10-QPeriod: Q3 FY2010

ECOLAB INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 4, 2010For Securities:ECL

Summary

Ecolab Inc. reported solid financial results for the third quarter and nine months ended September 30, 2010. Net sales saw a modest increase of 1% to $1.6 billion for the quarter, and a 4% increase to $4.5 billion for the nine-month period, with growth particularly strong in constant currency terms. This growth was driven by volume increases and pricing adjustments across key segments, notably U.S. Cleaning & Sanitizing and International operations. The company demonstrated improved profitability, with operating income up 10% to $245.1 million for the quarter and 24% to $603.2 million for the nine months, benefiting from cost-saving measures and increased sales. Net income attributable to Ecolab also saw a significant increase of 20% to $174.2 million for the quarter and 32% for the nine months. Diluted earnings per share rose to $0.74 for the quarter, reflecting the company's effective operational management and strategic initiatives.

Financial Highlights

54 data points
Beta

Revenue

$1.56B

51.1% Gross Margin

Net Income

$174.30M

11.2% Net Margin

EPS (Diluted)

$0.74

Total Assets

$4.86B

Cash & Equivalents

$168.40M

Free Cash Flow

$210.40M

Financial Statements
Beta
Revenue$1.56B
Cost of Revenue$763.40M
Gross Profit$798.50M
SG&A Expenses$558.50M
Operating Income$245.10M
Interest Expense$16.30M
Net Income$174.30M
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)232.80M
Shares Outstanding (Diluted)237.00M

Key Highlights

  • 1Consolidated net sales increased 1% to $1.6 billion in Q3 2010 and 4% to $4.5 billion for the first nine months of 2010, with constant currency sales growing 3% in both periods.
  • 2Operating income increased significantly by 10% to $245.1 million in Q3 2010 and by 24% to $603.2 million for the first nine months.
  • 3Net income attributable to Ecolab increased by 20% to $174.2 million in Q3 2010 and by 32% to $399.0 million for the first nine months.
  • 4Diluted EPS rose to $0.74 in Q3 2010 from $0.60 in Q3 2009, a 23% increase.
  • 5Gross profit margin improved to 51.1% in Q3 2010 from 50.6% in Q3 2009, driven by volume and cost savings.
  • 6The company repurchased approximately 2.9 million shares of common stock in Q3 2010 under its share repurchase program.
  • 7Ecolab completed the acquisition of the commercial laundry division of Dober Chemical Corp. in Q3 2010, strengthening its U.S. and Canada Textile Care business.

Frequently Asked Questions

Sales growth was primarily driven by volume increases and pricing adjustments across various segments. In fixed currency rates, sales grew by 3% for both the third quarter and the first nine months of 2010, indicating underlying operational strength despite negative foreign currency translation impacts.

Special gains and charges, particularly restructuring charges in the prior year and a gain on sale of investment in the current quarter, impacted year-over-year comparisons. Excluding these items, adjusted operating income increased by 4% for the third quarter, and adjusted net income attributable to Ecolab increased by 8%, indicating solid underlying performance.

Ecolab reported strong operating cash flow of $638.2 million for the nine months ended September 30, 2010. The company stated it has sufficient borrowing capacity and expects to fund foreseeable cash requirements through operating cash flow, cash reserves, and borrowings. The debt-to-capitalization ratio slightly increased to 33% from 32%, primarily due to a higher commercial paper balance and share repurchases.

Ecolab acquired the commercial laundry division of Dober Chemical Corp. in the third quarter of 2010, which is expected to enhance its Textile Care business. The company also sold an investment in a small U.S. business, recognizing a gain of $5.9 million.