01—Abstract
Summary
Summary of the 8-K filed January 9, 2006. Cited figures are marked; the original filing is the authoritative source.
Ecolab Inc. (ECL) has filed a Form 8-K to disclose its adoption of SFAS 123(R), the new accounting standard for expensing stock options.
This adoption, effective from the fourth quarter of 2005, involves restating prior period financial statements to recognize share-based compensation expense. The company has also adjusted its previously issued earnings per share (EPS) guidance for the fourth quarter and full year 2005 to reflect the impact of SFAS 123(R) and a tax charge related to the repatriation of foreign earnings. Investors should note the specific EPS impacts from these adjustments.
Furthermore, Ecolab provided its initial EPS guidance for fiscal year 2006, projecting double-digit growth. This guidance includes an estimated annual charge for SFAS 123(R). The company has made detailed restated financial information available on its website and as exhibits to this filing, allowing investors to analyze the historical impact of the new accounting standard and compare performance trends.
02—Key points
Key Highlights
- Ecolab has adopted SFAS 123(R) for expensing stock options, effective Q4 2005, using a modified retrospective application.
- Prior period financial statements have been restated to include share-based compensation expense under SFAS 123(R).
- Q4 2005 diluted EPS guidance adjusted to $0.26-$0.28, including $0.04 for stock option expense and $0.01 for foreign repatriation tax.
- Full Year 2005 diluted EPS guidance adjusted to $1.22-$1.24, including $0.10 for stock option expense and $0.01 for foreign repatriation tax.
- Restated comparable EPS for Q4 2004 was $0.22 and for full year 2004 was $1.09.
- Ecolab forecasts double-digit diluted EPS growth for 2006, with guidance in the $1.38-$1.42 range.
- The 2006 EPS guidance assumes an approximate $0.10 per share annual charge for SFAS 123(R).
03—Questions
Frequently Asked Questions
What is SFAS 123(R) and why is Ecolab reporting it?
SFAS 123(R) is a new accounting standard requiring companies to expense stock options. Ecolab is reporting its adoption because it impacts the company's financial statements, particularly earnings per share, and requires restatement of historical financial data.
How does the adoption of SFAS 123(R) affect Ecolab's reported earnings?
The adoption of SFAS 123(R) results in recognizing share-based compensation expense, which reduces reported net income and earnings per share. For Q4 2005, it's a $0.04 per share charge, and for the full year 2005, it's a $0.10 per share charge.
What is the expected impact of SFAS 123(R) on Ecolab's 2006 earnings?
Ecolab anticipates an annual charge of approximately $0.10 per share for SFAS 123(R) in its 2006 guidance. This charge is already factored into their projected diluted EPS range of $1.38 to $1.42.
Where can investors find the detailed restated financial information?
Ecolab has posted restated financial information on its website at www.ecolab.com/investor. This information is also furnished as Exhibits B through E of this Form 8-K filing.
04—Continue