Item 2.02 Results of Operations and Financial Condition
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Ecolab Inc. (“Ecolab” or the “Company”) is providing as an exhibit to this Current Report on Form 8-K a supplemental unaudited revised Consolidated Statement of Income for the years ended December 31, 2017 and 2016 (Exhibit 99.1) which include the effect of adopting the Accounting Standards Codification Topic 606
Revenue from Contracts with Customers
and the related amendments (“the new revenue standard”) using the full retrospective method. Concurrent with the adoption of the new revenue standard, the Company reclassified certain costs from selling, general and administrative expenses to cost of sales, to align the cost of providing the service with the recognition of service revenue. The new revenue standard was applied to all periods presented and the cumulative effect of applying the standard is recognized at the beginning of the earliest year presented. The Company also retrospectively adopted Accounting Standards Update 2017-07
Compensation – Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, relating to the presentation of the components of net periodic benefit costs for pension and other post-retirement benefits within the Consolidated Statement of Income (“the new pension standard”).
The Company is also providing a table (Exhibit 99.2) with a supplemental unaudited revised Consolidated Statement of Income for each of the four quarters of 2017 and for the twelve months ended December 31, 2017, reflecting the adoption of the new revenue and new pension standards.
In addition, the Company is presenting a table (Exhibit 99.3) with supplemental unaudited reportable segment net sales and operating income information for the years ended December 31, 2017 and December 31, 2016 reflecting the effect of adopting the new revenue and new pension standards, the establishment of the Colloidal Technologies Group (“CTG”) operating segment (which is not aggregated in a reportable segment, but rather reported in Other) effective in the first quarter of 2018 and international operations at the fixed currency exchange rates established by Company management at the beginning of 2018. The table also reflects other immaterial changes, including the movement of certain customers and cost allocations between reportable segments.
The Company is also providing a table (Exhibit 99.4) with supplemental unaudited reportable segment net sales and operating income information for each of the four quarters of 2017 and for the twelve months ended December 31, 2017, reflecting the changes noted above.
The Company is also providing certain supplemental unaudited revised adjusted financial measures that have not been calculated in accordance with accounting principles generally accepted in the United States (“non-GAAP measures”), including fixed currency sales, fixed currency cost of sales, adjusted gross margin, fixed currency operating income, adjusted fixed currency operating income, adjusted fixed currency operating income margin, adjusted net income, and adjusted diluted EPS (Exhibit 99.5) which incorporate the effect of adoption of the new revenue and new pension standards. These non-GAAP measures are provided as additional information regarding operating results and are used internally to evaluate performance and in making financial and operational decisions, including with respect to incentive compensation. These measures provide investors with greater transparency with respect to the results of operations and are useful for period-to-period comparison of results.
The financial information in the tables represents a supplemental presentation of certain of Ecolab’s 2017 and 2016 reportable segment information as explained in this Current Report on Form 8-K and the tables and is not intended to replace the presentation of such information in Ecolab’s Quarterly Reports on Form 10-Q filed with respect to the first, second and third quarters of 2017 and Ecolab’s Annual Reports on Form 10-K filed with respect to the fiscal years ended December 31, 2017 and December 31, 2016.