacts of investments in the business. Organic operating income margins increased in 2023 compared to 2022, as the positive impacts of strong pricing overcame the negative impacts of investments in business including incentive compensation, lower volume, and higher supply chain costs.
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Table of Contents
Global Institutional & Specialty
2024
2023
2022Sales at fixed currency (millions)
$5,413.9
$5,014.6
$4,433.2
Sales at public currency (millions)
5,382.6
4,999.2
4,432.1
Organic sales change
7%
*
Acquisitions and divestitures
1%
*
Fixed currency sales change
8%
13%
Foreign currency translation
-
%
-
%
Public currency sales change
8%
13%
Operating income at fixed currency (millions)
$1,182.7
$841.8
$631.9
Operating income at public currency (millions)
1,173.8
838.7
632.5
Fixed currency operating income change
40%
33%
Fixed currency operating income margin
21.8%
16.8%
14.3%
Organic operating income change
40%
*
Organic operating income margin
21.9%
16.8%
*
Public currency operating income change
40%
33%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Organic sales for Global Institutional & Specialty increased in 2024 continuing to significantly outperform end-market trends. The 2023 sales increased driven by strong pricing and new business wins.
At an operating segment level, Institutional organic sales increased 7% in 2024 reflecting sales growth across restaurants and lodging. Organic sales increased 12% in 2023, driven by strong pricing and new business wins. Specialty organic sales increased 7% in 2024 and 13% in 2023 reflecting growth in quick service and food retail in both years.
Operating Income
Organic operating income and organic operating income margin for our Global Institutional & Specialty segment increased in both 2024 and 2023 when compared to prior periods.Organic operating income margins increased 5.1 percentage points during 2024, as the 6.6 percentage point positive impacts from strong pricing, lower supply chain costs and higher volumes were partially offset by the 1.9 percentage point negative impacts of investments in the business. Organic operating income margins increased during 2023, as the positive impact from strong pricing and cost savings initiatives overcame the negative impacts of investments in the business including incentive compensation and higher supply chain costs.
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Table of ContentsGlobal Healthcare & Life Sciences
2024
2023
2022Sales at fixed currency (millions)
$1,434.1
$1,607.5
$1,534.3
Sales at public currency (millions)
1,418.8
1,586.0
1,510.5
Organic sales change
1%
*
Acquisitions and divestitures
(11)%
*
Fixed currency sales change
(11)%
5%
Foreign currency translation
-
%
-
%
Public currency sales change
(11)%
5%
Operating income at fixed currency (millions)
$147.2
$160.8
$193.4
Operating income at public currency (millions)
143.3
154.9
189.4
Fixed currency operating income change
(8)%
(17)%
Fixed currency operating income margin
10.3%
10.0%
12.6%
Organic operating income change
18%
*
Organic operating income margin
10.3%
8.8%
*
Public currency operating income change
(7)%
(18)%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Reported sales for 2024 reflected the sale of Ecolab’s global surgical solutions business, which closed in the third quarter 2024. Organic sales for Global Healthcare & Life Sciences increased in 2024 as compared to 2023 driven by continued growth in Life Sciences partially offset by modestly lower Healthcare sales. Organic sales for Global Healthcare & Life Sciences increased in 2023 as compared to 2022 driven by strong pricing and new business wins.At an operating segment level, Healthcare organic sales decreased 1% in 2024 as strategic low margin business exits were partially offset by value pricing. Organic sales increased 7% in 2023 driven by pricing and strong growth in North America. Life Sciences organic sales increased 3% in 2024 reflecting new business wins and progressively improving industry trends. Organic sales increased 1% in 2023 as pricing was more than offset by soft near-term industry demand.
Operating Income
Organic operating income and organic operating income margins for our Global Healthcare & Life Sciences segment both increased in 2024 when compared to 2023. Organic operating income and organic operating income margins for our Global Healthcare & Life Sciences segment both decreased in 2023 when compared to 2022.Organic operating income margins increased 1.5 percentage points in 2024, as the 3.5 percentage point positive impact from strong pricing and lower supply chain costs were partially offset by the 1.6 percentage point negative impacts from lower volumes in the business. Organic operating income margins decreased in 2023, as the positive impact from strong pricing was more than offset by the negative impacts from targeted investments in the business, unfavorable mix and higher supply chain costs.40
Table of ContentsGlobal Pest Elimination
2024
2023
2022Sales at fixed currency (millions)
$1,167.8
$1,070.2
$963.5
Sales at public currency (millions)
1,162.8
1,066.0
959.0
Organic sales change
8%
*
Acquisitions and divestitures
1%
*
Fixed currency sales change
9%
11%
Foreign currency translation
-%
-
%
Public currency sales change
9%
11%
Operating income at fixed currency (millions)
$220.4
$210.4
$197.3
Operating income at public currency (millions)
219.5
209.7
195.6
Fixed currency operating income change
5%
7%
Fixed currency operating income margin
18.9%
19.7%
20.5%
Organic operating income change
5%
*
Organic operating income margin
19.1%
19.7%
*
Public currency operating income change
5%
7%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Organic sales for Global Pest Elimination increased 8% in 2024 led by strong growth in food & beverage, restaurants and food retail.
Operating Income
Organic operating income in Global Pest Elimination increased in 2024 compared to 2023. Organic operating income margins decreased in 2024 when compared to 2023.Organic operating income margins in Global Pest Elimination decreased 0.6 percentage points in 2024, as the 4.4 percentage point positive impacts from strong pricing and higher volumes were more than offset by the 5.8 percentage point negative impacts of investments in the business and costs associated with a fourth quarter spike in accidents.
Corporate
Consistent with our internal management reporting, Corporate amounts in the table on page 37 include sales to ChampionX in accordance with the transitional supply agreement entered into with the transaction post-separation, as discussed in Note 17, 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 33.
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Table of Contents
FINANCIAL POSITION, CASH FLOW AND LIQUIDITY
Financial Position
Total assets were $22.4 billion as of December 31, 2024, compared to total assets of $21.8 billion as of December 31, 2023.
Total liabilities were $13.6 billion as of December 31, 2024, compared to total liabilities of $13.8 billion as of December 31, 2023. Total debt was $7.6 billion as of December 31, 2024 and $8.2 billion as of December 31, 2023. See further discussion of our debt activity within the “Liquidity and Capital Resources” section of this MD&A.Our net debt to 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.
2024
2023
2022(ratio)
Net debt to EBITDA
1.7
2.4
3.2
(millions)
Total debt
$7,564.9
$8,181.8
$8,580.4Cash
1,256.8
919.5
598.6Net debt
$6,308.1
$7,262.3
$7,981.8
Net income including noncontrolling interest
$2,131.9
$1,393.0
$1,108.9Provision for income taxes
439.3
362.5
234.5Interest expense, net
282.5
296.7
243.6Depreciation
634.9
616.7
618.5Amortization
300.5
306.9
320.2EBITDA
$3,789.1
$2,975.8
$2,525.7
Cash Flows
Operating Activities
Dollar Change
(millions)20242023
202220242023Cash provided by operating activities
$2,813.9
$2,411.8
$1,788.4
$402.1
$623.4
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 $402 million in 2024 compared to 2023, driven by a $739 million increase in net income less $258 million net gain on sale of global surgical solutions business.
Cash provided by operating activities increased $623 million in 2023 compared to 2022, driven primarily by $332 million net favorable change in working capital and $284 million increase in net income. The cash flow impact from working capital was primarily driven by improvement in inventory due to management efforts following easing global supply chain constraints and an improvement in receivables offset by a decrease in accounts payable primarily associated with our inventory reduction efforts.
The impact on operating cash flows of pension and postretirement plan contributions, cash activity related to restructuring, cash paid for income taxes and cash paid for interest, are shown in the following table:
Dollar Change
(millions)
20242023
202220242023Pensions and postretirement plan contributions$54.4
$109.3
$64.3
($54.9)
$45.0Restructuring payments
78.0
118.3
41.0
(40.3)
77.3Income tax payments
647.4
469.2
308.9
178.2
160.3Interest payments
342.6
324.8
222.4
17.8
102.4
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Investing Activities
Dollar Change
(millions)20242023
202220242023Cash used for investing activities
($433.8)
($990.5)
($716.8)
$556.7
($273.7)
Cash provided by (used for) investing activities is primarily impacted by the timing of business acquisitions and dispositions as well as from capital investments in the business.
We continue to make capital investments in the business, including merchandising and customer equipment and manufacturing facilities. Total capital expenditures were $995 million, $775 million and $713 million in 2024, 2023 and 2022, respectively.Total cash provided by (used for) acquisitions, net of cash acquired along with dispositions, net of cash divested, in 2024, 2023 and 2022 was $313 million, $180 million and $7 million, respectively. Our acquisitions and divestitures are discussed further in Note 4. 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
Dollar Change
(millions)20242023
202220242023Cash used for financing activities
($2,024.1)
($1,054.7)
($837.3)
($969.4)
($217.4)
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.
There were no long-term debt issuances in 2024 or 2023. We issued $500 million par value and received $494 million in proceeds of long-term debt in 2022. The proceeds received from the debt issuances were used for repayment of outstanding debt, repayment of commercial paper and general corporate purposes. In addition, we had commercial paper and notes payable net issuances of $2 million in 2024 and net repayments of $2 million and $404 million in 2023 and 2022, respectively. We repaid $630 million and $500 million of long-term debt in 2024 and 2023, respectively.
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 repurchased a total of $987 million, $14 million, and $518 million of shares in 2024, 2023 and 2022, respectively.
The impact on financing cash flows of commercial paper and notes payable repayments, long-term debt borrowings and long-term debt repayments, are shown in the following table:
Dollar Change
(millions)
20242023
202220242023Net issuances (repayments) of commercial paper and notes payable
$1.9
($1.9)
($404.3)
$3.8
$402.4Long-term debt borrowings
-
-
494.0
-
(494.0)Long-term debt repayments
(630.4)
(500.0)
-
(130.4)
(500.0)In December 2024, we increased our quarterly dividend rate by 14%. This represents the 33 rd consecutive year we have increased our dividend. We have paid dividends on our common stock for 88 consecutive years. We paid dividends of $664 million, $617 million and $603 million in 2024, 2023 and 2022, respectively. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Year2024
$0.57
$0.57
$0.57
$0.65
$2.362023$0.53$0.53
$0.53
$0.57
$2.162022$0.51$0.51
$0.51
$0.53
$2.06
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Liquidity and Capital Resources
We currently expect to fund all of our 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 December 31, 2024, we had $1,257 million of cash and cash equivalents on hand, of which $382 million was held outside of the U.S. As of December 31, 2023, we had $920 million of cash and cash equivalents on hand, of which $880 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.In January 2024, we repaid €575 million ($630 million) of long-term debt.As of December 31, 2024, we had 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 year end, we had no commercial paper outstanding under our U.S. program nor our Euro program. There were no borrowings under our credit facility as of December 31, 2024 or 2023. As of December 31, 2024, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.Additionally, we have uncommitted credit lines with major international banks and financial institutions. These credit lines support our daily global funding needs, primarily our global cash pooling structures. As of December 31, 2024 we had $165 million of bank supported letters of credit, surety bonds and guarantees outstanding in support of our commercial business transactions. We do not have any other significant unconditional purchase obligations or commercial commitments.As of December 31, 2024, Standard & Poor’s, Fitch and Moody’s rated our long-term credit at A- (stable outlook), A- (stable outlook) and A3 (stable outlook), respectively. A reduction in our credit ratings could limit or preclude our ability to issue commercial paper under our current programs or could also adversely affect our ability to renew existing, or negotiate new, credit facilities in the future and could increase the cost of these facilities.
As of December 31, 2024, we were in compliance with our debt covenants and other requirements of our credit agreements and indentures.
A schedule of our various obligations as of December 31, 2024 are summarized in the following table:
Payments Due by Period
Less
More
Than
2-3
4-5
Than
(millions)
Total
1 Year
Years
Years
5 YearsNotes payable
$4
$4
$-
$-
$-
One-time transition tax
6832
36
-
-
Long-term debt
7,561612
1,696
500
4,753
Operating leases
809159
268
130
252
Interest*
3,526295
543
379
2,309
Total
$11,968
$1,102
$2,543
$1,009
$7,314
*Interest on variable rate debt was calculated using the interest rate at year end 2024.As of December 31, 2024, our gross liability for unrecognized tax benefits was $34 million. We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended period of time or whether a cash settlement of the liability will be required. Therefore, these amounts have been excluded from the schedule of contractual obligations.
We do not have required minimum cash contribution obligations for our qualified pension plans in 2024. We are required to fund certain international pension benefit plans in accordance with local legal requirements. We estimate contributions to be made to our international plans will approximate $48 million in 2025. These amounts have been excluded from the schedule of contractual obligations.We lease certain sales and administrative office facilities, distribution centers, research and manufacturing facilities and other equipment under longer-term operating leases. Vehicle leases are generally shorter in duration. Vehicle leases have residual value requirements that have historically been satisfied primarily by the proceeds on the sale of the vehicles.
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Market Risk
We enter into contractual arrangements (derivatives) in the ordinary course of business to manage foreign currency exposure and interest rate risks. We do not enter into derivatives for speculative or trading purposes. Our use of derivatives is subject to internal policies that provide guidelines for control, counterparty risk, and ongoing monitoring and reporting, and is designed to reduce the volatility associated with movements in foreign exchange and interest rates on our income statement and cash flows.We enter into foreign currency forward contracts to hedge certain intercompany financial arrangements, and to hedge against the effect of exchange rate fluctuations on transactions related to cash flows denominated in currencies other than U.S. dollars. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations. As of December 31, 2024, we had a total of €575 million senior notes designated as net investment hedges.We enter into cross-currency swap derivative contracts to hedge certain Euro denominated exposures from our investments in certain of its Euro denominated functional currency subsidiaries. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations. As of December 31, 2024, we had €1,575 million of cross-currency swap derivative contracts outstanding designated as a net investment hedge.We enter into cross-currency swap derivative contracts to hedge certain Chinese Yuan (“CNY”) denominated exposures from our investments in certain CNY denominated functional currency subsidiaries. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations. As of December 31, 2024, we had CNH 3,619 million (CNH is the CNY traded in the offshore market) of cross-currency swap derivative contracts outstanding designated as a net investment hedge.We manage interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, we may enter into interest rate swap agreements. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. As of December 31, 2024, we had $1,500 million of interest rate swaps outstanding.
Refer to Note 8 for further information on our hedging activity.
Based on a sensitivity analysis (assuming a 10% change in market rates) of our foreign exchange and interest rate derivatives and other financial instruments, changes in exchange rates or interest rates would increase/decrease our financial position and liquidity by approximately $262 million. The effect on our results of operations would be substantially offset by the impact of the hedged items.GLOBAL ECONOMIC AND POLITICAL 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.
Argentina, Turkey and Egypt 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, Turkey and Egypt. During 2024, sales in Argentina, Turkey and Egypt represented approximately 1% of our consolidated sales. Assets held in Argentina, Turkey and Egypt at the end of 2024 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 to 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, such as the imposition of additional sanctions by the United States. Our Russian and Ukraine operations represented approximately 1% of our 2024 consolidated net sales. We recorded charges of $1.4 million and $13.1 million in 2023 and 2022, respectively, primarily related to recoverability risk of certain assets in both Russia and Ukraine. We cannot predict the progress or outcome of world geopolitical events, including the Russia and Ukraine conflict, or the consequences thereof.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 2.
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Table of ContentsSUBSEQUENT EVENTS
In February 2025, we entered into cross-currency swap derivative contracts with notional amounts of €300 million and CAD 280 million. These cross-currency swap derivative contracts are designated as net investment hedges of our Euro or CAD denominated exposures from our investments in certain of our Euro or CAD denominated functional currency subsidiaries.Effective in the first quarter of 2025, we modified our organizational structure. As a result, our Global Industrial reportable segment was renamed Global Water and includes the Light & Heavy (previously named Water), Food & Beverage, and Paper operating segments. Our Global Institutional & Specialty reportable segment continues to include the Institutional and Specialty operating segments. Our former healthcare operating segment moved into the Institutional operating segment. Global Life Sciences was elevated to a standalone reportable segment. The Global Pest Elimination segment remains a standalone reportable segment.
NON-GAAP FINANCIAL MEASURES
This MD&A includes financial measures that have not been calculated in accordance with U.S. GAAP. These non-GAAP measures include:● Fixed currency sales
● Adjusted net sales
● Adjusted 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
● Adjusted other (income) expense● Adjusted interest expense, net
● EBITDA
● Adjusted tax rate
● Adjusted net income attributable to Ecolab
● Adjusted diluted EPS
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.Our non-GAAP adjusted financial measures for cost of sales, gross margin, operating income and other (income) expense exclude the impact of special (gains) and charges and our non-GAAP adjusted financial measures for tax rate, net income attributable to Ecolab and 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 non-controlling 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-K are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2024. 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.
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Table of ContentsOur 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. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of the business for August through December 2023 from these organic measures for the years ended December 31, 2023 to remain comparable to the corresponding period in 2024. As part of the separation of ChampionX in 2020, we entered into an agreement with ChampionX to provide, receive or transfer certain products for a transitionary period. Transitionary period sales of product to ChampionX under this agreement are recorded in product and equipment sales in Corporate along with the related cost of sales. The remaining sales to ChampionX are recorded in product and equipment sales in the Global Industrial 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 in this MD&A.
FY 2025-12-31 (later)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative or qualitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.
The discussion should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Our consolidated financial statements are prepared in accordance with U.S. GAAP. This discussion contains various Non-GAAP Financial Measures and also contains various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements and information set forth in the sections entitled “Non-GAAP Financial Measures” at the end of this MD&A, and “Forward-Looking Statements” and “Risk Factors” within Items 1 and 1A of this Form 10-K. We also refer readers to the tables within the section entitled “Results of Operations” of this MD&A for reconciliation information of Non-GAAP measures to U.S. GAAP.
Comparability of Results
Ovivo Electronics Acquisition
On December 16, 2025, we acquired Ovivo’s electronics business (“Ovivo Electronics”) for total consideration of $1.6 billion in cash. Ovivo Electronics is a leading and fast-growing global provider of breakthrough ultrapure water technologies for semiconductor manufacturing. Ovivo Electronics is reported within our Light & Heavy operating segment. Acquisition and integration charges are recorded within special (gains) and charges. The remaining impacts of the Ovivo Electronics acquisition, including operating results, acquisition-related amortization and interest expense related to the transaction, have also been excluded from adjusted results.
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. In addition, as part of the separation of ChampionX in 2020, we continue to provide certain products to ChampionX which are recorded in product and equipment sales in the Global Water segment along with the related cost of sales. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of that business for January through July 2024 from these organic measures for the year ended December 31, 2024 to remain comparable to the corresponding period in 2025. 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, 2025, the Company’s former Global Industrial reportable segment was renamed Global Water and includes the Light & Heavy (previously named Water), Food & Beverage, and Paper operating segments. The Global Institutional & Specialty reportable segment continues to include the Institutional and Specialty operating segments. The Company’s former healthcare operating segment moved into the Institutional operating segment. Global Life Sciences was elevated to a standalone reportable segment. The Global Pest Elimination segment remains a standalone reportable segment. After these changes, the Company has seven operating segments.
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.
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EXECUTIVE SUMMARY
In 2025, we delivered record sales, operating income margin, adjusted diluted earnings per share, and free cash flows. Our team generated strong organic sales growth in Global Pest Elimination and Global Life Sciences, and good organic sales growth in Global Institutional & Specialty and Global Water. Organic operating income grew by double digits, as strong value pricing and improved productivity were partially offset by investments in the business.
Sales
Reported sales increased 2% to $16.1 billion in 2025 from $15.7 billion in 2024. When measured in fixed rates of foreign currency exchange, fixed currency sales increased 2% compared to the prior year. Organic sales increased 3% compared to the prior year.
Gross Margin
Our reported gross margin was 44.5% of sales for 2025, compared to our 2024 reported gross margin of 43.5%. Excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition included in cost of sales, our adjusted gross margin was 44.5% in 2025 and 43.5% in 2024. Our gross margin increase reflected strong value pricing.
Operating Income
Reported operating income decreased 2% to $2.7 billion in 2025, compared to $2.8 billion in 2024. Adjusted operating income, excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition increased 11% in 2025 as strong value pricing and improved productivity were partially offset by investments in the business. Organic operating income increased 13% in 2025.Earnings Attributable to Ecolab Per Common Share (“EPS”)Reported diluted EPS decreased 1% to $7.28 in 2025, compared to $7.37 in 2024. Special (gains) and charges had an impact on both years. Special (gains) and charges in 2025 were primarily related to One Ecolab, while in 2024 they were driven primarily by the gain on sale of the global surgical solutions business and restructuring expense. Adjusted diluted EPS, which excludes the impact of special (gains) and charges, discrete tax items and the Ovivo Electronics acquisition increased 13% to $7.53 in 2025 compared to $6.65 in 2024 which reflected good organic sales growth and robust operating income margin expansion.
Balance Sheet
We remain committed to maintaining “A” range ratings metrics over the long-term, supported by our current credit ratings of A-/A3/A- by Standard & Poor’s, Moody’s Investor Services and Fitch, respectively. Our strong balance sheet has allowed us continued access to capital at attractive rates.
Cash Flow
Cash flow from operating activities was $3.0 billion in 2025, compared to $2.8 billion in 2024. We continued to generate strong cash flow from operations, allowing us to fund our ongoing operations, investments in our business, acquisitions, debt repayments, pension obligations and return cash to our shareholders through share repurchases and dividend payments.
Dividends
Dividends declared per common share in 2025 were $2.68 per share. In December 2025 we increased our quarterly cash dividend by 12% to $0.73 per share, representing our 34 th consecutive annual dividend rate increase. We have paid cash dividends on our common shares for 89 consecutive years. Our outstanding dividend history reflects our long-term growth and development, strong cash flows, solid financial position and confidence in our business prospects for the years ahead.
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CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 2, “Significant Accounting Policies,” of the Notes to the Consolidated Financial Statements (“Notes”).Preparation of our consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are considered to be critical if they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
Besides estimates that meet the “critical” estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues or expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, even from estimates not deemed critical. Our critical accounting estimates include the following:
Actuarially Determined Liabilities
Pension and Postretirement Healthcare Benefit Plans
The measurement of our pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by our actuaries in their valuations and calculations. These assumptions affect the amount and timing of future pension contributions, benefit payments and expense or income recognized.
The significant assumptions used in developing the required estimates are the discount rates, expected returns on assets and projected salary and health care cost increases.● The discount rate assumptions for our U.S. plans are assessed using a yield curve constructed from a subset of bonds yielding greater than the median return from a population of non-callable, corporate bonds that have an average rating of AA when averaging available Moody’s Investor Services, Standard & Poor’s and Fitch ratings. The discount rates are calculated by matching each plans’ projected cash flows to the bond yield curve. For 2025 and 2024, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. In determining our U.S. pension obligations and U.S. postretirement health care obligation for 2025, our weighted-average discount rate decreased to 5.28% from 5.58% at year-end 2024.● The expected rate of return on plan assets reflects asset allocations, investment strategies and views of investment advisors, and represents our expected long-term return on plan assets. Our weighted-average expected returns on U.S. plan assets used in determining the U.S. pension and U.S. postretirement health care expenses was 8.25% for 2025, 8.00% for 2024, and 7.75% for 2023.● Projected salary is based on our long-term actual experience, the near-term outlook and assumed inflation. Our weighted-average projected salary increase used in determining the U.S. pension expenses was 3.60% for 2025, 3.60% for 2024, and 4.03% for 2023.● For postretirement benefit measurement purposes as of December 31, 2025, the annual rates of increase in the per capita cost of covered health care were assumed to be 8.15% for pre-65 costs. Post-65 costs are no longer used. The rates are assumed to decrease each year until they reach 4.5% in 2035 and remain at those levels thereafter.The effects of actual results differing from our assumptions, as well as changes in assumptions, are reflected in the unrecognized gains or losses and amortized into earnings in the future. Significant differences in actual experience or significant changes in assumptions may materially affect future pension and other postretirement obligations and income or expense. The unrecognized net losses on our U.S. qualified and non-qualified pension plans decreased to $486 million as of December 31, 2025, from $526 million as of December 31, 2024 (both before tax), primarily due to higher actual return on assets.28
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The effect of a decrease in the discount rate or in the expected return on assets assumption as of December 31, 2025, on the December 31, 2025 defined benefit obligation and 2026 expense is shown below, assuming no changes in benefit levels. Expense amounts reflect the accounting for gains or losses as a component of other comprehensive income or expense and recognition of the impacts into earnings over time:
Effect on U.S. Pension Plans
Increase in
Higher
Assumption
Recorded
2026(millions)
Change
Obligation
Expense
Discount rate
0.25 pts
$33.1
$2.5
Expected return on assets0.25 pts
N/A
4.4
Effect on U.S. Postretirement
Health Care Benefits Plans
Increase in
Higher
Assumption
Recorded
2026(millions)
Change
Obligation
Expense
Discount rate
0.25 pts$1.9
$-
Expected return on assets0.25 ptsN/A
-
Our international pension obligations and underlying plan assets represent approximately one third of our global pension plans, with the majority of the amounts held in the U.K. and Eurozone countries. We use assumptions similar to our U.S. plan assumptions to measure our international pension obligations, however, the assumptions used vary by country based on specific local country requirements and information.
Refer to Note 16, “Retirement Plans,” of the Notes for further discussion concerning our accounting policies, estimates, funded status, contributions and overall financial positions of our pension and postretirement plan obligations.
Self-Insurance
Globally we have insurance policies with varying deductible levels for property and casualty losses. We are insured for losses in excess of these deductibles, subject to policy terms and conditions and have recorded both a liability and an offsetting receivable for amounts in excess of these deductibles. We are self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. We determine our liabilities for claims on an actuarial basis.
Income Taxes
Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities, valuation allowances recorded against net deferred tax assets and unrecognized tax benefits.
Effective Income Tax Rate
Our effective income tax rate is based on annual income, statutory tax rates and tax planning available in the various jurisdictions in which we operate. Our annual effective income tax rate includes the impact of unrecognized tax benefits. We recognize the amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority. We adjust these liabilities for unrecognized tax benefits in light of changing facts and circumstances.
Tax regulations require items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, the effective income tax rate reflected in our financial statements differs from statutory tax rates. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as depreciation expense.
Deferred Tax Assets and Liabilities and Valuation Allowances
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, we recognize tax assets, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not. Relevant factors in determining the realizability of deferred tax assets include historical results, sources of future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes.
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Table of ContentsUnrecognized Tax Benefits
A number of years may elapse before a particular tax matter, for which we have established a liability for unrecognized tax benefits, is audited and finally resolved. The number of tax years with open tax audits varies depending on the tax jurisdiction. The Internal Revenue Service (“IRS”) has completed examinations of our U.S. federal income tax returns through 2018 and the years 2019 through 2020 are currently under audit. In addition to the U.S. federal examinations, we have ongoing audit activity in several U.S. state and foreign jurisdictions.
The tax positions we take are based on our interpretations of tax laws and regulations in the applicable federal, state and international jurisdictions. We believe our tax returns properly reflect the tax consequences of our operations, and our liabilities for unrecognized tax benefits are appropriate and sufficient for the positions taken. Because of the uncertainty of the final outcome of these examinations, we have established a liability for potential reductions of tax benefits (including related interest and penalties) for amounts that do not meet the more-likely-than-not thresholds for recognition and measurement as required by authoritative guidance. The liability for unrecognized tax benefits is reviewed throughout the year, taking into account new legislation, regulations, case law and audit results. Settlement of any particular issue could result in offsets to other balance sheet accounts, cash payments or receipts and/or adjustments to tax expense. Liabilities for unrecognized tax benefits are presented in the Consolidated Balance Sheets within other non-current liabilities. Our gross liability for unrecognized tax benefits was $53.9 million and $34.1 million as of December 31, 2025 and 2024, respectively. For additional information on income taxes refer to Note 12, “Income Taxes,” of the Notes.Long-Lived Assets, Intangible Assets and Goodwill
Long-Lived and Amortizable Intangible Assets
Purchased long-lived and amortizable intangible assets not acquired as part of a business combination are recorded as of their acquisition date at cost, whereas long-lived and amortizable assets acquired as part of a business combination are recorded as of their acquisition date at their fair values based on the fair value requirements defined in U.S. GAAP. This requires us to make significant estimates and assumptions relating to the present value of its future cash flows, such as growth rates, royalty rates or discount rates.
We review our long-lived and amortizable intangible assets, the net value of which was $7.5 billion and $6.5 billion as of December 31, 2025 and 2024, respectively, for impairment when significant events or changes in business circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances may include a significant decrease in the market price of an asset or asset group, a significant adverse change in the manner in which asset or asset groups are being used or history of operating or cash flow losses associated with the use of the asset or asset group. Impairment losses could occur when the carrying amount of an asset or asset group exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s or assets group’s carrying amount over its estimated fair value.
We use the straight-line method to recognize amortization expense related to our amortizable intangible assets, including our customer relationships. We consider various factors when determining the appropriate method of amortization for our customer relationships, including projected sales data, customer attrition rates and length of key customer relationships.
Globally, we have a broad customer base. Our retention rate of significant customers has aligned with our acquisition assumptions, including the customer bases acquired from our Nalco, Laboratoires Anios (“Anios”), Copal Invest NV, including its primary operating entity CID Lines (collectively, “CID Lines”), Purolite and Ovivo Electronics transactions, which make up the majority of our unamortized customer relationships. Our historical retention rates, coupled with our consistent track record of keeping long-term relationships with our customers, support our expectation of consistent sales generation for the foreseeable future from the acquired customer bases. If our customer retention rates or other post-acquisition operational activities change materially, we would evaluate the financial impacts and significance of the events given rise to the change which could result in impairment of our customer relationship intangible assets, or absent an impairment, an acceleration of amortization expense.
In addition, we periodically reassess the estimated remaining useful lives of our long-lived and amortizable intangible assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced no significant changes in the carrying amount or estimated remaining useful lives of our long-lived or amortizable intangible assets.
30
Table of ContentsGoodwill and Indefinite Life Intangible Assets
Goodwill arises from our acquisitions and represents the excess of the fair value of the purchase consideration exchanged over the fair value of net assets acquired. We had total goodwill of $9.2 billion and $7.9 billion as of December 31, 2025 and 2024, respectively. We test our goodwill for impairment at the reporting unit level. Our reporting units are our seven operating segments. We assess 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, we complete an interim goodwill impairment assessment of that reporting unit prior to the next annual assessment. If the results of an annual or interim goodwill impairment assessment demonstrate the carrying amount of a reporting unit is greater than its fair value, we 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.For our annual 2025 goodwill impairment assessment, we completed our impairment assessment for our seven reporting units using discounted cash flow analyses that incorporated assumptions regarding future growth rates, terminal values and discount rates. Our goodwill impairment assessments for 2025 indicated the estimated fair values of each of these seven reporting units exceeded the carrying amounts of the respective reporting units by a significant margin. No events were noted during the second half of 2025 that required completion of an interim goodwill impairment assessment in the second half of 2025 for any of our seven reporting units. There has been no impairment of goodwill in any of the periods presented.The Nalco trade name is our only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. For our annual 2025 indefinite life intangible asset impairment assessment, we completed our impairment assessment of the Nalco trade name using the relief from royalty discounted cash flow method, which incorporates assumptions regarding future sales projections, royalty rates and discount rates. Our Nalco tradename impairment assessment for 2025 indicated the estimated fair value of the Nalco trade name exceeded its $1.2 billion carrying amount by a significant margin. No events were noted during the second half of 2025 that required completion of an interim impairment assessment of our Nalco trade name in the second half of 2025. There has been no impairment of the Nalco trade name intangible since it was acquired.
31
Table of Contents
RESULTS OF OPERATIONS
Net Sales
Percent Change
(millions)
2025
2024
2023
2025
2024Product and equipment sales
$12,618.5
$12,473.6
$12,316.8
Service and lease sales
3,462.7
3,267.8
3,003.4
Reported GAAP net sales
16,081.2
15,741.4
15,320.2
2
%3
%
Impact of Ovivo Electronics on net sales
(3.7)
-
-
Non-GAAP adjusted net sales
16,077.5
15,741.4
15,320.2
2%
3%
Effect of foreign currency translation
(514.0)(468.0)
(519.2)
Non-GAAP adjusted fixed currency sales
15,563.5
15,273.4
14,801.0
2%
3%
Effect of acquisitions and divestitures
(87.2)
(248.4)
*
Non-GAAP organic sales
$15,476.3
$15,025.0
*
3%
*
* Not meaningful
The percentage components of the year-over-year sales change are shown below:
(percent)
20252024Volume
1%
*
%
Price changes
2
*
Organic sales change
3
*
Acquisitions and divestitures
(1)
*
Fixed currency sales change
2
3
Foreign currency translation
-
-
Reported GAAP net sales change
2%
3%
* Not meaningful
Amounts do not necessarily sum due to rounding.
Cost of Sales (“COS”) and Gross Profit Margin (“Gross Margin”)
2025
2024
2023
Gross
Gross
Gross
(millions/percent)
COS
Margin
COS
Margin
COS
Margin
Product and equipment cost of sales
$6,955.8
$6,990.0
$7,389.2
Service and lease cost of sales
1,975.0
1,909.7
1,765.7
Reported GAAP COS and gross margin
8,930.8
44.5
%
8,899.7
43.5
%
9,154.9
40.2
%Special (gains) and charges7.7
5.3
22.5
Impact of Ovivo Electronics on COS3.5
-
-
Non-GAAP adjusted COS and gross margin
$8,919.6
44.5%
$8,894.4
43.5%
$9,132.4
40.4%
Our COS values and corresponding gross margin are shown above. Our gross margin is defined as sales less cost of sales divided by sales.
Our reported gross margin was 44.5%, 43.5%, and 40.2% for 2025, 2024, and 2023, respectively. Our 2025, 2024 and 2023 reported gross margins were negatively impacted by special (gains) and charges of $7.7 million, $5.3 million, and $22.5 million, respectively. Special (gains) and charges items impacting COS are shown within the “Special (Gains) and Charges” table below.Excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition, our 2025 adjusted gross margin was 44.5% compared against a 2024 adjusted gross margin of 43.5%. Our adjusted gross margin increased when comparing 2025 against 2024 reflecting strong value pricing.Excluding the impact of special (gains) and charges, our adjusted gross margin was 43.5% and 40.4% for 2024 and 2023, respectively. The increase primarily reflected strong value pricing and lower delivered product costs.32
Table of ContentsSelling, General and Administrative Expenses (“SG&A”)
(percent)
2025
2024
2023SG&A Ratio26.5
%
26.9
%
26.5
%
The decreased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2025 against 2024 was driven by productivity which was partially offset by growth-oriented investments in the business. The increased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2024 against 2023 was driven by growth-oriented investments in the business which was partially offset by sales productivity.Special (Gains) and Charges
Special (gains) and charges reported on the Consolidated Statements of Income included the following items:
(millions)
2025
2024
2023Cost of sales
One Ecolab
$7.7
$1.9
$-
Other restructuring
-
3.4
22.5Cost of sales subtotal7.7
5.3
22.5
Special (gains) and charges
One Ecolab
140.2
98.3
-
Other restructuring
(12.0)
21.8
63.2
Sale of global surgical solutions business
3.0
(340.3)
10.3
Acquisition and integration activities
36.1
12.6
16.1
Other(12.4)18.7
21.8
Special (gains) and charges subtotal154.9(188.9)
111.4
Total special (gains) and charges$162.6
($183.6)
$133.9
For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with our internal management reporting. Per share amounts do not necessarily sum due to rounding.One Ecolab
On July 30, 2024, we announced the One Ecolab initiative, which will enhance our growth and margin expansion journey. As a program within this initiative, we also announced that we commenced a restructuring plan to leverage our digital technologies to realign the functional work done in many countries into global centers of excellence. In February 2026, we expanded the One Ecolab initiative and anticipate total restructuring costs of $334 million ($261 million after tax) or $0.91 per diluted share and special charges of $91 million ($71 million after tax) or $0.25 per diluted share by the end of 2027. We anticipate that the restructuring costs will primarily be cash expenditures for severance costs relating to team realignment. We also expanded the estimated annualized cost savings to $325 million in continuing operations by 2027. One Ecolab has delivered $119 million of cumulative cost savings.In anticipation of the One Ecolab initiative, a limited number of actions were taken in the first and second quarter of 2024. As a result, we reclassified $5.3 million ($4.0 million after tax) or $0.01 per diluted share from other restructuring to One Ecolab in the third quarter of 2024.We recorded restructuring charges of $117.0 million ($90.5 million after tax), or $0.32 per diluted share and $76.5 million ($59.0 million after tax), or $0.21 per diluted share in 2025 and 2024, respectively, primarily related to severance and professional services. In addition, we recorded non-restructuring special charges of $30.9 million ($23.4 million after tax), or $0.08 per diluted share and $23.7 million ($17.9 million after tax), or $0.06 per diluted share in 2025 and 2024, respectively, primarily related to professional services. We have recorded $198.8 million ($153.5 million after tax), or $0.54 per diluted share of cumulative restructuring charges and $54.6 million ($41.3 million after tax), or $0.14 per diluted share of cumulative special charges under the One Ecolab initiative. Net cash payments were $75.8 million during 2025 and $26.9 million in 2024.The net restructuring liability related to the One Ecolab initiative was $96.1 million and $54.9 million as of December 31, 2025 and 2024, 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.33
Table of ContentsOther restructuringOther restructuring is primarily related to the Combined Program which is 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 3, “Special (Gains) and Charges,” of the Notes.In November 2022, we approved a Europe cost savings program and subsequently expanded the program to focus on our Institutional and Healthcare businesses in other regions (the “Combined Program”). The restructuring activities were completed at the end of 2024, with total costs of $184.1 million ($151.5 million after tax), or $0.53 per diluted share. Subsequent to the completion of the Combined Program, we finalized the sale of a facility, resulting in a gain of $12.0 million ($9.2 million after tax), or $(0.03) per diluted share in the second quarter of 2025.In 2024 and 2023, we recorded restructuring (gains) charges of $25.2 million ($18.6 million after tax) or $0.06 per diluted share, and $77.7 million ($66.4 million after tax), or $0.23 per diluted share, respectively, primarily related to severance and professional services in the Combined Program.We reclassified $5.3 million ($4.0 million after tax), or $0.01 per diluted share from the combined restructuring program to other restructuring activities in the second quarter of 2024.During 2024, we recorded restructuring charges of $10.6 million ($8.0 million after tax), or $0.03 per diluted share related to an immaterial restructuring plan approved in the second quarter of 2024. This plan became part of the One Ecolab initiative in the third quarter of 2024.During 2023, we recorded restructuring charges of $8.0 million ($6.0 million after tax), or $0.03 per diluted share related to immaterial or subsequently concluded restructuring programs. The charges were primarily related to severance and asset write-offs.The restructuring liability balance for all other restructuring plans excluding the One Ecolab Program was $8.8 million and $19.3 million as of December 31, 2025 and 2024, 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 2025 related to all other restructuring plans excluding the One Ecolab Program was $10.4 million.Sale of global surgical solutions businessOn April 27, 2024, we reached a definitive agreement to sell our global surgical solutions business, which closed on August 1, 2024. During 2024, we recorded a gain on sale of $355.9 million ($257.7 million after tax) or ($0.90) per diluted share, as described in Note 4, “Acquisitions and Dispositions,” of the Notes. During 2025, we recorded charges of $3.0 million ($2.3 million after tax) or $0.01 per diluted share, which are primarily related to professional fees to support the sale. Excluding the gain on sale, we recorded charges of $15.6 million ($12.0 million after tax), or $0.05 per diluted share in 2024, which are primarily related to professional fees to support the sale. During 2023, we recorded charges of $10.3 million ($7.7 million after tax) or $0.03 per diluted share, primarily related to professional fees to support the sale.
Acquisition and integration related costs
Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2025 include $36.1 million ($31.2 million after tax), or $0.11 per diluted share, primarily related to the Ovivo Electronics and Purolite transactions.Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2024 and 2023 include $12.6 million ($9.6 million after tax) or $0.03 per diluted share and $16.1 million ($12.0 million after tax), or $0.04 per diluted share, respectively, primarily related to the Purolite transaction.Other operating activities
During 2025, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of ($12.4 million) ($10.8 million gain after tax), or ($0.04) per diluted share, relating primarily to the sale of an equity method investment.During 2024, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $18.7 million ($13.9 million after tax), or $0.05 per diluted share, relating primarily to a liability relating to a prior divestiture, COVID-19 activities, and certain legal charges. During 2023, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $21.8 million ($16.7 million after tax), or $0.05 per diluted share, relating primarily to certain legal charges.
34
Table of ContentsOperating Income and Operating Income Margin
Percent Change
(millions)
2025
2024 2023
20252024Reported GAAP operating income
$2,737.6
$2,802.4
$1,992.3
(2)%
41%
Special (gains) and charges
162.6
(183.6)
133.9
Impact of Ovivo Electronics on operating income
0.5
-
-
Non-GAAP adjusted operating income
2,900.7
2,618.8
2,126.2
11
23
Effect of foreign currency translation
(115.9)
(103.4)
(102.9)
Non-GAAP adjusted fixed currency operating income
2,784.8
2,515.4
2,023.3
11
24Effect of acquisitions and divestitures
(10.6)
(52.7)
*
Non-GAAP organic operating income
$2,774.2
$2,462.7
*
13%
*
* Not meaningful
(percent)
2025
2024
2023
Reported GAAP operating income margin
17.0%
17.8%
13.0%
Non-GAAP adjusted operating income margin
18.0%
16.6%
13.9%
Non-GAAP adjusted fixed currency operating income margin
17.9%
16.5%
13.7%
Non-GAAP organic operating income margin
17.9%
16.4%
*
* Not meaningful
Our operating income and corresponding operating income margin are shown in the previous tables. Operating income margin is defined as operating income divided by sales.
Our reported operating income was $2,737.6 million, $2,802.4 million, and $1,992.3 million, for 2025, 2024, and 2023, respectively. Our 2025, 2024 and 2023 operating incomes were negatively (positively) impacted by special (gains) and charges of $162.6 million, ($183.6 million) and $133.9 million, respectively.Excluding the impacts of special (gains) and charges and the Ovivo Electronics acquisition, 2025 adjusted operating income increased 11% as strong value pricing and improved productivity were partially offset by investments in the business. Excluding the impacts of special (gains) and charges 2024 adjusted operating income increased 23% as strong value pricing, lower delivered product costs, and higher volumes were partially offset by investments in the business.
Other (Income) Expense
(millions)
2025
2024 2023Reported GAAP other (income) expense
($51.4)
($51.3)
($59.9)
Our reported other income was $51.4 million, $51.3 million and $59.9 million, in 2025, 2024 and 2023, respectively. Other (income) expense was flat when comparing 2025 against 2024. Other (income) expense decreased when comparing 2024 against 2023 primarily due to higher pension costs.Interest Expense, Net
(millions)
2025
2024
2023
Reported GAAP interest expense, net
$241.1$282.5
$296.7
Impact of Ovivo Electronics on interest expense
3.6
-
-
Non-GAAP adjusted interest expense, net
$237.5
$282.5
$296.7
Our reported net interest expense totaled $241.1 million, $282.5 million, and $296.7 million during 2025, 2024, and 2023, respectively.Adjusted for the Ovivo Electronics acquisition, the decrease in net interest expense when comparing 2025 against 2024 reflects the impact from lower interest rates and a higher cash balance. The decrease in interest expense when comparing 2024 against 2023 was driven primarily by lower interest expense from the repayment of our January 2024 note and the impact from higher interest income earned on cash balances driven by strong free cash flows and proceeds from the sale of the global surgical solutions business.35
Table of Contents
Provision for Income Taxes
The following table provides a summary of our tax rate:
(percent)
20252024
2023Reported GAAP tax rate
17.8
%
17.1
%
20.6
%Tax rate impact of:
Special (gains) and charges0.3
(1.1)(0.1)Discrete tax items
2.1
3.3
(0.6)
Ovivo Electronics tax impacts-
-
-
Non-GAAP adjusted tax rate20.2%
19.3
%19.9
%Our reported tax rate was 17.8%, 17.1% and 20.6%, for 2025, 2024, and 2023, respectively. 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 a net tax benefit related to discrete tax items of $57.5 million during 2025. Discrete items include tax benefits of $21.5 million associated with recognition of deferred tax attributes and $16.8 million related to share-based compensation excess tax benefits. The remaining net discrete tax benefit of $19.2 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, and other changes in estimates.We recognized a net tax benefit related to discrete tax items of $78.6 million during 2024. Discrete items include tax benefits of $62.1 million associated with a change to the tax classification of a wholly-owned non-US subsidiary that resulted in recognizing a capital loss and benefit of $30.4 million due to additional basis of foreign intangible assets. The remaining net discrete tax expense of $13.9 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefits, and other changes in estimates.
We recognized a net tax expense related to discrete tax items of $11.2 million during 2023. The net discrete tax expense was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefits and other changes in estimates.
The change in our adjusted tax rates from 2024 to 2025 was primarily driven by geographic income mix. Future comparability of our adjusted tax rate may be impacted by various factors, including but not limited to other changes in global tax rules, further tax planning projects and geographic income mix.Net Income Attributable to Ecolab
Percent Change
(millions)
2025
2024 2023
20252024Reported GAAP net income attributable to Ecolab
$2,075.6
$2,112.4
$1,372.3(2)%
54%
Adjustments:
Special (gains) and charges, after tax
127.4
(126.7)
109.2
Discrete tax net (benefit) expense
(57.5)
(78.6)
11.2
Impact of Ovivo Electronics on net income
3.1
-
-
Non-GAAP adjusted net income attributable to Ecolab
$2,148.6
$1,907.1
$1,492.713%
28%
Diluted EPS
Percent Change
(dollars)
2025
2024 2023
20252024Reported GAAP diluted EPS
$7.28
$7.37
$4.79(1)%
54%
Adjustments:
Special (gains) and charges, after tax
0.45
(0.44)
0.38
Discrete tax net (benefit) expense
(0.21)
(0.28)
0.04
Impact of Ovivo Electronics on diluted EPS
0.01
-
-
Non-GAAP adjusted diluted EPS
$7.53
$6.65
$5.2113%
28%
Per share amounts do not necessarily sum due to rounding.
Currency translation had a favorable $0.04 impact on reported and adjusted diluted EPS when comparing 2025 to 2024 and unfavorable ($0.09) impact when comparing 2024 to 2023.36
Table of Contents
SEGMENT PERFORMANCE
The non-U.S. dollar functional currency international amounts included within our reportable segments are based on translation into U.S. dollars at the fixed currency exchange rates established by management for 2025. 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, “Significant Accounting Policies,” of the Notes. Additional information about our reportable segments is included in Note 18, “Operating Segment and Geographic Information,” of the Notes.Fixed currency net sales and operating income for 2025, 2024 and 2023 for our reportable segments are shown in the following tables.
Net Sales
Percent Change
(millions)
2025
2024 2023
2025
2024Global Water$7,679.9 $7,483.4
$7,284.13
%
3%
Global Institutional & Specialty
5,962.0
5,979.45,779.4
0
3Global Pest Elimination
1,219.2
1,140.1
1,044.37
9Global Life Sciences706.1
670.5650.8
5
3
Corporate
-
-
42.4*
*
Subtotal at fixed currency
15,567.2
15,273.414,801.0
2
3
Effect of foreign currency translation
514.0
468.0519.2
Consolidated reported GAAP net sales
$16,081.2
$15,741.4
$15,320.2
2%
3%
Operating Income
Percent Change
(millions)
2025
2024 2023
2025
2024Global Water$1,263.9 $1,207.2
$1,042.15
%
16
%Global Institutional & Specialty
1,357.8
1,202.2856.5
13
40Global Pest Elimination
237.1
209.7
200.913
4Global Life Sciences120.7
91.8118.9
31
(23)
Corporate
(353.2)
(12.1)(329.0)
*
*
Subtotal at fixed currency
2,626.3
2,698.81,889.4
(3)
43
Effect of foreign currency translation
111.3
103.6102.9
Consolidated reported GAAP operating income
$2,737.6
$2,802.4
$1,992.3
(2)%
41%* Not meaningful
The following tables reconcile the impact of acquisitions and divestitures within our reportable segments.
Year ended
December 31
Net Sales
20252024(millions) Fixed Currency
Impact of Acquisitions and Divestitures
Organic
Fixed Currency
Impact of Acquisitions and Divestitures
OrganicGlobal Water$7,679.9($80.2)$7,599.7$7,483.4($30.9)$7,452.5Global Institutional & Specialty5,962.0(1.4)5,960.65,979.4(217.5)5,761.9Global Pest Elimination1,219.2(9.3)1,209.91,140.1-
1,140.1
Global Life Sciences
706.1
-
706.1670.5
-
670.5Subtotal at fixed currency15,567.2(90.9)15,476.315,273.4(248.4)15,025.0Effect of foreign currency translation514.0
468.0
Consolidated reported GAAP net sales$16,081.2
$15,741.4
Operating Income
20252024(millions) Fixed Currency
Impact of Acquisitions and Divestitures
Organic
Fixed Currency
Impact of Acquisitions and Divestitures
OrganicGlobal Water$1,263.9($10.1)$1,253.8$1,207.2$0.2$1,207.4Global Institutional & Specialty1,357.80.51,358.31,202.2(52.9)1,149.3
Global Pest Elimination
237.1(0.5)236.6209.7-209.7
Global Life Sciences120.7-120.791.8
-
91.8Corporate
(195.2)
-
(195.2)(195.5)-(195.5)Non-GAAP adjusted fixed currency operating income2,784.3(10.1)2,774.22,515.4(52.7)2,462.7Special (gains) and charges158.0
(183.4)
Subtotal at fixed currency2,626.3
2,698.8
Effect of foreign currency translation111.3
103.6
Consolidated reported GAAP operating income$2,737.6
$2,802.4
37
Table of ContentsGlobal Water
2025
2024
2023Sales at fixed currency (millions)
$7,679.9
$7,483.4
$7,284.1
Sales at public currency (millions)
7,982.4
7,775.9
7,625.5
Organic sales change
2
%
*
Acquisitions and divestitures
1
%
*
Fixed currency sales change
3
%
3%
Foreign currency translation
-%
-%
Public currency sales change
3%
2%
Operating income at fixed currency (millions)
$1,263.9
$1,207.2
$1,042.1
Operating income at public currency (millions)
1,332.9
1,274.2
1,115.4
Fixed currency operating income change
5%
16%
Fixed currency operating income margin
16.5%
16.1%
14.3%
Organic operating income change
4%
*
Organic operating income margin
16.5%
16.2%
*
Public currency operating income change
5%
14%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 3% in 2025. Organic sales for Global Water increased 2% in 2025 driven by growth in Food & Beverage and Light & Heavy. Organic sales increased in 2024 driven by strong new business wins and value pricing which overcame uneven end-market trends.At an operating segment level, Light & Heavy organic sales increased 2% in 2025 reflecting double-digit growth in global high-tech, improved growth in downstream and solid manufacturing sales growth, which more than offset soft end-market demand in basic industries. Global high-tech reported strong double-digit sales growth driven by data centers and microelectronics. Downstream reported sales growth in North America was partially offset by softer sales in other international regions. Manufacturing reported solid growth driven by food & beverage. Basic Industries sales declined as new business wins were more than offset by continued soft end-market demand. Light & Heavy organic sales increased in 2024 reflecting strong growth in downstream and manufacturing. Downstream reported strong sales growth in 2024, driven by strong growth in refining and water management . Manufacturing reported strong sales growth in 2024 driven by strong performance across institutional, food & beverage and high-tech. Basic industries reported sales growth in 2024 driven by new business wins that overcame softer market trends. Food & Beverage organic sales increased 4% in 2025 as value pricing and new business wins overcame continued soft industry demand. Organic sales increased in 2024 as good new business wins more than offset continued soft industry demand. Paper organic sales declined 3% in 2025 as continued new business wins were more than offset by ongoing soft customer production rates. Organic sales were flat in 2024 as strong new business wins were offset by soft customer production rates.
Operating IncomeOrganic operating income and organic operating income margin for Global Water increased in both 2025 and 2024 when compared to prior periods.Organic operating income margin increased 0.3 percentage points during 2025 compared to 2024, as the 1.1 percentage point positive impact of value pricing was partially offset by the 0.9 percentage point negative impact of investments in the business. Organic operating income margin increased in 2024 compared to 2023, as the positive impacts of lower delivered product costs, strong value pricing, and higher volumes were partially offset by the negative impacts of investments in business.
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Table of Contents
Global Institutional & Specialty
2025
2024
2023Sales at fixed currency (millions)
$5,962.0
$5,979.4
$5,779.4
Sales at public currency (millions)
6,104.6
6,103.4
5,910.8
Organic sales change
3%
*
Acquisitions and divestitures
(4)%
*
Fixed currency sales change
-%
3%
Foreign currency translation
-
%
-
%
Public currency sales change
-%
3%
Operating income at fixed currency (millions)
$1,357.8
$1,202.2
$856.5
Operating income at public currency (millions)
1,385.9
1,227.4
878.9
Fixed currency operating income change
13%
40%
Fixed currency operating income margin
22.8%
20.1%
14.8%
Organic operating income change
18%
*
Organic operating income margin
22.8%
19.9%
*
Public currency operating income change
13%
40%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales were stable in 2025. Organic sales for Global Institutional & Specialty increased 3% in 2025 with growth in both operating segments. Organic sales increased in 2024 driven by outperformance of end-market trends.
At an operating segment level, Institutional organic sales increased 3% in 2025 reflecting sales growth to hospitality customers partially offset by modestly lower sales to hospitals. Organic sales increased in 2024 reflecting sales growth across restaurants and lodging. Specialty organic sales increased 5% in 2025 driven by new business wins and continued value pricing, which more than offset the impact from non-strategic, low margin business exits. Organic sales increased in 2024 reflecting growth in quick service and food retail.
Operating Income
Organic operating income and organic operating income margin for our Global Institutional & Specialty segment increased in both 2025 and 2024 when compared to prior periods.Organic operating income margin increased 2.9 percentage points during 2025, as the 4.3 percentage point positive impacts from value pricing, lower supply chain costs and improved productivity were partially offset by the 1.0 percentage point negative impacts of investments in the business. Organic operating income margin increased during 2024, as the positive impacts from strong value pricing, lower supply chain costs and higher volumes were partially offset by the negative impacts of investments in the business.
39
Table of ContentsGlobal Pest Elimination
2025
2024
2023Sales at fixed currency (millions)
$1,219.2
$1,140.1
$1,044.3
Sales at public currency (millions)
1,246.3
1,162.8
1,066.0
Organic sales change
6%
*
Acquisitions and divestitures
1%
*
Fixed currency sales change
7%
9%
Foreign currency translation
-
%
-
%
Public currency sales change
7%
9%
Operating income at fixed currency (millions)
$237.1
$209.7
$200.9
Operating income at public currency (millions)
242.9
214.3
205.3
Fixed currency operating income change
13%
4%
Fixed currency operating income margin
19.4%
18.4%
19.2%
Organic operating income change
13%
*
Organic operating income margin
19.6%
18.4%
*
Public currency operating income change
13%
4%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 7% and organic sales increased 6% in 2025. Organic sales for Global Pest Elimination increased in both 2025 and 2024 when compared to prior periods led by growth in food & beverage and restaurants.Operating Income
Organic operating income for our Global Pest Elimination segment increased in both 2025 and 2024 when compared to prior periods. Organic operating income margin increased in 2025 and decreased in 2024 when compared to prior periods.Organic operating income margin in Global Pest Elimination increased 1.2 percentage points in 2025, as the 3.7 percentage point positive impacts from value pricing and higher volumes were partially offset by the 3.1 percentage point negative impacts of investments in the business. Organic operating income margin decreased in 2024, as the positive impact from strong value pricing and higher volumes were more than offset by the negative impacts from investments in the business and costs associated with a fourth quarter spike in accidents.40
Table of ContentsGlobal Life Sciences
2025
2024
2023Sales at fixed currency (millions)
$706.1
$670.5
$650.8
Sales at public currency (millions)
747.9
699.3
675.4
Organic sales change
5%
*
Acquisitions and divestitures
-%
*
Fixed currency sales change
5%
3%
Foreign currency translation
2%
-
%
Public currency sales change
7%
4%
Operating income at fixed currency (millions)
$120.7
$91.8
$118.9
Operating income at public currency (millions)
136.0
101.2
125.7
Fixed currency operating income change
31%
(23)%
Fixed currency operating income margin
17.1%
13.7%
18.3%
Organic operating income change
31%
*
Organic operating income margin
17.1%
13.7%
*
Public currency operating income change
34%
(19)%
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 5% in 2025. Organic sales for Global Life Sciences increased 5% in 2025 as compared to 2024 driven by new business wins and progressively improving industry trends. Organic sales for Global Life Sciences increased in 2024 as compared to 2023 driven by new business wins and progressively improving industry trends.
Operating Income
Organic operating income and organic operating income margin for our Global Life Sciences segment both increased in 2025 when compared to 2024. Organic operating income increased and organic operating income margin decreased for our Global Life Sciences segment in 2024 when compared to 2023.Organic operating income margin increased 3.4 percentage points in 2025, as the 5.9 percentage point positive impact from value pricing, higher volumes and lower delivered product costs were partially offset by the 2.2 percentage point negative impacts from investments in the business, including performance-based compensation. Organic operating income margin decreased in 2024, as the positive impact from value pricing was more than offset by the negative impacts from higher supply chain costs and investments in the business.
Corporate
Consistent with our internal management reporting, Corporate amounts in the table on page 37 include sales to ChampionX in accordance with the transitional supply agreement entered into with the transaction post-separation, as discussed in Note 17, “Revenues,” intangible asset amortization specifically from the Nalco, Purolite and Ovivo Electronics 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 33.
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Table of Contents
FINANCIAL POSITION, CASH FLOW AND LIQUIDITY
Financial Position
Total assets were $24.7 billion as of December 31, 2025, compared to total assets of $22.4 billion as of December 31, 2024.
Total liabilities were $14.9 billion as of December 31, 2025, compared to total liabilities of $13.6 billion as of December 31, 2024. Total debt was $8.2 billion as of December 31, 2025 and $7.6 billion as of December 31, 2024. See further discussion of our debt activity within the “Liquidity and Capital Resources” section of this MD&A.Our net debt to 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.
2025
2024
2023(ratio)
Net debt to EBITDA
2.0
1.7
2.4
(millions)
Total debt
$8,236.3
$7,564.9
$8,181.8
Cash646.2
1,256.8
919.5
Net debt
$7,590.1
$6,308.1
$7,262.3
Net income including noncontrolling interest
$2,093.3
$2,131.9
$1,393.0
Provision for income taxes454.6
439.3
362.5
Interest expense, net241.1
282.5
296.7
Depreciation672.6
634.9
616.7
Amortization303.8
300.5
306.9
EBITDA$3,765.4
$3,789.1
$2,975.8
Cash Flows
Operating Activities
Dollar Change
(millions)
20252024 2023
2025
2024Cash provided by operating activities
$2,952.6
$2,813.9
$2,411.8
$138.7
$402.1
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 $139 million in 2025 compared to 2024, driven by a $219 million increase in net income, adjusted for the net gain on sale of surgical solutions business in 2024, partially offset by a $120 million unfavorable change in working capital. The cash flow impact from working capital was primarily driven by improvement in inventory due to optimization efforts offset by a decrease in accounts payable primarily associated with our inventory reduction efforts and timing impacts.
Cash provided by operating activities increased $402 million in 2024 compared to 2023, driven by a $739 million increase in net income less $258 million net gain on sale of global surgical solutions business.
The impact on operating cash flows of pension and postretirement plan contributions, cash activity related to restructuring, cash paid for income taxes and cash paid for interest, are shown in the following table:
Dollar Change
(millions)
20252024 2023
2025
2024Pensions and postretirement plan contributions
$77.8
$54.4
$109.3
$23.4
($54.9)
Restructuring payments86.2
78.0
118.3
8.2
(40.3)
Income tax payments548.1
647.4
469.2
(99.3)
178.2
Interest payments302.6
342.6
324.8
(40.0)
17.8
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Table of Contents
Investing Activities
Dollar Change
(millions)
20252024 2023
2025
2024Cash used for investing activities
($2,707.2)
($433.8)
($990.5)
($2,273.4)
$556.7
Cash provided by (used for) investing activities is primarily impacted by the timing of business acquisitions and dispositions as well as from capital investments in the business.
We continue to make capital investments in the business, including merchandising and customer equipment and manufacturing facilities. Total capital expenditures were $1.0 billion, $995 million, and $775 million in 2025, 2024, and 2023, respectively.Cash used for acquisitions and investments in affiliates, net of cash acquired, in 2025, 2024 and 2023 was $1.6 billion, $313 million, and $180 million, respectively. Cash used for acquisitions and investments in affiliates, net of cash acquired, in 2025 primarily related to the Ovivo Electronics acquisition. Cash used for dispositions, net of cash divested, related to the divestiture of our global surgical solutions business was $15 million in 2025. Cash provided by dispositions, net of cash divested, related to the divestiture of our global surgical solutions business was $890 million in 2024. There was no cash used for or provided by dispositions in 2023. Our acquisitions and divestitures are discussed further in Note 4, “Acquisitions and Dispositions,” of the Notes. 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
Dollar Change
(millions)
20252024 2023
2025
2024Cash used for financing activities
($853.3)
($2,024.1)
($1,054.7)
$1,170.8
($969.4)
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 issued $1 billion aggregate principal amount and received $994 million in proceeds of fixed rate public notes in 2025. The proceeds received from the debt issuances were used for general corporate purposes, which included partial funding of the Ovivo Electronics acquisition. There were no long-term debt issuances in 2024 or 2023. In addition, we had commercial paper and notes payable net issuances of $98 million in 2025, $2 million in 2024 and net repayments of $2 million in 2023, respectively. We repaid €575 million ($674 million), €575 million ($630 million), and $500 million of long-term debt in 2025, 2024 and 2023, respectively.
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 repurchased a total of $784 million, $987 million, and $14 million shares in 2025, 2024, and 2023, respectively.
The impact on financing cash flows of commercial paper and notes payable repayments, long-term debt borrowings and long-term debt repayments, are shown in the following table:
Dollar Change
(millions)
20252024 2023
2025
2024Net issuances (repayments) of commercial paper and notes payable
$98.2
$1.9
($1.9)
$96.3
$3.8
Long-term debt borrowings1,045.6
-
-
1,045.6
-
Long-term debt repayments(674.2)
(630.4)
(500.0)
(43.8)
(130.4)
In December 2025, we increased our quarterly dividend rate by 12%. This represents the 34 th consecutive year we have increased our dividend. We have paid dividends on our common stock for 89 consecutive years. We paid dividends of $754 million, $664 million, and $617 million in 2025, 2024, and 2023, respectively. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Year2025
$0.65
$0.65
$0.65
$0.73$2.682024$0.57
$0.57
$0.57
$0.65$2.362023$0.53
$0.53
$0.53
$0.57
$2.16
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Table of Contents
Liquidity and Capital Resources
We currently expect to fund all of our 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 December 31, 2025, we had $646 million of cash and cash equivalents on hand, of which $476 million was held outside of the U.S. As of December 31, 2024, we had $1,257 million of cash and cash equivalents on hand, of which $382 million was held outside of the U.S. We will continue to evaluate our cash position in light of future developments.In July 2025 and January 2024, we repaid €575 million ($674 million), and €575 million ($630 million) of long-term debt, respectively.As of December 31, 2024, we had a $2.0 billion multi-year revolving credit facility which was due to expire in April 2026. In March 2025, we entered into an amended and restated revolving credit facility which extended the maturity from April 2026 to March 2030. 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 year end, we had $100 million in commercial paper outstanding under our U.S. program and none under our Euro program. There were no borrowings under our credit facility as of December 31, 2025 or 2024. As of December 31, 2025, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.Additionally, we have uncommitted credit lines with major international banks and financial institutions. These credit lines support our daily global funding needs, primarily our global cash pooling structures. As of December 31, 2025, we had $217 million of bank supported letters of credit, short-term borrowings, surety bonds and guarantees outstanding in support of our commercial business transactions. We do not have any other significant unconditional purchase obligations or commercial commitments.As of December 31, 2025, Standard & Poor’s, Fitch and Moody’s rated our long-term credit at A- (stable outlook), A- (stable outlook) and A3 (stable outlook), respectively. A reduction in our credit ratings could limit or preclude our ability to issue commercial paper under our current programs or could also adversely affect our ability to renew existing, or negotiate new, credit facilities in the future and could increase the cost of these facilities.
As of December 31, 2025, we were in compliance with our debt covenants and other requirements of our credit agreements and indentures.
A schedule of our various obligations as of December 31, 2025 are summarized in the following table:
Payments Due by Period
Less
More
Than
2-3
4-5
Than
(millions)
Total
1 Year
Years
Years
5 YearsCommercial paper and notes payable
$111
$111
$-
$-
$-
One-time transition tax
3636
-
-
-
Long-term debt
8,125759
2,017
699
4,650
Operating leases
890197
300
141
252
Interest*
3,451313
494
395
2,249
Total
$12,613
$1,416
$2,811
$1,235
$7,151
*Interest on variable rate debt was calculated using the interest rate at December 31, 2025.As of December 31, 2025, our gross liability for unrecognized tax benefits was $54 million. We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended period of time or whether a cash settlement of the liability will be required. Therefore, these amounts have been excluded from the schedule of contractual obligations.
We do not have required minimum cash contribution obligations for our qualified pension plans in 2025. We are required to fund certain international pension benefit plans in accordance with local legal requirements. We estimate contributions to be made to our international plans will approximate $39 million in 2026. These amounts have been excluded from the schedule of contractual obligations.We lease certain sales and administrative office facilities, distribution centers, research and manufacturing facilities and other equipment under longer-term operating leases. Vehicle leases are generally shorter in duration. Vehicle leases have residual value requirements that have historically been satisfied primarily by the proceeds on the sale of the vehicles.
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Table of Contents
Market Risk
We enter into contractual arrangements (derivatives) in the ordinary course of business to manage foreign currency exposure and interest rate risks. We do not enter into derivatives for speculative or trading purposes. Our use of derivatives is subject to internal policies that provide guidelines for control, counterparty risk, and ongoing monitoring and reporting, and is designed to reduce the volatility associated with movements in foreign exchange and interest rates on our income statement and cash flows.We enter into foreign currency forward contracts to hedge certain intercompany financial arrangements, and to hedge against the effect of exchange rate fluctuations on transactions related to cash flows denominated in currencies other than U.S. dollars. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations.We enter into cross-currency swap derivative contracts to hedge certain Euro, Chinese Yuan (“CNY”) and Canadian Dollar (“CAD”) denominated exposures from our investments in certain of its respective denominated functional currency subsidiaries. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations. As of December 31, 2025, we had €2,275 million ($2,672 million), CNY 3,986 million ($570 million), and CAD 280 million ($204 million) contracts outstanding designated as net investment hedges.We manage interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, we may enter into interest rate swap agreements. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. As of December 31, 2025, we had $1,500 million of interest rate swaps outstanding.
Refer to Note 8, “Derivatives and Hedging Transactions,” of the Notes for further information on our hedging activity.
Based on a sensitivity analysis (assuming a 10% change in market rates) of our foreign exchange and interest rate derivatives and other financial instruments, changes in exchange rates or interest rates would increase/decrease our financial position and liquidity by approximately $388 million. The effect on our results of operations would be substantially offset by the impact of the hedged items.GLOBAL ECONOMIC AND POLITICAL 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.
Argentina, Turkey and Egypt 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, Turkey and Egypt. During 2025, sales in Argentina, Turkey and Egypt represented approximately 1% of our consolidated sales. Assets held in Argentina, Turkey and Egypt at the end of 2025 represented approximately 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 to 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, such as the imposition of additional sanctions by the United States. Our Russian and Ukraine operations represented approximately 1% of our 2025 consolidated net sales. We recorded charges of $1.4 million in 2023, primarily related to recoverability risk of certain assets in both Russia and Ukraine. We cannot predict the progress or outcome of world geopolitical events, including the Russia and Ukraine conflict, or the consequences thereof.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 2, “Significant Accounting Policies,” of the Notes.
SUBSEQUENT EVENTS
In February 2026, we expanded our existing One Ecolab restructuring program. We now anticipate total restructuring costs of $334 million ($261 million after tax) and special charges of $91 million ($71 million after tax) by the end of 2027. We anticipate that the restructuring costs will primarily be cash expenditures for severance costs relating to team realignment.In February 2026, we entered into cross-currency swap derivative contracts with aggregate notional amounts of 100 million Swiss Franc (“CHF”). These cross-currency swap derivative contracts are designated as net investment hedges of our CHF denominated exposures from our investments in certain of our CHF denominated functional currency subsidiaries.
45
Table of ContentsNON-GAAP FINANCIAL MEASURES
This MD&A includes financial measures that have not been calculated in accordance with U.S. GAAP. These non-GAAP measures may include:● Fixed currency sales
● Adjusted net sales
● Adjusted fixed currency sales● Organic 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
● Organic operating income margin● Adjusted interest expense, net
● EBITDA
● Adjusted tax rate
● Adjusted net income attributable to Ecolab
● Adjusted diluted EPS● Free cash flow
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 net sales and adjusted interest expense, net exclude the impact of the Ovivo Electronics acquisition. 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 the Ovivo Electronics acquisition, and our non-GAAP financial measures for adjusted tax rate, adjusted net income attributable to Ecolab and adjusted diluted EPS further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results. After tax special (gains) and charges are derived by applying the applicable local jurisdictional tax rate to the corresponding pre-tax special (gains) and charges.EBITDA is defined as net income including non-controlling interest with the sum of provision for income taxes, net interest expense, depreciation and amortization added back. Adjusted EBITDA further adds back special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are used in our net debt to EBITDA and net debt to adjusted EBITDA ratios, 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, which eliminate the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this Form 10-K are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2025. 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: (i) the impact of special (gains) and charges where applicable, (ii) the impact of the Ovivo Electronics acquisition, (iii) the results of our acquired businesses from the first twelve months post acquisition and (iv) the results of divested businesses from the twelve months prior to divestiture. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of the business for the nine-month period ended September 30, 2024 from these organic measures to remain comparable to the corresponding period in 2025. In addition, as part of the separation of ChampionX in 2020, we continue to provide certain products to ChampionX, which are recorded in product and equipment sales in the Global Water 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.
46
Table of ContentsWe define free cash flow as net cash provided by operating activities less cash outlays for capital expenditures. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. It should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. We believe free cash flow is meaningful to investors as it functions as a useful measure of performance and we use this measure as an indication of the strength of the Company and its ability to generate cash.
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 in this MD&A.
We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this Form 10-K) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of various items that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact reported earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.