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Ecolab Delivers Strong Third Quarter

Stocks in this article: ECL

The reported income tax rate for the third quarter 2012 was 29.0% and compared with the reported rate of 31.8% in the third quarter 2011. Excluding the tax rate impact of special gains and charges and discrete tax items, the adjusted effective income tax rate in the third quarter 2012 was 29.4% compared with 30.2% for the same period last year.

Business Outlook With the exception of special gains and charges, the following forecasts exclude the impact of the pending Champion Technologies acquisition.

2012Ecolab narrowed its 2012 full-year adjusted earnings per share forecast to $2.96 to $3.00, representing a 17% to 18% increase over the prior year. Ecolab’s prior forecast was $2.95 to $3.02.

Special gains and charges for the full year 2012 are expected to be approximately a $0.60 per share net charge, primarily driven by restructuring charges, Nalco merger and integration costs, and charges related to the pending Champion acquisition, offset by a gain on the Vehicle Care sale. Future amounts related to discrete tax items for 2012, if any, are not currently quantifiable.

2012 – Fourth QuarterEcolab expects fourth quarter adjusted earnings per share in the $0.87 to $0.91 range, representing a 24% to 30% increase, compared with adjusted earnings per share of $0.70 a year ago. When compared with the combined companies’ fourth quarter 2011 pro forma performance, we look for mid single-digit fixed currency sales growth, improved adjusted gross margin and SG&A ratios to sales, and a lower adjusted effective tax rate to drive a very attractive adjusted earnings performance in the fourth quarter.

Our detailed outlook for the fourth quarter 2012 is as follows:

Adjusted Gross Margins, excluding special gains and charges   46% - 47%
SG&A % of Sales, including impact of purchase accounting approx. 32%
Interest expense, net approx. $65 million
Adjusted effective tax rate 28% - 29%
Adjusted EPS, excluding special gains and charges $0.87 - $0.91
Diluted shares approx. 300 million

We expect fourth quarter 2012 special gains and charges, including restructuring charges, to be a net charge of approximately $0.10 per share, which will be primarily Nalco merger-related and European restructuring charges, integration charges related to the Nalco transaction, and charges related to the Champion acquisition, offset by a gain on the Vehicle Care sale.

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