Ecolab Delivers Strong Fourth Quarter Increase

Ecolab's reported net sales increased 5% to $1.6 billion in the fourth quarter of 2009; measured in fixed currencies, sales rose 2%. Reported diluted earnings per share increased 45% to $0.48.

12 Feb 2010 --- Ecolab Inc. has reported strong fourth quarter earnings as results were led by new account gains, pricing, cost-savings actions and favorable raw material comparisons.

Ecolab's reported net sales increased 5% to $1.6 billion in the fourth quarter of 2009; measured in fixed currencies, sales rose 2%. Excluding the impact of a change in distributor incentive programs and acquisitions and divestitures, fixed currency sales increased 1%. Net income increased 45% to $116 million. Reported diluted earnings per share increased 45% to $0.48.

Fourth quarter 2009 and 2008 results included special gains and charges and discrete tax items. Excluding those items, adjusted fourth quarter 2009 diluted earnings per share were $0.55, a 22% increase over adjusted fourth quarter 2008 diluted earnings per share of $0.45. The fourth quarter 2009 also included the effects of a change in distributor incentive programs made earlier in the year; this reversed a reduction in sales and earnings in the first quarter 2009 and increased fourth quarter earnings by approximately $0.03 per share.

Fourth quarter 2009 sales for Ecolab's U.S. Cleaning & Sanitizing operations rose 4% to $676 million, led by double-digit gains from Kay and Healthcare. Ecolab's U.S. Cleaning & Sanitizing operating income rose 29% to $125 million. Excluding the impact of the change in the Institutional distributor incentive program, U.S. Cleaning & Sanitizing sales increased 2% and operating income grew 19%.

U.S. Other Services sales declined 3% to $109 million in the fourth quarter. However, operating income increased 14% to $16 million.

Sales of Ecolab's International operations, when measured in fixed currencies, rose 1% to $701 million in the fourth quarter. Canada and Asia Pacific enjoyed strong sales growth. Fixed currency operating income increased 5% to $64 million. When measured at public currency rates, International sales increased 8% and operating income grew 13%. Currency translation had a favorable impact on net income growth of approximately $3 million for the fourth quarter of 2009.

The reported income tax rate for the fourth quarter 2009 was 35.6% compared to the reported tax rate of 35.5% for the fourth quarter 2008. Excluding the tax rate impact of special gains and charges and discrete tax items from both periods, the adjusted effective income tax rate for the fourth quarter 2009 was 31.9% compared with 30.5% in the fourth quarter 2008. The increase in the adjusted fourth quarter effective tax rate was primarily due to lower tax benefits derived from our international operations. The adjusted effective tax rate for the full year 2009, excluding the impact of special gains and charges and discrete tax items, was 31.7% and comparable to our 31.6% tax rate in 2008.

The Corporate segment includes special gains and charges, which are reported as a separate line item in the income statement. Special gains and charges for the fourth quarter 2009 of $13 million included a restructuring charge of $11 million ($8 million after tax) for actions announced in January 2009 that were taken primarily to optimize our workforce as well as other costs to optimize our business structure. Special gains and charges for the fourth quarter 2008 included a charge of $19 million for the write down of investments in an energy management business and the closure of two small non-strategic businesses. The Corporate segment also includes investments in the development of business systems and other corporate investments we are making as part of our ongoing effort to improve our efficiency and returns.

Ecolab reacquired 1.2 million shares of its common stock during the fourth quarter under its share repurchase program.

Commenting on the quarter, Douglas M. Baker, Jr., Ecolab's Chairman, President and Chief Executive Officer said, "We are proud of our accomplishments in 2009. The severe global recession had a significant impact on our foodservice and hospitality markets and customers, and made it one of the toughest years in memory for all of us. We took aggressive actions in response, working closely with our customers to provide them with effective cost-saving solutions for their cleaning and sanitizing needs, driving hard to win new accounts, reducing our costs and streamlining our processes. These actions were effective as we strengthened our customer relationships and grew our business, and made the right investments to accelerate our growth. My thanks to our many customers for their business, and to our outstanding team of Ecolab associates who worked hard to achieve these results.

"While we do not expect a significant rebound in our end markets in 2010, we have seen a clear bottoming. We have moved fully onto offense and will drive to achieve superior results for our customers and shareholders. We are focused on delivering double-digit earnings per share growth in 2010. We plan to build momentum through the year by driving share in our core markets; continuing the recent acceleration in future growth investments, including our healthcare, water and waste management, China and Latin America businesses; making significant investments in our sales and service team and field technology; and continuing our approach to doing what is right for our business. We also know our opportunity remains abundant. We are the leader in a huge global market, with tremendous growth opportunities in every one of our businesses. We have a rich technology base from which we will deliver more innovative solutions to customer needs. And we have a terrific team of associates whose creative and bold approach to solving problems continues to fuel our long term growth. The year before us will have its challenges, but we have the right tools, the right people and the right plans to deliver another year of superior service to our customers and superior returns to our shareholders."

Ecolab expects adjusted earnings per share, which exclude special gains and charges and discrete tax items, for the full year ending December 31, 2010 to be in the $2.17 to $2.25 range. Currently quantifiable special gains and charges for 2010 are expected to be approximately $0.03 per share unfavorable, including $0.02 per share related to the devaluation of the Venezuelan currency in the first quarter. Ecolab expects additional charges may be incurred during the year reflecting efforts to be undertaken to drive efficiencies in the business, though 2010 special gains and charges are expected to be dramatically lower than the $0.24 per share unfavorable reported in 2009. Amounts related to discrete tax items for 2010, if any, are not currently quantifiable.