EX-99.2 3 ecl_ex992.htm EX-99.2 ecl_Ex99_2

Exhibit 99.2

Picture 16

Fourth Quarter 2016
Teleconference
Supplemental Data

 

 

 

 

 

 

 

Picture 4

    

Picture 2

    

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Picture 1

 

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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 2017 first quarter and full year business and financial results, foreign currency impact, energy market conditions, pricing, capital investments and business acquisitions. These statements are based on the current expectations of management of Ecolab Inc (“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 February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

2

 

 

 

4Q 2016 Overview

◢Earnings: 

§

Reported diluted EPS $1.24, +80% versus last year; adjusted diluted EPS $1.25, +2% versus last year

§

Reported and adjusted diluted EPS include $0.02 (2 percentage points) impact from currency translation and Venezuela deconsolidation

◢Sales: 

§

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

§

Global Institutional, Global Industrial and Other segment acquisition adjusted fixed currency sales +4%, offset by an expected decline in Global Energy sales 

§

New business growth and new product introductions drove share gains

◢Operating Margin: 

§

Reported operating margin +710 bps; adjusted fixed currency operating margin +20 bps 

§

Pricing, volume growth and cost savings initiatives in our Global Institutional, Global Industrial and Other segments was partially offset by a decline in Global Energy

◢Outlook:

§

2017: Adjusted diluted EPS of $4.70 to $4.90, +8% to 12%

§

1Q: Adjusted diluted EPS of $0.77 to $0.83, +0% to 8%

  

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

3

 

 

 

4Q 2016 Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter Ended December 31

 

 

Reported

 

 

 

 

Adjusted *

 

 

 

(unaudited)

 

Public Currency Rates

 

%  

 

Public Currency Rates

 

%  

(millions, except per share)

 

2016

 

2015

 

Change

 

2016

 

 

2015

 

Change

Net sales

 
$
3,352.1

 

 
$
3,412.0

 

 
(2)

%

 
$
3,352.1

 

 
$
3,412.0

 

 
(2)

%

Operating income

 
556.9

 

 
322.8

 

 
73

%

 
564.8

 

 
566.7

 

 
0 

%

Net income attributable to Ecolab

 
366.3

 

 
208.9

 

 
75

%

 
368.2

 

 
366.7

 

 
0

%

Diluted earnings per share

 
$
1.24

 

 
$
0.69

 

 
80

%

 
$
1.25

 

 
$
1.22

 

 
2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted *

 

 

 

 

 

Fixed Currency Rates *

 

%  

 

Fixed Currency Rates

 

%  

 

 

2016

 

2015

 

Change

 

2016

 

 

2015

 

Change

Net sales

 
$
3,307.4

 

 
$
3,342.1

 

 
(1)

%

 
$
3,307.4

 

 
$
3,342.1

 

 
(1)

%

Operating income

 
548.6

 

 
311.6

 

 
76

%

 
556.5

 

 
555.5

 

 
0

%

 

 

 

 

 

 

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

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

4

 

 

 

4Q 2016 Sales Growth Detail

 

 

 

 

 

 

 

 

 

 

    

Fixed Rate

    

Acq./Div. Adj.

    

 

    

 

Global Industrial

 

% Change

 

% Change

 

Consolidated

 

% Change

Food & Beverage

 
2%

 
2%

 

Volume & mix

 

-1% 

Water

 
1%

 
1%

 

Pricing

 
0%

Paper

 
5%

 
5%

 

Subtotal

 

-1% 

Textile Care

 
4%

 
4%

 

Acq./Div.

 
0%

Total Global Industrial

 
2%

 
2%

 

Fixed currency growth

 

-1% 

 

 

 

 

 

 

Currency impact

 

-1% 

Global Institutional

 

 

 

 

 

Total

 

-2% 

Institutional

 
4%

 
4%

 

 

 

 

Specialty

 
8%

 
8%

 

 

 

 

Healthcare

 
6%

 
6%

 

 

 

 

Total Global Institutional

 
5%

 
5%

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Energy

 

-14% 

 

-14% 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

Pest Elimination

 
9%

 
9%

 

 

 

 

Equipment Care

 
2%

 
2%

 

 

 

 

Total Other

 
7%

 
7%

 

 

 

 

 

 

 

 

 

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 February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

5

 

 

 

4Q 2016 Income Statement / Margins

 

 

 

 

 

 

 

 

 

 

 

 

 

($ millions, unaudited)

2016

 

% sales

 

2015

 

% sales

 

% change

Comments*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit
$
1,607.0

 
47.9%

 
$
1,580.3

 
46.3%

 
2

%

Excluding special charges, our adjusted gross margin was 48.1% vs. 47.6%, increasing 50 bps, resulting from cost savings and the impact of the decline in Global Energy, which on average has a lower gross profit margin.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A
1,046.3

 
31.2%

 
1,058.8

 
31.0%

 
(1)

%

The 20 bps increase in 2016 primarily reflects investments in the business and the decline in Global Energy, which on average has a lower SG&A ratio.

 

Operating Income (fixed FX)

 

 

 

 

 

 

 

 

 

 

 

 

Global Industrial
203.2

 
16.9%

 
196.2

 
16.7%

 
4

%

2016 acquisition adjusted fixed currency margins were 16.9% vs. 16.6% in 2015. The 30 bps improvement was due to improved volume and mix, pricing and cost savings initiatives more than offsetting modestly higher delivered product costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Institutional
258.8

 
22.7%

 
224.9

 
20.6%

 
15

%

2016 acquisition adjusted fixed currency margins were 23.0% vs. 20.8% in 2015. Margins rose 220 bps as pricing, sales volume gains and a significant increase in the Healthcare margin versus last year (which included the impact of a voluntary recall) more than offset investments in the business and modestly higher delivered product costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Energy
98.3

 
12.9%

 
140.3

 
15.9%

 
(30)

%

2016 acquisition adjusted fixed currency margins were 12.8% vs. 15.5% in 2015 reflecting lower sales volume and reduced pricing, which more than offset cost reduction actions, delivered product cost savings and synergies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other
37.9

 
18.5%

 
35.6

 
18.6%

 
6

%

The 10 bps reduction reflected pricing and sales volume gains that were partially offset by investments in the business and higher fleet-related costs in the quarter.

 

Subtotal at fixed FX
598.2

 
18.1%

 
597.0

 
17.9%

 
0

%

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

Special Gains/(Ch.)
(7.9)

 

 

 
(243.9)

 

 

 

 

 

2016: Energy inventory and other charges partially offset by restructuring related gains and standardization of our accounting policies related to inventory product costing.
2015: Venezuela deconsolidation charge of $123 million, restructuring charges of $63 million, asset impairment, wage-hour litigation charges and other costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corp. Expense
(41.7)

 

 

 
(41.5)

 

 

 

 

 

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

 

Total Corporate Exp.
(49.6)

 

 

 
(285.4)

 

 

 

 

 

 

 

FX
8.3

 

 

 
11.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Op. Inc.
$
556.9

 
16.6%

 
$
322.8

 
9.5%

 
73

%

2016 adjusted fixed currency margin was 16.8%, +20 bps vs. the equivalent 2015 margin of 16.6%. The margin expansion was driven by pricing, continued sales volume growth and cost savings in our Global Institutional, Global Industrial and Other segments, which were partially offset by a decline in Global Energy results.

 

 

 

 

 

 

 

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

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

6

 

 

 

4Q 2016 Balance Sheet / Cash Flow

 

 

 

 

 

 

 

 

 

 

 

Summary Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

 

 

December 31

(millions, unaudited)

 

2016

 

2015

 

(millions, unaudited)

 

2016

 

2015

Cash and cash eq.

    
$
327.4

    
$
92.8

    

Short-term debt

    
$
541.3

    
$
2,205.3

Accounts receivable, net

 
2,341.2

 
2,390.2

 

Accounts payable

 
983.2

 
1,049.6

Inventories

 
1,319.4

 
1,388.2

 

Other current liabilities

 
1,494.9

 
1,509.5

Other current assets

 
291.4

 
576.3

 

Long-term debt

 
6,145.7

 
4,260.2

PP&E, net

 
3,365.0

 
3,228.3

 

Pension/Postretirement

 
1,019.2

 
1,117.1

Goodwill and intangibles

 
10,200.8

 
10,600.0

 

Other liabilities

 
1,175.0

 
1,519.6

Other assets

 
485.0

 
365.9

 

Total equity

 
6,970.9

 
6,980.4

Total assets

 
$
18,330.2

 
$
18,641.7

 

Total liab. and equity

 
$
18,330.2

 
$
18,641.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Cash Flow items

 

 

 

 

 

Selected Balance Sheet measures

 

 

 

 

Twelve Months Ended

 

 

 

 

 

 

 

 

December 31

 

 

 

December 31

(millions, unaudited)

    

2016

 

2015

    

(unaudited)

    

2016

 

2015

Cash from op. activities

 
$
1,939.7

 
$
1,999.8

 

Total Debt/Total Capital

 
49.0%

 
48.1%

Depreciation

 
561.0

 
559.5

 

Net Debt/Total Capital

 
47.7%

 
47.7%

Amortization

 
289.7

 
300.0

 

Net Debt/EBITDA*

 
2.3

 
2.6

Capital expenditures

 
707.4

 
771.0

 

Net Debt/Adjusted EBITDA*

 
2.2

 
2.2

 

 

 

 

 

* 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 February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

7

 

 

 

2017 Outlook

◢Outlook (adjusted EPS)

§

2017 $4.70 to $4.90, +8% to 12%

§

1Q $0.77 to $0.83, +0% to 8%

 

◢ Assumptions

§

Continued sluggish global economic backdrop

§

Moderating dollar: -2% FX translation impact included in EPS forecast

§

Stabilizing energy markets with oil trading in a $50 to $60 range

§

Modest raw materials inflation offset by pricing by second half

§

Continued strong execution of Ecolab playbook resulting in:

·

Another year of strong Global Industrial, Global Institutional and Other segment growth

·

Improving Global Energy results

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

8

 

 

 

2017 Outlook

Focus

◢Drive strong execution 

§

Maintain aggressive new business efforts

§

Continue strong innovation emphasis

§

Offset raw material inflation through pricing

◢  Fully capitalize on energy market improvement

◢Continue to drive supply chain efficiency programs to help drive ongoing margin improvement 

 

◢Continue to fully fund innovation, digital and enterprise system investments 

 

◢Capitalize on the right M&A opportunities

   

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

9

 

 

 

 

 

 

Appendix

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

10

 

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fourth Quarter Ended

    

Twelve Months Ended

(unaudited)

 

December 31

 

December 31

(millions, except percent)

 

2016

   

2015

 

2016

   

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP net sales

 
$
3,352.1

 

 
$
3,412.0

 

 
$
13,152.8

 

 
$
13,545.1

 

Effect of foreign currency translation

 
(44.7)

 

 
(69.9)

 

 
(197.8)

 

 
(630.8)

 

Non-GAAP fixed currency sales

 
$
3,307.4

 

 
$
3,342.1

 

 
$
12,955.0

 

 
$
12,914.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP cost of sales

 
$
1,745.1

 

 
$
1,831.7

 

 
$
6,898.9

 

 
$
7,223.5

 

Special (gains) and charges

 
4.1

 

 
45.2

 

 
66.0

 

 
80.6

 

Non-GAAP adjusted cost of sales

 
$
1,741.0

 

 
$
1,786.5

 

 
$
6,832.9

 

 
$
7,142.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin

 

 

 

 

 

 

 

 

 

 

 

 

Reported gross margin

 
47.9

%

 
46.3

%

 
47.5

%

 
46.7

%

Non-GAAP adjusted gross margin

 
48.1

%

 
47.6

%

 
48.0

%

 
47.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income

 
$
556.9

 

 
$
322.8

 

 
$
1,915.0

 

 
$
1,561.3

 

Effect of foreign currency translation

 
(8.3)

 

 
(11.2)

 

 
(32.2)

 

 
(129.1)

 

Non-GAAP fixed currency operating income

 
$
548.6

 

 
$
311.6

 

 
$
1,882.8

 

 
$
1,432.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income

 
$
556.9

 

 
$
322.8

 

 
$
1,915.0

 

 
$
1,561.3

 

Special (gains) and charges

 
7.9

 

 
243.9

 

 
105.5

 

 
495.4

 

Non-GAAP adjusted operating income

 
564.8

 

 
566.7

 

 
2020.5

 

 
2,056.7

 

Effect of foreign currency translation

 
(8.3)

 

 
(11.2)

 

 
(32.2)

 

 
(129.1)

 

Non-GAAP adjusted fixed currency operating income

 
$
556.5

 

 
$
555.5

 

 
$
1,988.3

 

 
$
1,927.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP operating income margin

 
16.6

%

 
9.5

%

 
14.6

%

 
11.5

%

Non-GAAP adjusted fixed currency operating income margin

 
16.8

%

 
16.6

%

 
15.3

%

 
14.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

11

 

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Fourth Quarter Ended

    

Twelve Months Ended

(unaudited)

 

December 31

 

December 31

(millions, except percent and per share)

 

2016

   

2015

 

2016

   

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to Ecolab

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP net income attributable to Ecolab

 
$
366.3

 

 
$
208.9

 

 
$
1,229.6

 

 
$
1,002.1

 

Special (gains) and charges, after tax

 
1.6

 

 
165.1

 

 
62.4

 

 
376.9

 

Discrete tax net expense (benefit)

 
0.3

 

 
(7.3)

 

 
3.9

 

 
(63.3)

 

Non-GAAP adjusted net income attributable to Ecolab

 
$
368.2

 

 
$
366.7

 

 
$
1,295.9

 

 
$
1,315.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP diluted EPS

 
$
1.24

 

 
$
0.69

 

 
$
4.14

 

 
$
3.32

 

Special (gains) and charges, after tax

 
0.01

 

 
0.55

 

 
0.21

 

 
1.25

 

Discrete tax net expense (benefit)

 
0.00

 

 
(0.02)

 

 
0.01

 

 
(0.21)

 

Non-GAAP adjusted diluted EPS

 
$
1.25

 

 
$
1.22

 

 
$
4.37

 

 
$
4.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP tax rate

 
23.9

%

 
14.4

%

 
24.4

%

 
22.8

%

Special gains and charges

 
0.9

 

 
8.3

 

 
1.0

 

 
(0.4)

 

Discrete tax items

 
(0.1)

 

 
1.5

 

 
(0.2)

 

 
3.5

 

Non-GAAP adjusted tax rate

 
24.7

%

 
24.2

%

 
25.2

%

 
25.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (trailing twelve months ended)

 

 

 

 

 

 

 

 

 

 

 

 

Net income including non-controlling interest

 
$
1,247.1

 

 
$
1,017.2

 

 

 

 

 

 

 

Provision for income taxes

 
403.3

 

 
300.5

 

 

 

 

 

 

 

Interest expense, net

 
264.6

 

 
243.6

 

 

 

 

 

 

 

Depreciation

 
561.0

 

 
559.5

 

 

 

 

 

 

 

Amortization

 
289.7

 

 
300.0

 

 

 

 

 

 

 

EBITDA

 
$
2,765.7

 

 
$
2,420.8

 

 

 

 

 

 

 

Special (gains) and charges impacting EBITDA

 
105.5

 

 
495.4

 

 

 

 

 

 

 

Adjusted EBITDA

 
$
2,871.2

 

 
$
2,916.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Picture 19

Please see Ecolab’s news release dated February 21, 2017 for additional information, including additional discussion on use of Non-GAAP financial measures.

12