<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, 1997
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
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, 370 N. Wabasha Street, 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, 1997.
64,878,010 shares of common stock, par value $1.00 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
ECOLAB INC.
CONSOLIDATED STATEMENT OF INCOME
First Quarter Ended Year Ended
March 31 December 31
(thousands, except per share) 1997 1996 1996
-------- -------- ----------
(unaudited)
Net Sales $373,760 $333,720 $1,490,009
Cost of Sales 165,726 152,589 674,953
Selling, General
and Administrative Expenses 164,604 147,333 629,739
-------- -------- ----------
Operating Income 43,430 33,798 185,317
Interest Expense, Net 2,998 3,440 14,372
-------- -------- ----------
Income Before Income Taxes
and Equity in Earnings of
Joint Venture 40,432 30,358 170,945
Provision for Income Taxes 16,577 12,171 70,771
Equity in Earnings of
Henkel-Ecolab Joint Venture 2,349 1,458 13,011
-------- -------- ----------
Net Income $ 26,204 $ 19,645 $ 113,185
-------- -------- ----------
-------- -------- ----------
Net Income Per Share
Net Income Per Common Share $ 0.40 $ 0.30 $ 1.75
Fully Diluted $ 0.39 $ 0.30 $ 1.69
Dividends Per Common Share $ 0.16 $ 0.14 $ 0.58
Average Common Shares
Outstanding 64,774 64,590 64,496
See notes to consolidated financial statements.
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ECOLAB INC.
CONSOLIDATED BALANCE SHEET
March 31 March 31 December 31
(thousands) 1997 1996 1996
-------- -------- -----------
(unaudited)
ASSETS
Cash and cash equivalents $ 63,510 $ 18,034 $ 69,275
Accounts receivable, net 205,426 194,407 205,026
Inventories 131,110 123,058 122,248
Deferred income taxes 29,107 23,010 29,344
Other current assets 8,669 28,902 9,614
---------- ---------- ---------
Current Assets 437,822 387,411 435,507
Property, Plant and
Equipment, Net 335,221 302,351 332,314
Investment in Henkel-Ecolab
Joint Venture 248,983 298,776 285,237
Other Assets 157,745 138,357 155,351
---------- ---------- ---------
Total Assets $1,179,771 $1,126,895 $1,208,409
----------- ---------- ---------
----------- ---------- ---------
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) 1997 1996 1996
----------- --------- -----------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 30,232 $ 55,043 $ 27,609
Accounts payable 97,877 84,835 103,803
Compensation and benefits 53,864 46,528 71,533
Income taxes 28,868 20,201 26,977
Other current liabilities 108,332 92,893 97,849
---------- --------- ----------
Current Liabilities 319,173 299,500 327,771
Long-Term Debt 148,403 163,842 148,683
Postretirement Health Care
and Pension Benefits 79,192 74,102 73,577
Other Liabilities 121,448 134,326 138,415
Shareholders' Equity (common stock,
par value $1.00 per share;
shares outstanding: March 31,
1997 - 64,809; March 31, 1996 -
64,420; December 31, 1996 -
64,800) 511,555 455,125 519,963
---------- --------- ----------
Total Liabilities and
Shareholders' Equity $1,179,771 $1,126,895 $1,208,409
---------- --------- ----------
---------- --------- ----------
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) 1997 1996 1996
---------- --------- -----------
(unaudited)
OPERATING ACTIVITIES
Net income $ 26,204 $19,645 $113,185
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation 20,846 18,527 75,185
Amortization 3,817 3,080 14,338
Deferred income taxes 31 (126) (6,878)
Equity in earnings of
joint venture (2,349) (1,458) (13,011)
Joint venture royalties
and dividends 13,787 1,244 15,769
Other, net 279 25 1,023
Changes in operating assets
and liabilities:
Accounts receivable 247 10,059 2,809
Inventories (7,587) (11,694) (6,852)
Other assets (4,645) (5,168) (5,255)
Accounts payable (6,058) (107) 16,397
Other liabilities (17,867) 671 47,559
------- -------- --------
Cash provided by operating
activities $26,705 $34,698 $254,269
------- -------- --------
------- -------- --------
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) 1997 1996 1996
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(unaudited)
INVESTING ACTIVITIES
Capital expenditures $(25,145) $(25,563) $(111,518)
Property disposals 595 576 3,284
Businesses acquired (6,068) (39,930) (54,911)
Other, net (230) (144) (1,449)
-------- -------- ---------
Cash used for investing
activities (30,848) (65,061) (164,594)
-------- -------- ---------
FINANCING ACTIVITIES
Notes payable 3,152 (16,164) (42,045)
Long-term debt borrowings 75,000 75,000
Long-term debt repayments (235) (19,459) (35,690)
Reacquired shares (8,753) (11,143) (22,790)
Dividends on common stock (10,366) (9,057) (36,096)
Other, net 15,008 4,417 17,088
-------- -------- ---------
Cash provided by (used for)
financing activities (1,194) 23,594 (44,533)
-------- -------- ---------
Effect of exchange rate
changes on cash (428) 85 (585)
-------- -------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (5,765) (6,684) 44,557
Cash and Cash Equivalents,
at beginning of period 69,275 24,718 24,718
-------- -------- ---------
Cash and Cash Equivalents,
at end of period $ 63,510 $ 18,034 $ 69,275
-------- -------- ---------
-------- -------- ---------
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, 1997 and 1996, 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, 1996 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, 1996.
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) 1997 1996 1996
--------- --------- -----------
(unaudited)
Accounts Receivable, Net
Accounts receivable $ 215,247 $ 202,710 $ 214,369
Allowance for doubtful
accounts (9,821) (8,303) (9,343)
--------- --------- ---------
Total $ 205,426 $ 194,407 $ 205,026
--------- --------- ---------
--------- --------- ---------
Inventories
Finished goods $ 57,102 $ 60,955 $ 52,232
Raw materials and parts 77,294 66,073 73,060
Excess of fifo cost over
lifo cost (3,286) (3,970) (3,044)
--------- --------- ---------
Total $ 131,110 $ 123,058 $ 122,248
--------- --------- ---------
--------- --------- ---------
Property, Plant and
Equipment, Net
Land $ 8,183 $ 6,915 $ 7,969
Buildings and leaseholds 132,301 118,860 129,781
Machinery and equipment 212,572 196,988 208,704
Merchandising equipment 340,797 298,973 330,277
Construction in progress 8,501 12,659 11,745
--------- --------- ---------
702,354 634,395 688,476
Accumulated depreciation
and amortization (367,133) (332,044) (356,162)
--------- --------- ---------
Total $ 335,221 $ 302,351 $ 332,314
--------- --------- ---------
--------- --------- ---------
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ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
BALANCE SHEET INFORMATION (CONTINUED)
March 31 March 31 December 31
(thousands) 1997 1996 1996
-------- -------- -----------
(unaudited)
Other Assets
Intangible assets, net $ 99,965 $ 76,849 $ 96,865
Investments in securities 5,000 5,000 5,000
Deferred income taxes 26,305 27,548 26,582
Other 26 475 28,960 26,904
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Total $ 157,745 $138,357 $ 155,351
--------- -------- ---------
--------- -------- ---------
Short-Term Debt
Notes payable $ 14,979 $ 38,552 $ 12,333
Long-term debt, current
maturities 15,253 16,491 15,276
--------- -------- ---------
Total $ 30,232 $ 55,043 $ 27,609
--------- -------- ---------
--------- -------- ---------
Shareholders' Equity
Common stock $ 70,992 $ 70,148 $ 70,751
Additional paid-in capital 190,548 172,713 187,111
Retained earnings 420,333 336,498 404,362
Deferred compensation (6,768) (6,109) (7,390)
Cumulative translation (13,137) 13,601 6,787
Treasury stock (150,413) (131,726) (141,658)
--------- -------- ---------
Total $ 511,555 $455,125 $ 519,963
--------- -------- ---------
--------- -------- ---------
Interest expense related to all debt was $4,141,000 and
$4,645,000 for the first quarter ended March 31, 1997 and 1996,
respectively, and $19,084,000 for the year ended December 31,
1996.
Other noncurrent liabilities included income taxes payable of $82
million at March 31, 1997, $100 million at December 31, 1996, and
$96 million at March 31,1996.
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<PAGE>
ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
BUSINESSES ACQUIRED
In February 1997, the Company acquired three small Food and
Beverage businesses in the Central Africa region. These
acquisitions have been accounted for as purchases and,
accordingly, the results of their operations have been included
in the financial statements of the Company from the dates of
acquisition. Net sales and operating income of these businesses
for the first quarter ended March 31, 1997 were not significant.
NET INCOME PER SHARE
Net income per common share amounts are computed by dividing net
income by the weighted average number of common shares
outstanding.
Fully diluted per share amounts are computed as above and assume
exercise of dilutive stock options.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, a new
standard for computing and presenting earnings per share. The
Company is required to adopt the new standard in the fourth
quarter of 1997; earlier adoption is not permitted. The Company
expects that earnings per share computed under the new standard
will approximate earnings per share currently reported.
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<PAGE>
ECOLAB INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
GEOGRAPHIC SEGMENTS
The Company is the leading 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,
African and Kay's international operations. In addition, the
Company and Henkel KGaA of Dusseldorf, Germany, each own 50% of
Henkel-Ecolab, a 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) 1997 1996 1996
--------- --------- -----------
(unaudited)
Net Sales
United States $290,703 $255,695 $1,148,778
International 83,057 78,025 341,231
--------- -------- -----------
Total $373,760 $333,720 $1,490,009
-------- -------- ----------
-------- -------- ----------
Operating Income
United States $ 38,441 $ 30,154 $ 164,886
International 5,870 4,378 23,871
Corporate (881) (734) (3,440)
-------- -------- ----------
Total $ 43,430 $ 33,798 $ 185,317
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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, 1997 and 1996 and
for the year ended December 31, 1996 was:
First Quarter Year Ended
Ended March 31 December 31
(thousands) 1997 1996 1996
-------- -------- -----------
(unaudited)
Joint venture
Net sales $209,597 $216,847 $905,402
Gross profit 115,058 118,850 497,909
Income before
income taxes 11,973 10,558 65,091
Net income $ 6,670 $ 5,183 $ 34,808
Ecolab equity in earnings
Ecolab equity in
net income $ 3,335 $ 2,592 $ 17,404
Ecolab royalty
income from joint
venture, net of
income taxes 1,135 1,193 4,730
Amortization expense
for the excess of
cost over the
underlying net
assets of the joint
venture (2,121) (2,327) (9,123)
-------- -------- --------
Equity in earnings of
Henkel-Ecolab
joint venture $ 2,349 $ 1,458 $ 13,011
-------- -------- --------
-------- -------- --------
At March 31, 1997, the Company's investment in the Henkel-Ecolab
joint venture included approximately $156 million of 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, 1997 and 1996, 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, 1996, 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
24, 1997, 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, 1996, 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 21, 1997
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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, 1997
Net sales for the first quarter ended March 31, 1997 were $374
million, an increase of 12 percent over net sales of $334 million
in the first quarter of last year. Both the Company's United
States and International operations contributed to this sales
improvement. Businesses acquired during 1996 accounted for
approximately 40 percent of the growth in sales for the first
quarter of 1997. New product introductions, generally good
business conditions in the hospitality and lodging industries and
comparison against a soft weather-affected first quarter of last
year also added to the sales improvements.
The gross profit margin for the first quarter of 1997 was 55.7
percent of net sales and increased significantly compared to the
gross profit margin of 54.3 percent of net sales in the first
quarter of last year. The improvement in the gross profit margin
reflected higher sales levels of the higher margin products of
the Company's core operations, a more stable raw material cost
environment and good sales volume growth, particularly the growth
in sales of new products. Selling price increases continued to
be limited due to market pressures.
Selling, general and administrative expenses totaled $165
million, or 44.0 percent of net sales for the first quarter ended
March 31, 1997, an increase of 12 percent over selling, general
and administrative expenses of $147 million, or 44.1 percent of
net sales in the first quarter of last year. As a percentage of
net sales, these expenses reflected strong sales growth during
the first quarter of 1997 and continued tight control of costs
partially offset by investments in the sales-and-service force.
The Company expects to continue investing in its
sales-and-service force, including investments in training and
productivity.
Net income for the first quarter of 1997 totaled $26 million, and
increased 33 percent over net income of $20 million in the
comparable period of last year. On a per share basis, net income
per common share was $0.40 and also increased 33 percent over
last year's first quarter net income per common share of $0.30.
These earnings improvements reflected the benefits of higher
sales, particularly in the Company's core operations, continued
tight cost controls, higher equity in earnings of the
Henkel-Ecolab joint venture and comparison against a soft
weather-affected first quarter of last year.
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Net sales for the Company's United States operations were $291
million for the first quarter of 1997, an increase of 14 percent
over first quarter 1996 sales of $256 million. United States
sales benefited from business acquisitions, new product
introductions and continued good business trends in the
hospitality and lodging industries. Business acquisitions
accounted for approximately 40 percent of the growth in United
States sales. Selling price increases continued to be limited
due to tight pricing conditions in several of the markets in
which the Company does business. First quarter 1997 sales growth
also benefited from comparison against weak core operation sales
in the first quarter of last year due to the negative effects of
severe winter weather on the customers of those businesses.
Sales of the U.S. Institutional division increased 9 percent over
the first quarter of last year and reflected strong growth in all
product lines. Pest Elimination reported sales growth of 9
percent for the first quarter of 1997, reflecting new contracts
and continued high retention of key customers. Sales of Kay's
U.S. operations increased 4 percent and reflected slower new
contract growth and comparison against a strong first quarter of
last year when new accounts helped Kay reach double-digit sales
growth. Textile Care Division sales were flat compared with the
first quarter of last year. Continued consolidations in the
laundry industry, increased competitive activity and a difficult
comparison against a period which benefited significantly from
new product introductions negatively affected Textile Care's
sales growth. Sales of the Company's Professional Products
Division increased 50 percent for the first quarter reflecting
the February 1996 acquisition of Huntington Laboratories.
Excluding Huntington's sales, Professional Products reported
sales growth of 6 percent, which included increased sales to
corporate accounts and to the addition of new branded products to
its commercial mass distribution line. Sales of the Company's
recently-formed Water Care Services Division decreased 4 percent
compared to the first quarter of last year. Water Care Services
sales reflected the consolidation of business acquisitions made
over the past three years, integration of disparate product lines
and the refining of sales efforts. The Food and Beverage
Division reported sales growth of 32 percent for the first
quarter of 1997 reflecting the August 1996 acquisition of the
operations of Monarch from H.B. Fuller. Excluding sales of the
Monarch operations, Food and Beverage sales increased 10 percent
and included good growth in sales to the beverage, food
processing and dairy plant markets.
Operating income of the Company's United States operations was
$38 million for the first quarter ended March 31, 1997, up 27
percent over operating income of $30 million in the comparable
quarter of last year. The operating income margin for United
States operations improved to 13.2 percent of net sales in the
first quarter of 1997 from 11.8 percent in the first quarter of
last year. Operating income reflected significant double-digit
growth in the core Institutional and Food and Beverage
operations, as well as double-digit growth in the Professional
Products and Pest Elimination Divisions. Operating
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<PAGE>
ECOLAB INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
income of the Textile Care Division and Kay's U.S. operations
decreased slightly compared with exceptionally strong operating
income performance in the first quarter of last year. Water Care
Service's operating income decreased reflecting the Company's
repositioning of the business. The overall improvement in United
States operating income reflected increased sales, particularly
in the core operations, the benefits of stable raw material
costs, and tight cost controls.
Sales of the Company's International operations totaled $83
million for 1997's first quarter and increased 6 percent over
sales of $78 million reported for the first quarter of last year.
Approximately 30 percent of International's sales growth was due
to business acquisitions. Changes in currency translation had a
negative impact on reported sales of International operations,
particularly in the Asia Pacific region. Excluding the effects
of currency translation, International's sales growth was 10
percent. The Asia Pacific region reported sales growth of 4
percent for the first quarter of 1997. However, when measured in
local currencies, Asia Pacific had sales growth of 8 percent,
with double-digit growth in New Zealand and near double-digit
growth in Japan. Sales in the Latin American region increased 14
percent on both a reported and local currency basis. Latin
American sales included double-digit sales growth in Brazil and
Mexico despite a slowdown in the hospitality and beverage
markets. Canadian sales increased 15 percent as reported in U.S.
dollars and 14 percent in local currency. Approximately 60
percent of Canada's sales growth was due to the 1996 Huntington
and Monarch acquisitions. First quarter 1997 International sales
also included double-digit growth in sales of Kay's international
operations and weak sales in Africa.
For the first quarter of 1997, International operations reported
operating income of $6 million, an increase of 34 percent over
operating income of $4 million in the first quarter of last year.
Operating income margins increased to 7.1 percent of net sales in
the first quarter of 1997, from 5.6 percent of net sales in the
comparable period of last year. International operating income
growth included double-digit growth in Asia Pacific and Canada.
Operating income in the Latin American region decreased from last
year's first quarter reflecting investments in the
sales-and-service force, comparison against strong operating
income levels of a year ago and a softening business environment.
The Company's equity in earnings of the Henkel-Ecolab joint
venture was $2.3 million for the first quarter ended March 31,
1997, an increase of 61 percent over $1.5 million of equity in
earnings in the first quarter of last year. Earnings growth of
the joint venture reflected product mix improvements, cost
controls and savings, reduced project spending and a lower
overall effective income tax rate. Joint venture sales, although
not consolidated in Ecolab's financial statements, increased 7
percent when measured in Deutsche marks. When measured in U.S.
dollars, joint venture sales were negatively affected by the
strengthening U.S. dollar and decreased 3 percent to $210
million.
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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 1997 and represented overhead costs directly related to the
joint venture.
Net interest expense totaled $3 million for the first quarter of
1997 and decreased 13 percent compared with the first quarter of
last year due to lower debt levels.
For the first quarter of 1997, the provision for income taxes
reflected an estimated effective rate of 41.0 percent, compared
to last year's first quarter estimated effective rate of 40.1
percent. The increase in the effective income tax rate was
principally due to the effects of business acquisitions made
during 1996.
FINANCIAL POSITION AND LIQUIDITY
Total assets were approximately $1.2 billion as of March 31,
1997, a decrease of 2 percent from total assets as of year-end
1996. This decrease reflects a lower investment in the
Henkel-Ecolab joint venture due to the effects of changes in
currency translation and dividends which were received from the
joint venture.
Total debt was $179 million at March 31, 1997, virtually
unchanged from $176 million of total debt as of December 31,
1996. The ratio of total debt to capitalization was 26 percent
at March 31, 1997, compared with the ratio of 25 percent at
year-end 1996. The modest increase in this ratio reflected a
lower level of shareholders' equity due to the effects of
currency translation, dividends on common stock and the
repurchase of stock under the Company's repurchase programs.
During the first quarter of 1997, approximately 230,000 shares
were purchased under the Company's repurchase programs. The
Company intends to continue making purchases from time to time in
open market and privately-negotiated transactions.
Cash provided by operating activities totaled $27 million for the
first quarter of 1997, a decrease from $35 million of cash which
was provided by operating activities in the first quarter of last
year. This decrease reflected the reversal of favorable timing
of payments which affected the fourth quarter of 1996 and an
income tax deposit made in 1997 against outstanding federal
income tax issues that had been accrued for in other noncurrent
liabilities.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, a new
standard for computing and presenting earnings per share. The
Company is required to adopt the new standard in the fourth
quarter of 1997; earlier adoption is not permitted. The Company
expects that earnings per share computed under the new standard
will approximate earnings per share currently reported.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Further developments with respect to two matters
reported in the Company's Form 10-K for the fiscal
year ended December 31, 1996, are described below.
The first matter was reported in the Form 10-K in the
Narrative Description of Business of Item 1(c) under
the heading, "Environmental Considerations," and the
second was reported in the Legal Proceedings of Item
3.
In April, the Illinois Environmental Protection
Agency ("Agency") denied the Company's request that
the Agency withdraw its identification of the Company
as a potentially responsible party in connection with
groundwater contamination near the Company's South
Beloit, Illinois manufacturing facility. The Agency
further indicated it plans to propose the site for the
National Priorities List, which would make the site
eligible for remedial action under the federal
Superfund program.
The legal action commenced by ten distributors of the
Company's Airkem janitorial products was reduced in
scope by summary judgment rendered by the Court in
April in favor of the Company. Two claims remain
pending, with the plaintiffs continuing to assert
essentially the same range of damages as originally
claimed. Trial is scheduled to commence May 19, 1997.
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:
No current Reports on Form 8-K were filed during
the quarter ended March 31, 1997.
-17-
<PAGE>
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 9, 1997 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
Exhibit No. Document Method of Filing
- ----------- -------- ----------------
(15) Letter regarding unaudited Filed herewith
interim financial electronically
information
(27) Financial Data Schedule Filed herewith
electronically
<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; 33-59431; 333-18617;
333-18627 and 333-21167) and Ecolab Inc. Registration
Statements on Form S-3 (Registration Nos. 33-57197 and
333-14771)
We are aware that our report dated April 21, 1997, on our reviews
of interim financial information of Ecolab Inc. for the periods
ended March 31, 1997 and 1996, and included in the Company's
quarterly report on Form 10-Q for the quarter ended March 31,
1997, 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 9, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAIN SUMMARY FINANCIAL IMFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MAR-31-1997 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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 63,510
<SECURITIES> 0
<RECEIVABLES> 215,247
<ALLOWANCES> 9,821
<INVENTORY> 131,110
<CURRENT-ASSETS> 437,822
<PP&E> 702,354
<DEPRECIATION> 367,133
<TOTAL-ASSETS> 1,179,771
<CURRENT-LIABILITIES> 319,173
<BONDS> 148,403
0
0
<COMMON> 70,992
<OTHER-SE> 440,563
<TOTAL-LIABILITY-AND-EQUITY> 1,179,771
<SALES> 373,760
<TOTAL-REVENUES> 373,760
<CGS> 165,726
<TOTAL-COSTS> 165,726
<OTHER-EXPENSES> 164,604
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 4,141
<INCOME-PRETAX> 40,432
<INCOME-TAX> 16,577
<INCOME-CONTINUING> 26,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,204
<EPS-PRIMARY> .40
<EPS-DILUTED> .39
<FN>
<F1>THE AMOUNT OF "LOSS PROVISION" IS NOT SIGNIFICANT AND HAS BEEN INCLUDED IN
"OTHER EXPENSES."
</FN>
</TABLE>
