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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Ecolab Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	1,348,902)	1,206,880)	1,736,725)	1,771,309)	1,369,555)
Cost of capital²	11.73%	12.24%	12.20%	12.07%	11.52%
Invested capital³	18,430,300)	15,595,900)	18,090,500)	17,830,002)	17,388,578)

Economic profit⁴	(813,795)	(702,588)	(470,378)	(380,781)	(634,034)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,348,902 – 11.73% × 18,430,300 = -813,795

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Ecolab Inc. economic profit decreased from 2019 to 2020 and from 2020 to 2021.

Ecolab Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income (loss) attributable to Ecolab	1,129,900)	(1,205,100)	1,558,900)	1,429,100)	1,508,400)
Deferred income tax expense (benefit)¹	(900)	(39,300)	(37,700)	85,100)	(354,500)
Increase (decrease) in allowance for expected credit losses²	(15,600)	29,600)	1,400)	(10,900)	3,900)
Increase (decrease) in LIFO reserve³	99,300)	(9,200)	(5,400)	29,000)	18,100)
Increase (decrease) in restructuring liability⁴	(60,000)	(800)	32,900)	37,300)	1,900)
Increase (decrease) in equity equivalents⁵	22,800)	(19,700)	(8,800)	140,500)	(330,600)
Interest expense	230,600)	304,800)	215,300)	237,200)	274,600)
Interest expense, operating lease liability⁶	12,209)	15,851)	23,136)	18,850)	18,469)
Adjusted interest expense	242,809)	320,651)	238,436)	256,050)	293,069)
Tax benefit of interest expense⁷	(50,990)	(67,337)	(50,072)	(53,771)	(102,574)
Adjusted interest expense, after taxes⁸	191,819)	253,314)	188,364)	202,280)	190,495)
Interest income	(12,300)	(14,600)	(24,100)	(14,900)	(19,600)
Investment income, before taxes	(12,300)	(14,600)	(24,100)	(14,900)	(19,600)
Tax expense (benefit) of investment income⁹	2,583)	3,066)	5,061)	3,129)	6,860)
Investment income, after taxes¹⁰	(9,717)	(11,534)	(19,039)	(11,771)	(12,740)
(Income) loss from discontinued operations, net of tax¹¹	—)	2,172,500)	—)	—)	—)
Net income (loss) attributable to noncontrolling interest	14,100)	17,400)	17,300)	11,200)	14,000)
Net operating profit after taxes (NOPAT)	1,348,902)	1,206,880)	1,736,725)	1,771,309)	1,369,555)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for expected credit losses.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in restructuring liability.

⁵ Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Ecolab.

⁶ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 397,700 × 3.07% = 12,209

⁷ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 242,809 × 21.00% = 50,990

⁸ Addition of after taxes interest expense to net income (loss) attributable to Ecolab.

⁹ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 12,300 × 21.00% = 2,583

¹⁰ Elimination of after taxes investment income.

¹¹ Elimination of discontinued operations.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Ecolab Inc. NOPAT decreased from 2019 to 2020 but then slightly increased from 2020 to 2021.

Ecolab Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Provision for income taxes	270,200)	176,600)	322,700)	364,300)	242,400)
Less: Deferred income tax expense (benefit)	(900)	(39,300)	(37,700)	85,100)	(354,500)
Add: Tax savings from interest expense	50,990)	67,337)	50,072)	53,771)	102,574)
Less: Tax imposed on investment income	2,583)	3,066)	5,061)	3,129)	6,860)
Cash operating taxes	319,507)	280,171)	405,411)	329,842)	692,614)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Ecolab Inc. cash operating taxes decreased from 2019 to 2020 but then slightly increased from 2020 to 2021.

Ecolab Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Short-term debt	411,000)	17,300)	380,600)	743,600)	564,400)
Long-term debt, excluding current maturities	8,347,200)	6,669,300)	5,973,500)	6,301,600)	6,758,300)
Operating lease liability¹	397,700)	426,100)	578,400)	574,702)	552,978)
Total reported debt & leases	9,155,900)	7,112,700)	6,932,500)	7,619,902)	7,875,678)
Total Ecolab shareholders’ equity	7,224,200)	6,166,500)	8,685,300)	8,003,200)	7,618,500)
Net deferred tax (assets) liabilities²	501,400)	320,700)	584,800)	659,500)	540,500)
Allowance for expected credit losses³	52,800)	68,400)	62,000)	60,600)	71,500)
LIFO cost to FIFO cost difference⁴	114,900)	15,600)	(9,300)	(3,900)	(32,900)
Restructuring liability⁵	42,400)	102,400)	111,700)	78,800)	41,500)
Equity equivalents⁶	711,500)	507,100)	749,200)	795,000)	620,600)
Accumulated other comprehensive (income) loss, net of tax⁷	1,634,800)	1,994,400)	2,089,700)	1,761,700)	1,642,300)
Noncontrolling interest	28,900)	35,000)	40,500)	50,400)	70,200)
Adjusted total Ecolab shareholders’ equity	9,599,400)	8,703,000)	11,564,700)	10,610,300)	9,951,600)
Construction in progress⁸	(325,000)	(219,800)	(406,700)	(400,200)	(438,700)
Invested capital	18,430,300)	15,595,900)	18,090,500)	17,830,002)	17,388,578)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of restructuring liability.

⁶ Addition of equity equivalents to total Ecolab shareholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Ecolab Inc. invested capital decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Ecolab Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	51,701,301)	51,701,301)	÷	61,592,801)	=	0.84	0.84	×	13.57%	=	11.39%
Debt³	9,493,800)	9,493,800)	÷	61,592,801)	=	0.15	0.15	×	2.68% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	397,700)	397,700)	÷	61,592,801)	=	0.01	0.01	×	3.07% × (1 – 21.00%)	=	0.02%
Total:	61,592,801)					1.00					11.73%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	59,845,547)	59,845,547)	÷	67,991,547)	=	0.88	0.88	×	13.57%	=	11.95%
Debt³	7,719,900)	7,719,900)	÷	67,991,547)	=	0.11	0.11	×	3.11% × (1 – 21.00%)	=	0.28%
Operating lease liability⁴	426,100)	426,100)	÷	67,991,547)	=	0.01	0.01	×	3.72% × (1 – 21.00%)	=	0.02%
Total:	67,991,547)					1.00					12.24%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	51,999,634)	51,999,634)	÷	59,519,734)	=	0.87	0.87	×	13.57%	=	11.86%
Debt³	6,941,700)	6,941,700)	÷	59,519,734)	=	0.12	0.12	×	3.39% × (1 – 21.00%)	=	0.31%
Operating lease liability⁴	578,400)	578,400)	÷	59,519,734)	=	0.01	0.01	×	4.00% × (1 – 21.00%)	=	0.03%
Total:	59,519,734)					1.00					12.20%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	48,981,106)	48,981,106)	÷	56,742,708)	=	0.86	0.86	×	13.57%	=	11.72%
Debt³	7,186,900)	7,186,900)	÷	56,742,708)	=	0.13	0.13	×	3.28% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	574,702)	574,702)	÷	56,742,708)	=	0.01	0.01	×	3.28% × (1 – 21.00%)	=	0.03%
Total:	56,742,708)					1.00					12.07%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	37,794,238)	37,794,238)	÷	46,077,916)	=	0.82	0.82	×	13.57%	=	11.13%
Debt³	7,730,700)	7,730,700)	÷	46,077,916)	=	0.17	0.17	×	3.34% × (1 – 35.00%)	=	0.36%
Operating lease liability⁴	552,978)	552,978)	÷	46,077,916)	=	0.01	0.01	×	3.34% × (1 – 35.00%)	=	0.03%
Total:	46,077,916)					1.00					11.52%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Ecolab Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	(813,795)	(702,588)	(470,378)	(380,781)	(634,034)
Invested capital²	18,430,300)	15,595,900)	18,090,500)	17,830,002)	17,388,578)
Performance Ratio
Economic spread ratio³	-4.42%	-4.50%	-2.60%	-2.14%	-3.65%
Benchmarks
Economic Spread Ratio, Competitors⁴
Linde plc	-6.50%	-8.01%	-8.35%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -813,795 ÷ 18,430,300 = -4.42%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Ecolab Inc. economic spread ratio deteriorated from 2019 to 2020 but then slightly improved from 2020 to 2021.

Ecolab Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	(813,795)	(702,588)	(470,378)	(380,781)	(634,034)
Net sales	12,733,100)	11,790,200)	14,906,300)	14,668,200)	13,838,300)
Performance Ratio
Economic profit margin²	-6.39%	-5.96%	-3.16%	-2.60%	-4.58%
Benchmarks
Economic Profit Margin, Competitors³
Linde plc	-15.31%	-23.15%	-23.24%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -813,795 ÷ 12,733,100 = -6.39%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Ecolab Inc. economic profit margin deteriorated from 2019 to 2020 and from 2020 to 2021.

Ecolab Inc. (NYSE:ECL)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin