What is the primary driver of the increase in net sales?

The primary driver of the increase in net sales for the third quarter and year-to-date 2011 was a combination of volume growth (2% in Q3, 3% year-to-date), pricing changes (1% in both periods), acquisitions (2% in both periods), and favorable foreign currency exchange (5% in Q3, 3% year-to-date). Strong performance was noted in the U.S. Cleaning & Sanitizing segment and international regions like Latin America and Asia Pacific.

What factors are negatively impacting Ecolab's profitability in the current quarter?

Profitability in the current quarter is being negatively impacted by significant special charges. These include $17.1 million in restructuring charges related to a European business efficiency plan and $10.3 million in costs associated with the anticipated merger with Nalco. These items, along with higher delivered product costs, have reduced gross profit margins and operating income.

What is the status and expected impact of the Nalco merger?

Ecolab entered into a merger agreement with Nalco Holding Company, a leader in water treatment, in July 2011. The transaction is valued at approximately $8.0 billion and is expected to close in the fourth quarter of 2011, subject to regulatory and shareholder approvals. The company has incurred $10.3 million in merger-related costs during the quarter and expects further integration and restructuring costs. The merger is a strategic move aimed at enhancing Ecolab's water management capabilities.

How is Ecolab managing its liquidity and capital structure?

Ecolab has expanded its credit facilities, increasing its total available credit to $3.5 billion through a new $1.5 billion multi-year facility and a $2.0 billion 364-day facility. This enhances its ability to fund operations, acquisitions, and shareholder returns. The company also has a strong operating cash flow and $207 million in cash and cash equivalents as of September 30, 2011.

ECL 10-Q Quarterly Report Q3 FY2011 — Revenue, Net Income, EPS

Summary

Ecolab Inc.'s (ECL) third quarter and nine-month results for the period ending September 30, 2011, demonstrate continued sales growth, driven by strong performance in the U.S. Cleaning & Sanitizing segment and key international regions, particularly Latin America and Asia Pacific. Despite an 11% increase in consolidated net sales for the quarter and a 10% increase year-to-date, reported operating income and net income saw a slight decrease due to the impact of significant restructuring charges and integration costs associated with the anticipated acquisition of Nalco Holding Company. These special charges, alongside other costs, impacted gross profit margins. However, on an adjusted basis, excluding these items, the company reported solid earnings per share growth, indicating underlying operational strength. Ecolab also expanded its credit facilities and announced a substantial share repurchase program, contingent on the Nalco merger's completion, signaling confidence in future cash flows and strategic growth. The company is actively managing its financial health, with increased investment in acquisitions and a proactive approach to its capital structure, including new credit facilities. The pending acquisition of Nalco, a significant strategic move in the water treatment sector, is a key focus, with integration planning underway and expected closing in the fourth quarter. Investors should note the impact of restructuring and merger-related costs on current reported figures, while recognizing the underlying growth drivers and the company's strategic initiatives aimed at long-term value creation.

Financial Highlights

55 data points

Beta

Revenue

$1.74B

0.5% Gross Margin

Net Income

$154.30M

0.1% Net Margin

EPS (Diluted)

$0.65

Total Assets

$5.51B

Cash & Equivalents

$207.30M

Free Cash Flow

$156.10M

Financial Statements

Beta

Revenue	$1.74B
Cost of Revenue	$877.90M
Gross Profit	$858.20M
SG&A Expenses	$595.30M
Operating Income	$239.60M
Interest Expense	$15.90M
Net Income	$154.30M
EPS (Basic)	$0.67
EPS (Diluted)	$0.65
Shares Outstanding (Basic)	231.90M
Shares Outstanding (Diluted)	236.10M

Key Highlights

1Consolidated net sales increased 11% to $1.7 billion in Q3 2011 and 10% to $5.0 billion year-to-date, driven by volume, pricing, acquisitions, and favorable foreign currency exchange.
2Operating income decreased 2% to $240 million in Q3 2011, primarily due to $27.8 million in special charges (including $17.1 million in restructuring), compared to a gain of $5.1 million in the prior year.
3Net income attributable to Ecolab decreased 11% to $154 million in Q3 2011, impacted by special charges and a higher effective tax rate.
4Diluted EPS of $0.65 in Q3 2011 decreased 12% year-over-year, but adjusted diluted EPS (excluding special charges and discrete tax items) increased 14% to $0.75.
5Significant restructuring charges ($17.1 million in Q3 2011) and merger integration costs ($10.3 million in Q3 2011 for Nalco) are impacting current results, with total restructuring expected to reach $150 million through 2013.
6The company entered into a merger agreement with Nalco Holding Company, a major water treatment and process improvement company, with an expected closing in Q4 2011, involving significant stock and cash consideration.
7Ecolab expanded its credit facilities, increasing its total available credit to $3.5 billion to support general corporate purposes, including potential acquisitions and share repurchases.

ECOLAB INC. Quarterly Report for Q3 Ended Sep 30, 2011

Summary

Financial Highlights

Key Highlights

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