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Sales +6%; reported EPS
2011 full year adjusted EPS forecast improved to
2011 FIRST QUARTER HIGHLIGHTS:
| First Quarter Ended March 31 | ||||||||
| (unaudited) | ||||||||
| (Millions, except per share) | 2011 | 2010 | % Change | |||||
| Net Sales | $ | 1,518.3 | $ | 1,432.1 | 6 | % | ||
| Operating Income | 151.7 | 153.8 | -1 | % | ||||
| Pretax Income | 138.2 | 138.8 | 0 | % | ||||
| Taxes | 44.4 | 43.1 | 3 | % | ||||
| Net Income Attributable to Ecolab | $ | 93.6 | $ | 95.5 | -2 | % | ||
| Diluted Earnings Per Share | $ | 0.40 | $ | 0.40 | 0 | % | ||
| Diluted Average Shares Outstanding | 235.9 | 239.0 | -1 | % | ||||
First quarter 2011 and 2010 results included special gains and charges
and discrete tax items. Excluding those items, adjusted first quarter
2011 net income attributable to shareholders rose 9% to
Segment review
First quarter 2011 sales for
U.S. Other Services sales increased 2% to
Sales of
The Corporate segment includes special gains and charges, which are
reported as a separate line item on the income statement. Special gains
and charges for the first quarter 2011 of
The reported income tax rate for the first quarter 2011 was 32.1% and compared with the reported rate of 31.1% in the first quarter 2010. Excluding the tax rate impact of special gains and charges and discrete tax items, the adjusted effective income tax rate in the first quarter 2011 was 30.2% compared with 30.6% for the same period last year.
CEO comment
Commenting on the quarter,
"We remain confident in our outlook for 2011 and expect better top and
bottom line growth over the balance of the year. Our end markets and
sales momentum are improving, our growth investments are delivering
effectively, we are implementing appropriate pricing to offset the
higher delivered product costs and our recent acquisitions are providing
excellent strategic value. We are making good progress in our efforts to
transform
Business Outlook
2011 — Full Year
Special gains and charges for 2011 are expected to be approximately
2011 — Second Quarter
|
Our outlook for the second quarter 2011 is as follows: |
||
|
Gross Margins |
approx. 50% |
|
|
SG&A % of Sales |
36% - 37% |
|
|
Interest expense, net |
approx. $16 million |
|
|
Effective tax rate |
30%-31% |
|
|
Adjusted EPS, excluding special gains and charges |
$0.62 - $0.64 |
|
We expect second quarter 2011 special gains and charges, including
restructuring and acquisition-related charges, to be a net charge of
approximately
Reported second quarter 2010 earnings per share of
With sales of
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This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP financial measures include fixed currency sales, fixed currency operating income, adjusted effective tax rate and adjusted diluted earnings per share. 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.
We include in special gains and charges items that are unusual in nature, significant in amount and important to an understanding of underlying business performance. In order to better allow investors to compare underlying business performance period-to-period, we provide adjusted diluted earnings per share, which excludes special gains and charges and discrete tax items.
The adjusted effective tax rate measure promotes period-to-period comparability of the underlying effective tax rate because the amount excludes the tax rate impact of special gains and charges and discrete tax items which do not necessarily reflect costs associated with historical trends or expected future costs.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency sales and fixed currency operating income measures eliminate the impact of exchange rate fluctuations on our international sales and operating income, respectively, and promote a better understanding of our sales and operating income trends from underlying business performance. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2011.
These non-GAAP financial measures are not in accordance with, or an alternative to, 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 GAAP measures included in this news release. A reconciliation of reported diluted earnings per share to adjusted diluted earnings per share is provided in the table "Supplemental Diluted Earnings per Share Information" included in this news release.
This news release contains various "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements concerning our future financial and business prospects, including forecasted 2011 second quarter and full year business results, estimated sales, gross margins, selling, general and administrative expense, interest expense, effective tax rate, special gains and charges, restructuring activities, end market trends, growth investments, acquisitions, delivered product costs, pricing, adjusted diluted earnings per share and the benefits of restructuring and cost savings activities in 2011 and subsequent years. These statements, which represent Ecolab's expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such Forward-Looking Statements. In particular, the ultimate results of any European restructuring and business improvement actions depend on a number of factors, including the development of a final plan, the input of the various works councils on the terms of the restructuring, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness. We caution that undue reliance should not be placed on Forward-Looking Statements, which speak only as of the date made.
Additional risks and uncertainties that may affect operating results and
business performance are set forth under Item 1A of our most recent Form
10-K and include the vitality of the markets we serve; the impact of
worldwide economic factors such as the worldwide economy, capital flows,
interest rates and foreign currency risk; our ability to execute on key
business initiatives, including leveraging a new ERP system and
completing other actions to increase the competitiveness of our European
business; the ability to acquire and effectively integrate complementary
businesses; fluctuations in raw material and delivered product costs;
our ability to develop competitive advantages through value, innovation
and customer support; the costs and effects of complying with laws and
regulations relating to the environment, including evolving climate
change standards, and to the manufacture, storage, distribution, sale
and use of our products, as well as to the conduct of our business
generally, including employment and labor laws; restraints on pricing
flexibility due to contractual obligations; pressure on results of
operations from consolidation of customers and vendors; public health
epidemics; the occurrence of litigation or claims; the loss or
insolvency of a major customer or distributor; acts of war, terrorism or
hostilities, natural or man-made disasters, water shortages or severe
weather conditions which impact our markets; our ability to attract and
retain high caliber management talent; and other uncertainties or risks
reported from time to time in our reports to the
Except as may be required under applicable law, we undertake no duty to update our Forward-Looking Statements.
(ECL-E)
| ECOLAB INC. | ||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||
| FIRST QUARTER ENDED MARCH 31, 2011 | ||||||||||||||
| (unaudited) | ||||||||||||||
| First Quarter Ended | ||||||||||||||
| March 31 | % | |||||||||||||
| (millions, except per share) | 2011 | 2010 | Change | |||||||||||
| Net sales | $ | 1,518.3 | $ | 1,432.1 | 6 | % | ||||||||
| Cost of sales (1) | 770.4 | 716.7 | 7 | % | ||||||||||
| Selling, general and administrative expenses | 581.6 | 558.1 | 4 | % | ||||||||||
| Special gains and charges (1) | 14.6 | 3.5 | ||||||||||||
| Operating income | 151.7 | 153.8 | -1 | % | ||||||||||
| Interest expense, net | 13.5 | 15.0 | -10 | % | ||||||||||
| Income before income taxes | 138.2 | 138.8 | 0 | % | ||||||||||
| Provision for income taxes | 44.4 | 43.1 | 3 | % | ||||||||||
| Net income including noncontrolling interest | 93.8 | 95.7 | -2 | % | ||||||||||
| Less: Net income attributable to noncontrolling interest | 0.2 | 0.2 | ||||||||||||
| Net income attributable to Ecolab | $ | 93.6 | $ | 95.5 | -2 | % | ||||||||
| Earnings attributable to Ecolab per common share | ||||||||||||||
| Basic | $ | 0.40 | $ | 0.41 | -2 | % | ||||||||
| Diluted | $ | 0.40 | $ | 0.40 | 0 | % | ||||||||
| Weighted-average common shares outstanding | ||||||||||||||
| Basic | 232.0 | 235.4 | -1 | % | ||||||||||
| Diluted | 235.9 | 239.0 | -1 | % | ||||||||||
| (1) Special gains and charges in the Consolidated Statement of Income above include the following: | ||||||||||||||
| (millions) | 2011 | 2010 | ||||||||||||
| Cost of sales | ||||||||||||||
| Restructuring | $ | 0.8 | $ | - | ||||||||||
| Subtotal cost of sales | 0.8 | - | ||||||||||||
| Special (gains) and charges | ||||||||||||||
| Restructuring | 10.4 | - | ||||||||||||
| Acquisition integration charges | 3.6 | - | ||||||||||||
| Business structure and optimization | 0.6 | 0.6 | ||||||||||||
| Venezuela currency devaluation | - | 4.2 | ||||||||||||
| Business write-downs and closures | - | (1.0 | ) | |||||||||||
| Other items | - | (0.3 | ) | |||||||||||
| Subtotal special (gains) and charges | 14.6 | 3.5 | ||||||||||||
| Total | $ | 15.4 | $ | 3.5 | ||||||||||
| ECOLAB INC. | ||||||||||||||
| OPERATING SEGMENT INFORMATION | ||||||||||||||
| FIRST QUARTER ENDED MARCH 31, 2011 | ||||||||||||||
| (unaudited) | ||||||||||||||
| First Quarter Ended | ||||||||||||||
| March 31 | % | |||||||||||||
| (millions) | 2011 | 2010 | Change | |||||||||||
| Net Sales | ||||||||||||||
| United States | ||||||||||||||
|
Cleaning & Sanitizing |
$ | 681.5 | $ | 632.3 | 8 | % | ||||||||
| Other Services | 107.2 | 104.7 | 2 | % | ||||||||||
| Total | 788.7 | 737.0 | 7 | % | ||||||||||
| International | 716.2 | 681.2 | 5 | % | ||||||||||
| Subtotal at fixed currency rates | 1,504.9 | 1,418.2 | 6 | % | ||||||||||
| Effect of foreign currency translation | 13.4 | 13.9 | ||||||||||||
| Consolidated | $ | 1,518.3 | $ | 1,432.1 | 6 | % | ||||||||
| Operating Income | ||||||||||||||
| United States | ||||||||||||||
| Cleaning & Sanitizing | $ | 111.9 | $ | 113.4 | -1 | % | ||||||||
| Other Services | 14.7 | 14.6 | 1 | % | ||||||||||
| Total | 126.6 | 128.0 | -1 | % | ||||||||||
| International | 45.0 | 40.2 | 12 | % | ||||||||||
| Corporate | (20.6 | ) | (11.9 | ) | ||||||||||
| Subtotal at fixed currency rates | 151.0 | 156.3 | -3 | % | ||||||||||
| Effect of foreign currency translation | 0.7 | (2.5 | ) | |||||||||||
| Consolidated | $ | 151.7 | $ | 153.8 | -1 | % | ||||||||
|
Note: The Corporate segment includes special gains and charges reported on the Consolidated Statement of Income as well as investments in the development of business systems and other business efficiency investments. |
||||||||||||||
| ECOLAB INC. | |||||||||||||||
| CONSOLIDATED BALANCE SHEET | |||||||||||||||
| (unaudited) | |||||||||||||||
| March 31 | December 31 | March 31 | |||||||||||||
| (millions) | 2011 | 2010 | 2010 | ||||||||||||
| Assets | |||||||||||||||
| Current assets | |||||||||||||||
| Cash and cash equivalents | $ | 151.4 | $ | 242.3 | $ | 85.3 | |||||||||
| Accounts receivable, net | 1,042.6 | 999.6 | 950.2 | ||||||||||||
| Inventories | 480.2 | 447.6 | 468.9 | ||||||||||||
| Deferred income taxes | 82.2 | 78.9 | 86.2 | ||||||||||||
| Other current assets | 132.5 | 101.5 | 127.7 | ||||||||||||
| Total current assets | 1,888.9 | 1,869.9 | 1,718.3 | ||||||||||||
| Property, plant and equipment, net | 1,192.5 | 1,148.3 | 1,141.8 | ||||||||||||
| Goodwill | 1,465.1 | 1,329.3 | 1,342.2 | ||||||||||||
| Other intangible assets, net | 439.7 | 282.5 | 295.6 | ||||||||||||
| Other assets | 276.1 | 242.2 | 271.3 | ||||||||||||
| Total assets | $ | 5,262.3 | $ | 4,872.2 | $ | 4,769.2 | |||||||||
| Liabilities and Equity | |||||||||||||||
| Current liabilities | |||||||||||||||
| Short-term debt | $ | 506.4 | $ | 189.2 | $ | 361.1 | |||||||||
| Accounts payable | 359.7 | 349.3 | 316.0 | ||||||||||||
| Compensation and benefits | 257.7 | 308.1 | 231.9 | ||||||||||||
| Income taxes | 58.8 | 36.7 | 30.9 | ||||||||||||
| Other current liabilities | 467.6 | 441.5 | 430.1 | ||||||||||||
| Total current liabilities | 1,650.2 | 1,324.8 | 1,370.0 | ||||||||||||
| Long-term debt | 683.7 | 656.4 | 677.9 | ||||||||||||
| Postretirement health care and pension benefits | 488.3 | 565.8 | 581.2 | ||||||||||||
| Other liabilities | 225.4 | 192.2 | 271.6 | ||||||||||||
| Equity | |||||||||||||||
| Common stock | 333.7 | 333.1 | 330.3 | ||||||||||||
| Additional paid-in capital | 1,341.5 | 1,310.2 | 1,198.9 | ||||||||||||
| Retained earnings | 3,332.1 | 3,279.1 | 2,957.1 | ||||||||||||
| Accumulated other comprehensive loss | (205.2 | ) | (271.9 | ) | (307.7 | ) | |||||||||
| Treasury stock | (2,591.5 | ) | (2,521.3 | ) | (2,317.9 | ) | |||||||||
| Total Ecolab shareholders' equity | 2,210.6 | 2,129.2 | 1,860.7 | ||||||||||||
| Noncontrolling interest | 4.1 | 3.8 | 7.8 | ||||||||||||
| Total equity | 2,214.7 | 2,133.0 | 1,868.5 | ||||||||||||
| Total liabilities and equity | $ | 5,262.3 | $ | 4,872.2 | $ | 4,769.2 | |||||||||
| ECOLAB INC. | ||||||||||||||||||||||||||||
| SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
|
The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share. |
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| First | Second | Six | Third | Nine | Fourth | |||||||||||||||||||||||
| Quarter | Quarter | Months | Quarter | Months | Quarter | Year | ||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||||
| Mar. 31 | June 30 | June 30 | Sept. 30 | Sept. 30 | Dec. 31 | Dec. 31 | ||||||||||||||||||||||
| 2010 | 2010 | 2010 | 2010 | 2010 | 2010 | 2010 | ||||||||||||||||||||||
|
Diluted earnings per share, as reported (U.S. GAAP) |
$ | 0.40 | $ | 0.54 | $ | 0.94 | $ | 0.74 | $ | 1.68 | $ | 0.56 | $ | 2.23 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||
| Special (gains) and charges (1) | 0.02 | 0.00 | 0.02 | (0.02 | ) | (0.00 | ) | 0.03 | 0.03 | |||||||||||||||||||
| Tax expense (benefits) (2) | (0.00 | ) | 0.01 | 0.01 | (0.05 | ) | (0.05 | ) | 0.01 | (0.03 | ) | |||||||||||||||||
|
Adjusted diluted earnings per share (Non-GAAP) |
$ | 0.41 | $ | 0.56 | $ | 0.97 | $ | 0.66 | $ | 1.63 | $ | 0.60 | $ | 2.23 | ||||||||||||||
| First | ||||||||||||||||||||||||||||
| Quarter | ||||||||||||||||||||||||||||
| Ended | ||||||||||||||||||||||||||||
| Mar. 31 | ||||||||||||||||||||||||||||
| 2011 | ||||||||||||||||||||||||||||
|
Diluted earnings per share, as reported (U.S. GAAP) |
$ | 0.40 | ||||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||
| Special (gains) and charges (3) | 0.05 | |||||||||||||||||||||||||||
| Tax expense (benefits) (4) | 0.00 | |||||||||||||||||||||||||||
|
Adjusted diluted earnings per share (Non-GAAP) |
$ | 0.45 | ||||||||||||||||||||||||||
| Per share amounts do not necessarily sum due to changes in shares outstanding and rounding. | ||||||||||||||||||||||||||||
|
(1) Special gains and charges for 2010 include a $4.4 million charge, net of tax, related to currency devaluation in Venezuela recorded in the first quarter, a $5.9 million gain, net of tax, on the sale of an investment in the third quarter, and a $7.5 million charge, net of tax, for business optimization costs in the fourth quarter, as well as other items, net of tax. |
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(2) First quarter 2010 tax benefits include discrete tax benefits related to tax audit settlement in Germany, partially offset by discrete tax expense related to the impact of a change in Medicare prescription drug benefit tax deductions. Second quarter 2010 discrete tax expense primarily includes the impact of international tax costs from optimizing our business structure. Third quarter 2010 tax benefits primarily include discrete tax impacts of recognizing settlements and adjustments related to prior year tax returns. Fourth quarter 2010 net discrete tax expense primarily includes adjustments related to prior year tax returns. |
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(3) Special gains and charges for the first quarter of 2011 include restructuring charges of $9.0 million, net of tax, acquisition and integration costs of $2.9 million, net of tax, as well as other items, net of tax. |
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(4) First quarter 2011 discrete tax expense primarily includes the impact of a tax rate change in the U.S., partially offset by a discrete tax benefit related to a California refund claim. |
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