10-QPeriod: Q1 FY2013

ECOLAB INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 2, 2013For Securities:ECL

Summary

Ecolab Inc. (ECL) reported a significant increase in net income attributable to Ecolab for the first quarter ended March 31, 2013, reaching $159.6 million, a substantial rise from $49.7 million in the same period last year. This growth was primarily driven by a substantial decrease in 'Special (gains) and charges,' which fell to $53.4 million in Q1 2013 from $131.1 million in Q1 2012. The company also saw a 2% increase in net sales to $2.9 billion. The company is actively managing its cost structure, evidenced by ongoing restructuring efforts aimed at improving efficiency and competitiveness, with significant charges incurred in both periods. The acquisition of Champion Technologies, completed shortly after the quarter's end, is expected to be a key growth driver. While overall asset and liability levels remained relatively stable, the company's balance sheet reflects continued investment and debt management. Investors should note the substantial year-over-year earnings improvement, largely attributable to reduced exceptional charges, alongside steady sales growth and strategic acquisitions.

Financial Highlights

54 data points
Beta

Revenue

$2.87B

46.4% Gross Margin

Net Income

$159.60M

5.6% Net Margin

EPS (Diluted)

$0.53

Total Assets

$17.30B

Cash & Equivalents

$824.30M

Free Cash Flow

$56.80M

Financial Statements
Beta
Revenue$2.87B
Cost of Revenue$1.54B
Gross Profit$1.33B
SG&A Expenses$1.02B
Operating Income$261.70M
Interest Expense$65.00M
Net Income$159.60M
EPS (Basic)$0.54
EPS (Diluted)$0.53
Shares Outstanding (Basic)295.40M
Shares Outstanding (Diluted)300.90M

Key Highlights

  • 1Net income attributable to Ecolab surged by 221% to $159.6 million in Q1 2013 from $49.7 million in Q1 2012, largely due to a significant reduction in special charges.
  • 2Net sales increased by 2% to $2.9 billion for the first quarter of 2013 compared to the prior year's first quarter.
  • 3Total 'Special (gains) and charges' decreased significantly to $53.4 million in Q1 2013 from $131.1 million in Q1 2012, positively impacting profitability.
  • 4The company is executing restructuring plans, incurring $20.8 million in charges in Q1 2013, aimed at improving efficiency and competitiveness.
  • 5Ecolab completed the acquisition of Champion Technologies on April 10, 2013, for approximately $2.0 billion, which is expected to contribute to future growth.
  • 6Operating income increased by 58% to $261.7 million in Q1 2013, driven by the reduction in special charges and solid sales performance.
  • 7Cash provided by operating activities increased to $186.0 million in Q1 2013 from $110.5 million in Q1 2012, indicating improved cash generation.

Frequently Asked Questions

The primary driver of the substantial increase in net income attributable to Ecolab was a significant reduction in 'Special (gains) and charges.' These charges decreased from $131.1 million in the first quarter of 2012 to $53.4 million in the first quarter of 2013, directly boosting profitability.

The acquisition of Champion Technologies was completed on April 10, 2013, which is *after* the close of the first quarter. Therefore, the financial results for the quarter ended March 31, 2013, do not include the financial impact of the Champion acquisition itself, although acquisition costs of $10.0 million were incurred during the quarter.

Ecolab is actively engaged in restructuring plans. This includes the 'Combined Restructuring Plan' which aims to optimize its supply chain, office facilities, and global workforce. The company incurred $20.8 million in restructuring charges in Q1 2013 related to these efforts, which are expected to yield future cost savings and synergies.

Foreign currency exchange rates had a minimal impact on Ecolab's sales and operating income in the first quarter of 2013. Net sales at fixed currency rates increased by 2%, the same as reported net sales, and adjusted fixed currency operating income also showed a minimal difference compared to adjusted operating income.