Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative or qualitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.
The discussion should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Our consolidated financial statements are prepared in accordance with U.S. GAAP. This discussion contains various Non-GAAP Financial Measures and also contains various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements and information set forth in the sections entitled “Non-GAAP Financial Measures” at the end of this MD&A, and “Forward-Looking Statements” and “Risk Factors” within Items 1 and 1A of this Form 10-K. We also refer readers to the tables within the section entitled “Results of Operations” of this MD&A for reconciliation information of Non-GAAP measures to U.S. GAAP.
Comparability of Results
Ovivo Electronics Acquisition
On December 16, 2025, we acquired Ovivo’s electronics business (“Ovivo Electronics”) for total consideration of $1.6 billion in cash. Ovivo Electronics is a leading and fast-growing global provider of breakthrough ultrapure water technologies for semiconductor manufacturing. Ovivo Electronics is reported within our Light & Heavy operating segment. Acquisition and integration charges are recorded within special (gains) and charges. The remaining impacts of the Ovivo Electronics acquisition, including operating results, acquisition-related amortization and interest expense related to the transaction, have also been excluded from adjusted results.
Impact of Acquisitions and Divestitures
Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude the impact of special (gains) and charges, the results of our acquired businesses from the first twelve months post acquisition and the results of divested businesses from the twelve months prior to divestiture. In addition, as part of the separation of ChampionX in 2020, we continue to provide certain products to ChampionX which are recorded in product and equipment sales in the Global Water segment along with the related cost of sales. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of that business for January through July 2024 from these organic measures for the year ended December 31, 2024 to remain comparable to the corresponding period in 2025. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
Comparability of Reportable Segments
Effective January 1, 2025, the Company’s former Global Industrial reportable segment was renamed Global Water and includes the Light & Heavy (previously named Water), Food & Beverage, and Paper operating segments. The Global Institutional & Specialty reportable segment continues to include the Institutional and Specialty operating segments. The Company’s former healthcare operating segment moved into the Institutional operating segment. Global Life Sciences was elevated to a standalone reportable segment. The Global Pest Elimination segment remains a standalone reportable segment. After these changes, the Company has seven operating segments.
Fixed Currency Foreign Exchange Rates
Management evaluates the sales and operating income performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Public currency rate data provided within the “Segment Performance” section of this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period and is provided for informational purposes only.
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EXECUTIVE SUMMARY
In 2025, we delivered record sales, operating income margin, adjusted diluted earnings per share, and free cash flows. Our team generated strong organic sales growth in Global Pest Elimination and Global Life Sciences, and good organic sales growth in Global Institutional & Specialty and Global Water. Organic operating income grew by double digits, as strong value pricing and improved productivity were partially offset by investments in the business.
Sales
Reported sales increased 2% to $16.1 billion in 2025 from $15.7 billion in 2024. When measured in fixed rates of foreign currency exchange, fixed currency sales increased 2% compared to the prior year. Organic sales increased 3% compared to the prior year.
Gross Margin
Our reported gross margin was 44.5% of sales for 2025, compared to our 2024 reported gross margin of 43.5%. Excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition included in cost of sales, our adjusted gross margin was 44.5% in 2025 and 43.5% in 2024. Our gross margin increase reflected strong value pricing.
Operating Income
Reported operating income decreased 2% to $2.7 billion in 2025, compared to $2.8 billion in 2024. Adjusted operating income, excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition increased 11% in 2025 as strong value pricing and improved productivity were partially offset by investments in the business. Organic operating income increased 13% in 2025.
Earnings Attributable to Ecolab Per Common Share (“EPS”)
Reported diluted EPS decreased 1% to $7.28 in 2025, compared to $7.37 in 2024. Special (gains) and charges had an impact on both years. Special (gains) and charges in 2025 were primarily related to One Ecolab, while in 2024 they were driven primarily by the gain on sale of the global surgical solutions business and restructuring expense. Adjusted diluted EPS, which excludes the impact of special (gains) and charges, discrete tax items and the Ovivo Electronics acquisition increased 13% to $7.53 in 2025 compared to $6.65 in 2024 which reflected good organic sales growth and robust operating income margin expansion.
Balance Sheet
We remain committed to maintaining “A” range ratings metrics over the long-term, supported by our current credit ratings of A-/A3/A- by Standard & Poor’s, Moody’s Investor Services and Fitch, respectively. Our strong balance sheet has allowed us continued access to capital at attractive rates.
Cash Flow
Cash flow from operating activities was $3.0 billion in 2025, compared to $2.8 billion in 2024. We continued to generate strong cash flow from operations, allowing us to fund our ongoing operations, investments in our business, acquisitions, debt repayments, pension obligations and return cash to our shareholders through share repurchases and dividend payments.
Dividends
Dividends declared per common share in 2025 were $2.68 per share. In December 2025 we increased our quarterly cash dividend by 12% to $0.73 per share, representing our 34 th consecutive annual dividend rate increase. We have paid cash dividends on our common shares for 89 consecutive years. Our outstanding dividend history reflects our long-term growth and development, strong cash flows, solid financial position and confidence in our business prospects for the years ahead.
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CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 2, “Significant Accounting Policies,” of the Notes to the Consolidated Financial Statements (“Notes”).
Preparation of our consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are considered to be critical if they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
Besides estimates that meet the “critical” estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues or expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, even from estimates not deemed critical. Our critical accounting estimates include the following:
Actuarially Determined Liabilities
Pension and Postretirement Healthcare Benefit Plans
The measurement of our pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by our actuaries in their valuations and calculations. These assumptions affect the amount and timing of future pension contributions, benefit payments and expense or income recognized.
The significant assumptions used in developing the required estimates are the discount rates, expected returns on assets and projected salary and health care cost increases.
The discount rate assumptions for our U.S. plans are assessed using a yield curve constructed from a subset of bonds yielding greater than the median return from a population of non-callable, corporate bonds that have an average rating of AA when averaging available Moody’s Investor Services, Standard & Poor’s and Fitch ratings. The discount rates are calculated by matching each plans’ projected cash flows to the bond yield curve. For 2025 and 2024, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. In determining our U.S. pension obligations and U.S. postretirement health care obligation for 2025, our weighted-average discount rate decreased to 5.28% from 5.58% at year-end 2024.
The expected rate of return on plan assets reflects asset allocations, investment strategies and views of investment advisors, and represents our expected long-term return on plan assets. Our weighted-average expected returns on U.S. plan assets used in determining the U.S. pension and U.S. postretirement health care expenses was 8.25% for 2025, 8.00% for 2024, and 7.75% for 2023.
Projected salary is based on our long-term actual experience, the near-term outlook and assumed inflation. Our weighted-average projected salary increase used in determining the U.S. pension expenses was 3.60% for 2025, 3.60% for 2024, and 4.03% for 2023.
For postretirement benefit measurement purposes as of December 31, 2025, the annual rates of increase in the per capita cost of covered health care were assumed to be 8.15% for pre-65 costs. Post-65 costs are no longer used. The rates are assumed to decrease each year until they reach 4.5% in 2035 and remain at those levels thereafter.
The effects of actual results differing from our assumptions, as well as changes in assumptions, are reflected in the unrecognized gains or losses and amortized into earnings in the future. Significant differences in actual experience or significant changes in assumptions may materially affect future pension and other postretirement obligations and income or expense. The unrecognized net losses on our U.S. qualified and non-qualified pension plans decreased to $486 million as of December 31, 2025, from $526 million as of December 31, 2024 (both before tax), primarily due to higher actual return on assets.
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The effect of a decrease in the discount rate or in the expected return on assets assumption as of December 31, 2025, on the December 31, 2025 defined benefit obligation and 2026 expense is shown below, assuming no changes in benefit levels. Expense amounts reflect the accounting for gains or losses as a component of other comprehensive income or expense and recognition of the impacts into earnings over time:
Effect on U.S. Pension Plans
Increase in
Higher
Assumption
Recorded
(millions)
Change
Obligation
Expense
Discount rate
0.25 pts
Expected return on assets
0.25 pts
Effect on U.S. Postretirement
Health Care Benefits Plans
Increase in
Higher
Assumption
Recorded
(millions)
Change
Obligation
Expense
Discount rate
0.25 pts
Expected return on assets
0.25 pts
Our international pension obligations and underlying plan assets represent approximately one third of our global pension plans, with the majority of the amounts held in the U.K. and Eurozone countries. We use assumptions similar to our U.S. plan assumptions to measure our international pension obligations, however, the assumptions used vary by country based on specific local country requirements and information.
Refer to Note 16, “Retirement Plans,” of the Notes for further discussion concerning our accounting policies, estimates, funded status, contributions and overall financial positions of our pension and postretirement plan obligations.
Self-Insurance
Globally we have insurance policies with varying deductible levels for property and casualty losses. We are insured for losses in excess of these deductibles, subject to policy terms and conditions and have recorded both a liability and an offsetting receivable for amounts in excess of these deductibles. We are self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations. We determine our liabilities for claims on an actuarial basis.
Income Taxes
Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities, valuation allowances recorded against net deferred tax assets and unrecognized tax benefits.
Effective Income Tax Rate
Our effective income tax rate is based on annual income, statutory tax rates and tax planning available in the various jurisdictions in which we operate. Our annual effective income tax rate includes the impact of unrecognized tax benefits. We recognize the amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority. We adjust these liabilities for unrecognized tax benefits in light of changing facts and circumstances.
Tax regulations require items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, the effective income tax rate reflected in our financial statements differs from statutory tax rates. Some of these differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as depreciation expense.
Deferred Tax Assets and Liabilities and Valuation Allowances
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, we recognize tax assets, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not. Relevant factors in determining the realizability of deferred tax assets include historical results, sources of future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes.
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Unrecognized Tax Benefits
A number of years may elapse before a particular tax matter, for which we have established a liability for unrecognized tax benefits, is audited and finally resolved. The number of tax years with open tax audits varies depending on the tax jurisdiction. The Internal Revenue Service (“IRS”) has completed examinations of our U.S. federal income tax returns through 2018 and the years 2019 through 2020 are currently under audit. In addition to the U.S. federal examinations, we have ongoing audit activity in several U.S. state and foreign jurisdictions.
The tax positions we take are based on our interpretations of tax laws and regulations in the applicable federal, state and international jurisdictions. We believe our tax returns properly reflect the tax consequences of our operations, and our liabilities for unrecognized tax benefits are appropriate and sufficient for the positions taken. Because of the uncertainty of the final outcome of these examinations, we have established a liability for potential reductions of tax benefits (including related interest and penalties) for amounts that do not meet the more-likely-than-not thresholds for recognition and measurement as required by authoritative guidance. The liability for unrecognized tax benefits is reviewed throughout the year, taking into account new legislation, regulations, case law and audit results. Settlement of any particular issue could result in offsets to other balance sheet accounts, cash payments or receipts and/or adjustments to tax expense. Liabilities for unrecognized tax benefits are presented in the Consolidated Balance Sheets within other non-current liabilities. Our gross liability for unrecognized tax benefits was $53.9 million and $34.1 million as of December 31, 2025 and 2024, respectively. For additional information on income taxes refer to Note 12, “Income Taxes,” of the Notes.
Long-Lived Assets, Intangible Assets and Goodwill
Long-Lived and Amortizable Intangible Assets
Purchased long-lived and amortizable intangible assets not acquired as part of a business combination are recorded as of their acquisition date at cost, whereas long-lived and amortizable assets acquired as part of a business combination are recorded as of their acquisition date at their fair values based on the fair value requirements defined in U.S. GAAP. This requires us to make significant estimates and assumptions relating to the present value of its future cash flows, such as growth rates, royalty rates or discount rates.
We review our long-lived and amortizable intangible assets, the net value of which was $7.5 billion and $6.5 billion as of December 31, 2025 and 2024, respectively, for impairment when significant events or changes in business circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances may include a significant decrease in the market price of an asset or asset group, a significant adverse change in the manner in which asset or asset groups are being used or history of operating or cash flow losses associated with the use of the asset or asset group. Impairment losses could occur when the carrying amount of an asset or asset group exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated as the excess of the asset’s or assets group’s carrying amount over its estimated fair value.
We use the straight-line method to recognize amortization expense related to our amortizable intangible assets, including our customer relationships. We consider various factors when determining the appropriate method of amortization for our customer relationships, including projected sales data, customer attrition rates and length of key customer relationships.
Globally, we have a broad customer base. Our retention rate of significant customers has aligned with our acquisition assumptions, including the customer bases acquired from our Nalco, Laboratoires Anios (“Anios”), Copal Invest NV, including its primary operating entity CID Lines (collectively, “CID Lines”), Purolite and Ovivo Electronics transactions, which make up the majority of our unamortized customer relationships. Our historical retention rates, coupled with our consistent track record of keeping long-term relationships with our customers, support our expectation of consistent sales generation for the foreseeable future from the acquired customer bases. If our customer retention rates or other post-acquisition operational activities change materially, we would evaluate the financial impacts and significance of the events given rise to the change which could result in impairment of our customer relationship intangible assets, or absent an impairment, an acceleration of amortization expense.
In addition, we periodically reassess the estimated remaining useful lives of our long-lived and amortizable intangible assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings. We have experienced no significant changes in the carrying amount or estimated remaining useful lives of our long-lived or amortizable intangible assets.
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Goodwill and Indefinite Life Intangible Assets
Goodwill arises from our acquisitions and represents the excess of the fair value of the purchase consideration exchanged over the fair value of net assets acquired. We had total goodwill of $9.2 billion and $7.9 billion as of December 31, 2025 and 2024, respectively. We test our goodwill for impairment at the reporting unit level. Our reporting units are our seven operating segments. We assess goodwill for impairment on an annual basis during the second quarter. If circumstances change or events occur that demonstrate it is more likely than not that the carrying amount of a reporting unit exceeds its fair value, we complete an interim goodwill impairment assessment of that reporting unit prior to the next annual assessment. If the results of an annual or interim goodwill impairment assessment demonstrate the carrying amount of a reporting unit is greater than its fair value, we will recognize an impairment loss for the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the carrying amount of goodwill assigned to that reporting unit.
For our annual 2025 goodwill impairment assessment, we completed our impairment assessment for our seven reporting units using discounted cash flow analyses that incorporated assumptions regarding future growth rates, terminal values and discount rates. Our goodwill impairment assessments for 2025 indicated the estimated fair values of each of these seven reporting units exceeded the carrying amounts of the respective reporting units by a significant margin. No events were noted during the second half of 2025 that required completion of an interim goodwill impairment assessment in the second half of 2025 for any of our seven reporting units. There has been no impairment of goodwill in any of the periods presented.
The Nalco trade name is our only indefinite life intangible asset, which is tested for impairment on an annual basis during the second quarter. For our annual 2025 indefinite life intangible asset impairment assessment, we completed our impairment assessment of the Nalco trade name using the relief from royalty discounted cash flow method, which incorporates assumptions regarding future sales projections, royalty rates and discount rates. Our Nalco tradename impairment assessment for 2025 indicated the estimated fair value of the Nalco trade name exceeded its $1.2 billion carrying amount by a significant margin. No events were noted during the second half of 2025 that required completion of an interim impairment assessment of our Nalco trade name in the second half of 2025. There has been no impairment of the Nalco trade name intangible since it was acquired.
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RESULTS OF OPERATIONS
Net Sales
Percent Change
(millions)
Product and equipment sales
Service and lease sales
Reported GAAP net sales
Impact of Ovivo Electronics on net sales
Non-GAAP adjusted net sales
Effect of foreign currency translation
Non-GAAP adjusted fixed currency sales
Effect of acquisitions and divestitures
Non-GAAP organic sales
* Not meaningful
The percentage components of the year-over-year sales change are shown below:
(percent)
Volume
Price changes
Organic sales change
Acquisitions and divestitures
Fixed currency sales change
Foreign currency translation
Reported GAAP net sales change
* Not meaningful
Amounts do not necessarily sum due to rounding.
Cost of Sales (“COS”) and Gross Profit Margin (“Gross Margin”)
Gross
Gross
Gross
(millions/percent)
COS
Margin
COS
Margin
COS
Margin
Product and equipment cost of sales
Service and lease cost of sales
Reported GAAP COS and gross margin
Special (gains) and charges
Impact of Ovivo Electronics on COS
Non-GAAP adjusted COS and gross margin
Our COS values and corresponding gross margin are shown above. Our gross margin is defined as sales less cost of sales divided by sales.
Our reported gross margin was 44.5%, 43.5%, and 40.2% for 2025, 2024, and 2023, respectively. Our 2025, 2024 and 2023 reported gross margins were negatively impacted by special (gains) and charges of $7.7 million, $5.3 million, and $22.5 million, respectively. Special (gains) and charges items impacting COS are shown within the “Special (Gains) and Charges” table below.
Excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition, our 2025 adjusted gross margin was 44.5% compared against a 2024 adjusted gross margin of 43.5%. Our adjusted gross margin increased when comparing 2025 against 2024 reflecting strong value pricing.
Excluding the impact of special (gains) and charges, our adjusted gross margin was 43.5% and 40.4% for 2024 and 2023, respectively. The increase primarily reflected strong value pricing and lower delivered product costs.
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Selling, General and Administrative Expenses (“SG&A”)
(percent)
SG&A Ratio
The decreased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2025 against 2024 was driven by productivity which was partially offset by growth-oriented investments in the business. The increased SG&A ratio (SG&A expenses as a percentage of reported net sales) comparing 2024 against 2023 was driven by growth-oriented investments in the business which was partially offset by sales productivity.
Special (Gains) and Charges
Special (gains) and charges reported on the Consolidated Statements of Income included the following items:
(millions)
Cost of sales
One Ecolab
Other restructuring
Cost of sales subtotal
Special (gains) and charges
One Ecolab
Other restructuring
Sale of global surgical solutions business
Acquisition and integration activities
Other
Special (gains) and charges subtotal
Total special (gains) and charges
For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with our internal management reporting. Per share amounts do not necessarily sum due to rounding.
One Ecolab
On July 30, 2024, we announced the One Ecolab initiative, which will enhance our growth and margin expansion journey. As a program within this initiative, we also announced that we commenced a restructuring plan to leverage our digital technologies to realign the functional work done in many countries into global centers of excellence. In February 2026, we expanded the One Ecolab initiative and anticipate total restructuring costs of $334 million ($261 million after tax) or $0.91 per diluted share and special charges of $91 million ($71 million after tax) or $0.25 per diluted share by the end of 2027. We anticipate that the restructuring costs will primarily be cash expenditures for severance costs relating to team realignment. We also expanded the estimated annualized cost savings to $325 million in continuing operations by 2027. One Ecolab has delivered $119 million of cumulative cost savings.
In anticipation of the One Ecolab initiative, a limited number of actions were taken in the first and second quarter of 2024. As a result, we reclassified $5.3 million ($4.0 million after tax) or $0.01 per diluted share from other restructuring to One Ecolab in the third quarter of 2024.
We recorded restructuring charges of $117.0 million ($90.5 million after tax), or $0.32 per diluted share and $76.5 million ($59.0 million after tax), or $0.21 per diluted share in 2025 and 2024, respectively, primarily related to severance and professional services. In addition, we recorded non-restructuring special charges of $30.9 million ($23.4 million after tax), or $0.08 per diluted share and $23.7 million ($17.9 million after tax), or $0.06 per diluted share in 2025 and 2024, respectively, primarily related to professional services. We have recorded $198.8 million ($153.5 million after tax), or $0.54 per diluted share of cumulative restructuring charges and $54.6 million ($41.3 million after tax), or $0.14 per diluted share of cumulative special charges under the One Ecolab initiative. Net cash payments were $75.8 million during 2025 and $26.9 million in 2024.
The net restructuring liability related to the One Ecolab initiative was $96.1 million and $54.9 million as of December 31, 2025 and 2024, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.
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Other restructuring
Other restructuring is primarily related to the Combined Program which is described below. These activities have been included as a component of cost of sales and special (gains) and charges on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.
Further details related to our restructuring charges are included in Note 3, “Special (Gains) and Charges,” of the Notes.
In November 2022, we approved a Europe cost savings program and subsequently expanded the program to focus on our Institutional and Healthcare businesses in other regions (the “Combined Program”). The restructuring activities were completed at the end of 2024, with total costs of $184.1 million ($151.5 million after tax), or $0.53 per diluted share. Subsequent to the completion of the Combined Program, we finalized the sale of a facility, resulting in a gain of $12.0 million ($9.2 million after tax), or $(0.03) per diluted share in the second quarter of 2025.
In 2024 and 2023, we recorded restructuring (gains) charges of $25.2 million ($18.6 million after tax) or $0.06 per diluted share, and $77.7 million ($66.4 million after tax), or $0.23 per diluted share, respectively, primarily related to severance and professional services in the Combined Program.
We reclassified $5.3 million ($4.0 million after tax), or $0.01 per diluted share from the combined restructuring program to other restructuring activities in the second quarter of 2024.
During 2024, we recorded restructuring charges of $10.6 million ($8.0 million after tax), or $0.03 per diluted share related to an immaterial restructuring plan approved in the second quarter of 2024. This plan became part of the One Ecolab initiative in the third quarter of 2024.
During 2023, we recorded restructuring charges of $8.0 million ($6.0 million after tax), or $0.03 per diluted share related to immaterial or subsequently concluded restructuring programs. The charges were primarily related to severance and asset write-offs.
The restructuring liability balance for all other restructuring plans excluding the One Ecolab Program was $8.8 million and $19.3 million as of December 31, 2025 and 2024, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities. Cash payments during 2025 related to all other restructuring plans excluding the One Ecolab Program was $10.4 million.
Sale of global surgical solutions business
On April 27, 2024, we reached a definitive agreement to sell our global surgical solutions business, which closed on August 1, 2024. During 2024, we recorded a gain on sale of $355.9 million ($257.7 million after tax) or ($0.90) per diluted share, as described in Note 4, “Acquisitions and Dispositions,” of the Notes. During 2025, we recorded charges of $3.0 million ($2.3 million after tax) or $0.01 per diluted share, which are primarily related to professional fees to support the sale. Excluding the gain on sale, we recorded charges of $15.6 million ($12.0 million after tax), or $0.05 per diluted share in 2024, which are primarily related to professional fees to support the sale. During 2023, we recorded charges of $10.3 million ($7.7 million after tax) or $0.03 per diluted share, primarily related to professional fees to support the sale.
Acquisition and integration related costs
Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2025 include $36.1 million ($31.2 million after tax), or $0.11 per diluted share, primarily related to the Ovivo Electronics and Purolite transactions.
Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income in 2024 and 2023 include $12.6 million ($9.6 million after tax) or $0.03 per diluted share and $16.1 million ($12.0 million after tax), or $0.04 per diluted share, respectively, primarily related to the Purolite transaction.
Other operating activities
During 2025, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of ($12.4 million) ($10.8 million gain after tax), or ($0.04) per diluted share, relating primarily to the sale of an equity method investment.
During 2024, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $18.7 million ($13.9 million after tax), or $0.05 per diluted share, relating primarily to a liability relating to a prior divestiture, COVID-19 activities, and certain legal charges. During 2023, we recorded other operating activities to special (gains) and charges on the Consolidated Statements of Income of $21.8 million ($16.7 million after tax), or $0.05 per diluted share, relating primarily to certain legal charges.
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Operating Income and Operating Income Margin
Percent Change
(millions)
Reported GAAP operating income
Special (gains) and charges
Impact of Ovivo Electronics on operating income
Non-GAAP adjusted operating income
Effect of foreign currency translation
Non-GAAP adjusted fixed currency operating income
Effect of acquisitions and divestitures
Non-GAAP organic operating income
* Not meaningful
(percent)
Reported GAAP operating income margin
Non-GAAP adjusted operating income margin
Non-GAAP adjusted fixed currency operating income margin
Non-GAAP organic operating income margin
* Not meaningful
Our operating income and corresponding operating income margin are shown in the previous tables. Operating income margin is defined as operating income divided by sales.
Our reported operating income was $2,737.6 million, $2,802.4 million, and $1,992.3 million, for 2025, 2024, and 2023, respectively. Our 2025, 2024 and 2023 operating incomes were negatively (positively) impacted by special (gains) and charges of $162.6 million, ($183.6 million) and $133.9 million, respectively.
Excluding the impacts of special (gains) and charges and the Ovivo Electronics acquisition, 2025 adjusted operating income increased 11% as strong value pricing and improved productivity were partially offset by investments in the business. Excluding the impacts of special (gains) and charges 2024 adjusted operating income increased 23% as strong value pricing, lower delivered product costs, and higher volumes were partially offset by investments in the business.
Other (Income) Expense
(millions)
Reported GAAP other (income) expense
Our reported other income was $51.4 million, $51.3 million and $59.9 million, in 2025, 2024 and 2023, respectively. Other (income) expense was flat when comparing 2025 against 2024. Other (income) expense decreased when comparing 2024 against 2023 primarily due to higher pension costs.
Interest Expense, Net
(millions)
Reported GAAP interest expense, net
Impact of Ovivo Electronics on interest expense
Non-GAAP adjusted interest expense, net
Our reported net interest expense totaled $241.1 million, $282.5 million, and $296.7 million during 2025, 2024, and 2023, respectively.
Adjusted for the Ovivo Electronics acquisition, the decrease in net interest expense when comparing 2025 against 2024 reflects the impact from lower interest rates and a higher cash balance. The decrease in interest expense when comparing 2024 against 2023 was driven primarily by lower interest expense from the repayment of our January 2024 note and the impact from higher interest income earned on cash balances driven by strong free cash flows and proceeds from the sale of the global surgical solutions business.
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Provision for Income Taxes
The following table provides a summary of our tax rate:
(percent)
Reported GAAP tax rate
Tax rate impact of:
Special (gains) and charges
Discrete tax items
Ovivo Electronics tax impacts
Non-GAAP adjusted tax rate
Our reported tax rate was 17.8%, 17.1% and 20.6%, for 2025, 2024, and 2023, respectively. The change in our tax rate includes the tax impact of special (gains) and charges and discrete tax items, which have impacted the comparability of our historical reported tax rates, as amounts included in our special (gains) and charges are derived from tax jurisdictions with rates that vary from our tax rate, and discrete tax items are not necessarily consistent across periods. The tax impact of special (gains) and charges and discrete tax items will likely continue to impact comparability of our reported tax rate in the future.
We recognized a net tax benefit related to discrete tax items of $57.5 million during 2025. Discrete items include tax benefits of $21.5 million associated with recognition of deferred tax attributes and $16.8 million related to share-based compensation excess tax benefits. The remaining net discrete tax benefit of $19.2 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, and other changes in estimates.
We recognized a net tax benefit related to discrete tax items of $78.6 million during 2024. Discrete items include tax benefits of $62.1 million associated with a change to the tax classification of a wholly-owned non-US subsidiary that resulted in recognizing a capital loss and benefit of $30.4 million due to additional basis of foreign intangible assets. The remaining net discrete tax expense of $13.9 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefits, and other changes in estimates.
We recognized a net tax expense related to discrete tax items of $11.2 million during 2023. The net discrete tax expense was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements, share-based compensation excess tax benefits and other changes in estimates.
The change in our adjusted tax rates from 2024 to 2025 was primarily driven by geographic income mix. Future comparability of our adjusted tax rate may be impacted by various factors, including but not limited to other changes in global tax rules, further tax planning projects and geographic income mix.
Net Income Attributable to Ecolab
Percent Change
(millions)
Reported GAAP net income attributable to Ecolab
Adjustments:
Special (gains) and charges, after tax
Discrete tax net (benefit) expense
Impact of Ovivo Electronics on net income
Non-GAAP adjusted net income attributable to Ecolab
Diluted EPS
Percent Change
(dollars)
Reported GAAP diluted EPS
Adjustments:
Special (gains) and charges, after tax
Discrete tax net (benefit) expense
Impact of Ovivo Electronics on diluted EPS
Non-GAAP adjusted diluted EPS
Per share amounts do not necessarily sum due to rounding.
Currency translation had a favorable $0.04 impact on reported and adjusted diluted EPS when comparing 2025 to 2024 and unfavorable ($0.09) impact when comparing 2024 to 2023.
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SEGMENT PERFORMANCE
The non-U.S. dollar functional currency international amounts included within our reportable segments are based on translation into U.S. dollars at the fixed currency exchange rates established by management for 2025. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as “effect of foreign currency translation” in the following tables. All other accounting policies of the reportable segments are consistent with U.S. GAAP and the accounting policies described in Note 2, “Significant Accounting Policies,” of the Notes. Additional information about our reportable segments is included in Note 18, “Operating Segment and Geographic Information,” of the Notes.
Fixed currency net sales and operating income for 2025, 2024 and 2023 for our reportable segments are shown in the following tables.
Net Sales
Percent Change
(millions)
Global Water
Global Institutional & Specialty
Global Pest Elimination
Global Life Sciences
Corporate
Subtotal at fixed currency
Effect of foreign currency translation
Consolidated reported GAAP net sales
Operating Income
Percent Change
(millions)
Global Water
Global Institutional & Specialty
Global Pest Elimination
Global Life Sciences
Corporate
Subtotal at fixed currency
Effect of foreign currency translation
Consolidated reported GAAP operating income
* Not meaningful
The following tables reconcile the impact of acquisitions and divestitures within our reportable segments.
Year ended
December 31
Net Sales
(millions)
Fixed
Currency
Impact of Acquisitions and Divestitures
Organic
Fixed
Currency
Impact of Acquisitions and Divestitures
Organic
Global Water
Global Institutional & Specialty
Global Pest Elimination
Global Life Sciences
Subtotal at fixed currency
Effect of foreign currency translation
Consolidated reported GAAP net sales
Operating Income
(millions)
Fixed
Currency
Impact of Acquisitions and Divestitures
Organic
Fixed
Currency
Impact of Acquisitions and Divestitures
Organic
Global Water
Global Institutional & Specialty
Global Pest Elimination
Global Life Sciences
Corporate
Non-GAAP adjusted fixed currency operating income
Special (gains) and charges
Subtotal at fixed currency
Effect of foreign currency translation
Consolidated reported GAAP operating income
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Global Water
Sales at fixed currency (millions)
Sales at public currency (millions)
Organic sales change
Acquisitions and divestitures
Fixed currency sales change
Foreign currency translation
Public currency sales change
Operating income at fixed currency (millions)
Operating income at public currency (millions)
Fixed currency operating income change
Fixed currency operating income margin
Organic operating income change
Organic operating income margin
Public currency operating income change
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 3% in 2025. Organic sales for Global Water increased 2% in 2025 driven by growth in Food & Beverage and Light & Heavy. Organic sales increased in 2024 driven by strong new business wins and value pricing which overcame uneven end-market trends.
At an operating segment level, Light & Heavy organic sales increased 2% in 2025 reflecting double-digit growth in global high-tech, improved growth in downstream and solid manufacturing sales growth, which more than offset soft end-market demand in basic industries. Global high-tech reported strong double-digit sales growth driven by data centers and microelectronics. Downstream reported sales growth in North America was partially offset by softer sales in other international regions. Manufacturing reported solid growth driven by food & beverage. Basic Industries sales declined as new business wins were more than offset by continued soft end-market demand. Light & Heavy organic sales increased in 2024 reflecting strong growth in downstream and manufacturing. Downstream reported strong sales growth in 2024, driven by strong growth in refining and water management . Manufacturing reported strong sales growth in 2024 driven by strong performance across institutional, food & beverage and high-tech. Basic industries reported sales growth in 2024 driven by new business wins that overcame softer market trends. Food & Beverage organic sales increased 4% in 2025 as value pricing and new business wins overcame continued soft industry demand. Organic sales increased in 2024 as good new business wins more than offset continued soft industry demand. Paper organic sales declined 3% in 2025 as continued new business wins were more than offset by ongoing soft customer production rates. Organic sales were flat in 2024 as strong new business wins were offset by soft customer production rates.
Operating Income
Organic operating income and organic operating income margin for Global Water increased in both 2025 and 2024 when compared to prior periods.
Organic operating income margin increased 0.3 percentage points during 2025 compared to 2024, as the 1.1 percentage point positive impact of value pricing was partially offset by the 0.9 percentage point negative impact of investments in the business. Organic operating income margin increased in 2024 compared to 2023, as the positive impacts of lower delivered product costs, strong value pricing, and higher volumes were partially offset by the negative impacts of investments in business.
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Global Institutional & Specialty
Sales at fixed currency (millions)
Sales at public currency (millions)
Organic sales change
Acquisitions and divestitures
Fixed currency sales change
Foreign currency translation
Public currency sales change
Operating income at fixed currency (millions)
Operating income at public currency (millions)
Fixed currency operating income change
Fixed currency operating income margin
Organic operating income change
Organic operating income margin
Public currency operating income change
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales were stable in 2025. Organic sales for Global Institutional & Specialty increased 3% in 2025 with growth in both operating segments. Organic sales increased in 2024 driven by outperformance of end-market trends.
At an operating segment level, Institutional organic sales increased 3% in 2025 reflecting sales growth to hospitality customers partially offset by modestly lower sales to hospitals. Organic sales increased in 2024 reflecting sales growth across restaurants and lodging. Specialty organic sales increased 5% in 2025 driven by new business wins and continued value pricing, which more than offset the impact from non-strategic, low margin business exits. Organic sales increased in 2024 reflecting growth in quick service and food retail.
Operating Income
Organic operating income and organic operating income margin for our Global Institutional & Specialty segment increased in both 2025 and 2024 when compared to prior periods.
Organic operating income margin increased 2.9 percentage points during 2025, as the 4.3 percentage point positive impacts from value pricing, lower supply chain costs and improved productivity were partially offset by the 1.0 percentage point negative impacts of investments in the business. Organic operating income margin increased during 2024, as the positive impacts from strong value pricing, lower supply chain costs and higher volumes were partially offset by the negative impacts of investments in the business.
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Global Pest Elimination
Sales at fixed currency (millions)
Sales at public currency (millions)
Organic sales change
Acquisitions and divestitures
Fixed currency sales change
Foreign currency translation
Public currency sales change
Operating income at fixed currency (millions)
Operating income at public currency (millions)
Fixed currency operating income change
Fixed currency operating income margin
Organic operating income change
Organic operating income margin
Public currency operating income change
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 7% and organic sales increased 6% in 2025. Organic sales for Global Pest Elimination increased in both 2025 and 2024 when compared to prior periods led by growth in food & beverage and restaurants.
Operating Income
Organic operating income for our Global Pest Elimination segment increased in both 2025 and 2024 when compared to prior periods. Organic operating income margin increased in 2025 and decreased in 2024 when compared to prior periods.
Organic operating income margin in Global Pest Elimination increased 1.2 percentage points in 2025, as the 3.7 percentage point positive impacts from value pricing and higher volumes were partially offset by the 3.1 percentage point negative impacts of investments in the business. Organic operating income margin decreased in 2024, as the positive impact from strong value pricing and higher volumes were more than offset by the negative impacts from investments in the business and costs associated with a fourth quarter spike in accidents.
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Global Life Sciences
Sales at fixed currency (millions)
Sales at public currency (millions)
Organic sales change
Acquisitions and divestitures
Fixed currency sales change
Foreign currency translation
Public currency sales change
Operating income at fixed currency (millions)
Operating income at public currency (millions)
Fixed currency operating income change
Fixed currency operating income margin
Organic operating income change
Organic operating income margin
Public currency operating income change
* Not meaningful
Percentages in the above table do not necessarily sum due to rounding.
Net Sales
Fixed currency sales increased 5% in 2025. Organic sales for Global Life Sciences increased 5% in 2025 as compared to 2024 driven by new business wins and progressively improving industry trends. Organic sales for Global Life Sciences increased in 2024 as compared to 2023 driven by new business wins and progressively improving industry trends.
Operating Income
Organic operating income and organic operating income margin for our Global Life Sciences segment both increased in 2025 when compared to 2024. Organic operating income increased and organic operating income margin decreased for our Global Life Sciences segment in 2024 when compared to 2023.
Organic operating income margin increased 3.4 percentage points in 2025, as the 5.9 percentage point positive impact from value pricing, higher volumes and lower delivered product costs were partially offset by the 2.2 percentage point negative impacts from investments in the business, including performance-based compensation. Organic operating income margin decreased in 2024, as the positive impact from value pricing was more than offset by the negative impacts from higher supply chain costs and investments in the business.
Corporate
Consistent with our internal management reporting, Corporate amounts in the table on page 37 include sales to ChampionX in accordance with the transitional supply agreement entered into with the transaction post-separation, as discussed in Note 17, “Revenues,” intangible asset amortization specifically from the Nalco, Purolite and Ovivo Electronics transactions and special (gains) and charges that are not allocated to our reportable segments. Items included within special (gains) and charges are shown in the table on page 33.
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FINANCIAL POSITION, CASH FLOW AND LIQUIDITY
Financial Position
Total assets were $24.7 billion as of December 31, 2025, compared to total assets of $22.4 billion as of December 31, 2024.
Total liabilities were $14.9 billion as of December 31, 2025, compared to total liabilities of $13.6 billion as of December 31, 2024. Total debt was $8.2 billion as of December 31, 2025 and $7.6 billion as of December 31, 2024. See further discussion of our debt activity within the “Liquidity and Capital Resources” section of this MD&A.
Our net debt to EBITDA is shown in the following table. EBITDA is a non-GAAP measure discussed further in the “Non-GAAP Financial Measures” section of this MD&A.
(ratio)
Net debt to EBITDA
(millions)
Total debt
Cash
Net debt
Net income including noncontrolling interest
Provision for income taxes
Interest expense, net
Depreciation
Amortization
EBITDA
Cash Flows
Operating Activities
Dollar Change
(millions)
Cash provided by operating activities
We continue to generate cash flow from operations allowing us to fund our ongoing operations, acquisitions, investments in the business and pension obligations along with returning cash to our shareholders through dividend payments and share repurchases.
Cash provided by operating activities increased $139 million in 2025 compared to 2024, driven by a $219 million increase in net income, adjusted for the net gain on sale of surgical solutions business in 2024, partially offset by a $120 million unfavorable change in working capital. The cash flow impact from working capital was primarily driven by improvement in inventory due to optimization efforts offset by a decrease in accounts payable primarily associated with our inventory reduction efforts and timing impacts.
Cash provided by operating activities increased $402 million in 2024 compared to 2023, driven by a $739 million increase in net income less $258 million net gain on sale of global surgical solutions business.
The impact on operating cash flows of pension and postretirement plan contributions, cash activity related to restructuring, cash paid for income taxes and cash paid for interest, are shown in the following table:
Dollar Change
(millions)
Pensions and postretirement plan contributions
Restructuring payments
Income tax payments
Interest payments
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Investing Activities
Dollar Change
(millions)
Cash used for investing activities
Cash provided by (used for) investing activities is primarily impacted by the timing of business acquisitions and dispositions as well as from capital investments in the business.
We continue to make capital investments in the business, including merchandising and customer equipment and manufacturing facilities. Total capital expenditures were $1.0 billion, $995 million, and $775 million in 2025, 2024, and 2023, respectively.
Cash used for acquisitions and investments in affiliates, net of cash acquired, in 2025, 2024 and 2023 was $1.6 billion, $313 million, and $180 million, respectively. Cash used for acquisitions and investments in affiliates, net of cash acquired, in 2025 primarily related to the Ovivo Electronics acquisition. Cash used for dispositions, net of cash divested, related to the divestiture of our global surgical solutions business was $15 million in 2025. Cash provided by dispositions, net of cash divested, related to the divestiture of our global surgical solutions business was $890 million in 2024. There was no cash used for or provided by dispositions in 2023. Our acquisitions and divestitures are discussed further in Note 4, “Acquisitions and Dispositions,” of the Notes. We continue to target strategic business acquisitions which complement our growth strategy and expect to continue to make capital investments and acquisitions in the future to support our long-term growth.
Financing Activities
Dollar Change
(millions)
Cash used for financing activities
Our cash flows from financing activities primarily reflect the issuances and repayment of debt, common stock repurchases, proceeds from common stock issuances related to our equity incentive programs and dividend payments.
We issued $1 billion aggregate principal amount and received $994 million in proceeds of fixed rate public notes in 2025. The proceeds received from the debt issuances were used for general corporate purposes, which included partial funding of the Ovivo Electronics acquisition. There were no long-term debt issuances in 2024 or 2023. In addition, we had commercial paper and notes payable net issuances of $98 million in 2025, $2 million in 2024 and net repayments of $2 million in 2023, respectively. We repaid €575 million ($674 million), €575 million ($630 million), and $500 million of long-term debt in 2025, 2024 and 2023, respectively.
Shares are repurchased for the purpose of partially offsetting the dilutive effect of our equity compensation plans, to manage our capital structure and to efficiently return capital to shareholders. We repurchased a total of $784 million, $987 million, and $14 million shares in 2025, 2024, and 2023, respectively.
The impact on financing cash flows of commercial paper and notes payable repayments, long-term debt borrowings and long-term debt repayments, are shown in the following table:
Dollar Change
(millions)
Net issuances (repayments) of commercial paper and notes payable
Long-term debt borrowings
Long-term debt repayments
In December 2025, we increased our quarterly dividend rate by 12%. This represents the 34 th consecutive year we have increased our dividend. We have paid dividends on our common stock for 89 consecutive years. We paid dividends of $754 million, $664 million, and $617 million in 2025, 2024, and 2023, respectively. Cash dividends declared per share of common stock, by quarter, for each of the last three years were as follows:
First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Year
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Liquidity and Capital Resources
We currently expect to fund all of our cash requirements which are reasonably foreseeable for the next twelve months, including scheduled debt repayments, new investments in the business, share repurchases, dividend payments, possible business acquisitions and pension and postretirement contributions with cash from operating activities, and as needed, additional short-term and/or long-term borrowings. We continue to expect our operating cash flow to remain strong.
As of December 31, 2025, we had $646 million of cash and cash equivalents on hand, of which $476 million was held outside of the U.S. As of December 31, 2024, we had $1,257 million of cash and cash equivalents on hand, of which $382 million was held outside of the U.S. We will continue to evaluate our cash position in light of future developments.
In July 2025 and January 2024, we repaid €575 million ($674 million), and €575 million ($630 million) of long-term debt, respectively.
As of December 31, 2024, we had a $2.0 billion multi-year revolving credit facility which was due to expire in April 2026. In March 2025, we entered into an amended and restated revolving credit facility which extended the maturity from April 2026 to March 2030. The credit facility has been established with a diverse syndicate of banks and supports our U.S. and Euro commercial paper programs. The maximum aggregate amount of commercial paper that may be issued under our U.S. commercial paper program and our Euro commercial paper program may not exceed $2.0 billion. At year end, we had $100 million in commercial paper outstanding under our U.S. program and none under our Euro program. There were no borrowings under our credit facility as of December 31, 2025 or 2024. As of December 31, 2025, both programs were rated A-2 by Standard & Poor’s, P-2 by Moody’s and F-1 by Fitch.
Additionally, we have uncommitted credit lines with major international banks and financial institutions. These credit lines support our daily global funding needs, primarily our global cash pooling structures. As of December 31, 2025, we had $217 million of bank supported letters of credit, short-term borrowings, surety bonds and guarantees outstanding in support of our commercial business transactions. We do not have any other significant unconditional purchase obligations or commercial commitments.
As of December 31, 2025, Standard & Poor’s, Fitch and Moody’s rated our long-term credit at A- (stable outlook), A- (stable outlook) and A3 (stable outlook), respectively. A reduction in our credit ratings could limit or preclude our ability to issue commercial paper under our current programs or could also adversely affect our ability to renew existing, or negotiate new, credit facilities in the future and could increase the cost of these facilities.
As of December 31, 2025, we were in compliance with our debt covenants and other requirements of our credit agreements and indentures.
A schedule of our various obligations as of December 31, 2025 are summarized in the following table:
Payments Due by Period
Less
More
Than
Than
(millions)
Total
1 Year
Years
Years
5 Years
Commercial paper and notes payable
One-time transition tax
Long-term debt
Operating leases
Interest*
Total
*Interest on variable rate debt was calculated using the interest rate at December 31, 2025.
As of December 31, 2025, our gross liability for unrecognized tax benefits was $54 million. We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended period of time or whether a cash settlement of the liability will be required. Therefore, these amounts have been excluded from the schedule of contractual obligations.
We do not have required minimum cash contribution obligations for our qualified pension plans in 2025. We are required to fund certain international pension benefit plans in accordance with local legal requirements. We estimate contributions to be made to our international plans will approximate $39 million in 2026. These amounts have been excluded from the schedule of contractual obligations.
We lease certain sales and administrative office facilities, distribution centers, research and manufacturing facilities and other equipment under longer-term operating leases. Vehicle leases are generally shorter in duration. Vehicle leases have residual value requirements that have historically been satisfied primarily by the proceeds on the sale of the vehicles.
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Market Risk
We enter into contractual arrangements (derivatives) in the ordinary course of business to manage foreign currency exposure and interest rate risks. We do not enter into derivatives for speculative or trading purposes. Our use of derivatives is subject to internal policies that provide guidelines for control, counterparty risk, and ongoing monitoring and reporting, and is designed to reduce the volatility associated with movements in foreign exchange and interest rates on our income statement and cash flows.
We enter into foreign currency forward contracts to hedge certain intercompany financial arrangements, and to hedge against the effect of exchange rate fluctuations on transactions related to cash flows denominated in currencies other than U.S. dollars. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations.
We enter into cross-currency swap derivative contracts to hedge certain Euro, Chinese Yuan (“CNY”) and Canadian Dollar (“CAD”) denominated exposures from our investments in certain of its respective denominated functional currency subsidiaries. We use net investment hedges as hedging instruments to manage risks associated with our investments in foreign operations. As of December 31, 2025, we had €2,275 million ($2,672 million), CNY 3,986 million ($570 million), and CAD 280 million ($204 million) contracts outstanding designated as net investment hedges.
We manage interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, we may enter into interest rate swap agreements. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. As of December 31, 2025, we had $1,500 million of interest rate swaps outstanding.
Refer to Note 8, “Derivatives and Hedging Transactions,” of the Notes for further information on our hedging activity.
Based on a sensitivity analysis (assuming a 10% change in market rates) of our foreign exchange and interest rate derivatives and other financial instruments, changes in exchange rates or interest rates would increase/decrease our financial position and liquidity by approximately $388 million. The effect on our results of operations would be substantially offset by the impact of the hedged items.
GLOBAL ECONOMIC AND POLITICAL ENVIRONMENT
Global Economies
Approximately half of our sales are outside of the U.S. Our international operations subject us to changes in economic conditions and foreign currency exchange rates as well as political uncertainty in some countries which could impact future operating results.
Argentina, Turkey and Egypt are classified as highly inflationary economies in accordance with U.S. GAAP, and the U.S. dollar is the functional currency for our subsidiaries in Argentina, Turkey and Egypt. During 2025, sales in Argentina, Turkey and Egypt represented approximately 1% of our consolidated sales. Assets held in Argentina, Turkey and Egypt at the end of 2025 represented approximately 1% of our consolidated assets.
In light of Russia’s invasion of Ukraine and the sanctions against Russia by the United States and other countries, we have made the determination to limit our Russian business to operations that are essential to life, providing minimal support for our healthcare, life sciences, food and beverage and certain water businesses. We may further narrow our presence in Russia depending on future developments, such as the imposition of additional sanctions by the United States. Our Russian and Ukraine operations represented approximately 1% of our 2025 consolidated net sales. We recorded charges of $1.4 million in 2023, primarily related to recoverability risk of certain assets in both Russia and Ukraine. We cannot predict the progress or outcome of world geopolitical events, including the Russia and Ukraine conflict, or the consequences thereof.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 2, “Significant Accounting Policies,” of the Notes.
SUBSEQUENT EVENTS
In February 2026, we expanded our existing One Ecolab restructuring program. We now anticipate total restructuring costs of $334 million ($261 million after tax) and special charges of $91 million ($71 million after tax) by the end of 2027. We anticipate that the restructuring costs will primarily be cash expenditures for severance costs relating to team realignment.
In February 2026, we entered into cross-currency swap derivative contracts with aggregate notional amounts of 100 million Swiss Franc (“CHF”). These cross-currency swap derivative contracts are designated as net investment hedges of our CHF denominated exposures from our investments in certain of our CHF denominated functional currency subsidiaries.
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NON-GAAP FINANCIAL MEASURES
This MD&A includes financial measures that have not been calculated in accordance with U.S. GAAP. These non-GAAP measures may include:
● Fixed currency sales
● Adjusted net sales
● Adjusted fixed currency sales
● Organic sales
● Adjusted cost of sales
● Adjusted gross margin
● Fixed currency operating income
● Fixed currency operating income margin
● Adjusted operating income
● Adjusted operating income margin
● Adjusted fixed currency operating income
● Adjusted fixed currency operating income margin
● Organic operating income
● Organic operating income margin
● Adjusted interest expense, net
● EBITDA
● Adjusted tax rate
● Adjusted net income attributable to Ecolab
● Adjusted diluted EPS
● Free cash flow
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
Our non-GAAP financial measures for adjusted net sales and adjusted interest expense, net exclude the impact of the Ovivo Electronics acquisition. Our non-GAAP financial measures for adjusted cost of sales, adjusted gross margin and adjusted operating income exclude the impact of special (gains) and charges and the Ovivo Electronics acquisition, and our non-GAAP financial measures for adjusted tax rate, adjusted net income attributable to Ecolab and adjusted diluted EPS further exclude the impact of discrete tax items. We include items within special (gains) and charges and discrete tax items that we believe can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results. After tax special (gains) and charges are derived by applying the applicable local jurisdictional tax rate to the corresponding pre-tax special (gains) and charges.
EBITDA is defined as net income including non-controlling interest with the sum of provision for income taxes, net interest expense, depreciation and amortization added back. Adjusted EBITDA further adds back special (gains) and charges impacting EBITDA. EBITDA and adjusted EBITDA are used in our net debt to EBITDA and net debt to adjusted EBITDA ratios, which we view as important indicators of the operational and financial health of our organization.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange, which eliminate the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this Form 10-K are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2025. We also provide our segment results based on public currency rates for informational purposes.
Our reportable segments do not include the impact of intangible asset amortization from the Nalco and Purolite transactions or the impact of special (gains) and charges as these are not allocated to our reportable segments.
Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude: (i) the impact of special (gains) and charges where applicable, (ii) the impact of the Ovivo Electronics acquisition, (iii) the results of our acquired businesses from the first twelve months post acquisition and (iv) the results of divested businesses from the twelve months prior to divestiture. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of the business for the nine-month period ended September 30, 2024 from these organic measures to remain comparable to the corresponding period in 2025. In addition, as part of the separation of ChampionX in 2020, we continue to provide certain products to ChampionX, which are recorded in product and equipment sales in the Global Water segment along with the related cost of sales. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.
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We define free cash flow as net cash provided by operating activities less cash outlays for capital expenditures. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. It should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. We believe free cash flow is meaningful to investors as it functions as a useful measure of performance and we use this measure as an indication of the strength of the Company and its ability to generate cash.
These non-GAAP measures are not in accordance with, or an alternative to U.S. GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the U.S. GAAP measures included in this MD&A and we have provided reconciliations of reported U.S. GAAP amounts to the non-GAAP amounts in this MD&A.
We do not provide reconciliations for non-GAAP estimates on a forward-looking basis (including those contained in this Form 10-K) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of various items that have not yet occurred, are out of our control and/or cannot be reasonably predicted, and that would impact reported earnings per share and the reported tax rate, the most directly comparable forward-looking GAAP financial measures to adjusted earnings per share and the adjusted tax rate. For the same reasons, we are unable to address the probable significance of the unavailable information.
