10-QPeriod: Q3 FY2017

ECOLAB INC. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:ECL

Summary

Ecolab Inc. reported solid financial performance for the third quarter and first nine months of 2017, demonstrating growth across key segments. Net sales increased by 5% year-over-year to $3.56 billion for the quarter and by 4% to $10.19 billion for the nine-month period. This growth was driven by a combination of volume increases and strategic pricing actions, particularly in the Global Industrial and Global Institutional segments. Diluted Earnings Per Share (EPS) saw a healthy increase of 6% to $1.34 for the quarter, and 10% to $3.20 for the nine months, reflecting improved profitability and effective cost management. The company also made significant strategic moves, notably the acquisition of Anios for $798.3 million, which is expected to enhance its hygiene and disinfection product offerings and expand its European healthcare market presence. While facing some headwinds such as higher delivered product costs and the impact of hurricanes, Ecolab managed these challenges through operational efficiencies and cost savings initiatives. The company's strong balance sheet and robust cash flow generation provide a solid foundation for continued investment, strategic acquisitions, and shareholder returns.

Financial Highlights

55 data points
Beta

Revenue

$3.56B

42.3% Gross Margin

Net Income

$393.20M

11.0% Net Margin

EPS (Diluted)

$1.34

Total Assets

$19.86B

Cash & Equivalents

$209.10M

Free Cash Flow

$369.40M

Financial Statements
Beta
Revenue$3.56B
Cost of Revenue$2.06B
Gross Profit$1.51B
SG&A Expenses$939.80M
Operating Income$564.10M
Interest Expense$60.70M
Net Income$393.20M
EPS (Basic)$1.36
EPS (Diluted)$1.34
Shares Outstanding (Basic)289.00M
Shares Outstanding (Diluted)293.40M

Key Highlights

  • 1Ecolab reported a 5% increase in Net Sales to $3.56 billion for Q3 2017 compared to Q3 2016, driven by volume and pricing.
  • 2Diluted EPS grew by 6% to $1.34 in Q3 2017, demonstrating improved profitability.
  • 3The acquisition of Anios for $798.3 million was completed, aimed at strengthening the hygiene and disinfection portfolio and European market reach.
  • 4Global Industrial and Global Institutional segments showed robust fixed currency sales growth, indicating strong performance in core markets.
  • 5SG&A expenses as a percentage of sales decreased to 30.5% in Q3 2017 from 31.6% in Q3 2016, reflecting improved efficiency.
  • 6The company generated $1.44 billion in cash from operating activities for the nine months ended September 30, 2017, underscoring strong operational cash flow.
  • 7Total debt increased due to the Anios acquisition and commercial paper borrowings, reaching $7.6 billion as of September 30, 2017.

Frequently Asked Questions

Ecolab's net sales increased by 5% to $3,563.3 million in the third quarter of 2017, compared to $3,386.1 million in the third quarter of 2016. This growth was attributed to a combination of volume increases and pricing strategies across its key segments.

The acquisition of Anios, a European hygiene and disinfection products manufacturer, was completed on February 1, 2017, for $798.3 million. This acquisition was reflected in Ecolab's financial statements starting in the first quarter of 2017, contributing to increased goodwill and intangible assets on the balance sheet, and is expected to expand the company's offerings and geographic reach, particularly in the healthcare market.

Diluted EPS attributable to Ecolab increased by 6% to $1.34 in the third quarter of 2017, up from $1.27 in the prior year's third quarter. For the first nine months of 2017, diluted EPS grew by 10% to $3.20, compared to $2.91 in the same period of 2016, demonstrating improved profitability.

Yes, Ecolab reported 'Special (gains) and charges' totaling $5.2 million in the third quarter of 2017, primarily related to restructuring activities and acquisition integration costs. For the first nine months of 2017, these charges amounted to $74.1 million. The company also noted discrete tax items that affected its effective tax rate and net income.