Ecolab Reports Double-Digit First Quarter EPS Increase to $0.30; Diluted EPS Increases 11% Over $0.27 Earned in Year-Ago Period; Raises 2006 EPS Forecast to $1.40-$1.43.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. (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. ): 2006 FIRST QUARTER HIGHLIGHTS: --Record net income, +12% --Record sales, +8% at fixed management rates; unfavorable currency impact yields 5% gain to $1.1 billion --Continued strong U.S., 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 --Increased full year 2006 earnings forecast range to $1.40-$1.43 from prior range of $1.38-$1.42 per share
First Quarter Ended March 31
----------------------------
(Millions, except per share)
2006 2005 % Increase
---- ---- ----------
(unaudited)
Net Sales $1,120.1 $1,069.9 5%
Operating Income 131.5 118.0 11%
Pretax Income 121.1 106.8 13%
Taxes 43.2 37.4 16%
---------- ---------- ----------
Net Income $77.9 $69.4 12%
========== ========== ==========
Diluted Net Income Per Common Share $0.30 $0.27 11%
Diluted Average Shares Outstanding 258.1 260.6 -1%
Note: Results for both 2005 and 2006 reflect Ecolab's adoption of SFAS
123 (R), which requires the expensing of stock options, and Ecolab's
restatement of prior period results as part of its transition to this
new accounting standard.
Continued strong sales trends in its U.S., 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 and Asia Pacific businesses led Ecolab's first quarter results to record levels for the period ended March 31, 2006. Ecolab's consolidated sales increased 5% to a record $1.1 billion in the first quarter. Foreign currency translation had an unfavorable impact on sales; when measured in fixed currency rates, sales rose 8%. Net income increased 12% to a record $78 million, or $0.30 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 an unfavorable impact on net income of approximately $1 million. All financial results presented in this release include the impact of expensing stock options. Ecolab adopted 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 accounting standard for expensing stock options, in the fourth quarter of 2005. As part of the transition to the new standard, Ecolab restated its earnings per share 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 the notes to Ecolab's financial statements. These restated results were included in Ecolab's 2005 annual report and are available at Ecolab's website at www.ecolab.com/investor. 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, Jr., Ecolab's President and Chief Executive Officer said, "Growth continued to be strong in our U.S., Latin America and Asia Pacific businesses. Customer account gains, new products and increased solutions for our customers drove the growth. These strong fundamentals, along with improved pricing and cost savings, more than offset higher raw material costs and fueled the margin improvement and strong earnings. We are pleased by the solid start to the year. "Our prospects for 2006 remain attractive, and we raised our forecast for full year 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 to $1.40 to $1.43. Our end markets are in good shape and our capacity to drive business within them is stronger than ever; in addition, changes in the competitive landscape offer opportunities for us to further serve our industry. We continue to be aggressive in the marketplace, and remain focused on delivering the strongest product and service solutions available to our existing and new customers. We believe 2006 will once again show why Ecolab remains the industry leader and a superior growth company." First 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 10% over the first quarter of 2005 to $513 million, led by Institutional, Kay KAY Kick Ass Year KAY Kansas Association of Youth and Food & Beverage. 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. increased 11% to $80 million, as the benefits of the higher sales to existing and new accounts, cost efficiencies and increased pricing offset higher delivered product costs. United States Other Services sales increased 9% to $93 million in the first quarter reflecting double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. gains by Pest Elimination and modest growth by 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 first quarter of 2006 increased 6% to $8 million as continued strong growth at Pest Elimination and improvement at GCS were offset by GCS systems investments and the annualization against a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. Pest Elimination legal settlement last year. 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 $510 million in the first quarter. Latin America sales again enjoyed double-digit sales gains, and Asia Pacific and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of reported good sales growth; 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). recorded a
moderate sales gain. Fixed currency operating income rose 18% to $43
million as sales growth, pricing initiatives and cost efficiencies more
than offset higher delivered product costs. At public currency rates,
International sales decreased 1% and operating income grew 13%.
The tax rate for the first quarter was 35.7% in 2006 and 35.0% in 2005. Last year's first quarter tax rate included the benefits of one-time items. Excluding those one-time items, the tax rate was 36.1% in the first quarter 2005. Ecolab reacquired 2.0 million shares of its common stock during the first quarter. Business Outlook Certain information presented in this news 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 second quarter 2006 over the second quarter 2005. Gross margins are expected to approximate 51%, and selling, general and administrative expenses are expected to be in the range of 38%-39%. Interest expense is expected to be approximately $10 million. The effective tax rate should be approximately 36%. Overall, currency translation is expected to reduce second quarter earnings. Diluted earnings per share are expected to be in the $0.34-$0.36 range in the second quarter of 2006. Diluted net income per share was $0.31 for the second quarter of 2005. For the full year ending December 31, 2006, Ecolab raised its forecast range for diluted earnings per share to $1.40 to $1.43 from the prior $1.38-$1.42 range. In 2005, Ecolab reported diluted net income per share of $1.23. With 2005 sales of $4.5 billion, Ecolab is the leading global developer and marketer of premium cleaning, sanitizing, pest elimination, maintenance and repair products for the hospitality, foodservice, healthcare 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 first 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 May 5, 2006. 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 2006 second quarter and full year financial and business prospects, including estimated sales, gross margins, selling, general and administrative expenses, effective tax rates, currency translation and earnings per share. These statements, which represent Ecolab's expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such Forward-Looking Statements. 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
FIRST QUARTER ENDED MARCH 31, 2006
(unaudited)
First Quarter
-----------------------
(thousands, except per share) 2006 2005
----------- -----------
Net Sales $1,120,075 $1,069,880
Cost of Sales 552,491 526,975
Selling, General and Administrative Expenses 436,127 424,918
----------- -----------
Operating Income 131,457 117,987
Interest Expense, Net 10,328 11,190
----------- -----------
Income before Income Taxes 121,129 106,797
Provision for Income Taxes 43,243 37,371
----------- -----------
Net Income $77,886 $69,426
=========== ===========
Diluted Net Income per Common Share $0.30 $0.27
Weighted-Average Common
Shares Outstanding
Basic 253,540 256,272
Diluted 258,055 260,626
2005 amounts have been restated for the adoption of SFAS No. 123(R),
"Share-Based Payment"
ECOLAB INC.
OPERATING SEGMENT INFORMATION
FIRST QUARTER ENDED MARCH 31, 2006
(unaudited)
First Quarter
-----------------------
(thousands) 2006 2005
----------- -----------
Net Sales
United States
Cleaning & Sanitizing $513,447 $467,179
Other Services 93,233 85,810
----------- -----------
Total 606,680 552,989
International 510,088 483,997
Effect of Foreign
Currency Translation 3,307 32,894
----------- -----------
Consolidated $1,120,075 $1,069,880
=========== ===========
Operating Income
United States
Cleaning & Sanitizing $79,525 $71,605
Other Services 8,009 7,534
----------- -----------
Total 87,534 79,139
International 43,238 36,503
Effect of Foreign
Currency Translation 685 2,345
----------- -----------
Consolidated $131,457 $117,987
=========== ===========
2005 amounts have been restated for the adoption of SFAS No. 123(R),
"Share-Based Payment"
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
March 31 December 31 March 31
(thousands) 2006 2005 2005
----------- ----------- -----------
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $62,934 $104,378 $83,447
Short-term investments 125,063
Accounts receivable, net 769,695 743,520 767,857
Inventories 341,556 325,574 345,921
Deferred income taxes 65,074 65,880 75,821
Other current assets 70,156 57,251 73,962
----------- ----------- -----------
Total current assets 1,309,415 1,421,666 1,347,008
Property, plant and equipment, net 841,977 835,503 838,759
Goodwill, net 944,802 937,019 1,001,794
Other intangible assets, net 198,743 202,936 230,700
Other assets, net 453,378 399,504 380,073
----------- ----------- -----------
Total assets $3,748,315 $3,796,628 $3,798,334
=========== =========== ===========
Liabilities and Shareholders'
Equity
Current liabilities
Short-term debt $191,621 $226,927 $276,282
Accounts payable 266,644 277,635 257,933
Compensation and benefits 176,333 214,131 182,014
Income taxes 46,168 39,583 36,349
Other current liabilities 346,447 361,081 362,324
----------- ----------- -----------
Total current liabilities 1,027,213 1,119,357 1,114,902
Long-term debt 522,382 519,374 566,636
Postretirement health care
and pension benefits 309,729 302,048 296,645
Other liabilities 200,631 206,639 252,453
Shareholders' equity 1,688,360 1,649,210 1,567,698
----------- ----------- -----------
Total liabilities and
shareholders' equity $3,748,315 $3,796,628 $3,798,334
=========== =========== ===========
March 31, 2005 amounts have been restated for the adoption of SFAS No.
123(R), "Share-Based Payment"
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