01—Abstract
Summary
Summary of the 10-Q filed May 8, 2009. Cited figures are marked; the original filing is the authoritative source.
Ecolab Inc. reported a decrease in net sales and net income for the first quarter of 2009 compared to the same period in 2008, largely attributable to the global recession, higher product costs, and unfavorable foreign currency exchange rates.
The company also incurred significant restructuring charges related to its plan to streamline operations, reduce workforce, and optimize locations. Despite these headwinds, Ecolab saw strong sales growth in certain U.S. businesses (Kay and Healthcare) and in its Latin America and Canadian operations. Management actions such as pricing and cost savings initiatives are in place to mitigate the impact of the economic downturn.
02—Key points
Key Highlights
- Consolidated net sales decreased by 8% to $1.3 billion, or 1% on a fixed currency basis, impacted by the global recession and a change in distributor incentive programs.
- Net income attributable to shareholders decreased by 44% to $57.4 million ($0.24 per diluted share), compared to $102.9 million ($0.41 per diluted share) in the prior year.
- The company incurred approximately $33 million in restructuring charges ($21 million after tax) in the first quarter of 2009, impacting earnings per share by $0.09.
- U.S. Cleaning & Sanitizing segment sales declined 5%, with specific businesses like Kay and Healthcare showing positive growth, while Institutional and Food & Beverage saw decreases.
- International sales, when measured in fixed currency rates, increased by 3%, driven by strong performance in Latin America and Canada.
- Operating income decreased by 39% to $97.5 million, with a notable 52% decline in the International segment's operating income at fixed currency rates.
- The company maintained a strong liquidity position with $79.5 million in cash and cash equivalents and access to a $600 million credit facility, despite a decrease in cash provided by operating activities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2009, Ecolab Inc. kept $0.04.
- Revenue$1.35B100.0%
- Cost of revenue−$707.9M52.5%
- Gross profit$640.3M47.5%
- Operating costs−$542.8M40.3%
- Operating income$97.5M7.2%
- Interest, other & tax−$39.8M3.0%
- Net income$57.7M4.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2009filed May 8, 2009Financial Statements
| Revenue | $1.35B |
| Cost of Revenue | $707.90M |
| Gross Profit | $640.30M |
| SG&A Expenses | $516.30M |
| Operating Income | $97.50M |
| Net Income | $57.70M |
| EPS (Basic) | $0.24 |
| EPS (Diluted) | $0.24 |
| Shares Outstanding (Basic) | 236.10M |
| Shares Outstanding (Diluted) | 238.10M |
05—Questions
Frequently Asked Questions
What is the primary reason for the decline in Ecolab's net sales and net income in Q1 2009?
The primary reasons for the decline in net sales and net income were the global recession, increased delivered product costs, unfavorable foreign currency exchange rates, and significant restructuring charges related to operational streamlining efforts. A change in distributor incentive programs also impacted the timing of sales.
How much did the restructuring activities cost Ecolab in Q1 2009, and what is the expected future impact?
In the first quarter of 2009, Ecolab recorded approximately $33 million in restructuring charges ($21 million after tax), which reduced diluted earnings per share by $0.09. The company anticipates additional restructuring expenses in 2009, with total pretax charges expected to range from $65 million to $75 million. These actions are projected to yield annualized pretax savings of $70 million to $80 million.
Which business segments performed well despite the challenging economic environment?
Despite the overall downturn, Ecolab experienced strong sales growth in its U.S. Kay and Healthcare businesses. Internationally, Latin America and Canada showed robust sales performance. The company also noted positive contributions from pricing and cost-saving initiatives across various segments.
What is Ecolab's current financial position and liquidity outlook?
Ecolab maintained a solid financial position with $4.7 billion in total assets and $1.2 billion in total debt as of March 31, 2009. The company had $79.5 million in cash and cash equivalents and access to a $600 million credit facility, indicating sufficient liquidity to meet its foreseeable operating needs. However, cash provided by operating activities decreased year-over-year due to factors like a voluntary pension contribution and lower earnings.
06—Continue