Ecolab Inc. Reports Operating Results (10-Q)
Ecolab Inc. has a market cap of $11.42 billion; its shares were traded at around $49.49 with a P/E ratio of 22.9 and P/S ratio of 1.9. The dividend yield of Ecolab Inc. stocks is 1.3%. Ecolab Inc. had an annual average earning growth of 10.8% over the past 10 years. GuruFocus rated Ecolab Inc. the business predictability rank of 4-star.ECL is in the portfolios of Bill Frels of Mairs & Power Inc. , Bill Gates of Bill & Melinda Gates Foundation Trust, Ron Baron of Baron Funds, Mario Gabelli of GAMCO Investors, Pioneer Investments, Jeremy Grantham of GMO LLC, Dodge & Cox.
Highlight of Business Operations: · Reported diluted earnings per share attributable to Ecolab increased 23% to $0.74 for the third quarter of 2010 compared to $0.60 in the third quarter of 2009. Excluding the impact of special gains and charges, and discrete tax items, adjusted diluted earnings per share attributable to Ecolab increased 8% to $0.66 for the third quarter of 2010 compared to $0.61 in the third quarter of 2009.
Consolidated net sales for the third quarter ended September 30, 2010 were $1.6 billion, an increase of 1% compared to last year. For the first nine months of 2010, net sales increased 4% to $4.5 billion. When measured in fixed rates of currency exchange, sales increased 3% for both the third quarter and first nine months of 2010. The components of the sales increase are shown below.
In 2009 we undertook restructuring and other cost-saving actions in order to streamline operations and improve efficiency and effectiveness. We recorded restructuring expense of $5 million ($4 million after tax) or $0.02 per diluted share and $62 million ($44 million after tax) or $0.18 per diluted share during the third quarter and nine months ended September 30, 2009, respectively. Restructuring expense on the Consolidated Statement of Income has been included both as a component of cost of sales and as a component of special gains and charges, as shown in the table above. Further details related to these restructuring expenses are included in Note 2.
Net interest expense totaled $14.9 million in the third quarter of 2010, compared with $15.1 million in the third quarter of 2009. Net interest expense was $44.9 million for the first nine months of 2010 and $46.1 million for the first nine months of 2009. The decline in our net interest expense has been due to lower commercial paper borrowing rates combined with lower borrowing amounts as well as lower interest expense related to hedging activities, partially offset by lower interest income.
Discrete tax benefits for the third quarter and first nine months of 2010 were $12.1 million and $10.8 million, respectively. Third quarter 2010 tax benefits primarily include recognizing favorable settlements related to our 2002 through 2004 IRS appeals case and adjustments related to our prior year tax reserves. The discrete tax benefit for the nine month period also includes a $6 million tax benefit from the settlement of an international tax audit recorded in the first quarter, offset by a $5 million charge also recorded in the first quarter due to the passage of the U.S. Patient Protection and Affordable Care Law which changes the tax deductibility related to federal subsidies and resulted in a reduction of the value of our deferred tax assets related to the subsidies, as well as a $2 million charge in the second quarter for the impact of international tax costs from optimizing our business structure.
Discrete tax benefits for the third quarter and first nine months of 2009 were $4.8 million and $4.1 million, respectively. The 2009 discrete tax benefits are primarily due to a $4.4 million third quarter benefit related to prior year reserve adjustments.
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