ST. PAUL, Minn.--(BUSINESS WIRE)--
2015 FIRST QUARTER HIGHLIGHTS:
First Quarter Ended
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(unaudited) | ||||||||||||||||||
Reported | Adjusted* | |||||||||||||||||
First Quarter | % | First Quarter | % | |||||||||||||||
(Millions, except per share) |
2015
|
2014
|
change
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2015
|
2014
|
change
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Net Sales | $ | 3,297.6 | $ | 3,336.6 | -1 | % | $ | 3,297.6 | $ | 3,336.6 | -1 | % | ||||||
Operating Income | 387.7 | 350.9 | 10 | % | 396.1 | 386.5 | 2 | % | ||||||||||
Net Income Attributable to |
233.4 | 191.0 | 22 | % | 241.3 | 228.2 | 6 | % | ||||||||||
Diluted Net Income Per Share | $ | 0.77 | $ | 0.62 | 24 | % | $ | 0.80 | $ | 0.74 | 8 | % | ||||||
* Operating income is adjusted for special gains and charges. Net income and diluted net income per share are adjusted for special gains and charges and discrete tax items. | ||||||||||||||||||
CEO comment
Commenting on the quarter,
"Looking forward, we expect to once again show the strength of our balanced business portfolio as we leverage our recurring business model and competitive advantages, as well as sharpen our cost efficiencies. While food service and light industrial markets continue to show improving trends, energy markets contracted faster than expected and currency headwinds have increased. We have adjusted our earnings outlook for the year and continue to look for strong earnings growth in 2015. We remain focused on driving sales gains and product innovation in all our businesses, capturing cost savings and synergies, and managing effectively through the crosswinds of lower oil prices and unfavorable currency impacts. With substantial growth opportunities throughout our businesses, our compelling value proposition to customers and our strong execution discipline, we are committed to delivering superior results for our customers and shareholders in 2015, and will continue to invest in the right opportunities to drive future growth and returns."
Quarter overview
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First Quarter Ended
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(unaudited) | ||||||||||||
Reported | % | Adjusted Fixed Currency* | % | |||||||||
(Millions) |
2015
|
2014
|
Change
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2015
|
2014
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Change
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Net Sales | -1% | 4% | ||||||||||
Operating Income | 387.7 | 350.9 | 10% | 397.0 | 370.5 | 7% | ||||||
* Operating income is adjusted for special gains and charges. | ||||||||||||
First quarter 2015 reported operating income increased 10% to
First quarter 2015 reported net income attributable to
Segment review
First quarter 2015 sales grew in all operating units for the
First quarter 2015 sales for the Global Institutional segment, when measured at fixed currency rates, rose 6% to
First quarter 2015 sales for the Global Energy segment, when measured at fixed currency rates, grew 1% to
Other segment sales, when measured at fixed currency rates, increased 6% to
The Corporate segment includes
The reported tax rate for the first quarter 2015 was 27.6% and compared with 31.9% in the first quarter 2014. Excluding the tax rate impact of special gains and charges and discrete tax items, the adjusted tax rate was 27.1% in the first quarter 2015 and compared with 27.9% in the same period last year. The improved adjusted tax rate was the result of favorable geographic income mix and global tax planning strategies.
Business Outlook
2015
Our detailed outlook for the full year 2015 is as follows: | |||
Adjusted Gross Margin, excluding special gains and charges | 47% - 48% | ||
SG&A % of Sales | approx. 32% | ||
Interest expense, net | |||
Adjusted tax rate | approx. 27% | ||
Adjusted EPS, excluding special gains and charges | |||
Diluted shares | approx. 302 million | ||
We expect special gains and charges and quantifiable discrete tax items for the full-year 2015 to be a net charge of approximately
2015 - Second Quarter
Our detailed outlook for the second quarter 2015 is as follows: | |||
Adjusted Gross Margin, excluding special gains and charges | approx. 47% | ||
SG&A % of Sales | approx. 33% | ||
Interest expense, net | approx. |
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Adjusted tax rate | 27% - 28% | ||
Adjusted EPS, excluding special gains and charges | |||
Diluted shares | approx. 302 million | ||
We expect special gains and charges for the second quarter of 2015 to be a net charge of approximately
Reported second quarter 2014 diluted earnings per share of
About
A trusted partner at more than one million customer locations,
Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "we believe," "we expect," "estimate," "project," "may," "will," "intend," "plan," "believe," "target," "forecast" (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding our financial and business performance and prospects, including impact of oil prices, forecasted 2015 second quarter and full-year financial and business results, including sales growth, adjusted gross margin, SG&A ratios to sales, interest expense, adjusted effective tax rate, adjusted earnings per share and diluted shares outstanding; special gains and charges, including restructuring charges and integration costs; market conditions; operational improvements; cost savings; merger synergies; currency exchange, including the impact of a strong U.S. dollar; pension expense; share repurchase and acquisition activity; and a potential Venezuelan devaluation charge. 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 included in this communication. In particular, the ultimate results of any restructuring, integration and business improvement actions, including cost synergies, depend on a number of factors, including the development of final plans, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness.
Additional risks and uncertainties that may affect operating results and business performance are set forth under Item 1A of our most recent Form 10-K, and our other public filings with the
Non-GAAP Financial Information
This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP financial measures include fixed currency sales, acquisition adjusted fixed currency sales, adjusted gross margins, fixed currency operating income, adjusted operating income, adjusted fixed currency operating income, adjusted tax rate, adjusted net income and adjusted diluted earnings per share.
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
We include in special gains and charges items that are unusual in nature, and significant in amount. In order to better allow investors to compare underlying business performance period-to-period, we provide adjusted gross margin, adjusted operating income, adjusted fixed currency operating income, adjusted net income and adjusted diluted earnings per share, which excludes special gains and charges and discrete tax items.
The adjusted effective tax rate measure promotes period-to-period comparability of the underlying effective tax rate because it excludes the tax rate impact of special gains and charges and discrete tax items which do not necessarily reflect costs associated with historical trends or expected future results.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency sales, acquisition adjusted fixed currency sales, fixed currency operating income and adjusted fixed currency operating income measures eliminate the impact of exchange rate fluctuations on our international sales, acquisition adjusted sales, operating income and adjusted operating income, respectively, and promote a better understanding of our sales and operating income trends from underlying business performance. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2015.
Acquisition adjusted growth rates generally exclude the results of any acquired business from the first twelve months post acquisition and exclude the results of divested businesses from the previous twelve months prior to divestiture.
These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this news release. A reconciliation of reported diluted earnings per share to adjusted diluted earnings per share is provided in the table "Supplemental Diluted Earnings per Share Information" included in this news release.
(ECL-E)
CONSOLIDATED STATEMENT OF INCOME | ||||||||||
FIRST QUARTER ENDED |
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(unaudited) | ||||||||||
First Quarter Ended | ||||||||||
% | ||||||||||
(millions, except per share) |
2015
|
2014 | Change | |||||||
Net sales | $ | 3,297.6 | $ | 3,336.6 | -1 | % | ||||
Cost of sales (1) | 1,765.3 | 1,819.2 | -3 | % | ||||||
Selling, general and administrative expenses | 1,136.8 | 1,136.9 | 0 | % | ||||||
Special (gains) and charges (1) | 7.8 | 29.6 | ||||||||
Operating income | 387.7 | 350.9 | 10 | % | ||||||
Interest expense, net | 62.5 | 65.1 | -4 | % | ||||||
Income before income taxes | 325.2 | 285.8 | 14 | % | ||||||
Provision for income taxes | 89.8 | 91.3 | -2 | % | ||||||
Net income including noncontrolling interest | 235.4 | 194.5 | 21 | % | ||||||
Less: Net income attributable to noncontrolling interest | 2.0 | 3.5 | ||||||||
Net income attributable to |
$ | 233.4 | $ | 191.0 | 22 | % | ||||
Earnings attributable to |
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Basic | $ | 0.78 | $ | 0.64 | 22 | % | ||||
Diluted | $ | 0.77 | $ | 0.62 | 24 | % | ||||
Weighted-average common shares outstanding | ||||||||||
Basic | 298.2 | 300.6 | -1 | % | ||||||
Diluted | 303.2 | 306.5 | -1 | % | ||||||
(1) Special (gains) and charges in the Consolidated Statement of Income above include the following: | ||||||||||
(millions) | 2015 | 2014 | ||||||||
Cost of sales | ||||||||||
Restructuring charges | $ | 0.6 | $ | 6.0 | ||||||
Special (gains) and charges | ||||||||||
Restructuring charges | 2.1 | 22.6 | ||||||||
Champion acquisition and integration costs | 5.2 | 6.5 | ||||||||
Nalco merger and integration costs | 0.5 | 1.3 | ||||||||
Other gains | - | (0.8 | ) | |||||||
Subtotal | 7.8 | 29.6 | ||||||||
Total special (gains) and charges | $ | 8.4 | $ | 35.6 | ||||||
REPORTABLE SEGMENT INFORMATION | |||||||||||
FIRST QUARTER ENDED |
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(unaudited) | |||||||||||
First Quarter Ended | |||||||||||
(millions) | 2015 | 2014 | % Change | ||||||||
Net Sales | |||||||||||
$ | 1,129.7 | $ | 1,077.2 | 5 | % | ||||||
Global Institutional | 1,018.0 | 956.7 | 6 | % | |||||||
Global Energy | 981.9 | 973.7 | 1 | % | |||||||
Other | 178.1 | 168.5 | 6 | % | |||||||
Subtotal at fixed currency rates | 3,307.7 | 3,176.1 | 4 | % | |||||||
Currency impact | (10.1 | ) | 160.5 | ||||||||
Consolidated | $ | 3,297.6 | $ | 3,336.6 | -1 | % | |||||
Operating Income | |||||||||||
$ | 119.2 | $ | 113.6 | 5 | % | ||||||
Global Institutional | 169.5 | 152.0 | 12 | % | |||||||
Global Energy | 128.7 | 127.6 | 1 | % | |||||||
Other | 23.4 | 21.4 | 9 | % | |||||||
Corporate | (52.2 | ) | (79.7 | ) | |||||||
Subtotal at fixed currency rates | 388.6 | 334.9 | 16 | % | |||||||
Currency impact | (0.9 | ) | 16.0 | ||||||||
Consolidated | $ | 387.7 | $ | 350.9 | 10 | % | |||||
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Note: | ||
The Corporate segment includes amortization from the Nalco merger intangible assets. | ||
The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income. | ||
We evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as "currency impact" in the above tables. | ||
CONSOLIDATED BALANCE SHEET | ||||||||||||
(unaudited) | ||||||||||||
(millions) | 2015 | 2014 | 2014 | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 237.9 | $ | 209.6 | $ | 300.3 | ||||||
Accounts receivable, net | 2,546.9 | 2,626.7 | 2,519.6 | |||||||||
Inventories | 1,503.0 | 1,466.9 | 1,367.1 | |||||||||
Deferred income taxes | 172.8 | 183.2 | 170.8 | |||||||||
Other current assets | 461.2 | 366.6 | 345.2 | |||||||||
Total current assets | 4,921.8 | 4,853.0 | 4,703.0 | |||||||||
Property, plant and equipment, net | 3,115.1 | 3,050.6 | 2,889.0 | |||||||||
Goodwill | 6,529.0 | 6,717.0 | 6,856.6 | |||||||||
Other intangible assets, net | 4,326.7 | 4,456.8 | 4,701.3 | |||||||||
Other assets | 359.4 | 371.2 | 413.5 | |||||||||
Total assets | $ | 19,252.0 | $ | 19,448.6 | $ | 19,563.4 | ||||||
Liabilities and Equity | ||||||||||||
Current liabilities | ||||||||||||
Short-term debt | $ | 1,797.5 | $ | 1,705.4 | $ | 1,507.4 | ||||||
Accounts payable | 950.6 | 1,162.4 | 951.2 | |||||||||
Compensation and benefits | 435.7 | 560.4 | 474.7 | |||||||||
Income taxes | 70.5 | 88.6 | 89.3 | |||||||||
Other current liabilities | 866.7 | 851.7 | 881.8 | |||||||||
Total current liabilities | 4,121.0 | 4,368.5 | 3,904.4 | |||||||||
Long-term debt | 5,408.7 | 4,864.0 | 5,696.6 | |||||||||
Postretirement health care and pension benefits | 1,140.8 | 1,188.5 | 795.9 | |||||||||
Other liabilities | 1,645.5 | 1,645.5 | 1,893.4 | |||||||||
Total liabilities | 12,316.0 | 12,066.5 | 12,290.3 | |||||||||
Equity | ||||||||||||
Common stock | 348.7 | 347.7 | 346.4 | |||||||||
Additional paid-in capital | 4,881.3 | 4,874.5 | 4,757.0 | |||||||||
Retained earnings | 5,690.4 | 5,555.1 | 4,807.2 | |||||||||
Accumulated other comprehensive loss | (1,187.4 | ) | (951.9 | ) | (373.3 | ) | ||||||
Treasury stock | (2,862.0 | ) | (2,509.5 | ) | (2,326.8 | ) | ||||||
Total |
6,871.0 | 7,315.9 | 7,210.5 | |||||||||
Noncontrolling interest | 65.0 | 66.2 | 62.6 | |||||||||
Total equity | 6,936.0 | 7,382.1 | 7,273.1 | |||||||||
Total liabilities and equity | $ | 19,252.0 | $ | 19,448.6 | $ | 19,563.4 | ||||||
Note: | ||||||||||||
During the first quarter of 2015, we changed our accounting policy for presenting derivatives subject to master netting arrangements with the same counterparties within our Consolidated Balance Sheet. We previously presented all derivative positions on a gross basis and began presenting derivatives subject to master netting arrangements with the same counterparties on a net basis during the first quarter of 2015. We reclassified the presentation of derivatives subject to master netting arrangements with the same counterparty as of |
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SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
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The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share.
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First | Second | Six | Third | Nine | Fourth | |||||||||||||||||||
Quarter | Quarter | Months | Quarter | Months | Quarter | Year | ||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||
2014 | 2014 | 2014 | 2014 | 2014 | 2014 | 2014 | ||||||||||||||||||
Diluted earnings per share, as reported (U.S. GAAP) | ||||||||||||||||||||||||
$ | 0.62 | $ | 1.02 | $ | 1.64 | $ | 1.19 | $ | 2.83 | $ | 1.10 | $ | 3.93 | |||||||||||
Adjustments: | ||||||||||||||||||||||||
Special (gains) and charges (1) | 0.09 | (0.02 | ) | 0.07 | 0.02 | 0.09 | 0.11 | 0.20 | ||||||||||||||||
Tax expense (benefits) (2) | 0.03 | 0.03 | 0.06 | (0.01 | ) | 0.05 | (0.01 | ) | 0.04 | |||||||||||||||
Adjusted diluted earnings per share (Non-GAAP)
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$ | 0.74 | $ | 1.03 | $ | 1.77 | $ | 1.21 | $ | 2.98 | $ | 1.20 | $ | 4.18 | |||||||||||
First | Second | Six | Third | Nine | Fourth | |||||||||||||||||||
Quarter | Quarter | Months | Quarter | Months | Quarter | Year | ||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||
2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | ||||||||||||||||||
Diluted earnings per share, as reported (U.S. GAAP) | ||||||||||||||||||||||||
$ | 0.77 | |||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Special (gains) and charges (3) | 0.02 | |||||||||||||||||||||||
Tax expense (benefits) (4) | 0.01 | |||||||||||||||||||||||
Adjusted diluted earnings per share (Non-GAAP)
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$ | 0.80 | |||||||||||||||||||||||
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding. | ||||||||||||||||||||||||
(1) Special (gains) and charges for 2014 include restructuring charges of |
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(2) The first quarter 2014 discrete tax net expense of |
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(3) Special (gains) and charges for the first quarter of 2015 include restructuring charges of |
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(4) The first quarter 2015 discrete tax net expense of |
or
Source:
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