Solution Manual for Principles of Corporate Finance 14th Edition by Richard B...
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ecolab ReviewOfOperations
1. Sustainable Solutions.
Sustainable Growth.
Review of Operations
In 2008, Ecolab achieved another year of superior growth despite a
challenging economy, resulting from unprecedented increases and volatility in
raw material and fuel costs, combined with slowing end markets. We worked
extremely hard to offset these issues, by aggressively driving sales, leveraging
innovative products to deliver sustainable results and cost savings, using on-
premise service expertise to create operational efficiencies for our customers,
and implementing appropriate price increases and cost-saving measures
to help offset our higher costs. These principles will continue to guide our
business and drive consistent, sustainable growth in the future.
The following is a detailed summary of our 2008 results and plans for 2009.
14 2008 ECOLAB ANNUAL REPORT
2. UNITED STATES: Kay HEALTHCARE
CLEANING & SANITIZING New account gains, the successful rollout Healthcare sales nearly tripled in 2008,
of new solids technology in major quick reflecting the impact of the Microtek
INSTITUTIONAL
service accounts and the introduction acquisition. Adjusted for the acquisition,
Despite the economic challenges in both
of innovative cleaning solutions in Healthcare sales rose 11%. Growth was
the foodservice and hospitality industries,
food retail helped Kay leverage achieved through a targeted focus
Institutional drove 5% sales growth
favorable market trends and propel on hand hygiene and disinfectants to
in 2008. Institutional benefited from
15% sales growth. reduce healthcare-associated infections,
continued new account gains, leveraging
expanded sales of Microtekâs operating
our sustainable offerings and further
penetration into key corporate accounts. HIGHLIGHTS room and surgical solutions, and an
y Completed the installation of
emphasis on value-added programs and
SolidSense⢠cleaning and sanitation services in key customer accounts.
HIGHLIGHTS
systems into several quick service
y Drove double-digit growth for Apexâ˘,
a breakthrough warewashing system
corporate accounts, achieving HIGHLIGHTS
very strong customer satisfaction y Delivered double-digit sales growth
that helps restaurants reduce costs
in the process. The SolidSense⢠within the core equipment and
and lower their environmental impact
concentrated detergent capsules patient drapes market by focusing on
with innovative technology and
deliver excellent cleaning performance expanding our expertise throughout
automated control systems that help
while reducing environmental surgical facilities and operating
optimize efficiency and decrease water
impact by significantly reducing rooms nationwide.
and energy use.
packaging waste, freight costs and y Expanded our skin care line with the
y Launched the Ultimate Impact
storage requirements. launch of Quik-Care Moisturizing
Program to hospitality, healthcare and
y Launched the Formula Foamâ˘
Gel Waterless Antimicrobial Hand
commercial customers, leveraging
Cleaning System, a self-contained, Sanitizerâ˘. The fragrance-free formula
key distributor partnerships to gain
mobile foam-generating machine helps reduce the chance of irritation or
new business and strengthen existing
for use in food retail. The thick foam allergic reaction, while the emollient-
accounts by bundling floor care,
reduces product, energy and water use rich ingredients moisturize and help
housekeeping and laundry solutions.
by eliminating the need to re-spray repair skin.
y Increased sales force productivity
surfaces, helping decrease the amount y Made significant new account gains
with investments in web-enabled sales
of wastewater. and successfully renewed key
prospecting tools and improved field
y Significantly offset raw material costs
contracts through our targeted focus
planning and management tools. These
by aggressively pursuing product on health systems to drive corporate
tools continue to improve program
reformulation, and streamlined account sales.
prioritization and implementation at
operations by reducing the number y Delivered strong double-digit growth
our customersâ unit level.
of SKUs (stock keeping units) in with innovative services to OEMs
our portfolio. (original equipment manufacturers)
OUTLOOK through technology leadership on
In 2009, Institutional will continue our
aggressive approach to the marketplace,
OUTLOOK equipment draping solutions.
Kay is well positioned for growth in
further leveraging the âlowest total costâ
attributes of the Apex⢠warewashing
2009, as consumers seek value offerings OUTLOOK
from quick service restaurants in these Healthcare expects steady growth in
system with other Institutional products
difficult economic times. Additionally, 2009 and plans to further strengthen
in order to accelerate new chain
recent account wins, increased corporate our portfolio of solutions and services
and independent customer account
account sales and better penetration of to reduce healthcare-associated
acquisitions. We will work to increase
our new solids product line are expected infections. We will also pursue
the solutions sold per account, focus
to help drive sales growth. opportunities to expand our penetration
on improved sales force productivity
of the healthcare market through organic
and efficiency, improve our joint selling
growth and acquisitions.
relationships with key foodservice and
janitorial distributors and strengthen
customer service delivery.
2008 ECOLAB ANNUAL REPORT 15
3. TEXTILE CARE FOOD BEVERAGE VEHICLE CARE
Textile Care grew 4% in 2008 with an Food Beverage rose 17% reflecting the Vehicle Care sales declined 10% as the
acceleration of new business sales, acquisition of Ecovation; excluding the impact of the recession and high fuel
pricing to offset increased fuel and raw acquisition, sales grew 9%. Growth was prices throughout much of the year
material costs and key investments in fueled by strong sales efforts, corporate reduced car wash demand. In response,
initiatives focused on helping improve account wins, aggressive pricing and a we focused on corporate account wins,
long- and short-term business good business mix in multiple industries. continued training investments in field
operational efficiencies. In addition, FB broadened its market service and distributor partnerships, and
opportunity in the wastewater treatment exited unprofitable market segments to
HIGHLIGHTS business and bolstered its industry help set the stage for long-term growth.
y Continued to build on corporate
leadership in sustainability.
account momentum to add new, more HIGHLIGHTS
profitable customers. HIGHLIGHTS y Took a leadership position in the
y Continued to provide customers
y Successfully drove continued
industry by launching Blue CoralÂŽ
with higher performing products to implementation of key product lines Beyond Green, a sustainability
improve their operational efficiency. such as DryExxÂŽ waterless conveyor program that offers a full line of
This included PERformanceâ˘, a low- lubricant, which significantly reduces products reformulated to conserve
temperature, proprietary oxygen water consumption on beverage water and energy while meeting the
bleach that reduces energy and filling lines; and OctaveÂŽ FS, a patent- strictest regulatory standards across
increases textile life; and EcolabÂŽ pending EPA-registered peroxyoctanoic North America.
Fabric Relaxant, a product designed acid-based foaming sanitizer and y Achieved our third consecutive year
to visibly reduce garment wrinkling, disinfectant that eliminates the post- of growth for Rain-XÂŽ, expanding our
eliminating the need for pressing and rinse process for food contact surfaces, brand leadership position and driving
providing customers with significant providing substantial water savings. retail profits.
labor and energy savings. y Implemented global service standards
y Focused on driving corporate
y Worked to create more sustainable
enabled by a new business system, account gains in core customer
product solutions for customers by ServiceChexxâ˘, which allows us to segments including convenience
focusing on Ecolabâs total impact document the delivery of our value stores, large car wash chains and car
approach that looks not only at proposition and the positive impact on dealership accounts.
chemistry, but at water, energy, waste our customersâ businesses. y Launched a reformulation initiative
and safety costs. Significant reductions y Ecovation sales were flat as the
that resulted in a 30% reduction
were made in NPE and phosphorous- uncertain economy and tight in products helping offset costly
containing materials to demonstrate credit markets contributed to raw materials.
sustainability leadership. customers delaying installation of
Ecovationâs effluent and energy OUTLOOK
OUTLOOK management systems. Vehicle Care will focus on strengthening
Textile Care will continue to leverage our our corporate account team, launching
resources in RD, marketing, training and OUTLOOK an automated service reporting tool and
information technology to improve our Food Beverage expects growth in 2009 driving our new sustainability certification
value offerings to customers in 2009. The through expanded opportunities with key program in 2009. In addition, we plan
business will also focus on building clear corporate account customers, continued to launch a new cost management
customer benefits around our sustainable execution of our DryExxÂŽ platform, and service to help reduce car wash water
offerings and launching innovative increased investment in information and energy consumption.
solutions focused on optimizing technologies to improve customer
customer operations. service and satisfaction. Ecovation is
also expected to benefit as customers
seek better ways to reduce operating
costs and meet more sustainability goals
around water, waste and energy. However,
uncertain economic conditions may
continue to dampen growth potential for
the short- to medium-term.
16 2008 ECOLAB ANNUAL REPORT
4. UNITED STATES: GCS SERVICE OUTLOOK
OTHER SERVICES Despite operational and business process GCS Service will drive improved business
improvements facilitated by the new results in 2009 by stimulating demand
PEST ELIMINATION
nationwide business information system, through strong corporate account
Pest Elimination achieved 7% growth
GCS Service sales declined 1% in 2008. relationships, direct marketing initiatives
in 2008. The business showed growth
Strong new corporate account sales, and strategic pricing. We will also increase
in all core segments and took steps to
aggressive pricing and the realization productivity and operational efficiencies
further improve operating efficiency and
of both field service and operational enabled by our new business information
customer retention.
efficiencies resulting from the new system platform.
business information system were offset
HIGHLIGHTS as customers deferred repairs and
y Expanded our leadership position with
maintenance in the slowing economy.
the launch of our newly improved
CheckPointÂŽ Rodent Program with
multiple catch and snap trap inserts,
HIGHLIGHTS
y Gained new accounts by leveraging
which provide customers with
the Circle the Customer strategy
rodenticide-free solutions, lower
with multi-unit chain customers to
the impact on the environment, and
provide comprehensive solutions and
eliminate chemical exposure for
exceptional service.
customers and employees.
y Leveraged our new business system to
y Launched the innovative Exterior
gain marketing and business process
Fly Bait Station, a device designed to
improvements, which will benefit sales
protect bait from outdoor elements
and profit development.
and provide continuous protection to
y Continued aggressive efforts to
a facility while aggressively targeting
enhance already high customer
flies at their source.
satisfaction and quality while
y Continued to vigorously convert our
improving associate productivity
fleet to more fuel-efficient vehicles.
and performance.
y Achieved double-digit growth in the
EcoSure food safety and quality control
business by expanding into auditing,
training and consulting within the food
supply chain to capitalize on global
food safety initiatives.
OUTLOOK
Pest Elimination will continue to focus
on extending leadership in key areas,
such as preventative bed bug services,
while expanding our lower-environmental
impact pest solutions.
2008 ECOLAB ANNUAL REPORT 17
5. INTERNATIONAL: CANADA ASIA PACIFIC
EUROPE/MIDDLE EAST/AFRICA Canada achieved 6% sales growth in Asia Pacific sales grew 8% in fixed
Product innovations and increased service 2008 in fixed currency exchange rates currency exchange rates. Significant
solutions with existing customers served as it launched a number of sustainable investments in new talent, solid
to offset the slowdown in end markets, customer solutions in multiple markets sales gains due to increased product
yielding 3% sales growth in fixed currency and gained corporate account customers penetration within existing markets, and
exchange rates for the region. across nearly all segments. large customer account wins contributed
to strong overall growth.
HIGHLIGHTS HIGHLIGHTS
y Successfully centralized strategic
y Drove Institutional growth in both
HIGHLIGHTS
leadership in Zurich, Switzerland, the Food Retail and Long Term Care y Served as the principal foodservice
to establish a more efficient pan- sectors with innovative products and food safety provider to the Beijing
European business model. major gains in large national accounts. Olympics, a role Ecolab has fulfilled in
y Piloted a new business information
y Successfully launched another
the past 14 out of 16 Olympic Games.
system to manage the pan-European sustainable solution for Pest y Continued to leverage the advantages
business and drive improved sales and Elimination customers with the of EvolutionÂŽ, a Japanese adaptation
supply chain efficiency. newly improved CheckPointŽ Rodent of the U.S. Apex⢠product line. The
y Introduced key Institutional customers
Program with rodenticide-free multiple products represent a state-of-the-art
to the 360° AdvisorTM, a hand-held catch and snap trap inserts, and the warewashing program to help optimize
PC for field associates to analyze Exterior Fly Bait Station that provides operational efficiency and reduce a
operational data at a customer site. continuous protection to a facility facilityâs overall environmental impact.
This data is used to help customers by aggressively targeting flies at y Drove strong sales growth with
improve results, save water and their source. increased product penetration in the
energy costs, and help train their y Continued to drive new environmental
beverage and brewing sectors from
employees to work more efficiently. cleaning technologies to align the expanded use of DryExxÂŽ.
y Gained new Food Beverage business
and support customersâ sustainability y Launched the Ecolab Total Hygiene
with the ongoing rollouts of our initiatives with products such as Management solution for Chinaâs
waterless lubricant DryExxÂŽ and DryExxÂŽ, a dry lube for beverage brewery, beverage, dairy and
ServiceChexxTM reporting system. plants that saves water, improves food processing markets; and the
y Healthcare showed strong growth
efficiency and reduces Ecolab Food Safety Program
across Europe driven by new product package damage. for the foodservice, retail and
sales, as well as a focus on increasing y Achieved excellent growth in
hospitality markets.
core product sales in surface the brewery, dairy and meat/
disinfection and hand hygiene across poultry sectors by continuing to OUTLOOK
the entire geography. drive home our proactive focus Asia Pacific expects continued growth
on food safety solutions as the in 2009, led by success in the emerging
OUTLOOK cornerstone of our programs. markets of China and India, and continued
In 2009, EMEA will focus on the expansion in Pest Elimination and Food
foundational investments it has made OUTLOOK Retail. We will aggressively pursue
over the past several years. The rollout Canada expects to see a solid opportunities with key corporate account
of a new business information system performance in 2009 as we work to customers, leverage the introduction of
will continue across the region, corporate meet increasing customer needs new products in the region and make
account teams will be strengthened with solutions that improve their ongoing investments in infrastructure,
with new talent additions and improved operations through optimization, new people and resources to help drive
training processes, and an improved technologies and enhanced food safety expanded geographic coverage.
focus will be brought to RD. We will also and reporting programs.
continue to invest in training for
our sales force, leverage our strength
in the core Institutional and Food
Beverage industries and work to
expand our Healthcare and Pest
Elimination businesses.
18 2008 ECOLAB ANNUAL REPORT
6. LATIN AMERICA y Leveraged data obtained through sales
Latin America reported yet another automation tools like ServiceChexxTM
outstanding performance, with sales in the beverage, brewery and dairy
rising a very strong 15% at fixed currency markets, and the 360° AdvisorTM in
exchange rates. Sales were excellent foodservice and food retail, to help
throughout the region as all segments of customers optimize operational
the business again rose by double-digits, efficiencies and improve their overall
driven by new account gains, increased service delivery satisfaction.
product penetration and continued
success with global and regional accounts. OUTLOOK
Latin America expects to continue our
HIGHLIGHTS growth in 2009 by leveraging Circle
y Continued to leverage customer
the Customer relationships in key
relationships with key global and local customer accounts. In addition, we will
corporate account chains to accelerate drive products and services that help
sales growth throughout the region. customers save energy and water, and
y Expanded our successful penetration
strengthen our value-added service
of the food retail segment with offerings through investments in
the cross-divisional MarketGuardÂŽ state-of-the-art technology, and
program, providing strong leadership improve supply chain efficiencies.
for customers looking for help with
front- and back-of-house cleaning and
food safety solutions.
y Strengthened our Pest Elimination
business with significant Circle
the Customer successes throughout
the region, and achieved start-up gains
in several Central American countries.
2008 ECOLAB ANNUAL REPORT 19