Ecolab, Inc. Earnings Call Nuggets: Paper Business, Pricing Dynamics
David Begleiter – Deutsche Bank: Doug, just on your 2012 guidance you didn’t raise the low end despite beating Q1, just comment on your thinking about the guidance for the full year, given some of the macro headwinds you’re seeing in Europe?
Douglas M. Baker, Jr. – Chairman, President and CEO: Yeah. You know, Dave, I guess, I would call it – I wouldn’t try to read much into this. We have aggressive guidance out there in terms of 16% to 20%, and there’s certainly a lot of uncertainty and a lot of time left to play in the year. We feel very confident in our ability to hit or we would have moved it the other way. We don’t raise guidance frequently in this call and so I really would just say given the nature of the economic situation in parts, raw materials, and the rest we thought discretion was probably the smart play. We are committed to driving this business forward and we’ve got a team all over the key issues, so we feel good about position we are in, and what we’re going to do this year.
A Closer Look: Ecolab Earnings Cheat Sheet>>
David Begleiter – Deutsche Bank: Doug, just on the paper business, as you get to know that business, and the results are pretty weak, is this a long-term keeper in the portfolio in your mind?
Douglas M. Baker, Jr. – Chairman, President and CEO: Yeah. David, the only – I would say is we don’t get into big M&A. I think, we had a lot of questions about this post-announcement other deal, and pre-close and I would say two things – one, the reason that we felt Nalco was such a – it’s a real strength in water technologies, and as we all shared, we tend to appreciate and understand the strategic value that Nalco brought historically and in the future to energy. Paper is a good business and we always said that we weren’t going to get to evaluating paper at the onset. Our real focus right now is make sure we continue to drive forward. Good integration right, which I think we’re going a great job on and making sure we focus on driving the fundamentals in the; new customers, new innovation, taking care of the team and all those metrics look good. That’s the focus for this year.
David Begleiter – Deutsche Bank: Then just lastly Energy. I know (this is also) aren’t sustainable at these levels but how much stronger can this business be than it was the last couple of years?
Douglas M. Baker, Jr. – Chairman, President and CEO: If you go back and we spend a lot of time understanding the history. Some five, six years ago, they embarked on a strategy which has proven to be politically one, very smart and extremely well executed. That’s a good combo. And it was really going after for a lack of a better term, the new oil for a couple of reasons. It’s easier to get the business at the onset versus trying to kick somebody out of a already drilled well. Number two, new oil is going to command much more of the technology that Nalco sell. So, in terms of a smart strategy in driving share, it was exactly on that team delivered against it excellently. That story is not over. So, (I don’t know if it’s) tar sands or other unconventional oil, right, these areas and this development is going to require more of the technology that Nalco sales. If you look at year-on-year growth last year, they clearly accelerated throughout the year. As you look at it, the base is going to get more challenging as we go through the year. First quarter last year organically was around 15, in the fourth quarter, last year for them was around 24%. So, clearly, you’re going to be climbing a bit of a base. So, that we business we expect to continue to perform very well. We do not expect to regularly put up 29% growth there. We never talked about 29% as the target growth rate, and so we don’t expect it, but we do expect a long period of double digit growth. Right. It’s very, very good growth in the following quarters this year.
Nathan Brochmann – William Blair & Company: I wanted to talk a little bit – you guys recently announced some – what felt like more aggressive pricing actions to combat the raw material price run up. I was wondering if you could talk about the dynamics there and how that’s going in terms of acceptance and kind of flow through to the customers.
Douglas M. Baker, Jr. – Chairman, President and CEO: Yeah. Nate, this is I guess a strategy that the water businesses deployed for a while, which is make sure that the broad customer base understands the raw material implications and the rest, and so it’s not new for the water business, whereas it may be viewed as something unique for Ecolab, but if people have plays that work well, we’re not going to get in the way. I’d say it’s too early to tell, but pricing in general has been a focus, it was a focus for the water and energy businesses last year. We successfully implemented pricing which is why you’re starting to see the margins come back in those businesses and you see the outsized earnings performance. It’s exactly what we thought was going on in that business, but we talked to the market post announcement, so, we feel good about that. So, yeah, water is on pricing, energy is on pricing, institutional is on pricing, F&B is on pricing, we do not have a business that’s not out there, making sure that they are regularly pushing price, because it is a must in this environment. We do not expect raw material inflation to abate long-term. We think we are in an inflationary environment raw material for the rest of our career, that’s our assumption. It’s not a bad thing, because if you look at our ability we have grown OI margin in this inflationary period, I think every year in the last five-six years. So we will mind the environment, we just have to continue to execute in it. We think the energy and water execution last year was quite good and all they are doing is looking at continuing that execution.
Nathan Brochmann – William Blair & Company: Then just one quick follow-up here. Minus kind of the pull forward end of the first quarter from the second quarter on some of the distributor levels. How do you feel in general about those inventory levels currently minus that issue at the distributional level? Then I’ll turnover it over. Thank you.
Douglas M. Baker, Jr. – Chairman, President and CEO: I don’t think there is any major issue there. It is kind of this quarter-to-quarter stuff. Institutional had a very good first quarter and I would say if you look at two things importantly as we talk, we really focus on the field sales i.e. consumption. Consumption is continuing to improve there. We had a quarter where the reported was largely about field sales, because of the lower inventory build, but institutional has gotten itself back in organic six to eight growth range and we are continuing to see it. Kay had some noise, sometimes quarter-to-quarter. We are not worried about Kay. Kay had an unbelievable first quarter result in terms of new business. So we know that’s exactly what Kay needs to do. They hunt elephants, so you will start seeing that reflected in Kay’s results as they go out and install these customers.