Ecolab Reports 22% Second Quarter EPS Increase to $0.44
July 24 2007 - 8:35AM
Business Wire
Ecolab Inc. (NYSE:ECL): 2007 SECOND QUARTER HIGHLIGHTS: Record
diluted net income per share, +22% to $0.44; excluding $0.02 tax
benefit, EPS +17% to $0.42 Record sales, +11% to $1.4 billion
Strong U.S., Canada and Latin America sales results propel growth
Europe sales and profits improve Cash flow from operations
increases 25% to $221 million Second Quarter and Six Months Ended
June 30 (unaudited) Second Quarter % Six Months % 2007 2006
increase 2007 2006 increase (Millions, except per share) Net Sales
$ 1,362.4 $ 1,225.9 11 % $ 2,616.6 $ 2,346.0 12 % � Operating
Income 173.0 153.2 13 % 321.4 284.6 13 % � Pretax Income 159.6
142.2 12 % 296.3 263.3 13 % Taxes 49.3 49.0 1 % 96.5 92.2 5 % Net
Income $ 110.3 $ 93.2 18 % $ 199.8 $ 171.1 17 % � Diluted Net
Income Per Share $ 0.44 $ 0.36 22 % $ 0.79 $ 0.66 20 % Diluted
Average Shares Outstanding 250.7 256.7 -2 % 252.6 257.4 -2 %
Continued strong growth from its U.S., Canada and Latin America
operations led Ecolab�s second quarter results to record levels for
the period ended June 30, 2007. Ecolab's consolidated sales
increased 11% to a record $1.4 billion in the second quarter of
2007; measured in fixed currencies, sales rose 8%. Net income
increased 18% to a record $110 million. Diluted earnings per share
were up 22% to a record $0.44. Excluding a benefit from tax audit
settlements, earnings per share rose 17% to $0.42. Commenting on
the quarter, Douglas M. Baker, Jr., Ecolab�s Chairman, President
and Chief Executive Officer said, �We turned in another excellent
quarter as we continued to enjoy the benefits of our global
business balance. Solid growth trends in U.S., Canada and Latin
America, along with improvement in Europe, drove the sales and
profit gain. �We continue to expect strong results for 2007, as we
both deliver on the current year and invest for future growth. We
will be introducing new product platforms in key businesses in the
second half of 2007 that will deliver superior customer results,
once again demonstrating Ecolab�s industry leadership, and driving
future growth. We are also using our momentum to make important
long term investments in the fundamental business growth drivers,
particularly in Europe and Asia Pacific, and are confident in the
returns they will generate. We are excited about our opportunities,
both over the near and long term, and by our abilities to
successfully capitalize on them. We believe our future remains
strong, and we are determined to continue delivering superior
shareholder value.� Second quarter 2007 sales for Ecolab's U.S.
Cleaning & Sanitizing operations rose 8% to $589 million, led
by strong Institutional, Healthcare and Textile Care gains and
continued good growth from Food & Beverage and Vehicle Care.
Ecolab's U. S. Cleaning & Sanitizing operating income rose 16%
to $100 million. U.S. Other Services sales increased 8% to $114
million in the second quarter benefiting from strong gains by Pest
Elimination and improved sales growth by GCS. Operating income
increased 3% to $11 million. Continued profit gains at Pest
Elimination were partially offset by a charge for an increase in
legal reserves. Excluding the charge, U.S. Other Services operating
income would have risen 17%. Sales of Ecolab's International
operations, when measured at fixed currency rates, rose 7% to $633
million in the second quarter. Latin America reported double-digit
sales growth and Asia Pacific and Canada showed attractive gains.
Europe/Middle East/Africa (EMEA) recorded improved sales growth.
Fixed currency operating income rose 8% to $63 million. When
measured at public currency rates, International sales increased
14% and operating income rose 18%. Currency translation had a
favorable impact on net income growth of approximately $3.4 million
for the second quarter of 2007. Beginning in the second quarter,
the Corporate segment includes investments in the development of
business systems (previously reported in the International segment)
and investments we are making to optimize our business structure as
part of our ongoing efforts to improve our efficiency and returns.
The provision for income taxes for the second quarter of 2007
reflected an income tax rate of 30.9% compared to an income tax
rate of 34.4% for the second quarter of 2006. Excluding the benefit
of various audit settlements, the adjusted effective income tax
rate for the second quarter 2007 was 34.3%. Ecolab reacquired 3.4
million shares of its common stock during the second quarter. The
company reacquired 7.7 million shares in the first half of 2007.
Business Outlook Ecolab expects sales for both domestic and
international operations (in fixed currencies) to increase in the
third quarter 2007 over the third quarter 2006. Gross margins are
expected to approximate the 51% recorded last year. Selling,
general and administrative expenses as a ratio to sales are
expected to be in the 36%-37% range. Interest expense is expected
to approximate $12 million. The effective tax rate in the quarter
is expected to be approximately 34%. Overall, currency translation
is expected to benefit third quarter earnings. Diluted earnings per
share are expected to be in the $0.48-$0.49 range in the third
quarter of 2007. Diluted earnings per share were $0.43 for the
third quarter of 2006. For the full year ending December 31, 2007,
Ecolab now expects diluted earnings per share in the $1.64-$1.66
range, excluding the $0.02 per share impact of the second quarter
tax benefit. The estimated effective tax rate in the quarter and
full year forecasts do not reflect the impact of discrete events
that, if and when they occur, are recognized in the appropriate
period. With sales of $5 billion and more than 13,000
sales-and-service associates, Ecolab Inc. (NYSE: ECL) is the global
leader in cleaning, sanitizing, food safety and infection
prevention products and services. Ecolab delivers comprehensive
programs and services to the foodservice, food and beverage
processing, healthcare, and hospitality markets in more than 160
countries. More news and information is available at
www.ecolab.com. Ecolab will host a live webcast to review the
second quarter earnings announcement today at 1:00 p.m. Eastern
Time. The webcast will be available to the public on Ecolab's
website at http://www.ecolab.com/investor. A replay of the webcast
will be available at that site through August 3, 2007. Listening to
the webcast requires Internet access, the Windows Media Player,
Real Player or other compatible streaming media player. 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 2007 third quarter and full
year financial and business prospects, including product launches;
estimated sales; gross margins; selling, general and administrative
expenses; interest expense; effective tax rates; currency
translation; and diluted earnings per share. 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.
We caution that undue reliance should not be placed on
Forward-Looking Statements, which speak only as of the date made.
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 foodservice, hospitality,
travel, health care and food processing industries; our ability to
develop competitive advantages through technological innovations;
restraints on pricing flexibility due to contractual obligations;
pressure on operations from consolidation of customers or vendors;
changes in oil or raw material prices or unavailability of adequate
and reasonably priced raw materials or substitutes therefore; the
effect of future acquisitions or divestitures or other corporate
transactions; the costs and effects of complying with: (i) laws and
regulations relating to the environment and to the manufacture,
storage, distribution, sale and use of our products, (ii) changes
in tax, fiscal, governmental and other regulatory policies and
(iii) changes in accounting standards, including the impact of FIN
48, which could increase the volatility of our quarterly tax rate;
economic factors such as the worldwide economy, interest rates and
currency movements including, in particular, our exposure to
foreign currency risk; the occurrence of (a) litigation or claims,
(b) the loss or insolvency of a major customer or distributor, (c)
war (including acts of terrorism or hostilities which impact our
markets), (d) natural or manmade disasters, or (e) severe weather
conditions or public health epidemics affecting the foodservice,
hospitality and travel industries; 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 Securities
and Exchange Commission. 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 SECOND QUARTER
AND SIX MONTHS ENDED JUNE 30, 2007 (unaudited) � Second Quarter Six
Months (millions, except per share) 2007 2006 2007 2006 � � Net
Sales $ 1,362.4 $ 1,225.9 $ 2,616.6 $ 2,346.0 � Cost of Sales 669.5
608.0 1,285.2 1,160.5 Selling, General and Administrative Expenses
� 519.9 � 464.7 � 1,010.0 � 900.9 � Operating Income 173.0 153.2
321.4 284.6 � Interest Expense, Net � 13.4 � 11.0 � 25.1 � 21.3 �
Income before Income Taxes 159.6 142.2 296.3 263.3 � Provision for
Income Taxes � 49.3 � 49.0 � 96.5 � 92.2 � Net Income $ 110.3 $
93.2 $ 199.8 $ 171.1 � Diluted Net Income per Common Share $ 0.44 $
0.36 $ 0.79 $ 0.66 � Weighted-Average Common Shares Outstanding
Basic 246.0 252.2 247.8 252.8 Diluted 250.7 256.7 252.6 257.4
ECOLAB INC. OPERATING SEGMENT INFORMATION (unaudited) � First
Quarter Second Quarter Six Months (millions) 2007 2006 2007 2006
2007 2006 � Net Sales � United States Cleaning & Sanitizing $
568.2 $ 513.5 $ 589.3 $ 544.4 $ 1,157.5 $ 1,057.9 Other Services �
102.1 � � 93.2 � � 113.7 � � 105.0 � � 215.8 � � 198.2 � Total
670.3 606.7 703.0 649.4 1,373.3 1,256.1 International 573.3 535.3
633.2 589.3 1,206.5 1,124.6 Effect of Foreign�Currency Translation
� 10.6 � � (21.9 ) � 26.2 � � (12.8 ) � 36.8 � � (34.7 )
Consolidated $ 1,254.2 � $ 1,120.1 � $ 1,362.4 � $ 1,225.9 � $
2,616.6 � $ 2,346.0 � � � Operating Income � United States Cleaning
& Sanitizing $ 99.2 $ 79.5 $ 99.8 $ 86.1 $ 199.0 $ 165.6 Other
Services � 9.3 � � 8.0 � � 11.0 � � 10.6 � � 20.3 � � 18.6 � Total
108.5 87.5 110.8 96.7 219.3 184.2 International 41.6 45.3 63.3 58.6
104.9 103.9 Corporate (2.2 ) - (4.3 ) - (6.5 ) - Effect of
Foreign�Currency Translation � 0.5 � � (1.4 ) � 3.2 � � (2.1 ) �
3.7 � � (3.5 ) Consolidated $ 148.4 � $ 131.4 � $ 173.0 � $ 153.2 �
$ 321.4 � $ 284.6 � Note: The Corporate segment includes
investments in the development of business systems (previously
reported in Q1 in the International segment) and other business
efficiency investments. ECOLAB INC. CONSOLIDATED BALANCE SHEET June
30, 2007 � June 30 December 31 June 30 (millions) 2007 2006 2006
(unaudited) (unaudited) � Assets Current assets Cash and cash
equivalents $ 72.2 $ 484.0 $ 105.9 Accounts receivable, net 930.8
867.6 831.8 Inventories 387.9 364.9 348.1 Deferred income taxes
80.0 86.9 62.7 Other current assets � 68.7 � 50.2 � 69.9 Total
current assets 1,539.6 1,853.6 1,418.4 � Property, plant and
equipment, net 987.5 951.6 903.0 � Goodwill, net 1,064.0 1,035.9
977.4 � Other intangible assets, net 229.4 223.8 200.4 � Other
assets, net � 319.9 � 354.5 � 412.1 � Total assets $ 4,140.4 $
4,419.4 $ 3,911.3 � Liabilities and Shareholders' Equity Current
liabilities Short-term debt $ 295.2 $ 509.0 $ 262.6 Accounts
payable 338.1 330.9 274.8 Compensation and benefits 205.5 252.7
190.0 Income taxes 19.5 17.7 28.8 Other current liabilities � 429.2
� 392.5 � 385.0 Total current liabilities 1,287.5 1,502.8 1,141.2 �
Long-term debt 563.9 557.1 544.8 � Postretirement health care and
pension benefits 437.1 420.2 328.2 � Other liabilities 262.2 259.1
199.1 � Shareholders' equity � 1,589.7 � 1,680.2 � 1,698.0 � Total
liabilities and shareholders' equity $ 4,140.4 $ 4,419.4 $ 3,911.3
Note: The June 30, 2006 balance sheet includes $38.1 million of
capitalized software that has been reclassified from Other Assets
to Property, Plant and Equipment to conform to the June 30, 2007
and December 31, 2006 presentation.
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