10-QPeriod: Q2 FY2010

ECOLAB INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 5, 2010For Securities:ECL

Summary

Ecolab Inc. reported a solid second quarter and first half of 2010, demonstrating revenue growth and improved profitability. Net sales increased by 5% for the quarter and 6% year-to-date, driven by strong performance in international markets, particularly Asia Pacific and Latin America, alongside steady growth in U.S. Cleaning & Sanitizing segments. Operating income saw a significant increase of 24% for the quarter and 36% year-to-date, boosted by cost-saving initiatives, lower delivered product costs, and a favorable comparison to prior year special charges. The company also returned capital to shareholders through dividends and share repurchases, indicating confidence in its financial position and future prospects. Investors can look to Ecolab's continued focus on operational efficiency, strategic investments in growth areas, and robust cash generation as key drivers for future performance.

Financial Highlights

54 data points
Beta

Revenue

$1.52B

50.7% Gross Margin

Net Income

$129.50M

8.5% Net Margin

EPS (Diluted)

$0.54

Total Assets

$4.66B

Cash & Equivalents

$121.30M

Free Cash Flow

$155.20M

Financial Statements
Beta
Revenue$1.52B
Cost of Revenue$750.00M
Gross Profit$770.20M
SG&A Expenses$565.30M
Operating Income$204.30M
Interest Expense$16.10M
Net Income$129.50M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)233.40M
Shares Outstanding (Diluted)237.40M

Key Highlights

  • 1Consolidated net sales increased 5% to $1.5 billion in Q2 2010 and 6% to $3.0 billion for the first six months of 2010.
  • 2Operating income grew significantly, up 24% to $204 million in Q2 2010 and 36% to $358 million year-to-date.
  • 3Net income attributable to Ecolab increased by 30% to $129 million in Q2 2010, with diluted EPS rising to $0.54.
  • 4International sales showed strong growth, increasing by 5% at fixed currency rates in Q2 2010, with Asia Pacific and Latin America leading at 9% growth.
  • 5Gross profit margin improved to 50.7% in Q2 2010 from 49.7% in Q2 2009, driven by volume, pricing, and favorable product costs.
  • 6The company repurchased approximately $200 million of its common stock in the first half of 2010, alongside continuing dividend payments.
  • 7Special gains and charges decreased significantly to $0.6 million in Q2 2010 from $25.0 million in Q2 2009, positively impacting profitability comparisons.

Frequently Asked Questions

Ecolab's sales growth in the second quarter of 2010 was primarily driven by strong performance in international markets, especially Asia Pacific and Latin America, which saw 9% growth at fixed currency rates. Domestically, the U.S. Cleaning & Sanitizing segment also contributed positively with a 3% increase in sales, supported by growth in key sub-segments like Institutional, Food & Beverage, and Kay.

Special gains and charges significantly decreased in the second quarter of 2010, totaling $0.6 million compared to $25.0 million in the same period of 2009. This reduction, largely due to the completion of restructuring activities from the previous year, led to a substantial year-over-year improvement in reported operating income and net income, making the comparison of underlying business performance more favorable.

Ecolab actively manages its exposure to foreign currency exchange rate fluctuations through the use of foreign currency forward contracts, foreign currency debt, and interest rate swaps. These instruments are used to hedge forecasted foreign currency transactions, specific foreign currency-denominated assets and liabilities, and net investments in foreign operations. The company also analyzes its international performance on a 'fixed currency' basis to better understand underlying business trends, separate from the impact of currency translation.

Ecolab is returning capital to shareholders through a combination of share repurchases and dividend payments. In the first six months of 2010, the company repurchased approximately $200 million of its common stock. Additionally, dividends declared per common share increased to $0.1550 in the second quarter of 2010 from $0.1400 in the second quarter of 2009, reflecting a consistent commitment to shareholder returns.