Ecolab Reports Very Strong Second Quarter EPS Gain; Increases 2004 EPS forecast range to $1.18-$1.20.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. ): 2004 SECOND QUARTER HIGHLIGHTS: --Record 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. net income per share +20% to $0.30 --Record sales +10% to $1 billion --Solid domestic 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. results and international improvement lead growth --2004 earnings forecast of $1.18-$1.20 per share compares to 2003 diluted net income of $1.06 and $1.03 from ongoing operations
Second Quarter and Six Months Ended June 30
Second Quarter Six Months
---------------- % ------------------ %
2004 2003 increase 2004 2003 increase
--------- ------ -------- --------- -------- --------
(Millions, except unaudited unaudited
per share)
Net Sales $1,042.7 $946.7 10% $2,022.1 $1,822.6 11%
Operating Income 135.9 121.4 12% 252.0 222.9 13%
Pretax Income 124.7 109.6 14% 229.6 200.4 15%
Taxes 46.4 42.5 9% 85.3 78.0 9%
--------- ------ -------- --------- -------- --------
Net Income $ 78.3 $ 67.2 17% $ 144.3 $ 122.5 18%
========= ====== ======== ========= ======== ========
Diluted Net
Income Per
Common Share $ 0.30 $ 0.25 20% $ 0.55 $ 0.46 20%
Diluted Average
Shares
Outstanding 260.9 264.6 -1% 260.6 264.2 -1%
Continued growth in its domestic and international businesses led Ecolab's results for the second quarter ended June June: see month. 30, 2004, as 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 rose 20% to $0.30 per share. Ecolab's consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: sales increased 10% to a record $1 billion in 2004's second quarter. Net income rose 17% to a record $78 million. Diluted net income per share of $0.30 for the second quarter of 2004 increased 20 percent over last year's $0.25 net income per 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 of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.5 million for the second quarter of 2004. 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, "The second quarter results were outstanding as we continued to outpace out·pace tr.v. out·paced, out·pac·ing, out·pac·es To surpass or outdo (another), as in speed, growth, or performance. outpace Verb [-pacing, recovering markets and leverage a strong slate of new product offerings. We did this through the hard work of our outstanding sales and service force, careful management of expenses, and our ongoing commitment to performance excellence. We remained focused on execution and it shows in our results. "Our strong earnings underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. our confidence that we will achieve yet another year of double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth in 2004. Though unlikely to match the first half's very strong growth, we nonetheless continue to expect further good earnings gains in the remaining quarters as our improving sales momentum and divisional operations more than offset less favorable comparisons for currencies and reduced benefits from lower tax rates in the second half. We remain focused on delivering the industry's best products and service solutions to our customers, continuing to follow our Circle the Customer strategy to bring new opportunities for growth, and relentlessly driving for improved service and operating excellence. Ecolab has a strong tradition for unbeatable customer service, expanding its market opportunities and delivering consistent, reliable double-digit growth and superior returns for its shareholders, and we will focus all our efforts to continuing that in the years ahead." 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 5% to $451 million, as gains in Institutional and Kay KAY Kick Ass Year KAY Kansas Association of Youth led the growth. Excluding acquisitions and divestitures, sales rose 4% 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. also rose 5% to $75 million as the higher volume, new products and cost efficiencies were partially offset by sales force and other investments. United States Other Services sales increased 4% to $86 million in the second quarter. Operating income grew 20% to $8 million due to an improved performance by Pest Elimination. Sales of Ecolab's International Cleaning & Sanitizing operations rose 8% in the second quarter when measured at fixed currency rates to $486 million. Excluding acquisitions and divestitures, sales rose 4%. 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. sales showed double-digit growth, while both Europe/Africa/Middle East and Asia Pacific reported attractive gains. Fixed currency operating income rose 12% to $50 million as margins improved in all regions through new products and programs as well as careful management of costs. At public currency rates, International Cleaning & Sanitizing sales increased 17% and operating income grew 23%. Ecolab reacquired 180,000 shares of its common stock during the second quarter. 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 or other material corporate transactions, which may be completed after the date of this release. This Business Outlook section should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the information on "Forward Looking Statements" at the end of this release. Ecolab expects sales for both domestic and 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. (in fixed currencies) to increase in the third quarter 2004 over the third quarter 2003. Gross margins are expected to rise to the 52% range, and selling, general and administrative expenses are expected to be around 38% of sales. Interest expense is likely to be approximately $13 million. The effective tax rate should be approximately 37%. Overall, currency translation is expected to contribute to third quarter earnings. Diluted earnings per share from ongoing operations are expected to be in the $0.34-$0.36 range in the third quarter of 2004. Ecolab earned $0.32 per share from ongoing operations in the third quarter of 2003, with diluted net income of $0.33 per share. For the full year ending December December: see month. 31, 2004, Ecolab expects diluted earnings per share from ongoing operations will rise to the $1.18-$1.20 range. In 2003, Ecolab reported diluted net income per share of $1.06; earnings from ongoing operations were $1.03. With sales of $3.8 billion, Ecolab is the global developer and marketer of premium cleaning, sanitizing, pest elimination, maintenance and repair products 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. and the Pacific Exchange 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 Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). 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 2, 2004. Listening to the webcast requires Internet access See how to access the Internet. , a soundcard soundcard Noun a printed circuit board inserted into a computer, enabling the output and manipulation of sound 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/players.asp. This news release contains various "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. " 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 2004 third quarter and full year financial and business prospects, including estimated sales, gross margins, selling, general and administrative expenses, interest expense, taxes and currency translation for the third quarter 2004. 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. These risks and uncertainties 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, and travel industries; restraints on pricing flexibility due to competitive factors and customer and vendor consolidations; 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; 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; the effect of future acquisitions or divestitures or other corporate transactions; the company's 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 efficacy /ef·fi·ca·cy/ (ef´i-kah-se) 1. the ability of an intervention to produce the desired beneficial effect in expert hands and under ideal circumstances. 2. and labeling of the company's products and (ii) changes in tax, fiscal, governmental and other regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. policies; economic factors such as the worldwide economy, interest rates and currency movements, including, in particular, the company's 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, (d) natural or manmade disasters (including acts of terrorism or other hostilities hos·til·i·ty n. pl. hos·til·i·ties 1. The state of being hostile; antagonism or enmity. See Synonyms at enmity. 2. a. A hostile act. b. hostilities Acts of war; overt warfare. which impact the company's markets) and, (e) severe weather conditions or public health epidemics This article is a list of major epidemics. Worldwide Pandemics
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2004
(unaudited)
Second Quarter Six Months
--------------------- -----------------------
(thousands, except per
share) 2004 2003 2004 2003
----------- --------- ----------- -----------
Net Sales $1,042,711 $946,735 $2,022,082 $1,822,587
Cost of Sales(a) 504,609 466,734 978,703 897,216
Selling, General and
Administrative Expenses 402,487 358,783 787,820 702,816
Special Charges (Income) (254) (147) 3,551 (344)
----------- --------- ----------- -----------
Operating Income 135,869 121,365 252,008 222,899
Interest Expense, Net 11,217 11,752 22,390 22,455
----------- --------- ----------- -----------
Income before Income
Taxes 124,652 109,613 229,618 200,444
Provision for Income
Taxes 46,359 42,458 85,319 77,971
----------- --------- ----------- -----------
Net Income $78,293 $67,155 $144,299 $122,473
=========== ========= =========== ===========
Diluted Net Income per
Common Share $0.30 $0.25 $0.55 $0.46
Weighted-Average Common
Shares Outstanding
Basic 257,135 261,246 257,080 260,847
Diluted 260,905 264,553 260,645 264,236
(a) Cost of sales includes income from reductions in restructuring
accruals of $16 for the second quarter ended June 30, 2004 and $66
and $45 for the six months ended June 30, 2004 and 2003,
respectively.
ECOLAB INC.
OPERATING SEGMENT INFORMATION
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2004
(unaudited)
Second Quarter Six Months
--------------------- -----------------------
(thousands) 2004 2003 2004 2003
----------- --------- ----------- -----------
Net Sales
United States
Cleaning &
Sanitizing $450,625 $430,901 $881,359 $848,200
Other Services 85,875 82,963 163,650 156,292
----------- --------- ----------- -----------
Total 536,500 513,864 1,045,009 1,004,492
International Cleaning
& Sanitizing 485,819 448,744 924,993 864,467
Effect of Foreign
Currency Translation 20,392 (15,873) 52,080 (46,372)
----------- --------- ----------- -----------
Consolidated $1,042,711 $946,735 $2,022,082 $1,822,587
=========== ========= =========== ===========
Operating Income
United States
Cleaning &
Sanitizing $75,297 $71,943 $152,587 $141,849
Other Services 8,123 6,785 13,321 10,432
----------- --------- ----------- -----------
Total 83,420 78,728 165,908 152,281
International Cleaning
& Sanitizing 50,049 44,524 84,998 75,104
Corporate Expense(a) 270 106 (3,485) 348
Effect of Foreign
Currency Translation 2,130 (1,993) 4,587 (4,834)
----------- --------- ----------- -----------
Consolidated $135,869 $121,365 $252,008 $222,899
=========== ========= =========== ===========
(a) Consistent with the company's internal management reporting,
corporate expense includes income from reductions in restructuring
accruals of $270 and $106 for the second quarter ended June 30,
2004 and 2003, respectively and $495 and $348 for the six months
ended June 30, 2004 and 2003, 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, 2004
June 30 December 31 June 30
(thousands) 2004 2003 2003
----------- ----------- -----------
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $41,246 $85,626 $30,572
Accounts receivable, net 676,158 626,002 644,294
Inventories 322,453 309,959 325,986
Deferred income taxes 76,359 75,820 78,866
Other current assets 64,390 52,933 60,243
----------- ----------- -----------
Total current assets 1,180,606 1,150,340 1,139,961
Property, plant and equipment, net 771,963 736,797 708,136
Goodwill, net 890,937 797,211 780,308
Other intangible assets, net 228,264 203,859 210,535
Other assets, net 341,062 340,711 281,995
----------- ----------- -----------
Total assets $3,412,832 $3,228,918 $3,120,935
=========== =========== ===========
Liabilities and Shareholders'
Equity
Current liabilities
Short-term debt $100,976 $70,203 $97,506
Accounts payable 226,164 212,287 222,168
Compensation and benefits 191,496 190,386 162,602
Income taxes 48,561 59,829 60,271
Other current liabilities 342,233 319,237 327,737
----------- ----------- -----------
Total current liabilities 909,430 851,942 870,284
Long-term debt 611,385 604,441 601,981
Postretirement health care and
pension benefits 250,899 249,906 224,248
Other liabilities 246,396 227,203 172,071
Shareholders' equity 1,394,722 1,295,426 1,252,351
----------- ----------- -----------
Total liabilities and
shareholders' equity $3,412,832 $3,228,918 $3,120,935
=========== =========== ===========
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 June June Sept. Sept. Dec. Dec.
31 30 30 30 30 31 31
2003 2003 2003 2003 2003 2003 2003
------- --------------- -------------- ------- ------
Pro forma income
from ongoing
operations $0.21 $0.25 $0.46 $0.32 $0.78 $0.26 $1.03
Pro forma
adjustments:
Gain from sale
of equity
investments 0.02 0.02 0.03
Special charges (0.01)
------- ------- ------- ------- ------ ------- ------
Net income, as
reported $0.21 $0.25 $0.46 $0.33 $0.80 $0.26 $1.06
======= ======= ======= ======= ====== ======= ======
Six
Quarter Quarter Months
Ended Ended Ended
March June June
31 30 30
2004 2004 2004
------- ---------------
Pro forma income
from ongoing
operations $0.26 $0.30 $0.56
Pro forma
adjustments:
Special charges (0.01) (0.01)
------- ------- -------
Net income, as
reported $0.25 $0.30 $0.55
======= ======= =======
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 comparibility of the
company's operations for 2004 and 2003. 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 and 2003 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, 2004 and for the
full year and quarters and interim year-to-date periods ended March
31, June 30, September 30 and December 31, 2003. The information was
originally presented in the company's quarterly earning releases and
reflects the impact of the company's two-for-one stock split paid June
6, 2003. Special charges includes reductions to prior restructuring
expenses and losses related to the sale of product lines and
businesses. The pro forma information should not be construed as an
alternative to reported results under U.S. GAAP.
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