Annual Reports

 
Quarterly Reports

  • 10-Q (Nov 2, 2017)
  • 10-Q (Aug 3, 2017)
  • 10-Q (May 4, 2017)
  • 10-Q (Nov 3, 2016)
  • 10-Q (Aug 4, 2016)
  • 10-Q (May 5, 2016)

 
8-K

 
Other

Ecolab 10-Q 2016

Documents found in this filing:

  1. 10-Q
  2. Ex-15.1
  3. Ex-31.1
  4. Ex-32.1
  5. Ex-32.1
ecl_Current folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to              

 

Commission File No. 1-9328

 

ECOLAB INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

41-0231510

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

370 Wabasha Street N., St. Paul, Minnesota  55102

(Address of principal executive offices)(Zip Code)

 

1-800-232-6522

(Registrant’s telephone number, including area code)

 

(Not Applicable)

(Former name, former address and former fiscal year,

if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer 

 

Accelerated filer 

 

 

 

Non-accelerated filer 

 

Smaller reporting company 

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of September 30, 2016.

 

291,551,991 shares of common stock, par value $1.00 per share.

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED STATEMENT OF INCOME

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended 

 

Nine Months Ended 

 

 

September 30

 

September 30

 

(millions, except per share amounts)

2016

    

2015

    

2016

    

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$
3,386.1

 

 

 

$
3,446.4

 

 

$
9,800.7

 

 

 

$
10,133.1

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (including special charges (a))

 

1,737.2

 

 

 

1,820.0

 

 

5,153.8

 

 

 

5,391.8

 

Selling, general and administrative expenses

 

1,071.6

 

 

 

1,070.7

 

 

3,253.1

 

 

 

3,286.7

 

Special (gains) and charges

 

3.2

 

 

 

142.7

 

 

35.7

 

 

 

216.1

 

Operating income

 

574.1

 

 

 

413.0

 

 

1,358.1

 

 

 

1,238.5

 

Interest expense, net

 

64.9

 

 

 

57.6

 

 

196.3

 

 

 

181.3

 

Income before income taxes

 

509.2

 

 

 

355.4

 

 

1,161.8

 

 

 

1,057.2

 

Provision for income taxes

 

129.7

 

 

 

105.3

 

 

286.7

 

 

 

262.9

 

Net income including noncontrolling interest

 

379.5

 

 

 

250.1

 

 

875.1

 

 

 

794.3

 

Net income attributable to noncontrolling interest (including special charges (a))

 

5.4

 

 

 

(7.7)

 

 

11.8

 

 

 

1.1

 

Net income attributable to Ecolab

 

$
374.1

 

 

 

$
257.8

 

 

$
863.3

 

 

 

$
793.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings attributable to Ecolab per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$
1.28

 

 

 

$
0.87

 

 

$
2.95

 

 

 

$
2.67

 

Diluted

 

$
1.27

 

 

 

$
0.86

 

 

$
2.91

 

 

 

$
2.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$
0.350

 

 

 

$
0.330

 

 

$
1.050

 

 

 

$
0.990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

291.6

 

 

 

295.2

 

 

292.8

 

 

 

296.5

 

Diluted

 

295.7

 

 

 

300.0

 

 

297.1

 

 

 

301.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Cost of sales includes special charges of $23.8 in the third quarter of 2015, and $61.9 and $35.4 in the first nine months of 2016 and 2015, respectively. Net income (loss) attributable to noncontrolling interest includes special charges of $11.1 in both the third quarter and the first nine months of 2015.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

2


 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended 

 

Nine Months Ended 

 

(millions)

 

September 30

 

September 30

 

 

    

2016

    

2015

 

2016

    

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

 

$
379.5

 

 

 

$
250.1

 

 

$
875.1

 

 

 

$
794.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

17.2

 

 

 

(211.5)

 

 

(1.3)

 

 

 

(556.3)

 

Gain (loss) on net investment hedges

 

 

(1.2)

 

 

 

(12.0)

 

 

(29.1)

 

 

 

66.8

 

 

 

 

16.0

 

 

 

(223.5)

 

 

(30.4)

 

 

 

(489.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives and hedging instruments

 

 

(9.5)

 

 

 

7.2

 

 

(40.2)

 

 

 

12.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial loss and prior service costs included in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

net periodic pension and postretirement costs

 

 

5.6

 

 

 

7.5

 

 

16.7

 

 

 

23.6

 

Postretirement benefits changes

 

 

30.9

 

 

 

 -

 

 

30.9

 

 

 

 -

 

 

 

 

36.5

 

 

 

7.5

 

 

47.6

 

 

 

23.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

43.0

 

 

 

(208.8)

 

 

(23.0)

 

 

 

(453.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income, including noncontrolling interest

 

 

422.5

 

 

 

41.3

 

 

852.1

 

 

 

340.5

 

Comprehensive income (loss) attributable to noncontrolling interest

 

 

8.0

 

 

 

(7.0)

 

 

17.8

 

 

 

 -

 

Comprehensive income attributable to Ecolab

 

 

$
414.5

 

 

 

$
48.3

 

 

$
834.3

 

 

 

$
340.5

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3


 

CONSOLIDATED BALANCE SHEET

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(millions, except shares and per share amounts)

 

September 30

 

December 31

 

 

    

2016

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$
180.6

 

 

 

$
92.8

 

Accounts receivable, net

 

 

2,349.6

 

 

 

2,390.2

 

Inventories

 

 

1,342.4

 

 

 

1,388.2

 

Deferred income taxes

 

 

 -

 

 

 

250.0

 

Other current assets

 

 

299.4

 

 

 

326.3

 

Total current assets

 

 

4,172.0

 

 

 

4,447.5

 

Property, plant and equipment, net

 

 

3,292.9

 

 

 

3,228.3

 

Goodwill

 

 

6,515.5

 

 

 

6,490.8

 

Other intangible assets, net

 

 

3,914.3

 

 

 

4,109.2

 

Other assets

 

 

484.1

 

 

 

365.9

 

Total assets

 

 

$
18,378.8

 

 

 

$
18,641.7

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Short-term debt

 

 

$
1,571.2

 

 

 

$
2,205.3

 

Accounts payable

 

 

1,022.7

 

 

 

1,049.6

 

Compensation and benefits

 

 

505.8

 

 

 

509.0

 

Income taxes

 

 

83.3

 

 

 

52.2

 

Other current liabilities

 

 

991.0

 

 

 

948.3

 

Total current liabilities

 

 

4,174.0

 

 

 

4,764.4

 

Long-term debt

 

 

5,091.4

 

 

 

4,260.2

 

Postretirement health care and pension benefits

 

 

914.5

 

 

 

1,117.1

 

Deferred income taxes

 

 

1,030.7

 

 

 

1,281.2

 

Other liabilities

 

 

226.4

 

 

 

238.4

 

Total liabilities

 

 

11,437.0

 

 

 

11,661.3

 

 

 

 

 

 

 

 

 

 

Equity (a)

 

 

 

 

 

 

 

 

Common stock

 

 

352.3

 

 

 

350.3

 

Additional paid-in capital

 

 

5,236.1

 

 

 

5,086.1

 

Retained earnings

 

 

6,716.7

 

 

 

6,160.3

 

Accumulated other comprehensive loss

 

 

(1,452.3)

 

 

 

(1,423.3)

 

Treasury stock

 

 

(3,983.2)

 

 

 

(3,263.5)

 

Total Ecolab shareholders’ equity

 

 

6,869.6

 

 

 

6,909.9

 

Noncontrolling interest

 

 

72.2

 

 

 

70.5

 

Total equity

 

 

6,941.8

 

 

 

6,980.4

 

Total liabilities and equity

 

 

$
18,378.8

 

 

 

$
18,641.7

 

 

(a)

Common stock, 800.0 million shares authorized, $1.00 par value per share, 291.6 million shares outstanding at September 30, 2016, 296.0 million shares outstanding at December 31, 2015. Shares outstanding are net of treasury stock.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4


 

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended 

 

(millions)

 

 

September 30

 

 

 

 

2016

 

2015

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

 

 

$
875.1

 

 

 

$
794.3

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

420.9

 

 

 

422.7

 

Amortization

 

 

 

217.2

 

 

 

224.4

 

Deferred income taxes

 

 

 

(55.3)

 

 

 

(176.2)

 

Share-based compensation expense

 

 

 

67.7

 

 

 

60.1

 

Excess tax benefits from share-based payment arrangements

 

 

 

(39.5)

 

 

 

(36.2)

 

Pension and postretirement plan contributions

 

 

 

(207.0)

 

 

 

(54.0)

 

Pension and postretirement plan expense

 

 

 

43.1

 

 

 

87.0

 

Restructuring charges, net of cash paid

 

 

 

(48.1)

 

 

 

(9.9)

 

Venezuelan charges

 

 

 

 -

 

 

 

165.9

 

Loss on sale of business

 

 

 

 -

 

 

 

13.7

 

Asset charges and write-downs

 

 

 

50.9

 

 

 

 -

 

Other, net

 

 

 

11.9

 

 

 

2.2

 

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

37.8

 

 

 

(11.6)

 

Inventories

 

 

 

34.6

 

 

 

(77.4)

 

Other assets

 

 

 

(14.0)

 

 

 

(79.8)

 

Accounts payable

 

 

 

(37.6)

 

 

 

(63.9)

 

Other liabilities

 

 

 

134.0

 

 

 

133.9

 

Cash provided by operating activities

 

 

 

1,491.7

 

 

 

1,395.2

 

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

(478.6)

 

 

 

(551.6)

 

Capitalized software expenditures

 

 

 

(32.2)

 

 

 

(24.7)

 

Property and other assets sold

 

 

 

29.6

 

 

 

10.2

 

Acquisitions and investments in affiliates, net of cash acquired

 

 

 

(44.7)

 

 

 

(129.5)

 

Divestiture of businesses

 

 

 

 -

 

 

 

0.3

 

Release from acquisition related  escrow

 

 

 

 -

 

 

 

44.4

 

Restricted cash activity

 

 

 

(55.9)

 

 

 

 -

 

Settlement of net investment hedges

 

 

 

 -

 

 

 

101.8

 

Cash used for investing activities

 

 

 

(581.8)

 

 

 

(549.1)

 

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net issuances (repayments) of commercial paper and notes payable

 

 

 

(522.4)

 

 

 

(227.4)

 

Long-term debt borrowings

 

 

 

793.8

 

 

 

1,225.0

 

Long-term debt repayments

 

 

 

(130.5)

 

 

 

(884.2)

 

Reacquired shares

 

 

 

(737.8)

 

 

 

(727.8)

 

Dividends paid

 

 

 

(324.5)

 

 

 

(301.6)

 

Exercise of employee stock options

 

 

 

62.3

 

 

 

57.8

 

Excess tax benefits from share-based payment arrangements

 

 

 

39.5

 

 

 

36.2

 

Acquisition related liabilities and contingent consideration

 

 

 

(3.8)

 

 

 

(0.8)

 

Cash used for financing activities

 

 

 

(823.4)

 

 

 

(822.8)

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

1.3

 

 

 

(48.1)

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

 

87.8

 

 

 

(24.8)

 

Cash and cash equivalents, beginning of period

 

 

 

92.8

 

 

 

209.6

 

Cash and cash equivalents, end of period

 

 

 

$
180.6

 

 

 

$
184.8

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

5


 

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. CONSOLIDATED FINANCIAL INFORMATION

 

The unaudited consolidated financial information for the third quarter and nine months ended September 30, 2016 and 2015 reflect, in the opinion of company management, all adjustments necessary for a fair presentation of the financial position, results of operations, comprehensive income (loss) and cash flows of Ecolab Inc. ("Ecolab" or "the company") for the interim periods presented. Any adjustments consist of normal recurring items.

 

The financial results for any interim period are not necessarily indicative of results for the full year. The consolidated balance sheet data as of December 31, 2015 was derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto incorporated in the company's Annual Report on Form 10-K for the year ended December 31, 2015.

 

During the first quarter of 2016, the company early-adopted the accounting guidance issued in November 2015 that requires all deferred tax assets and liabilities to be classified as noncurrent on the Consolidated Balance Sheet, using the prospective application method. Periods prior to the first quarter of 2016 have not been retrospectively adjusted for adoption of this guidance. Previous guidance required the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. As a result of the new guidance, each jurisdiction now only has one net noncurrent deferred tax asset or liability. The new guidance does not change the existing requirement that only permits offsetting deferred tax assets and liabilities within a single jurisdiction.

 

With respect to the unaudited financial information of the company for the third quarter and nine months ended September 30, 2016 and 2015 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. Their separate report dated November 3, 2016 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"), for their report on the unaudited financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

 

 

2. SPECIAL (GAINS) AND CHARGES

 

Special (gains) and charges reported on the Consolidated Statement of Income include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended 

 

Nine Months Ended 

 

 

 

September 30

 

September 30

 

(millions)

    

2016

 

2015

    

2016

 

2015

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring activities

 

 

$ -

 

 

 

$ -

 

 

$
0.9

 

 

 

$
2.2

 

Energy related charges

 

 

 -

 

 

 

 -

 

 

51.0

 

 

 

 -

 

Fixed asset impairment and other inventory charges

 

 

 -

 

 

 

 -