Ecolab Inc. (NYSE:ECL):
2014 FOURTH QUARTER HIGHLIGHTS:
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Record reported diluted EPS $1.10
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Record adjusted EPS $1.20, +15%, excluding special gains and
charges and discrete tax items, driven by solid sales growth,
synergies and strong margin improvement
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Reported sales +3%. Fixed currency and acquisition adjusted fixed
currency sales +6% led by Energy and Specialty growth and strong gains
in Latin America
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Fourth Quarter Ended December 31
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(unaudited)
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Reported
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Adjusted*
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Fourth Quarter
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%
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Fourth Quarter
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%
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(Millions, except per share)
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2014
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2013
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change
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2014
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2013
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change
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Net Sales
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$
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3,680.8
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$
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3,559.5
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3
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%
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$
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3,680.8
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$
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3,559.5
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3
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%
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Operating Income
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520.5
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470.6
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11
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%
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565.2
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510.5
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11
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%
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Net Income Attributable to Ecolab
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335.5
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287.1
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17
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%
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366.2
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318.4
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15
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%
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Diluted Net Income Per Share
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$
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1.10
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$
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0.93
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18
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%
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$
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1.20
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$
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1.04
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15
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%
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* Operating income is adjusted for special gains and charges. Net
income and diluted net income per share are adjusted for special
gains and charges and discrete tax items.
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Ecolab Inc. delivered strong fourth quarter earnings as continued solid
sales growth and operating margin gains led to a 15% adjusted earnings
per share increase over last year. Ecolab also announced it plans to
repurchase $1 billion of its shares.
CEO comment
Commenting on the
quarter, Douglas M. Baker, Jr., Ecolab’s chairman and chief executive
officer said, “2014 was another excellent year for us. We achieved
record new business wins, had a record year for new products launched,
accelerated our sales momentum and delivered a very strong 18% adjusted
earnings per share increase. We also continued to invest in the key
drivers to build our company for the future. We finished 2014 a much
stronger company with an improved team, and we are well prepared for the
new year.
“While 2015 presents us with a mix of opportunities and challenges, our
balanced business portfolio, significant competitive advantages and
experienced management teams should enable us to achieve another strong
earnings performance in spite of very unfavorable currency movements.
Though lower oil prices will slow our Energy segment results, the
strength of its recurring business model makes us confident it will be
accretive to the year; at the same time, our other businesses will
benefit from lower raw material costs and, in the case of the
Institutional and Other segments, improved end-use markets. Net, these
factors should roughly offset each other, and we look for strong growth
from operations before currency effects.
“Foreign currency exchange and pension together will represent
approximately a $0.35 headwind in 2015. We will work to offset that
through continued strong business performance, operational improvements,
synergies and cost efficiencies. Further, with our capital structure
returning to our preferred range, we will launch a $1 billion share
repurchase and accelerate our acquisition pipeline. Our team is excited
about the opportunities this year will present and is committed to
continuing to build our business while delivering another great year.”
Quarter overview
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Fourth Quarter Ended December 31
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(unaudited)
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Reported
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%
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Adjusted Fixed Currency*
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%
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(Millions)
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2014
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2013
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Change
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2014
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2013
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Change
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Net Sales
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$
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3,680.8
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$
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3,559.5
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3
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%
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$
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3,731.1
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$
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3,507.0
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6
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%
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Operating Income
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520.5
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470.6
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11
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%
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573.3
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502.0
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14
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%
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* Operating income is adjusted for special gains and charges.
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Ecolab's reported sales rose 3% to a record $3.7 billion in the fourth
quarter of 2014. Fourth quarter 2014 fixed currency and acquisition
adjusted fixed currency sales rose 6%.
Acquisition adjusted growth rates generally exclude the results of any
acquired business for the first twelve months post acquisition and
exclude the results of any divested businesses for the twelve months
prior to divestiture. Champion is an exception. Due to the rapid pace at
which the business has been integrated within our Global Energy segment,
including all customer selling activity, discrete financial data
specific to the legacy Champion business is no longer available post
acquisition. As such, to allow for the most meaningful
period-over-period comparison, specific to the Champion transaction,
Champion's results for the comparable period of the prior year have been
included for purposes of providing acquisition adjusted growth rates.
Fourth quarter 2014 reported operating income increased 11% to $521
million. Both reported fourth quarter 2014 and 2013 results include
special gains and charges. Excluding special gains and charges, fourth
quarter 2014 adjusted operating income of $565 million increased 11%
compared with fourth quarter 2013 adjusted operating income. Excluding
special gains and charges and at fixed currency rates, fourth quarter
2014 adjusted fixed currency operating income of $573 million increased
14% when compared with fourth quarter 2013 adjusted fixed currency
operating income.
Fourth quarter 2014 reported net income attributable to Ecolab increased
17% to $336 million, representing $1.10 per diluted share. Excluding
special gains and charges and discrete tax items, fourth quarter 2014
adjusted net income rose 15% to $366 million, and adjusted diluted
earnings per share increased 15% to $1.20, when compared with fourth
quarter 2013 adjusted diluted earnings per share of $1.04. Currency
translation had a negative impact of $0.04 per share on reported and
adjusted diluted earnings per share in the fourth quarter of 2014.
Segment review
Fourth quarter
2014 sales for the Global Industrial segment, when measured at fixed
currency rates, rose 4% to $1,284 million and fixed currency operating
income increased 9% to $186 million compared with the year ago period.
Fourth quarter 2014 acquisition adjusted fixed currency sales rose 2%,
led by Water; acquisition adjusted fixed currency operating income
increased 7%. Regionally, Latin America enjoyed strong growth, with
modest gains in North America and Asia Pacific, and a slight decline in
EMEA. When measured at public currency rates, Global Industrial segment
sales were $1,259 million and operating income was $182 million.
Fourth quarter 2014 sales for the Global Institutional segment, when
measured at fixed currency rates, rose 6% to $1,119 million, led by
strong Specialty sales growth. Fixed currency operating income increased
to $228 million, up 13% compared with last year. Sales for the segment
showed strong gains in North America, Asia Pacific and Latin America,
with modest gains in EMEA. When measured at public currency rates,
Global Institutional segment sales were $1,102 million and operating
income was $226 million.
Fourth quarter 2014 sales for the Global Energy segment, when measured
at fixed currency rates, grew 11% to $1,138 million in the fourth
quarter 2014 reflecting strong upstream and solid downstream growth.
Fixed currency operating income increased 13% to $172 million. When
measured at public currency rates, Global Energy segment sales were
$1,131 million and operating income was $171 million.
Other segment sales, when measured at fixed currency rates, increased 5%
to $190 million in the fourth quarter led by Pest. Fixed currency
operating income increased 22% to $32 million. When measured at public
currency rates, Other segment reported sales were $188 million and
reported operating income was $31 million.
The Corporate segment includes $45 million and $49 million for the
fourth quarter of 2014 and 2013, respectively, primarily related to
amortization from the Nalco merger intangible assets. The Corporate
segment also includes special gains and charges. Special gains and
charges for the fourth quarter 2014 were a net charge of $45 million
($34 million after-tax) and primarily consisted of restructuring
charges. Special gains and charges for the fourth quarter 2013 were $40
million ($33 million after-tax).
The reported tax rate for the fourth quarter 2014 was 25.1% and compared
with 28.1% in the fourth quarter 2013. Excluding the tax rate impact of
special gains and charges and discrete tax items, the adjusted income
tax rate was 25.7% in the fourth quarter 2014 compared with 27.5% for
the same period last year. The improved tax rate was primarily the
result of passage of the extension of the U.S. R&D tax credit in the
quarter, global tax planning actions and the geographic mix of income.
Ecolab reacquired 0.7 million shares of its common stock during the
fourth quarter.
Share repurchase
As balance
sheet leverage ratios return to our preferred range and free cash flow
remains strong, Ecolab plans to repurchase approximately $1 billion of
its shares. Ecolab expects to conduct its purchases under the planned
program in the open market; in privately negotiated transactions from
time to time, depending on the market conditions; and through purchases
made in accordance with Rule 10b5-1 of the Securities Exchange Act of
1934. The repurchase is expected to be completed by mid-2016. No further
details regarding the planned repurchase program were announced.
Business Outlook
2015
Ecolab
expects 2015 full-year adjusted earnings per share to rise to the $4.50
to $4.70 range, representing an 8% to 12% increase over the prior year.
When compared with the 2014 performance, we expect further solid fixed
currency sales growth with improved growth in our Institutional,
Industrial and Other segments and slower fixed currency sales gains in
our Energy segment. We look for an improved adjusted gross margin, with
a comparable selling, general and administrative (SG&A) ratio to sales,
slightly lower interest expense and a similar adjusted tax rate versus
2014. Pension expense is expected to be an unfavorable $0.09 per share
in 2015. We expect a lower number of shares outstanding for the full
year. At current rates of exchange, we expect foreign currency to have
an unfavorable impact on sales of five to six percentage points and be
unfavorable to earnings per share by an estimated $0.26. Net, we expect
solid fixed currency sales growth, improved efficiency, cost savings and
merger synergies to more than offset impacts from unfavorable currency
exchange and pension expense and produce another strong full-year
adjusted earnings per share increase in 2015. Please note our tax rate
forecast for the full year assumes passage of the R&D tax credit before
year end.
Our detailed outlook for the full year 2015 is as follows:
Adjusted Gross Margin, excluding special gains and charges
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47% - 48%
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SG&A % of Sales
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approx. 32%
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Interest expense, net
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$240 million to $250 million
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Adjusted tax rate
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approx. 27%
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Adjusted EPS, excluding special gains and charges
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$4.50 - $4.70
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Diluted shares
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approx. 303 million
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Special gains and charges for the full-year 2015 are expected to be
approximately a $0.20 per share net charge, primarily driven by
restructuring charges and integration costs. Special gains and charges
do not reflect the impact of discrete tax items or a potential
Venezuelan devaluation charge.
2015 – First Quarter
Ecolab expects
first quarter adjusted earnings per share in the $0.78 to $0.83 range,
representing a 5% to 12% increase versus a very strong year-ago period,
when adjusted earnings per share rose 23% to $0.74.
Our detailed outlook for the first quarter 2015 is as follows:
Adjusted Gross Margin, excluding special gains and charges
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approx. 46%
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SG&A % of Sales
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approx. 34%
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Interest expense, net
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$60 million to $65 million
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Adjusted tax rate
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27% - 28%
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Adjusted EPS, excluding special gains and charges
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$0.78 - $0.83
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Diluted shares
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approx. 304 million
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We expect first quarter 2015 special gains and charges, including
restructuring charges and integration costs, to be a net charge of
approximately $0.08 per share. Amounts do not reflect future discrete
tax items for the first quarter of 2015 that are not currently
quantifiable or the impact of a potential Venezuelan devaluation charge.
Reported first quarter 2014 diluted earnings per share of $0.62 included
special gains and charges and discrete tax items. Excluding these items,
first quarter 2014 adjusted diluted earnings per share were $0.74.
About Ecolab
A trusted partner at more than one million
customer locations, Ecolab (ECL) is the global leader in water, hygiene
and energy technologies and services that protect people and vital
resources. With 2014 sales of $14 billion and 47,000 associates, Ecolab
delivers comprehensive solutions and on-site service to promote safe
food, maintain clean environments, optimize water and energy use and
improve operational efficiencies for customers in the food, healthcare,
energy, hospitality and industrial markets in more than 170 countries
around the world. For more Ecolab news and information, visit www.ecolab.com.
Ecolab will host a live webcast to review the fourth quarter earnings
announcement and earnings guidance today at 1:00 p.m. Eastern Time. The
webcast, along with related presentation slides, will be available to
the public on Ecolab's website at www.ecolab.com/investor.
A replay of the webcast and related materials will be available at that
site. Listening to the webcast requires Internet access, the Windows
Media Player or other compatible streaming media player.
Cautionary Statements Regarding Forward-Looking Information
This
communication contains certain statements relating to future events and
our intentions, beliefs, expectations and predictions for the future
which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Words or phrases such
as “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “we believe,” “we expect,” “estimate,” “project,” “may,”
“will,” “intend,” “plan,” “believe,” “target,” “forecast” (including the
negative or variations thereof) or similar terminology used in
connection with any discussion of future plans, actions or events
generally identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements regarding our
financial and business performance and prospects, including impact of
oil prices, forecasted 2015 first quarter and full-year business
results, including sales growth, adjusted gross margin, SG&A ratios to
sales, interest expense, adjusted effective tax rate, adjusted earnings
per share and diluted shares outstanding; special gains and charges,
including restructuring charges and integration costs; market
conditions; operational improvements; cost savings; merger synergies;
currency exchange, including the impact of a strong U.S. dollar; pension
expense; and share repurchase and acquisition activity. These statements
are based on the current expectations of management of the company.
There are a number of risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements
included in this communication. In particular, the ultimate results of
any restructuring, integration and business improvement actions,
including cost synergies, depend on a number of factors, including the
development of final plans, the impact of local regulatory requirements
regarding employee terminations, the time necessary to develop and
implement the restructuring and other business improvement initiatives
and the level of success achieved through such actions in improving
competitiveness, efficiency and effectiveness.
Additional risks and uncertainties that may affect operating results and
business performance are set forth under Item 1A of our most recent Form
10-K, and our other public filings with the Securities and Exchange
Commission (the "SEC") and include the vitality of the markets we serve,
including the impact of oil price fluctuations on the markets served by
our Global Energy segment; the impact of economic factors such as the
worldwide economy, capital flows, interest rates and foreign currency
risk, including a potential currency devaluation in Venezuela and
reduced sales and earnings in other countries resulting from the
weakening of local currencies versus the U.S. dollar; our ability to
attract and retain high caliber management talent to lead our business;
our ability to execute key business initiatives; potential information
technology infrastructure failures; exposure to global economic,
political and legal risks related to our international operations
including with respect to our operations in Russia; the costs and
effects of complying with laws and regulations, including those relating
to the environment and to the manufacture, storage, distribution, sale
and use of our products; the occurrence of litigation or claims,
including related to the Deepwater Horizon oil spill; our ability to
develop competitive advantages through innovation; difficulty in
procuring raw materials or fluctuations in raw material costs; our
substantial indebtedness; our ability to acquire complementary
businesses and to effectively integrate such businesses; restraints on
pricing flexibility due to contractual obligations; pressure on
operations from consolidation of customers, vendors or competitors;
public health epidemics; potential losses arising from the impairment of
goodwill or other assets; potential loss of deferred tax assets;
potential chemical spill or release; potential class action lawsuits;
the loss or insolvency of a major customer or distributor; acts of war
or terrorism; natural or man-made disasters; water shortages; severe
weather conditions; and other uncertainties or risks reported from time
to time in our reports to the SEC. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events
discussed in this communication may not occur. We caution that undue
reliance should not be placed on forward-looking statements, which speak
only as of the date made. Ecolab does not undertake, and expressly
disclaims, any duty to update any forward-looking statement whether as a
result of new information, future events or changes in expectations,
except as required by law.
Non-GAAP Financial Information
This news release and certain
of the accompanying tables include financial measures that have not been
calculated in accordance with accounting principles generally accepted
in the U.S. (GAAP). These non-GAAP financial measures include fixed
currency sales, acquisition adjusted fixed currency sales, adjusted
gross margins, fixed currency operating income, adjusted operating
income, adjusted fixed currency operating income, adjusted fixed
currency operating income adjusted for acquisitions, adjusted tax rate,
adjusted net income and adjusted diluted earnings per share.
We provide these measures as additional information regarding our
operating results. We use these non-GAAP measures internally to evaluate
our performance and in making financial and operational decisions,
including with respect to incentive compensation. We believe that our
presentation of these measures provides investors with greater
transparency with respect to our results of operations and that these
measures are useful for period-to-period comparison of results.
We include in special gains and charges items that are unusual in
nature, and significant in amount. In order to better allow investors to
compare underlying business performance period-to-period, we provide
adjusted gross margin, adjusted operating income, adjusted net income
attributable to Ecolab and adjusted diluted earnings per share, which
excludes special gains and charges and discrete tax items.
The adjusted effective tax rate measure promotes period-to-period
comparability of the underlying effective tax rate because it excludes
the tax rate impact of special gains and charges and discrete tax items
which do not necessarily reflect costs associated with historical trends
or expected future results.
We evaluate the performance of our international operations based on
fixed currency rates of foreign exchange. Fixed currency sales,
acquisition adjusted fixed currency sales, fixed currency operating
income, adjusted fixed currency operating income and adjusted fixed
currency operating income adjusted for acquisitions measures eliminate
the impact of exchange rate fluctuations on our international sales,
acquisition adjusted sales, operating income, adjusted operating income
and acquisition adjusted operating income, respectively, and promote a
better understanding of our sales and operating income trends from
underlying business performance. Fixed currency amounts included in this
release are based on translation into U.S. dollars at the fixed foreign
currency exchange rates established by management at the beginning of
2014.
Acquisition adjusted growth rates generally exclude the results of any
acquired business for the first twelve months post acquisition and
exclude the results of any divested businesses for the previous twelve
months prior to divestiture. Champion is an exception. Due to the rapid
pace at which the business has been integrated within our Global Energy
segment, including all customer selling activity, discrete financial
data specific to the legacy Champion business is no longer available
post acquisition. As such, to allow for the most meaningful
period-over-period comparison, specific to the Champion transaction,
Champion’s results for the comparable period of the prior year have been
included for purposes of providing acquisition adjusted growth rates.
These non-GAAP financial measures are not in accordance with, or an
alternative to, GAAP and may be different from non-GAAP measures used by
other companies. Investors should not rely on any single financial
measure when evaluating our business. We recommend that investors view
these measures in conjunction with the GAAP measures included in this
news release. A reconciliation of reported diluted earnings per share to
adjusted diluted earnings per share is provided in the table
"Supplemental Diluted Earnings per Share Information" included in this
news release.
(ECL-E)
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ECOLAB INC.
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CONSOLIDATED STATEMENT OF INCOME
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FOURTH QUARTER & TWELVE MONTHS ENDED DECEMBER 31
|
(unaudited)
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|
|
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|
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|
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|
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|
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Fourth Quarter Ended
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
|
|
|
December 31
|
|
|
%
|
|
|
December 31
|
|
|
%
|
(millions, except per share)
|
|
|
2014
|
|
|
2013
|
|
|
Change
|
|
|
2014
|
|
|
2013
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
3,680.8
|
|
|
|
$
|
3,559.5
|
|
|
|
3
|
%
|
|
|
$
|
14,280.5
|
|
|
|
$
|
13,253.4
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (1)
|
|
|
|
1,979.9
|
|
|
|
|
1,945.2
|
|
|
|
2
|
%
|
|
|
|
7,679.1
|
|
|
|
|
7,161.2
|
|
|
|
7
|
%
|
Selling, general and administrative expenses
|
|
|
|
1,142.1
|
|
|
|
|
1,123.5
|
|
|
|
2
|
%
|
|
|
|
4,577.6
|
|
|
|
|
4,360.3
|
|
|
|
5
|
%
|
Special (gains) and charges (1)
|
|
|
|
38.3
|
|
|
|
|
20.2
|
|
|
|
|
|
|
|
68.8
|
|
|
|
|
171.3
|
|
|
|
|
Operating income
|
|
|
|
520.5
|
|
|
|
|
470.6
|
|
|
|
11
|
%
|
|
|
|
1,955.0
|
|
|
|
|
1,560.6
|
|
|
|
25
|
%
|
Interest expense, net (1)
|
|
|
|
62.0
|
|
|
|
|
67.6
|
|
|
|
-8
|
%
|
|
|
|
256.6
|
|
|
|
|
262.3
|
|
|
|
-2
|
%
|
Income before income taxes
|
|
|
|
458.5
|
|
|
|
|
403.0
|
|
|
|
14
|
%
|
|
|
|
1,698.4
|
|
|
|
|
1,298.3
|
|
|
|
31
|
%
|
Provision for income taxes
|
|
|
|
115.2
|
|
|
|
|
113.4
|
|
|
|
2
|
%
|
|
|
|
476.2
|
|
|
|
|
324.7
|
|
|
|
47
|
%
|
Net income including noncontrolling interest
|
|
|
|
343.3
|
|
|
|
|
289.6
|
|
|
|
19
|
%
|
|
|
|
1,222.2
|
|
|
|
|
973.6
|
|
|
|
26
|
%
|
Less: Net income (loss) attributable to noncontrolling interest (1)
|
|
|
|
7.8
|
|
|
|
|
2.5
|
|
|
|
|
|
|
|
19.4
|
|
|
|
|
5.8
|
|
|
|
|
Net income attributable to Ecolab
|
|
|
$
|
335.5
|
|
|
|
$
|
287.1
|
|
|
|
17
|
%
|
|
|
$
|
1,202.8
|
|
|
|
$
|
967.8
|
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings attributable to Ecolab per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
1.12
|
|
|
|
$
|
0.95
|
|
|
|
18
|
%
|
|
|
$
|
4.01
|
|
|
|
$
|
3.23
|
|
|
|
24
|
%
|
Diluted
|
|
|
$
|
1.10
|
|
|
|
$
|
0.93
|
|
|
|
18
|
%
|
|
|
$
|
3.93
|
|
|
|
$
|
3.16
|
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
300.1
|
|
|
|
|
301.2
|
|
|
|
0
|
%
|
|
|
|
300.1
|
|
|
|
|
299.9
|
|
|
|
0
|
%
|
Diluted
|
|
|
|
305.6
|
|
|
|
|
307.5
|
|
|
|
-1
|
%
|
|
|
|
305.9
|
|
|
|
|
305.9
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Special (gains) and charges in the Consolidated Statement of
Income above include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
$
|
6.4
|
|
|
|
$
|
1.1
|
|
|
|
|
|
|
$
|
13.9
|
|
|
|
$
|
6.6
|
|
|
|
|
Recognition of inventory fair value step-up
|
|
|
|
-
|
|
|
|
|
18.6
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
36.6
|
|
|
|
|
Subtotal
|
|
|
|
6.4
|
|
|
|
|
19.7
|
|
|
|
|
|
|
|
14.3
|
|
|
|
|
43.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special (gains) and charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
|
34.3
|
|
|
|
|
8.0
|
|
|
|
|
|
|
|
69.2
|
|
|
|
|
83.4
|
|
|
|
|
Champion acquisition and integration costs
|
|
|
|
4.1
|
|
|
|
|
7.2
|
|
|
|
|
|
|
|
19.9
|
|
|
|
|
49.7
|
|
|
|
|
Nalco merger and integration costs
|
|
|
|
3.7
|
|
|
|
|
5.1
|
|
|
|
|
|
|
|
8.5
|
|
|
|
|
18.6
|
|
|
|
|
Venezuela currency devaluation
|
|
|
|
-
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
-
|
|
|
|
|
23.2
|
|
|
|
|
Gain on sale of businesses, litigation activity, settlements and
other gains
|
|
|
|
(3.8
|
)
|
|
|
|
-
|
|
|
|
|
|
|
|
(28.8
|
)
|
|
|
|
(3.6
|
)
|
|
|
|
Subtotal
|
|
|
|
38.3
|
|
|
|
|
20.2
|
|
|
|
|
|
|
|
68.8
|
|
|
|
|
171.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income subtotal
|
|
|
|
44.7
|
|
|
|
|
39.9
|
|
|
|
|
|
|
|
83.1
|
|
|
|
|
214.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition debt costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Venezuela currency devaluation
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
44.7
|
|
|
|
$
|
39.9
|
|
|
|
|
|
|
$
|
83.1
|
|
|
|
$
|
216.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
Effective in the first quarter of 2014, certain
employee-related costs from our recently acquired businesses that were
historically presented within cost of sales were revised and
reclassified to SG&A. These immaterial revisions were made to conform
with management's view of the respective costs within the global
organizational model. Results for 2013 have been revised to conform to
the current year presentation. The reclassification had no impact on net
earnings, financial position or cash flows.
|
ECOLAB INC.
|
REPORTABLE SEGMENT INFORMATION
|
FOURTH QUARTER & TWELVE MONTHS ENDED DECEMBER 31
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
|
Twelve Months Ended
|
|
|
|
December 31
|
|
|
December 31
|
(millions)
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Industrial
|
|
|
$
|
1,284.0
|
|
|
|
$
|
1,238.7
|
|
|
|
4
|
%
|
|
|
$
|
4,886.7
|
|
|
|
$
|
4,742.8
|
|
|
|
3
|
%
|
Global Institutional
|
|
|
|
1,118.7
|
|
|
|
|
1,060.3
|
|
|
|
6
|
%
|
|
|
|
4,314.5
|
|
|
|
|
4,152.5
|
|
|
|
4
|
%
|
Global Energy
|
|
|
|
1,138.3
|
|
|
|
|
1,027.0
|
|
|
|
11
|
%
|
|
|
|
4,283.3
|
|
|
|
|
3,427.3
|
|
|
|
25
|
%
|
Other
|
|
|
|
190.1
|
|
|
|
|
181.1
|
|
|
|
5
|
%
|
|
|
|
750.3
|
|
|
|
|
709.3
|
|
|
|
6
|
%
|
Subtotal at fixed currency rates
|
|
|
|
3,731.1
|
|
|
|
|
3,507.1
|
|
|
|
6
|
%
|
|
|
|
14,234.8
|
|
|
|
|
13,031.9
|
|
|
|
9
|
%
|
Currency impact
|
|
|
|
(50.3
|
)
|
|
|
|
52.4
|
|
|
|
|
|
|
|
45.7
|
|
|
|
|
221.5
|
|
|
|
|
Consolidated
|
|
|
$
|
3,680.8
|
|
|
|
$
|
3,559.5
|
|
|
|
3
|
%
|
|
|
$
|
14,280.5
|
|
|
|
$
|
13,253.4
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Industrial
|
|
|
$
|
185.9
|
|
|
|
$
|
170.0
|
|
|
|
9
|
%
|
|
|
$
|
642.6
|
|
|
|
$
|
603.0
|
|
|
|
7
|
%
|
Global Institutional
|
|
|
|
228.2
|
|
|
|
|
202.4
|
|
|
|
13
|
%
|
|
|
|
821.2
|
|
|
|
|
768.2
|
|
|
|
7
|
%
|
Global Energy
|
|
|
|
172.4
|
|
|
|
|
152.7
|
|
|
|
13
|
%
|
|
|
|
634.9
|
|
|
|
|
458.9
|
|
|
|
38
|
%
|
Other
|
|
|
|
31.9
|
|
|
|
|
26.1
|
|
|
|
22
|
%
|
|
|
|
116.5
|
|
|
|
|
104.1
|
|
|
|
12
|
%
|
Corporate
|
|
|
|
(89.8
|
)
|
|
|
|
(89.1
|
)
|
|
|
|
|
|
|
(263.4
|
)
|
|
|
|
(409.1
|
)
|
|
|
|
Subtotal at fixed currency rates
|
|
|
|
528.6
|
|
|
|
|
462.1
|
|
|
|
14
|
%
|
|
|
|
1,951.8
|
|
|
|
|
1,525.1
|
|
|
|
28
|
%
|
Currency impact
|
|
|
|
(8.1
|
)
|
|
|
|
8.5
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
35.5
|
|
|
|
|
Consolidated
|
|
|
$
|
520.5
|
|
|
|
$
|
470.6
|
|
|
|
11
|
%
|
|
|
$
|
1,955.0
|
|
|
|
$
|
1,560.6
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
Effective in the first quarter of 2014, Ecolab made
immaterial changes to its reportable segments, including the movement of
certain customers between reportable segments and updates to the
internal allocations of certain supply chain and SG&A expenses related
to our centralized functions. Results for 2013 have been revised to
conform to the current year presentation and are reflected in the above
table for both 2013 and 2014 results.
The Corporate segment includes amortization from the Nalco merger
intangible assets and in 2013 certain integration costs for both the
Nalco and Champion transactions. The Corporate segment also includes
special (gains) and charges reported on the Consolidated Statement of
Income.
We evaluate the performance of our international operations based on
fixed currency exchange rates, which eliminate the impact of exchange
rate fluctuations on our international operations. The difference
between the fixed currency exchange rates and the actual currency
exchange rates is reported as “currency impact” in the above tables.
|
ECOLAB INC.
|
CONSOLIDATED BALANCE SHEET
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
December 31
|
(millions)
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
209.6
|
|
|
|
$
|
339.2
|
|
Accounts receivable, net
|
|
|
|
2,626.7
|
|
|
|
|
2,568.0
|
|
Inventories
|
|
|
|
1,466.9
|
|
|
|
|
1,321.9
|
|
Deferred income taxes
|
|
|
|
183.2
|
|
|
|
|
163.0
|
|
Other current assets
|
|
|
|
384.7
|
|
|
|
|
306.3
|
|
Total current assets
|
|
|
|
4,871.1
|
|
|
|
|
4,698.4
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
3,050.6
|
|
|
|
|
2,882.0
|
|
Goodwill
|
|
|
|
6,717.0
|
|
|
|
|
6,862.9
|
|
Other intangible assets, net
|
|
|
|
4,456.8
|
|
|
|
|
4,785.3
|
|
Other assets
|
|
|
|
371.2
|
|
|
|
|
407.9
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$
|
19,466.7
|
|
|
|
$
|
19,636.5
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term debt
|
|
|
$
|
1,705.4
|
|
|
|
$
|
861.0
|
|
Accounts payable
|
|
|
|
1,162.4
|
|
|
|
|
1,021.9
|
|
Compensation and benefits
|
|
|
|
560.4
|
|
|
|
|
571.1
|
|
Income taxes
|
|
|
|
88.6
|
|
|
|
|
80.9
|
|
Other current liabilities
|
|
|
|
869.8
|
|
|
|
|
953.8
|
|
Total current liabilities
|
|
|
|
4,386.6
|
|
|
|
|
3,488.7
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
4,864.0
|
|
|
|
|
6,043.5
|
|
Postretirement health care and pension benefits
|
|
|
|
1,188.5
|
|
|
|
|
795.6
|
|
Other liabilities
|
|
|
|
1,645.5
|
|
|
|
|
1,899.3
|
|
Total liabilities
|
|
|
|
12,084.6
|
|
|
|
|
12,227.1
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common stock
|
|
|
|
347.7
|
|
|
|
|
345.1
|
|
Additional paid-in capital
|
|
|
|
4,874.5
|
|
|
|
|
4,692.0
|
|
Retained earnings
|
|
|
|
5,555.1
|
|
|
|
|
4,699.0
|
|
Accumulated other comprehensive loss
|
|
|
|
(951.9
|
)
|
|
|
|
(305.2
|
)
|
Treasury stock
|
|
|
|
(2,509.5
|
)
|
|
|
|
(2,086.6
|
)
|
Total Ecolab shareholders' equity
|
|
|
|
7,315.9
|
|
|
|
|
7,344.3
|
|
Noncontrolling interest
|
|
|
|
66.2
|
|
|
|
|
65.1
|
|
Total equity
|
|
|
|
7,382.1
|
|
|
|
|
7,409.4
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
$
|
19,466.7
|
|
|
|
$
|
19,636.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECOLAB INC.
|
SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The table below provides a reconciliation of diluted earnings per
share, as reported, to the non-GAAP measure of adjusted diluted
earnings per share.
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First
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Second
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Six
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Third
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Nine
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Fourth
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Quarter
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Quarter
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Months
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Quarter
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Months
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Quarter
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Year
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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Mar. 31
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June 30
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June 30
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Sept. 30
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Sept. 30
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Dec. 31
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Dec. 31
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2013
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2013
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2013
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2013
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2013
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2013
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2013
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Diluted earnings per share, as reported (U.S. GAAP)
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$
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0.53
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$
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0.69
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$
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1.23
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$
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1.00
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$
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2.23
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$
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0.93
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$
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3.16
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Adjustments:
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Special (gains) and charges (1)
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0.12
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0.21
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0.33
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0.07
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0.40
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0.11
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0.51
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Tax expense (benefits) (2)
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(0.05
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(0.04
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(0.09
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)
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(0.04
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)
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(0.13
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(0.01
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(0.14
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)
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Adjusted diluted earnings per share (Non-GAAP)
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$
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0.60
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$
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0.86
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$
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1.47
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$
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1.04
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$
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2.50
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$
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1.04
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$
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3.54
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First
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Second
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Six
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Third
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Nine
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Fourth
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Quarter
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Quarter
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Months
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Quarter
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Months
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Quarter
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Year
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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Ended
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Mar. 31
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June 30
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June 30
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Sept. 30
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Sept. 30
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Dec. 31
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Dec. 31
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2014
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2014
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2014
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2014
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2014
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2014
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2014
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Diluted earnings per share, as reported (U.S. GAAP)
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$
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0.62
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$
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1.02
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$
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1.64
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$
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1.19
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$
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2.83
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$
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1.10
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$
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3.93
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Adjustments:
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Special (gains) and charges (3)
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0.09
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(0.02
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0.07
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0.02
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0.09
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0.11
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0.20
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Tax expense (benefits) (4)
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0.03
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0.03
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0.06
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(0.01
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0.05
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(0.01
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0.04
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Adjusted diluted earnings per share (Non-GAAP)
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$
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0.74
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$
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1.03
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$
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1.77
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$
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1.21
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$
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2.98
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$
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1.20
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$
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4.18
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Per share amounts do not necessarily sum due to changes in shares
outstanding and rounding.
(1) Special (gains) and charges for 2013 include restructuring charges
of $14.1 million, $33.7 million, $8.9 million and $10.2 million, net of
tax, in the first, second, third and fourth quarters, respectively.
Special (gains) and charges for 2013 also include $7.1 million, $17.1
million, $6.7 million and $4.6 million of costs, net of tax, in the
first, second, third and fourth quarters of 2013, respectively, related
to Champion acquisition and integration costs. Special (gains) and
charges for 2013 also include $10.5 million, $3.5 million and $11.9
million, net of tax, in the second, third and fourth quarters,
respectively, for the recognition of Champion inventory fair value
step-up. Special (gains) and charges for 2013 also include $2.7 million,
$3.0 million, $3.5 million and $5.0 million of costs, net of tax, in the
first, second, third and fourth quarters of 2013, respectively, related
to Nalco integration costs. Special (gains) and charges for the first
and fourth quarters of 2013 also include $15.0 million and $1.2 million,
net of tax, for the devaluation of Venezuelan currency. Special (gains)
and charges for the first quarter of 2013 also includes a net gain of
$2.5 million, net of tax, related to other items.
(2) The first quarter 2013 discrete tax net benefit of $15.5 million is
driven primarily by net benefits related to the remeasurement of certain
deferred tax assets and liabilities and the retroactive extension during
first quarter 2013 of the U.S. R&D 2012 credit. The second quarter 2013
discrete tax net benefit of $12.1 million is driven primarily by the
release of a valuation allowance related to the realizability of foreign
deferred tax assets, law changes within a foreign jurisdiction and
recognition of settlements related to our 2009 through 2010 U.S. income
tax returns, offset partially by foreign audit adjustments. The third
quarter 2013 discrete tax net benefit of $12.5 million primarily
includes recognizing adjustments from filing our 2012 U.S. federal tax
return and the recognition of settlements related to prior year income
tax audits, partially offset by the remeasurement of certain deferred
tax assets. The fourth quarter 2013 discrete tax net benefit of $1.6
million relates primarily to U.S. and foreign audit settlements and
adjustments and net benefits from filing our 2012 U.S. state tax
returns, partially offset by net adjustments to deferred tax assets and
liabilities.
(3) Special (gains) and charges for 2014 include restructuring charges
of $22.8 million, $6.1 million, $4.1 million and $32.0, net of tax, in
the first, second, third and fourth quarters, respectively. Special
(gains) and charges for 2014 also include $4.1 million, $3.4 million,
$2.7 million and $2.6 of costs, net of tax, in the first, second, third
and fourth quarters, respectively, related to Champion integration
costs. Special (gains) and charges for 2014 also include $0.9 million,
$1.1 million, $2.0 million and $3.0 million of costs, net of tax, in the
first, second, third and fourth quarters, respectively, related to Nalco
integration costs. Special (gains) and charges for 2014 also include a
gain of $0.5 million, net of tax, in the first quarter related to other
items, a gain of $15.9 million, net of tax, in the second quarter
related to a favorable licensing settlement and other settlement gains,
a gain of $3.1 million, net of tax, in the third quarter related to the
consolidation of a subsidiary and removal of the corresponding equity
method investment and a gain of $3.8 million, net of tax, in the fourth
quarter related to the sale of a business.
(4) The first quarter 2014 discrete tax net expense of $9.9 million is
driven primarily by the rate differential on certain prior year shared
costs, the remeasurement of certain deferred tax assets and liabilities
resulting from a change in the state tax rate for certain entities
following the merger of Champion operations and the change of a
valuation allowance related to the realizability of foreign deferred tax
assets, which collectively more than offset benefits from a foreign
country audit settlement. The second quarter 2014 discrete tax net
expense of $8.3 million is driven primarily by an update to non-current
tax liabilities for global tax audits and an adjustment related to the
re-characterization of intercompany payments between our U.S. and
foreign affiliates which more than offset the change of valuation
allowances based on the realizability of foreign deferred tax assets.
The third quarter 2014 discrete tax net benefit of $1.9 million is
driven primarily by recognizing adjustments from filing our 2013 federal
tax return, offset partially by the net impact of foreign audits
settlements and adjustments. The fourth quarter discrete tax net benefit
of $3.1 million is driven primarily by the remeasurement of certain
deferred tax assets and liabilities, resulting from changes in our
deferred state tax rate and local country tax rates.
Copyright Business Wire 2015