Ecolab Reports Double-Digit Second Quarter EPS Increase To $0.33.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 SECOND QUARTER HIGHLIGHTS: --Diluted net income per share +10% --Sales +11% to $1.2 billion --Continued strong U.S. 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 lead sales growth --U.S. Other Services shows further profit improvement --2005 earnings forecast increased to $1.32 - $1.35 from $1.30 - $1.34
Second Quarter and Six Months Ended June 30
----------------------------------------------------------
Second Quarter Six Months
------------------- % ------------------- %
(Millions, 2005 2004 increase 2005 2004 increase
except per ---- ---- -------- ---- ---- --------
share) (unaudited) (unaudited)
Net Sales $1,158.7 $1,042.7 11% $2,228.5 $2,022.1 10%
Operating
Income 146.4 135.9 8% 272.7 252.0 8%
Pretax Income 134.2 124.7 8% 249.4 229.6 9%
Taxes 47.6 46.4 3% 88.2 85.3 3%
--------- --------- -------- --------- --------- --------
Net Income $86.6 $78.3 11% $161.2 $144.3 12%
========= ========= ======== ========= ========= ========
Diluted Net
Income Per
Common Share $0.33 $0.30 10% $0.62 $0.55 13%
Diluted Average
Shares
Outstanding 258.9 260.9 -1% 259.5 260.6 0%
Continued strong sales in its domestic and Latin American businesses, along with further sharp profit improvement in U.S. Other Services, led Ecolab's second quarter results to record levels for the period ended June June: see month. 30, 2005. Ecolab's consolidated sales increased 11% to a record $1.2 billion in 2005's second quarter. Net income increased 11% to a record $87 million, or $0.33 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 $ 2.8 million for the second 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 enjoyed strong business trends across our U.S. and 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. operations in the second quarter. 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 also reported good sales growth, 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 moderate 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. Our Healthcare
and GCS GCS Glasgow Coma ScaleGCS 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 sales increased at double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. rates as they showed excellent progress in developing their businesses and profitability. Further, we have been successful in our pricing and aggressive cost reduction actions to manage the higher raw material cost environment. It was a solid quarter, especially when compared with the strong earnings achieved in the year-ago period. We are pleased with our performance." "We remain very confident in our prospects for the balance of 2005. Solid trends in most of our markets, and operational improvements in our businesses should yield further gains in the second half of the year. Our pricing and cost reduction measures are expected to show further and increasing benefit in our results as the year progresses, and we will continue to take appropriate measures in these areas. While the second half of the year may hold its challenges, we are committed to achieving our goals and continuing our history of outperformance, as reflected in our improved earnings outlook for 2005. Ecolab is a strong company building a stronger future, and we have the market opportunities, the people and the resources to develop them. We are determined to do what it takes to continue our strong growth trends for years to come, as we invest and drive results in our established businesses while at the same time continue to invest and build the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth and profit potential in our developing businesses. As the global leader in premium cleaning and sanitizing products and services to our customers, we are determined to build on and aggressively grow our business." Second 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 second quarter of 2004 to $497 million, as most businesses showed solid gains. Excluding acquisitions, sales rose 8% 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 3% to $77 million, as the benefits of the higher sales, cost efficiencies and increased pricing were partially offset by higher delivered product costs. United States Other Services sales increased 12% to $96 million in the second quarter with good sales gains by both Pest Elimination and GCS. Operating income in the second quarter of 2005 increased 38% to $11 million as both businesses showed solid improvement in their profitability. 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 $560 million in the second 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 moderate sales gain as weak economies in major central countries slowed results. Fixed currency operating income rose 2% to $57 million, as sales growth, pricing initiatives and cost efficiencies were partially offset by higher delivered product costs and less favorable business mix. At public currency rates, International sales increased 12% and operating income grew 11%. Business Outlook The following statements are based on current expectations. These statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and 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 third quarter 2005 over the third quarter 2004. Gross margins are expected to approximate 52%, and selling, general and administrative expenses are expected to approximate 37%. Interest expense is expected to be approximately $12 million. The effective tax rate should be approximately 36%. Overall, currency translation is expected to contribute to third 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 $0.39-$0.40 range in the third quarter of 2005. For the full year ending December December: see month. 31, 2005, Ecolab expects diluted earnings per share in the $1.32 -$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, when it becomes effective, currently anticipated to be the beginning of 2006. The above forecasts for the third 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 results on Ecolab's website at www.ecolab.com/investor as part of this change. 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 second quarter earnings announcement today at 1:00 p.m. Eastern Time. The webcast will be available to the public on Ecolab's website at http://www.ecolab.com/investor. A replay of the webcast will be available at that site through August 5, 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 third 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
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2005
(unaudited)
Second Quarter Six Months
(thousands, except ----------------------- -----------------------
per share) 2005 2004 2005 2004
----------- ----------- ----------- -----------
Net Sales $1,158,664 $1,042,711 $2,228,544 $2,022,082
Cost of Sales (a) 570,659 504,609 1,097,215 978,703
Selling, General and
Administrative
Expenses 441,626 402,487 858,581 787,820
Special Charges (b) (254) 3,551
----------- ----------- ----------- -----------
Operating Income 146,379 135,869 272,748 252,008
Interest Expense, Net 12,184 11,217 23,374 22,390
----------- ----------- ----------- -----------
Income before Income
Taxes 134,195 124,652 249,374 229,618
Provision for Income
Taxes 47,618 46,359 88,149 85,319
----------- ----------- ----------- -----------
Net Income $86,577 $78,293 $161,225 $144,299
=========== =========== =========== ===========
Diluted Net Income
per Common Share $0.33 $0.30 $0.62 $0.55
Weighted-Average Common
Shares Outstanding
Basic 255,474 257,135 255,873 257,080
Diluted 258,872 260,905 259,479 260,645
(a) Cost of sales includes income from reductions in restructuring
accruals of $16 and $66 for the second quarter and six months
ended June 30, 2004, respectively.
(b) Special charges include a revision of prior restructuring expenses
of $254 and $429 for the second quarter and six months ended June
30, 2004, respectively. Special charges for the six months ended
June 30, 2004 also include a charge of $3,980 related to the
disposal of a product line.
ECOLAB INC.
OPERATING SEGMENT INFORMATION
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2005
(unaudited)
Second Quarter Six Months
----------------------- -----------------------
(thousands) 2005 2004 2005 2004
----------- ----------- ----------- -----------
Net Sales
United States
Cleaning & Sanitizing $496,808 $450,625 $963,987 $881,359
Other Services 96,328 85,875 182,138 163,650
----------- ----------- ----------- -----------
Total 593,136 536,500 1,146,125 1,045,009
International 560,119 535,000 1,065,153 1,018,807
Effect of Foreign
Currency Translation 5,409 (28,789) 17,266 (41,734)
----------- ----------- ----------- -----------
Consolidated $1,158,664 $1,042,711 $2,228,544 $2,022,082
=========== =========== =========== ===========
Operating Income
United States
Cleaning & Sanitizing $77,352 $75,297 $153,796 $152,587
Other Services 11,195 8,123 19,666 13,321
----------- ----------- ----------- -----------
Total 88,547 83,420 173,462 165,908
International 56,903 55,659 96,912 94,172
Corporate Expense(a) - 270 - (3,485)
Effect of Foreign
Currency Translation 929 (3,480) 2,374 (4,587)
----------- ----------- ----------- -----------
Consolidated $146,379 $135,869 $272,748 $252,008
=========== =========== =========== ===========
(a) Consistent with the company's internal management reporting,
corporate expense includes income from reductions in restructuring
accruals of $270 and $495 for the second quarter and six months
ended June 30, 2004, respectively. Corporate expense for the six
months ended June 30, 2004 also includes a charge of $3,980
related to the disposal of a grease management product line.
ECOLAB INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2005
June 30 December 31 June 30
(thousands) 2005 2004 2004
----------- ----------- -----------
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $110,023 $71,231 $41,246
Accounts receivable, net 767,612 738,266 676,158
Inventories 334,816 338,603 322,453
Deferred income taxes 73,962 76,038 76,359
Other current assets 69,174 54,928 64,390
----------- ----------- -----------
Total current assets 1,355,587 1,279,066 1,180,606
Property, plant and equipment, net 833,025 834,730 771,963
Goodwill, net 958,848 991,811 890,937
Other intangible assets, net 218,046 229,095 228,264
Other assets, net 364,977 381,472 341,062
----------- ----------- -----------
Total assets $3,730,483 $3,716,174 $3,412,832
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $230,530 $56,132 $100,976
Accounts payable 249,437 269,561 226,164
Compensation and benefits 180,673 231,856 191,496
Income taxes 33,056 22,709 48,561
Other current liabilities 374,689 359,289 342,233
----------- ----------- -----------
Total current liabilities 1,068,385 939,547 909,430
Long-term debt 537,912 645,445 611,385
Postretirement health care and
pension benefits 287,459 270,930 250,899
Other liabilities 283,800 297,733 246,396
Shareholders' equity 1,552,927 1,562,519 1,394,722
----------- ----------- -----------
Total liabilities and
shareholders' equity $3,730,483 $3,716,174 $3,412,832
----------- ----------- -----------
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
adjustments:
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
Quarter Quarter Months
Ended Ended Ended
March 31 June 30 June 30
2005 2005 2005
------- ------- -------
Pro forma
income from
ongoing
operations $0.29 $0.33 $0.62
Pro forma
adjustments:
Special
charges
------- ------- -------
Net income,
as reported $0.29 $0.33 $0.62
======= ======= =======
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 and June 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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