Ecolab Reports 11% Third Quarter EPS Increase to $0.40.ST. PAUL St. Paul as a missionary he fearlessly confronts the “perils of waters, of robbers, in the city, in the wilderness.” [N.T.: II Cor. 11:26] See : Bravery , Minn. -- Ecolab Ecolab, Inc., is a St. Paul, Minnesota based sanitation supply company founded in 1923. It was named "Economics Laboratory" before its name was changed to Ecolab in 1986. Inc. (NYSE NYSE See: New York Stock Exchange :ECL (Emitter-Coupled Logic) A digital circuit composed of bipolar transistors in which the emitter ends are wired together. ECL gates switch faster than TTL gates, but consume more power. See TTL, I2L and bipolar. 1. ): 2005 THIRD QUARTER HIGHLIGHTS: --Diluted net income per share +11% to a record $0.40 --Sales +7% to a record $1.2 billion --Continued strong North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and Asia Pacific businesses lead sales growth --U.S. Other Services continues solid sales gains and strong profit improvement --Full year outlook calls for 12%-13% EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. growth
Third Quarter and Nine Months Ended Sept. 30
------------------------------------------------------
Third Quarter % Nine Months %
----------------- -----------------
2005 2004 increase 2005 2004 increase
-------- -------- -------- -------- -------- --------
(Millions, (unaudited) (unaudited)
except per
share)
Net Sales $1164.8 $1090.3 7% $3393.3 $3112.4 9%
Operating Income 171.6 158.9 8% 444.3 411.0 8%
Pretax Income 160.0 147.4 9% 409.4 377.0 9%
Taxes 56.3 52.4 7% 144.5 137.7 5%
-------- -------- -------- -------- -------- --------
Net Income $103.7 $94.9 9% $265.0 $239.2 11%
======== ======== ======== ======== ======== ========
Diluted Net
Income Per
Common Share $0.40 $0.36 11% $1.02 $0.92 11%
Diluted Average
Shares
Outstanding 259.1 262.3 -1% 259.4 261.2 -1%
Healthy sales trends in its North America, Asia Pacific and Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of businesses, and continued sharp profit improvement in U.S. Other Services, led Ecolab's third quarter results to record levels for the period ended September September: see month. 30, 2005. Ecolab's consolidated sales increased 7% to a record $1.2 billion in 2005's third quarter. Net income increased 9% to a record $104 million, or $0.40 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Currency translation had a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact on net income growth of approximately $1.6 million for the third quarter of 2005. Commenting on the quarter, Douglas Douglas, city, Isle of Man Douglas, city (1991 pop. 19,950), capital of the Isle of Man, Great Britain. It is a popular resort, connected by rail to Ramsey and Port Erin, on the Irish Sea. Tourism is the chief industry. M. Baker, Ecolab's President and Chief Executive Officer said, "We continued to see solid sales growth in our North America, Latin America and Asia Pacific operations in the third quarter, while Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). saw modest but improving
gains. We achieved good growth in our core hospitality and foodservice The foodservice (or food service) industry (US English; catering industry in British English) encompasses those places, institutions, and companies responsible for any meal eaten away from home. markets as a result of our investments in new products and an increased
sales and service force. We are also realizing improving returns from
our newer strategic growth businesses. In addition, we continued to
aggressively implement pricing and cost reduction actions to address the
higher raw material cost environment. We performed well in our key
areas, and we are pleased with our results."
"Our outlook for 2005 remains strong and we look for 12%-13% earnings growth for the full year. While the impact of the hurricanes has had only a minor impact on our sales, they have added to the existing headwind head·wind or head wind n. A wind blowing directly against the course of an aircraft or ship. headwind Noun a wind blowing directly against the course of an aircraft or ship we face on our costs. As a result, we are increasing our actions to offset them over time. We are taking effective actions to address the year's challenges, developing new business opportunities, and at the same time continuing to make the right investments for our future which we believe will sustain consistent double-digit EPS growth for the years to come. We remain dedicated in our efforts to build on and improve the performance that made us the global leader, and to sustain our growth, superior shareholder returns and expanded industry leadership in 2005 and the years ahead." Third quarter sales for Ecolab's United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Cleaning & Sanitizing operations rose 7% over the third quarter of 2004 to $510 million, led by Institutional, Food & Beverage and Kay KAY Kick Ass Year KAY Kansas Association of Youth . Excluding acquisitions, sales rose 6% for the quarter. Ecolab's United States Cleaning & Sanitizing operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. rose 6% to $91 million, as the benefits of the higher sales, cost efficiencies, increased pricing and favorable general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. were slightly offset by higher delivered product costs. United States Other Services sales increased 10% to $98 million in the third quarter with good sales gains by both Pest Elimination and GCS GCS Glasgow Coma Scale GCS Guilford County Schools (North Carolina) GCS Ground Control Station GCS Grand Central Station GCS Ground Control System GCS Ground Combat Systems GCS Group Communication Systems . Operating income in the third quarter of 2005 increased 81% to $12 million as GCS continues to show sharp profitability improvement. Sales of Ecolab's International operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , when measured at fixed currency rates, rose 5% to $574 million in the third quarter. Excluding acquisitions, sales rose 4%. Latin America sales showed double-digit sales gains, and Asia Pacific and Canada sales also showed good increases; Europe recorded a modest sales gain as weak economies in major central countries slowed results. Fixed currency operating income declined 2% to $70 million, as sales growth and pricing initiatives were more than offset by higher delivered product costs and less favorable business mix. At public currency rates, International sales increased 6% and operating income grew 2%. Business Outlook Certain information presented in this new release, including the following statements, are forward-looking and based on current expectations. Actual results may differ materially. These statements do not include the potential impact of business acquisitions, divestitures, higher than anticipated raw material price increases or other material corporate events, which may be completed after the date of this release. This Business Outlook section should be read in conjunction with the information on "Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " at the end of this release. Ecolab expects sales for both domestic and international operations (in fixed currencies) to increase in the fourth quarter 2005 over the fourth quarter 2004. Gross margins are expected to be in the 50%-51% range compared with 50.3% last year. Selling, general and administrative expenses are expected to approximate 38% compared with 38.9% a year ago. Interest expense is expected to be approximately $11 million. The effective tax rate should be approximately 36%. Overall, currency translation is expected to negatively impact fourth quarter earnings. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of are expected to be in the $0.31-$0.33 range in the fourth quarter of 2005. For the full year ending December 31, 2005, Ecolab expects diluted earnings per share in the $1.33 -$1.35 range. In 2004, Ecolab reported net income per share of $1.19. Ecolab plans to adopt SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123(R), the new standard for expensing stock options no later than the beginning of 2006, as required. The above forecasts for the fourth quarter and full year 2005 do not include any impact from this accounting rule change. As part of the transition to the new standard, Ecolab expects to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state its earnings history in line with the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma amounts historically disclosed in Ecolab's financial statements. Ecolab expects to present these restated GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). results on Ecolab's website at www.ecolab.com/investor. In addition, Ecolab continues to evaluate the reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. of foreign earnings in the United States pursuant to the provisions of the American Jobs Creation Act of 2004. This Act provides the company the opportunity to tax efficiently repatriate repatriate To bring home assets that are currently held in a foreign country. Domestic corporations are frequently taxed on the profits that they repatriate, a factor inducing the firms to leave overseas the profits earned there. foreign earnings for U.S. qualifying investments specified in a domestic reinvestment plan reinvestment plan See dividend reinvestment plan (DRIP). . Any tax charges resulting from a possible repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. are not considered in the above forecasts. With 2004 sales of $4.2 billion, Ecolab is the leading global developer and marketer of premium cleaning, sanitizing, pest elimination, maintenance and repair products and services for the hospitality, foodservice, institutional and industrial markets. Ecolab shares are traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol ECL. Ecolab news releases and other investor information are available on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http://www.ecolab.com. Ecolab will host a live webcast to review the third quarter earnings announcement today at 1:00 p.m. Eastern Time. The webcast will be available to the public on Ecolab's website at http://www.ecolab.com/investor. A replay of the webcast will be available at that site through November 4, 2005. Listening to the webcast requires Internet access See how to access the Internet. , a soundcard and the Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. or other compatible streaming media player See digital media hub. . If you do not have the Media Player client installed on your PC, you may download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. a free version of Media Player at http://www.microsoft.com/windows/windowsmedia/download/default.asp. This news release contains various "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These include statements concerning our 2005 fourth quarter and full year financial and business prospects, including estimated sales, gross margins, selling, general and administrative expenses, interest expense, effective tax rates, currency translation, earnings per share and future pricing, cost reductions and accounting for stock options. These statements, which represent Ecolab's expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such Forward-Looking Statements. Risks and uncertainties that may affect operating results and business performance include: --the vitality vi·tal·i·ty n. 1. The capacity to live, grow, or develop. 2. Physical or intellectual vigor; energy. of the foodservice, hospitality, travel, health care and food processing Food processing is the set of methods and techniques used to transform raw ingredients into food for consumption by humans or animals. The food processing industry utilises these processes. industries --restraints on pricing flexibility due to competitive factors, customer or vendor consolidations, and existing contractual obligations; --changes in oil or raw material prices or unavailability un·a·vail·a·ble adj. Not available, accessible, or at hand. un  a·vail of
adequate and reasonably priced raw materials or substitutes therefor there·for adv. For that: ordering goods and enclosing payment therefor. Adv. 1. therefor ; --the occurrence of capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. or the loss of a key supplier or the inability to obtain or renew supply agreements on favorable terms; --the effect of future acquisitions or divestitures or other corporate transactions; --our ability to achieve plans for past acquisitions; --the costs and effects of complying with: (i) laws and regulations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the environment and to the manufacture, storage, distribution, efficacy and labeling of our products, and (ii) changes in tax, fiscal, governmental and other regulatory policies; --economic factors such as the worldwide economy, interest rates and currency movements including, in particular, our exposure to foreign currency risk; --the occurrence of (a) litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. or claims, (b) the loss or insolvency insolvency Condition in which liabilities exceed assets so that creditors cannot be paid. It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet of a major customer or distributor, (c) war (including acts of terrorism or hostilities which impact our markets), (d) natural or manmade disasters, or (e) severe weather conditions or public health epidemics This article is a list of major epidemics. Worldwide Pandemics
--loss of, or changes in, executive management; --our ability to continue product introductions or reformulations and technological innovations; and --other uncertainties or risks reported from time to time in our reports to the Securities and Exchange Commission. In addition, we note that our stock price can be affected by fluctuations in quarterly earnings. There can be no assurances that our earnings levels will meet investors' expectations. We undertake no duty to update our Forward-Looking Statements.
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2005
(unaudited)
Third Quarter Nine Months
------------------------ -----------------------
(thousands, except
per share) 2005 2004 2005 2004
------------ ----------- ----------- -----------
Net Sales $1,164,773 $1,090,316 $3,393,317 $3,112,398
Cost of Sales (a) 572,406 519,669 1,669,621 1,498,372
Selling, General and
Administrative
Expenses 420,791 410,360 1,279,372 1,198,180
Special Charges (b) - 1,345 - 4,896
------------ ----------- ----------- -----------
Operating Income 171,576 158,942 444,324 410,950
Interest Expense, Net 11,529 11,566 34,903 33,956
------------ ----------- ----------- -----------
Income before Income
Taxes 160,047 147,376 409,421 376,994
Provision for Income
Taxes 56,305 52,429 144,454 137,748
------------ ----------- ----------- -----------
Net Income $103,742 $94,947 $264,967 $239,246
============ =========== =========== ===========
Diluted Net Income
per Common Share $0.40 $0.36 $1.02 $0.92
Weighted-Average
Common
Shares
Outstanding
Basic 255,817 258,368 255,854 257,509
Diluted 259,086 262,252 259,410 261,240
(a) Cost of sales includes income from reductions in restructuring
accruals of $66 for the nine months ended September 30, 2004.
(b) Special charges include a revision of prior restructuring expenses
of $255 and $684 for the third quarter and nine months ended September
30, 2004, respectively. Special charges for the third quarter and
nine months ended September 30, 2004 also include a charge of $1,600
for in-process research and development recorded as part of the
acquisition of Alcide Corp. Special charges for the nine months ended
September 30, 2004 also include a charge of $3,980 related to the
disposal of a product line.
ECOLAB INC.
OPERATING SEGMENT INFORMATION
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2005
(unaudited)
Third Quarter Nine Months
----------------------- -----------------------
(thousands) 2005 2004 2005 2004
----------- ----------- ----------- -----------
Net Sales
United States
Cleaning &
Sanitizing $510,476 $478,464 $1,474,463 $1,359,823
Other
Services 98,315 89,157 280,453 252,807
----------- ----------- ----------- -----------
Total 608,791 567,621 1,754,916 1,612,630
International 573,981 547,871 1,639,134 1,566,678
Effect of
Foreign
Currency
Translation (17,999) (25,176) (733) (66,910)
----------- ----------- ----------- -----------
Consolidated $1,164,773 $1,090,316 $3,393,317 $3,112,398
=========== =========== =========== ===========
Operating Income
United States
Cleaning &
Sanitizing $91,206 $86,443 $245,002 $239,030
Other
Services 12,142 6,697 31,808 20,018
----------- ----------- ----------- -----------
Total 103,348 93,140 276,810 259,048
International 69,582 70,966 166,494 165,138
Corporate
Expense (a) - (1,345) - (4,830)
Effect of
Foreign
Currency
Translation (1,354) (3,819) 1,020 (8,406)
----------- ----------- ----------- -----------
Consolidated $171,576 $158,942 $444,324 $410,950
=========== =========== =========== ===========
(a) Consistent with the company's internal management reporting,
corporate expense includes income from reductions in restructuring
accruals of $255 and $750 for the third quarter and nine months ended
September 30, 2004, respectively. Corporate expense for the third
quarter and nine months ended September 30, 2004 also includes a
charge of $1,600 for in-process research and development recorded as
part of the acquisition of Alcide Corp. Corporate expense for the nine
months ended September 30, 2004 also includes a charge of $3,980
related to the disposal of a grease management product line.
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
September 30 December 31 September 30
(thousands) 2005 2004 2004
------------- ------------ -------------
(unaudited) (unaudited)
Assets
Current assets
Cash and cash
equivalents $165,308 $71,231 $72,097
Accounts receivable, net 801,981 738,266 739,057
Inventories 337,518 338,603 325,951
Deferred income taxes 73,844 76,038 75,984
Other current assets 68,914 54,928 53,456
------------- ------------ -------------
Total current assets 1,447,565 1,279,066 1,266,545
Property, plant and
equipment, net 837,850 834,730 783,210
Goodwill, net 964,888 991,811 934,671
Other intangible assets, net 213,635 229,095 221,875
Other assets, net 364,644 381,472 343,111
------------- ------------ -------------
Total assets $3,828,582 $3,716,174 $3,549,412
============= ============ =============
Liabilities and Shareholders'
Equity
Current liabilities
Short-term debt $169,529 $56,132 $83,312
Accounts payable 264,196 269,561 251,921
Compensation and
benefits 199,108 231,856 214,342
Income taxes 49,955 22,709 68,043
Other current
liabilities 383,264 359,289 350,370
------------- ------------ -------------
Total current
liabilities 1,066,052 939,547 967,988
Long-term debt 539,019 645,445 611,378
Postretirement health care
and pension benefits 291,343 270,930 254,199
Other liabilities 287,838 297,733 245,321
Shareholders' equity 1,644,330 1,562,519 1,470,526
------------- ------------ -------------
Total liabilities and
shareholders' equity $3,828,582 $3,716,174 $3,549,412
============= ============ =============
ECOLAB INC.
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
(unaudited)
Six Nine
Quarter Quarter Months Quarter Months Quarter Year
Ended Ended Ended Ended Ended Ended Ended
March 31 June 30 June 30 Sept. 30 Sept. 30 Dec. 31 Dec. 31
2004 2004 2004 2004 2004 2004 2004
-------- --------------- ----------------- ---------------
Pro forma
income
from
ongoing
operations $0.26 $0.30 $0.56 $0.36 $0.92 $0.27 $1.19
Pro forma
adjust-
ments:
Special
charges (0.01) - (0.01) - (0.01) - (0.01)
-------- ------- ------- -------- -------- ------- -------
Net income,
as
reported $0.25 $0.30 $0.55 $0.36 $0.92 $0.27 $1.19
======== ======= ======= ======== ======== ======= =======
Six Nine
Quarter Quarter Months Quarter Months
Ended Ended Ended Ended Ended
March 31 June 30 June 30 Sept. 30 Sept. 30
2005 2005 2005 2005 2005
-------- --------------- -----------------
Pro forma
income
from
ongoing
operations $0.29 $0.33 $0.62 $0.40 $1.02
Pro forma
adjust-
ments:
Special
charges - - - - -
-------- ------- ------- -------- --------
Net income,
as
reported $0.29 $0.33 $0.62 $0.40 $1.02
======== ======= ======= ======== ========
Per share amounts do not necessarily sum due to changes in shares
outstanding and rounding.
The non-GAAP financial measures in the tables above are provided to
assist in the reader's understanding of the comparability of the
company's operations for 2005 and 2004. The company believes that pro
forma income from ongoing operations, a non-GAAP financial measure, is
a useful basis to compare the company's results against, because
unusual items during 2004 impacted the company's reported net income
(see "pro forma adjustments" in table above). The presentation above
reconciles as reported net income (U.S. GAAP amounts) to pro forma
income from ongoing operations for the quarters and interim
year-to-date periods ended March 31, June 30 and September 30, 2005
and for the quarters and interim year-to-date periods ended March 31,
June 30, September 30 and December 31, 2004. The information was
originally presented in the company's quarterly earning releases.
Special charges for 2004 includes reductions to prior restructuring
expenses, losses related to the sale of a product line, a charge for
in-process research and development and a favorable tax benefit
related to prior periods. The pro forma information should not be
construed as an alternative to reported results under U.S. GAAP.
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