Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Ecolab2005AR

1,107 views

Published on

  • Be the first to comment

  • Be the first to like this

Ecolab2005AR

  1. 1. Annual Report 2005 Clearly Ecolab
  2. 2. DESCRIPTION OF BUSINESS Ecolab is the leading global developer and marketer of premium cleaning, sanitizing, pest elimination, maintenance and repair products and services for the world’s hospitality, foodservice, healthcare and industrial markets. Founded in 1923 and headquartered in St. Paul, Minn., Ecolab reaches customers in more than 160 countries across North America, Europe, Asia Pacific, Latin America, the Middle East and Africa, and employs more than 22,000 associates worldwide. Customers include hotels and restaurants; healthcare and educational facilities; quickservice (fast-food and convenience stores) units; grocery stores; commercial and institutional laundries; light industry; dairy plants and farms; food and beverage processors; pharmaceutical and cosmetic facilities; and the vehicle wash industry. Products and services are marketed by the industry’s largest and best-trained direct sales-and-service force, numbering nearly 13,000 associates, who advise and assist customers in meeting a full range of cleaning, sanitation and service needs. Ecolab common stock is traded on the New York Stock Exchange under the symbol ECL. Ecolab news releases and other selected investor information are available on the Internet at www.ecolab.com. FORWARD-LOOKING STATEMENTS AND RISK FACTORS We refer readers to the company’s disclosure, entitled “Forward-Looking Statements and Risk Factors,” which is located on page 30 of this Annual Report. FINANCIAL HIGHLIGHTS Percent Change (thousands, except per share) 2005 2004 2003 2005 2004 Net Sales $4,534,832 $4,1 84,933 $3,76 1,81 9 8% 1 1% Net Income 3 19,48 1 282,693 260,590 13 8 Percent of Sales 7.0% 6.8% 6.9% Diluted Net Income Per Common Share 1.23 1.09 0.99 13 10 Diluted Weighted-Average Common Shares Outstanding 260,098 260,407 262,737 - (1 ) Cash Dividends Declared Per Common Share 0.3625 0.3275 0.2975 11 10 Cash Provided by Operating Activities 590,1 3 6 570,908 523,932 3 9 Capital Expenditures 268,783 275,87 1 2 12,035 (3) 30 Shareholders’ Equity 1,649,2 1 0 1,598, 1 4 1 1,32 1,08 1 3 21 Return on Beginning Equity 20.0% 2 1.4% 23.3% Total Debt 746,30 1 701,577 674,644 6 4 Total Debt to Capitalization 3 1.2% 30.5% 33.8% Total Assets $3,796,628 $ 3,716, 1 74 $3,228,91 8 2% 15% DILUTED NET INCOME DIVIDENDS DECLARED NET SALES NET INCOME PER SHARE PER SHARE (dollars in millions) (dollars in millions) (dollars) (dollars) $0.363 $4,535 $319 $1.23 $4,185 $0.328 $1.09 $283 $3,762 $0.99 $0.298 $261 $3,404 $0.263$0.275 $0.75 $196 $0.68 $2,321 $178 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 All financial information for all periods reflects the company’s adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” in the fourth quarter of 2005. All prior periods have been restated.
  3. 3. Clearly Ecolab Who is the trusted source for “clean” among restaurants, hotels, hospitals, food and beverage plants, laundries, retail facilities, educational institutions and more? Clearly Ecolab. Our strong customer relationships have allowed Ecolab to grow from a single product offering in 1923 to the leading global provider of cleaning, sanitizing and service solutions. We serve customers in more than 160 countries through our direct sales-and-service force, distributors and export activities. In the United States, we have 10 complementary business units: Institutional, Kay, Pest Elimination, Food & Beverage, Professional Products, Healthcare, GCS Service, Textile Care, Vehicle Care and Water Care Services. By focusing on our Circle the Customer - Circle the Globe strategy, we continue to expand many of these services to markets throughout the world. Ecolab’s mission is clear. We spend every hour of every day working to provide outstanding results for Ecolab customers and shareholders everywhere. SERVICES/PRODUCTS PROVIDED INSTITUTIONAL FOOD & BEVERAGE TEXTILE CARE Products, programs and services for the Cleaning and sanitizing products, Cleaning and sanitizing products, foodservice, hospitality and healthcare equipment, systems and services for programs and services, including water industries, including warewashing, the agribusiness, beverage, brewery, recycling and energy solutions, and data on-premise laundry, housekeeping, pharmaceutical, dairy, meat, poultry management systems, for commercial water filtration and conditioning, food and food processing industries. laundries serving the work wear, linen safety products, specialty kitchen and and healthcare markets. GCS SERVICE laundry products, and pool and spa VEHICLE CARE management. Service and parts for the repair and maintenance of commercial foodservice Vehicle cleaning, protection and KAY equipment. detailing products and services for Cleaning and sanitizing products, full-service tunnel, quick-service in-bay, services and training programs for PROFESSIONAL PRODUCTS self-service and detail car wash quickservice restaurants, food retail Janitorial cleaning and floor care operations and corporate-owned markets, movie theaters and products, systems and services for the transportation fleets. convenience stores. retail, building services and industrial WATER CARE SERVICES markets. PEST ELIMINATION Industrial water treatment products and Service and technology for the services for boilers, cooling water and HEALTHCARE detection, identification, elimination waste treatment systems. Products and services including and prevention of pests in commercial healthcare personnel hand wash, facilities, as well as food safety audit surgical scrubs, cleaning and and training services. disinfection products used in processing surgical instruments and hard surface Note: All product names and certain disinfection. information appearing in italic type in the text of this Annual Report are trademarks, brand names, service marks or copyrighted material of Ecolab Inc., Kay Chemical Company or Ecolab GmbH & Co. OHG.
  4. 4. NET SALES ECOLAB BUSINESS MIX 2005 (dollars in millions) $4,535 $4,185 ● International 49% United States 51% $3,762 ● Institutional 25% Europe/Middle East/Africa 34% ● Food & Beverage 7% Asia Pacific 8% ● Pest Elimination 6% Canada 3% ● Kay 5% Latin America 3% ● GCS Service 3% Other 1% ● Professional Products 1% ● Healthcare 1% ● Vehicle Care 1% ● Textile Care 1% ● Water Care Services 1% 2003 2004 2005 CUSTOMERS/MARKETS SERVED CUSTOMER SEGMENTS Food, beverage and brewery plants Government facilities Full-service restaurants Pharmaceutical and cosmetic facilities Airlines Quickservice restaurants Office buildings Light manufacturing industries Hotels Shopping malls Vehicle wash and detailing Food retail Retail facilities Schools MARKETS Movie theaters Colleges and universities Recreational facilities United States Laundries and textile rental Amusement parks Europe/Middle East/Africa Hospitals Building service contractors Asia Pacific Nursing homes Cruise lines Canada Other healthcare facilities Correctional facilities Latin America Dairy farms and plants ECOLAB STOCK PERFORMANCE SALES-AND-SERVICE ASSOCIATES (December 31) 2003 2004 2005 2003 2004 2005 Quarter Low High Low High Low High Institutional* 3,1 90 3,055 3,1 55 Kay 275 325 350 First $23.08 $26.00 $26.1 2 $28.6 1 $31.20 $35.08 Pest Elimination 1,645 1,725 1,830 Second 24. 2 1 27.92 27.95 31 .77 30.68 34.23 Professional Products** 180 95 90 Third 23.78 26.80 29.04 31.80 30.75 34.1 4 Healthcare** - 70 80 Fourth 25.1 5 27.89 31.32 35.59 30.93 37. 1 5 GCS Service 535 470 470 Textile Care 80 75 75 Food & Beverage 405 450 425 ECOLAB STOCK PERFORMANCE COMPARISON Water Care Services 95 95 1 25 Vehicle Care 1 00 1 00 1 00 Europe/Africa/ME 3,285 3,9 1 5 4,1 50 • Ecolab Stock Price Index, Dec. 31, 2002 = 1.00 $38 1.60 Asia Pacific 1,01 5 960 995 • Ecolab Stock Price 31, 2002 = 1.00 ECOLAB, S&P 500 INDICES $36 • S&P 500 Index, Dec. Canada 340 355 375 1.50 ECOLAB STOCK PRICE Latin America 540 590 690 $34 Total 1 1,685 12,280 12,9 1 0 1.40 $32 *2004 decrease of 250 associates due to the sale of a 1.30 grease management product line. $30 **2004 reflects the separation of Healthcare from 1.20 Professional Products. $28 1. 10 $26 1.00 $24 $22 0.90 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2002 2003 2004 2005
  5. 5. Only one company stands out as the clear leader, offering the finest premium programs, technology and service for every aspect of “clean.” Only one company invests resources as deeply to research and develop the next innovative breakthroughs. Only one company has the largest and best-trained global sales-and-service team in the industry. And for customers who want only the best for their cleaning and sanitation needs, there is only one clear choice. Clearly Ecolab. Clearly Ecolab Ecolab | Annual Report 2005 | 1
  6. 6. Clearly Ecolab TO OUR SHAREHOLDERS: At Ecolab, we want our message to be loud and clear. When it comes to providing the most comprehensive solutions and dedicated service to our customers, we know there is only one choice. And that choice is clearly Ecolab. It is clear that our people make the difference. When we say our team of 22,000 associates is our most important asset, we back it up by investing in them, carefully selecting, training and developing them so they can make exciting and important contributions to grow our business. These investments not only drive the strong performance and add to the impressive results from our exceptional team, but also deepen our commitment and dedication to serving our customers in every way possible. We guide our business with a clear, coherent, proven strategy. Our Circle the Customer – Circle the Globe strategy continues to provide a solid strategic platform for exceeding our customers’ expectations, and providing solutions for every customer need, everywhere our customers need it. And we keep a clear eye on the Douglas M. Baker, President and CEO (left), challenges to our business, whether Allan L. Schuman, Chairman of the Board (right) it’s a tough rising raw material cost solutions for our customers’ changing environment or a change in our requirements. customers’ expectations of their Above all, our ultimate goal is business partners. This is especially crystal clear – to fuel growth and clear as we streamline our operations success for our customers, our to keep costs at a minimum while associates and our shareholders. So we protecting our investments in our ask the questions. We do the research. business, and as we create new turnkey | Ecolab | Annual Report 2005 2
  7. 7. For example, we introduced our 360º of Protection program for foodservice and Only one company stands out as the hospitality customers, which provides a customized plan for the full spectrum of clear leader in providing premium cleaning and hygiene issues an operation faces. The program includes programs, technology and service new products, such as Oasis 146 for every aspect of “clean.” Multi-Quat Sanitizer, which provides a broad sanitizing range that helps simplify use and minimize the risk of health code violations, with innovative technologies such as our advanced no-rinse enzyme-based floor cleaner Wash ‘n Walk. A wide-ranging We innovate. We build relationships. We $1.23 for 2005, up 13 percent from $1.09 combination of products, systems, serve. We produce. We deliver. And by in 2004. Excluding a $0.01 per share training aids and service combine to doing these well, we grow. charge related to the repatriation of make 360º of Protection the industry’s We stay true to our mission, our foreign earnings under the American most comprehensive solution for today’s culture and ourselves. And because we Jobs Creation Act (AJCA), diluted increasingly busy customers. dedicate ourselves to all of these things, income per share from ongoing For commercial laundries, we only one company stands out as the operations increased 14 percent unveiled full cycle solutions, designed clear leader in providing premium from 2004. specifically to meet laundry challenges ❙ programs, technology and service for Our return on beginning and reduce total operating costs every aspect of “clean.” That company shareholders’ equity was 20 percent in through a combination of chemistry, 2005, the 14th consecutive year in which is clearly Ecolab. service, engineering, technology and Read on for a clear picture of our the company achieved its long-term water care solutions. This program 2005 accomplishments: financial objective of a 20 percent allows customers to economize their return on beginning shareholders’ operations in an incredibly competitive CLEAR equity. market environment. ❙ FINANCIAL PERFORMANCE Our share price rose 3 percent in And we expanded our MarketGuard ❙ We adopted the new accounting 2005 – slightly outperforming the program globally to give food retailers standard for expensing stock options Standard & Poor’s 500. Our share worldwide access to the best food and restated our prior year financial performance has exceeded that of the safety, pest elimination and floor care statements in transitioning to the new S&P 500 in 12 of the past 15 years. In solutions to achieve the highest rules. All financial information in this addition, we increased our quarterly standards of cleanliness and sanitation dividend rate for the 14th consecutive report reflects these restatements. See in their operations. MarketGuard the Notes to the Consolidated Financial year, as it rose 14 percent in December represents the success both Ecolab and Statements for more information. to an indicated annual rate of $0.40 per our customers achieve when we employ ❙ We are proud to report that our net common share. the best practices from our many areas ❙ sales rose to $4.5 billion in 2005, an We achieved record cash flow from of expertise to create one customized increase of 8 percent over 2004, fueled operating activities of $590 million, and solution for our customers. by double-digit growth from Kay, Pest our total debt to capitalization ratio Check out more of our latest Elimination, Healthcare, Vehicle Care remained unchanged from year-end product, program and service offerings and Latin America, along with strong 2004 at 31 percent. These results in the “Review of Operations” section of gains from Institutional, GCS Service allowed us to retain our debt rating this report. and Asia Pacific. within the “A” categories of the major Because service to customers is our ❙ Operating income was $542 million rating agencies during 2005. first priority and our ultimate customer in 2005, up 11 percent from $490 million solution, we continued to invest in our CLEAR PRODUCT AND in 2004, leveraging the strong sales sales-and-service organization in 2005. SERVICE DIFFERENTIATION gain and effective cost-savings We added more than 600 new initiatives. Operating income increased In 2005, we committed to providing associates to our global field to 12.0 percent of net sales, compared customers with even more complete organization, which is now nearly 13,000 to last year’s 1 1.7 percent. solutions and new programs to meet strong. We also made significant ❙ Diluted net income per share was every need in their operations. Ecolab | Annual Report 2005 | 3
  8. 8. IR Magazine. Recipients of this honor investments in additional training and and his outstanding leadership abilities tools for our associates in the field, and focus were great assets as he built are selected by means of an including our portable 360º Advisor our international business, especially independent survey of more than 4,000 computers, so they can continue to do during his role leading the Ecolab investors. The increased emphasis on what they do best – build long-lasting Europe business to create one global corporate governance makes this award relationships with our valued customers. Ecolab. particularly meaningful to Ecolab, and is ❙ In August, Jochen Krautter retired a credit to the high standards of CLEAR EXPANSION STRATEGY from Ecolab’s board of directors. Jochen conduct in which we hold ourselves in We continue to execute a disciplined had served on Ecolab’s board since all areas of our work. In addition, IndustryWeek named acquisition strategy to ensure the 2002 as a member of the Finance businesses we acquire are a sound Committee. We thank Jochen for his Ecolab to its “50 Best Manufacturing strategic fit and meet our financial valued service on the board and to our Companies” report, which identifies the criteria. company, and wish him well. top-performing manufacturers in the ❙ United States. IndustryWeek focuses on In January 2005, we acquired Also in August, Ecolab’s board of Kansas-based Midland Research directors appointed Kasper Rorstad to financial measures that pertain to Laboratories, a $16 million provider of fill the vacancy created by Jochen operational efficiency and operating water treatment products, process Krautter’s retirement. Kasper is success in order to determine the best chemicals and services serving the executive vice president of Human manufacturing companies, which is commercial, institutional, industrial, Resources, IT and Logistics & another great acknowledgement of our food and sugar processing markets. We Purchasing for Henkel KGaA of company. also acquired Kilco Chemicals Ltd., of Düsseldorf, Germany. We welcome him And paying tribute to our dedicated salesforce, Selling Power magazine Belfast, Northern Ireland, in April 2005. to the Ecolab board. ❙ With annual sales of $5 million, Kilco Finally, in February 2006, we again praised Ecolab as one of the best offers products, systems and services regretfully accepted the resignation of companies in America to sell for. Our for the food and beverage processing Steve Newlin. Steve served as the ongoing commitment to training, industry, further expanding Ecolab’s president of our Industrial Sector for compensation and development of our reach in this core market. We continue the past three years, and was a strong field sales-and-service team earned us to be active in our acquisition efforts to and valued member of our management this notable recognition for the second broaden our business, improve scale team. We appreciate Steve’s straight year. and increase our capacity to better contributions to our business, and wish OUTLOOK FOR 2006 serve our customer needs. him success in his new venture. As we look ahead at the opportunities CLEAR CLEAR and challenges we face, our vision LEADERSHIP DEVELOPMENT ACHIEVEMENT & RECOGNITION remains as clear as ever. We will deliver As detailed in the sidebar of this letter, For the sixth consecutive year, we were strong and sustainable growth. Ecolab’s Chairman of the Board Al honored to be named one of the “100 We will continue our long tradition Best Corporate Citizens” by Business Schuman will retire in May 2006 after of growth in 2006 and beyond by Ethics magazine. Ecolab is one of only a remarkable 49 years of service to focusing on what we do best: Ecolab. We thank him for his dedication 19 companies to receive this recognition surrounding our customers with an and many contributions in building every year since its inception. Corporate expanding array of solutions, entering Ecolab. The Ecolab board of directors integrity and good citizenship are new market segments where we can has announced that it plans to elect essential pillars of our business, and clearly differentiate and add unique Doug Baker to the post of chairman recognition like this reaffirms our value, and making the right strategic upon Al’s retirement. Additional ongoing commitment to conducting our investments in our business to better important leadership developments business the right way for our serve our many stakeholders. include the following: customers, our shareholders and our To achieve this, we will leverage our ❙ In June, John Spooner retired associates. Circle the Customer strategy through from Ecolab after 11 years of service. Ecolab was also recognized for cross-selling and cross-marketing of our John held a number of significant “Best Corporate Governance” among many divisional services, as well as management posts during his tenure, mid- to large-cap companies by introducing a new stable of | Ecolab | Annual Report 2005 4
  9. 9. improvements and cost savings allow us to strengthen our infrastructure and create more robust solutions within our supply chain, information technology, and capital investments. Saluting None of this is possible without 49 years of service the intense focus and exceptional performance of our global workforce. They clearly possess the drive and the talent required to push us to greater In an exceptional career that has spanned five decades, Al Schuman has achievements. They have done it year been a key figure in molding the future of Ecolab. He began his remarkable after year, and we are confident they journey with Ecolab in 1957 as a junior salesman in Queens, New York. will do it again in 2006, because we After a decade of service in the field, he went on to create the very have a culture built squarely on service successful national accounts structure that helped drive Ecolab’s success, execution and value-based results. to work tirelessly as general manager of our largest businesses, and to Our expectations of our global serve nine impressive years as chief executive officer, from 1995 to 2004. associate base are absolutely clear. Our spirit, pride, determination, commitment, passion and integrity are In May 2006, after 49 years of service, performance, and aggressive growth, Al will retire as Ecolab’s Chairman of the Board, a post in which he unparalleled. Ecolab associates embody has served since 2000. Al has been a thoughtful, tenacious and devoted these traits by living this culture every member of Ecolab’s board since 1991, and his wise counsel, enthusiasm day. We care deeply about our and motivational approach will be missed. customers, our company and one another. Clearly, that’s what being part Al’s legacy at Ecolab will continue in many ways, from the company’s of the Ecolab family is all about. strong commitment to service and customer relationships to its focus on There is no mystery to Ecolab. training and development for associates. His steadfast commitment, deep We’re clear about the high expectations industry knowledge, and unstoppable drive for success for our associates, we set for ourselves and our company, our customers and our company has helped secure and solidify Ecolab’s our demanding performance standards, place as the market leader in premium cleaning and sanitation products and our passion for serving our and services worldwide. Thank you, Al, for sharing your unwavering customers and shareholders. So when dedication and determination on behalf of our company and all of us our associates, customers and in the Ecolab family. shareholders think of the company that provides these better than any other, the answer is clear. Clearly Ecolab. leading-edge product solutions. This will field headcount in the face of rising raw be fueled by the strong global customer materials and other costs, we choose to relationships already established by our invest in our people, their training and core Institutional, Pest Elimination, Food field technology. We know there is no & Beverage, and Kay businesses. more powerful driver for customer Douglas M. Baker Our continued investments in the satisfaction – and our success – than President and Chief Executive Officer strategic pillars of our organization will ensuring we have the best possible also play a critical role in continued service force that executes effectively. growth. We will make further Our strategy for reducing costs in investments in our winning sales-and- this tough operating environment is service force by adding more talented based on carefully reviewing and people to our undisputed industry- streamlining our business processes to leading field team. While some find ways to more efficiently and Allan L. Schuman competitors have chosen to reduce their effectively serve our customers. These Chairman of the Board Ecolab | Annual Report 2005 | 5
  10. 10. | Ecolab | Annual Report 2005 6
  11. 11. Why compromise quality or quantity when you can have both? Not only do we equip our field service team with the best tools and technology to serve our customers, but we also continually invest in expanding this critical link to customers. That’s why only one company can say it has the largest, best-trained, and most talented sales-and- service team in the industry. Clearly Ecolab. Clearly Ecolab Ecolab | Annual Report 2005 | 7
  12. 12. | Ecolab | Annual Report 2005 8
  13. 13. Clearly Ecolab The next big breakthrough is rarely clear from the beginning. It takes research, both in the lab and in the customer environment, to understand the opportunities. It takes vision, to clearly see the possibilities and the path to realize them. It takes dedication, to persevere in the work and remain relentlessly committed to development until the answer is better than just right. All of this must be done with the customer clearly in mind. One company has this down to a science. Clearly Ecolab. Ecolab | Annual Report 2005 | 9
  14. 14. | Ecolab | Annual Report 2005 10
  15. 15. We don’t just offer our customers products. We provide them with solutions. By asking customers what they really need. By combing their operations in search of potential problem areas. And by factoring in key considerations that matter most to the customer, including use-cost, operating efficiencies, and time and labor savings. That’s why our industry recognizes one company as the clear leader in revolutionary solutions for its customers. Clearly Ecolab. Clearly Ecolab Ecolab | Annual Report 2005 | 11
  16. 16. | Ecolab | Annual Report 2005 12
  17. 17. Clearly Ecolab Service. Innovation. Solutions. Many factors contribute to our success. But when we look at the ultimate key to our success, it’s clearly our people. Our team is talented, dynamic and enthusiastic. Knowledgeable, creative and passionate. We aggressively pursue what’s best for our customers, our shareholders and our company every day. Our commitment is what makes our future so clear. Clearly Ecolab. Ecolab | Annual Report 2005 | 13
  18. 18. Clearly UNITED STATES: INSTITUTIONAL Institutional delivered record sales in 2005, growing 7%, thanks to new business gains, increased market penetration and successful new product launches. The division also implemented comprehensive cost-saving initiatives to help offset substantial rises in raw material and fuel costs. Ecolab HIGHLIGHTS • Launched the highly successful 360º of Protection program, which 2005 dramatically increases food safety, operating efficiency, guest satisfaction REVIEW OF and employee safety for Ecolab’s foodservice, hospitality and long-term OPERATIONS care customers. • Entered into a strategic alliance with Minnesota-based Pentair, Inc., a provider of industry-leading water Innovative solutions. purification solutions, including Reliable results. Everpure® water filtration and conditioning systems, thus enhancing Clearly, Ecolab delivers. Ecolab’s ability to develop and market Our business units water management solutions in its core account base. consistently provide • Introduced a slate of new products and services, including EcoLogic, a our customers with the new line of cleaners that includes right products, systems products certified by Green Seal as meeting its environmental standards and service expertise and features less packaging to reduce to help streamline their waste, Pathways Solid Drain Sanitizer, a drain treatment program, and Oasis operations. Ecolab is 146 Multi-Quat Sanitizer, a food contact hard surface sanitizer. clearly committed to • Successfully integrated the Daydots being a trusted partner acquisition and leveraged its food safety product line for the foodservice for every customer, and restaurant segments globally. every day. • Strengthened its sales-and-service infrastructure with enhanced training programs, a new e-learning platform and service automation. The following is a detailed summary of OUTLOOK Institutional plans to leverage its proven 2005 and outlook for programs to drive expanded growth in 2006 from each of our 2006. This growth is expected to be driven primarily by delivering more core businesses. superior product and service solutions to existing accounts, new account gains, new product launches including a next-generation warewashing program, new water management solutions, and sales force additions. | Ecolab | Annual Report 2005 14
  19. 19. PROFESSIONAL PRODUCTS PEST ELIMINATION KAY Kay achieved another year of Professional Products sales rose 2% in Pest Elimination posted another year 2005, fueled by new product offerings, double-digit growth, increasing sales of double-digit sales growth in 2005, effective utilization of the Circle the increasing 12%, driven by strong 1 1%, with continued strong Customer strategy, and a strong focus performances in all of its market performances across its markets. Kay on the retail market segment. segments. These gains were led by also streamlined processes and drove government, food and beverage, and costs out of its operations to further non-food retail sectors. enhance and drive its aggressive growth goals. HIGHLIGHTS HIGHLIGHTS HIGHLIGHTS • Introduced successful new tools, • Solidified its retail floor care presence • Continued to serve as principal driver including the Allur-Ring Pheromone of the enhanced MarketGuard through participation in the cross- Pad for cockroach control, the divisional MarketGuard program and program, which combines the best in Electronic Duster, a metering tool for the aggressive marketing and food safety, pest elimination and floor successful launch of the Bright FX dispensing dust-type insecticides, and care to enable food retail customers Protector System, a family of High Performance Floor Care System, to complete the cleaning and products that improve the safety and which provides exceptional gloss and sanitation circle. • Introduced Q-Sure Towels, featuring efficiency of Ecolab’s service durability in high-traffic areas. • Introduced the GlossTek line of patented QuatSmart technology, specialists. • Added two new sales training premium ultra-durable floor finishes, which help maintain more constant programs that are driving increased offering exceptional durability and quat sanitizer concentration within sales productivity, as well as a new high gloss floors for facilities where the holding solution, thereby reducing food retail training program for all regular burnishing is not feasible, health code violations. • Launched its new Chlorinated field associates. such as patient rooms, nursing Cleaner, designed for heavy-protein • Achieved double-digit sales and stations and corridors in healthcare operating income growth in its and acute care facilities. soils common in food retail EcoSure food safety and quality environments, and Coffee Pot • Entered the stone care market with a Cleaner, a high-performance solution assurance business through major complete line of stone care products, account gains, expansion into the equipment and tools that clean, that cleans hard-to-reach buildup and hospitality segment and increased restore and protect natural and stains without scrubbing. penetration with existing customers. manufactured stone floors. • Gained significant new business by • Introduced territory routing software securing several new corporate to field associates, which helps OUTLOOK account customers. improve service efficiency and Professional Products expects to response. continue building on the successful OUTLOOK • Improved worker and driver safety foundation of 2005 by partnering with Kay is primed for further attractive performance among field associates. key distributors and large customers, as growth in 2006 in its markets, well as leveraging the proven Circle the propelled by additional corporate OUTLOOK Customer strategy. In 2006, the division accounts gains and new product Pest Elimination’s field service and plans to continue to strengthen its field innovations. Kay’s focus on process sales organizations are well positioned team to better serve the unique needs improvement and driving its new for growth in 2006. Increases in of large corporate accounts. The business pipeline should continue to corporate accounts and better division also expects further success in enhance its position as the market penetration of existing markets are the retail market and additional leader in quickservice and food retail expected to again drive double-digit penetration of the healthcare arena markets. sales and operating income growth. through the introduction of new In addition, programs that further product innovations. demonstrate Ecolab’s superior responsiveness to customer needs should help fully circle customers and increase sales within existing accounts. Ecolab | Annual Report 2005 | 15
  20. 20. HEALTHCARE GCS SERVICE TEXTILE CARE Establishing itself as an industry leader On the heels of extensive operational In 2005, Textile Care sales grew 5% and in infection control, Healthcare enjoyed improvements, GCS achieved 8% sales profitability improved. New product a strong 16% sales increase in 2005 as growth in 2005 and significantly offerings, cross-divisional partnerships, the business further penetrated its core improved its bottom line. Growth within highly trained service personnel and markets and made its first entrance existing accounts and major corporate gains in the tunnel washer segment into the operating room, while account gains helped drive sales, along helped drive sales growth, and cost- simultaneously building its long-term with a continued emphasis on quality savings initiatives offset a significant product pipeline. control, associate retention and increase in raw material prices. expense-control management. HIGHLIGHTS HIGHLIGHTS HIGHLIGHTS • Introduced full cycle solutions, a • Picked up business with several large, • Significantly expanded its presence multi-unit national corporate account comprehensive program of products, with integrated delivery networks with customers and laid the foundation for equipment and service that helps the continued success of the more new business expansion in commercial laundries economize their Asepti-Solid line for convenient, 2006. operations and reduce costs. effective instrument cleaning, as well • Introduced Unitrax, which assists • Leveraged collaboration with its as the introduction of new products customers in tracking important European counterparts to develop the and technologies. information regarding their kitchen industry’s most experienced and • Successfully entered the operating equipment, providing details such as best-trained service specialists for the room market with the launch of cost per unit and frequency of repair. tunnel washer segment, resulting in Endure 450, a surgical hand • Continued its aggressive efforts to good growth. antiseptic that provides excellent enhance customer satisfaction and • Successfully made key customer gains persistent antimicrobial protection quality while simultaneously in the healthcare and hospitality while maintaining skin health with a improving associate productivity, segments. combination of moisturizers and performance and retention. • Continued working with Ecolab’s conditioners. • Made additional improvements and Water Care Services Division to bring • Bolstered its infrastructure through investments to its service model, solutions to customers in both the growth of its sales-and-service team, improving service excellence through wash aisle and wastewater areas. and leveraged the Circle the its quality assurance initiative. Customer strategy through key OUTLOOK partnerships for preventive OUTLOOK Textile Care expects continued growth maintenance with other businesses GCS Service plans to aggressively in 2006 on the strength of groundwork in the Ecolab team. leverage Ecolab’s Circle the Customer laid in 2005. While higher raw material • Achieved ongoing success with its strategy in 2006 as it continues prices will present operating challenges, established waterless hand hygiene partnering with sister divisions to help Textile Care plans to leverage new and central sterile processing drive strong growth. Increases in both product offerings and effectively utilize solutions. parts and service sales are expected, its corporate accounts team to expand building on the momentum generated business with several large, multi-unit OUTLOOK in 2005. The division also plans to national operators. In addition, the Healthcare expects another robust year expand its corporate accounts team as division will continue its partnership in 2006 as it builds on investments it continues to streamline its internal with other divisions to offer full cycle made in its sales-and-service force, operating systems and division-wide solutions and realize Ecolab’s differentiated new product and system infrastructure. value-added proposition. solutions, and innovative research and development. These effective tools should be key drivers for Healthcare as it expects to continue to grow its business scale and drive strong organic growth. | Ecolab | Annual Report 2005 16
  21. 21. FOOD & BEVERAGE WATER CARE SERVICES VEHICLE CARE Food & Beverage experienced a 9% Water Care Services increased its Vehicle Care enjoyed a solid year, sales increase in 2005, due to the national presence in 2005 with the growing sales 12% in 2005, spurred by successful integration of the Alcide acquisition of Midland Research the introduction of new, innovative acquisition and outstanding perform- Laboratories Inc., which – along with products, sales-and-service automation ance in the dairy and beverage markets. good organic growth – enabled the tools and several large account gains. Global customer relationships were also division to drive a 34% sales increase. These results were bolstered by an impetus for growth for the division, New products and systems focused on Ecolab’s ability to offer complete with several key customers seeking energy and cost savings added depth service solutions to its customers. standardized operations worldwide. to the division’s product offering. HIGHLIGHTS HIGHLIGHTS HIGHLIGHTS • Introduced Rain-X Online Protectant, • Integrated Midland Research • Leveraged the power of Sanova, the Laboratories Inc., a Kansas-based the industry’s first complete surface revolutionary antimicrobial food water treatment company, enhancing protectant used across full-service, additive that significantly reduces Ecolab’s national coverage and quickservice, self-service and fleet pathogens on food surfaces, which is gaining a strong position in the sugar markets. This innovative technology generating excitement and new processing market. delivers outstanding shine, enhanced business in the antimicrobial market. • Significantly expanded and visibility in poor weather, and advanced • Effectively marketed its value reorganized its sales team, creating all-weather protection for multiple proposition, emphasizing food safety, nearly two dozen new territories and vehicle surfaces. time savings and operational adding scale in areas such as • Expanded service coverage by adding efficiencies to help customer facilities marketing, finance and R&D. sales-and-service associates, and run more smoothly. • Made key investments in sales force continued developing its strong distri- • Helped to significantly expand productivity, including a training bution network with strategic partners. Ecolab’s international business program based on its value • Increased its fleet segment sales using through key corporate account gains, proposition and the addition of tablet the proven Circle the Customer model resulting from its strong global personal computers for field with large corporate accounts. customer relationships and the Circle personnel. • Successfully developed new detail the Customer strategy. • Introduced new products and segment sales by building new • Introduced WPA-1000, a whey equipment specifically focused on business around large dealership processing additive that prevents saving energy and reducing costs, chains as well as local and regional mineral deposits and buildup in including Precision Plus, a customers. processing equipment, and Eco-Wipe revolutionary boiler technology, EZ • Enjoyed strong results in the self-serve FCS, a convenient, easy-to-use hard Blue Controller, an all-in-one cooling market due to a focus and surface sanitizing wipe ideal for water control system, and ChillerCalc, revitalization of Westley’s Self-Serve cleaning and sanitizing areas where an efficiency tool for chillers. product line. water use is limited. • Automated sales-and-service functions OUTLOOK for field personnel through wireless OUTLOOK In 2006, Water Care Services plans to personal computers and printers, Food & Beverage expects continued leverage its strengthened field presence enabling quicker, more efficient growth in sales to the dairy and food to better serve its customers with its training, enhanced multimedia product processing markets in 2006. Its broadened product and service launches, and real-time service reports partnership with Ecolab’s Water Care offerings. Despite challenges from high for customer operations. Services group should offer additional energy and raw material costs, the avenues for growth by enhancing division expects continued growth OUTLOOK Ecolab’s complete customer solutions through aggressive sales efforts, new Vehicle Care expects continued for commercial and institutional program offerings and strategic attractive growth in 2006. This will be customers. The division also expects to acquisitions, as well as further utilizing driven by new product innovation, continue to invest in and capitalize on including developments in the Rain-X, its cross-selling strategy to enhance the highly successful Sanova product Blue Coral and Black Magic product lines, Ecolab’s integrated customer solutions line to further penetrate the to food and beverage, commercial and as well as by continued expansion in the antimicrobial food treatment market. institutional customers. detail and fleet segments. The division also plans to leverage its four-pronged value-added model, which is based on advanced technology, superior service, operational excellence and powerful marketing programs. Ecolab | Annual Report 2005 | 17
  22. 22. INTERNATIONAL: EUROPE/MIDDLE EAST/AFRICA ASIA PACIFIC Asia Pacific accelerated sales in 2005, Despite sluggish markets in the larger Western European countries, Europe grew growing 8% in fixed currency exchange its business 3% in fixed currency exchange rates, leveraging new products, rates, turning in strong performances strengthening its food distributor network, and leveraging the Circle the Customer throughout the region, most notably in approach to secure new corporate account customers. Europe also achieved good China and Australia. The business also geographical expansion, turning in strong results in Eastern Europe and Turkey. worked closely with its many customers Middle East and Africa experienced solid sales growth through customer gains in in recovery and rebuilding efforts in the Institutional and Pest Elimination. aftermath of the Southeast Asia tsunami that struck the region in December 2004. • Pest Elimination solidified its strong HIGHLIGHTS HIGHLIGHTS market position in the United Kingdom • Institutional secured new corporate • Introduced new technologies for the and France, with double-digit sales accounts, enjoyed good growth Food & Beverage market, including growth from new programs including Lubodrive AP and Lubodrive ZF, through its expanded partnerships EcoPro for Food & Beverage with food distributors and its core conveyor lubricants that increase customers and bird protection product range, invested in training for production speeds while reducing systems for the food retail segment. bottle tipping, and Advantis, a its field organization and successfully • Middle East and Africa recorded partnered with Professional Products value-added line of clean-in-place strong gains, led by solid Institutional to capitalize on large floor care detergents that work well in ambient growth, as well as good results in opportunities. temperatures, therefore reducing Turkey and the South African Pest • Food & Beverage benefited from a time and energy requirements at Elimination business. pan-European approach, which bottling facilities. resulted in growth gains organically, • Aggressively entered the retail OUTLOOK with new corporate account market in East Asia and Japan Europe expects improved growth in customers and via successful through the cross-divisional 2006, based on its strengthened MarketGuard program for food acquisition integration. Eastern foodservice distributor network, Europe was a source of good growth retailers. expanded cross-divisional and for the division, as was the • Accelerated its floor care offering pan-European efforts, incremental with the introduction of Wash ’n Walk, pharmaceutical market. additions to its field sales-and-service • Healthcare strengthened its position the revolutionary no-rinse floor force, and introduction of proven as market leader in endoscope cleaner first introduced by programs including 360º of Protection. reprocessing with Sekusept easy, a Institutional in North America. Europe also plans to continue to explore high-level disinfectant for manual and • Achieved significant corporate additional opportunities for geographic automatic reprocessing that offers no account gains, creating a platform expansion of smaller divisions in 2006. activation period, short contact times for future growth in the region. and easy disposal, as well as increased focus on hand care disinfectants and OUTLOOK investments in automatic instrument Asia Pacific plans to continue its disinfection. attractive performance in 2006. The • Textile Care growth was driven by Asia Pacific team expects to leverage key corporate account gains that new product and program introductions expanded its market share, as well as in floor care and lubes to continue to a focus on its next generation of water gain market share in the Institutional and energy-saving systems that and Food & Beverage markets across strengthen customers’ bottom line the region. In addition, the division will by reducing natural resource continue to focus on the high growth consumption. China market, as well as accelerate • Professional Products strengthened development of Ecolab’s new business its approach to the retail market, in India. Asia Pacific also plans to drove its innovation portfolio in the invest in its infrastructure, with key Healthcare segment with HealthGuard, investments in its sales-and-service an all-in-one janitorial cleaning system team and in strengthening its supply for healthcare facilities, and chain position to meet the increasing strengthened its cross-divisional customer needs of this growing region. approach with Institutional. | Ecolab | Annual Report 2005 18
  23. 23. CANADA LATIN AMERICA In 2005, Canada delivered a healthy Latin America enjoyed another strong sales performance, rising 8% in fixed year of double-digit growth across the currency exchange rates, as solid region. Sales grew 15% in fixed performances in its core markets currency exchange rates, outperforming benefited from the introduction of new its previous five years of strong double- products and programs. These were digit growth through good gains with further leveraged by a renewed focus global accounts, high growth in targeted on customer satisfaction and segments, and success in rolling out cross-divisional collaboration. innovative products and solutions. HIGHLIGHTS HIGHLIGHTS • Increased its success with both • Continued to leverage the global and independent restaurants and large regional customer relationships chains by leveraging the power of established through Institutional, Food Wash ’n Walk and 360º of Protection & Beverage, Kay and Europe to for foodservice customers, further accelerate sales growth throughout penetrating this core market. the region. • Forged a highly successful partnership • Strengthened growth platforms with utility companies to offer through enhancing the field firepower restaurant customers with spray and productivity, developing total heads that reduce energy, water and solutions to deliver higher value sewage costs. propositions and targeting high-growth • Gained market share with building segments. service contractors through the help • Continued its successful penetration of Professional Products’ new and expansion of the food retail GemStar Stratus, a long-lasting, segment with the cross-divisional MarketGuard program. durable floor finish ideal for high traffic areas, as well as strengthened • Aided growth with flagship technology its presence in the retail floor care upgrades, such as the introduction of DryExx dry lube for beverage bottling segment. • Added strength to its Pest Elimination plants, a dry lubricant that eliminates service force, as well as emphasizing the need to use water to dilute the and increasing divisional employee lubricant, resulting in less soil buildup, safety through dynamic safety no slime formation, and no water or programs. lubricant dripping on the floor, thereby increasing productivity, and the Oasis Pro product line, featuring color-coded OUTLOOK Canada expects to continue to build on super-concentrated products, reduced the momentum of 2005’s focus on packaging, and controlled dispensing, cross-divisional collaboration in order to into the high-growth hospitality secure additional business with both market. large corporate accounts and • Expanded geographic coverage, as well independent “street” customers. Canada as Pest Elimination and Water Care also plans to make investments in Services, to deliver the Circle the additional resources to bolster growth in Customer – Circle the Globe promise its smaller divisions and further in key areas. leverage the collaborative efforts through the Circle the Customer OUTLOOK strategy. Latin America expects to continue its strong growth in 2006 as it further builds on the Circle the Customer platform by strengthening value propositions for targeting high-growth customer segments, enhancing quality service delivery, improving supply chain efficiency and enabling better execution. Ecolab | Annual Report 2005 | 19
  24. 24. Environmental Sustainability As an industry leader in providing superior value to our customers, Ecolab also helps conserve resources and preserve the quality of the environment. We believe that corporations should conduct their business as responsible stewards of the environment and in a manner that does not disrupt the earth’s natural evolutionary processes. Ecolab has a long track record for sustainability. We are committed to helping our customers achieve cleaner, healthier and safer surroundings so they can more productively conduct their business around the globe. Consistent with our sustainability objectives, Ecolab is continually expanding our portfolio of environmentally responsible cleaning products. We are dedicated to finding ways to deliver better product solutions for our customers in ways that help preserve our environment. Our commitment to doing what’s The Formula 1 laundry system right for the long term has helped lowers the risk of product spills Ecolab achieve sustainable, profitable Ecolab’s key focus of investment or mixing of incompatible growth in the past and will continue to in our communities is toward products. It also does not guide us in the future. youth and education enrichment contain caustic soda or chlorine. programs. Social Responsibility thousands of At Ecolab we believe that giving hours of back to our communities benefits the volunteer work our associates economic and social vitality of the entire commit to charitable area. We have a strong history of organizations. supporting the communities where our In times of natural associates live and work. We believe this Ecolab field associates participate in relief efforts in the disasters, Ecolab assists in also enables us to attract the talent we wake of Hurricane Katrina. recovery efforts, and the need to continue our business growth Ecolab Foundation has given and development. cash grants and matched Through the Ecolab Foundation, we these terrible disasters. employee donations to the American annually contribute 1.2 percent of our Our dedication to social Red Cross. For example, in the aftermath U.S. pretax earnings to domestic responsibility, ethics and philanthropy of the tsunami in Southeast Asia and charitable organizations. Over the past enhances the health and well-being of during the worst hurricane season in the 20 years, the Ecolab Foundation has our communities. A company that history of the United States, Ecolab contributed more than $35 million to focuses on environmental, social and donated more than $3 million of our communities. economic performance is good for products, primarily hand sanitizers and We also believe that success is society and good for business. surface sanitizers, to the relief efforts. measured not only by the satisfaction of Cash donations to the Red Cross our customers, but by the contributions For further details on both of these topped $300,000 as Ecolab associates of our employees to their communities. important areas, please visit our from around the world responded to Ecolab encourages and fosters the website at www.ecolab.com. | Ecolab | Annual Report 2005 20

×