Ecolab Reports 17% First Quarter EPS Increase to $0.41
biz.yahoo.com
Thursday April 24, 8:43 am ET
ST. PAUL, Minn.--(BUSINESS WIRE)--Ecolab Inc. (NYSE: ECL):
2008 FIRST QUARTER HIGHLIGHTS:
* Record diluted net income per share, +17% to $0.41; excluding net discrete tax benefits and special gains and charges, EPS +11% to $0.39. Results include $0.01 dilution from acquisitions.
* Record sales, +16% to $1.5 billion; +11% excluding acquisitions.
* Strong Latin America and Asia Pacific led sales growth.
* U.S. sales led by solid gains in Institutional, Food & Beverage, Healthcare and Pest Elimination.
Strong growth from its Latin America and Asia Pacific operations along with solid gains from the U.S. business led Ecolab’s first quarter results to record levels for the period ended March 31, 2008.
Ecolab’s consolidated sales increased 16% to a record $1.5 billion in the first quarter of 2008; measured in fixed currencies, sales rose 11%. Fixed currency sales increased 6% when adjusted for acquisitions. Net income increased 15% to a record $103 million. Diluted earnings per share were up 17% to a record $0.41. Earnings dilution from acquisitions was approximately $0.01 per share.
First quarter results included net discrete tax benefits and special gains and charges. Excluding those items, diluted earnings per share rose 11% to $0.39.
Commenting on the quarter, Douglas M. Baker, Jr., Ecolab’s Chairman, President and Chief Executive Officer said, “First quarter results reflected good sales growth across our global businesses, as solid gains in our U.S. businesses combined with strong growth in Latin America and Asia Pacific to lead results.
“We continue to expect another year of attractive growth. We anticipated headwinds would arise from softer end markets and rising raw material costs in 2008; we saw them develop in the first quarter, but remain confident that we are well-positioned to offset them and deliver superior results again this year. We believe our strong sales and service approach, through which our 14,000-plus field associates work with customers to identify cost-saving and performance-improving solutions, as well as our major product penetration and market share expansion potential provide us with excellent opportunities to continue to improve customer results and outperform our markets. These strengths, which we have enhanced with targeted investments in our U.S. businesses in recent years, should continue to drive superior growth over the balance of the year. In addition, our Latin America and Asia Pacific operations are enjoying attractive market and sales trends. The investments to strengthen and reinvigorate our European business are well underway and we are making good progress; we are confident these investments will provide attractive future growth and profitability. Further, integration of our recent acquisitions in healthcare and water management is progressing well, and the businesses are showing excellent trends.”
Baker continued, saying, “We look for continued good sales momentum in the second quarter, and solid earnings growth more than offsetting the impact of acquisition dilution. We expect second half 2008 earnings to show attractive comparisons as top line growth and strong operating income gains from our ongoing businesses, contributions from acquisitions, and benefits from expected permanent tax rate improvement yield strong earnings comparisons and superior earnings growth.
“2008 is a year of significant investments to assure a strong future. We are confident in our prospects and expect to outperform our markets once again this year. We have the balanced global business base to support them while sustaining attractive growth, and look to deliver another year of superior earnings growth while building an even stronger base for continued future growth.”
First quarter 2008 sales for Ecolab's United States Cleaning & Sanitizing operations rose 15% to $653 million. Excluding acquisitions, sales rose 5%, with good growth from Institutional, Food & Beverage and Healthcare. Ecolab's United States Cleaning & Sanitizing operating income rose 6% to $105 million.
United States Other Services sales increased 8% to $110 million in the first quarter benefiting from continued solid gains by Pest Elimination and a good sales increase by GCS. Operating income decreased $2 million from the year-ago period to $7 million, primarily reflecting systems deployment and stabilization costs in GCS.
Sales of Ecolab's International operations, when measured at fixed currency rates, rose 8% to $683 million in the first quarter. Latin America and Asia Pacific reported strong sales increases. Europe/Middle East/Africa (EMEA) recorded moderate sales growth. Fixed currency operating income rose 13% to $54 million. When measured at public currency rates, International sales increased 19% and operating income rose 30%. Currency translation had a favorable impact on net income growth of approximately $3.9 million for the first quarter of 2008.
The Corporate segment includes Special Gains and Charges, which are reported as a separate line item in the income statement. Special Gains and Charges for the first quarter included non-recurring costs to optimize our business structure, including the establishment of our European headquarters in Zurich, Switzerland, which were partially offset by an additional gain from the previously announced sale of a business in the U.K. The Corporate segment also includes investments in the development of business systems and other corporate investments we are making as part of our ongoing efforts to improve our efficiency and returns.
The reported income tax rate for the first quarter 2008 was 29.4% compared to a tax rate of 34.5% for the first quarter 2007. Excluding net discrete tax benefits of approximately $0.02 per share, the adjusted effective income tax rate for the first quarter 2008 was 32.8%. The decrease in the adjusted first quarter effective tax rate was due primarily to tax planning efforts, international rate reductions and U.S. tax legislation.
Ecolab reacquired 0.4 million shares of its common stock during the first quarter.
Business Outlook
For the full year ending December 31, 2008, Ecolab continues to expect pro forma diluted earnings per share, which exclude Special Gains and Charges and discrete tax benefits, in the $1.84-$1.88 range. These pro forma results are expected to include approximately $0.02 per share of dilution from acquisitions presently completed. Excluding that dilution, diluted earnings per share are expected to increase 12% to 14% to the $1.86 to $1.90 range.
The pro forma forecast excludes Special Gains and Charges which, for the full year, are expected to net to a range of $0.00 to $0.03 accretive per share. Special Gains and Charges, which are reported as a separate line item on the income statement, will include a gain on the sale of a plant in Europe that is expected to close in the second or third quarter, as well as costs associated with the establishment of and move to a European headquarters.
Ecolab expects sales for both domestic and international operations (in fixed currencies) to increase in the second quarter 2008 over the second quarter 2007. Gross margins are expected to be in a 49% to 50% range. Selling, general and administrative expenses as a ratio to sales are forecast to decline to the 37% to 38% range. Interest expense is expected to be $15 million to $16 million. The effective tax rate in the quarter is anticipated to be in a 32% to 33% range. Overall, currency translation should benefit second quarter earnings. Second quarter pro forma diluted earnings per share, which exclude Special Gains and Charges and discrete tax benefits, are expected to be in the $0.45 to $0.47 range. These pro forma results are forecast to include between $0.01-$0.02 per share of dilution from completed acquisitions. Reported second quarter 2007 earnings per share of $0.44 included a discrete tax benefit; excluding that benefit, pro forma second quarter 2007 earnings per share were $0.42. |
