<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-9328
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ECOLAB INC.
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(Exact name of registrant as specified in its charter)
Delaware 41-0231510
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ecolab Center, St. Paul, Minnesota 55102
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(Address of principal executive offices)(Zip Code)
612-293-2233
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(Registrant's telephone number, including area code)
(Not Applicable)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1996.
64,272,684 shares of common stock, par value $1.00 per share.
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PART I - FINANCIAL INFORMATION
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
First Quarter Ended Year Ended
March 31 December 31
(thousands, except per share) 1996 1995 1995
--------- --------- -----------
(unaudited)
Net Sales $333,720 $309,560 $1,340,881
Cost of Sales 152,589 138,619 603,167
Selling, General
and Administrative Expenses 147,333 139,870 575,028
-------- -------- ----------
Operating Income 33,798 31,071 162,686
Interest Expense, Net 3,440 2,573 11,505
-------- -------- ----------
Income Before Income Taxes
and Equity in Earnings of
Joint Venture 30,358 28,498 151,181
Provision for Income Taxes 12,171 11,458 59,694
Equity in Earnings of
Henkel-Ecolab Joint Venture 1,458 1,355 7,702
-------- -------- ----------
Net Income $ 19,645 $ 18,395 $ 99,189
-------- -------- ----------
-------- -------- ----------
Net Income Per Common Share $ 0.30 $ 0.27 $ 1.50
Dividends Per Common Share $ 0.14 $ 0.125 $ 0.515
Average Common Shares Outstanding 64,590 67,742 66,097
See notes to consolidated financial statements.
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ECOLAB INC.
CONSOLIDATED BALANCE SHEET
March 31 March 31 December 31
(thousands) 1996 1995 1995
---------- ---------- -----------
(unaudited)
ASSETS
Cash and cash equivalents $ 18,034 $ 91,492 $ 24,718
Accounts receivable, net 194,407 174,593 198,432
Inventories 123,058 102,015 106,117
Deferred income taxes 23,010 22,232 21,617
Other current assets 28,902 14,802 7,188
----------- ---------- ----------
Current Assets 387,411 405,134 358,072
Property, Plant and
Equipment, Net 302,351 251,196 292,937
Investment in Henkel-Ecolab
Joint Venture 298,776 301,651 302,298
Other Assets 138,357 91,862 107,573
----------- ---------- ----------
Total Assets $1,126,895 $1,049,843 $1,060,880
----------- ---------- ----------
----------- ---------- ----------
See notes to consolidated financial statements.
(Continued)
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ECOLAB INC.
CONSOLIDATED BALANCE SHEET, Continued
March 31 March 31 December 31
(thousands, except per share) 1996 1995 1995
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(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 55,043 $ 42,444 $ 71,647
Accounts payable 84,835 78,474 81,931
Compensation and benefits 46,528 41,441 59,766
Income taxes 20,201 19,982 18,248
Other current liabilities 92,893 75,516 78,946
----------- ---------- ---------
Current Liabilities 299,500 257,857 310,538
Long-Term Debt 163,842 105,185 89,402
Postretirement Health Care
and Pension Benefits 74,102 75,608 70,666
Other Liabilities 134,326 129,500 133,616
Shareholders' Equity (common stock,
par value $1.00 per share;
shares outstanding: March 31,
1996 - 64,420; March 31, 1995 -
67,881; December 31, 1995 -
64,701) 455,125 481,693 456,658
----------- ---------- ---------
Total Liabilities and
Shareholders' Equity $1,126,895 $1,049,843 $1,060,880
----------- ---------- ---------
----------- ---------- ---------
See notes to consolidated financial statements.
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ECOLAB INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
First Quarter Ended Year Ended
March 31 December 31
(thousands) 1996 1995 1995
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(unaudited)
OPERATING ACTIVITIES
Net income $19,645 $18,395 $ 99,189
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation 18,527 15,892 64,651
Amortization 3,080 2,819 11,628
Deferred income taxes (126) (274) (759)
Equity in earnings of
joint venture, net of
royalties received (214) 29 (2,092)
Other, net 25 58 801
Changes in operating assets
and liabilities:
Accounts receivable 10,059 (6,944) (26,843)
Inventories (11,694) (2,590) (4,136)
Other assets (5,168) (2,483) (11,371)
Accounts payable (107) 1,538 4,561
Other liabilities 671 1,296 27,834
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Cash provided by continuing
operations 34,698 27,736 163,463
Cash provided by discontinued
operations 3,000
------- ------- --------
Cash provided by operating
activities $34,698 $27,736 $166,463
------- ------- --------
Bracketed amounts indicate a use of cash.
See notes to consolidated financial statements.
(Continued)
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<PAGE>
ECOLAB INC.
CONSOLIDATED STATEMENT OF CASH FLOWS, Continued
First Quarter Ended Year Ended
March 31 December 31
(thousands) 1996 1995 1995
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(unaudited)
INVESTING ACTIVITIES
Capital expenditures $(25,563) $(22,221) $(109,894)
Property disposals 576 292 1,806
Sale of investments in securities 4,007
Businesses acquired (39,930) (5,795) (26,437)
Other, net (144) (315) 6,991
-------- -------- ---------
Cash used for investing activities (65,061) (28,039) (123,527)
-------- -------- ---------
FINANCING ACTIVITIES
Notes payable (16,164) 456 29,355
Long-term debt borrowings 75,000 2,141
Long-term debt repayments (19,459) (143) (20,060)
Reacquired shares (11,143) (14) (90,391)
Dividends (9,057) (8,457) (33,114)
Other, net 4,417 1,747 (4,561)
-------- -------- ---------
Cash provided by (used for)
financing activities 23,594 (6,411) (116,630)
-------- -------- ---------
Effect of exchange rate
changes on cash 85 (49) 157
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DECREASE IN CASH AND
CASH EQUIVALENTS (6,684) (6,763) (73,537)
Cash and Cash Equivalents,
at beginning of period 24,718 98,255 98,255
-------- -------- ---------
Cash and Cash Equivalents,
at end of period $ 18,034 $ 91,492 $ 24,718
-------- -------- ---------
-------- -------- ---------
Bracketed amounts indicate a use of cash.
See notes to consolidated financial statements.
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ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
The unaudited consolidated statements of income for the first quarter ended
March 31, 1996 and 1995, reflect, in the opinion of management, all adjustments
necessary for a fair statement of the results of operations for the interim
periods. The results of operations for any interim period are not necessarily
indicative of results for the full year. The consolidated balance sheet data as
of December 31, 1995 and the related consolidated statements of income and cash
flows data for the year then ended were derived from audited consolidated
financial statements, but do not include all disclosures required by generally
accepted accounting principles. The unaudited consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
incorporated in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. Coopers & Lybrand L.L.P., the Company's independent
accountants, have performed a limited review of the interim financial
information included herein. Their report on such review accompanies this
filing.
BALANCE SHEET INFORMATION
March 31 March 31 December 31
(thousands) 1996 1995 1995
--------- --------- -----------
(unaudited)
Accounts Receivable, Net
Accounts receivable $ 202,710 $ 183,460 $ 206,763
Allowance for doubtful accounts (8,303) (8,867) (8,331)
--------- --------- ---------
Total $ 194,407 $ 174,593 $ 198,432
--------- --------- ---------
--------- --------- ---------
Inventories
Finished goods $ 60,955 $ 44,293 $ 47,035
Raw materials and parts 66,073 61,163 62,132
Excess of fifo cost over lifo cost (3,970) (3,441) (3,050)
--------- --------- ---------
Total $ 123,058 $ 102,015 $ 106,117
--------- --------- ---------
--------- --------- ---------
Property, Plant and Equipment, Net
Land $ 6,915 $ 6,400 $ 6,941
Buildings and leaseholds 118,860 109,057 117,042
Machinery and equipment 196,988 174,977 188,453
Merchandising equipment 298,973 265,114 292,962
Construction in progress 12,659 5,915 14,571
--------- --------- ---------
634,395 561,463 619,969
Accumulated depreciation
and amortization (332,044) (310,267) (327,032)
--------- --------- ---------
Total $ 302,351 $ 251,196 $ 292,937
--------- --------- ---------
--------- --------- ---------
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ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Balance Sheet Information (Continued)
March 31 March 31 December 31
(thousands) 1996 1995 1995
-------- -------- -----------
(unaudited)
Other Assets
Intangible assets, net $ 76,849 $ 42,923 $ 50,773
Investments in securities 5,000 5,000 5,000
Deferred income taxes 27,548 26,371 27,383
Other 28,960 17,568 24,417
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Total $138,357 $ 91,862 $ 107,573
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-------- -------- ---------
Short-Term Debt
Notes payable $ 38,552 $ 25,844 $ 54,950
Long-term debt, current
maturities 16,491 16,600 16,697
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Total $ 55,043 $ 42,444 $ 71,647
-------- -------- ---------
-------- -------- ---------
Shareholders' Equity
Common stock $ 70,148 $ 69,834 $ 70,078
Additional paid-in capital 172,713 166,407 171,765
Retained earnings 336,498 267,821 325,674
Deferred compensation (6,109) (4,560) (6,484)
Cumulative translation 13,601 14,488 16,272
Treasury stock (131,726) (32,297) (120,647)
-------- -------- ---------
Total $455,125 $481,693 $ 456,658
-------- -------- ---------
-------- -------- ---------
Interest expense related to all debt was $4,645,000 and $3,932,000 for the first
quarter ended March 31, 1996 and 1995, respectively, and $15,857,000 for the
year ended December 31, 1995.
Other noncurrent liabilities included income taxes payable of $96 million at
March 31, 1996 and December 31, 1995, and $94 million at March 31, 1995.
In January 1996, the Company issued $75 million of 7.19 percent senior notes to
a group of insurance companies. The notes mature in January 2006. Proceeds
from the debt were used to reduce short-term borrowings and for general
corporate purposes.
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<PAGE>
ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Business Acquisitions
On February 20, 1996, the Company acquired Huntington Laboratories, Inc. of
Huntington, Indiana. Huntington is a leading manufacturer and marketer of
disinfectants, germicides, surgical scrubs and sterilants, primarily serving the
U.S. healthcare and education janitorial markets. Huntington will become part
of the Company's Janitorial Division, complimenting the existing janitorial
product lines. Included in the purchase is Huntington's QUATS-Surfactants
disinfectant business which Ecolab intends to sell. The purchase price included
cash consideration and the assumption of existing indebtedness which the Company
repaid concurrent with the consummation of the stock purchase transaction. The
acquisition was financed with a portion of the proceeds received from the
issuance of $75 million of senior notes in January 1996 and with existing lines
of credit.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations have been included in the financial statements of the
Company from the date of acquisition. The allocation of the purchase price and
the determination of the excess of the purchase price over the fair market value
of the net assets acquired are preliminary as of March 31, 1996.
Net sales for the first quarter ended March 31, 1996 included approximately $5
million of sales from the Huntington operations from the date of acquisition.
Huntington's operating income for the first quarter of 1996 was not significant.
The annual sales of the core Huntington operations, which the Company expects to
retain, are approximately $50 million.
NET INCOME PER COMMON SHARE
Net income per common share amounts are computed by dividing net income by the
weighted average number of common shares outstanding. Stock options did not
have a significant dilutive effect.
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ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
GEOGRAPHIC SEGMENTS
The Company is a global developer and marketer of premium cleaning, sanitizing
and maintenance products and services for the hospitality, institutional and
industrial markets. Customers include hotels and restaurants; foodservice,
healthcare and educational facilities; quickservice (fast-food) units;
commercial laundries; light industry; dairy plants and farms; and food and
beverage processors around the world. International consists of Canadian, Asia
Pacific, Latin American and African operations and the international operations
of Kay. In addition, the Company and Henkel KGaA of Dusseldorf, Germany, each
have a 50% economic interest in the Henkel-Ecolab joint venture which operates
institutional and industrial cleaning and sanitizing businesses in Europe.
Information concerning the Company's equity in earnings of the Henkel-Ecolab
joint venture is provided in a separate note to the consolidated financial
statements.
First Quarter Year Ended
Ended March 31 December 31
(thousands) 1996 1995 1995
-------- -------- -----------
(unaudited)
Net Sales
United States $255,695 $242,226 $1,030,126
International 78,025 67,334 310,755
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Total $333,720 $309,560 $1,340,881
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-------- -------- ----------
Operating Income
United States $ 30,154 $ 29,525 $ 147,330
International 4,378 2,695 19,580
Corporate (734) (1,149) (4,224)
-------- -------- ----------
Total $ 33,798 $ 31,071 $ 162,686
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<PAGE>
ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
EQUITY IN EARNINGS OF HENKEL-ECOLAB JOINT VENTURE
The Company's equity in earnings of the Henkel-Ecolab joint venture for the
first quarter ended March 31, 1996 and 1995 and for the year ended December 31,
1995 was:
First Quarter Year Ended
Ended March 31 December 31
(thousands) 1996 1995 1995
-------- ------- -----------
(unaudited)
Joint venture
Net sales $216,847 $200,482 $909,196
Gross profit 118,850 111,534 502,849
Income before
income taxes 10,558 8,583 44,392
Net income $ 5,183 $ 4,291 $ 22,406
Ecolab equity in earnings
Ecolab equity in
net income $ 2,592 $ 2,146 $ 11,203
Ecolab royalty
income from joint
venture, net of
income taxes 1,193 1,410 5,814
Amortization expense
for the excess of
cost over the
underlying net
assets of the joint
venture (2,327) (2,201) (9,315)
-------- -------- --------
Equity in earnings of
Henkel-Ecolab
joint venture $ 1,458 $ 1,355 $ 7,702
-------- -------- --------
-------- -------- --------
At March 31, 1996, the Company's investment in the Henkel-Ecolab joint venture
included approximately $188 million for the unamortized excess of the Company's
investment over its equity in the joint venture's net assets. This excess is
being amortized on a straight-line basis over estimated economic useful lives of
up to 30 years.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Ecolab Inc.
We have reviewed the accompanying consolidated balance sheet of Ecolab Inc.
as of March 31, 1996 and 1995, and the related consolidated statements of income
and cash flows for the three-month periods then ended. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated February
26, 1996, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1995, and the related consolidated
statements of income and cash flows for the year then ended, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet and statements of income and cash flows from which it has been derived.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Saint Paul, Minnesota
April 18, 1996
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER ENDED MARCH 31, 1996
Net sales for the first quarter ended March 31, 1996 were $334 million, an
increase of 8 percent over net sales of $310 million in the first quarter of
last year. This sales improvement included strong International growth and
modest growth in the United States where sales were negatively affected by the
impact of severe weather on Ecolab's customers and comparison against very
strong sales in the first quarter of last year.
The gross profit margin for the first quarter of 1996 was 54.3 percent of net
sales, compared to a gross profit margin of 55.2 percent of net sales in the
first quarter of last year. The decrease in the gross profit margin reflects
higher raw material costs, limited selling price increases due to competitive
pressures and product mix, with lower sales levels of the higher margin products
of the Company's core operations during the first quarter of 1996. Raw material
cost increases have moderated somewhat since mid-1995. Management continues to
focus on future raw material cost increases and competition in the marketplace
to minimize any impact on the Company's overall operating results.
Selling, general and administrative expenses totaled $147 million, or 44.1
percent of net sales, an increase of 5 percent over selling, general and
administrative expenses of $140 million or 45.2 percent of net sales in the
first quarter of 1995. The decrease in the ratio of these expenses as a
percentage of net sales was primarily due to the Company's continued cost
control efforts.
Net income for the first quarter of 1996 was $20 million, an increase of 7
percent over net income of $18 million in the comparable period of last year.
This net income improvement reflected the benefits of higher sales, the effects
of the Company's cost control efforts and modestly higher equity in earnings of
the Henkel-Ecolab joint venture. These benefits were partially offset by the
decrease in gross profit margin and higher net interest expense. On a per share
basis, net income per share increased 11 percent to $0.30 per share from $0.27
per share in the first quarter of last year. The comparison of net income per
share benefited from a smaller number of average shares outstanding due to the
purchase of approximately 3.5 million shares of the Company's common stock in
June 1995 and the purchase of approximately 350,000 additional shares during the
first quarter of 1996.
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ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
For the Company's United States operations, net sales for the first quarter of
1996 were $256 million, an increase of 6 percent over sales of $242 million in
the first quarter of last year. United States sales continued to benefit from
new product introductions and good general economic conditions in the
hospitality and lodging industries. However, the Company's core operations were
negatively affected by the impact of the first quarter's severe weather on its
customers and the comparison against very strong sales in the first quarter of
last year. The U.S. Institutional Division reported a decrease in sales of 1
percent for the first quarter and the Food and Beverage Division reported a
modest sales increase of 1 percent. Much of the business that was lost due to
the inclement weather cannot be recovered; however, the Company expects these
core operations to return to more normal growth patterns in the second quarter.
The Pest Elimination Division continued its pattern of double- digit sales
growth with an 11 percent sales increase over the first quarter of last year.
The Textile Care Division reported sales growth of 12 percent due to new
products and continued success in the commercial laundry and hospitality
markets. Sales of the Company's Janitorial operations increased 39 percent due
to sales of Huntington Laboratories, which was acquired in late February 1996.
Excluding Huntington sales, Janitorial sales decreased modestly due to lower
sales of the division's Signature Label program. Sales of Kay's U.S. operations
increased 13 percent for the first quarter of 1996, benefiting from good general
growth of the quickservice market and from new business with discount retail
chains. Sales of the recently formed Water Care Division have quadrupled since
the first quarter of last year due to businesses which were acquired during 1995
and to new customers which have been added, in part by leveraging the Company's
other divisions.
Operating income of the Company's United States operations was $30 million, an
increase of 2 percent over the first quarter of last year. The operating income
margin for the Company's United States operations was 11.8 percent for the first
quarter of 1996, compared with 12.2 percent for the first quarter of last year.
Operating income results reflected soft weather-related results in the core
Institutional business and double-digit growth in the Pest Elimination, Textile
Care, Food and Beverage and Kay operations. First quarter 1996 operating income
reflected increased sales and the benefits of cost controls which were offset by
higher raw material costs, competitive pricing pressures and the negative
effects of the severe weather.
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Sales of the Company's International Operations totaled $78 million for the
first quarter of 1996, an increase of 16 percent over sales of $67 million in
the first quarter of last year. Changes in currency translation affected
certain regions of International's operations, but did not have a significant
impact on overall International sales growth. The Asia Pacific region reported
sales growth of 10 percent for the first quarter with good growth in Japan and
Australia and double digit growth in New Zealand and East Asia. Sales in the
Latin American region rose 8 percent and reflected good growth in most
countries, including a continuation of double-digit growth in Brazil. Sales in
Mexico also showed good growth in local currency; however, this growth was more
than offset by the weakening of the peso. Canada reported sales growth of 7
percent for the first quarter of 1996 with good growth in sales to Institutional
markets and double-digit growth in sales to Food and Beverage and Janitorial
markets. Sales of International operations also included double-digit growth of
Kay's international operations and approximately $4 million of sales related to
African operations which were acquired in 1995.
For the first quarter of 1996, International Operations reported operating
income of $4 million, a 62 percent increase over operating income of $3 million
in the first quarter of last year. Operating income margins increased to 5.6
percent of net sales in the first quarter of 1996, from 4.0 percent of net sales
in the comparable period of last year. The comparison of operating income is
favorably affected by a $0.9 million pre-tax charge included in last year's
first quarter related to the devaluation of the Mexican peso. Excluding the
effects of the peso devaluation from last year, International's operating income
increased 22 percent for the first quarter of 1996. International operating
income growth included significantly improved results in Asia Pacific and Latin
America operations and double-digit growth in Canada.
The Company's equity in earnings of the Henkel-Ecolab joint venture was $1.5
million, an increase of 8 percent versus the first quarter of last year. Joint
venture results benefited from comparison against weak financial results for the
first quarter of last year. A number of investments were made in the joint
venture in 1995, including financial and operating systems and organizational
development; however, the Company does not expect that financial results will
fully benefit from these investments until late 1996 and later years.
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Corporate operating expense was $1 million for the first quarter of 1996 and
represented overhead costs directly related to the joint venture.
Net interest expense was $3 million for the first quarter and increased 34
percent over net interest expense for the first quarter of 1995. The increase
in net interest expense was due to lower cash levels and increased debt
reflecting cash used during 1995 for the mid-year stock purchase self-tender
offer and for business acquisitions.
For the first quarter of 1996, the provision for income taxes reflected an
estimated effective rate of 40.1 percent and was virtually unchanged from the
estimated effective rate of 40.2 percent in the first quarter of last year.
FINANCIAL POSITION AND LIQUIDITY
The Company's consolidated total assets at March 31, 1996 reflected the February
acquisition of Huntington Laboratories. Other current assets at March 31
included the QUATS-Surfactants disinfectants net assets of Huntington's
operations which the Company intends to sell. The increase in other noncurrent
assets from year-end 1995 was also primarily due to the Huntington acquisition.
Total debt at March 31, 1996 was $219 million, an increase of $58 million from
total debt of $161 million at December 31, 1995. The increase in debt was due
to $75 million of 7.19 percent senior notes which were issued to a group of
insurance companies in January 1996. The notes mature in January 2006.
Proceeds from the debt were used to reduce short-term borrowings and for general
corporate purposes, including the February 1996 acquisition of Huntington
Laboratories. The ratio of total debt to capitalization increased to 32 percent
at March 31, 1996 from 26 percent at December 31, 1995.
Cash provided by continuing operations was $35 million, compared with cash
provided by continuing operations of $28 million in the first quarter of last
year. Earnings growth and cash flows from the collection of accounts receivable
related to strong fourth quarter 1995 sales were significant factors in this
cash flow improvement.
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In May 1995, the Company announced a 6 million share repurchase program. As
part of that program, the Company purchased approximately 3.5 million shares in
June 1995 under a "Dutch auction" self-tender offer. At March 31, 1996, there
were approximately 2.4 million shares remaining under the existing repurchase
authorization. In addition, the Company maintains a systematic share repurchase
program, which is intended to offset the dilutive effect of shares issued for
employee benefit plans. During the first quarter of 1996, approximately 350,000
shares were purchased under these programs. The Company intends to continue
making purchases for both of these programs from time to time in open market and
privately negotiated transactions.
-17-
<PAGE>
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
On March 11, 1996, the Company's former Preferred Stock Purchase
Rights (the "1986 Rights") expired pursuant to the terms of the
Rights Agreement, as amended and restated as of July 15, 1988, and
as amended September 10, 1990, between the Company and First
Chicago Trust Company of New York, as Rights Agent. Following
expiration of the 1986 Rights, the Company issued new Preferred
Stock Purchase Rights (the "1996 Rights") on March 11, 1996
pursuant to the terms of a Rights Agreement, dated as of February
24, 1996 (the "1996 Rights Agreement"), between the Company and
First Chicago Trust Company of New York, as Rights Agent. A copy
of the 1996 Rights Agreement was filed as an exhibit to the
Company's Current Report on Form 8-K dated February 24, 1996. The
1996 Rights are registered under Section 12(b) of the Securities
Exchange Act of 1934, as amended, on a registration statement on
Form 8-A dated February 27, 1996 and a description of the 1996
Rights is provided therein.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits to this report:
(15) Letter regarding unaudited interim financial
information.
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the quarter ended March 31, 1996, the Company filed one
Current Report on Form 8-K, dated February 24, 1996, reporting
adoption of a new shareholder rights plan.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECOLAB INC.
Date: May 8, 1996 By:/s/Michael E. Shannon
--------------------------------------
Michael E. Shannon
Chairman of the Board, Chief Financial
and Administrative Officer
(duly authorized officer and
Principal Financial Officer)
-18-
<PAGE>
EXHIBIT INDEX
Paper (P) or
Exhibit Description Electronic E
- ------- ----------- ------------
(15) Letter regarding unaudited E
interim financial information
(27) Financial Data Schedule E
-19-
<PAGE>
Exhibit (15)
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
RE: Ecolab Inc. Registration Statements on Form S-8
(Registration Nos. 2-60010; 2-74944; 33-1664;
33-41828; 2-90702; 33-18202; 33-55986; 33-56101
33-26241; 33-34000; 33-56151; 33-39228; 33-56125
33-55984; 33-60266; 33-65364; and 33-59431) and
Ecolab Inc. Registration Statement on Form S-3
(Registration No. 33-57197)
We are aware that our report dated April 18, 1996, on our reviews of interim
financial information of Ecolab Inc. for the periods ended March 31, 1996 and
1995, and included in the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1996, is incorporated by reference in these registration
statements. Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration statements prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Saint Paul, Minnesota
May 8, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MAR-31-1996 AND THE RELATED STATEMENTS OF
INCOME AND CASH FLOWS FOR THE THREE-MONTH PERIOD THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000031462
<NAME> ECOLAB INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,034
<SECURITIES> 0
<RECEIVABLES> 202,710
<ALLOWANCES> 8,303
<INVENTORY> 123,058
<CURRENT-ASSETS> 387,411
<PP&E> 634,395
<DEPRECIATION> 332,044
<TOTAL-ASSETS> 1,126,895
<CURRENT-LIABILITIES> 299,500
<BONDS> 163,842
0
0
<COMMON> 70,148
<OTHER-SE> 384,977
<TOTAL-LIABILITY-AND-EQUITY> 1,126,895
<SALES> 333,720
<TOTAL-REVENUES> 333,720
<CGS> 152,589
<TOTAL-COSTS> 152,589
<OTHER-EXPENSES> 147,333
<LOSS-PROVISION> 0 <F1>
<INTEREST-EXPENSE> 4,645
<INCOME-PRETAX> 30,358
<INCOME-TAX> 12,171
<INCOME-CONTINUING> 19,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,645
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0
<FN>
<F1> THE AMOUNT OF "LOSS PROVISION" IS NOT SIGNIFICANT
AND HAS BEEN INCLUDED IN "OTHER EXPENSES."
</FN>
</TABLE>
