EX-99.2 3 ecl-20160802ex99253d656.htm EX-99.2 ecl_Ex99_2

Exhibit 99.2

Picture 16

Second Quarter 2016
Teleconference
Supplemental Data

 

 

 

 

 

 

 

Picture 4

    

Picture 2

    

Picture 6

 

 

 

 

 

 

 

Picture 1

 

Picture 17

 

Picture 5

 

 

 

 

Cautionary Statement

Forward-Looking Information    This communication contains forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding our future financial and business performance and prospects, including forecasted 2016 third quarter and full year business and financial results, sales growth, performance against the market, investments, innovation, cost efficiencies, unfavorable foreign currency and merger and acquisition opportunities. 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. These risks and uncertainties are set forth under Item 1A of our most recent Annual Report on Form 10-K and our other our public filings with the Securities and Exchange Commission (the “SEC”) and include the vitality of the markets we serve, including the markets served by our Global Energy segment; the impact of worldwide economic factors such as the worldwide economy, credit markets, interest rates and foreign currency risk, including reduced sales and earnings in other countries resulting from the weakening of local currencies versus the U.S. dollar; exposure to economic, political and legal risks related to our international operations; the costs and effects of complying with laws and regulations relating to our operations; the occurrence of litigation or claims; and other uncertainties or risks reported from time to time in our reports to the SEC. In light of these risks, uncertainties 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 except as required by law.

Non-GAAP Financial Information    This communication includes Company information that does not conform to generally accepted accounting principles (GAAP). Management believes that a presentation of this information is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. Reconciliations of our non-GAAP measures included within this presentation are included in the “Non-GAAP Financial Measures” section of this presentation.

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

2

 

 

 

2Q 2016 Overview

◢Earnings: 

§

Reported diluted EPS $0.87, -13% versus last year; adjusted diluted EPS $1.08, flat year on year

§

Reported and adjusted diluted EPS include $0.08 (7%) unfavorable currency

◢Sales: 

§

Reported sales -2%; fixed currency sales +1%; acquisition adjusted fixed currency sales -1%

§

Solid acquisition adjusted fixed currency Global Institutional, Global Industrial and Other segment sales, +4%, offset by lower Global Energy sales 

§

Strong new business growth and new product introductions drove market share gains

◢Operating Margin: 

§

Reported operating margin -50 bps; adjusted fixed currency operating margin +30 bps 

§

Strong margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by an increase in variable compensation and a decline in Global Energy

◢Outlook:

§

Expect a solid second half with continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons

§

3Q: Adjusted diluted EPS of $1.24 to $1.32, including an approximate $0.08, or 6%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

§

2016: Adjusted diluted EPS of $4.35 to $4.50, including an approximate $0.27 to $0.32, or 6% to 7%, unfavorable impact from FX/Venezuelan devaluation/deconsolidation

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

3

 

 

 

2Q 2016 Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter Ended June 30

 

 

 

Reported

 

 

 

 

Adjusted *

 

 

 

 

(unaudited)

 

Public Currency Rates

 

%  

 

Public Currency Rates

 

%  

 

(millions, except per share)

 

2016

 

2015

 

Change

 

2016

 

2015

 

Change

 

Net sales

 

 
$
3,317.2

 

 
$
3,389.1

 

 
(2)

%

 

 
$
3,317.2

 

 
$
3,389.1

 

 
(2)

%

 

Operating income

 

 
412.5

 

 
437.8

 

 
(6)

%

 

 
500.6

 

 
514.4

 

 
(3)

%

 

Net income attributable to Ecolab

 

 
258.4

 

 
302.0

 

 
(14)

%

 

 
319.3

 

 
323.7

 

 
(1)

%

 

Diluted earnings per share

 

 
$
0.87

 

 
$
1.00

 

 
(13)

%

 

 
$
1.08

 

 
$
1.08

 

 
0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted *

 

 

 

 

 

 

Fixed Currency Rates *

 

%  

 

Fixed Currency Rates

 

%  

 

 

 

2016

 

2015

 

Change

 

2016

 

2015

 

Change

 

Net sales

 

 
$
3,252.5

 

 
$
3,213.8

 

 
1

%

 

 
$
3,252.5

 

 
$
3,213.8

 

 
1

%

 

Operating income

 

 
402.9

 

 
399.1

 

 
1

%

 

 
491.0

 

 
475.7

 

 
3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*See “Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations.

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

4

 

 

 

2Q 2016 Sales Growth Detail

 

 

 

 

 

 

 

 

 

 

    

Fixed Rate

    

Acq./Div. Adj.

    

 

    

 

Global Industrial

 

% Change

 

% Change

 

Consolidated

 

% Change

F&B

 
4%

 
4%

 

Volume & mix

 

(1)%

Water

 
6%

 
1%

 

Pricing

 

<1%

Paper

 
1%

 
1%

 

Subtotal

 

(1)%

Textile Care

 
6%

 
6%

 

Acq./Div.

 
2%

Total Global Industrial

 
4%

 
2%

 

Fixed currency growth

 
1%

 

 

 

 

 

 

Currency impact

 

(3)%

Global Institutional

 

 

 

 

 

Total

 

(2)%

Institutional

 
10%

 
6%

 

 

 

 

Specialty

 
6%

 
6%

 

 

 

 

Healthcare

 
4%

 
4%

 

 

 

 

Total Global Institutional

 
8%

 
5%

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Energy

 

(13)%

 

(13)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Pest Elimination

 
8%

 
8%

 

 

 

 

Equipment Care

 
6%

 
6%

 

 

 

 

Total Other

 
8%

 
8%

 

 

 

 

 

 

 

 

 

 

Amounts in the tables above may reflect rounding.  Acq./Div. Adj. excludes the impact of acquisitions and divestitures and Venezuela results.

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

5

 

 

 

2Q 2016 Income Statement / Margins

 

 

 

 

 

 

 

 

 

 

 

 

 

($ millions, unaudited)

2016

    

% sales

    

2015

    

% sales

    

% change

    

Comments*

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit
$
1,532.0

 
46.2%

 
$
1,582.6

 
46.7%

 
(3)

%

 

Excluding special charges, our adjusted gross margin was 48.0% and increased 100 bps, resulting from lower delivered product costs, cost efficiencies and the impact of the decline in Global Energy, which on average has a lower gross profit margin.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A
1,093.3

 
33.0%

 
1,079.2

 
31.8%

 
1

%

 

The 120 bps increase in 2016 reflects the impact of investments in the business, higher variable compensation and the decline in Global Energy, which on average has a lower SG&A ratio.

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (fixed FX)

 

 

 

 

 

 

 

 

 

 

 

Global Industrial
171.3

 
14.9%

 
147.9

 
13.4%

 
16

%

 

2016 acquisition adjusted fixed currency margins were 15.1% vs. 13.6% in 2015. The 150 bps improvement was due to appropriate pricing, cost savings initiatives, lower delivered product costs and sales volume gains, partially offset by higher variable compensation.

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Institutional
245.0

 
21.4%

 
228.5

 
21.7%

 
7

%

 

2016 acquisition adjusted fixed currency margins were 22.1% vs. 21.7% in 2015. The 40 bps improvement reflected appropriate pricing and sales volume gains, which more than offset investments in the business and higher variable compensation.

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Energy
77.5

 
10.3%

 
109.9

 
12.7%

 
(29)

%

 

2016 acquisition adjusted fixed currency margins were 9.8% vs. 12.4% in 2015. The 260 bps decrease reflected lower sales volume, reduced plant overhead absorption (driven by both lower volumes and a planned reduction in inventory levels) and reduced pricing, which more than offset delivered product cost savings, synergies and other cost reduction actions.

 

 

 

 

 

 

 

 

 

 

 

 

 

Other
38.8

 
19.1%

 
31.8

 
16.8%

 
22

%

 

The 230 bps improvement was due to pricing and sales volume gains, partially offset by higher variable compensation.

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal at fixed FX
532.6

 
16.4%

 
518.1

 
16.1%

 
3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

Special Gains/(Ch.)
(88.1)

 

 

 
(76.6)

 

 

 

 

 

 

2016: Energy inventory, Energy workforce, other asset charges and a wage-hour litigation charge.
2015: Venezuela devaluation, loss on disposition of business, restructuring, other charges.

 

 

 

 

 

 

 

 

 

 

 

 

 

Corp. Expense
(41.6)

 

 

 
(42.4)

 

 

 

 

 

 

Includes Nalco intangible amortization of $42 million in 2016 and 2015.

Total Corporate Exp.
(129.7)

 

 

 
(119.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FX
9.6

 

 

 
38.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Op. Inc.
$
412.5

 
12.4%

 
$
437.8

 
12.9%

 
(6)

%

 

2016 adjusted fixed currency margin was 15.1%, +30 bps vs. the equivalent 2015 margin of 14.8%. Good margin expansion in our Global Institutional, Global Industrial and Other segments was partially offset by higher variable compensation and a decline in Global Energy.

 

 

 

 

 

 

 

*See Non-GAAP Financial Measures” section of this presentation for corresponding reconciliations.

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

6

 

 

 

2Q 2016 Balance Sheet / Cash Flow

 

 

 

 

 

 

 

 

 

 

 

Summary Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

June 30

 

 

 

June 30

(millions)

 

2016

 

2015

 

(millions, unaudited)

 

2016

 

2015

Cash and cash eq.

    
$
167.4

    
$
310.6

    

Short-term debt

    
$
1,749.9

    
$
2,185.2

Accounts receivable, net

 
2,318.0

 
2,494.8

 

Accounts payable

 
977.8

 
961.0

Inventories

 
1,331.7

 
1,462.7

 

Other current liabilities

 
1,510.7

 
1,299.8

Other current assets

 
278.3

 
703.0

 

Long-term debt

 
5,097.0

 
5,102.3

PP&E, net

 
3,257.3

 
3,123.4

 

Pension/Postretirement

 
968.4

 
1,139.6

Goodwill and intangibles

 
10,482.7

 
10,744.4

 

Other liabilities

 
1,251.2

 
1,627.9

Other assets

 
389.2

 
356.4

 

Total equity

 
6,669.6

 
6,879.5

Total assets

 
$
18,224.6

 
$
19,195.3

 

Total liab. and equity

 
$
18,224.6

 
$
19,195.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Cash Flow items

 

 

 

 

 

Selected Balance Sheet measures

 

 

 

 

Six Months Ended

 

 

 

 

 

 

(unaudited)

 

June 30

 

 

 

June 30

(millions)

    

2016

 

2015

    

(unaudited)

    

2016

 

2015

Cash from op. activities

 
$
874.8

 
$
636.6

 

Total Debt/Total Capital

 
50.7%

 
51.4%

Depreciation

 
276.0

 
285.8

 

Net Debt/Total Capital

 
50.0%

 
50.4%

Amortization

 
145.3

 
149.9

 

Net Debt/EBITDA*

 
2.8

 
2.5

Capital expenditures

 
303.7

 
327.5

 

Net Debt/Adjusted EBITDA*

 
2.3

 
2.4

 

 

 

 

 

 

* EBITDA and Adjusted EBITDA are non-GAAP measures.  EBITDA is defined as the sum of operating income, depreciation and amortization. Adjusted EBITDA is defined as the sum of adjusted operating income, depreciation and amortization. The inputs to EBITDA reflect the trailing twelve months of activity for the period presented. See “Non-GAAP Financial Measures” section of this presentation corresponding reconciliations.

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

7

 

 

 

2016 Focus

◢Expect solid second half

§

Continued good Global Institutional, Global Industrial and Other segment performances and better Global Energy comparisons, lessening FX headwind

§

Execute the Ecolab Model

§

Drive growth through best product/best service to produce best results/lowest total use cost

§

Leverage corporate account new business investments and momentum

§

Expect continued mid-single digit growth in Global Institutional, Global Industrial and Other segments along with better Global Energy comparisons

§

Invest in the future

§

Continued investments in critical areas

§

Product innovation and new field technology

§

Enterprise systems

◢Improve cost efficiency and effectiveness

◢Focused M&A

§

Technologies, products/services, geographic expansion, opportunities in distressed markets

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

8

 

 

 

 

 

 

Appendix

 

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

9

 

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Second Quarter Ended

    

Six Months Ended

(unaudited)

 

June 30

 

June 30

(millions, except percent)

 

2016

   

2015

 

2016

   

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP net sales

 
$
3,317.2

 

 
$
3,389.1

 

 
$
6,414.6

 

 
$
6,686.7

 

Effect of foreign currency translation

 
(64.7)

 

 
(175.3)

 

 
(86.7)

 

 
(397.2)

 

Non-GAAP fixed currency sales

 
$
3,252.5

 

 
$
3,213.8

 

 
$
6,327.9

 

 
$
6,289.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP cost of sales

 
$
1,785.2

 

 
$
1,806.5

 

 
$
3,416.6

 

 
$
3,571.8

 

Special (gains) and charges

 
61.9

 

 
11.0

 

 
61.9

 

 
11.6

 

Non-GAAP adjusted cost of sales

 
$
1,723.3

 

 
$
1,795.5

 

 
$
3,354.7

 

 
$
3,560.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

 

 

 

 

 

Reported Gross Margin

 
46.2

%

 
46.7

%

 
46.7

%

 
46.6

%

Non-GAAP adjusted Gross Margin

 
48.0

%

 
47.0

%

 
47.7

%

 
46.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income

 
$
412.5

 

 
$
437.8

 

 
$
784.0

 

 
$
825.5

 

Effect of foreign currency translation

 
(9.6)

 

 
(38.7)

 

 
(13.8)

 

 
(80.8)

 

Non-GAAP fixed currency operating income

 
$
402.9

 

 
$
399.1

 

 
$
770.2

 

 
$
744.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income

 
$
412.5

 

 
$
437.8

 

 
$
784.0

 

 
$
825.5

 

Special gains and charges

 
88.1

 

 
76.6

 

 
94.4

 

 
85.0

 

Non-GAAP adjusted operating income

 
500.6

 

 
514.4

 

 
878.4

 

 
910.5

 

Effect of foreign currency translation

 
(9.6)

 

 
(38.7)

 

 
(13.8)

 

 
(80.8)

 

Non-GAAP adjusted fixed currency operating income

 
$
491.0

 

 
$
475.7

 

 
$
864.6

 

 
$
829.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income margin

 
12.4

%

 
12.9

%

 
12.2

%

 
12.3

%

Non-GAAP adjusted fixed currency operating income margin

 
15.1

%

 
14.8

%

 
13.7

%

 
13.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

10

 

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Second Quarter Ended

    

Six Months Ended

(unaudited)

 

June 30

 

June 30

(millions, except percent and per share)

 

2016

   

2015

 

2016

   

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to Ecolab

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP net income

 
$
258.4

 

 
$
302.0

 

 
$
489.2

 

 
$
535.4

 

Special (gains) and charges, after tax

 
57.0

 

 
61.1

 

 
61.4

 

 
66.4

 

Discrete tax net expense (benefit)

 
3.9

 

 
(39.4)

 

 
(0.9)

 

 
(36.8)

 

Non-GAAP adjusted net income attributable to Ecolab

 
$
319.3

 

 
$
323.7

 

 
$
549.7

 

 
$
565.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share Attributable to Ecolab ("EPS")

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP diluted EPS

 
$
0.87

 

 
$
1.00

 

 
$
1.64

 

 
$
1.77

 

Special (gains) and charges, after tax

 
0.19

 

 
0.20

 

 
0.21

 

 
0.22

 

Discrete tax net expense (benefit)

 
0.01

 

 
(0.13)

 

 
(0.00)

 

 
(0.12)

 

Non-GAAP adjusted diluted EPS

 
$
1.08

 

 
$
1.08

 

 
$
1.85

 

 
$
1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP tax rate

 
24.1

%

 
18.0

%

 
24.1

%

 
22.5

%

Special gains and charges

 
2.3

 

 
0.4

 

 
1.4

 

 
(0.1)

 

Discrete tax items

 
(0.9)

 

 
8.7

 

 
0.1

 

 
4.7

 

Non-GAAP adjusted tax rate

 
25.5

%

 
27.1

%

 
25.6

%

 
27.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (trailing twelve months ended)

 

 

 

 

 

 

 

 

 

 

 

 

Net income including non-controlling interest

 
$
968.6

 

 
$
1,256.9

 

 

 

 

 

 

 

Provision for income taxes

 
299.9

 

 
411.5

 

 

 

 

 

 

 

Interest expense, net

 
251.3

 

 
249.0

 

 

 

 

 

 

 

Depreciation

 
549.7

 

 
567.8

 

 

 

 

 

 

 

Amortization

 
295.4

 

 
304.5

 

 

 

 

 

 

 

EBITDA

 
$
2,364.9

 

 
$
2,789.7

 

 

 

 

 

 

 

Special (gains) and charges impacting EBITDA

 
504.8

 

 
137.5

 

 

 

 

 

 

 

Adjusted EBITDA

 
$
2,869.7

 

 
$
2,927.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated August 2, 2016 for additional information, including additional discussion on use of Non-GAAP financial measures.

11