ECL
#Thank you
Hello, everyone, and welcome to Ecolab's third quarter conference call
With me today is Doug <UNK>, Ecolab's Chairman and CEO; and <UNK> <UNK>, our CFO
A discussion of our results along with our earnings release and the slides referencing the quarter's results and our outlook are available on Ecolab's website at ecolab
com/investor
Please take a moment to read the cautionary statements on these materials, stating that this teleconference, the discussion and the slides include estimates of future performance
These are forward-looking statements and actual results could differ materially from those projected
Factors that could cause actual results to differ are described in the section of our most recent Form 10-K under item 1A, risk factors, and in our posted materials
We also refer you to the supplemental diluted earnings per share information in the release
Starting with a brief overview of the quarter, Ecolab's underlying sales and profit fundamentals continued to improve through the third quarter and we are building momentum as we finish 2017. Continued pricing and new business gains drove third quarter acquisition-adjusted fixed currency sales growth in all our business segments despite the unfavorable impact of hurricanes in North America
The sales gains along with product innovation and ongoing cost efficiency work more than offset higher delivered product costs
These along with our work to lower interest expense and our tax rate as well as fewer shares outstanding yielded the third quarter 7% adjusted earnings per share increase
Moving to some highlights from the quarter, and as discussed in our press release, on an adjusted basis, excluding special gains and charges and discrete tax item from both years, third quarter 2017 adjusted diluted earnings per share were $1.37. Hurricane related impacts on sales and costs were estimated to be a negative $0.04 per share in the third quarter, representing a 3 percentage point reduction in our EPS growth
Consolidated acquisition-adjusted fixed currency sales rose for all of our business segments
Europe and Asia Pacific led the regional growth
Absent the impact of the hurricanes, acquisition-adjusted fixed currency operating margin declined an estimated 20 basis points as price and volume increases were more than offset by the margin impact of higher delivered product costs in the quarter
Absent the impact of the hurricanes, acquisition-adjusted fixed currency operating income is estimated to have increased 3%
The operating income gain along with lower interest expense, a lower tax rate, and fewer shares outstanding yielded a 7% increase in third quarter 2017 adjusted diluted earnings per share
We continue to aggressively work to drive our growth, winning new business through our innovative new products and sales and service expertise, as well is driving pricing and cost efficiencies to grow our top and bottom lines at improved rates
We also continue to see underlying sales volume and pricing improve across most of our business segments and look for that to more than offset continued delivered product cost headwinds and yield stronger operating income growth
We expect fourth quarter fixed currency sales to rise in the 5% to 6% range with net income increasing more than 10% as improved sales momentum and stronger pricing drive results and more than offset higher delivered product costs
Adjusted diluted earnings per share are expected to be in the $1.35 to $1.45 range, up 8% to 16%
Hurricane related impacts are estimated to be a negative $0.04 per share in the fourth quarter and the loss of Equipment Care income will reduce earnings per share by an estimated $0.01 per share
Together, these represent an estimated 4 percentage point headwind to fourth quarter EPS growth
Reflecting the impact of the hurricanes and higher delivered product costs, we've tightened our full-year adjusted diluted earnings per share forecast to the $4.65 to $4.75 per share range in 2017, rising 6% to 9%
We expect the impact of the hurricanes on full-year sales and costs will be approximately a negative $0.08 per share, and the Equipment Care sale to reduce income by $0.01 per share
We do not expect 2017 hurricanes to have a meaningful impact on 2018 results
In summary, we see momentum improving in our business
We expect to deliver strong adjusted diluted EPS growth in 2017 and we look for our investments and actions to drive better growth ahead
And now here's Doug <UNK> with some comments
That concludes our formal remarks
Operator, would you please begin the question-and-answer period? Question-and-Answer Session
Thanks
That wraps up our third quarter conference call
This conference call and the associated discussion and slides will be available for replay on our website
Thanks for your time and participation today, and our best wishes for the rest of the day
