UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark One)~~

☒~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the quarterly period ended September 30, 2017~~

☐~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the transition period from to~~


(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 1-9328

ECOLAB INC.

(Exact name of registrant as specified in its charter)


Delaware		41-0231510
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1 Ecolab Place, St. Paul, Minnesota 55102

(Address of principal executive offices)(Zip Code)

1-800-232-6522

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

2.625% Euro Notes due 2025

1.000% Euro Notes due 2024

ECL

ECL 25

ECL 24

New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of ~~Regulations~~Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~		Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~Indicate the~~The number of shares ~~outstanding~~ of each of the ~~issuer’s~~registrant’s classes of ~~common stock,~~Common Stock outstanding as of ~~September 30, 2017.~~

March 31, 2019: 288,242,150 shares~~288,914,305 shares of common stock,~~ , par value $1.00 per ~~share~~share..

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENT OF INCOME

(unaudited)




	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions, except per share amounts)	2017		2016		2017		2016		2019		2018

Product and equipment sales										$2,886.3		$2,859.6
Service and lease sales										619.1		611.3
Net sales		$3,563.3		$3,386.1		$10,187.6		$9,800.7		3,505.4		3,470.9
Operating expenses
Product and equipment cost of sales										1,717.1		1,696.2
Service and lease cost of sales										379.6		376.1
Cost of sales (including special charges (a))		1,891.3		1,737.2		5,454.4		5,153.8		2,096.7		2,072.3
Selling, general and administrative expenses		1,087.3		1,071.6		3,293.2		3,253.1		1,001.2		1,018.3
Special (gains) and charges		4.9		3.2		47.9		35.7		40.3		26.0
Operating income		579.8		574.1		1,392.1		1,358.1		367.2		354.3
Interest expense, net		55.1		64.9		177.2		196.3
Other (income) expense										(21.2)		(19.4)
Interest expense, net (b)										49.4		56.4
Income before income taxes		524.7		509.2		1,214.9		1,161.8		339.0		317.3
Provision for income taxes		128.9		129.7		264.2		286.7		38.6		69.1
Net income including noncontrolling interest		395.8		379.5		950.7		875.1		300.4		248.2
Net income attributable to noncontrolling interest		3.4		5.4		8.2		11.8		3.9		0.9
Net income attributable to Ecolab		$392.4		$374.1		$942.5		$863.3		$296.5		$247.3

Earnings attributable to Ecolab per common share
Basic		$ 1.36		$ 1.28		$ 3.25		$ 2.95		$ 1.03		$ 0.86
Diluted		$ 1.34		$ 1.27		$ 3.20		$ 2.91		$ 1.01		$ 0.84

Dividends declared per common share		$0.370		$0.350		$1.110		$1.050

Weighted-average common shares outstanding
Basic		289.0		291.6		289.8		292.8		288.2		288.6
Diluted		293.4		295.7		294.2		297.1		292.3		292.7

(a)

Cost of sales includes special (gains) and charges of ~~$0.3 million in the third quarter of 2017, and $26.2 million and $61.9 million~~$3.6 in the first ~~nine months~~quarter of ~~2017~~2019, which is recorded in product and ~~2016, respectively.~~equipment cost of sales.

(b)

Interest expense, net includes special (gains) and charges of $0.2 in the first quarter of 2019.

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018

Net income including noncontrolling interest		$395.8		$379.5		$950.7		$875.1		$300.4		$248.2

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments
Foreign currency translation		150.6		17.2		275.8		(1.3)		105.1		115.6
Loss on net investment hedges		(50.9)		(1.2)		(103.7)		(29.1)
Gain (loss) on net investment hedges										(6.6)		(26.2)
		99.7		16.0		172.1		(30.4)		98.5		89.4

Derivatives and hedging instruments		(20.8)		(9.5)		(29.1)		(40.2)		(5.6)		(2.1)

Pension and postretirement benefits
Amortization of net actuarial loss and prior service costs included in
net periodic pension and postretirement costs		1.3		5.6		8.2		16.7		(4.0)		0.3
Postretirement benefits changes		-		30.9				30.9
		1.3		36.5		8.2		47.6		(4.0)		0.3

Subtotal		80.2		43.0		151.2		(23.0)		88.9		87.6

Total comprehensive income, including noncontrolling interest		476.0		422.5		1,101.9		852.1		389.3		335.8
Comprehensive income attributable to noncontrolling interest		4.0		8.0		10.8		17.8		4.8		3.4
Comprehensive income attributable to Ecolab		$472.0		$414.5		$1,091.1		$834.3		$384.5		$332.4

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

CONSOLIDATED BALANCE SHEET

(unaudited)



	September 30		December 31		March 31		December 31
(millions, except shares and per share amounts)	2017		2016
(millions, except per share amounts)					2019		2018

ASSETS
Current assets
Cash and cash equivalents		$209.1		$327.4		$79.0		$114.7
Accounts receivable, net		2,533.2		2,341.2		2,691.6		2,662.5
Inventories		1,509.0		1,319.4		1,645.6		1,546.4
Other current assets		363.2		291.4		334.8		354.1
Total current assets		4,614.5		4,279.4		4,751.0		4,677.7
Property, plant and equipment, net		3,617.2		3,365.0		3,878.6		3,836.0
Goodwill		7,154.4		6,383.0		7,324.2		7,078.0
Other intangible assets, net		4,039.6		3,817.8		3,877.3		3,797.7
Operating lease assets						570.9		-
Other assets		431.0		485.0		525.6		685.1
Total assets		$19,856.7		$18,330.2		$20,927.6		$20,074.5

LIABILITIES AND EQUITY
Current liabilities
Short-term debt		$1,073.0		$541.3		$1,132.3		$743.6
Accounts payable		1,115.9		983.2		1,237.7		1,255.6
Compensation and benefits		509.8		516.3		478.2		579.7
Income taxes		51.7		87.4		89.6		100.6
Other current liabilities		1,006.2		891.2		1,218.2		1,006.1
Total current liabilities		3,756.6		3,019.4		4,156.0		3,685.6
Long-term debt		6,484.5		6,145.7		6,008.2		6,301.6
Postretirement health care and pension benefits		983.7		1,019.2		942.3		944.3
Deferred income taxes		1,030.2		970.2		792.3		764.6
Operating lease liabilities						412.2		-
Other liabilities		302.5		204.8		349.7		324.8
Total liabilities		12,557.5		11,359.3		12,660.7		12,020.9
Commitments and contingencies (Note 17)

Equity (a)
Common stock		354.2		352.6		358.2		357.0
Additional paid-in capital		5,397.5		5,270.8		5,731.0		5,633.2
Retained earnings		7,598.0		6,975.0		9,131.8		8,909.5
Accumulated other comprehensive loss		(1,564.3)		(1,712.9)		(1,734.9)		(1,761.7)
Treasury stock		(4,563.1)		(3,984.4)		(5,265.4)		(5,134.8)
Total Ecolab shareholders’ equity		7,222.3		6,901.1		8,220.7		8,003.2
Noncontrolling interest		76.9		69.8		46.2		50.4
Total equity		7,299.2		6,970.9		8,266.9		8,053.6
Total liabilities and equity		$19,856.7		$18,330.2		$20,927.6		$20,074.5

(a)

Common stock, 800.0 ~~million~~ shares authorized, $1.00 par value per share, ~~288.9 million~~288.2 shares outstanding at ~~September 30, 2017~~March 31, 2019 and ~~291.8 million~~287.7 shares outstanding at December 31, ~~2016.~~2018. Shares outstanding are net of treasury stock.

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

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)


	Nine Months Ended				First Quarter Ended
	September 30				March 31
(millions)	2017		2016		2019		2018

OPERATING ACTIVITIES
Net income including noncontrolling interest		$950.7		$875.1		$300.4		$248.2
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		437.0		420.9		159.0		150.9
Amortization		228.5		217.2		79.8		80.2
Deferred income taxes		10.4		(55.3)		(5.0)		13.3
Share-based compensation expense		71.8		67.7		32.2		33.7
Excess tax benefits from share-based payment arrangements		-		(39.5)
Pension and postretirement plan contributions		(131.0)		(207.0)		(19.0)		(23.0)
Pension and postretirement plan expense		26.5		43.1		4.9		8.6
Restructuring charges, net of cash paid		13.3		(48.1)		16.3		(7.7)
Asset charges and write-downs		-		50.9
Other, net		19.9		11.9		6.4		4.9
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(23.5)		37.8		8.0		33.9
Inventories		(116.9)		34.6		(83.0)		(77.2)
Other assets		8.4		(14.0)		5.9		(1.0)
Accounts payable		57.0		(37.6)		(35.3)		40.4
Other liabilities		(107.2)		134.0		(92.5)		(18.0)
Cash provided by operating activities		1,444.9		1,491.7		378.1		487.2

INVESTING ACTIVITIES
Capital expenditures		(538.2)		(478.6)		(187.0)		(203.3)
Capitalized software expenditures		(55.8)		(32.2)
Property and other assets sold		4.1		29.6		1.4		0.5
Acquisitions and investments in affiliates, net of cash acquired		(831.2)		(44.7)		(281.8)		(76.5)
Deposit into acquisition related escrow		(0.8)		-
Restricted cash activity		53.8		(55.9)
Divestiture of businesses						-		9.4
Settlement of net investment hedges						-		14.1
Other, net						(10.0)		-
Cash used for investing activities		(1,368.1)		(581.8)		(477.4)		(255.8)

FINANCING ACTIVITIES
Net issuances (repayments) of commercial paper and notes payable		187.8		(522.4)
Long-term debt borrowings		495.0		793.8
Net issuances of commercial paper and notes payable						487.9		354.3
Long-term debt repayments		(20.1)		(130.5)		(400.3)		(300.6)
Reacquired shares		(587.7)		(737.8)		(131.4)		(215.1)
Dividends paid		(330.3)		(324.5)		(141.4)		(123.4)
Exercise of employee stock options		63.0		62.3		67.7		28.4
Excess tax benefits from share-based payment arrangements		-		39.5
Acquisition related liabilities and contingent consideration		(8.2)		(3.8)		-		(8.6)
Cash provided by (used for) financing activities		(200.5)		(823.4)
Cash used for financing activities						(117.5)		(265.0)

Effect of exchange rate changes on cash and cash equivalents		5.4		1.3
Effect of exchange rate changes on cash, cash equivalents and restricted cash						1.8		(2.3)

Increase (decrease) in cash and cash equivalents		(118.3)		87.8
Cash and cash equivalents, beginning of period		327.4		92.8
Cash and cash equivalents, end of period		$209.1		$180.6
Decrease in cash, cash equivalents and restricted cash						(215.0)		(35.9)
Cash, cash equivalents and restricted cash, beginning of period (a)						294.0		211.4
Cash, cash equivalents and restricted cash, end of period (b)						$79.0		$175.5

(a)

Restricted cash was $179.3 as of December 31, 2018 and included in Other assets on the Consolidated Balance Sheet.

(b)

There was no restricted cash as of March 31, 2019 and 2018.

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

CONSOLIDATED STATEMENT OF EQUITY

(unaudited)


	Ecolab Shareholders
(millions, except shares and per share amounts)	Common Stock		Additional Paid-in Capital		Retained Earnings		OCI (Loss)		Treasury Stock		Ecolab Shareholders' Equity		Non-Controlling Interest		Total Equity
Balance, December 31, 2017		$354.7		$5,435.7		$8,011.6		$(1,643.4)		$(4,575.0)		$7,583.6		$70.2		$7,653.8

New accounting guidance adoption (a)						(43.6)						(43.6)				(43.6)
Net income						247.3						247.3		0.9		248.2
Comprehensive income (loss) activity								85.1				85.1		2.5		87.6
Cash dividends declared (b)						(118.3)						(118.3)		(4.7)		(123.0)
Stock options and awards		0.8		60.8						0.4		62.0				62.0
Reacquired shares										(215.1)		(215.1)				(215.1)
Balance, March 31, 2018		$355.5		$5,496.5		$8,097.0		$(1,558.3)		$(4,789.7)		$7,601.0		$68.9		$7,669.9


Balance, December 31, 2018		$357.0		$5,633.2		$8,909.5		$(1,761.7)		$(5,134.8)		$8,003.2		$50.4		$8,053.6
New accounting guidance adoption (c)						58.4		(61.2)				(2.8)				(2.8)
Net income						296.5						296.5		3.9		300.4
Comprehensive income (loss) activity								88.0				88.0		0.9		88.9
Cash dividends declared (b)						(132.6)						(132.6)		(9.0)		(141.6)
Stock options and awards		1.2		97.8						0.8		99.8				99.8
Reacquired shares										(131.4)		(131.4)				(131.4)
Balance, March 31, 2019		$358.2		$5,731.0		$9,131.8		$(1,734.9)		$(5,265.4)		$8,220.7		$46.2		$8,266.9

(a)

Upon adoption of ASU 2016-16, Intra-Entity Transfers of Assets Other than Inventory, the Company recorded an adjustment to retained earnings representing the write-off of income tax effects that had been deferred from past transactions and the recording of deferred tax assets which previously were not allowed to be recognized.

(b)

Dividends declared per common share were $0.460 and $0.410 in the first quarter of 2019 and 2018, respectively.

(c)

Upon adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, the Company reclassified stranded tax effects resulting from the Tax Cut and Jobs Act from accumulated other comprehensive income to retained earnings. Also, upon adoption of ASU 2016-02, Leases (Topic 842), the Company has established right-of-use assets and lease liabilities for operating leases and the cumulative effect of applying the standard is recognized to retained earnings at the beginning of the period adopted.

See Note 18 for additional information regarding adoption of new accounting guidance.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. CONSOLIDATED FINANCIAL INFORMATION

The unaudited consolidated financial information for the ~~third~~first quarter ended March 31, 2019 and ~~nine months ended September 30, 2017 and 2016~~2018 reflect, in the opinion of company management, all adjustments necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), equity and cash flows of Ecolab Inc. ("Ecolab" or "the Company") for the interim periods presented. Any adjustments consist of normal recurring items.

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, ~~2016~~2018 was derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

~~During~~Sales, cost of sales and selling, general and administrative expenses in the selected consolidated income statement information includes immaterial revisions to amounts previously reported in the Company’s quarterly reports on Form 10-Q for each of the first ~~quarter~~three quarters of ~~2017,~~2018. The revisions had no impact on previously reported total net sales or operating income. Except for the changes due to the adoption of the new accounting standards, the Company ~~adopted~~has consistently applied the accounting ~~guidance issued~~policies to all periods presented in ~~March 2016 that amends certain aspects~~these consolidated financial statements.

Upstream Energy Spin-off

Ecolab intends to pursue, subject to the receipt of ~~share-based compensation for employees, including~~approval by Ecolab’s Board of Directors and any regulatory approvals, a plan to separate and spin-off the ~~accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classifications on~~Upstream businesses of Ecolab’s Global Energy segment (the Upstream Business) through a series of tax-efficient transactions (collectively, the ~~Consolidated Statement of Cash Flows.~~Spin-off). Under the plan, if effectuated, Ecolab’s shareholders would own 100% of the common stock of a new ~~guidance, all excess tax benefits or deficiencies are~~corporation that owns the Upstream Business. The Spin-off is expected to be ~~recognized prospectively~~completed in 2020 and is intended to qualify as ~~discrete~~a tax-free distribution to Ecolab shareholders for U.S. federal income tax items on the Consolidated Statement of Income, while previous guidance required realized excess tax benefits or deficiencies to be recognized in additional paid-in capital. The Company recorded $2.4 million and $29.2 million of excess tax benefits during the third quarter and first nine months of 2017, respectively. The extent of excess tax benefits is subject to variation in stock price and stock option exercises. Adoption of the accounting standard also eliminated the requirement that excess tax benefits be realized before they can be recognized, and as a result, the Company recorded a $1.9 million cumulative-effect adjustment for previously unrecognized excess tax benefits. purposes.

The Company’s adoption also resulted in associated excess tax benefits being classified as an operating activity in the statement of cash flows prospectively beginning January 1, 2017 with no changes to the prior year. Based on the adoption methodology applied, employee taxes paid remain classified as a financing activity on the statement of cash flows, and the statement of cash flows classification of prior periods has not changed. With regards to forfeitures, the new guidance allows companies either to continue to estimate the number of awards that will be forfeited or to account for forfeitures as they occur. The Company has elected to continue to estimate the number of awards that will be forfeited based on an estimate of the number of outstanding awards expected to vest.

With respect to the unaudited financial information of the Company for the ~~third~~first quarter ended March 31, 2019 and ~~nine months ended September 30, 2017 and 2016~~2018 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated ~~November~~May 2, ~~2017~~2019 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

2. SPECIAL (GAINS) AND CHARGES

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



	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Cost of sales
Restructuring activities		$-		$-		$2.2		$0.9		3.4		-
Acquisition and integration costs		0.3		-		12.9		-
Energy related charges		-		-		-		51.0
Other		-		-		11.1		10.0
Acquisition and integration activities										0.2		-
Subtotal		0.3		-		26.2		61.9		3.6		-

Special (gains) and charges
Restructuring activities		4.1		(7.7)		34.6		(6.8)		37.1		0.3
Acquisition and integration costs		1.8		1.7		12.7		5.0
Energy related charges		-		-		-		12.6
Venezuela related gain		(3.2)		-		(8.5)		(7.8)
Upstream energy spin-off										4.3		-
Acquisition and integration activities										2.5		0.5
Other		2.2		9.2		9.1		32.7		(3.6)		25.2
Subtotal		4.9		3.2		47.9		35.7		40.3		26.0

Operating income subtotal										43.9		26.0

Interest expense, net										0.2		-
Total special (gains) and charges		$5.2		$3.2		$74.1		$97.6		$44.1		$26.0

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

Restructuring activities

~~The Company’s restructuring~~Restructuring activities are ~~associated with plans~~primarily related to enhance its efficiency and effectiveness and sharpen its competitiveness. Restructuring plans include net costs associated with significant actions involving employee-related severance charges, contract termination costs and asset write-downs and disposals. Employee termination costs are largely based on policies and severance plans, and include personnel reductions and related costs for severance, benefits and outplacement services.Accelerate 2020 (described below). These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the actions. Contract termination costs include charges to terminate leases prior to the end of their respective terms and other contract terminations. Asset write-downs and disposals include leasehold improvement write-downs, other asset write-downs associated with combining operations and disposal of assets. Restructuring activities have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Restructuring liabilities have been classified as a component of both other current and other noncurrent liabilities on the Consolidated Balance Sheet.

Accelerate 2020

During the ~~second~~third quarter of ~~2017,~~2018, the Company formally commenced a restructuring plan Accelerate 2020 (“the Plan”), to leverage technology and ~~other cost-saving actions in order to streamline its operations. These actions include a reduction~~systems investments and organizational changes. During the first quarter of ~~the Company’s global workforce by approximately 570 positions, as well as asset disposals and lease terminations. As a result of these actions,~~2019, the Company raised its goals for the Plan to simplify and automate processes and tasks, reduce complexity and management layers, consolidate facilities and focus on key long-term growth areas by leveraging technology and structural improvements. The Company now expects ~~to incur $40 to $45~~that the restructuring activities will be completed by the end of 2020, with total anticipated costs of $260 million ($~~30 to $35~~190 million after tax) over this period of ~~restructuring charges, the majority of which is~~time. The costs are expected to be ~~incurred during 2017.~~ primarily cash expenditures for severance costs and some facility closure costs relating to team reorganizations. Actual costs may vary from these estimates depending on actions taken.

The Company recorded restructuring charges of ~~$3.6~~$40.5 million ($~~1.3~~30.4 million after tax) ~~and $36.6~~in the first quarter of 2019. The liability related to this Plan was $81.4 million as of the end of the first quarter. The Company has recorded $145.1 million ($~~26.2~~110.0 million after tax) ~~during~~of cumulative restructuring charges under the ~~third~~Plan.

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



	Employee
	Termination		Asset
(millions)	Costs		Disposals		Other		Total
2018 Activity
Recorded expense	$	94.1	$	5.0	$	5.5	$	104.6
Net cash payments		(32.8)		-		(2.4)		(35.2)
Non-cash charges		-		(5.0)		-		(5.0)
Effect of foreign currency translation		(0.5)		-		-		(0.5)
Restructuring liability, December 31, 2018		60.8		-		3.1		63.9

2019 Activity
Recorded expense		29.4		0.3		10.8		40.5
Net cash payments		(20.0)		-		(2.8)		(22.8)
Non-cash charges		-		(0.3)		-		(0.3)
Effect of foreign currency translation		0.1		-		-		0.1
Restructuring liability, March 31, 2019	$	70.3	$	-	$	11.1	$	81.4

Other Restructuring Activities

Prior to Accelerate 2020, the Company engaged in a number of restructuring plans. During the first quarter ~~and~~of 2019, net restructuring charges related to the prior year plans were minimal. During the first ~~nine months~~quarter of ~~2017, respectively,~~2018, net restructuring charges related ~~primarily~~ to ~~employee termination costs. As of September 30, 2017,~~ the prior year plans were $0.3 million ($0.3 million after tax). The restructuring liability balance ~~related~~for all plans commencing prior to ~~these actions~~Accelerate 2020 was ~~$28.2 million.~~$13.1 million and $14.9 million as of March 31, 2019 and December 31, 2018, respectively. The ~~Company anticipates the~~reduction in liability was driven primarily by severance payments. The majority of ~~the~~ pretax charges ~~will~~ represent net cash expenditures which are 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 ~~the third quarter and first nine months of 2017~~2019 related to restructuring plans commencing prior to 2018 were ~~$4.3 million and $4.9 million, respectively.~~$1.4 million.

Net restructuring charges related to the Company’s Energy and Combined restructuring plans during 2017 were minimal during the third quarter and first nine months of 2017. During the third quarter and first nine months of 2016, net restructuring activities included net restructuring gains of $7.7 million ($7.2 million after tax) and $5.9 million ($7.3 million after tax), respectively. The restructuring liability balance was $23.1 million and $39.6 million as of September 30, 2017 and December 31, 2016, respectively. The reduction in liability was driven primarily by severance and other cash payments. The remaining accrual is expected to be paid over a period of a few months to several quarters and continues to be funded from operating activities.Upstream energy spin-off

~~Acquisition~~During the first quarter of 2019, the Company announced its intention to pursue a plan to separate and ~~integration related costs~~

~~Acquisition and integration costs~~spin-off the Upstream businesses of Ecolab’s Global Energy segment (the Upstream Business). The charges reported in ~~cost of sales~~special (gains) and charges on the Consolidated Statement of Income include ~~$0.3~~$4.3 million ($~~0.2~~3.3 million after tax) in the ~~third~~first quarter of ~~2017~~2019, which are primarily related to ~~disposal of excess inventory~~professional fees.

Acquisition and ~~$12.9 million ($8.2 million after tax) during the first nine months of 2017~~integration related primarily to recognition of accelerated rent expense upon the closure of Swisher Hygiene Inc. (“Swisher”) plants and disposal of excess inventory. The first nine months of 2017 also include amounts related to recognition of fair value step-up in the Laboratoires Anios (“Anios”) inventory.costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statement of Income include ~~$1.8~~$2.5 million ($~~1.2~~1.8 million after tax) and ~~$12.7~~$0.5 million ($~~8.5~~0.3 million after tax) in the first quarter of 2019 and 2018, respectively. Charges are related to Laboratoires Anios (“Anios”) and Bioquell, PLC (“Bioquell”) acquisitions and consist of integration costs, advisory and legal fees. Acquisition and integration costs reported in product and equipment cost of sales on the Consolidated Statement of Income in the first quarter of 2019 relate to the recognition of fair value step-up in the Bioquell inventory. The Company also incurred $0.2 million ($0.1 million after tax) of ~~acquisition costs, advisory and legal fees, and integration charges for~~interest expense in the ~~Anios and Swisher acquisitions during the third~~first quarter ~~and first nine months~~ of ~~2017, respectively.~~2019.

During the third quarter and first nine months of 2016, the Company incurred acquisition and integration charges of $1.7 million ($1.0 million after tax) and $5.0 million ($3.1 million after tax), respectively. Further information related to the Company’s acquisitions is included in Note 3.

~~Energy related charges~~

Oil industry activity remained depressed during 2016 when compared with 2014 levels, resulting from excess oil supply pressures, which have negatively impacted exploration and production investments in the energy industry, particularly in North America. As a result of these conditions and their corresponding impact on the Company’s business outlook, the Company recorded total charges of $63.6 million ($42.9 million after tax) during the first nine months of 2016, comprised of inventory write downs and related disposal costs, fixed asset charges, headcount reductions and other charges. No such charges were incurred in 2017.

The inventory write-downs and related disposal costs of $31.1 million include adjustments due to the significant decline in activity and related prices of certain specific-use and other products, coupled with declines in replacement costs, as well as estimated costs to dispose the respective excess inventory. The fixed asset charges of $18.2 million resulted from the write-down of certain assets related to the reduction in certain aspects of the Company’s North American Global Energy segment, as well as abandonment of certain projects under construction. The carrying value of the corresponding fixed assets was reduced to zero. The employee termination costs of $12.8 million include a reduction in the Global Energy segment’s global workforce to better align its workforce with anticipated activity levels in the near term. As of the end of the third quarter of 2017, the Company had $3.2 million of corresponding severance remaining to be paid, which is expected to be paid in the next several months and be funded from operating activities.

~~The charges discussed above have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income.~~

~~Venezuela related gain~~

Effective as of the end of the fourth quarter of 2015, the Company deconsolidated its Venezuelan subsidiaries. The Company recorded gains due to U.S. dollar cash recoveries of intercompany receivables written off at the time of deconsolidation of $3.2 million ($2.0 million after tax) during the third quarter of 2017 and $8.5 million ($5.3 million after tax) during the first nine months of 2017. In 2016, the Company recorded no such gains during the third quarter and $7.8 million ($4.9 million after tax) during the first nine months.

Other

During the third quarter of 2017, the Company recorded charges of $2.2 million ($1.4 million after tax) related to litigation. During the first nine months of 2017, the Company recorded charges of $20.2 million ($15.9 million after tax) related to litigation and a Global Energy vendor contract termination. These charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income.

During the first ~~nine months~~quarter of ~~2016,~~2019, the Company recorded ~~a charge~~other special gains of ~~$10.0~~$3.6 million ($~~6.3~~4.3 million after of tax) which primarily related to a ~~fixed asset impairment and related inventory~~litigation settlement which was offset with other legal charges. ~~The fixed asset impairment corresponds to additional charges of certain U.S. production equipment and buildings, resulting from further lower production, initially impaired during~~During the ~~fourth~~first quarter of ~~2015. This charge has been included as a component of cost of sales on the Consolidated Statement of Income. There were no such charges in the third quarter of 2016.~~

~~Additionally, during the third quarter and first nine months of 2016,~~2018, the Company recorded other special charges of ~~$9.2~~$25.2 million ($~~5.6~~18.9 million after of tax) ~~and $32.7 million ($20.7 million after tax), respectively, primarily consisting of litigation related charges. These charges have been included as a component of~~in special (gains) and charges onwhich primarily consisted of $25.0 million ($18.9 million after tax) commitment to the ~~Consolidated Statement of Income.~~Ecolab Foundation in response to the new U.S. tax law.

3. ACQUISITIONS AND DISPOSITIONS

Acquisitions

The Company makes business acquisitions that align with its strategic business objectives. The assets and liabilities of the acquired ~~entities~~businesses have been recorded as of the acquisition date, at their respective fair values, and are included in the Consolidated Balance ~~Sheet and results of the Company from the date of acquisition.~~Sheet. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed. The aggregate purchase price of acquisitions has been reduced for any cash or cash equivalents acquired with the acquisition. Acquisitions during the first ~~nine months~~quarter of ~~2017~~2019 and ~~2016~~2018 were not ~~material~~significant to the Company’s consolidated financial statements; therefore, pro forma financial information is not presented.

~~Anios Acquisition~~2019 Activity

~~On February 1, 2017,~~During the first quarter of 2019, the Company acquired ~~Anios for total consideration of $798.3 million, including satisfaction of outstanding debt. Anios~~Bioquell, a life sciences business which is a ~~leading European manufacturer~~seller of bio-decontamination products and ~~marketer of hygiene~~services to the Life Sciences and ~~disinfection products for the healthcare, food service, and food and beverage processing~~Healthcare industries. Anios provides an innovative product line that expands the solutions the Company is able to offer while also providing a complementary geographic footprint within the healthcare market. With pre-acquisition annual sales of approximately $245 million, the acquiredThis business became part of the ~~Company’s~~ Global ~~Institutional reportable segment during the first quarter of 2017.~~Industrial reporting segment. During ~~2016,~~2018, the Company deposited ~~€50~~$179.3 million (£140.5 million) in an escrow account that was released back to the Company upon closing of the transaction in February ~~2017.~~2019. As shown within Note 4, this was recorded as restricted cash within other assets on the Consolidated Balance Sheet as of December 31, ~~2016.~~2018.

The Company ~~incurred~~also acquired Lobster Ink a leading provider of end-to-end online customer training solutions. This acquired business became part of the Global Institutional reporting segment. The purchase price included an earn-out based on certain revenue thresholds in any of the full three years following the acquisition, ~~and integration costs associated with the transaction that were expensed and are reflected~~which has been recorded as contingent consideration in other liabilities in the Consolidated ~~Statement~~Balance Sheet as of ~~Income. See Note 2 for additional information related to the Company’s special gains and charges related to such activities.~~March 31, 2019.

~~The Anios acquisition has~~These acquisitions have been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. Certain estimated values, primarily working capital adjustments, are not yet finalized and are subject to change. ~~Amounts~~Annualized sales for ~~certain deferred tax assets and liabilities, environmental reserves, certain tangible and intangible assets, income tax uncertainties, and goodwill remain subject~~the businesses acquired in 2019 are $61 million.

2018 Activity

During the first quarter of 2018, the Company acquired a water business which provides a range of services to ~~change, as information necessary to complete the analysis is obtained. The Company expects to finalize these by the filing~~Nalco Water institutional customers. This acquired business became part of the ~~2017 Form 10-K.~~Company’s Global Industrial reportable segment. In addition, the Company acquired an institutional business which provides a range of cleaning and disinfection products for the hospitality, leisure, residential care, housekeeping and janitorial sectors. These acquisitions have been accounted for using the acquisition method of accounting. There were insignificant purchase price adjustments related to prior year acquisitions.

The ~~following table summarizes the preliminary value of Anios assets acquired and liabilities assumed as~~components of the ~~acquisition date.~~



~~(millions)~~
~~Tangible assets~~			~~$142.7~~
~~Identifiable intangible assets:~~
~~Customer relationships~~			~~252.0~~
~~Trademarks~~			~~65.7~~
~~Other technology~~			~~16.1~~
~~Total assets acquired~~			~~476.5~~

~~Total liabilities assumed~~			~~184.7~~

~~Goodwill~~			~~506.5~~
~~Total consideration transferred~~			~~798.3~~

~~Long-term debt repaid upon close~~			~~192.8~~
~~Net consideration transferred to sellers~~			~~$605.5~~

~~Net tangible assets are primarily comprised of accounts receivable of $66.2 million, property, plant and equipment of $25.6 million and inventory of $29.7 million.~~

~~Customer relationships, trademarks, and other technology are being amortized over weighted average lives of 20, 17, and 11 years, respectively.~~

Goodwill of $506.5 million arising from the acquisition consists largely of the synergies and economies of scale expected through adding complementary geographies and innovative products to the Company’s healthcare portfolio. The goodwill was initially assigned to the Healthcare operating segment within the Global Institutional reportable segment and will be allocated to other operating segments within the purchase accounting window. None of the goodwill recognized is expected to be deductiblecash paid for ~~income tax purposes.~~

~~Other Acquisitions~~

~~Excluding the Anios acquisition,~~acquisitions for transactions during the first ~~nine months~~quarter of ~~2017,~~2019 and 2018 are shown in the ~~Company paid $32.6 million for acquisitions, of which $18.4 million was attributed~~following table.


	First Quarter Ended
	March 31
(millions)	2019		2018
Net tangible assets (liabilities) acquired and equity method investments		$(14.6)		$(2.7)

Identifiable intangible assets
Customer relationships		70.4		42.2
Trademarks		20.4		1.1
Other technology		45.8		4.0
Total intangible assets		136.6		47.3

Goodwill		180.3		32.5
Total aggregate purchase price		302.3		77.1

Acquisition related liabilities and contingent consideration		(20.5)		(0.6)
Net cash paid for acquisitions, including acquisition related
liabilities and contingent consideration		$281.8		$76.5

The 2019 and 2018 acquisition related liabilities are related to ~~certain identifiable intangible assets.~~ holdback liabilities and contingent consideration.

The weighted average useful life of these identifiable intangible assets acquired was 12 ~~years. Additionally, there were immaterial purchase price adjustments related to prior year acquisitions.~~

~~During the first nine months~~and 11 years as of 2016, the Company paid $48.5 million for acquisitions, of which $2.5 million was attributed to certain identifiable intangible assets. The weighted average useful life of these identifiable intangible assets acquired was 5 years. Additionally, there were immaterial purchase price adjustments related to prior year acquisitions.

~~Subsequent Event Activity~~

The Company entered into various purchase agreements which are expected to close in the fourth quarter of 2017. None of the agreements are material to the consolidated financial statements, individually or in the aggregate.March 31, 2019 and 2018, respectively.

Dispositions

There were no significant business dispositions during the first ~~nine months~~quarter of ~~2017 or 2016.~~2019 and 2018.

~~Subsequent Event Activity~~

In October 2017, the Company entered into an agreement to sell its Equipment Care business which subsequently closed on November 1, 2017. The disposition is not expected to be material to the consolidated financial statements.

4. BALANCE SHEET INFORMATION




	September 30		December 31		March 31		December 31
(millions)	2017		2016		2019		2018
Accounts receivable, net
Accounts receivable		$2,606.4		$2,408.8		$2,750.0		$2,723.1
Allowance for doubtful accounts		(73.2)		(67.6)		(58.4)		(60.6)
Total		$2,533.2		$2,341.2		$2,691.6		$2,662.5

Inventories
Finished goods		$1,004.8		$860.0		$1,080.0		$1,016.9
Raw materials and parts		461.0		408.4		570.7		525.6
Inventories at FIFO cost		1,465.8		1,268.4		1,650.7		1,542.5
FIFO cost to LIFO cost difference		43.2		51.0		(5.1)		3.9
Total		$1,509.0		$1,319.4		$1,645.6		$1,546.4

Other current assets
Prepaid assets		$128.2		$98.3		$136.5		$132.1
Taxes receivable		155.9		105.0		140.0		144.2
Derivative assets		29.0		46.3		28.5		42.8
Other		50.1		41.8		29.8		35.0
Total		$363.2		$291.4		$334.8		$354.1

Property, plant and equipment, net
Land		$227.4		$211.0		$216.1		$214.5
Buildings and leasehold improvements		1,174.5		1,121.2		1,308.6		1,279.4
Machinery and equipment		2,219.3		2,035.8		2,402.2		2,313.7
Merchandising and customer equipment		2,396.6		2,199.4		2,648.0		2,565.5
Capitalized software		583.0		531.1		674.8		666.2
Construction in progress		422.0		344.1		417.8		400.2
		7,022.8		6,442.6		7,667.5		7,439.5
Accumulated depreciation		(3,405.6)		(3,077.6)		(3,788.9)		(3,603.5)
Total		$3,617.2		$3,365.0		$3,878.6		$3,836.0

Other intangible assets, net
Intangible assets not subject to amortization
Trade names		$1,230.0		$1,230.0		$1,230.0		$1,230.0
Intangible assets subject to amortization
Customer relationships		$3,588.2		$3,206.1		3,745.9		3,649.3
Trademarks		378.8		303.3		406.1		384.9
Patents		459.7		446.5		475.4		470.2
Other technology		229.1		210.5		289.5		242.8
		4,655.8		4,166.4		4,916.9		4,747.2
Accumulated amortization
Customer relationships		(1,356.1)		(1,148.2)		(1,674.4)		(1,604.0)
Trademarks		(144.6)		(125.2)		(182.7)		(175.2)
Patents		(179.0)		(157.3)		(214.4)		(207.3)
Other technology		(166.5)		(147.9)		(198.1)		(193.0)
		(1,846.2)		(1,578.6)		(2,269.6)		(2,179.5)
Net intangible assets subject to amortization		2,809.6		2,587.8		2,647.3		2,567.7
Total		$4,039.6		$3,817.8		$3,877.3		$3,797.7

Other assets
Deferred income taxes		$105.3		$92.3		$108.0		$105.1
Pension		35.6		27.2		43.0		39.0
Derivative assets		-		21.5
Derivative asset						13.2		11.8
Restricted cash		-		53.0		-		179.3
Other		290.1		291.0		361.4		349.9
Total		$431.0		$485.0		$525.6		$685.1



	September 30		December 31		March 31		December 31
(millions)	2017		2016		2019		2018
Other current liabilities
Discounts and rebates		$318.3		$275.2		$303.5		$291.3
Dividends payable		106.9		108.0		132.7		132.4
Interest payable		70.4		37.3		71.1		44.5
Taxes payable, other than income		117.0		103.7		107.2		116.9
Derivative liabilities		86.6		24.6		15.5		20.1
Restructuring		45.7		30.5		89.6		73.7
Contract liability						85.4		75.8
Operating lease liabilities						159.1		-
Other		261.3		311.9		254.1		251.4
Total		$1,006.2		$891.2		$1,218.2		$1,006.1

Accumulated other comprehensive loss
Unrealized loss on derivative financial instruments, net of tax		$(37.6)		$(8.5)
Unrealized gain (loss) on derivative financial instruments, net of tax						$(6.3)		$2.0
Unrecognized pension and postretirement benefit expense, net of tax		(527.2)		(511.4)		(581.4)		(518.9)
Cumulative translation, net of tax		(999.5)		(1,193.0)		(1,147.2)		(1,244.8)
Total		$(1,564.3)		$(1,712.9)		$(1,734.9)		$(1,761.7)

5. DEBT AND INTEREST

Short-term Debt

The following table provides the components of the Company’s short-term debt obligations as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.





	September 30		December 31		March 31		December 31
(millions)	2017		2016		2019		2018
Short-term debt
Commercial paper		$238.0		$-		$787.5		$165.4
Notes payable		24.2		29.9		43.9		176.8
Long-term debt, current maturities		810.8		511.4		300.9		401.4
Total		$1,073.0		$541.3		$1,132.3		$743.6

Line of Credit

As of ~~September 30, 2017,~~March 31, 2019, the Company had in place a $2.0 billion multi-year credit facility which expires in ~~December 2019.~~November 2022. The credit facility has been established with a diverse syndicate of banks and supports the Company’s U.S. and Euro commercial paper programs. There were no borrowings under the Company’s credit facility as of either ~~September 30, 2017~~March 31, 2019 or December 31, ~~2016.~~2018.

Commercial Paper

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

As of ~~September 30, 2017,~~March 31, 2019, the Company had ~~$238.0~~$398.0 million (€~~200~~350.0 million) of commercial paper outstanding under its Euro program and ~~no commercial paper~~$389.5 million outstanding under its U.S. program. As of December 31, ~~2016,~~2018, the Company had no$141.4 million (€125.0 million) of commercial paper outstanding under ~~either~~its Euro program and $24.0 million outstanding under its U.S. program.

Notes Payable

The Company’s notes payable consists of uncommitted credit lines with major international banks and financial institutions, primarily to support global cash pooling structures. As of March 31, 2019 and December 31, 2018, the Company had $43.9 million and $176.8 million, respectively, outstanding under these credit lines.

Long-term Debt

The following table provides the components of the Company’s long-term debt obligations, including current maturities, as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.




	Maturity	September 30		December 31		Maturity	March 31		December 31
(millions)	by Year	2017		2016		by Year	2019		2018

Long-term debt
Public notes (2017 principal amount)
Five year 2012 senior notes ($500 million)	2017		$499.6		$498.9
Three year 2015 senior notes ($300 million)	2018		299.5		298.9
Public notes (2019 principal amount)
Three year 2016 senior notes ($400 million)	2019		396.6		395.9	2019		-		399.7
Five year 2015 senior notes ($300 million)	2020		298.9		298.6	2020		299.6		299.5
Ten year 2011 senior notes ($1.25 billion)	2021		1,245.6		1,244.8
Ten year 2011 senior notes ($1.02 billion)						2021		1,017.7		1,017.6
Five year 2017 senior notes ($500 million)	2022		496.0		-	2022		497.1		496.9
Seven year 2016 senior notes ($400 million)	2023		397.4		397.0	2023		398.1		398.0
Seven year 2016 senior notes (€575 million)	2024		676.5		608.4	2024		648.3		644.1
Ten year 2015 senior notes (€575 million)	2025		679.5		604.3	2025		650.3		646.3
Ten year 2016 senior notes ($750 million)	2026		742.7		742.1	2026		743.9		743.8
Thirty year 2011 senior notes ($750 million)	2041		739.1		738.7
Ten year 2017 senior notes ($500 million)						2027		495.0		494.8
Thirty year 2011 senior notes ($458 million)						2041		451.7		451.6
Thirty year 2016 senior notes ($250 million)	2046		245.9		245.9	2046		246.1		246.1
Private notes (2017 principal amount)
Series A private placement senior notes ($250 million)	2018		248.8		248.9
Thirty year 2017 senior notes ($700 million)						2047		609.4		609.0
Private notes (2019 principal amount)
Series B private placement senior notes ($250 million)	2023		249.3		249.2	2023		249.5		249.4
Capital lease obligations			4.9		5.2
Other			75.0		80.3
Finance lease obligations and other								2.4		6.2
Total debt			7,295.3		6,657.1			6,309.1		6,703.0
Long-term debt, current maturities			(810.8)		(511.4)			(300.9)		(401.4)
Total long-term debt			$6,484.5		$6,145.7			$6,008.2		$6,301.6

Public Notes

In August 2017, the Company issued a $500 million aggregate principal five year fixed rate note with a coupon rate of 2.375%. The proceeds were used to repay a portion of the Company’s outstanding commercial paper and for general corporate purposes.

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

Private Notes

The Company’s private notes may be redeemed by the Company at its option at redemption prices that include accrued and unpaid interest and a make-whole premium. Upon the occurrence of specified changes of control involving the Company, the Company would be required to offer to repurchase the private notes at a price equal to 100% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase. Additionally, the Company would be required to make a similar offer to repurchase the private notes upon the occurrence of specified merger events or asset sales involving the Company, when accompanied by a downgrade of the private notes below investment grade rating, within a specified time period. The private notes are unsecured senior obligations of the Company and rank equal in right of payment with all other senior indebtedness of the Company. The private notes shall be unconditionally guaranteed by subsidiaries of the Company in certain circumstances, as described in the note purchase agreement as amended.

Covenants

The Company is in compliance with its debt covenants as of ~~September 30, 2017.~~March 31, 2019.

Net Interest Expense

Interest expense and interest income recognized during the ~~third~~first quarter of 2019 and ~~the first nine months of 2017 and 2016~~2018 were as follows:


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Interest expense		$60.7		$69.0		$191.0		$209.4		$56.1		$61.0
Interest income		(5.6)		(4.1)		(13.8)		(13.1)		(6.7)		(4.6)
Interest expense, net		$55.1		$64.9		$177.2		$196.3		$49.4		$56.4

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. The Company’s reporting units are its operating segments.

~~During~~The Company tests goodwill for impairment on an annual basis during the second quarter of 2017, the Company completed its annual assessment for goodwill impairment across its eleven reporting units through a quantitative analysis, utilizing a discounted cash flow approach, which incorporates assumptions regarding future growth rates, terminal values, and discount rates. The two-step quantitative process involved comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not to be impaired, and the second step of the impairment test is unnecessary. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test would be performed to measure the amount of impairment loss to be recorded, if any. The Company’s goodwill impairment assessment for 2017 indicated the estimated fair value of each of its reporting units exceeded its carrying amount by a significant margin.

quarter. If circumstances change significantly, the Company would also test a reporting unit’s goodwill for impairment during interim periods between its annual tests. Based on the current and expected performance of the Company’s reporting units, updating the impairment testing during the first quarter of 2019 was not deemed necessary. There has been no impairment of goodwill in any of the years presented.

The changes in the carrying amount of goodwill for each of the Company's reportable segments during the ~~nine months~~quarter ended ~~September 30, 2017~~March 31, 2019 were as follows:

Global

Global

Global

(millions)

Industrial

Institutional

Energy

Other

Total

December 31, 2016

$2,522.3

$653.4

$3,093.6

$113.7

$6,383.0

Reclassifications (a)

62.7

(62.7)

-

-

-

December 31, 2016 revised

$2,585.0

$590.7

$3,093.6

$113.7

$6,383.0

Current year business combinations (b)

4.1

506.5

-

-

510.6

Prior year business combinations (c)

-

-

0.3

-

0.3

Effect of foreign currency translation

97.9

41.6

116.8

4.2

260.5

September 30, 2017

$2,687.0

$1,138.8

$3,210.7

$117.9

$7,154.4


	Global		Global		Global
(millions)	Industrial		Institutional		Energy		Other		Total
December 31, 2018		$2,730.8		$1,015.3		$3,126.6		$205.3		$7,078.0
Current year business combinations (a)		90.1		90.3		-		-		180.4
Prior year business combinations (b)		(0.1)		-		-		-		(0.1)
Effect of foreign currency translation		25.4		10.1		28.5		1.9		65.9
March 31, 2019		$2,846.2		$1,115.7		$3,155.1		$207.2		$7,324.2

(a)

Relates to establishment of the Life Sciences reporting unit, and goodwill being allocated to Life Sciences based on fair value allocation of goodwill. The Life Sciences reporting unit is included in the Industrial reportable segment and is comprised of operations previously recorded in the Food & Beverage and Healthcare reporting units, which are aggregated and reported in the Global Industrial and Global Institutional reportable segments, respectively. See Note 14 for further information.

~~(b)~~

Represents goodwill associated with current year acquisitions. ~~Of the goodwill acquired, the~~The Company ~~expects $4.1 million~~does not expect any of the goodwill related to businesses acquired to be tax deductible.

~~(c)~~(b)

Represents the purchase price allocation adjustments for ~~2016~~ acquisitions deemed preliminary as of ~~December 31, 2016.~~the end of the prior year.

Other Intangible Assets

The Nalco trade name is the Company’s principal indefinite life intangible ~~asset. During~~asset, which is tested for impairment on an annual basis during the second quarter. Based on the ongoing performance of the Company’s reporting units associated with the trade name, updating the impairment testing during the first quarter of 2017, the Company completed its annual test for indefinite life intangible asset impairment using a relief from royalty method of assessment, which incorporates assumptions regarding future sales projections and discount rates. Based on this testing, the estimated fair value of the asset exceeded its carrying value by a significant margin; therefore, no adjustment to the $1.2 billion carrying value of this asset2019 was not deemed necessary. There has been no impairment of the Nalco trade name intangible ~~asset~~ since it was acquired.

The Company’s intangible assets subject to amortization primarily include customer relationships, trademarks, patents and other technology. The fair value of identifiable intangible assets is estimated based upon discounted future cash flow projections and other acceptable valuation methods. Other intangible assets are amortized on a straight-line basis over their estimated economic lives. Total amortization expense related to other intangible assets during the ~~third~~first quarter of ~~2017~~2019 and ~~2016~~2018 was ~~$77.6~~$79.8 million and ~~$71.9 million, respectively. Total amortization expense related to other intangible assets during the first nine months of 2017 and 2016 was $228.5 million and $217.2~~$80.2 million, respectively. Estimated amortization for the remaining ~~three~~nine month period of ~~2017~~2019 related to other amortizable intangible assets is expected to be approximately ~~$84~~$243 million.

7. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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


	September 30, 2017								March 31, 2019
(millions)	Carrying		Fair Value Measurements						Carrying		Fair Value Measurements
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
Assets
Foreign currency forward contracts		$52.1		$-		$52.1		$-		$51.7		$-		$51.7		$-

Liabilities
Foreign currency forward contracts		209.2		-		209.2		-		29.2		-		29.2		-
Interest rate swap agreements		3.6		-		3.6		-


	December 31, 2016								December 31, 2018
(millions)	Carrying		Fair Value Measurements						Carrying		Fair Value Measurements
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
Assets
Foreign currency forward contracts		$ 93.4		$ -		$ 93.4		$ -		$72.3		$-		$72.3		$-

Liabilities
Foreign currency forward contracts		46.7		-		46.7		-		41.1		-		41.1		-
Interest rate swap agreements		3.5		-		3.5		-		0.2		-		0.2		-

The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date and is classified within Level 2. The carrying value of interest rate swap contracts is at fair value, which is determined based on current interest rates and forward interest rates as of the balance sheet date and is classified within Level 2. For purposes of fair value disclosure above, derivative values are presented gross. See further discussion of gross versus net presentation of the Company's derivatives within Note 8.

Contingent consideration obligations are recognized and measured at fair value at the acquisition date and thereafter until settlement. Contingent consideration is classified within level 3 as the underlying fair value is measured based on the probability-weighted present value of the consideration expected to be transferred. The consideration expected to be transferred is based on the Company’s expectations of various financial measures. The ultimate payment of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration activities during the first quarter of 2019 and 2018 were not material to the Company’s consolidated financial statements.

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

The fair value of long-term debt is based on quoted market prices for the same or similar debt instruments ~~classified~~(classified as Level 2.2). The carrying amount and the estimated fair value of long-term debt, including current maturities, held by the Company were:

September 30

December 31
(millions)

2017

2016

Carrying

Fair

Carrying

Fair


Amount

Value

Amount

Value
Long-term debt, including current maturities

$7,295.3

$7,707.6

$6,657.1

$6,963.9

March 31, 2019

December 31, 2018

Carrying

Fair

Carrying

Fair

Amount

Value

Amount

Value

Long-term debt, including current maturities

$6,309.1

$6,642.2

$6,703.0

$6,844.7

8. DERIVATIVES AND HEDGING TRANSACTIONS

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

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

Derivative Positions Summary

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

The respective net amounts are included in other current assets, other ~~non-current~~ assets, other current liabilities and other liabilities on the Consolidated Balance Sheet.

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



(millions)

	Asset Derivatives				Liability Derivatives				Derivatives Assets				Derivatives Liabilities
	September 30		December 31		September 30		December 31		March 31		December 31		March 31		December 31
(millions)	2017		2016		2017		2016		2019		2018		2019		2018
Derivatives designated as hedging instruments
Foreign currency forward contracts		$30.2		$73.4		$156.7		$19.8		$34.3		$40.4		$12.0		$10.2
Interest rate swap agreements		-		-		3.6		3.5		-		-		-		0.2

Derivatives not designated as hedging instruments
Foreign currency forward contracts		21.9		20.0		52.5		26.9		17.4		31.9		17.2		30.9
Gross value of derivatives		52.1		93.4		212.8		50.2		51.7		72.3		29.2		41.3

Gross amounts offset in the Consolidated Balance Sheet		(23.1)		(25.7)		(23.1)		(25.7)		(10.0)		(17.7)		(10.0)		(17.7)
Net value of derivatives		$29.0		$67.7		$189.7		$24.5		$41.7		$54.6		$19.2		$23.6

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

Notional Values

September 30

December 31
(millions)

2017

2016

Foreign currency forward contracts (a)

$ 5,617

$ 4,317

Interest rate agreements

$ 1,450

$ 1,450

~~(a)~~

~~Includes net investment hedge forward contracts of €40 million and €0 million as of September 30, 2017 and December 31, 2016, respectively.~~


	Notional Values
	March 31		December 31
(millions)	2019		2018

Foreign currency forward contracts		$ 5,552		$ 6,226
Interest rate agreements		-		400

Cash Flow Hedges

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

The Company occasionally enters into treasury lock and forward starting interest rate swap agreements to manage interest rate exposure. During ~~2016,~~ 2015 and ~~2014~~2016, the Company entered into and subsequently closed a series of treasury lock and forward starting interest rate swap agreements, in conjunction with its public debt issuances. The agreements were designated and effective as cash flow hedges of the expected interest payments related to the anticipated future debt issuances. Amounts recorded in AOCI are recognized as part of interest expense over the remaining life of the notes as the forecasted interest transactions occur.

~~The effective portion of gains and losses recognized into AOCI and earnings from derivative contracts that qualified as cash flow hedges was as follows:~~

Third Quarter Ended

Nine Months Ended

September 30

September 30

(millions)

2017

2016

2017

2016

Unrealized gain (loss) recognized into AOCI

Foreign currency forward contracts

AOCI (equity)

$(118.8)

$(12.9)

$(192.4)

$(40.4)

Interest rate swap agreements

AOCI (equity)

-

1.4

-

(11.5)

Total

(118.8)

(11.5)

(192.4)

(51.9)

Gain (loss) recognized in income

Foreign currency forward contracts

Cost of sales

(0.9)

5.0

(11.7)

26.6

SG&A

(99.5)

(0.7)

(157.3)

(20.3)

Interest expense, net

7.4

-

16.1

2.9

Subtotal

(93.0)

4.3

(152.9)

9.2

Interest rate swap agreements

Interest expense, net

(1.8)

(1.6)

(5.4)

(4.8)

Total

$(94.8)

$2.7

$(158.3)

$4.4

~~Gains and losses recognized in income related to the ineffective portion of the Company’s cash flow hedges were insignificant during the first nine months of 2017 and 2016.~~

Fair Value Hedges

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

In January 2016, the Company entered into an interest rate swap agreement that converted its $400 million 2.00% debt from a fixed interest rate to a floating interest rate. In January 2015, the Company entered into interest rate swap agreements that converted its $300 million 1.55% debt and its $250 million 3.69% debt from fixed interest rates to floating interest rates. ~~In May 2014, the Company entered into an~~The interest rate swap ~~agreement that converted its $500~~agreements tied to the Company’s $300 million ~~1.45%~~1.55% debt, ~~from a fixed rate to a floating interest rate.~~$250 million 3.69% and $400 million 2.00% debt expired in January 2018, November 2018 and January 2019, respectively, upon repayment of the underlying debt.

The interest rate swaps referenced above were designated as fair value hedges.

The ~~impact~~following amounts were recorded on ~~earnings from derivative contracts that qualified as~~the Consolidated Balance Sheet related to cumulative basis adjustments for fair value ~~hedges was as follows:~~

hedges:

Third Quarter Ended

Nine Months Ended

September 30

September 30

(millions)



2017

2016

2017

2016

Gain (loss) on derivative recognized income

Interest rate swap

Interest expense, net

$0.3

$(7.6)

$(0.1)

$6.1

Gain (loss) on hedged item recognized income

Interest rate swap

Interest expense, net

$(0.3)

$7.6

$0.1

$(6.1)



Line item in which the hedged item is included	Carrying amount of the hedged liabilities				Cumulative amount of the fair value hedging adjustment included in the carrying amount of the hedged liabilities
	First Quarter Ended				First Quarter Ended
	March 31				March 31
(millions)	2019		2018		2019		2018
Long-term debt		$-		$643.8		$-		$5.8

Net Investment Hedges

The Company designates its outstanding ~~€1,150~~$1,299 million ~~($1,356~~(€1,150 million at the end of the ~~third~~first quarter of ~~2017)~~2019) senior notes (“euronotes”) ~~and €200 million ($238 million at the end of the third quarter of 2017) Euro commercial paper~~ and related accrued interest as hedges of existing foreign currency exposures related to investments the Company has in certain euro denominated functional currency subsidiaries.

$337 million (€300 million at the end of the first quarter of 2019) of Euro commercial paper were also designated as a hedge of existing foreign currency exposures. The revaluation gains and losses on the euronotes and Euro commercial paper, which are designated and effective as hedges of the Company’s net investments, have been included as a component of the cumulative translation adjustment account, and were as follows:


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Revaluation gains (losses), net of tax		$(50.9)		$(1.2)		$(103.7)		$(29.1)		$(6.6)		$(26.2)

Derivatives Not Designated as Hedging Instruments

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

~~The impact~~Effect of all Derivative Instruments on ~~earnings from derivative contracts that are not designated as hedging instruments was as follows:~~Income

Third Quarter Ended

Nine Months Ended

September 30

September 30
(millions)



2017

2016

2017

2016

Gain (loss) recognized in income

Foreign currency forward contracts

SG&A

$(29.4)

$(12.0)

$(38.1)

$(27.3)

Interest expense, net

(0.2)

1.0

(3.5)

(2.1)

Total

$(29.6)

$(11.0)

$(41.6)

$(29.4)

The ~~amounts~~gain (loss) of all derivative instruments recognized in ~~SG&A above offset the earnings impact~~product and equipment cost of ~~the related foreign currency denominated assets~~sales (“COS”), selling, general and ~~liabilities. The amounts recognized in~~administrative expenses (“SG&A”) and interest expense, above represent the component of the hedging gains (losses) attributable to the difference between the spot and forward rates of the hedges as a result of interest rate differentials. The losses recognized in 2017 primarily relate to movements in the Euro rates.net (“interest”) is summarized below:



		First Quarter Ended
		March 31
		2019						2018
(millions)		COS		SG&A		Interest		COS		SG&A		Interest
Gain (loss) on derivatives in cash flow hedging relationship:
Foreign currency forward contracts	��
Amount of gain (loss) reclassified from AOCI to income			$4.4		$(7.1)		$-		$(1.9)		$(47.6)		$-
Amount excluded from the assessment of effectiveness recognized in earnings based on changes in fair value			-		-		7.0		-		-		8.3
Interest rate swap agreements
Amount of gain (loss) reclassified from AOCI to income			-		-		(0.2)		-		-		(1.8)

Gain (loss) on derivatives in fair value hedging relationship:
Interest rate swaps
Hedged items			-		-		0.2		-		-		1.1
Derivatives designated as hedging instruments			-		-		(0.2)		-		-		(1.1)

Gain (loss) on derivatives not designated as hedging instruments:
Foreign currency forward contracts
Amount of gain (loss) recognized in income			-		6.1		-		-		(18.4)		1.6
Total gain (loss)			$4.4		$(1.0)		$6.8		$(1.9)		$(66.0)		$8.1

9. OTHER COMPREHENSIVE INCOME (LOSS) INFORMATION

Other comprehensive income (loss) includes net income, foreign currency translation adjustments, unrecognized gains and losses on securities, defined benefit pension and postretirement plan adjustments, gains and losses on derivative instruments designated and effective as cash flow hedges and non-derivative instruments designated and effective as foreign currency net investment hedges that are charged or credited to the accumulated other comprehensive loss account in shareholders’ equity.

The following tables provide other comprehensive income information related to the Company’s derivatives and hedging instruments and pension and postretirement benefits. See Note 8 for additional information related to the Company’s derivatives and hedging transactions. See Note 1314 for additional information related to the Company’s pension and postretirement benefits activity.


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Derivative and Hedging Instruments
Unrealized gains (losses) on derivative & hedging instruments
Amount recognized in AOCI		$(118.8)		$(11.5)		$(192.4)		$(51.9)		$(2.9)		$(44.9)
(Gains) losses reclassified from AOCI into income
Cost of sales		0.9		(5.0)		11.7		(26.6)
COS										(4.4)		1.9
SG&A		99.5		0.7		157.3		20.3		7.1		47.6
Interest (income) expense, net		(5.6)		1.6		(10.7)		1.9		(6.8)		(6.5)
		94.8		(2.7)		158.3		(4.4)		(4.1)		43.0
Other activity		(0.6)		0.1		(0.1)		0.1		-		(0.3)
Tax impact		3.8		4.6		5.1		16.0		1.4		0.1
Net of tax		$(20.8)		$(9.5)		$(29.1)		$(40.2)		$(5.6)		$(2.1)

Pension and Postretirement Benefits
Amount reclassified from AOCI into income
Actuarial losses		11.3		10.8		33.3		32.6
Prior service costs		(6.1)		(2.0)		(18.1)		(6.0)
Postretirement benefits changes		-		50.0		-		50.0
Amortization of net actuarial loss and prior service costs and benefits										-		7.7
		5.2		58.8		15.2		76.6		-		7.7
Other activity										(4.0)		(5.5)
Tax impact		(3.9)		(22.3)		(7.0)		(29.0)		-		(1.9)
Net of tax		$1.3		$36.5		$8.2		$47.6		$(4.0)		$0.3

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


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
	2017		2016		2017		2016		2019		2018
(millions)
Derivative losses (gains) reclassified from AOCI into income, net of tax		$72.7		$(2.0)		$120.3	$	(3.5)
Derivative (gains) losses reclassified from AOCI into income, net of tax										$(3.0)		$33.5

Pension and postretirement benefits net actuarial losses
Pension and postretirement benefits net actuarial (gains) losses
and prior services costs reclassified from AOCI into income, net of tax		$1.3		$5.6		$8.2	$	16.7		$(4.0)		$0.3

10. SHAREHOLDERS’ EQUITY

Share Repurchase Authorization

In February 2015, the Company’s Board of Directors authorized the repurchase of up to 20 million shares of its common stock, including shares to be repurchased under Rule 10b5–1. As of ~~September 30, 2017, 12,358,110~~March 31, 2019, 8,004,726 shares remained to be repurchased under the Company’s repurchase authorization. The Company intends to repurchase all shares under its authorization, for which no expiration date has been established, in open market or privately negotiated transactions, subject to market conditions.

~~Accelerated Stock Repurchase (“ASR”) Agreements~~

In February 2017, the Company entered into an ASR agreement to repurchase $300 million of its common stock and received 2,077,224 shares of its common stock, which was approximately 85% of the total number of shares the Company expected to be repurchased under the ASR, based on the price of the Company’s common stock at that time. In connection with the final settlement of the ASR agreement in June 2017, the Company received an additional 286,620 shares of common stock.

In February 2016, the Company entered into an ASR agreement to repurchase $300 million of its common stock and received 2,459,490 shares of its common stock, which was approximately 85% of the total number of shares the Company expected to be repurchased under the ASR, based on the price of the Company’s common stock at that time. Upon final settlement of the ASR agreement in May 2016, the Company received an additional 232,012 shares of common stock.

The final per share purchase price and the total number of shares to be repurchased under both 2017 and 2016 ASR agreements generally were based on the volume-weighted average price of the Company’s common stock during the term of the agreements.

~~All shares acquired under the ASR agreements were recorded as treasury stock.~~

During their respective open periods in 2017 and 2016, neither of the ASRs was dilutive to the Company’s earnings per share calculations, nor did they trigger the two-class earnings per share methodology. Additionally, the unsettled portion of ASRs during their respective open periods met the criteria to be accounted for as a forward contract indexed to the Company’s stock and qualified as equity transactions.

~~The initial delivery of shares, as well as the additional receipt of shares at settlement resulted in a reduction to the Company’s common stock outstanding used to calculate earnings per share.~~

Share Repurchases

During the first ~~nine months~~quarter of ~~2017,~~2019, the Company reacquired ~~4,614,646~~766,648 shares of its common stock, of which ~~4,414,416~~646,668 related to share repurchases through open market or private purchases, ~~including the February 2017 ASR discussed above,~~ and ~~200,230~~119,980 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

During ~~2016,~~all of 2018, the Company reacquired ~~6,483,198~~3,908,041 shares of its common stock, of which ~~6,126,033~~3,706,716 related to share repurchases through open market or private purchases, ~~including the February 2016 ASR discussed above,~~ and ~~357,165~~201,325 related to shares withheld for taxes on the exercise of stock options and the vesting of stock awards and units.

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

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

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



	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions, except per share)	2017		2016		2017		2016		2019		2018

Net income attributable to Ecolab		$392.4		$374.1		$942.5		$863.3		$296.5		$247.3

Weighted-average common shares outstanding
Basic		289.0		291.6		289.8		292.8		288.2		288.6
Effect of dilutive stock options and units		4.4		4.1		4.4		4.3		4.1		4.1
Diluted		293.4		295.7		294.2		297.1		292.3		292.7

Basic EPS		$ 1.36		$ 1.28		$ 3.25		$ 2.95		$ 1.03		$ 0.86
Diluted EPS		$ 1.34		$ 1.27		$ 3.20		$ 2.91		$ 1.01		$ 0.84

Anti-dilutive securities excluded from the computation of EPS		0.1		1.7		1.7		1.7
Anti-dilutive securities excluded from the computation of diluted EPS										1.4		1.8

The Company’s diluted EPS for 2017 was impacted by the adoption of the new accounting guidance that amends the calculation of diluted EPS for share-based payments to exclude excess tax benefits or deficiencies from assumed proceeds during application of the treasury stock method.

12. INCOME TAXES

The Company’s tax rate was ~~24.6%~~11.4% and ~~25.5% for the third quarter of 2017 and 2016, respectively, and 21.7% and 24.7%~~21.8% for the first ~~nine months~~quarter of ~~2017~~2019 and ~~2016,~~2018, respectively. The change in the Company’s tax rate for the ~~third~~first quarter of ~~2017~~2019 compared to the ~~third~~first quarter of ~~2016~~2018 was ~~primarily~~ driven ~~by global tax planning strategies and geographic mix. The change in the Company’s tax rate for the first nine months of 2017 compared to first nine months of 2016 was~~ primarily ~~driven~~ by the ~~tax rate~~ impact of discrete tax items, ~~with lesser impacts from global~~special (gains) and charges, tax planning ~~strategies~~ and the geographic ~~mix.~~mix of income.

The Company recognized total net ~~expenses~~benefit related to discrete tax items of ~~$8.3~~$27.7 million ~~and net~~in the first quarter of 2019. Share-based compensation excess tax ~~benefits~~benefit contributed $18.7 million. The Company also recognized a $5.1 million benefit due to issuance of technical guidance during the quarter related to the one-time transition tax imposed by the Tax Cuts and Jobs Act (the “Act”). The remaining discrete ~~tax items of $24.2 million during the third quarter and first nine months of 2017, respectively. The third quarter net expense~~benefit was ~~driven~~ primarily ~~by recognizing adjustments from filing the Company’s 2016 U.S. federal income tax return and international adjustments due~~related to changes in ~~estimates, partially offset by~~tax rates in non-U.S. jurisdictions.

The Company recorded a net discrete tax benefit of $0.1 million in the ~~release~~first quarter of ~~reserves~~2018. The Company recorded discrete tax expense of $11.3 million for ~~uncertain~~the one-time transition tax ~~positions~~ due to issuance of technical guidance during the ~~expiration of statute of limitations in state~~quarter. Discrete tax ~~matters. Net benefits for the first nine months of 2017 was also impacted by the recognition of $29.2 million of share-based compensation~~items include excess tax benefits related to ~~employee~~ share-based ~~payments (resulting from~~compensation of $6.8 million and other discrete tax benefits of $4.6 million related to changes in the ~~adoption of a new accounting standard as discussed~~Company’s state tax profile and changes in ~~Note 1).~~reserves in non-U.S. jurisdictions.

13. RENTAL AND LEASES

Lessee

The Company leases sales and administrative office facilities, distribution centers, research and manufacturing facilities, as well as vehicles and other equipment under operating leases. The Company also enters into insignificant finance leases.

The Company determines whether a lease exists at the inception of the arrangement. In assessing whether a contract is or contains a lease, the Company considers a lease a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company accounts for lease components separately from the nonlease components (e.g., common-area maintenance costs). Operating leases are recorded in operating lease assets, other current liabilities, and operating lease liabilities in the Consolidated Balance Sheet.

Operating lease assets and operating lease liabilities are measured and recognized ~~net expenses related to discrete tax items~~based on the present value of ~~$4.5 million~~the future minimum lease payments over the lease term at commencement date. The Company uses the rate implicit in the lease when available or determinable and ~~$3.6 million during~~when the ~~third quarter and first nine months of 2016, respectively. Third quarter net expense was driven primarily by recognizing adjustments from filing~~rate implicit in the lease is not determinable, the Company’s ~~2015 U.S. federal income tax return, partially offset by settlement~~incremental borrowing rate based on the information available at commencement date is used in determining the present value of ~~international tax matters~~future payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the lease liability and ~~remeasurement~~are recognized as incurred. The Company identified real estate, vehicles and other equipment as the primary classes of leases. Certain leases with a similar class of underlying assets are accounted for as a portfolio of leases.

The Company elected to not apply the recognition requirements of the new standard to leases with terms of twelve months or less. Those lease payments will continue to be recognized in the Consolidated Statement of Income on a straight-line basis over the lease term and are not recorded on the Consolidated Balance Sheet.

Most leases include one or more options to renew, which is at the Company’s sole discretion, with renewal terms that can extend the lease term from one month to multiple years. The lease start date is when the asset is available for use and in possession of the Company. The lease end date, which includes any options to renew that are reasonably certain ~~deferred tax~~to be exercised, is based on the terms of the contract. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material restrictive covenants.

The Company’s operating lease cost was as follows:



	First Quarter Ended
	March 31
(millions)	2019
Operating lease cost*		$54.4

*Includes immaterial short-term and variable lease costs

Future maturity of operating lease liabilities ~~resulting from the application~~as of ~~an updated tax rate~~March 31, 2019 is as follows:



(millions)
Remainder of 2019			$ 132
2020			153
2021			114
2022			80
2023			40
2024			27
Thereafter			89
Total lease payments			635
Less: imputed interest			64
Present value of lease liabilities			$ 571

As of December 31, 2018, identifiable future minimum payments with non-cancelable terms in ~~an international jurisdiction. Net expense related to discrete tax items for the first nine months~~excess of 2016 was also impacted by adjustments to deferred tax asset and liability positions and the release of reserves for uncertain tax positions due to the expiration of statute of limitations in non-U.S. jurisdictions.one year were:


(millions)
2019			$ 172
2020			141
2021			108
2022			72
2023			37
Thereafter			104
Total			$ 634

~~13.~~The Company’s operating leases term and discount rate were as follows:



	March 31
	2019

Weighted-average remaining lease terms (years)		5.6

Weighted-average discount rate		4.01%

The Company’s other lease information was as follows:



	First Quarter Ended
	March 31
(millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$49.1

Leased assets obtained in exchange for new operating lease liabilities		39.6

Lessor

The Company leases warewashing and water treatment equipment to customers under operating leases. The Company’s accounting policy for these leases is to account for lease and nonlease components separately. The nonlease components, such as product and service revenue, are accounted for under Topic 606 Revenue from Contracts with Customers, see Note 15. Revenue from leasing equipment is recognized on a straight-line basis over the life of the lease. Cost of sales includes the depreciation expense for assets under operating leases. The assets are depreciated over their estimated useful lives. Initial lease terms range from one year to five years and most leases include annual renewal options.

Lease contracts convey the right for the customer to control the equipment for a period of time as defined by the contract. There are no options for the customer to purchase the equipment and therefore the equipment remains the property of the Company at the end of the lease term.

The gross assets under operating leases recorded in Property, plant and equipment, net is $1,049.9 million and related accumulated depreciation is $602.1 million as of March 31, 2019.

The Company’s operating lease revenue was as follows:



	First Quarter Ended
	March 31
(millions)	2019
Operating lease revenue*		$102.9

*Includes immaterial variable lease revenue

Revenue from operating leases for existing contracts as of March 31, 2019 is as follows:



(millions)
Remainder of 2019			$ 265
2020			290
2021			220
2022			148
2023			71
2024			21
Thereafter			8
Total lease revenue			$ 1,023

The Company mitigates the risk of residual value subsequent to the lease term by redeploying assets. As such, the Company expects to receive revenue from the operating lease assets through the remaining useful life and therefore subsequent to the initial contract termination date.

14. PENSION AND POSTRETIREMENT PLANS

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

The components of net periodic pension and postretirement health care benefit costs for the ~~third~~first quarter ended ~~September 30~~March 31 are as follows:


	U.S.				International				U.S. Postretirement				U.S.				International				U.S. Postretirement
	Pension				Pension				Health Care				Pension				Pension				Health Care
(millions)	2017		2016		2017		2016		2017		2016		2019		2018		2019		2018		2019		2018
Service cost		$17.5		$16.8		$7.7		$7.0		$0.7		$0.8		$18.2		$18.6		$7.6		$8.5		$0.3		$0.9
Interest cost on benefit obligation		20.9		20.4		7.0		8.0		1.5		2.0		22.3		20.8		7.8		7.5		1.4		1.5
Expected return on plan assets		(37.4)		(35.9)		(13.9)		(13.3)		(0.1)		(0.2)		(37.4)		(40.5)		(15.2)		(16.3)		(0.1)		(0.1)
Recognition of net actuarial (gain) loss		7.2		7.7		4.5		3.6		(0.6)		(0.4)		5.9		9.8		4.1		4.4		(1.0)		(0.5)
Amortization of prior service
cost (benefit)		(1.7)		(1.7)		(0.2)		(0.2)		(4.2)		(0.1)		(2.9)		(1.7)		(0.3)		(0.2)		(5.8)		(4.1)
Total expense (benefit)		$6.5		$7.3		$5.1		$5.1		$(2.7)		$2.1		$6.1		$7.0		$4.0		$3.9		$(5.2)		$(2.3)

~~The~~Service cost is included with employee compensation cost in cost of sales and selling, general and administrative expenses in the Consolidated Statement of Income while all other components are included in other (income) expense in the Consolidated Statement of ~~net periodic pension and postretirement health care benefit costs for the nine months ended September 30 are as follows:~~

U.S.

International

U.S. Postretirement

Pension

Pension

Health Care
(millions)

2017

2016

2017

2016

2017

2016
Service cost

$52.6

$50.3

$23.0

$20.9

$2.0

$2.3
Interest cost on benefit obligation

62.6

61.2

21.1

24.0

4.4

6.1
Expected return on plan assets

(112.3)

(107.7)

(41.7)

(40.0)

(0.4)

(0.6)
Recognition of net actuarial (gain) loss

21.5

23.1

13.6

10.7

(1.8)

(1.2)
Amortization of prior service

cost (benefit)

(5.1)

(5.2)

(0.5)

(0.6)

(12.5)

(0.2)
Total expense (benefit)

$19.3

$21.7

$15.5

$15.0

$(8.3)

$6.4

Income.

As of ~~September 30, 2017,~~March 31, 2019, the Company is in compliance with all funding requirements of its U.S. pension and postretirement health care plans. ~~In September 2017, the Company made an $80 million voluntary contribution to its non-contributory qualified U.S. pension plan.~~ During the first ~~nine months~~quarter of ~~2017,~~2019, the Company made payments of $6$1 million to its U.S. non-contributory non-qualified defined benefit plans and estimates it will make additional payments of approximately $1$5 million to such plans during the remainder of ~~2017.~~2019. In addition, the Company expects to make an $120 million voluntary contribution in 2019 to its non-contributory qualified U.S. pension plan.

The Company contributed ~~$33~~$15 million to its international pension benefit plans during the first ~~nine months~~quarter of ~~2017.~~2019. The Company estimates it will contribute approximately an additional $9$29 million to such plans during the remainder of ~~2017.~~2019.

During the first ~~nine months~~quarter of ~~2017,~~2019, the Company made payments of ~~$12~~$3 million to its U.S. postretirement health care benefit plans and estimates it will make additional payments of approximately $4$8 million to such plans during the remainder of ~~2017.~~

The Company’s U.S. postretirement health care costs decreased in 2017 relative to the costs incurred in the comparable period of the prior year as a result of moving the U.S. postretirement healthcare plans to a Retiree Exchange approach for post-65 retiree medical coverage beginning in 2018 and the merger of Nalco U.S. postretirement health care plan with the Ecolab U.S. postretirement plan.

2019.

2223

15. REVENUES

~~14.~~

Revenue Recognition

Product and Sold Equipment

Product revenue is generated from cleaning, sanitizing, water, energy and colloidal silica products provided to customers in the Global Industrial, Global Institutional, Global Energy segments and Other. In addition, the Company sells equipment which may be used in combination with its specialized products. Revenue recognized from product and sold equipment is recognized at the point in time when the obligations in the contract with the customer are satisfied, which generally occurs with the transfer of the product or delivery of the equipment.

Service and Lease Equipment

Service and lease equipment revenue is generated from providing services or leasing equipment to customers. Service offerings include installing or repairing certain types of equipment, activities that supplement or replace headcount at the customer location, or fulfilling deliverables included in the contract. Services provided in Other primary includes services designed to detect, eliminate and prevent pests. Global Energy services include process and water treatment offerings to the global petroleum and petrochemical industries, while services in the Global Industrial segment are associated with water treatment and paper process applications. Global Institutional services include water treatment programs and process applications, and wash process solutions. Revenue recognized from leased equipment primarily relates to warewashing and water treatment equipment. 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. Refer to Note 13 for additional information related to lease equipment.

The following table shows principal activities, separated by reportable segments, from which the Company generates its revenue. For more information about the Company’s reportable segments, refer to Note 16.

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


	First Quarter Ended
	March 31
(millions)	2019		2018
Global Industrial
Product and sold equipment		$1,125.6		$1,069.8
Service and lease equipment		155.7		156.1
Global Institutional
Product and sold equipment		1,030.6		1,038.6
Service and lease equipment		177.9		167.7
Global Energy
Product and sold equipment		709.4		732.6
Service and lease equipment		100.0		110.3
Other
Product and sold equipment		20.7		18.6
Service and lease equipment		185.5		177.2
Total
Total product and sold equipment		$2,886.3		$2,859.6
Total service and lease equipment		619.1		611.3

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


	Global				Global				Global
	Industrial				Institutional				Energy				Other
(millions)	2019		2018		2019		2018		2019		2018		2019		2018

North America		$597.7		$556.7		$832.8		$817.0		$469.7		$485.1		$138.3		$130.0
Europe		309.0		297.2		231.9		244.6		100.3		101.8		30.4		30.3
Asia Pacific		164.4		160.9		59.7		60.3		57.6		67.4		9.8		8.9
Latin America		117.0		109.3		40.6		41.2		49.6		54.6		11.8		11.7
Greater China		62.9		71.1		31.5		29.3		20.5		18.3		13.2		12.0
Middle East and Africa		30.3		30.7		12.0		13.9		111.7		115.7		2.7		2.9
Total		$1,281.3		$1,225.9		$1,208.5		$1,206.3		$809.4		$842.9		$206.2		$195.8

Net sales by geographic region were determined based on origin of sale. Revenues in the United States made up 54% and 53% of total revenues as of March 31, 2019 and 2018, respectively.

Contract Liability

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



	March 31		March 31
(millions)	2019		2018

Contract liability as of beginning of period		$75.8		$79.0

Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period		(75.8)		(79.0)

Increases due to billings excluding amounts recognized as revenue during the period		82.4		88.0
Business combination		3.0		0.2

Contract liability as of end of period		$85.4		$88.2

16. OPERATING SEGMENTS

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

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

Comparability of Reportable Segments

The Company evaluates the performance of its non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which ~~eliminate~~eliminates the impact of exchange rate fluctuations on its international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Fixed currency rates are generally based on existing market rates at the time they are established. The “Fixed Currency Rate Change” column shown in the following table reflects the impact on previously reported values related to fixed currency exchange rates established by management at the beginning of ~~2017.~~

~~Effective~~2019. The “Other” column shown in the first quarter of 2017, the Company established the Life Sciences operating segment, to align with the strategy for growth in the pharmaceutical and personal care manufacturing operations. Life Sciences is comprised of operations previously recorded in the Food & Beverage and Healthcare operating segments and has been aggregated into the Global Industrial reportable segment. The Company also madetable reflects immaterial changes ~~to its reportable~~between segments, ~~including the movement of certain customers and~~primarily cost ~~allocations between reportable segments. These changes are presented in "Segment Change" column of the table below.~~allocations.

The impact of the preceding changes on previously reported full year ~~2016~~2018 reportable segment net sales and operating income is summarized as follows:


	December 31, 2018
	2018 Reported				Fixed	2018 Revised
	Valued at 2018				Currency	Valued at 2019
(millions)	Management Rates		Other		Rate Change	Management Rates
Net Sales
Global Industrial		$5,462.4		$-	$(242.2)	$5,220.2
Global Institutional		5,204.5		-	(138.5)	5,066.0
Global Energy		3,501.8		-	(113.0)	3,388.8
Other		877.6		-	(21.9)	855.7
Subtotal at fixed currency rates		15,046.3		-	(515.6)	14,530.7
Effect of foreign currency translation		(378.1)		-	515.6	137.5
Consolidated reported GAAP net sales		$14,668.2		$-	$-	$14,668.2

Operating Income
Global Industrial		$768.1		$(1.4)	$(42.3)	$724.4
Global Institutional		1,026.9		-	(19.6)	1,007.3
Global Energy		358.5		(0.4)	(19.6)	338.5
Other		161.3		1.8	(3.1)	160.0
Corporate		(307.1)		-	3.5	(303.6)
Subtotal at fixed currency rates		2,007.7		-	(81.1)	1,926.6
Effect of foreign currency translation		(60.7)		-	81.1	20.4
Consolidated reported GAAP operating income		$1,947.0		$-	$-	$1,947.0

December 31, 2016




Fixed






Values at

Currency


Segment

Values at
(millions)

2016 Rates

Rate Change


Change

2017 Rates
Net Sales








Global Industrial


$ 4,617.1

$ 6.9

$ 63.2

$ 4,687.2

Global Institutional


4,495.6

7.7

(63.2)

4,440.1

Global Energy


3,035.8

40.0

-

3,075.8

Other


806.5

(4.8)

-

801.7

Subtotal at fixed currency rates


12,955.0

49.8

-

13,004.8

Effect of foreign currency translation


197.8

(49.8)

-

148.0

Consolidated reported GAAP net sales


$ 13,152.8

$ -

$ -

$ 13,152.8



Operating Income


Global Industrial


$ 703.0

$ (0.9)

$ 17.9

$ 720.0

Global Institutional


966.7

3.0

(19.2)

950.5

Global Energy


337.1

7.9

1.7

346.7

Other


148.1

(2.5)

(0.4)

145.2

Corporate

(272.1)

(0.5)

-

(272.6)

Subtotal at fixed currency rates

1,882.8

7.0

-

1,889.8

Effect of foreign currency translation

32.2

(7.0)

-

25.2

Consolidated reported GAAP operating income

$ 1,915.0

$ -

$ -

$ 1,915.0

2326

Reportable Segment Information

Financial information for each of the Company’s reportable segments, ~~including the impact of all preceding segment structure changes,~~ is as follows:


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Net Sales
Global Industrial		$1,248.1		$1,202.1		$3,586.5		$3,468.4		$1,289.2		$1,190.2
Global Institutional		1,225.1		1,149.2		3,524.3		3,315.0		1,215.3		1,187.0
Global Energy		796.7		771.2		2,346.1		2,305.6		811.7		826.5
Other		221.7		209.2		633.8		598.1		206.8		192.4
Subtotal at fixed currency rates		3,491.6		3,331.7		10,090.7		9,687.1		3,523.0		3,396.1
Effect of foreign currency translation		71.7		54.4		96.9		113.6		(17.6)		74.8
Consolidated reported GAAP net sales		$3,563.3		$3,386.1		$10,187.6		$9,800.7		$3,505.4		$3,470.9

Operating Income
Global Industrial		$207.4		$204.1		$501.9		$510.1		$147.5		$122.0
Global Institutional		274.2		262.1		726.1		697.8		195.9		195.7
Global Energy		89.7		102.6		236.1		244.9		78.4		68.6
Other		44.0		40.4		110.9		108.2		30.2		27.0
Corporate		(46.9)		(45.0)		(198.9)		(222.9)		(83.7)		(68.2)
Subtotal at fixed currency rates		568.4		564.2		1,376.1		1,338.1		368.3		345.1
Effect of foreign currency translation		11.4		9.9		16.0		20.0		(1.1)		9.2
Consolidated reported GAAP operating income		$579.8		$574.1		$1,392.1		$1,358.1		$367.2		$354.3

The profitability of the Company’s operating segments is evaluated by management based on operating income. ~~The Company has no intersegment revenues.~~

Consistent with the Company’s internal management reporting, Corporate amounts in the table above include intangible asset amortization specifically from the Nalco merger and special (gains) and charges, as discussed in Note 2, that are not allocated to the Company’s reportable segments.

~~15.~~17. COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and contingencies related to, among other things, workers’ compensation, general liability (including product liability), automobile claims, health care claims, income taxes, environmental matters and lawsuits. The Company is also subject to various claims and contingencies related to income taxes, which are discussed in Note 12. The Company also has contractual obligations ~~related~~including to lease ~~commitments.~~commitments, which are discussed in Note 13.

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

Insurance

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

Litigation and Environmental Matters

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

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Environmental Matters

The Company is currently participating in environmental assessments and remediation at approximately 4540 locations, ~~excluding recently acquired Anios locations which are currently under review. The~~the majority of ~~these locations~~which are in the U.S. ~~Environmental~~, and environmental liabilities have been accrued reflecting management’s best estimate of future costs. Potential insurance reimbursements are not anticipated in the Company’s accruals for environmental liabilities.

Matters Related to Deepwater Horizon Incident Response

On April 22, 2010, the ~~deepwater~~deep water drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after a catastrophic explosion and fire that began on April 20, 2010. A massive oil spill resulted. Approximately one week following the incident, subsidiaries of BP plc, under the authorization of the responding federal agencies, formally requested Nalco Company, now an indirect subsidiary of Ecolab, to supply large quantities of COREXIT® 9500, a Nalco oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule. Nalco Company responded immediately by providing available COREXIT and increasing production to supply the product to BP’s subsidiaries for use, as authorized and directed by agencies of the federal government throughout the incident. Prior to the incident, Nalco and its subsidiaries had not provided products or services or otherwise had any involvement with the Deepwater Horizon platform. On July 15, 2010, BP announced that it had capped the leaking well, and the application of dispersants by the responding parties ceased shortly thereafter.

On May 1, 2010, the President appointed retired U.S. Coast Guard Commandant Admiral Thad Allen to serve as the National Incident Commander in charge of the coordination of the response to the incident at the national level. The EPA directed numerous tests of all the dispersants on the National Contingency Plan Product Schedule, including those provided by Nalco Company, “to ensure decisions about ongoing dispersant use in the Gulf of Mexico are grounded in the best available science.” Nalco Company cooperated with this testing process and continued to supply COREXIT, as requested by BP and government authorities. The use of dispersants by the responding parties was one tool used by the government and BP to avoid and reduce damage to the Gulf area from the spill.

In connection with its provision of COREXIT, Nalco Company has been named in several lawsuits as described below.

Cases arising out of the Deepwater Horizon accident were administratively transferred for pre-trial purposes to a judge in the United States District Court for the Eastern District of Louisiana with other related cases under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 (E.D. La.) (“MDL 2179”). Nalco Company was named, along with other unaffiliated defendants, in six putative class action complaints related to the Deepwater Horizon oil spill and 21 complaints filed by individuals. Those complaints were consolidated in MDL 2179. The complaints generally allege, among other things, strict liability and negligence relating to the use of our Corexit dispersant in connection with the Deepwater Horizon oil spill.

Pursuant to orders issued by the Court in MDL 2179, the claims were consolidated in several master complaints, including one naming Nalco Company and others who responded to the Gulf Oil Spill (known as the “B3 Master Complaint”). On May 18, 2012, Nalco filed a motion for summary judgment against the claims in the B3“B3” Master Complaint, on the grounds that: (i) Plaintiffs’ claims are preempted by the comprehensive oil spill response scheme set forth in the Clean Water Act and National Contingency Plan; and (ii) Nalco is entitled to derivative immunity from suit. On November 28, 2012, the Court granted Nalco’s motion and dismissed with prejudice the claims in the “B3” Master Complaint asserted against Nalco. The Court held that such claims were preempted by the Clean Water Act and National Contingency Plan. Because claims in the “B3” Master Complaint remained pending against other defendants, the Court’s decision was not a “final judgment” for purposes of appeal. Under Federal Rule of Appellate Procedure 4(a), plaintiffs will have 30 days after entry of final judgment to appeal the Court’s decision.

In December 2012 and January 2013, the MDL 2179 court issued final orders approving two settlements between BP and Plaintiffs’ Class Counsel: (1) a proposed Medical Benefits Class Action Settlement; and (2) a proposed Economic and Property Damages Class Action Settlement. Pursuant to the proposed settlements, class members agree to release claims against BP and other released parties, including Nalco Company and its related entities.

Nalco Company, the incident defendants and the other responder defendants have been named as first party defendants by Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against Nalco Company and other unaffiliated cross defendants. The Cross Claimants generally allege, among other things, that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to indemnity or contribution from the cross defendants.

In April and June 2011, in support of its defense of the claims against it, Nalco Company filed counterclaims against the Cross Claimants. In its counterclaims, Nalco Company generally alleges that if it is found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, it is entitled to contribution or indemnity from the Cross Claimants.

In May 2016, Nalco was named in nine additional complaints filed by individuals alleging, among other things, business and economic loss resulting from the Deepwater Horizon oil ~~spill.~~ spill (“B1” claims). In April 2017, Nalco was named in two additional complaints filed by individuals seeking, among other things, business and economic loss resulting from the Deepwater Horizon oil spill. The plaintiffs in these lawsuits are generally seeking awards of unspecified compensatory and punitive damages, and attorneys’ fees and costs. These actions have been consolidated in the MDL and the Company expects they will be dismissed pursuant to the Court’s November 28, 2012 order granting Nalco’s motion for summary judgment.

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On February 22, 2017, the Court dismissed the “B3” Master Complaint and ordered that Plaintiffs who had previously filed a claim that fell within the scope of the “B3” Master Complaint and who had “opted out” of and not released their claims under the Medical Benefits Class Action Settlement either: (1) complete a sworn statement indicating, among other things, that they opted out of the Medical Benefits Class Action Settlement (to be completed by Plaintiffs who previously filed an individual complaint); or (2) file an individual lawsuit attaching the sworn statement as an exhibit, by a deadline date set by the Court. ~~The~~

On July 10, 2018, the Court ~~will then determine which~~entered an order dismissing the “B1” claims against Nalco. In light of the Court’s orders dismissing various “B3” ~~Plaintiffs are entitled to pursue~~and “B1” claims in their ~~claims~~entirety, for most plaintiffs the Court’s November 28, 2012 grant of summary judgment for Nalco is now final and the ~~procedures~~deadline to appeal has passed. On October 23, 2018, a plaintiff filed a new “B3” complaint against Nalco and other unaffiliated defendants generally alleging, among other things, negligence and gross negligence related to the use of Corexit dispersant in connection with the Deepwater Horizon oil spill. The complaint was consolidated in the MDL. There currently remain five cases pending against Nalco, all of which are expected to ultimately be dismissed pursuant to the Court’s November 28, 2012 order granting Nalco’s motion for ~~addressing those claims.~~summary judgment.

The Company believes the claims asserted against Nalco Company are without merit and intends to defend these lawsuits vigorously. The Company also believes that it has rights to contribution and/or indemnification (including legal expenses) from third parties. However, the Company cannot predict the outcome of these lawsuits, the involvement it might have in these matters in the future, or the potential for future ~~litigation~~.litigation.

~~16.~~18. NEW ACCOUNTING PRONOUNCEMENTS


Standards that are not yet adopted:
			Required
	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements

~~Standards that are not yet adopted:~~

ASU ~~2017-12~~2018-15 - ~~Derivatives~~Intangibles - Goodwill and ~~Hedging (Topic 815)~~Other - Internal-Use Software (Subtopic 350-40): ~~Targeted Improvements to~~Customer’s Accounting for ~~Hedging Activities~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)	August ~~2017~~2018	~~Amends the hedge accounting recognition and presentation requirements in ASC 815. Simplifies the guidance on the application of hedge accounting and~~Aligns the requirements for ~~hedge documentation~~capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments require an entity (customer) in a hosting arrangement that is a service contract to determine which implementation costs to capitalize as an asset related to the service contract and ~~effectiveness testing. Requires presentation of all items that affect earnings in the same income statement line as the hedged item.~~which costs to expense.	January 1, ~~2019~~2020	The ~~Company is currently evaluating the impact of adoption, and certain transition elections provided for by the ASU.~~

ASU ~~2017-09 - Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting~~	~~August 2017~~	Clarifies the definition of what's considered a substantive modification related to a change in terms or conditions of a share-based payment award and when it's appropriate to apply modification accounting. The current definition of "modification" is too broad, resulting in diverse interpretations of what's considered a substantive modification.	~~January 1, 2018~~	~~This ASU must~~should be applied either retrospectively or prospectively to ~~an award modified on or~~all implementation costs incurred after the ~~adoption date.~~date of adoption. The Company is currently evaluating the impact of adoption.

ASU ~~2017-07~~2018-14 - Compensation - Retirement Benefits ~~(Topic 715)~~- Defined Benefit Plans - General (Subtopic 715-20): ~~Improving~~Disclosure Framework - Changes to the ~~Presentation of Net Periodic Pension Cost and the Net Periodic Postretirement~~Disclosure Requirements for Defined Benefit ~~Cost~~Plans	~~March 2017~~August 2018	~~Amends~~Modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This includes, but is not limited to, the ~~requirements related~~removal of the requirement to disclose the amounts in accumulated other comprehensive income ~~statement presentation of the~~expected to be recognized as components of net periodic benefit ~~costs. New requirements include (1) disaggregate~~cost over the ~~current-service-cost component from~~next fiscal year, and the addition of a requirement to disclose the weighted-average interest crediting rates for cash balance plans and other ~~components of net benefit cost (the “other components") and present it~~plans with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented.promised interest crediting rates.	January 1, ~~2018~~2020	Upon adoption of the standard, the Company will record only the service cost component with compensation cost in Cost of Sales and Selling, General, and Administrative costs. The other components of net period benefit cost will be presented below operating income. The Company is currently evaluating the impact of adoption.

ASU 2017-05 - Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets	~~February 2017~~	Clarifies the scope of guidance on nonfinancial asset derecognition (ASC 610-20) including the accounting for partial sales of nonfinancial assets. The ASU defines "in-substance nonfinancial asset". Also clarifies the derecognition of all businesses should be accounted for in accordance with derecognition and deconsolidation guidance in 810-10.	~~January 1, 2018~~	~~The Company is~~Entities are required to apply ~~this ASU~~the disclosure amendments on a retrospective ~~basis.~~basis to all periods presented. The Company is currently evaluating the impact of adoption.

ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	January 2017	Simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.	January 1, 2020	The ASU must be applied on a prospective basis upon adoption. ~~The Company~~Adoption of the ASU is ~~currently evaluating the impact of adoption.~~

~~ASU 2017-01--Business Combinations (Topic 805): Clarifying the Definition of a Business~~	~~January 2017~~	~~Clarifies the definition of a business and provides guidance on whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.~~	~~January 1, 2018~~	~~The ASU must be applied prospectively on or after the effective date, and no disclosures are required at transition. The Company is currently evaluating the impact of adoption.~~

~~ASU 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash~~	~~November 2016~~	~~Clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows.~~	~~January 1, 2018~~	~~Presentation impact only related to restricted cash. The Company does~~ not ~~expect the updated guidance~~expected to have a ~~significant~~material impact on ~~future~~the Company's financial statements.

Credit Losses ASUs: ASU ~~2016-16~~2018-19 - ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~	~~October 2016~~	~~Simplifies the guidance on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory (e.g. intellectual property).~~	~~January 1, 2018~~	~~This ASU must be applied on a modified retrospective basis through a cumulative-effect adjustment directly~~Codification Improvements to ~~retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of adoption.~~

~~ASU 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~	~~August 2016~~	~~The guidance's objective is to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flow.~~	~~January 1, 2018~~	~~Presentation impact only related to eight specific cash flow items. The Company is currently evaluating the impact of adoption.~~

Topic 326, Financial Instruments -Credit Losses ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	~~June 2016~~Various	Addresses the recognition, measurement, presentation and disclosure of credit losses on trade and reinsurance receivables, loans, debt securities, net investments in leases, off-balance-sheet credit exposures and certain other instruments. Amends guidance on reporting credit losses from an incurred model to an expected model for assets held at amortized cost, such as accounts receivable, loans and held-to-maturity debt securities. Additional disclosures will also be required.	January 1, 2020	Adoption of the standard ~~will~~may change how the allowance for trade and other receivables is calculated. The Company is currently evaluating the impact of adoption.

~~ASU 2016-02 - Leases (Topic 842)~~	~~February 2016~~	~~Introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.~~	~~January 1, 2019~~	~~See additional information regarding the impact of this guidance on the Company's financials at the bottom of this table in note (a).~~

Revenue Recognition ASUs: 2014-09 - Revenue from Contracts with Customers 2015-14 - Deferral of the Effective Date 2016-08 - Principal Versus Agent Considerations 2016-10 - Identifying Performance Obligations and Licensing 2016-11 - Revenue Recognition and Derivatives and Hedging 2016-12 - Narrow-Scope Improvements & Practical Expedients 2016-20 - Technical Corrections and Improvements	~~Various~~	Recognition standard contains principles for entities to apply to determine the measurement of revenue and timing of when the revenue is recognized. The underlying principle of the updated guidance will have entities recognize revenue to depict the transfer of goods or services to customers at an amount that is expected to be received in exchange for those goods or services.	~~January 1, 2018~~	~~See additional information regarding the impact of this guidance on the Company's financials at the bottom of this table in note (b).~~

~~(a)~~

As part of implementing the new standard, the Company is in process of reviewing current accounting policies, developing future policies, and assessing the practical expedients allowed under the new accounting guidance. In addition, the project team is defining future processes to identify, accumulate, and report on the Company’s various leases. The Company expects most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption and is currently evaluating other impacts on the consolidated financial statements. The standard requires a modified retrospective transition to be applied at the beginning of the earliest comparative period presented in the year of adoption.

~~(b)~~

The Company has reached conclusions on certain key accounting assessments related to the standard and is finalizing the related accounting policies. The Company’s focus on the identification and evaluation of performance obligations within certain contracts has identified additional performance obligations within contracts which relate to providing services to customers. These additional performance obligations, when aggregated with the service revenue that is currently reported, represent more than 10% of consolidated net sales. Upon adoption of the new standard, service revenues are expected to be reported separately from product revenues. Additionally, the Company anticipates certain costs currently classified in Selling, General, and Administrative expenses will be reclassified as Cost of Sales as they are tied to satisfaction of a service performance obligation. In addition to expanded disclosures associated with the new standard, the Company is continuing to assess the impact on the consolidated financial statements. The Company currently intends to adopt the new standard using the full retrospective method on January 1, 2018, which is dependent upon the completion of the analysis of information necessary to restate prior period financial statements.

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Standards that were adopted:
	Date of		Date of	Effect on the
Standard	Issuance	Description	Adoption	Financial Statements

~~Standards~~ASU 2018-02 - Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	February 2018	Allows entities to reclassify stranded tax effects resulting from the Tax Cut and Jobs Act (“the Act”) from accumulated other comprehensive income to retained earnings. Tax effects stranded in other comprehensive income for reasons other than the impact of the Act cannot be reclassified.	January 1, 2019	In order to improve the usefulness and transparency, the Company made the election to reclassify $61.2 million of income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings related to pension and derivatives.

ASU 2018-16 - Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	Various	Amends the hedge accounting recognition and presentation requirements. Simplifies the application of hedge accounting and the requirements for hedge documentation and effectiveness testing. Requires presentation of all items that ~~were adopted:~~affect earnings in the same income statement line as the hedged item. Expands the benchmark interest rates that can be used for hedge accounting.	January 1, 2019	Adoption of this guidance did not have a material impact on the results of operations, financial position or cash flows. Required disclosures under the new guidance is included in Note 8.

Lease ASUs: ASU 2019-01 - Leases (Topic 842): Codification Improvements ASU 2018-20 - Leases (Topic 842): Narrow-Scope Improvements for Lessors ASU 2018-11 - Leases (Topic 842) Targeted Improvements ASU 2018-10 - Codification Improvements to Topic 842, Leases ASU 2018-01 - Leases (Topic 842): Land Easement Practical Expedient ASU 2016-02 - Leases (Topic 842)	Various	Introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.	January 1, 2019	See additional information regarding the impact of this guidance on the Company's financial statements at the bottom of this table in note (a).


~~ASU 2015-11 - Inventory (Topic 330): Simplifying the Measurement of Inventory~~	~~July 2015~~	~~The amendment requires entities to measure inventory under the FIFO or average cost methods at the lower of cost or net realizable value.~~	~~January 1, 2017~~	~~The adoption of the guidance did not have a material impact on the Company's financial statements.~~

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

~~ASU 2016-01 - Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~	(a)	~~January 2016~~	The amendment revises accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments.	~~January 1, 2017~~	~~The adoption of the guidance did not have a material impact on the Company's financial statements.~~

~~ASU 2016-05 - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships~~		~~March 2016~~	The amendment clarifies language related to hedge accounting criteria that a change in the counterparty is not in and of itself considered a termination of the derivative or critical term of the hedging relationship.	~~January 1, 2017~~	~~The adoption of the guidance did not have a material impact on the Company's financial statements.~~

~~ASU 2016-07 - Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting~~		~~March 2016~~	Simplifies the transition to equity method accounting for entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.	~~January 1, 2017~~	~~The adoption of the guidance did not have a material impact on the Company's financial statements.~~

~~ASU 2016-09 - Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~		~~March 2016~~	~~The amendment includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements.~~	~~January 1, 2017~~	~~The Company included appropriate disclosures within this 10-Q to adhere to this new ASU.~~

~~ASU 2017-03 - Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323)~~		~~January 2017~~	Amends the disclosure requirements associated with certain recently issued Accounting Standards and how they will have an impact on the Financial Statements of a registrant when such standards are adopted in a future period. It applies to ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases ~~(Topic 842); and ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and any subsequent amendments to these ASU's.~~	~~Effective Immediately~~	~~The Company included appropriate disclosure requirements within this 10-Q to adhere to this new ASU.~~

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842 Leases (“the new lease standard”) prospectively and recorded a cumulative effect adjustment to the opening balance of retained earnings of $2.8 million. The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard, which allows the Company to carryforward the historical lease classification, to not reassess whether existing contracts are or contain a lease and not to reassess initial direct costs. The Company also elected the land easement practical expedient.

In addition, the Company elected the hindsight practical expedient to determine the lease term for existing leases. When applying the hindsight expedient, the Company determined that most renewal options would not be reasonably certain in determining the expected lease term. The Company made an accounting policy election to not apply the recognition requirements of the new standard to leases with terms of twelve months or less and which do not include an option to purchase the underlying assets which is reasonably certain of exercise.

Adoption of the new standard resulted in the recording of additional net operating lease assets and operating lease liabilities of approximately $572.2 million and $575.0 million, respectively, as of January 1, 2019. The difference between the operating lease assets and operating lease liabilities was recorded as an adjustment to retained earnings. There was no impact to consolidated net earnings or cash flows. Further information related to the Company’s adoption of the new lease standard is included in Note 13.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Ecolab Inc.:

Results of Review of Financial Statements

We have reviewed the accompanying consolidated balance sheet of Ecolab Inc. and its subsidiaries (the “Company”) as of ~~September 30, 2017,~~March 31, 2019, and the related consolidated statements of income, ~~and~~ comprehensive income ~~for the three-month~~(loss), equity and ~~nine-month periods ended September 30, 2017 and 2016 and the consolidated statement of~~ cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016. These~~2018, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements ~~are~~for them to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~America.

We ~~conducted our review~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)., the consolidated balance sheet of the Company as of December 31, 2018, and the related consolidated statements of income, comprehensive income (loss), equity, and cash flowsfor the year then ended (not presented herein), and in our report dated March 1, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive income, equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 24, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


/s/ PricewaterhouseCoopers LLP


PricewaterhouseCoopers LLP
Minneapolis, Minnesota
~~November~~May 2, ~~2017~~2019

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

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

The MD&A should be read in conjunction with both the unaudited consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. This discussion contains various ~~“Non-GAAP~~Non-GAAP Financial ~~Measures”~~Measures and also contains various ~~“Forward-Looking Statements”~~Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled “Non-GAAP Financial Measures” and “Forward-Looking Statements” located at the end of Part I of this report.

Comparability of Results

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. Fixed currency exchange rates are generally based on existing market rates at the time they are established.

~~Comparability~~ Public currency rate data provided within the “Segment Performance” section of ~~Reportable Segments~~

~~Effective in~~this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the ~~first quarter of 2017, in order to align with the strategy~~corresponding period and is provided for growth specifically in the pharmaceutical and personal care manufacturing operations, we established the Life Sciences operating segment. Life Sciences is comprised of customers and accounts that were previously included in our Food & Beverage and Healthcare operating segments, which were related to manufacturing in the following industries: pharmaceutical, animal health and medicine, biologic products, cosmetics and medical device. The Life Sciences operating segment is included in our Global Industrial reportable segment. All comparisons and discussion throughout the MD&A are based on the new operating segment structure effective in the first quarter of 2017.informational purposes only.

Impact of Acquisitions and Divestitures

Acquisition adjusted growth rates exclude the results of our acquired businesses from the first twelve months post acquisition and exclude the results of our divested businesses from the twelve months prior to ~~divestiture, and exclude sales to our deconsolidated Venezuelan subsidiaries from both the current period and comparable period of the prior year.~~divestiture.

OVERVIEW OF THE ~~THIRD~~FIRST QUARTER ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2019

Sales Performance

When comparing ~~third~~first quarter ~~2017~~2019 against ~~third~~first quarter ~~2016,~~2018, sales performance was as follows:

Reported net sales increased 5%1% to ~~$3,563~~$3,505 million, fixed currency sales and acquisition adjusted fixed currency sales increased 5%4% and 3%, respectively. ~~Hurricanes Harvey, Irma, and Maria are estimated to have had a negative 1% impact on fixed currency sales growth.~~

Fixed currency sales for our Global Industrial segment increased 4%8% to ~~$1,248~~$1,289 million, acquisition adjusted fixed currency sales increased 7%, led by Water, ~~and~~ Food and ~~Beverage.~~Beverage, Paper and Life Sciences.

Fixed currency sales for our Global Institutional segment increased 7%2% to ~~$1,225 million, acquisition~~$1,215 million. Acquisition adjusted fixed currency sales also increased 2%, led by growth in Specialty.

Fixed currency sales for our Global Energy segment ~~increased 3%~~decreased 2% to ~~$797 million, acquisition~~$812 million. Acquisition adjusted fixed currency sales ~~increased 4%~~also decreased 2%, ~~as strong growth~~primarily reflecting slower activity in the ~~well stimulation business and modest gains in~~energy markets during the ~~downstream business were offset by a decline in our production business.~~quarter.

Fixed currency sales and acquisition adjusted fixed currency sales for ~~our~~ Other segment sales increased 6%7% to ~~$222~~$207 million, driven by sales growth in Pest ~~Elimination.~~Elimination and Colloidal Technologies.

Financial Performance

When comparing ~~third~~first quarter ~~2017~~2019 against ~~third~~first quarter ~~2016,~~2018, our financial performance was as follows:

Reported operating income increased 1%4% to ~~$580~~$367 million. Excluding the impact of special (gains) and charges from both ~~2017~~2019 and ~~2016~~2018 reported results, adjusted operating income ~~also~~ increased 1%8% and our adjusted fixed currency operating income ~~also~~ increased ~~1%. Hurricanes are estimated to have negatively impacted adjusted fixed currency operating income growth by 3%~~11%.

Net income attributable to Ecolab increased 5%20% to ~~$392~~$297 million. Excluding the impact of special (gains) and charges and discrete tax items from both ~~2017~~2019 and ~~2016~~2018 reported results, our adjusted net income attributable to Ecolab increased 7%13%.

~~Diluted~~Reported diluted EPS of ~~$1.34~~$1.01 increased 6%20%. Excluding the impact of special (gains) and charges and discrete tax items from both ~~2017~~2019 and ~~2016~~2018 reported results, adjusted diluted EPS increased 7%13% to ~~$1.37~~$1.03 in the ~~third~~first quarter of ~~2017.~~2019.

Our reported tax rate was ~~24.6%~~11.4% during the ~~third~~first quarter of ~~2017,~~2019, compared to ~~25.5%~~21.8% during the ~~third~~first quarter of ~~2016.~~2018. Excluding the tax rate impact of special (gains) and charges and discrete tax items from both ~~2017~~2019 and ~~2016~~2018 results, our adjusted tax rate was ~~23.3%~~20.6% and ~~25.2%~~22.0% during the ~~third~~first quarter of ~~2017~~2019 and ~~2016,~~2018, respectively.

RESULTS OF OPERATIONS

Net Sales


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
(millions)	2017		2016		Change		2017		2016		Change		2019		2018		Change
Product and equipment sales														$2,886.3		$2,859.6
Service and lease sales														619.1		611.3
Reported GAAP net sales		$3,563.3		$3,386.1	5	%		$10,187.6		$9,800.7	4	%		$3,505.4		$3,470.9	1	%
Effect of foreign currency translation		(71.7)		(54.4)				(96.9)		(113.6)				17.6		(74.8)
Non-GAAP fixed currency sales		$3,491.6		$3,331.7	5	%		$10,090.7		$9,687.1	4	%		$3,523.0		$3,396.1	4	%

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

The percentage components of the period-over-period ~~2017~~2019 sales change are shown below:

Third Quarter Ended

Nine Months Ended

September 30

September 30
(percent)

2017

2017
Volume

2%

2%
Price changes

1

1
Acquisition adjusted fixed currency sales change

3

3
Acquisitions and divestitures

2

1
Fixed currency sales change

5

4
Foreign currency translation

0

0
Reported GAAP net sales change

5%

4%



		First Quarter Ended
		March 31
(percent)		2019
Volume		1%
Price changes		3
Acquisition adjusted fixed currency sales change		3
Acquisitions and divestitures		1
Fixed currency sales change		4
Foreign currency translation		(3)
Reported GAAP net sales change		1%

Amounts do not necessarily sum due to rounding.

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


	Third Quarter Ended								Nine Months Ended								First Quarter Ended
	September 30								September 30								March 31
	2017				2016				2017				2016				2019				2018
			Gross				Gross				Gross				Gross				Gross				Gross
(millions/percent)	COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin		COS		Margin
Product and equipment cost of sales																		$1,717.1				$1,696.2
Service and lease cost of sales																		379.6				376.1
Reported GAAP COS and gross margin		$1,891.3	46.9	%		$1,737.2	48.7	%		$5,454.4	46.5	%		$5,153.8	47.4	%		$2,096.7	40.2	%		$2,072.3	40.3	%
Special (gains) and charges		0.3	0.0			-	-			26.2	0.2			61.9	0.6			3.6				-	-
Non-GAAP adjusted COS and gross margin		$1,891.0	46.9	%		$1,737.2	48.7	%		$5,428.2	46.7	%		$5,091.9	48.0	%		$2,093.1	40.3	%		$2,072.3	40.3	%

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

Our reported gross margin was ~~46.9%~~40.2% and ~~48.7% for the third quarter of 2017 and 2016, respectively. Our reported gross margin~~40.3% for the first ~~nine months~~quarter of ~~2017~~2019 and ~~2016 was 46.5%~~2018, respectively. Special (gains) and ~~47.4%, respectively.~~charges included in items impacting COS are shown within the “Special (Gains) and Charges” table on page 34.

Excluding the impact of special (gains) and charges within COS, our ~~third~~first quarter ~~2017~~2019 and first quarter of 2018 adjusted gross margin was ~~46.9% and our adjusted gross margin for the first nine months of 2017 was 46.7%~~40.3%. ~~These percentages compared against a third quarter 2016 adjusted gross margin of 48.7% and an adjusted gross margin of 48.0% for the first nine months of 2016.~~

Our adjusted gross margin ~~decrease~~was flat when comparing the ~~third~~first quarter of ~~2017~~2019 against the ~~third~~first quarter of ~~2016 and the comparable periods for the first nine months of 2017 and 2016~~2018 which was driven primarily by pricing and cost savings, which were offset by higher delivered product ~~costs and an increase in Global Energy, which more than offset pricing and cost savings.~~

costs.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expenses as a percentage of sales were ~~30.5%~~28.6% for the ~~third~~first quarter of ~~2017~~2019 compared to ~~31.6%~~29.3% in ~~2016. For the nine month period, SG&A expenses were 32.3% of sales in 2017 compared to 33.2% in 2016.The~~2018. The decreased SG&A ratio to sales ~~across~~in the ~~periods~~first quarter of 2019 was driven primarily by sales ~~volume~~ leverage and cost savings actions which more than offset investments in the business.

Special (Gains) and Charges

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



	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(millions)	2017		2016		2017		2016		2019		2018
Cost of sales
Restructuring activities		$-		$-		$2.2		$0.9		3.4		-
Acquisition and integration costs		0.3		-		12.9		-
Energy related charges		-		-		-		51.0
Other		-		-		11.1		10.0
Acquisition and integration activities										0.2		-
Subtotal		0.3		-		26.2		61.9		3.6		-

Special (gains) and charges
Restructuring activities		4.1		(7.7)		34.6		(6.8)		37.1		0.3
Acquisition and integration costs		1.8		1.7		12.7		5.0
Energy related charges		-		-		-		12.6
Venezuela related gain		(3.2)		-		(8.5)		(7.8)
Upstream energy spin-off										4.3		-
Acquisition and integration activities										2.5		0.5
Other		2.2		9.2		9.1		32.7		(3.6)		25.2
Subtotal		4.9		3.2		47.9		35.7		40.3		26.0

Operating income subtotal										43.9		26.0

Interest expense, net										0.2		-
Total special (gains) and charges		$5.2		$3.2		$74.1		$97.6		$44.1		$26.0

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

Restructuring activities

Restructuring activities are primarily related to Accelerate 2020 (described below). These activities have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income. Restructuring liabilities have been classified as a component of both other current and other noncurrent liabilities on the Consolidated Balance Sheet.

Accelerate 2020

During the ~~second~~third quarter of ~~2017,~~2018, we formally commenced a restructuring plan Accelerate 2020 (“the Plan”), to leverage technology and ~~other cost-saving actions in order~~systems investments and organizational changes. During the first quarter of 2019, we raised our goals for the Plan to ~~streamline our operations. These actions include a reduction~~further simplify and automate processes and tasks, reduce complexity and management layers, consolidated facilitates and focus on key long-term growth areas by leveraging technology and structural improvements. We now expect that the restructuring activities will be completed by the end of ~~our global workforce by approximately 570 positions, as well as asset disposals and lease terminations. As a result~~2020, with total anticipated costs of ~~these actions, we expect to incur approximately $40 to $45~~$260 million ($~~30 to $35~~190 million after tax), or $0.65 per diluted share, over this period of ~~restructuring charges, the majority of which is~~time. Costs are expected to be ~~incurred during 2017.~~ primarily cash expenditures for severance costs and some facility closure costs relating to team reorganizations. Actual costs may vary from these estimates depending on actions taken.

We recorded restructuring charges of ~~$3.6~~$40.5 million ($~~1.3~~30.4 million after tax), or $0.10 per diluted share in the first quarter of 2019. The liability related to this Plan was $81.4 million as of the end of the first quarter of 2019. We have recorded $145.1 million ($110.0 million after tax), or $0.37 per diluted share, of cumulative restructuring charges under the Plan.

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



	Employee
	Termination		Asset
(millions)	Costs		Disposals		Other		Total
2018 Activity
Recorded expense	$	94.1	$	5.0	$	5.5	$	104.6
Net cash payments		(32.8)		-		(2.4)		(35.2)
Non-cash charges		-		(5.0)		-		(5.0)
Effect of foreign currency translation		(0.5)		-		-		(0.5)
Restructuring liability, December 31, 2018		60.8		-		3.1		63.9

2019 Activity
Recorded expense		29.4		0.3		10.8		40.5
Net cash payments		(20.0)		-		(2.8)		(22.8)
Non-cash charges		-		(0.3)		-		(0.3)
Effect of foreign currency translation		0.1		-		-		0.1
Restructuring liability, March 31, 2019	$	70.3	$	-	$	11.1	$	81.4

Other Restructuring Activities

Prior to Accelerate 2020, we engaged in a number of restructuring plans. During the first quarter of 2019, net restructuring charges related to the prior year plans were minimal. During the first quarter of 2018, net restructuring gains related to prior year plans were $0.3 million ($0.3 million after tax), or less than $0.01 per diluted share, and $36.6 million ($26.2 million after tax) or $0.09 per diluted share, during the third quarter and first nine months of 2017, respectively, related primarily to employee termination costs. As of September 30, 2017, theshare. The restructuring liability balance ~~related~~for all plans commencing prior to ~~these activities~~Accelerate 2020 was ~~$28.2 million. We anticipate the~~$13.1 million and $14.9 million as of March 31, 2019 and December 31, 2018, respectively. The reduction in liability was driven primarily by severance payments. The majority of ~~the~~ pretax charges ~~will~~ represent net cash expenditures which are 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 ~~the third quarter and first nine months of 2017~~2019, related to restructuring plans commencing prior to 2019 were ~~$4.3 million and $4.9 million, respectively.~~$1.4 million.

Net restructuring charges related to our Energy and Combined restructuring plans during 2017 were minimal during the third quarter and first nine months of 2017. During the third quarter and first nine months of 2016, net restructuring activities included net restructuring gains of $7.7 million ($7.2 million after tax) or $0.02 per diluted share and $5.9 million ($7.3 million gain after tax) or $0.03 per diluted share, respectively. The restructuring liability balance was $23.1 million and $39.6 million as of September 30, 2017 and December 31, 2016, respectively. The reduction in liability was driven primarily by severance and other cash payments. The remaining accrual is expected to be paid over a period of a few months to several quarters and continues to be funded from operating activities.Upstream energy spin-off

~~Acquisition~~During the first quarter of 2019, we announced our intention to pursue a plan to separate and ~~integration related costs~~

~~Acquisition and integration costs~~spin-off the Upstream businesses of Ecolab’s Global Energy segment (the Upstream Business). The charges reported in ~~cost of sales~~special (gains) and charges on the Consolidated Statement of Income include ~~$0.3~~$4.3 million ($~~0.2~~3.3 million after tax) or ~~less than~~ $0.01 per diluted share, in the ~~third~~first quarter of ~~2017~~2019. The charges are primarily related to ~~disposal of excess inventory~~professional fees.

Acquisition and ~~$12.9 million ($8.2 million) or $0.03 per diluted share during the first nine months of 2017~~integration related primarily to recognition of accelerated rent expense upon the closure of Swisher plants and disposal of excess inventory. The first nine months of 2017 also include amounts related to recognition of fair value step-up in the Anios inventory.costs

Acquisition and integration costs reported in special (gains) and charges on the Consolidated Statement of Income include ~~$1.8~~$2.5 million ($~~1.2~~1.8 million after tax) or $0.01 per diluted share, and $0.5 million ($0.3 million after tax) or less than $0.01 per diluted share, in the first quarter of 2019 and ~~$12.7 million ($8.5 million after tax) or $0.03 per diluted share~~2018, respectively. Charges are related to Laboratoires Anios (“Anios”) and Bioquell PLC (“Bioquell”) acquisitions and consist of ~~acquisition~~integration costs, advisory and legal ~~fees,~~fees. Acquisition and integration ~~charges for~~costs reported in product and equipment cost of sales on the ~~Anios and Swisher acquisitions during~~Consolidated Statement of Income in the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively.~~

~~During~~2019 relate to the ~~third quarter and first nine months~~recognition of ~~2016, we~~fair value step-up in the Bioquell inventory. We also incurred ~~acquisition and integration charges of $1.7~~$0.2 million ($~~1.0~~0.1 million after tax) or less than $0.01 per diluted share, ~~and $5.0~~of interest expense in the first quarter of 2019.

Other

During the first quarter of 2019, we recorded other special gains of $3.6 million ($~~3.1~~4.3 million after tax) or $0.01 per diluted share, ~~respectively. Further information~~which primarily related to ~~our acquisitions is included in Note 3.~~

~~Energy related charges~~

~~Oil industry activity remained depressed during 2016 when compared~~a litigation settlement which was offset with ~~2014 levels, resulting from excess oil supply pressures, which have negatively impacted exploration and production investments in~~other legal charges. During the ~~energy industry, particularly in North America. As a result~~first quarter of ~~these conditions and their corresponding impact on our business outlook,~~2018, we recorded ~~total~~other special charges of ~~$63.6~~$25.2 million ($~~42.9~~18.9 million after tax) or ~~$0.14~~$0.06 per diluted share, ~~during the first nine months~~which primarily consisted of ~~2016, comprised of inventory write downs and related disposal costs, fixed asset charges, headcount reductions and other charges. No such charges were incurred in 2017.~~

~~The inventory write-downs and related disposal costs of $31.1~~a $25.0 million include adjustments due to the significant decline in activity and related prices of certain specific-use and other products, coupled with declines in replacement costs, as well as estimated costs to dispose the respective excess inventory. The fixed asset charges of $18.2 million resulted from the write-down of certain assets related to the reduction in certain aspects of our North American Global Energy segment, as well as abandonment of certain projects under construction. The carrying value of the corresponding fixed assets was reduced to zero. The employee termination costs of $12.8 million include a reduction in the Global Energy segment’s global workforce to better align its workforce with anticipated activity levels in the near term. As of the end of the third quarter of 2017, we had $3.2 million of corresponding severance remaining to be paid, which is expected to paid in the next several months and be funded from operating activities.

~~The charges discussed above have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income.~~

~~Venezuela related gain~~

Effective as of the end of the fourth quarter of 2015, we deconsolidated our Venezuelan subsidiaries. We recorded gains due to U.S. dollar cash recoveries of intercompany receivables written off at the time of deconsolidation of $3.2 million ($~~2.0~~18.9 million after tax) or ~~$0.01~~$0.06 per diluted share, ~~during~~commitment to the ~~third quarter of 2017 and $8.5 million ($5.3 million after tax) or $0.02 per diluted share during~~Ecolab Foundation in response to the ~~first nine months of 2017. In 2016, the Company recorded no such gains during the third quarter and $7.8 million ($4.9 million after tax) or $0.02 per diluted share during the first nine months.~~

~~Other~~

During the third quarter of 2017, we recorded charges of $2.2 million ($1.4 million after tax) or less than $0.01 per diluted share related to litigation. During the first nine months of 2017, we recorded charges of $20.2 million ($15.9 million after tax) or $0.05 per diluted share, related to litigation and a Global Energy vendor contract termination. These charges have been included as a component of both cost of sales and special (gains) and charges on the Consolidated Statement of Income.

During the first nine months of 2016, we recorded a charge of $10.0 million ($6.3 million after tax) or $0.02 per diluted share related to a fixed asset impairment and related inventory charges. The fixed asset impairment corresponds to additional charges of certainnew U.S. production equipment and buildings, resulting from further lower production, initially impaired during the fourth quarter of 2015. This charge has been included as a component of cost of sales on the Consolidated Statement of Income. There were no such charges in the third quarter of 2016.

Additionally, during the third quarter and first nine months of 2016, we recorded charges of $9.2 million ($5.6 million after tax) or $0.02 per diluted share and $32.7 million ($20.7 million after tax) or $0.07 per diluted share, respectively, primarily consisting of litigation related charges. These charges have been included as a component of special (gains) and charges on the Consolidated Statement of Income.tax law.

3335

Operating Income and Operating Income Margin



	Third Quarter Ended								Nine Months Ended								First Quarter Ended
	September 30								September 30								March 31
(millions)	2017			2016			Change		2017			2016			Change		2019			2018			Change
Reported GAAP operating income		$579.8			$574.1		1	%		$1,392.1			$1,358.1		3	%		$367.2			$354.3		4	%
Special (gains) and charges		5.2			3.2					74.1			97.6					43.9			26.0
Non-GAAP adjusted operating income		585.0			577.3		1			1,466.2			1,455.7		1			411.1			380.3		8	%
Effect of foreign currency translation		(11.4)			(9.9)					(16.0)			(20.0)					1.1			(9.2)
Non-GAAP adjusted fixed currency operating income		$573.6			$567.4		1	%		$1,450.2			$1,435.7		1	%		$412.2			$371.1		11	%

	Third Quarter Ended								Nine Months Ended								First Quarter Ended
	September 30								September 30								March 31
(percent)	2017			2016					2017			2016					2019			2018
Reported GAAP operating income margin		16.3	%		17.0	%				13.7	%		13.9	%				10.5	%		10.2	%
Non-GAAP adjusted operating income margin		16.4	%		17.0	%				14.4	%		14.9	%				11.7	%		11.0	%
Non-GAAP adjusted fixed currency operating income margin		16.4	%		17.0	%				14.4	%		14.8	%				11.7	%		10.9	%

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

~~Reported~~Our reported operating income increased ~~1% and 3%~~4% in the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively,~~2019, versus the comparable periods of ~~2016. Excluding~~2018. Our reported operating income for 2019 and 2018 was impacted by special (gains) and charges; excluding the impact of special (gains) and charges from ~~2017~~2019 and ~~2016~~2018 reported results, our adjusted operating income increased 1%8% in ~~both the third quarter and~~ the first ~~nine months~~quarter of ~~2017.~~2019.

~~Adjusted fixed~~As shown in the previous table, foreign currency ~~operating income increased 1% in both the third quarter and the first nine months of 2017, when compared against the third quarter and first nine months of 2016. The net~~had a 3% impact ~~of acquisitions and divestitures added approximately 1 and 3 percentage points, respectively, to our third quarter and first nine months of 2017~~on adjusted ~~fixed currency~~ operating income growth ~~rates.~~for the first quarter of 2019 and 2018.

~~Our third quarter~~Other (Income) Expense

Other (income) expense was $21.2 million and first nine months of 2017 adjusted fixed currency operating income increase was driven by pricing, volume growth and cost savings in our Global Institutional, Global Industrial and Other segments, which more than offset higher delivered product costs, hurricane impacts, investments$19.4 million in the ~~business,~~first quarter of 2019 and 2018, respectively. Other income increased due to the ~~impact~~return on pension assets and lower non-service costs of ~~Global Energy.~~our pension obligations.

Interest Expense, Net


	First Quarter Ended
	March 31
(millions)	2019		2018		Change
Reported GAAP interest expense, net		$49.4		$56.4	(12)	%
Special (gains) and charges		0.2		-
Non-GAAP adjusted interest expense, net		$49.2		$56.4	(13)	%

~~Net~~

Reported net interest expense was ~~$55.1~~$49.4 million and ~~$64.9~~$56.4 million in the ~~third~~first quarter of ~~2017~~2019 and ~~2016, respectively. Net interest expense in the first nine months of 2017 and 2016 was $177.2 million and $196.3 million,~~2018, respectively. The decrease in net interest expense when comparing ~~2017~~the first quarter of 2019 against ~~2016~~the first quarter of 2018 was driven primarily ~~by an increased mix of~~ lower ~~cost Euro~~outstanding debt and higher interest ~~and lower interest rates on refinanced debt.~~income.

Provision for Income Taxes

The following table provides a summary of our tax rate:


	Third Quarter Ended				Nine Months Ended				First Quarter Ended
	September 30				September 30				March 31
(percent)	2017		2016		2017		2016		2019		2018

Reported GAAP tax rate	24.6	%	25.5	%	21.7	%	24.7	%	11.4	%	21.8	%
Tax rate impact of:
Special gains and charges	0.3		0.6		0.4		1.0
The Tax Act									1.3		(3.3)
Special (gains) and charges									2.0		0.2
Discrete tax items	(1.6)		(0.9)		1.9		(0.3)		5.9		3.3
Non-GAAP adjusted tax rate	23.3	%	25.2	%	24.0	%	25.4	%	20.6	%	22.0	%

Our reported tax rate was 11.4% and 21.8% for ~~2017~~the first quarter of 2019 and ~~2016 includes the~~2018, respectively. The change in our tax rate ~~impact~~for the first quarter of ~~special gains and charges and~~2019 versus the comparable periods of 2018 was driven primarily by discrete tax items, ~~which have impacted the comparability of our historical reported tax rates, as amounts included in our~~ special ~~gains~~(gains) and charges, ~~are derived from~~ tax ~~jurisdictions with rates that vary from our overall non-GAAP adjusted tax rate,~~planning and ~~discrete tax items are not necessarily consistent across periods.~~the geographic mix of income. The tax impact of special ~~gains~~(gains) and charges and discrete tax items will likely continue to impact comparability of our reported tax rate in the ~~future.~~

~~Our third quarter 2017 reported tax expense~~future as amounts included ~~$2.8 million of net tax benefits on~~in special ~~gains~~(gains) and charges are derived from tax jurisdictions with rates that vary from our tax rate, and ~~net expense of $8.3 million associated with~~ discrete tax items. For the first nine months of 2017, our reported tax expense included $20.9 million of net tax benefits on special gains and charges and net benefits of $24.2 million associated with discrete tax items.

Our third quarter and first nine months of 2017 reported tax expense was lower than the comparable periods of 2016 primarily due to $2.4 million and $29.2 million of excess tax benefits recorded in the third quarter and first nine months of 2017, respectively, resulting from the adoption of accounting changes regarding the treatment of tax benefits on share-based compensation. The extent of excess tax benefits is subject to variation in stock price and stock option exercises. We expect excess tax benefits to impact the rate by approximately 2% to 3% for the full year of 2017.

The remaining discrete tax benefits in the third quarter of 2017 were driven primarily by recognizing adjustments from filing our 2016 U.S. federal income tax return and international adjustments due to changes in estimates, partially offset by the release of reserves for uncertain tax positions due to the expiration of statute of limitations in state tax matters. The corresponding impact of these items ~~on the reported~~are not necessarily consistent across periods. Our tax rate is ~~shown in~~based on our interpretations of existing tax rules; potential future guidance including regulations not yet issued could impact the ~~previous table.~~future tax rate.

~~Our third quarter 2016 reported tax expense included $3.8 million of~~We recognized total net tax benefits on special gains and charges and net expense of $4.5 million associated with discrete tax items. For the first nine months of 2016, our reported tax expense included $36.8 million of net tax benefits on special gains and charges and net expense of $3.6 million associated with discrete tax items. The corresponding impact of these items on the reported tax rate is shown in the previous table.

Third quarter 2016 discrete tax items net expense was driven primarily by recognizing adjustments from filing our 2015 U.S. federal income tax return, partially offset by the settlement of international tax matters and remeasurement of certain deferred tax assets and liabilities resulting from the application of an updated tax rate in an international jurisdiction. Net expensebenefit related to discrete tax items of $27.7 million in the first quarter of 2019. Share-based compensation excess tax benefit contributed $18.7 million. We also recognized a $5.1 million benefit due to issuance of technical guidance during the quarter related to the one-time transition tax imposed by the Tax Cuts and Jobs Act (the “Act”). The remaining discrete benefit was primarily related to changes in tax rates in non-U.S. jurisdictions.

We recorded a net discrete tax benefit of $0.1 million in the first quarter of 2018. We recorded discrete tax expense of $11.3 million for the ~~first nine months of 2016 was also impacted by the release of reserves for uncertain~~one-time transition tax ~~positions~~ due to issuance of technical guidance during the ~~expiration~~quarter. Discrete tax items include excess tax benefits related to share-based compensation of ~~statute~~$6.8 million and other discrete tax benefits of ~~limitations~~$4.6 million related to changes in our state tax profile and changes in reserves in non-U.S. jurisdictions.

The ~~change~~decrease in the ~~2017~~2019 adjusted tax rate compared to ~~2016~~2018 was primarily ~~driven by global~~due to tax ~~planning strategies and geographic mix.~~planning.

Net Income Attributable to Ecolab


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
(millions)	2017		2016		Change		2017		2016		Change		2019		2018		Change
Reported GAAP net income attributable to Ecolab		$392.4		$374.1	5	%		$942.5		$863.3	9	%		$296.5		$247.3	20	%
Adjustments:
Special (gains) and charges, after tax		2.4		(0.6)				53.2		60.8				31.5		19.7
Discrete tax net expense (benefit)		8.3		4.5				(24.2)		3.6				(27.7)		(0.1)
Non-GAAP adjusted net income attributable to Ecolab		$403.1		$378.0	7	%		$971.5		$927.7	5	%		$300.3		$266.9	13	%

Diluted EPS


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
(dollars)	2017		2016		Change		2017		2016		Change		2019		2018		Change
Reported GAAP diluted EPS		$1.34		$ 1.27	6	%		$ 3.20		$ 2.91	10	%		$1.01		$ 0.84	20	%
Adjustments:
Special (gains) and charges		0.01		-				0.18		0.20				0.11		0.07
Discrete tax net expense (benefit)		0.03		0.02				(0.08)		0.01				(0.09)		-
Non-GAAP adjusted diluted EPS		$1.37		$ 1.28	7	%		$ 3.30		$ 3.12	6	%		$1.03		$ 0.91	13	%

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

Currency translation had ~~minimal~~an unfavorable impact of approximately $0.04 per share on diluted EPS for ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2019, when compared to the ~~third~~first quarter ~~and first nine months~~ of ~~2016.~~2018.

3537

SEGMENT PERFORMANCE

The non-U.S. dollar functional international amounts included within our reportable segments are based on translation into U.S. dollars at the fixed currency exchange rates used by management for 2019. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as “effect of foreign currency translation” in the following tables. All other accounting policies of the reportable segments are consistent with U.S. GAAP and the accounting policies described in Note 2 of our Annual Report on Form 10-K for the year ended December 31, 2018. Additional information about our reportable segments is included in Note 16.

Fixed currency net sales and operating income for the ~~third~~first quarter of 2019 and ~~first nine months of 2017 and 2016~~2018 for ~~each of~~ our reportable segments ~~were as follows:~~are shown in the following tables.


Net Sales	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
(millions)	2017		2016		Change		2017		2016		Change		2019		2018		Change
Global Industrial		$1,248.1		$1,202.1	4	%		$3,586.5		$3,468.4	3	%		$1,289.2		$1,190.2	8	%
Global Institutional		1,225.1		1,149.2	7			3,524.3		3,315.0	6			1,215.3		1,187.0	2
Global Energy		796.7		771.2	3			2,346.1		2,305.6	2			811.7		826.5	(2)
Other		221.7		209.2	6			633.8		598.1	6			206.8		192.4	7
Subtotal at fixed currency		3,491.6		3,331.7	5			10,090.7		9,687.1	4			3,523.0		3,396.1	4
Effect of foreign currency translation		71.7		54.4				96.9		113.6				(17.6)		74.8
Consolidated reported GAAP net sales		$3,563.3		$3,386.1	5	%		$10,187.6		$9,800.7	4	%		$3,505.4		$3,470.9	1	%

Operating Income	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
(millions)	2017		2016		Change		2017		2016		Change		2019		2018		Change
Global Industrial		$207.4		$204.1	2	%		$501.9		$510.1	(2)	%		$147.5		$122.0	21	%
Global Institutional		274.2		262.1	5			726.1		697.8	4			195.9		195.7	0
Global Energy		89.7		102.6	(13)			236.1		244.9	(4)			78.4		68.6	14
Other		44.0		40.4	9			110.9		108.2	2			30.2		27.0	12
Corporate		(46.9)		(45.0)				(198.9)		(222.9)				(83.7)		(68.2)
Subtotal at fixed currency		568.4		564.2	1			1,376.1		1,338.1	3			368.3		345.1	7
Effect of foreign currency translation		11.4		9.9				16.0		20.0				(1.1)		9.2
Consolidated reported GAAP operating income		$579.8		$574.1	1	%		$1,392.1		$1,358.1	3	%		$367.2		$354.3	4	%

3638

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


Net Sales	First Quarter Ended
	March 31
	2019			2018
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$1,289.2	$(21.9)	$1,267.3	$1,190.2	$(7.8)	$1,182.4
Global Institutional	1,215.3	(3.1)	1,212.2	1,187.0	-	1,187.0
Global Energy	811.7	(0.1)	811.6	826.5	(2.3)	824.2
Other	206.8	-	206.8	192.4	-	192.4
Subtotal at fixed currency	3,523.0	(25.1)	3,497.9	3,396.1	(10.1)	3,386.0
Effect of foreign currency translation	(17.6)			74.8
Total reported net sales	$3,505.4			$3,470.9

Operating Income
	2019			2018
(millions)	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted	Fixed Currency	Impact of Acquisitions and Divestitures	Acquisition Adjusted
Global Industrial	$147.5	$1.4	$148.9	$122.0	$(0.8)	$121.2
Global Institutional	195.9	1.9	197.8	195.7	-	195.7
Global Energy	78.4	-	78.4	68.6	1.2	69.8
Other	30.2	-	30.2	27.0	-	27.0
Corporate	(39.8)	-	(39.8)	(42.2)	-	(42.2)
Non-GAAP adjusted fixed currency operating income	412.2	3.3	415.5	371.1	0.4	371.5
Special (gains) and charges	43.9			26.0
Subtotal at fixed currency	368.3			345.1
Effect of foreign currency translation	(1.1)			9.2
Total reported operating income	$367.2			$354.3

Unless otherwise noted, the following segment performance commentary compares the ~~third~~first quarter ~~and first nine months~~ of ~~2017~~2019 against the ~~third~~first quarter ~~and first nine months~~ of ~~2016.~~2018.

Global Industrial


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
	2017			2016			2017			2016			2019			2018
Sales at fixed currency (millions)		$1,248.1			$1,202.1			$3,586.5			$3,468.4			$1,289.2			$1,190.2
Sales at public currency (millions)		1,284.3			1,230.2			3,636.8			3,527.6			1,281.3			1,226.0

Volume		2	%					2	%					4	%
Price changes		1	%					1	%					3	%
Acquisition adjusted fixed currency sales change		3	%					3	%					7	%
Acquisitions and divestitures		1	%					0	%					1	%
Fixed currency sales change		4	%					3	%					8	%
Foreign currency translation		1	%					(0)	%					(4)	%
Public currency sales change		4	%					3	%					5	%

Operating income at fixed currency (millions)		$207.4			$204.1			$501.9			$510.1			$147.5			$122.0
Operating income at public currency (millions)		214.1			209.7			511.6			521.6			147.1			127.3

Fixed currency operating income change		2	%					(2)	%					21	%
Fixed currency operating income margin		16.6	%		17.0	%		14.0	%		14.7	%		11.4	%		10.3	%
Acquisition adjusted fixed currency operating income change		2	%					(2)	%					23	%
Acquisition adjusted fixed currency operating income margin		16.7	%		17.0	%		14.1	%		14.7	%		11.7	%		10.3	%
Public currency operating income change		2	%					(2)	%					16	%

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

Net Sales

Fixed currency sales for Global Industrial increased in the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2019, benefitting from volume ~~gains~~ and ~~pricing.~~pricing gains. At a regional level, ~~both~~ the ~~third~~first quarter ~~and first nine months~~ sales showed good growth in ~~Greater China,~~ North ~~America and Latin~~ America.

At an operating segment level, Water fixed currency sales increased ~~4% (3% acquisition adjusted) in the third quarter of 2017 and 4% (2%~~7% (8% acquisition adjusted) in the first ~~nine months~~quarter of ~~2017.~~2019. Light industry sales growth was led by innovative technology and service offerings. Heavy industry sales ~~declined modestly~~benefitted from sales force investments and improved market conditions in the ~~quarter impacted by hurricanes and exit of low margin business.~~quarter. Mining sales were ~~strong as~~led by new business ~~wins led the growth.~~wins. Food & Beverage fixed currency sales increased ~~5% in the third quarter of 2017 and 4%~~11% (7% acquisition adjusted) in the first ~~nine months~~quarter of ~~2017,~~2019, benefiting from ~~new business~~corporate account wins, share gains and pricing, which more than offset generally flat industry trends. Growth was led by the ~~food,~~dairy, beverage and ~~brew markets.~~brewing, protein, and food businesses. Paper fixed currency sales ~~were flat in the third quarter of 2017 reflecting the impact of hurricanes and~~ increased 2%6% in the first ~~nine months~~quarter of ~~2017, benefiting from strong sales efforts and business wins, which more than offset challenging market conditions in China and Europe.~~2019. Textile Care fixed currency sales increased ~~1% in the third quarter of 2017 and 2%~~3% in the first ~~nine months~~quarter of ~~2017, benefiting from new customer accounts in Europe.~~2019. Life Sciences fixed currency sales increased ~~9% in the third quarter of 2017 and 7%~~27% (14% acquisition adjusted) in the first ~~nine months~~quarter of ~~2017. Good~~2019 as we realized good growth from business wins and pricing execution ~~led by strong sales of cleaning and disinfection programs~~ in both the pharmaceutical ~~market~~ and ~~better program penetration in the~~ personal care ~~market.~~markets.

Operating Income

Fixed currency operating income ~~for Global Industrial increased in the third quarter of 2017,~~ and ~~decreased in the first nine months of 2017. Fixed~~fixed currency operating income margins ~~decreased~~increased for Global Industrial in ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017.~~2019. Acquisitions had ~~minimal~~negative impact on both the fixed currency operating income ~~growth~~ and fixed currency operating income margins.

Acquisition adjusted fixed currency operating income margins ~~decreased 0.3 and 0.6~~increased 1.4 percentage points during the ~~third~~first quarter of 2019 and ~~first nine months of 2017, respectively, negatively~~were positively impacted by approximately ~~2.3 and 2.0~~4.2 percentage points ~~for~~by pricing and sales volume leverage and cost savings, which more than offset the ~~respective periods, related to~~approximately 2.4 percentage point margin impact of higher delivered product costs and investments in the business. Favorable impact of sales volume gains and pricing, and cost savings initiatives, added approximately 1.7 and 1.4 percentage points during the third quarter and first nine months of 2017. Hurricanes had an estimated negative 0.3 percentage point impact on the third quarter results and minimal impact on the first nine months of 2017.

3740

Global Institutional


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
	2017			2016			2017			2016			2019			2018
Sales at fixed currency (millions)		$1,225.1			$1,149.2			$3,524.3			$3,315.0			$1,215.3			$1,187.0
Sales at public currency (millions)		1,248.0			1,164.1			3,551.4			3,349.4			1,208.5			1,206.2

Volume		1	%					1	%					0	%
Price changes		2	%					1	%					2	%
Acquisition adjusted fixed currency sales change		2	%					3	%					2	%
Acquisitions and divestitures		5	%					3	%					0	%
Fixed currency sales change		7	%					6	%					2	%
Foreign currency translation		1	%					(0)	%					(2)	%
Public currency sales change		7	%					6	%					0	%

Operating income at fixed currency (millions)		$274.2			$262.1			$726.1			$697.8			$195.9			$195.7
Operating income at public currency (millions)		277.4			264.6			729.6			703.2			195.4			197.8

Fixed currency operating income change		5	%					4	%					0	%
Fixed currency operating income margin		22.4	%		22.8	%		20.6	%		21.0	%		16.1	%		16.5	%
Acquisition adjusted fixed currency operating income change		2	%					1	%					1	%
Acquisition adjusted fixed currency operating income margin		22.9	%		23.0	%		20.9	%		21.2	%		16.3	%		16.5	%
Public currency operating income change		5	%					4	%					(1)	%

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

Net Sales

Fixed currency sales for Global Institutional increased in the ~~third~~first quarter ~~and first nine months~~ of ~~2017,~~2019, driven by ~~volume growth, acquisitions and~~ pricing gains. At a regional level, ~~both~~ the ~~third~~first quarter ~~and first nine months~~ sales increase was led by good growth in ~~Latin America and~~ North America.

At an operating segment level, Institutional fixed currency sales ~~were flat in the third quarter of 2017 and~~ increased 1% in the first ~~nine months~~quarter of ~~2017. Acquisition adjusted fixed currency sales increased 1% in~~2019, reflecting the ~~third quarter and 2% in the first nine months~~exit of ~~2017, when adjusting for the divestiture of the restroom cleaning~~low margin business ~~initially acquired through the Swisher transaction.~~as well as lower shipments to distributors. Global lodging demand continued to show moderate growth while global full service restaurant industry foot traffic remained ~~weak, particularly in North America. Sales also include an estimated impact from the hurricanes.~~soft. Specialty fixed currency sales increased ~~6% in the third quarter of 2017 and~~ 7% in the first ~~nine months~~quarter of ~~2017,~~2019, led primarily byfrom strong ongoing business and new account ~~wins~~ and growth in global quick service accounts, leveraging generally modest industry trends. New business gains remain strong, driven by increased service coverage, new product innovations, additional customer solutions and a continued focus among our customers on food safety.program wins. Healthcare fixed currency sales increased ~~45% in the third quarter of 2017 and 40%~~2% in the first ~~nine months~~quarter of ~~2017. Fixed currency~~2019, as improved sales ~~increased 1% in the third quarter and 4% in the first nine months~~ of ~~2017, when adjusted for the Anios acquisition, with modest growth for Healthcare in North America and Europe in the quarter.~~environmental hygiene programs were partially offset by lower sales of non-core products.

Operating Income

Fixed currency operating income for our Global Institutional segment ~~increased~~was flat in ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of ~~2017.~~2019. Fixed currency operating income margins decreased in ~~both~~ the ~~third~~first quarter as pricing and ~~first nine months of 2017. Acquisitions had a positive impact on fixed currency operating income growth~~sales volume gains, along with cost savings, were offset by investments in the business and ~~minimal impact on fixed currency operating income margins.~~higher delivered product costs.

Acquisition adjusted fixed currency operating income margins decreased ~~by 0.1 percentage points and 0.3~~0.2 percentage points during the ~~third~~first quarter of 2019 and ~~first nine months of 2017, respectively,~~were negatively impacted by approximately ~~1.7~~2.4 percentage points from investments in ~~both respective periods, related to innovation and customer investments and~~the business along with higher delivered product costs. ~~Sales volume~~Improved pricing and ~~pricing gains favorably impacted acquisition adjusted fixed currency operating income margins by adding~~cost savings added approximately ~~1.6 and 1.5~~2.1 percentage points ~~in the third quarter and first nine months of 2017, respectively. Hurricanes had an estimated negative 0.3 percentage point impact on the third quarter results and minimal impact on~~during the first ~~nine months~~quarter of ~~2017.~~2019.

3841

Global Energy


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
	2017			2016			2017			2016			2019			2018
Sales at fixed currency (millions)		$796.7			$771.2			$2,346.1			$2,305.6			$811.7			$826.5
Sales at public currency (millions)		806.5			780.2			2,361.8			2,318.6			809.5			842.9

Volume		5	%					3	%					(4)	%
Price changes		-	%					(1)	%					3	%
Acquisition adjusted fixed currency sales change		4	%					3	%					(2)	%
Acquisitions and divestitures		(1)	%					(1)	%					0	%
Fixed currency sales change		3	%					2	%					(2)	%
Foreign currency translation		0	%					0	%					(2)	%
Public currency sales change		3	%					2	%					(4)	%

Operating income at fixed currency (millions)		$89.7			$102.6			$236.1			$244.9			$78.4			$68.6
Operating income at public currency (millions)		91.3			104.3			238.9			247.4			78.1			70.6

Fixed currency operating income change		(13)	%					(4)	%					14	%
Fixed currency operating income margin		11.3	%		13.3	%		10.1	%		10.6	%		9.7	%		8.3	%
Acquisition adjusted fixed currency operating income change		(11)	%					0	%					12	%
Acquisition adjusted fixed currency operating income margin		11.2	%		13.1	%		10.0	%		10.3	%		9.7	%		8.5	%
Public currency operating income change		(12)	%					(3)	%					11	%

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

Net Sales

Fixed currency sales for Global Energy ~~had a strong growth~~decreased in the first quarter of 2019. Declines in the well stimulation business ~~while~~and production sales were due to the ~~production business showed a modest decline, as growth in~~reduced North America ~~was offset by international markets. Sales in our downstream business rose moderately, impacted by the hurricanes.~~industry activity. Downstream sales decreased slightly due to lower equipment sales versus last year.

Operating Income

Fixed currency operating income ~~and fixed currency operating income margins~~ for Global Energy ~~decreased~~increased during the ~~third~~first quarter ~~and first nine months~~ of ~~2017.~~2019. Acquisitions had a ~~negative~~positive impact on the fixed currency operating income ~~and~~for the first quarter of 2019 with minimal impact on the fixed currency operating income margins during the ~~third~~first quarter ~~and first nine months~~ of ~~2017.~~2019.

Acquisition adjusted fixed currency operating income margins ~~for our Global Energy segment decreased 1.9~~increased 1.2 percentage points during the first quarter of 2019. Pricing increases and 0.3 percentage points in the third quarter and first nine months of 2017, respectively. Higher delivered product costs, a rebuild of compensation reductions made in 2016 and reduced sales, pricing, and volume, negativelycost savings favorably impacted margins by approximately ~~2.6~~3.2 percentage points ~~in both~~during the ~~third~~first quarter ~~and first nine months~~ of ~~2017. Cost reduction actions and~~2019. These gains more than offset a ~~favorable legal cost recovery impacted the margins by~~negative impact of approximately ~~2.2 and 1.4~~1.8 percentage points ~~for the respective periods. Hurricanes had an estimated negative 0.6 percentage point impact on the third quarter results~~related to higher delivered product costs and ~~minimal impact on the first nine months of 2017.~~

lower sales volume.

3942

Other


	Third Quarter Ended						Nine Months Ended						First Quarter Ended
	September 30						September 30						March 31
	2017			2016			2017			2016			2019			2018
Sales at fixed currency (millions)		$221.7			$209.2			$633.8			$598.1			$206.8			$192.4
Sales at public currency (millions)		224.5			211.6			637.6			605.1			206.1			195.8

Volume		4	%					4	%					5	%
Price changes		2	%					2	%					2	%
Acquisition adjusted fixed currency sales change		6	%					6	%					7	%
Acquisitions and divestitures		(0)	%					(0)	%					0	%
Fixed currency sales change		6	%					6	%					7	%
Foreign currency translation		0	%					(1)	%					(2)	%
Public currency sales change		6	%					5	%					5	%

Operating income at fixed currency (millions)		$44.0			$40.4			$110.9			$108.2			$30.2			$27.0
Operating income at public currency (millions)		44.5			40.9			111.6			109.9			30.1			27.4

Fixed currency operating income change		9	%					2	%					12	%
Fixed currency operating income margin		19.8	%		19.3	%		17.5	%		18.1	%		14.6	%		14.0	%
Acquisition adjusted fixed currency operating income change		9	%					2	%					12	%
Acquisition adjusted fixed currency operating income margin		19.8	%		19.3	%		17.5	%		18.1	%		14.6	%		14.0	%
Public currency operating income change		9	%					2	%					10	%

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

Net Sales

Fixed currency sales for Other increased in the first quarter of 2019 with strong gains in both ~~the third quarter~~Pest Elimination and ~~first nine months of 2017, driven by both volume and pricing gains.~~Colloidal Technologies Group. At a regional level, ~~both~~ the ~~third~~first quarter ~~and first nine months~~of 2019 sales results showed good growth in North America.

At an operating segment level, Pest Elimination fixed currency sales increased ~~8% and~~ 7% in the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively. Sales to food beverage and hospitality, and good~~2019 led by sales growth in ~~restaurants led the growth.~~all regions. ~~Equipment Care~~Colloidal Technologies Group fixed currency sales ~~decreased 2% and~~ increased 1%11% in the ~~third~~first quarter ~~and first nine months~~ of ~~2017, respectively.~~2019.

Operating Income

~~Fixed~~Acquisition adjusted fixed currency operating income margins for Other ~~segment~~ increased ~~0.5 and decreased~~ 0.6 percentage points during the ~~third~~first quarter ~~and first nine months~~ of ~~2017.~~2019. The favorable impact of sales volume and pricing increases added ~~1.2~~approximately 3.1 percentage points ~~in the third quarter and 1.3 percentage points~~to growth for the ~~first nine months of 2017.~~period. Field investments negatively impacted comparable margins by approximately ~~0.4 percentage points in the third quarter and 1.8~~2.3 percentage points for the ~~first nine months of 2017. Hurricanes had an estimated negative 0.3 percentage point impact on the third quarter results and minimal impact on the first nine months of 2017.~~period.

Corporate

Consistent with our internal management reporting, Corporate amounts in the table on page 3638 include intangible asset amortization specifically from the Nalco merger and special (gains) and charges that are not allocated to our reportable segments. Items included within special (gains) and charges are shown in the table on page ~~32.~~34.

4043

FINANCIAL POSITION, CASH FLOWS AND LIQUIDITY

Financial Position

Total assets were ~~$19.9 billion and $18.3~~$20.9 billion as of ~~September 30, 2017 and December~~March 31, ~~2016, respectively. The increase in~~2019 compared to total assets ~~was driven primarily by the impact~~ of the Anios acquisition and the positive impact of foreign currency exchange rates on the value of our foreign assets translated into U.S. dollars. Total liabilities were $12.6 billion as of September 30, 2017 and $11.4$20.1 billion as of December 31, ~~2016.~~ 2018.

Total ~~debt was $7.6~~liabilities were $12.7 billion as of ~~September 30, 2017 and $6.7~~March 31, 2019 compared to total liabilities of $12.0 billion as of December 31, ~~2016.~~2018. Total debt was $7.1 billion as of March 31, 2019 and $7.0 billion as of December 31, 2018. See further discussion of our debt activity within the “Liquidity and Capital Resources” section of this MD&A.

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

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

					��
	2017		2016			2019		2018
(ratio)
Net debt to EBITDA		2.6		2.6			2.4		2.5
Net debt to adjusted EBITDA		2.5		2.3

(millions)
Total debt		$7,557.5		$6,662.6			$7,140.5		$7,415.5
Cash		209.1		180.6			79.0		175.5
Net debt		$7,348.4		$6,482.0			$7,061.5		$7,240.0

Net income including non-controlling interest		$1,322.7		$1,098.0
Net income including noncontrolling interest							$1,529.5		$1,509.5
Provision for income taxes		380.8		324.3			296.8		258.7
Interest expense, net		245.5		258.6			215.3		248.9
Depreciation		585.2		557.7			629.4		594.4
Amortization		297.3		292.8			316.6		314.0
EBITDA		2,831.5		2,531.4			$2,987.6		$2,925.5

Special (gains) and charges impacting EBITDA		82.0		341.5
Adjusted EBITDA		$2,913.5		$2,872.9

Cash Flows

Operating Activities


	Nine Months Ended						First Quarter Ended
	September 30						March 31
(millions)	2017		2016		Change		2019		2018		Change
Cash provided by operating activities		$1,444.9		$1,491.7		$(46.8)		$378.1		$487.2		$(109.1)

Year-over-year comparability was negatively impacted by an increase in comparable income tax payments and changes in working capital (accounts receivable, inventory and accounts payable) metrics, partially offset by a decrease in comparable pension contributions. We continue to generate strong cash flow from operations, ~~which has allowed~~allowing us to fund our ongoing operations, ~~debt repayments,~~acquisitions, investments in the business ~~acquisitions~~ and pension obligations ~~and return~~along with returning cash to our shareholders through dividend payments and share ~~repurchases and dividend payments.~~repurchases.

~~Investing Activities~~

Nine Months Ended

September 30

(millions)

2017

2016

Change

Cash used for investing activities

$(1,368.1)

$(581.8)

$(786.3)

~~Year-over-year comparability in our investing~~Comparability of cash generated from operating activities was impacted ~~primarily~~by fluctuations in accounts receivable, inventories and accounts payable (“working capital”). The cash flow impact from working capital accounts was driven by the ~~Anios acquisition in the first quarter~~impact of ~~2017. See Note 3 for further information. We also continue to make investments in our business, including capital expenditures.~~ sales volume, payment timing and customer terms, and discretionary inventory build.

4144

Investing Activities


	First Quarter Ended
	March 31
(millions)	2019		2018		Change
Cash used for investing activities		$(477.4)		$(255.8)		$(221.6)

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

Total cash paid for acquisitions, net of cash acquired and net of cash received from dispositions, during the first quarter in 2019 and 2018, was $282 million and $77 million, respectively. Our acquisitions and divestitures across 2019 and 2018 are discussed further in Note 3. We continue to target strategic business acquisitions which complement our growth strategy and expect to continue to make capital investments and acquisitions in the future to support our long-term growth.

We continue to make capital investments in the business, including merchandising and customer equipment and manufacturing facilities. Total capital expenditures, including software, were $187 million and $203 million in the first quarter of 2019 and 2018, respectively.

Financing Activities


	Nine Months Ended						First Quarter Ended
	September 30						March 31
(millions)	2017		2016		Change		2019		2018		Change
Cash provided by (used for) financing activities		$(200.5)		$(823.4)		$622.9
Cash used for financing activities								$(117.5)		$(265.0)		$147.5

~~During~~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, dividend payments and acquisition-related contingent considerations.

Shares are repurchased for the purpose of partially offsetting the dilutive effect of our equity compensation plans and stock issued in acquisitions, to manage our capital structure and to efficiently return capital to shareholders. We repurchased a total of $131 million and $215 million of shares in the first ~~nine months~~quarter of ~~2017, we issued $500 million 2.375% senior notes. We also had net issuances~~2019 and 2018, respectively. Cash proceeds and tax benefits from stock option exercises provide a portion of the funding for repurchase activity.

The impact on financing cash flows of commercial paper and notes payable ~~of $188 million. We repurchased $588 million of shares, including $300 million shares through an ASR program initiated~~issuances and long-term debt borrowings and repayments are shown in ~~February 2017. Refer to Note 10 for further discussion on our ASRs. We distributed $330 million of dividends.~~the following table:


	First Quarter Ended
	March 31
(millions)	2019		2018		Change
Net issuances of commercial paper and notes payable		$487.9		$354.3		$133.6
Long-term debt repayments		(400.3)		(300.6)		(99.7)

During the first nine months of 2016, we issued $400 million 2.00% and $400 million 3.25% senior notes and repaid the remaining $125 million of our term loan borrowings. We had net repayments of commercial paper and notes payable of $522 million. We repurchased $738 million of shares, including $300 million shares through an ASR program initiated in February 2016, and distributed $325 million of dividends.

Liquidity and Capital Resources

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

As of ~~September 30, 2017,~~March 31, 2019, we had ~~$209.1~~$79 million of cash and cash equivalents on hand, substantially all of which ~~$171.7 million~~ was held outside of the U.S.

As of ~~September 30, 2017,~~March 31, 2019, we ~~had in place~~have a $2.0 billion multi-year credit facility which expires in ~~December 2019.~~November 2022. The credit facility has been established with a diverse syndicate of banks and supports our ~~$2.0 billion~~ U.S. ~~commercial paper program~~ and ~~our $2.0 billion~~ Euro commercial paper ~~program.~~programs. The maximum aggregate amount of commercial paper that may be issued under our U.S. commercial paper program and our Euro commercial paper program may not exceed $2.0 billion. At the end of the ~~third~~first quarter of ~~2017,~~2019, we had ~~$238~~$398 million (€~~200~~350 million) ~~in outstanding Euro commercial paper with an average annual interest rate~~ of ~~less than 1% and no~~ commercial paper outstanding under ~~the~~our Euro program and $390 million outstanding under our U.S. program. There were no borrowings under our credit facility as of March 31, 2019 or 2018. As of ~~September 30, 2017,~~March 31, 2019, both programs were rated A-2 by Standard & Poor’s, ~~and~~ P-2 by ~~Moody’s.~~Moody’s and F-2 by Fitch.

Our long-term debt issuance and repayment activity through the first ~~nine months~~quarter of ~~2017~~2019 and ~~2016~~2018 is discussed in the Cash Flows – Financing Activities section of this MD&A.

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

~~As of September 30, 2017, Standard & Poor’s and Moody’s rated our long-term credit at A- (stable outlook) and Baa1 (stable outlook), respectively.~~

The schedule of contractual obligations included in the Financial Position and Liquidity section of our Form 10-K for the year ended December 31, ~~2016~~2018 disclosed total notes payable and long-term debt due within one year of ~~$0.5 billion.~~$577 million. As of ~~September 30, 2017,~~March 31, 2019, the total notes payable and long-term debt due within one year decreased to $344 million. The commercial paper outstanding as of March 31, 2019 increased to ~~$1.1 billion.~~$788 million. The ~~increase primarily reflected~~ commercial paper ~~borrowings~~outstanding as of December 31, 2018 was $165 million.

In the first quarter of 2019 and 2018 we recorded a one-time transition tax benefit of $5 million and expense of $11 million, respectively, primarily due to the issuance of technical guidance during the ~~first nine months of 2017 and reclassification of obligations due within one year to current.~~quarter.

Our gross liability for uncertain tax positions was ~~$71~~$51 million as of ~~September 30, 2017~~March 31, 2019 and ~~$76~~$50 million as of December 31, ~~2016.~~2018. We are not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, we do not expect significant payments related to these obligations within the next year.

GLOBAL ECONOMIC ENVIRONMENT

Energy Markets

Approximately 23% of our sales are generated from our Global Energy segment, the results of which ~~as noted further below,~~ are subject to ~~volatility~~changes in the oil and gas commodity markets.

Oil industry activity has been gradually recovering from 2016’s lows during the first nine months of 2017, with strong gains in drilling activity over the past year and recovering capital expenditure trends in 2017.

~~Global demand for oil and overall energy consumption has shown modest growth over this period. Oil prices have risen from their lows in early 2016.~~

Our global footprint and broad business portfolio within the Global Energy segment, as well as our ~~strong~~ execution capabilities, are expected to provide the required resilience to outperform in the current market. As such, we continue to remain confident in the long-term growth prospects of the segment.

~~As petroleum derived materials are key inputs to many of our chemical products, lower oil prices will continue to provide benefits across our segments in the form of lower raw material costs.~~

Global Economies

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

Argentina has continued to experience negative economic trends, evidenced by multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates. Argentina is classified as a highly inflationary economy in accordance with U.S. GAAP, and the U.S. dollar is the functional currency for our subsidiaries in Argentina. During the first quarter of 2019, sales in Argentina represented less than 1% of our consolidated sales. Assets held in Argentina at the end of the first quarter represented less than 1% of our consolidated assets.

Brexit Referendum

On March 29, 2017, the United Kingdom (“U.K.”) government gave formal notice to the European Union (“EU”) to begin the process of negotiating the U.K.’s exit (“Brexit”) from the EU. The effects of Brexit will depend on any agreements the U.K. makes to retain access to the EU markets either during a transitional period or more permanently. The negotiations might also impact various tax reliefs and exemptions that apply to transactions between the U.K. and EU. In the longer term, any impact from Brexit on our U.K. operations will depend, in part, on the outcome of tariff, trade, regulatory, and other negotiations. ~~We will~~The Brexit deadline continues to be extended and we continue to monitor the status of tax law changes and tax treaty negotiations at the U.K. and EU.

For the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2019, net sales of our U.K. operations were approximately 2% of our consolidated net sales.

NEW ACCOUNTING PRONOUNCEMENTS

For information on new accounting pronouncements, see Note 1618 to the Consolidated Financial Statements.

~~SUBSEQUENT EVENTS~~

In October 2017, we entered into an agreement to sell the Equipment Care business which subsequently closed on November 1, 2017. The disposition is not expected to be material to the consolidated financial statements.

We have entered into various purchase agreements which are expected to close in the fourth quarter of 2017. None of the agreements are material to the consolidated financial statements, individually or in the aggregate.

NON-GAAP FINANCIAL MEASURES

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

Fixed currency sales

Acquisition adjusted fixed currency sales

Adjusted cost of sales

Adjusted gross margin

Fixed currency operating income

Fixed currency operating income margin

Adjusted operating income

Adjusted operating income margin

Adjusted fixed currency operating income

Adjusted fixed currency operating income margin

Acquisition adjusted fixed currency operating income

Acquisition adjusted fixed currency operating income margin

EBITDA

Adjusted ~~EBITDA~~interest expense, net

Adjusted tax rate

Adjusted net income attributable to Ecolab

Adjusted diluted EPS

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

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

EBITDA is defined as the sum of net income including ~~non-controlling~~noncontrolling interest, provision for income taxes, net interest expense, depreciation and amortization. ~~Adjusted~~ EBITDA is ~~defined as the sum of EBITDA and special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are~~ used ~~as inputs to~~in our net debt to EBITDA ~~and net debt to adjusted EBITDA ratios. We~~ratio, which we view ~~these ratios~~ 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.~~exchange. Fixed currency amounts included in this Form 10-Q are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of ~~2017.~~2019.

Acquisition adjusted growth rates exclude the results of our acquired businesses from the first twelve months post acquisition, exclude the results of our divested businesses from the twelve months prior to ~~divestiture, and exclude sales to our deconsolidated Venezuelan subsidiaries from both the current period and comparable period of the prior year.~~divestiture.

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include the anticipated spin-off of our Upstream Energy business into a new stand-alone company and the expected form, timing and tax effects; expectations concerning ~~our~~timing, amount and type of restructuring costs and savings from restructuring activities; tax deductibility of goodwill; capital investments and acquisitions; amortization expense; non-performance of financial counterparties; payments and contributions to pension and postretirement health care benefit plans; impact of tax ~~deductibility of goodwill; amortization expense; share repurchases; actions and impact associated with adoption of new accounting standards;~~reform; the impact of lawsuits, claims and environmental matters; impact of new accounting pronouncements; cash flows, borrowing capacity and funding of cash requirements; payments related to uncertain tax positions; timing of hedged transactions; timing and funding of restructuring cash expenditures; tax rate impact of special gains and charges and discrete tax items; excess tax benefits; timing and funding of restructuring cash expenditures; tax rate impact of special gains and charges and discrete tax items; excess tax benefits; borrowing capacity; impact of oil price fluctuations, ~~regarding sales,~~comparative performance ~~compared to market~~ and ~~future prospects; global foreign currency markets; global credit or market risk; future cash flow; cash requirements and sources~~prospects of ~~funding; nonperformance of financial counterparties; closing of Equipment Care divestiture;~~businesses in our Global Energy segment; implementation of ERP ~~system;~~system upgrade; and doing business inrelating to Iran.

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

Some of the factors which could cause results to differ from those expressed in any forward-looking statements are set forth under Item 1A, entitled Risk Factors, of our Form 10-K for the year ended December 31, ~~2016,~~2018, and include the vitality of the markets we serve, including the impact of oil price fluctuations on the markets served by our Global Energy segment; the impact of economic factors such as the worldwide economy, capital flows, interest rates and foreign currency risk, ~~and~~including reduced sales and earnings in ~~our international operations~~other countries resulting from the weakening of local currencies versus the U.S. dollar; our ability to execute key business initiatives, including upgrades to our information technology systems; potential information technology infrastructure failures and cybersecurity attacks; the possibility that the proposed spin-off ofour Upstream Energy business will not be consummated within the anticipated time period or at all and the potential that the Upstream Energy business and Ecolab will not realize all of the expected benefits of the spin-off; our ability to attract and retain high caliber management talent to lead our business; our ability to ~~execute key business initiatives; potential information technology infrastructure failures or breaches in data security;~~develop competitive advantages through innovation and to commercialize digital solutions; exposure to global economic, political and legal risks related to our international operations including ~~with respect to our~~trade sanctions; difficulty in procuring raw materials or fluctuations in raw material costs; pressure on operations ~~in Russia;~~from consolidation of customers, vendors or competitors; the costs and effects of complying with laws and regulations, including those relating to the environment and to the manufacture, storage, distribution, sale and use of our products; the occurrence of litigation or claims, including related to the Deepwater Horizon oil spill; ~~our ability~~restraints on pricing flexibility due to ~~develop competitive advantages through innovation; difficulty in procuring raw materials or fluctuations in raw material costs; our substantial indebtedness;~~contractual obligations; our ability to acquire complementary businesses and to effectively integrate such businesses; ~~restraints on pricing flexibility due to contractual obligations; pressure on operations from consolidation~~changes in tax law and unanticipated tax liabilities; potential loss of ~~customers, vendors~~deferred tax assets or ~~competitors;~~increase in deferred tax liabilities; our substantial indebtedness; public health epidemics; potential losses arising from the impairment of goodwill or other assets; ~~potential loss of deferred tax assets; changes in tax law and unanticipated tax liabilities;~~ potential chemical spill or release; potential class action lawsuits; the loss or insolvency of a major customer or distributor; acts of war or terrorism; natural or man-made disasters; water shortages; severe weather conditions; and other uncertainties or risks reported from time to time in our reports to the SEC. There can be no assurances that our earnings levels will meet investors’ expectations. Except as may be required under applicable law, we do not undertake, and expressly disclaim, any duty to update our Forward-Looking Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We use foreign currency forward contracts, interest rate swap agreements and foreign currency debt to manage risks associated with foreign currency exchange rates, interest rates and net investments in our foreign operations. We do not hold derivative financial instruments of a speculative nature or for trading purposes. For a more detailed discussion of derivative instruments, refer to Note 8, entitled “Derivatives and Hedging Transactions”, of the consolidated financial statements located under Part I, Item 1 of this quarterly report on Form 10-Q.

Item 4. Controls and Procedures

As of ~~September 30, 2017,~~March 31, 2019, we carried out an evaluation, under the supervision and with the participation of our management, including the Chairman of the Board and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chairman of the Board and Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures are effective.

During the period ~~July~~January 1 through ~~September 30, 2017,~~March 31, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are ~~implementing~~continuing our implementation of an enterprise resource planning (“ERP”) system upgrade we began in 2018, which is ~~expected to occur~~occurring in phases over the next several ~~years beginning in 2018.~~years. This upgrade, which includes supply chain and certain finance functions, is expected to improve the efficiency of certain financial and related transactional processes. The upgrade of the ERP system will affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported, the prosecution office of Liu He district, Nanjing City, Jiangsu Province, China, brought charges alleging violation of environmental laws relating to waste disposal against the Company’s Nalco subsidiary in Nanjing City, China on November 26, 2018. Prior to these charges being alleged, related charges were brought against certain individual employees of the subsidiary. A hearing was held on the case on March 26, 2019 before the People’s Court of Liu He District, which is seeking to assess monetary penalties. The subsidiary could also be subject to a separate civil penalty. The court has not issued its ruling. We anticipate that this matter will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Note ~~15,~~17, entitled “Commitments and Contingencies” located under Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

In our report on Form 10-K for the year ended December 31, ~~2016,~~2018, filed with the Securities and Exchange Commission on ~~February 24, 2017,~~March 1, 2019, we identify under Item 1A 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-Q. See the section entitled Forward-Looking Statements located on page 4448 of this Form 10-Q. We may also refer to such disclosure to identify factors that may cause results to differ from those expressed in other forward-looking statements made in oral presentations, including telephone conferences and/or webcasts open to the public.

The discussion below should be read together with the full list of risk factors set forth in the aforementioned Form 10-K. The first two risk factors appearing in this discussion include new updates and additions to such risk factors since the Form 10-K, while the other two risk

~~factors are unchanged from as they were previously updated in our Form 10-Q for the quarterly period ended March 31, 2017, and repeated in our Form 10-Q for the quarterly period ended June 30, 2017.There have been no other changes to our risk factors.~~

~~If we are unsuccessful in executing on key business initiatives, including our ERP system upgrade, our business could be adversely affected~~.

We continue to execute key business initiatives, including investments to develop business systems and restructurings such as those discussed under Note 2 entitled “Special Gains and Charges” of this Form 10-Q, as part of our ongoing efforts to improve our efficiency and returns. In particular, we are implementing an ERP system upgrade, which is expected to occur in phases over the next several years. This upgrade, which includes supply chain and certain finance functions, is expected to improve the efficiency of certain financial and related transactional processes. The upgrade involves complex business processdesign and a breakdown in certain of these processes could result in business disruption. 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 be adversely affected.

~~We may be 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 make them potentially vulnerable to breakdown, malicious intrusion and random attack. Recent acquisitions, including the Nalco and Champion transactions, have resulted in further de-centralization of systems and additional complexity in our systems infrastructure. Likewise, data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we have invested in protection of data and information technology, there can be no assurance that our efforts will prevent breakdowns, cybersecurity attacks or breaches in our systems that could cause reputational damage, business disruption and legal and regulatory costs; could result in third-party claims; could result in compromise or misappropriation of our intellectual property, trade secrets and sensitive information; or could otherwise adversely affect our business. There may be other challenges and risks as we continue to invest in our ERP system.

~~Our business depends on our ability to comply with laws and governmental regulations, and we may be 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. Compliance with these laws and regulations exposes us to potential financial liability and increases our operating costs. 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 adversely affect our consolidated results of operations, financial position or cash flows.

Our subsidiaries are defendants in pending lawsuits alleging negligence and injury resulting from the use of our COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose us to monetary damages or settlement costs.

Our subsidiaries were named as defendants in pending lawsuits alleging negligence and injury resulting from the use of our COREXIT dispersant in response to the Deepwater Horizon oil spill, which could expose us to monetary damages or settlement costs. On April 22, 2010, the deepwater drilling platform, the Deepwater Horizon, operated by a subsidiary of BP plc, sank in the Gulf of Mexico after a catastrophic explosion and fire that began on April 20, 2010. A massive oil spill resulted. Approximately one week following the incident, subsidiaries of BP plc, under the authorization of the responding federal agencies, formally requested our indirect subsidiary, Nalco Company, to supply large quantities of COREXIT 9500, a Nalco oil dispersant product listed on the U.S. EPA National Contingency Plan Product Schedule. Nalco Company responded immediately by providing available COREXIT and increasing production to supply the product to BP’s subsidiaries for use, as authorized and directed by agencies of the federal government.

Nalco Company and certain affiliates (collectively “Nalco”) were named as a defendant in a series of class action and individual plaintiff lawsuits arising from this event. The plaintiffs in these matters claimed damages under products liability, tort and other theories. Nalco was also named as a third party defendant in certain matters. Nalco was indemnified in these matters by another of the defendants.

These cases were administratively transferred to a judge in the United States District Court for the Eastern District of Louisiana with other related cases under In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Case No. 10-md-02179 (E.D. La.) (the “MDL”).

Nalco Company, the incident defendants and the other responder defendants have been named as third party defendants by Transocean Deepwater Drilling, Inc. and its affiliates (the “Transocean Entities”) (In re the Complaint and Petition of Triton Asset Leasing GmbH, et al, MDL No. 2179, Civil Action 10-2771). In April and May 2011, the Transocean Entities, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P. and Weatherford International, Inc. (collectively, the “Cross Claimants”) filed cross claims in MDL 2179 against Nalco Company and other unaffiliated cross defendants. The Cross Claimants generally allege, among other things, that if they are found liable for damages resulting from the Deepwater Horizon explosion, oil spill and/or spill response, they are entitled to indemnity or contribution from the cross defendants.

On November 28, 2012, the Federal Court in the MDL entered an order dismissing all claims against Nalco. Because claims remained pending against other defendants, the Court’s decision was not a “final judgment” for purposes of appeal. Plaintiffs will have 30 days after entry of final judgment to appeal the Court’s decision. We cannot predict whether there will be an appeal of the dismissal, the involvement we might have in these matters in the future or the potential for future litigation. However, if an appeal by plaintiffs in these lawsuits is brought and won, these suits could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

In December 2012 and January 2013, the MDL court issued final orders approving two settlements between BP and Plaintiffs’ Class Counsel: (1) a proposed Medical Benefits Class Action Settlement; and (2) a proposed Economic and Property Damages Class Action Settlement. Pursuant to the proposed settlements, class members agree to release claims against BP and other released parties, including Nalco Company and its related entities.

Nalco was named in nine additional complaints in May 2016, and two additional complaints in April 2017, filed by individuals alleging, among other things, business and economic loss resulting from the Deepwater Horizon oil spill. The plaintiffs in these lawsuits are generally seeking awards of unspecified compensatory and punitive damages, and attorneys’ fees and costs. These actions have been consolidated in the MDL and we expect they will be dismissed pursuant to the Court’s November 28, 2012 order granting Nalco’s motion for summary judgment.

On February 22, 2017, the Federal Court in the MDL ordered that plaintiffs who had previously filed a claim and who had “opted out” of and not released their claims under the Medical Benefits Class Action Settlement either: (1) complete a sworn statement indicating, among other things, that they opted out of the Medical Benefits Class Action Settlement (to be completed by plaintiffs who previously filed an individual complaint); or (2) file an individual lawsuit attaching the sworn statement as an exhibit, by a deadline date set by the Court. The Court will then determine which plaintiffs are entitled to pursue their claims and the procedures for addressing those claims.

Nalco continues to sell the COREXIT oil dispersant product and could be exposed to future lawsuits from the use of such product. We cannot predict the potential for future litigation with respect to such sales. However, if one or more of such lawsuits are brought and won, these suits could have a material adverse impact on our financial results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c)

Issuer Purchases of Equity Securities

(c)

(d)

(a)

Number of shares

Maximum number of

Total

(b)

purchased as part

shares that may

number of

Average price

of publicly

yet be purchased

shares

paid per

announced plans

under the plans

Period

purchased(1)

share(2)

or programs(3)

or programs(3)

July 1-31, 2017

302,196

132.5193

301,703

12,698,468

August 1-31, 2017

343,534

131.2854

340,358

12,358,110

September 1-30, 2017

11,084

131.3123

-

12,358,110

Total

656,814

131.8536

642,061

12,358,110


			(c)	(d)
	(a)		Number of shares	Maximum number of
	Total	(b)	purchased as part	shares that may
	number of	Average price	of publicly	yet be purchased
	shares	paid per	announced plans	under the plans
Period	purchased(1)	share(2)	or programs(3)	or programs(3)
January 1-31, 2019	-	-	-	8,651,394
February 1-28, 2019	119,564	166.2324	-	8,651,394
March 1-31, 2019	647,084	172.4020	646,668	8,004,726
Total	766,648	171.4398	646,668	8,004,726

(1)

Includes ~~14,753~~119,980 shares reacquired from employees and/or directors as swaps for the cost of stock options, or shares surrendered to satisfy minimum statutory tax obligations under our stock incentive plans.

(2)

The average price paid per share includes brokerage commissions associated with publicly announced plan purchases plus the value of such other reacquired shares.

(3)

As announced on February 24, 2015, our Board of Directors authorized the repurchase of up to 20,000,000 shares. Subject to market conditions, we expect to repurchase all shares under the open authorizations, for which no expiration date has been established, in open market or privately negotiated transactions, including pursuant to Rule ~~10b5-1 and accelerated share repurchase programs.~~10b5-1.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Iran Threat Reduction and Syria Human Rights Act of 2012

Under the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the Securities Exchange Act of 1934, the Company is required to disclose in its periodic reports if it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with entities or individuals designated pursuant to certain Executive Orders. Disclosure is required even where the activities are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and even if the activities are not covered or prohibited by U.S. law. ~~In connection with the easing of certain sanctions~~

As authorized by the ~~United States against Iran in January 2016 and in compliance with the economic sanctions regulations administered by~~ U.S. Treasury’s Office of Foreign Assets Control (OFAC) ~~and U.S. export control laws,~~, a ~~wholly-owned~~ non-U.S. subsidiary of the Company completed ~~the following sales related to businesses in our Energy operating segment pursuant to and in compliance with the terms and conditions of OFAC’s General License H:~~ sales of products used for process and water treatment applications in ~~(i)~~ upstream oil and gas production related to the operation of and ~~(ii) petrochemical plants~~production from the Rhum gas field off the Scottish coast (Rhum) totaling ~~$1,019,000~~$0.2 million during the subsidiary’s ~~third~~fiscal first quarter ended ~~August 31, 2017,~~February 28, 2019, and additional sales of such products totaling ~~$552,000~~$0.1 million during ~~September 2017, were made to a distributor in Dubai and two distributors in Iran.~~March 2019. The net profit before taxes associated with these sales for each period were nominal. Rhum is ~~estimated to be $256,000~~jointly owned by Serica Energy plc and ~~$130,000, respectively.~~ Iranian Oil Company (U.K.) Limited. Our non-U.S. subsidiary intends to continue ~~doing business in Iran under General License H in compliance~~the Rhum-related activities, consistent with ~~U.S. economic sanctions~~a specific license obtained from OFAC by its customers, and ~~export control laws, which sales~~such activities may require additional disclosure pursuant to the abovementioned statute.

Item 6. Exhibits


Exhibit No.	Document	Method of Filing:
(a)	The following documents are filed as exhibits to this report:
~~(4.1)~~(10.1)	Amended and Restated Dealer Agreement, dated 9 June 2017, between Ecolab Inc., Ecolab Lux 1 S.À R.L., Ecolab Lux 2 S.À R.L., Ecolab NL 10 B.V. and Ecolab NL 11 B.V. (as Issuers), Ecolab Inc. (as Guarantor in respect of the notes issued by Ecolab Lux 1 S.À R.L., Ecolab Lux 2 S.À R.L. and Ecolab NL 10 B.V. and Ecolab NL 11 B.V.), Credit Suisse Securities (Europe) Limited (as Arranger), and Citibank Europe plc, UK Branch, Credit Suisse Securities (Europe) Limited, Citigroup Global Markets Europe AG and Credit Suisse Securities Sociedad de Valores S.A. (as Dealers).	Incorporated by reference to Exhibit (10.1)(a) of our Form 10‑Q for the quarter ended June 30, 2017. (File No. 001‑9328)

(10.2)	Form of ~~Common~~Commercial Paper Dealer Agreement for 4(a)(2) Program, dated September 22, 2014. The dealers for the program are Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, BofA Securities, Inc., Mizuho Securities USA Inc., and Wells Fargo Securities, LLC.	Incorporated by reference to Exhibit (10.1)(a) of our Form 10‑Q for the quarter ended September 30, 2014. (File No. 001‑9328)

(10.3)	Declaration of Amendment, effective as of February 22, 2019, to Ecolab Inc. 2010 Stock ~~Certificate~~Incentive Plan, as amended and restated, effective ~~October~~as of May 2, ~~2017.~~2013.	Filed herewith electronically.
~~(4.2)~~		~~Sixth Supplemental Indenture, dated August 10, 2017, between the Company and Wells Fargo Bank, National Association~~.	~~Incorporated by reference to Exhibit 4.2 of our Form 8-K dated August 7, 2017. (File No. 01-9328)~~
~~(4.3)~~	~~Form of 2.375% Notes due 2022.~~	~~Included in Exhibit 4.2 above.~~
~~(10.1)~~	~~Documents related to U.S. $2,000,000,000 Commercial Paper Program:~~
~~(10.1a)~~	~~Commercial Paper Issuing and Paying Agency Agreement dated as of September 18, 2017 between Ecolab Inc. and MUFG Union Bank, N.A. as Issuing and Paying Agent.~~	~~Filed herewith electronically.~~
~~(10.1b)~~	~~Corporate Commercial Paper — Master Note dated September 18, 2017, together with Annex thereto.~~	~~Filed herewith electronically.~~
(15.1)	Letter regarding unaudited interim financial information.	Filed herewith electronically.
(31.1)	Rule 13a - 14(a) CEO Certification.	Filed herewith electronically.
(31.2)	Rule 13a - 14(a) CFO Certification.	Filed herewith electronically.
(32.1)	Section 1350 CEO and CFO Certifications.	Filed herewith electronically.
(101.1)	Interactive Data File.	Filed herewith electronically.

4950

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	ECOLAB INC.


Date: ~~November~~May 2, ~~2017~~2019	By:	/s/ Bruno Lavandier
		Bruno Lavandier
		Senior Vice President and Corporate Controller
		(duly authorized officer and
		Chief Accounting Officer)

5051


	December 31, 2016
			Fixed
	Values at		Currency		Segment	Values at
(millions)	2016 Rates		Rate Change		Change	2017 Rates
Net Sales
Global Industrial		$ 4,617.1		$ 6.9	$ 63.2	$ 4,687.2
Global Institutional		4,495.6		7.7	(63.2)	4,440.1
Global Energy		3,035.8		40.0	-	3,075.8
Other		806.5		(4.8)	-	801.7
Subtotal at fixed currency rates		12,955.0		49.8	-	13,004.8
Effect of foreign currency translation		197.8		(49.8)	-	148.0
Consolidated reported GAAP net sales		$ 13,152.8		$ -	$ -	$ 13,152.8

Operating Income
Global Industrial		$ 703.0		$ (0.9)	$ 17.9	$ 720.0
Global Institutional		966.7		3.0	(19.2)	950.5
Global Energy		337.1		7.9	1.7	346.7
Other		148.1		(2.5)	(0.4)	145.2
Corporate		(272.1)		(0.5)	-	(272.6)
Subtotal at fixed currency rates		1,882.8		7.0	-	1,889.8
Effect of foreign currency translation		32.2		(7.0)	-	25.2
Consolidated reported GAAP operating income		$ 1,915.0		$ -	$ -	$ 1,915.0