UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
(Mark One)
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30,
2008
OR
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period
from to
Commission
File No. 1-9328
ECOLAB INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
41-0231510
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
370
Wabasha Street N., St. Paul, Minnesota 55102
(Address of principal executive offices)(Zip Code)
1-800-232-6522
(Registrants
telephone number, including area code)
(Not
Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act.
Large
accelerated filer
x
|
|
Accelerated
filer
o
|
|
|
|
Non-accelerated
filer
o
(Do not check if a smaller
reporting company)
|
|
Smaller
reporting company
o
|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of June 30,
2008.
247,266,546 shares of
common stock, par value $1.00 per share.
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
.
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
|
|
Second Quarter Ended
|
|
|
|
June 30
|
|
(millions,
except per share)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,570.0
|
|
$
|
1,362.4
|
|
|
|
|
|
|
|
Cost of sales
|
|
798.8
|
|
669.5
|
|
|
|
|
|
|
|
Selling, general
and administrative expenses
|
|
580.0
|
|
519.9
|
|
|
|
|
|
|
|
Special (gains)
and charges
|
|
(19.3
|
)
|
|
|
|
|
|
|
|
|
Operating income
|
|
210.5
|
|
173.0
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
15.3
|
|
13.4
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
195.2
|
|
159.6
|
|
|
|
|
|
|
|
Provision for
income taxes
|
|
56.2
|
|
49.3
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139.0
|
|
$
|
110.3
|
|
|
|
|
|
|
|
Net income per
common share
|
|
|
|
|
|
Basic
|
|
$
|
0.56
|
|
$
|
0.45
|
|
Diluted
|
|
$
|
0.55
|
|
$
|
0.44
|
|
|
|
|
|
|
|
Dividends
declared per common share
|
|
$
|
0.1300
|
|
$
|
0.1150
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
Basic
|
|
247.1
|
|
246.0
|
|
Diluted
|
|
251.4
|
|
250.7
|
|
The accompanying notes are an integral part of the consolidated
financial information.
2
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
|
|
Six Months Ended
|
|
|
|
June 30
|
|
(millions,
except per share)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,027.9
|
|
$
|
2,616.6
|
|
|
|
|
|
|
|
Cost of sales
|
|
1,537.1
|
|
1,285.2
|
|
|
|
|
|
|
|
Selling, general
and administrative expenses
|
|
1,137.2
|
|
1,010.0
|
|
|
|
|
|
|
|
Special (gains)
and charges
|
|
(17.4
|
)
|
|
|
|
|
|
|
|
|
Operating income
|
|
371.0
|
|
321.4
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
30.1
|
|
25.1
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
340.9
|
|
296.3
|
|
|
|
|
|
|
|
Provision for
income taxes
|
|
99.0
|
|
96.5
|
|
|
|
|
|
|
|
Net income
|
|
$
|
241.9
|
|
$
|
199.8
|
|
|
|
|
|
|
|
Net income per
common share
|
|
|
|
|
|
Basic
|
|
$
|
0.98
|
|
$
|
0.81
|
|
Diluted
|
|
$
|
0.96
|
|
$
|
0.79
|
|
|
|
|
|
|
|
Dividends
declared per common share
|
|
$
|
0.2600
|
|
$
|
0.2300
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
Basic
|
|
247.1
|
|
247.8
|
|
Diluted
|
|
251.5
|
|
252.6
|
|
The accompanying notes are an integral part of the consolidated
financial information.
3
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
|
|
June 30
|
|
December 31
|
|
(millions)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
222.0
|
|
$
|
137.4
|
|
|
|
|
|
|
|
Accounts
receivable (net of allowance of $43.9 at June 30, 2008 and $42.7
at December 31, 2007)
|
|
1,082.1
|
|
974.0
|
|
|
|
|
|
|
|
Inventories
|
|
499.1
|
|
450.8
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
96.2
|
|
89.4
|
|
|
|
|
|
|
|
Other current
assets
|
|
93.1
|
|
65.7
|
|
|
|
|
|
|
|
Total current
assets
|
|
1,992.5
|
|
1,717.3
|
|
|
|
|
|
|
|
Property, plant
and equipment, net
|
|
1,157.3
|
|
1,083.4
|
|
|
|
|
|
|
|
Goodwill
|
|
1,439.6
|
|
1,279.2
|
|
|
|
|
|
|
|
Other intangible
assets, net
|
|
374.8
|
|
328.9
|
|
|
|
|
|
|
|
Other assets
|
|
391.3
|
|
314.0
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,355.5
|
|
$
|
4,722.8
|
|
The accompanying notes are an integral part of the consolidated
financial information.
(Continued)
4
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
(Continued)
|
|
June 30
|
|
December 31
|
|
(millions, except per share)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
376.1
|
|
$
|
403.5
|
|
|
|
|
|
|
|
Accounts payable
|
|
399.1
|
|
343.7
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
237.3
|
|
280.2
|
|
|
|
|
|
|
|
Income taxes
|
|
31.2
|
|
27.7
|
|
|
|
|
|
|
|
Other current
liabilities
|
|
518.0
|
|
463.2
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
1,561.7
|
|
1,518.3
|
|
|
|
|
|
|
|
Long-term debt
|
|
876.0
|
|
599.9
|
|
|
|
|
|
|
|
Postretirement
health care and pension benefits
|
|
443.8
|
|
418.5
|
|
|
|
|
|
|
|
Other
liabilities
|
|
275.3
|
|
250.4
|
|
|
|
|
|
|
|
Shareholders
equity (a)
|
|
|
|
|
|
Common stock
|
|
327.4
|
|
326.5
|
|
Additional
paid-in capital
|
|
1,055.9
|
|
1,015.2
|
|
Retained
earnings
|
|
2,476.1
|
|
2,298.4
|
|
Accumulated
other comprehensive income
|
|
126.9
|
|
63.1
|
|
Treasury stock
|
|
(1,787.6
|
)
|
(1,767.5
|
)
|
Total
shareholders equity
|
|
2,198.7
|
|
1,935.7
|
|
|
|
|
|
|
|
Total
liabilities and shareholders equity
|
|
$
|
5,355.5
|
|
$
|
4,722.8
|
|
(a) Common stock, 400 million shares authorized, $1.00 par value
per share, 247.3 million shares outstanding at June 30, 2008, 246.8
million shares outstanding at December 31, 2007.
The accompanying notes are an integral part of the consolidated
financial information.
5
ECOLAB INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
Six Months Ended
|
|
|
|
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
241.9
|
|
$
|
199.8
|
|
|
|
|
|
|
|
Adjustments to
reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
170.0
|
|
142.5
|
|
Deferred income
taxes
|
|
(4.8
|
)
|
(3.8
|
)
|
Share-based
compensation expense
|
|
15.4
|
|
17.2
|
|
Excess tax
benefits from share-based payment arrangements
|
|
(4.9
|
)
|
(8.6
|
)
|
Gain on sale of
plant
|
|
(24.5
|
)
|
|
|
Other, net
|
|
6.8
|
|
(0.6
|
)
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(73.3
|
)
|
(54.1
|
)
|
Inventories
|
|
(30.8
|
)
|
(24.1
|
)
|
Other assets
|
|
(38.5
|
)
|
6.3
|
|
Accounts payable
|
|
35.2
|
|
(3.4
|
)
|
Other
liabilities
|
|
18.2
|
|
36.1
|
|
|
|
|
|
|
|
Cash provided by
operating activities
|
|
$
|
310.7
|
|
$
|
307.3
|
|
The accompanying notes are an integral part of the consolidated
financial information.
(Continued)
6
ECOLAB INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS (Continued)
|
|
Six Months Ended
|
|
|
|
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
$
|
(164.5
|
)
|
$
|
(126.0
|
)
|
Capitalized
software expenditures
|
|
(35.7
|
)
|
(23.0
|
)
|
Property sold
|
|
34.5
|
|
5.6
|
|
Businesses
acquired and investments in affiliates, net of cash acquired
|
|
(202.5
|
)
|
(24.7
|
)
|
Sale of
businesses and assets
|
|
2.2
|
|
1.1
|
|
Deposit into
indemnification escrow
|
|
(21.0
|
)
|
|
|
|
|
|
|
|
|
Cash used for
investing activities
|
|
(387.0
|
)
|
(167.0
|
)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Net issuances (repayment)
of notes payable
|
|
(32.3
|
)
|
182.8
|
|
Long-term debt
borrowings
|
|
248.0
|
|
|
|
Long-term debt
repayments
|
|
(2.8
|
)
|
(392.7
|
)
|
Reacquired
shares
|
|
(20.2
|
)
|
(336.3
|
)
|
Cash dividends
on common stock
|
|
(64.2
|
)
|
(57.6
|
)
|
Exercise of
employee stock options
|
|
21.8
|
|
42.3
|
|
Excess tax
benefits from share-based payment arrangements
|
|
4.9
|
|
8.6
|
|
Other, net
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
Cash provided by
(used for) financing activities
|
|
154.4
|
|
(552.9
|
)
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash
|
|
6.5
|
|
0.8
|
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
84.6
|
|
(411.8
|
)
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
137.4
|
|
484.0
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
|
$
|
222.0
|
|
$
|
72.2
|
|
The accompanying
notes are an integral part of the consolidated financial information.
7
ECOLAB INC.
CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
1.
Consolidated Financial
Information
The unaudited consolidated
financial information for the second quarter and six months ended June 30,
2008 and 2007, reflect, in the opinion of management, all adjustments necessary
for a fair statement of the financial position, results of operations and cash
flows of Ecolab Inc. (the company) for the interim periods presented. The
financial results for any interim period are not necessarily indicative of
results for the full year. The consolidated balance sheet data as of December 31,
2007 was derived from the audited consolidated financial statements, but does
not include all disclosures required by accounting principles generally
accepted in the United States of America.
The unaudited consolidated financial information should be read in
conjunction with the consolidated financial statements and notes thereto
incorporated in the companys Annual Report on Form 10-K for the year
ended December 31, 2007.
With
respect to the unaudited financial information of the company for the three and
six-month periods ended June 30, 2008 and 2007 included in this Form 10-Q,
PricewaterhouseCoopers LLP reported that they have applied limited procedures
in accordance with professional standards, which do not require an audit, for a
review of such information. Therefore, their separate report dated July 24,
2008 appearing herein, states that they did not audit and they do not express
an opinion on that unaudited financial information. Accordingly, the degree of
reliance on their report on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to
the liability provisions of Section 11 of the Securities Act of 1933, as
amended (the Act) for their report on the unaudited financial information
because that report is not a report or a part of a registration statement
prepared or certified by PricewaterhouseCoopers LLP within the meaning of
Sections 7 and 11 of the Act.
2.
Special Gains and Charges
The company reported a net pre-tax gain in special
gains and charges of $19.3 million and $17.4 million for the second quarter and
six months ended June 30, 2008, respectively. The reported amounts include a gain of $24.0
million recorded in the second quarter on the previously announced sale of a
plant in Denmark and a $1.7 million additional gain recorded in the first
quarter of 2008 related to the sale of a business in the U.K. These gains were partially offset by costs to
optimize the companys business structure including the establishment of a
European headquarters in Zurich, Switzerland.
For segment reporting purposes, special gains and
charges have been included in the companys corporate segment, which is
consistent with the companys internal management reporting.
8
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
3.
Share-Based
Compensation
Statement of
Financial Accounting Standards (SFAS) No. 123 (Revised 2004),
Share-Based Payment,
(SFAS 123R) requires the company to
measure compensation expenses for share-based awards at fair value at the date
of grant and recognize compensation expense over the service period for awards
expected to vest.
Total
compensation expense related to share-based compensation plans was $7.7 million
($4.9 million net of tax benefit) and $9.6 million ($6.1 million net of tax
benefit) for the second quarters ended June 30, 2008 and 2007,
respectively. Total compensation expense
related to share-based compensation plans was $15.4 million ($9.9 million net
of tax benefit) and $17.2 million ($10.9 million net of tax benefit) for the six
months ended June 30, 2008 and 2007, respectively.
4.
Selected
Balance Sheet Information
|
|
June 30
|
|
December 31
|
|
(millions)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
Inventories
|
|
|
|
|
|
Finished goods
|
|
$
|
267.0
|
|
$
|
241.9
|
|
Raw materials
and parts
|
|
249.2
|
|
224.9
|
|
Excess of FIFO
cost over LIFO cost
|
|
(17.1
|
)
|
(16.0
|
)
|
Total
|
|
$
|
499.1
|
|
$
|
450.8
|
|
|
|
|
|
|
|
Property, plant
and equipment, net
|
|
|
|
|
|
Land
|
|
$
|
30.5
|
|
$
|
30.7
|
|
Buildings and
leaseholds
|
|
342.9
|
|
331.9
|
|
Machinery and
equipment
|
|
718.9
|
|
683.7
|
|
Merchandising
equipment
|
|
1,427.9
|
|
1,330.1
|
|
Capitalized
software
|
|
148.8
|
|
129.0
|
|
Construction in
progress
|
|
136.3
|
|
113.0
|
|
|
|
2,805.3
|
|
2,618.4
|
|
Accumulated
depreciation
|
|
(1,648.0
|
)
|
(1,535.0
|
)
|
Total
|
|
$
|
1,157.3
|
|
$
|
1,083.4
|
|
|
|
|
|
|
|
Other intangible
assets, gross
|
|
|
|
|
|
Customer
relationships
|
|
$
|
312.8
|
|
$
|
291.6
|
|
Intellectual
property
|
|
78.8
|
|
52.2
|
|
Trademarks
|
|
115.7
|
|
102.5
|
|
Other
intangibles
|
|
56.1
|
|
45.8
|
|
|
|
563.4
|
|
492.1
|
|
Accumulated
amortization
|
|
|
|
|
|
Customer
relationships
|
|
(130.0
|
)
|
(108.5
|
)
|
Intellectual
property
|
|
(21.4
|
)
|
(20.0
|
)
|
Trademarks
|
|
(29.3
|
)
|
(29.1
|
)
|
Other
intangibles
|
|
(7.9
|
)
|
(5.6
|
)
|
Other intangible
assets, net
|
|
$
|
374.8
|
|
$
|
328.9
|
|
9
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
Selected Balance Sheet Information (continued)
|
|
June 30
|
|
December 31
|
|
(millions)
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
Other assets
|
|
|
|
|
|
Deferred income
taxes
|
|
$
|
139.7
|
|
$
|
137.6
|
|
Pension
|
|
22.4
|
|
23.2
|
|
Sole supply fees
|
|
56.7
|
|
56.3
|
|
Other
|
|
172.5
|
|
96.9
|
|
Total
|
|
$
|
391.3
|
|
$
|
314.0
|
|
|
|
|
|
|
|
Other current
liabilities
|
|
|
|
|
|
Discounts and
rebates
|
|
$
|
247.8
|
|
$
|
223.7
|
|
Dividends
payable
|
|
32.2
|
|
32.1
|
|
Other
|
|
238.0
|
|
207.4
|
|
Total
|
|
$
|
518.0
|
|
$
|
463.2
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
|
|
|
Deferred income
taxes
|
|
$
|
89.1
|
|
$
|
86.1
|
|
Income taxes
payable non-current
|
|
61.6
|
|
57.3
|
|
Other
|
|
124.6
|
|
107.0
|
|
Total
|
|
$
|
275.3
|
|
$
|
250.4
|
|
|
|
|
|
|
|
Accumulated
other comprehensive income
|
|
|
|
|
|
Unrealized loss
on financial instruments
|
|
$
|
(5.0
|
)
|
$
|
(5.4
|
)
|
Pension and
postretirement benefits
|
|
(161.9
|
)
|
(162.7
|
)
|
Cumulative
translation
|
|
293.8
|
|
231.2
|
|
Total
|
|
$
|
126.9
|
|
$
|
63.1
|
|
5.
Interest
|
|
Second Quarter Ended
June 30
|
|
Six Months Ended
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
17.8
|
|
$
|
14.3
|
|
$
|
35.1
|
|
$
|
29.5
|
|
Interest income
|
|
(2.5
|
)
|
(0.9
|
)
|
(5.0
|
)
|
(4.4
|
)
|
Interest
expense, net
|
|
$
|
15.3
|
|
$
|
13.4
|
|
$
|
30.1
|
|
$
|
25.1
|
|
10
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6.
Financial
Instruments
In December 2006, the
company issued euro 300 million ($467 million as of June 30, 2008)
aggregate principal amount of the companys senior notes in two series: 4.355% Series A
Senior Notes due 2013 in the aggregate principal amount of euro 125 million and
4.585% Series B Senior Notes due 2016 in the aggregate principal amount of
euro 175 million. The company designated this debt and related accrued interest
as a hedge of existing foreign currency exposures related to net investments
the company has in certain European subsidiaries. Accordingly, the transaction
gains and losses on all euronotes which are designated and are effective as
hedges of the companys net investments have been included as a component of
the cumulative translation account.
Total transaction losses related to the euronotes charged to
shareholders equity were $6.9 million, net of tax, and $17.1 million, net of
tax, in the second quarter and first six months of 2008, respectively. Total transaction losses related to the
euronotes charged to shareholders equity were $4.1 million, net of tax, and
$3.7 million, net of tax, in the second quarter and first six months of 2007,
respectively.
7.
Comprehensive
Income
Comprehensive income was as follows:
|
|
Second Quarter Ended
June 30
|
|
Six Months Ended
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139.0
|
|
$
|
110.3
|
|
$
|
241.9
|
|
$
|
199.8
|
|
Foreign currency
translation
|
|
17.5
|
|
29.4
|
|
60.4
|
|
25.9
|
|
Derivative
instruments
|
|
0.1
|
|
(0.8
|
)
|
0.4
|
|
(0.3
|
)
|
Pension and
postretirement benefits
|
|
1.5
|
|
1.6
|
|
3.0
|
|
12.3
|
|
Comprehensive
income
|
|
$
|
158.1
|
|
$
|
140.5
|
|
$
|
305.7
|
|
$
|
237.7
|
|
11
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8.
Business Acquisitions and Investments
In December 2007,
subsequent to the companys year-end for International operations, the company
purchased the Irish dairy hygiene business from Novartis Animal Health Ireland
Ltd. The business, which has annual sales of approximately $3 million, became
part of the companys International operations during the first quarter of
2008.
In February 2008,
the company acquired Ecovation, Inc., a Rochester, N.Y. area-based
provider of renewable energy solutions and effluent management systems
primarily for the food and beverage manufacturing industry in the U.S.,
including dairy, beverage, and meat and poultry producers. 2007 sales were approximately $50
million. The total purchase price was
approximately $210 million, of which $21 million remains payable and was placed
in escrow for indemnification purposes.
Ecovation became part of the companys U.S. Cleaning &
Sanitizing operations during the first quarter of 2008.
Acquisitions in
2008 and 2007 are not material to the companys consolidated financial
statements; therefore pro forma financial information is not presented. The aggregate purchase price of acquisitions
and investments in affiliates has been reduced for any cash or cash equivalents
acquired with the acquisitions.
Based upon
purchase price allocations and subsequent adjustments thereto, the components
of the aggregate purchase prices of the acquisitions and investments in affiliates
made were as follows:
|
|
Second Quarter Ended
June 30
|
|
Six Months Ended
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Net tangible
assets acquired (liabilities assumed)
|
|
$
|
5.9
|
|
$
|
(0.3
|
)
|
$
|
49.4
|
|
$
|
(4.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Identifiable
intangible assets
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
(1.7
|
)
|
3.8
|
|
10.3
|
|
7.4
|
|
Intellectual
property
|
|
(1.5
|
)
|
0.2
|
|
26.8
|
|
0.3
|
|
Trademarks
|
|
0.1
|
|
0.3
|
|
16.0
|
|
0.3
|
|
Other
intangibles
|
|
|
|
|
|
9.6
|
|
8.3
|
|
Total
|
|
(3.1
|
)
|
4.3
|
|
62.7
|
|
16.3
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
0.4
|
|
10.1
|
|
111.4
|
|
12.9
|
|
Total aggregate
purchase price
|
|
3.2
|
|
14.1
|
|
223.5
|
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
Liability for
indemnification
|
|
|
|
|
|
(21.0
|
)
|
|
|
Net cash paid
for acquisitions
|
|
$
|
3.2
|
|
$
|
14.1
|
|
$
|
202.5
|
|
$
|
24.7
|
|
Note: Amounts in table above include immaterial
purchase accounting adjustments to prior period acquisitions.
12
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8
.
Business Acquisitions and Investments
(continued)
The changes in the carrying amount of goodwill for each of the companys
reportable segments for the quarter and six months ended June 30, 2008
were as follows:
|
|
United States
|
|
|
|
|
|
(unaudited)
|
|
Cleaning &
|
|
Other
|
|
|
|
|
|
|
|
(millions)
|
|
Sanitizing
|
|
Services
|
|
Total
|
|
International
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2007
|
|
$
|
318.7
|
|
$
|
50.5
|
|
$
|
369.2
|
|
$
|
910.0
|
|
$
|
1,279.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
acquired during quarter
|
|
111.0
|
|
|
|
111.0
|
|
|
|
111.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
allocated to business dispositions
|
|
|
|
|
|
|
|
(0.4
|
)
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation
|
|
|
|
|
|
|
|
32.6
|
|
32.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31,
2008
|
|
429.7
|
|
50.5
|
|
480.2
|
|
942.2
|
|
1,422.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
acquired during quarter
|
|
(0.9
|
)
|
|
|
(0.9
|
)
|
1.3
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation
|
|
|
|
|
|
|
|
16.8
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30,
2008
|
|
$
|
428.8
|
|
$
|
50.5
|
|
$
|
479.3
|
|
$
|
960.3
|
|
$
|
1,439.6
|
|
Goodwill acquired
in 2008 includes immaterial adjustments to prior period acquisitions.
13
ECOLAB INC.
CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9.
Net Income Per Common Share
The computations
of the basic and diluted net income per share amounts were as follows:
|
|
Second Quarter Ended
June 30
|
|
Six Months Ended
June 30
|
|
(millions, except per share)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139.0
|
|
$
|
110.3
|
|
$
|
241.9
|
|
$
|
199.8
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
247.1
|
|
246.0
|
|
247.1
|
|
247.8
|
|
Effect of
diluted stock options and awards
|
|
4.3
|
|
4.7
|
|
4.4
|
|
4.8
|
|
Diluted
|
|
251.4
|
|
250.7
|
|
251.5
|
|
252.6
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.56
|
|
$
|
0.45
|
|
$
|
0.98
|
|
$
|
0.81
|
|
Diluted
|
|
$
|
0.55
|
|
$
|
0.44
|
|
$
|
0.96
|
|
$
|
0.79
|
|
Stock options to
purchase approximately 5.4 million shares for the second quarter and six months
ended June 30, 2008 and 2.8 million shares for the second quarter and six
months ended June 30, 2007 were non-dilutive and, therefore, were not
included in the computation of diluted common shares outstanding.
Restricted stock awards of 91,646 shares and 88,246 shares for the
second quarter and six months ended June 30, 2008, respectively, and
39,987 shares and 34,340 shares for the second quarter and six months ended June 30,
2007, respectively, were excluded from the computation of basic weighted-average
shares outstanding because such shares were not yet vested at these dates.
14
ECOLAB INC.
CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10.
Pension and Postretirement Plans
The
components of net periodic pension and postretirement health care benefit costs
for the second quarter ended June 30 are as follows:
|
|
U.S. Pension Benefits
|
|
|
|
|
|
U.S.
|
|
|
|
(qualified and non-
|
|
International
|
|
Postretirement
|
|
(unaudited)
|
|
qualified plans)
|
|
Pension Benefits
|
|
Health Care Benefits
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
11.2
|
|
$
|
10.8
|
|
$
|
5.2
|
|
$
|
5.2
|
|
$
|
0.6
|
|
$
|
0.7
|
|
Interest cost on
benefit obligation
|
|
13.0
|
|
11.9
|
|
6.8
|
|
5.5
|
|
2.4
|
|
2.4
|
|
Expected return
on plan assets
|
|
(17.6
|
)
|
(16.4
|
)
|
(4.9
|
)
|
(3.9
|
)
|
(0.6
|
)
|
(0.6
|
)
|
Amortization of
prior service
cost (benefit)
|
|
0.3
|
|
0.5
|
|
0.1
|
|
|
|
(1.6
|
)
|
(1.6
|
)
|
Recognition of
net actuarial loss
|
|
2.2
|
|
3.2
|
|
0.2
|
|
0.7
|
|
1.1
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
9.1
|
|
$
|
10.0
|
|
$
|
7.4
|
|
$
|
7.5
|
|
$
|
1.9
|
|
$
|
2.7
|
|
The
components of net periodic pension and postretirement health care benefit costs
for the six months ended June 30 are as follows:
|
|
U.S. Pension Benefits
|
|
|
|
U.S.
|
|
|
|
(qualified and non-
|
|
International
|
|
Postretirement
|
|
(unaudited)
|
|
qualified plans)
|
|
Pension Benefits
|
|
Health Care Benefits
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
22.4
|
|
$
|
21.6
|
|
$
|
10.1
|
|
$
|
10.2
|
|
$
|
1.2
|
|
$
|
1.4
|
|
Interest cost on
benefit obligation
|
|
26.0
|
|
23.8
|
|
13.4
|
|
10.9
|
|
4.8
|
|
4.8
|
|
Expected return
on plan assets
|
|
(35.2
|
)
|
(32.8
|
)
|
(9.7
|
)
|
(7.8
|
)
|
(1.2
|
)
|
(1.2
|
)
|
Amortization of
prior service
cost (benefit)
|
|
0.6
|
|
1.0
|
|
0.1
|
|
|
|
(3.2
|
)
|
(3.2
|
)
|
Recognition of
net actuarial loss
|
|
4.4
|
|
6.4
|
|
0.5
|
|
1.5
|
|
2.2
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense
|
|
$
|
18.2
|
|
$
|
20.0
|
|
$
|
14.4
|
|
$
|
14.8
|
|
$
|
3.8
|
|
$
|
5.4
|
|
The
company is not required to make any contributions to its U.S. pension plan and
postretirement health care benefits plans for 2008 based on plan asset values
as of June 30, 2008. Certain
international pension benefit plans are required to be funded in accordance
with local government requirements. The
company contributed approximately $13 million to its international pension
benefit plans during the first six months of 2008. The company currently
estimates that it will contribute approximately $13 million to the
international pension benefit plans during the remainder of 2008.
15
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11.
Operating Segments
Financial information for each of the companys reportable segments is
as follows:
|
|
Second Quarter Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
Cleaning &
Sanitizing
|
|
$
|
663.7
|
|
$
|
589.3
|
|
$
|
1,317.1
|
|
$
|
1,157.5
|
|
Other Services
|
|
120.9
|
|
113.7
|
|
231.3
|
|
215.8
|
|
Total
|
|
784.6
|
|
703.0
|
|
1,548.4
|
|
1,373.3
|
|
International
|
|
740.7
|
|
701.7
|
|
1,424.1
|
|
1,336.5
|
|
Effect of
foreign currency translation
|
|
44.7
|
|
(42.3
|
)
|
55.4
|
|
(93.2
|
)
|
Consolidated
|
|
$
|
1,570.0
|
|
$
|
1,362.4
|
|
$
|
3,027.9
|
|
$
|
2,616.6
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
Cleaning &
Sanitizing
|
|
$
|
107.5
|
|
$
|
99.8
|
|
$
|
213.0
|
|
$
|
199.0
|
|
Other Services
|
|
13.0
|
|
11.0
|
|
20.0
|
|
20.3
|
|
Total
|
|
120.5
|
|
110.8
|
|
233.0
|
|
219.3
|
|
International
|
|
73.7
|
|
72.4
|
|
127.6
|
|
120.2
|
|
Corporate
|
|
9.9
|
|
(4.3
|
)
|
3.1
|
|
(6.5
|
)
|
Effect of
foreign currency translation
|
|
6.4
|
|
(5.9
|
)
|
7.3
|
|
(11.6
|
)
|
Consolidated
|
|
$
|
210.5
|
|
$
|
173.0
|
|
$
|
371.0
|
|
$
|
321.4
|
|
The International amounts included above are based on translation into
U.S. dollars at the fixed currency exchange rates used by management for 2008.
Consistent with the companys internal management reporting, the
corporate segment includes special gains and charges reported on the
Consolidated Statement of Income. The
corporate segment also includes investments in the development of business
systems and other corporate investments the company is making as part of
ongoing efforts to improve efficiency and returns.
Total service
revenue for the U.S. Other Services segment was $100.7 million and $191.1
million for the second quarter and six months ended June 30, 2008,
respectively, and $94.3 million and $176.7 million for the second quarter and
six months ended 2007, respectively.
Total service revenue for the International segment at public currency
exchange rates was $48.2 million and $92.9 million for the second quarter and six
months ended June 30, 2008, respectively, and $45.9 million and $88.6
million for the second quarter and six months ended June 30, 2007,
respectively.
16
ECOLAB INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
Goodwill
and Other Intangible Assets
Under
SFAS 142, goodwill must be tested annually for impairment. The company performs its annual goodwill
impairment test during the second quarter. If circumstances change significantly
within a reporting unit, the company would also test a reporting unit for
impairment prior to the annual test. As
of June 30, 2008, the company has completed its annual test for goodwill
impairment. Based on this testing, no adjustment to the carrying value of
goodwill was necessary.
Goodwill and other intangible assets arise principally from business
acquisitions. Goodwill represents the
excess of the purchase price over the fair value of identifiable net assets
acquired. Other intangible assets include
primarily customer relationships, trademarks, patents and other technology.
Other intangible assets are amortized on a straight-line basis over their
estimated economic lives. The
weighted-average useful life of other intangible assets was 13 years as of both
June 30, 2008 and 2007.
The straight-line method of amortization reflects an appropriate
allocation of the cost of the intangible assets to earnings in proportion to
the amount of economic benefits obtained by the company in each reporting period. Total amortization expense related to other
intangible assets during the second quarters ended June 30, 2008 and 2007
was $11.1 million and $7.1 million, respectively. Total amortization expense
related to other intangible assets during the six months ended June 30,
2008 and 2007 was $25.9 million and $14.1 million, respectively. As of June 30, 2008, future estimated
amortization expense related to amortizable other identifiable intangible
assets will be:
(unaudited)
|
|
|
|
(millions)
|
|
|
|
2008 (Remainder:
six-month period)
|
|
$
|
22
|
|
2009
|
|
43
|
|
2010
|
|
43
|
|
2011
|
|
42
|
|
2012
|
|
41
|
|
|
|
|
|
|
17
ECOLAB
INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13.
New Accounting Pronouncements
In
September 2006, the FASB issued SFAS 157,
Fair Value
Measurement
(SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurement. Additionally, in February 2008,
the FASB announced it will defer for one year the effective date of SFAS 157
for nonfinancial assets and liabilities that are recognized or disclosed at
fair value in the financial statements on a nonrecurring basis. The FASB also
amended SFAS 157 to add a scope exception for leasing transactions subject to
SFAS 13
Accounting for Leases
from its
application. The company adopted SFAS 157 effective January 1, 2008 for
financial assets and liabilities. The
adoption did not have a material impact on the companys consolidated results
of operations and financial condition.
The companys financial liabilities as of June 30, 2008 include
foreign exchange contracts with fair market value of approximately $2 million,
which are valued using foreign currency exchange rates as of the balance sheet
date (level 2 - significant other observable inputs). In addition, the company
has concluded that it does not have material amounts of assets and liabilities
measured using the companys own assumptions of fair market value (level 3 -
unobservable inputs).
In
February 2007, the FASB issued SFAS 159,
The Fair
Value Option for Financial Assets and Financial Liabilities - including an
amendment of FASB Statement No. 115
(SFAS 159). SFAS 159 provides companies with an option to
report selected financial assets and financial liabilities at fair value, which
can be elected on an instrument-by-instrument basis. Unrealized gains and
losses on items for which the fair value option has been elected are reported
in earnings at each subsequent reporting date. The company adopted SFAS 159
effective January 1, 2008. The adoption did not have a material impact on
the companys consolidated results of operations and financial condition.
In December 2007, the
FASB issued SFAS 141 (revised 2007),
Business
Combinations
(SFAS 141R). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. SFAS 141R is effective for
fiscal years beginning after December 15, 2008, and will be adopted by the
company in the first quarter of 2009. The company is currently evaluating the
potential impact of the adoption of SFAS 141R on its consolidated results
of operations and financial condition including the impact on future
acquisitions.
18
ECOLAB INC.
CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13.
New
Accounting Pronouncements (continued)
In December 2007, the
FASB issued SFAS 160,
Noncontrolling
Interests in Consolidated Financial Statementsan amendment of Accounting
Research Bulletin No. 51
(SFAS 160). SFAS 160 establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income attributable
to the parent and to the noncontrolling interest, changes in a parents
ownership interest, and the valuation of retained noncontrolling equity
investments when a subsidiary is deconsolidated. SFAS 160 also establishes
disclosure requirements that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008, and
will be adopted by the company in the first quarter of 2009. The company
is currently evaluating the potential impact of the adoption of SFAS 160 on its
consolidated results of operations and financial condition.
In March 2008, the FASB
issued SFAS 161,
Disclosures about Derivative Instruments and
Hedging Activities, an amendment to FASB Statement 133
(SFAS 161). SFAS 161 requires companies to provide
greater transparency through disclosures about how and why the company uses
derivative instruments. This includes
how derivative instruments and related hedged items are accounted for under
SFAS 133 and its related interpretations, the level of derivative activity
entered into by the company and how derivative instruments and related hedged
items affect the companys financial position, results of operations, and cash
flows. SFAS 161 is effective for fiscal
years and interim periods beginning after November 15, 2008. The company is currently evaluating the
impact of the adoption of SFAS 161 on its consolidated financial statement
disclosures.
No other new accounting
pronouncement issued or effective has had, or is expected to have, a material
impact on the companys consolidated financial statements.
19
ECOLAB INC.
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14.
Accounting
for Uncertain Tax Positions
The
company files income tax returns in the U.S. federal jurisdiction and various
U.S. state and international jurisdictions. With few exceptions, the company is
no longer subject to state and foreign income tax examinations by tax
authorities for years before 2002
.
The Internal Revenue Service (IRS)
is currently examining the 2005 and 2006 tax years and is expected to complete
its field examination in 2009. The IRS
has completed examinations of the companys U.S. income tax returns for the
years 1999 through 2004. It is reasonably possible for specific open positions
within the 1999 through 2004 examinations to be settled in the next 12
months. The company believes these
settlements could result in a decrease in the companys gross liability for
unrecognized tax benefits of up to $43 million during the next 12 months.
Decreases in the companys gross liability could result in offsets to other
balance sheet accounts, cash payments, and/or adjustments to the annual
effective tax rate. The occurrence of these events and/or other events not
included above within the next 12 months could change depending on a variety of
factors and result in amounts different from above.
During
the first quarter of 2008, the company recognized a discrete $5.2 million
reduction in income tax expense resulting from a new tax treaty between the
U.S. and Germany that went into effect after ratification by the U.S.
Senate. The treaty provides for binding
arbitration in disputes on the treatment of transactions impacting the two
countries. As a result of the treaty
ratification, the company has greater assurance of favorable resolution on
potential disputes between these two countries.
The company did not recognize any discrete tax items during the second
quarter of 2008.
As
of June 30, 2008, the companys gross liability for unrecognized tax
benefits was $105 million compared to $99 million as of December 31, 2007.
Included in the June 30, 2008 balance are $52 million of tax positions
that would affect the annual effective tax rate if such benefits were
recognized.
20
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Directors
Ecolab
Inc.
We
have reviewed the accompanying consolidated balance sheet of Ecolab Inc. and
its subsidiaries as of June 30, 2008 and the related consolidated statements
of income for each of the three and six-month periods ended June 30, 2008
and 2007 and the consolidated statement of cash flows for the six-month periods
ended June 30, 2008 and 2007. These
interim financial statements are the responsibility of Ecolabs management.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States).
A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for
financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole.
Accordingly, we do not express such an opinion.
Based
on our review, we are not aware of any material modifications that should be
made to the accompanying consolidated interim financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We
have previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as
of December 31, 2007, and the related consolidated statements of income,
of comprehensive income and changes in shareholders equity, and of cash flows
for the year then ended (not presented herein), and in our report dated February 22,
2008, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet
information as of December 31, 2007, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
/s/
PricewaterhouseCoopers LLP
|
|
PRICEWATERHOUSECOOPERS
LLP
Minneapolis,
Minnesota
July 24,
2008
21
ECOLAB INC.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Item 2.
Managements
Discussion and Analysis of Financial Condition and Results of Operations
.
The following discussion and analysis provides
information that we believe is useful in understanding our operating results,
cash flows and financial condition. The
discussion should be read in conjunction with the unaudited consolidated
financial information and related notes included in this Form 10-Q. The
discussion contains various Forward-Looking Statements within the meaning of
the Private Securities Litigation Reform Act of 1995. We refer readers to the
statement entitled Forward-Looking Statements located at the end of Part I
of this report.
Overview of the second quarter
ended June 30, 2008
Steady
gains from our U.S. business along with double-digit growth from our Latin
America operations led results for the second quarter of 2008. We achieved a
strong financial performance against increasingly challenging conditions
including softening foodservice and hospitality end markets as well as rising
raw material costs. The balance from our global businesses and market coverage,
led by aggressive sales efforts, pricing actions and effective cost savings
measures, all worked to deliver attractive results.
Sales
Performance
·
Consolidated
net sales increased 15% to $1.6 billion including 3% growth due to
acquisitions.
·
U.S.
Cleaning & Sanitizing sales increased 13% to $664 million. Excluding
acquisitions, sales rose 5% with double-digit growth from Kay, good growth from
Food & Beverage and Healthcare, and moderate growth from
Institutional.
·
U.S.
Other Services sales increased 6% to $121 million, benefiting from good growth
by Pest Elimination and GCS.
·
International
sales, when measured in fixed currency rates, rose 6% to $741 million. Latin America reported double-digit sales
growth and Asia Pacific and Canada reported good sales increases. Europe/Middle East/Africa (EMEA) recorded
moderate sales growth. When measured at
public currency rates, International sales increased 19%.
Financial
Performance
·
Operating
income increased 22% in the second quarter of 2008 compared to the second
quarter of 2007. Excluding special gains and charges, operating income
increased 11%.
22
ECOLAB INC.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial
Performance (continued)
·
Net
income increased 26% to $139 million in the second quarter of 2008 compared to
the second quarter of 2007. Special gains and charges and discrete tax benefits
had a 13% favorable impact.
·
Diluted
net income per share increased 25% to $0.55 for the second quarter of 2008
compared to $0.44 in the second quarter of 2007. Second quarter 2008 results
included $0.08 per share benefit from special gains and charges, primarily due
to a previously announced $24 million gain on the sale of a plant in Denmark.
Second quarter 2007 results included $0.02 per share of discrete tax benefits.
·
Our
income tax rate was 28.8% for the second quarter of 2008 compared to 30.9% for
the second quarter of 2007. Net tax impacts from special gains and charges,
primarily due to the tax-free gain on the plant sale, decreased our effective
income tax rate by 4.0% in the second quarter of 2008. Discrete tax benefits decreased our effective
income tax rate by 3.4% in the second quarter of 2007.
Results of Operations -
Second Quarter and Six Months Ended June 30, 2008
Consolidated net
sales for the second quarter ended June 30, 2008 were $1.6 billion, an
increase of 15% compared to last year. For the first six months of 2008, net
sales increased 16% to $3.0 billion. When measured in fixed currency rates,
sales rose 8% and 10% for the second quarter and first six months of 2008,
respectively. The components of the quarter and year to date sales growth are
shown below.
|
|
Second Quarter Ended
|
|
Six Months Ended
|
|
(percent)
|
|
June 30, 2008
|
|
June 30, 2008
|
|
|
|
|
|
|
|
|
|
Volume growth
|
|
3
|
%
|
|
4
|
%
|
|
Price changes
|
|
2
|
|
|
2
|
|
|
Foreign currency
exchange
|
|
7
|
|
|
6
|
|
|
Acquisitions &
divestitures
|
|
3
|
|
|
4
|
|
|
Total sales
growth
|
|
15
|
%
|
|
16
|
%
|
|
The gross profit margin (defined as the difference
between net sales less cost of sales divided by net sales) was 49.1% and 50.9%
for the second quarter of 2008 and 2007, respectively. For the six month
periods, the gross profit margin was 49.2% in 2008 and 50.9% in 2007. Our gross
profit margin decline for the second quarter and year-to-date has been driven
by the negative impact of the recent Microtek and Ecovation acquisitions which,
by their business model, operate at lower gross profit margins than our
historical business. Our gross profit
margin was also negatively impacted by higher delivered product costs, which
more than offset sales leverage, pricing and cost savings initiatives from a
margin perspective.
23
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of
Operations - Second Quarter and Six Months Ended June 30, 2008 (continued)
Selling, general and administrative expenses were
36.9% of consolidated net sales for the second quarter of 2008 compared to
38.2% in 2007. For the six month periods, selling, general and administrative
expenses were 37.6% in 2008 and 38.6% in 2007.
The decrease in the ratios reflected leverage from our sales growth,
cost controls and the impact of Microtek and Ecovation acquisitions, which
operate at lower ratios. These more than
offset investments in business systems and efficiency, R&D and information
technology.
We reported a net pre-tax gain in special gains and
charges of $19.3 million and $17.4 million for the second quarter and six
months ended June 30, 2008, respectively. The reported amounts include a
gain of $24.0 million recorded in the second quarter on the previously
announced sale of a plant in Denmark and a $1.7 million additional gain
recorded in the first quarter of 2008 related to the sale of a business in the
U.K. These gains were partially offset
by costs to optimize the companys business structure including the
establishment of a European headquarters in Zurich, Switzerland.
Net income increased 26% to $139 million in the second
quarter of 2008. On a per share basis, diluted net income per share increased
25% to $0.55 per share compared to $0.44 per share in 2007. Net income in the second quarter of 2008
includes $20.8 million, net of tax, of special gains and charges, which
increased reported diluted net income per share by $0.08. Net income in the second quarter of 2007
included $5.4 million, or $0.02 per share of discrete tax benefits. Net income for the first six months of 2008
increased 21% to $242 million. On a per
share basis, diluted net income increased 22% to $0.96 compared to $0.79 last
year. Net income in the first six months
of 2008 includes $19.8 million, net of tax, of special gains and charges and
$4.8 million of discrete tax benefits.
These items increased reported diluted net income per share by
$0.10. Net income for the first six
months of 2007 includes $5.4 million or $0.02 per share of discrete tax
items. Currency translation increased
net income by $7.8 million and $11.8 million for the second quarter and first
six months of 2008, respectively. Second
quarter and first six months of 2008 results included $0.02 and $0.03 per share
of dilution from acquisitions, respectively.
24
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Second Quarter and Six Months
Ended June 30, 2008 (continued)
Sales for each of our reportable segments are as
follows:
|
|
Second Quarter Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
Cleaning &
Sanitizing
|
|
$
|
663.7
|
|
$
|
589.3
|
|
$
|
1,317.1
|
|
$
|
1,157.5
|
|
Other Services
|
|
120.9
|
|
113.7
|
|
231.3
|
|
215.8
|
|
Total
|
|
784.6
|
|
703.0
|
|
1,548.4
|
|
1,373.3
|
|
International
|
|
740.7
|
|
701.7
|
|
1,424.1
|
|
1,336.5
|
|
Effect of
foreign currency translation
|
|
44.7
|
|
(42.3
|
)
|
55.4
|
|
(93.2
|
)
|
Consolidated
|
|
$
|
1,570.0
|
|
$
|
1,362.4
|
|
$
|
3,027.9
|
|
$
|
2,616.6
|
|
U.S. Cleaning & Sanitizing sales increased
13% in the second quarter and 14% for the first six months of 2008 compared to
the prior year periods. Microtek and
Ecovation acquisitions added 8% and 9% to quarter over quarter and year over
year sales growth, respectively. Sales
for our significant U.S. Cleaning & Sanitizing businesses were as
follows:
·
Institutional
- Sales grew 3% in the second quarter of
2008 compared to the second quarter of 2007.
We continue to see strong customer demand for energy and cost savings
solutions like our new Apex warewashing line.
New business gains also continued to be solid as we picked up market
share against regional and local competitors.
These gains were partially offset by lower consumption among our
customers as they experience a slowdown in their traffic trends. We also saw some inventory reduction among distributors
in the quarter as they tightened their operations.
·
Food & Beverage
- Beginning in the first quarter of 2008,
following the Ecovation acquisition, we combined our Food & Beverage,
Water Care and Ecovation divisions. Food &
Beverage customers are the primary targets for our Water Care sales and there
are potential synergies and efficiencies available between Water Care and
Ecovation. Combined Food &
Beverage sales, including Water Care and Ecovation increased 13% in the second
quarter compared to the second quarter of 2007.
The acquisition of Ecovation added 6% to the sales growth. Sales growth was led by strong performances
in the agri, dairy and meat & poultry market segments and good growth
from Water Care. Customer retention and
new business gains continue to fuel strong organic growth in spite of more
difficult economic conditions across most of our key market segments.
25
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Second Quarter and Six Months
Ended June 30, 2008 (continued)
·
Kay
- Sales grew 17% in the second quarter and are up 9% for the first six
months of 2008 compared to the second quarter and first six months of
2007. Our strong second quarter sales
growth was driven by favorable timing of distributor shipments in 2007, new
account gains and new products and programs.
Continued strong demand from new and existing quick-service restaurant
customers continue to favorably impact Kays results.
·
Healthcare
- Second quarter sales for Healthcare increased significantly, reflecting
the impact of the Microtek acquisition.
Excluding the impact of the acquisition, sales rose 8% in the second
quarter reflecting continued solid end market demand for our infection control
and skin care products. Microtek also
reported strong double-digit sales growth during the quarter.
U.S. Other Services sales increased 6% and 7% for the
second quarter and first six months of 2008, respectively, compared to the
second quarter and first six months of 2007.
Sales for our U.S. Other Services businesses were as follows:
·
Pest Elimination
- Sales
increased 7% for the quarter driven by continued solid growth in contract
services due to the addition of new customer locations. Non-contract service
growth slowed in the quarter as we are seeing reduced discretionary spending by
our customers due the current economic environment.
·
GCS Service
- Sales increased
5% during the quarter led by continued service sales growth offset partially by
soft direct parts sales.
We evaluate the performance
of our International operations based on fixed management rates of currency
exchange. Management rate sales for our International operations grew 6% and 7%
for the second quarter and first six months of 2008, respectively, compared to
the second quarter and first six months of 2007. The net impact of acquisitions
and divestitures did not have a significant impact on second quarter or year to
date International sales growth. Sales
for our International regions were as follows:
·
EMEA
- Sales grew 2% in the second quarter of 2008 due to good sales growth
in the U.K. and moderate growth in France and Germany. The net impact of
acquisitions and divestitures reduced EMEA sales growth by 2% compared to the
prior year, primarily due to the divestiture of a business in the U.K.
26
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations -
Second Quarter and
Six Months Ended June 30, 2008 (continued)
·
Asia Pacific
- Sales increased 6% in the second quarter
led by growth in China and Hong Kong. Acquisitions added 1% to Asia Pacific
sales growth for the quarter.
·
Latin America
- Sales continued to grow double-digits,
rising 15% in the second quarter. Sales continued to be strong throughout the
region, led by double-digit growth in Brazil, Chile, Mexico and Venezuela.
·
Canada
- Sales in Canada increased 5% in the second quarter. Sales growth in
Canada continued to be led by Institutional growth due to new products and good
account retention.
Operating income for each of
our reportable segments is as follows:
|
|
Second Quarter Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
(millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
Cleaning &
Sanitizing
|
|
$
|
107.5
|
|
$
|
99.8
|
|
$
|
213.0
|
|
$
|
199.0
|
|
Other Services
|
|
13.0
|
|
11.0
|
|
20.0
|
|
20.3
|
|
Total
|
|
120.5
|
|
110.8
|
|
233.0
|
|
219.3
|
|
International
|
|
73.7
|
|
72.4
|
|
127.6
|
|
120.2
|
|
Corporate
|
|
9.9
|
|
(4.3
|
)
|
3.1
|
|
(6.5
|
)
|
Effect of
foreign currency translation
|
|
6.4
|
|
(5.9
|
)
|
7.3
|
|
(11.6
|
)
|
Consolidated
|
|
$
|
210.5
|
|
$
|
173.0
|
|
$
|
371.0
|
|
$
|
321.4
|
|
U.S.
Cleaning & Sanitizing operating income increased 8% and 7% for the
second quarter and first six months of 2008, respectively. Acquisitions reduced
operating income by 3% for the second quarter of 2008 and 2% for the first six
months of 2008.
Operating income
increased due to higher sales volume, pricing and improved cost efficiencies,
which more than offset higher delivered product costs and investments in the
business.
27
ECOLAB
INC.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations -
Second
Quarter and Six Months Ended June 30, 2008 (continued)
U.S. Other Services
operating income increased $2.0 million or 18% and decreased $0.3 million or 1%
for the second quarter and first six months of 2008, respectively. Second quarter 2007 operating income included
a charge for a legal reserve. Adjusting
for this charge, U.S. Other Services operating income increased 5% for the
second quarter of 2008 and decreased 8% for the first six months of 2008
compared to the prior year periods. The second quarter growth was driven by
continued operating income growth at Pest Elimination and improved business
trends at GCS. The year-to-date decrease in adjusted operating income was due
to growth at Pest Elimination which was more than offset by systems deployment,
stabilization and optimization costs at GCS in the first quarter of 2008.
International segment
operating income increased 2% and 6% for the second quarter and first six
months of 2008, respectively, at fixed currency rates. Acquisitions and
divestitures decreased the operating income growth rate by 1% for both the
quarter and six month period.
International sales gains more than offset higher delivered product
costs and investments in the business to drive operating income growth. When measured at public currency rates,
operating income increased 18% and 23% for the second quarter and first six
months of 2008, respectively, compared to the prior year periods.
Consistent with our internal
management reporting, the corporate segment includes special gains and charges
reported on the Consolidated Statement of Income. The corporate segment also
includes investments in the development of business systems and other corporate
investments we are making as part of our ongoing efforts to improve efficiency
and returns.
Net interest expense totaled
$15.3 million in the second quarter of 2008, compared with $13.4 million in
2007. Net interest expense was $30.1 and
$25.1 million for the first six months of 2008 and 2007, respectively. The increase in our net interest expense
during 2008 is due primarily to higher debt levels during the current period
compared to last year to fund our Microtek and Ecovation acquisitions.
28
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations -
Second Quarter and
Six Months Ended June 30, 2008 (continued)
The following table provides
a summary of our reported tax rate:
|
|
Second Quarter Ended
|
|
Six Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
(percent)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
Reported tax
rate
|
|
28.8
|
%
|
|
30.9
|
%
|
|
29.0
|
%
|
|
32.6
|
%
|
|
Impact of
special gains and charges and discrete tax items -
increase (decrease)
|
|
(4.0
|
)%
|
|
(3.4
|
)%
|
|
(3.8
|
)%
|
|
(1.8
|
)%
|
|
The provision for income
taxes for the second quarter and first six months of 2008 and 2007 include tax
impacts from special gains and charges and discrete tax events.
The decrease in the 2008
rate over the 2007 rate, excluding the impact of special gains and charges and
discrete tax items, is due primarily to tax planning strategies, international
rate reductions and U.S. tax legislation. We expect the effective income tax
rate, excluding the impact of special gains and charges and discrete tax items,
will approximate 31% to 32% for the full year 2008.
29
ECOLAB INC.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial
Position and Liquidity
Total
assets were $5.4 billion as of June 30, 2008, compared to total assets of
$4.7 billion at December 31, 2007. The largest increase is due to
acquisitions which added approximately $0.2 billion to total assets. Foreign
currency exchange also increased the value of non-U.S. assets on the balance
sheet since December 31, 2007.
Total
debt was $1.3 billion at June 30, 2008, compared to total debt of $1.0
billion at December 31, 2007. In February 2008,
we issued and sold $250 million aggregate principal amount of 4.875% senior
unsecured notes that mature in 2015. The proceeds were used to refinance
outstanding commercial paper related to acquisitions and for general corporate
purposes. Total debt increased primarily
due to the issuance of these notes and the effects of foreign currency exchange
during the quarter. The ratio of total debt to capitalization (shareholders
equity plus total debt) increased to 36% at June 30, 2008 compared to 34%
at December 31, 2007 due to the increase in total debt. We are in compliance with all of our debt
covenants and believe we have sufficient borrowing capacity to meet our
reasonably foreseeable operating needs.
Cash provided by operating activities totaled $311
million for the first six months of 2008 compared to $307 million in 2007.
Operating cash flow increased due to increased earnings but was negatively
impacted by the timing of tax payments and changes in operating assets and
liabilities. Cash used for investing
activities increased in 2008 primarily due to increased acquisition activity as
well as increased capital and software investments as we continue to invest in
our business to support our long-term growth. Cash used for investing
activities also includes a $21 million deposit into an indemnification escrow
related to the Ecovation acquisition. Our financing cash flow activities in
2008 include proceeds from new debt issued in 2008 and lower share repurchase
activity compared to last year. 2007 financing cash flow activities included
the repayment of our euro 300 million 5.375% euronotes in February 2007 as
well as significant share repurchase activity.
At December 31, 2007, the schedule of
contractual obligations included in the Financial Position and Liquidity
section of our Form 10-K for the year ended December 31, 2007
disclosed total notes payable and long-term debt due within one year of $403
million. As of June 30, 2008, the total notes payable and long-term debt
due within one year is $376 million. The decrease from year-end is due to a
reduction in short-term borrowings as share repurchase and acquisition activity
slowed down during the second quarter of 2008.
As of June 30, 2008, our gross liability for uncertain tax
positions under FIN 48 was $105 million (refer to Note 14).
30
ECOLAB
INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial
Position and Liquidity (continued)
We are not able to reasonably estimate the amount by
which the liability will increase or decrease over time; however, at this time,
we do not expect significant payments related to these obligations within the
next year. No other significant changes
to our contractual obligations occurred during the first six months of 2008.
In February 2008,
Henkel KGaA announced its intention to sell some or all of the Ecolab shares
held by Henkel. We have a stockholders agreement with Henkel which ensures an
orderly process in the event of any disposition by Henkel of our shares,
including our right of first refusal. We are currently prepared to work with
Henkel on a transaction, which may include the repurchase of some shares from
Henkel. Henkel held 72.7 million Ecolab shares at December 31, 2007.
We
currently expect to fund all of the requirements which are reasonably
foreseeable for the remainder of 2008, including scheduled debt repayments, new
investments in the business, share repurchases, dividend payments, possible
business acquisitions and pension contributions with cash from operating
activities, cash reserves and short-term or long-term borrowings. In the event
of a significant acquisition or other significant funding need, funding may
occur through additional short and/or long-term borrowing or through the
issuance of the companys stock.
New Accounting
Pronouncements
See Note 13 of the
condensed notes to consolidated financial statements.
Item 3.
Quantitative
and Qualitative Disclosures about Market Risk
We primarily use interest rate swaps, foreign currency
forward contracts and foreign currency debt to manage risks generally
associated with interest rate and foreign exchange rate volatility and net
investments in our foreign operations.
To the extent applicable, all derivative instruments are designated and
effective as hedges, in accordance with accounting principles generally
accepted in the United States of America.
We do not hold derivative financial instruments of a speculative
nature. For a more detailed discussion
of derivative instruments, refer to Note 8 of the consolidated financial
statements located as exhibit (13) to our Annual Report on Form 10-K for
the year ended December 31, 2007.
31
ECOLAB INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 4.
Controls and
Procedures
As of June 30, 2008, we carried out an evaluation, under the supervision
and with the participation of our management, including the Chairman of the
Board, President and Chief Executive Officer and the Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation,
our Chairman of the Board, President and Chief Executive Officer and the Chief
Financial Officer concluded that our disclosure controls and procedures are
effective.
During the period April 1 through June 30, 2008, there were
no changes in our internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including Managements
Discussion and Analysis of Financial Condition and Results of Operation in
Item 2, contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.
These statements include expectations concerning contributions to
pension benefit plans, the impact of new accounting pronouncements, gross
liability for unrecognized tax benefits or uncertain tax positions, effective
tax rate, borrowing capacity and favorable short-term liquidity requirements.
Without limiting the foregoing, words or phrases such as will likely result, are
expected to, will continue, is anticipated, we believe, estimate, project
(including the negative or variations thereof) or similar terminology,
generally identify forward-looking statements.
Forward-looking statements may also represent challenging goals for
us. We caution that undue reliance
should not be placed on such forward-looking statements, which speak only as of
the date made. Some of the factors which
could cause results to differ from those expressed in any forward-looking
statement are set forth under Item 1A of our Form 10-K Annual Report for
the year ended December 31, 2007, entitled Risk Factors. See also Item 1A under Part II of this Form 10-Q.
32
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
The company and certain subsidiaries are party to
various lawsuits, claims and environmental actions that have arisen in the
ordinary course of business. These include antitrust, patent infringement, wage
hour lawsuits and possible obligations to investigate and mitigate the effects
on the environment of the disposal or release of certain chemical substances at
various sites, such as Superfund sites and other operating or closed
facilities.
In accordance with SFAS 5,
Accounting
for Contingencies
(
SFAS 5
) and related guidance, the
company records liabilities where a contingent loss is probable and can be
reasonably estimated. If the reasonable estimate of a probable loss is a
range, the company records the most probable estimate of the loss or the
minimum amount when no amount within the range is a better estimate than any
other amount. The company discloses a contingent liability even if the liability
is not probable or the amount is not estimable, or both, if there is a
reasonable possibility that a material loss may have been incurred.
As
previously
disclosed,
an arbitration decision in conjunction with a settlement was rendered on September 24,
2007 concerning two California class action lawsuits involving wage hour claims
affecting former and current employees of the Division. If upheld, the company
will pay approximately $27.4 million plus post-award interest in settlement of
the cases. The company intends to continue to challenge the decision and the
settlement. The company has fully accrued for this award as of June 30,
2008.
One other
wage
hour lawsuit has been
certified for class action status. The company has completed an analysis and
established an accrual for this claim in accordance with SFAS 5. The company
believes that there is not a reasonably possible risk of material loss related
to this lawsuit.
While the final
resolution
of these
contingencies could result in expenses different than current accruals, and
therefore have an impact on the companys consolidated financial results in a
future reporting period, management believes the ultimate outcome will not have
a significant effect on the companys financial position. However, legal matters
are subject to inherent uncertainties and there exists the possibility that the
ultimate resolution of these matters could have a material adverse impact on
the companys financial position, results of operations and cash flows in the
period in which any such effect is recorded.
33
Item
1A.
Risk Factors
In our Annual Report on Form 10-K
filed with the
Securities and Exchange Commission on February 25, 2008
,
we identify
under
Item 1A important factors which
could affect our financial performance and could cause our actual results for
future periods to differ materially from our anticipated results or other
expectations, including those expressed in any forward-looking statements made
in this Form 10-Q. There has been
no material change in our risk factors subsequent to the filing of our Form 10-K. However, the risks described in our Form 10-K
are not the only risks we face.
Additional risks and uncertainties that we currently deem to be
immaterial or not currently known to us, as well as other risks reported from
time to time in our reports to the Securities and Exchange Commission, also
could cause our actual results to differ materially from our anticipated
results or other expectations.
Item
2.
Unregistered Sales of Equity
Securities and Use of Proceeds
(c) Issuer
Purchases
of Equity Securities
Period
|
|
(a)
Total
number of
shares
purchased(1)
|
|
(b)
Average
price paid
per share
|
|
(c)
Number of
shares
purchased
as part of
publicly
announced
plans or
programs(2)
|
|
(d)
Maximum
number
of shares
that
may yet be
purchased
under the
plans or
programs(2)
|
|
April 1-30,
2008
|
|
1,888
|
|
$
|
46.5305
|
|
0
|
|
4,321,562
|
|
May 1-31,
2008
|
|
26,503
|
|
$
|
45.7503
|
|
0
|
|
4,321,562
|
|
June 1-30,
2008
|
|
6,181
|
|
$
|
44.5899
|
|
0
|
|
4,321,562
|
|
Total
|
|
34,572
|
|
$
|
45.5854
|
|
0
|
|
4,321,562
|
|
(1)
Column (a) represents
34,572 shares reacquired from employees and/or directors to satisfy the cost of
stock options, or shares surrendered to satisfy minimum statutory tax
obligations under our stock incentive plans.
(2)
As announced on October 26,
2006, our Board of Directors authorized the repurchase of up to 10,000,000
shares of Common Stock, including shares to be repurchased under Rule 10b5-1. We intend to repurchase all shares under this
authorization, for which no expiration date has been established, in open
market or privately negotiated transactions, subject to market conditions.
34
Item
4.
Submission of Matters to a Vote
of Security Holders
.
Ecolabs
Annual Meeting of Stockholders was held on May 2, 2008. A report on the
results of that meeting and related information
concerning
the directors continuing in office are contained in
our Current Reports on Form 8-K dated May 2 and
June
27, 2008,
filed with the Commission on May 5 and July 3, 2008, respectively,
and are incorporated herein by reference.
Item
6.
Exhibits
(a) The
following
documents are filed as
exhibits to this report:
(15) Letter regarding unaudited interim financial
information.
(31) Rule 13a
- 14(a) Certifications.
(32) Section 1350
Certifications.
35
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
|
|
ECOLAB
INC.
|
|
|
|
|
|
|
Date:
|
August 1,
2008
|
By:
|
/s/John J. Corkrean
|
|
|
|
John
J. Corkrean
|
|
|
|
Vice
President & Corporate Controller
|
|
|
|
(duly
authorized Officer and
|
|
|
|
Chief
Accounting Officer)
|
36
EXHIBIT INDEX
Exhibit
No.
|
|
Document
|
|
Method of
Filing
|
|
|
|
|
|
(15)
|
|
Letter
regarding unaudited interim financial information.
|
|
Filed
herewith
electronically
|
|
|
|
|
|
(31)
|
|
Rule 13a
- 14(a) Certifications.
|
|
Filed
herewith electronically
|
|
|
|
|
|
(32)
|
|
Section 1350
Certifications.
|
|
Filed
herewith electronically
|
37
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