Ecolab Inc. (NYSE: ECL):
2011 THIRD QUARTER
HIGHLIGHTS:
- Reported diluted EPS $0.65
- Record adjusted EPS $0.75, +14%
excluding special gains and charges and discrete tax items,
reaching top end of forecasted range
- Record sales: reported sales +11% to
$1.7 billion; fixed currency sales +6%; adjusted for currency and
acquisitions +3%
- Strong growth by Food & Beverage
business in nearly all regions. Latin America, Canada and Asia
Pacific led robust geographic growth. These combined with excellent
performances from acquisitions to more than offset significantly
higher delivered product costs
Third Quarter Ended
September 30
(unaudited)
Reported Adjusted* Third Quarter % Third Quarter % (Millions,
except per share)
2011
2010
change
2011
2010
change
Net Sales $1,736.1 $1,561.9 11% $1,736.1 $1,561.9 11%
Operating Income 239.6 245.1 -2% 267.4 240.0 11% Net Income
Attributable to Ecolab $154.3 $174.2 -11% $177.2 $156.8 13%
Diluted Net Income Per Share $0.65 $0.74 -12% $0.75 $0.66 14%
* Non-GAAP measures are adjusted for special gains and
charges and discrete tax items
Ecolab delivered strong third quarter results as adjusted
earnings per share increased 14% over last year. These results were
driven by continued strong sales growth, led by its Food &
Beverage business in nearly every region, along with robust Latin
America, Asia Pacific and Canadian sales. This growth, coupled with
over-performance in both our newly acquired businesses and in our
efficiency programs, enabled Ecolab to overcome much higher than
expected delivered product costs.
Ecolab's reported sales rose 11% to a record $1.7 billion in the
third quarter of 2011; when measured in fixed currencies, sales
rose 6%. Adjusted for currency and acquisitions, sales rose 3%.
Reported net income attributable to shareholders declined 11% to
$154 million, representing $0.65 per share.
Third quarter 2011 and 2010 results included special gains and
charges and discrete tax items. Excluding those items, adjusted
third quarter 2011 net income attributable to shareholders rose 13%
to $177 million. Adjusted diluted earnings per share increased 14%
to $0.75, reaching the top end of Ecolab’s forecasted range. Third
quarter 2010 adjusted diluted earnings per share were $0.66.
Currency translation had a favorable effect on reported and
adjusted diluted earnings per share of $0.03 per share in the third
quarter of 2011.
Segment review
Third quarter 2011 sales for Ecolab's U.S. Cleaning &
Sanitizing operations rose 6% to $763 million. Adjusted for
acquisitions, sales increased 3%. Food & Beverage and
Healthcare led the growth, while good underlying Institutional and
Kay growth in the quarter was somewhat offset by prior year new
product and program pipeline filling and large new customer
rollouts. Ecolab's U.S. Cleaning & Sanitizing operating income
increased 6% to $158 million. Adjusted for acquisitions, U.S.
Cleaning & Sanitizing operating income was flat, reflecting
significantly higher delivered product costs.
U.S. Other Services sales increased 2% to $120 million in the
third quarter. Operating income increased 6% to $21 million as GCS
became profitable.
Sales for Ecolab's International operations, when measured at
fixed currency rates, grew 6% to $797 million in the third quarter.
Adjusted for acquisitions and divestitures, fixed currency sales
increased 4%. Fixed currency operating income increased 9% to $88
million in the third quarter. Adjusted for acquisitions and
divestitures, International fixed currency operating income
increased 8% as strong regional growth and significant benefits
from our European efficiency programs offset significantly higher
delivered product costs. When measured at public currency rates,
International sales increased 18% and operating income rose
23%.
The Corporate segment includes special gains and charges.
Special gains and charges for the third quarter 2011 of $28 million
($24 million after-tax) primarily consisted of charges from the
previously announced European restructuring as well as the
anticipated Nalco merger and integration costs. Special gains and
charges for the third quarter 2010 were a net gain of $5 million
(before and after tax). 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 our efficiency and returns.
The reported income tax rate for the third quarter 2011 was
31.8% and compared with the reported rate of 24.3% in the third
quarter 2010. The substantially lower third quarter 2010 reported
tax rate was due primarily to the favorable settlement of an IRS
appeals case in that period. Excluding the tax rate impact of
special gains and charges and discrete tax items, the adjusted
effective income tax rate in the third quarter 2011 was 30.2%
compared with 30.3% for the same period last year.
CEO comment
Commenting on the quarter, Douglas M. Baker, Jr., Ecolab’s
Chairman, President and Chief Executive Officer, said, “We
delivered very good results in a challenging environment. Most
importantly, we have set ourselves up to deliver a strong 2011 and
are continuing to build momentum leading into 2012.
“Our sales growth remained on-track and outperformed our
markets. We had excellent new business results and our strong
portfolio of new products continues to gain traction. Additionally,
all of our recent acquisitions continue to outperform our
expectations. These results, combined with our success in realizing
leverage from our cost efficiency programs and our European
restructure program in particular, allowed us to overcome
significantly higher than anticipated raw material costs.
“We are pleased with our position. We anticipate strong sales
growth momentum in the fourth quarter, with raw material
comparisons expected to ease and pricing on-track to more than
offset those costs going forward. When we combine this with the
continued strong efforts to build our businesses and the European
restructure work we have underway, we see continued strong results
in front of us.
“This perspective only gets brighter when we factor in the
benefits of our Nalco merger. We still anticipate a successful
close in the fourth quarter. We are well into the integration
planning work with Nalco to prepare for the transaction’s close and
the subsequent integration of our businesses. We have strong
integration teams working to pull the businesses together quickly
and successfully upon the transaction close, and we are preparing
to deliver a great performance in 2012. The more we have learned
about the Nalco business, the more it has increased our confidence
in the opportunities we have together and the benefits it will
bring for our customers, shareholders and associates.”
Business Outlook
2011
Ecolab narrowed its 2011 full-year forecast. Ecolab now expects
adjusted earnings per share, excluding the anticipated impact of
the Nalco merger, to be in the $2.53 to $2.55 range, up 13% to 14%
compared to 2010 adjusted earnings per share. Ecolab previously
forecast 2011 earnings per share to be in the $2.52 to $2.56
range.
Special gains and charges for 2011 are expected to approximate a
$0.45 per share net charge, primarily driven by Europe
restructuring charges and Nalco merger and integration costs.
Future amounts related to discrete tax items for 2011, if any, are
not currently quantifiable.
2011 – Fourth Quarter
Ecolab expects improved year-over-year sales growth in the
fourth quarter 2011. Gross margins are expected to increase,
reflecting the impact of pricing and efficiency initiatives as well
as the lessening impact of delivered product cost increases. The
SG&A ratio should reflect year-on-year improvement from sales
leverage which is expected to more than offset continued investment
in the business.
Our outlook for the fourth quarter 2011, which excludes the
impact of the anticipated Nalco merger, is as follows:
Adjusted Gross Margins
50% - 51%
SG&A % of Sales
35% - 36%
Interest expense, net
approx. $15 million
Effective tax rate
30% - 31%
Adjusted EPS, excluding special gains and
charges
$0.69 - $0.71
We expect fourth quarter 2011 special gains and charges,
including restructuring charges, to be a net charge of
approximately $0.20 per share, nearly all of which will be merger
and integration charges related to the Nalco transaction.
Reported fourth quarter 2010 earnings per share of $0.56
included special gains and charges and discrete tax items.
Excluding these items, fourth quarter 2010 adjusted diluted
earnings per share were $0.60.
Nalco merger update
Ecolab continues to expect to close on the Nalco merger in the
fourth quarter 2011. Ecolab established a record date of October
11, 2011 for the special meeting of stockholders to approve the
issuance of Ecolab common stock in the merger. In addition, Ecolab
now has credit facilities in place to fund the cash portion of the
merger consideration and retire Nalco bank debt.
Ecolab and Nalco have submitted notifications with competition
authorities in the U.S., European Union, Australia, Canada, China,
Colombia, Mexico, Russia, South Korea and Turkey. We have received
clearances without imposed conditions from the U.S., Australia,
Canada, Mexico, Russia, South Korea and Turkey. We continue to
expect to obtain all required regulatory clearances to enable us to
close the transaction in the fourth quarter.
With sales of $6 billion and more than 26,000 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 third quarter
earnings announcement and earnings guidance today at 1:00 p.m.
Eastern Time. The webcast, along with related presentation slides,
will be available to the public on Ecolab's website at
www.ecolab.com/investor. A replay of the webcast and related
materials will be available at that site.
Listening to the webcast requires Internet access, the Windows
Media Player or other compatible streaming media player.
Cautionary Statements Regarding Forward-Looking
Information
This communication contains certain statements relating to
future events and our intentions, beliefs, expectations and
predictions for the future which are forward-looking statements as
that term is defined in the Private Securities Litigation Reform
Act of 1995. Words or phrases such as "will likely result," "are
expected to," "will continue," "is anticipated," "we believe," "we
expect," "estimate," "project," "may," "will," "intend," "plan,"
"believe," "target," "forecast" (including the negative or
variations thereof) or similar terminology used in connection with
any discussion of future plans, actions or events generally
identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements regarding
sales momentum; operating efficiency; growth; investments; new
product pipeline and technology; raw material and delivered product
costs; forecasted 2011 fourth quarter and full year business
results, including estimated sales growth, pricing, efficiency
gains, adjusted gross margins, selling, general and administrative
expense, sales leverage, investments, interest expense, effective
tax rate, special gains and charges, including restructuring
charges and Nalco merger and integration costs, and adjusted
diluted earnings per share; the benefits of the Nalco merger,
integration plans, regulatory clearances and the expected timing of
completion of the merger. These statements are based on the current
expectations of management of Ecolab and Nalco, as applicable.
There are a number of risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements included in this communication. These risks and
uncertainties include (i) the risk that the stockholders of
Nalco may not adopt the merger agreement, (ii) the risk that
the stockholders of Ecolab may not approve the issuance of Ecolab
common stock to Nalco stockholders in the merger, (iii) the
risk that the companies may be unable to obtain regulatory
approvals required for the merger, or that required regulatory
approvals may delay the merger or result in the imposition of
conditions that could have a material adverse effect on the
combined company or cause the companies to abandon the merger,
(iv) the risk that the conditions to the closing of the merger
may not be satisfied, (v) the risk that a material adverse
change, event or occurrence may affect Ecolab or Nalco prior to the
closing of the merger and may delay the merger or cause the
companies to abandon the merger, (vi) the risk that an
unsolicited offer by another company to acquire shares or assets of
Ecolab or Nalco could interfere with or prevent the merger,
(vii) problems that may arise in successfully integrating the
businesses of the companies, which may result in the combined
company not operating as effectively and efficiently as expected,
(viii) the possibility that the merger may involve unexpected
costs, unexpected liabilities or unexpected delays, (ix) the
risk that the credit ratings of the combined company or its
subsidiaries may be different from what the companies currently
expect, (x) the risk that the businesses of the companies may
suffer as a result of uncertainty surrounding the merger and
(xi) the risk that disruptions from the transaction will harm
relationships with customers, employees and suppliers.
Other unknown or unpredictable factors could also have material
adverse effects on future results, performance or achievements of
Ecolab, Nalco and the combined company. For a further discussion of
these and other risks and uncertainties applicable to the
respective businesses of Ecolab and Nalco, see the Annual Reports
on Form 10-K of Ecolab and Nalco for the fiscal year ended
December 31, 2010 and the companies' other public filings with
the Securities and Exchange Commission (the “SEC”). These risks, as
well as other risks associated with the merger, are more fully
discussed in the joint proxy statement/prospectus included in the
Registration Statement on Form S-4 that Ecolab filed with the
SEC on August 31, 2011 in connection with the merger. In light of
these risks, uncertainties, assumptions and factors, the
forward-looking events discussed in this communication may not
occur. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
communication. Neither Ecolab nor Nalco undertakes, and each of
them expressly disclaims, any duty to update any forward-looking
statement whether as a result of new information, future events or
changes in their respective expectations, except as required by
law.
Additional Information and Where to Find it
Ecolab filed with the SEC on August 31, 2011 a registration
statement on Form S-4 (commission file number 333-176601), as
subsequently amended, that includes a joint proxy statement of
Ecolab and Nalco and that also constitutes a prospectus of Ecolab
relating to the proposed transaction. WE URGE INVESTORS AND
SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS BECAUSE THEY
CONTAIN IMPORTANT INFORMATION about Ecolab, Nalco and the proposed
merger. Investors and security holders may obtain these materials
and other documents filed with the SEC free of charge at the SEC's
website, www.sec.gov. In addition, copies of the registration
statement and joint proxy statement/prospectus may be obtained free
of charge by accessing Ecolab's website at www.ecolab.com by
clicking on the "Investor" link and then clicking on the "SEC
Filings" link or by writing Ecolab at 370 Wabasha
Street North, Saint Paul, Minnesota, 55102,
Attention: Corporate Secretary or by accessing Nalco's website
at www.nalco.com by clicking on the "Investors" link and then
clicking on the "SEC Filings" link or by writing Nalco at
1601 West Diehl Road, Naperville, Illinois 60563,
Attention: Corporate Secretary, and security holders may also read
and copy any reports, statements and other information filed by
Ecolab or Nalco with the SEC, at the SEC public reference room at
100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 or visit the SEC's website for further information
on its public reference room.
Participants in the Merger Solicitation
Ecolab, Nalco and certain of their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Ecolab's
directors and executive officers is available in its proxy
statement filed with the SEC by Ecolab on March 18, 2011 in
connection with its 2011 annual meeting of stockholders, and
information regarding Nalco's directors and executive officers is
available in its proxy statement filed with the SEC by Nalco on
March 14, 2011 in connection with its 2011 annual meeting of
stockholders. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, is contained in the
registration statement and joint proxy statement/prospectus and
other relevant materials filed by Ecolab and Nalco with the
SEC.
Non-Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such
jurisdiction.
Non-GAAP Financial Information
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 operating income, adjusted
effective tax rate, adjusted net income attributable to
shareholders 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 operating income, adjusted
net income attributable to shareholders and 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.
(ECL-E)
ECOLAB INC. CONSOLIDATED STATEMENT OF INCOME THIRD
QUARTER & NINE MONTHS ENDED SEPTEMBER 30, 2011 (unaudited)
Third Quarter Ended Nine
Months Ended September 30 % September 30 % (millions, except per
share)
2011 2010
Change 2011 2010
Change Net sales
$ 1,736.1 $
1,561.9 11 %
$ 4,953.2 $ 4,514.2 10 % Cost of
sales (1)
877.9 763.4 15 %
2,509.1 2,230.1 13 %
Selling, general and administrative expenses
595.3 558.5 7 %
1,786.5 1,681.9 6 % Special (gains) and charges (1)
23.3 (5.1 )
68.0 (1.0 )
Operating income
239.6 245.1 -2 %
589.6 603.2 -2 %
Interest expense, net
13.2 14.9
-11 %
39.8 44.9 -11 % Income
before income taxes
226.4 230.2 -2 %
549.8 558.3 -2 %
Provision for income taxes
71.9 55.9
29 %
175.3 158.8 10 % Net
income including noncontrolling interest
154.5 174.3 -11 %
374.5 399.5 -6 %
Less: Net income attributable to
noncontrolling interest
0.2 0.1
0.7 0.5
Net income attributable to Ecolab
$
154.3 $ 174.2 -11 %
$ 373.8 $ 399.0
-6 % Earnings attributable to Ecolab per common share
Basic
$ 0.67 $ 0.75 -11 %
$ 1.61 $ 1.71
-6 % Diluted
$ 0.65 $ 0.74 -12 %
$ 1.58
$ 1.68 -6 % Weighted-average common shares outstanding Basic
231.9 232.8 0 %
231.8 233.8 -1 % Diluted
236.1
237.0 0 %
236.2 238.0 -1 % (1) Amounts include
the following special gains and charges: Third Quarter Ended Nine
Months Ended September 30 September 30 (millions)
2011 2010
2011 2010 Cost of sales Restructuring
$
4.5 $ - $ 5.3 $
- Subtotal cost of sales
4.5 -
5.3 -
Special (gains) and charges Restructuring
12.6 -
52.8 - Business structure and optimization
0.3 0.6
1.2 1.8 Cleantec acquisition integration charges
0.1
-
3.7 - Nalco merger and integration costs
10.3 -
10.3 - Gain on sale of investment
- (5.9 )
-
(5.9 ) Venezuela currency devaluation
- -
- 4.2
Business write-downs and closures
- (0.4 )
- (1.4 )
Other items
- 0.6
-
0.3 Subtotal special (gains) and charges
23.3
(5.1 )
68.0 (1.0 ) Total special
(gains) and charges
$ 27.8 $ (5.1 )
$
73.3 $ (1.0 )
ECOLAB INC. OPERATING SEGMENT
INFORMATION THIRD QUARTER & NINE MONTHS ENDED SEPTEMBER
30, 2011 (unaudited)
Third Quarter Ended Nine Months Ended September 30 %
September 30
% (millions)
2011 2010 Change
2011 2010 Change
Net Sales United States Cleaning & Sanitizing
$
763.1 $ 718.9 6 %
$ 2,197.0 $ 2,040.5 8 %
Other Services
119.6 117.6 2 %
343.3 337.2 2 % Total
882.7 836.5 6 %
2,540.3 2,377.7 7 % International
797.0 753.4 6 %
2,294.3 2,163.0 6 % Subtotal at fixed
currency rates
1,679.7 1,589.9 6 %
4,834.6 4,540.7 6
% Effect of foreign currency translation
56.4
(28.0 )
118.6 (26.5 )
Consolidated
$ 1,736.1 $ 1,561.9 11 %
$ 4,953.2 $ 4,514.2 10 %
Operating Income United States Cleaning & Sanitizing
$
157.7 $ 148.6 6 %
$ 412.6 $ 400.6 3 % Other
Services
20.9 19.7 6 %
51.5 52.9 -3 % Total
178.6 168.3
6 %
464.1 453.5 2 % International
88.1 80.5 9 %
204.2 177.2 15 % Corporate
(33.4 )
0.4
(89.7 ) (18.4 )
Subtotal at fixed currency rates
233.3 249.2 -6 %
578.6 612.3 -6 % Effect of foreign currency translation
6.3 (4.1 )
11.0
(9.1 ) Consolidated
$ 239.6 $ 245.1
-2 %
$ 589.6 $ 603.2 -2 %
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)
September 30 December 31 September
30 (millions)
2011 2010 2010
Assets Current
assets Cash and cash equivalents
$ 207.3 $ 242.3 $
168.4 Accounts receivable, net
1,143.1 999.6 1,019.8
Inventories
504.9 447.6 456.5 Deferred income taxes
86.5 78.9 78.6 Other current assets
149.2
101.5 131.2 Total current assets
2,091.0 1,869.9 1,854.5 Property, plant and
equipment, net
1,218.2 1,148.3 1,137.3 Goodwill
1,504.0 1,329.3 1,313.8 Other intangible assets, net
418.8 282.5 291.2 Other assets
273.6
242.2 264.7 Total assets
$ 5,505.6 $ 4,872.2 $ 4,861.5
Liabilities and Equity Current liabilities Short-term
debt
$ 336.8 $ 189.2 $ 343.6 Accounts payable
413.4 349.3 346.9 Compensation and benefits
300.0
308.1 267.7 Income taxes
36.5 36.7 25.0 Other current
liabilities
531.0 441.5
455.4 Total current liabilities
1,617.7 1,324.8
1,438.6 Long-term debt
700.2 656.4 647.3
Postretirement health care and pension benefits
494.8 565.8
577.5 Other liabilities
222.0 192.2 230.3 Equity
Common stock
335.1 333.1 332.5 Additional paid-in capital
1,404.8 1,310.2 1,281.3 Retained earnings
3,531.2
3,279.1 3,188.4 Accumulated other comprehensive loss
(160.7
) (271.9 ) (320.2 ) Treasury stock
(2,643.4
) (2,521.3 ) (2,517.8 ) Total Ecolab
shareholders' equity
2,467.0 2,129.2 1,964.2 Noncontrolling
interest
3.9 3.8 3.6
Total equity
2,470.9 2,133.0 1,967.8 Total
liabilities and equity
$ 5,505.6 $ 4,872.2
$ 4,861.5
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.
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
Second Six Third Nine Quarter
Quarter Months Quarter Months
Ended Ended Ended Ended Ended
Mar. 31 June 30 June 30 Sept. 30
Sept. 30 2011 2011 2011 2011
2011
Diluted earnings per share, as reported
(U.S. GAAP)
$ 0.40 $ 0.53 $ 0.93 $ 0.65 $ 1.58 Adjustments: Special
(gains) and charges (3) 0.05 0.11 0.16 0.10 0.26 Tax expense
(benefits) (4) 0.00 (0.01 ) (0.00 ) (0.00 ) (0.01 ) Adjusted
diluted earnings per share
(Non-GAAP) $ 0.45 $ 0.64 $ 1.09 $ 0.75
$ 1.84
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.
(2) First quarter 2010 tax benefits
include discrete tax benefits related to a 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.
(3) Special gains and charges for 2011
include restructuring charges of $9.0 million, $25.2 million and
$14.8 million, net of tax in the first, second and third quarters,
respectively. Special gains and charges for the third quarter of
2011 include $8.5 million, net of tax, for Nalco merger and
integration costs. Special gains and charges for 2011 also include
Cleantec acquisition and integration costs of $2.9 million, net of
tax, recorded in the first quarter, as well as other items, net of
tax.
(4) First quarter 2011 discrete tax
expense primarily includes the impact of a change in our blended
U.S. state tax rate, partially offset by a discrete tax benefit
related to a state refund claim. Second quarter 2011 discrete tax
benefits primarily include discrete tax impacts of recognizing
settlements and adjustments related to prior year tax returns.
Third quarter 2011 discrete tax benefits of $0.8 million primarily
relate to net benefits from filing our 2010 U.S. federal and other
International income tax returns and settlements and adjustments
related to prior year tax returns.
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