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| Financial
discussion
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2001
Overview
During 2001,
Ecolab took aggressive actions to optimize its financial performance
for the year in the face of deteriorating conditions in the economy.
Results for the year included the following:
The company
met or exceeded two of its three long-term financial objectives
during 2001, including a 20 percent return
on beginning shareholders’ equity and maintaining an investment
grade rating of its balance sheet. The
third objective of 15 percent growth in diluted income per common
share was not achieved this year as already
softened conditions in the travel and hospitality industry were
exacerbated by the events of September
11, 2001.
Diluted net income per share was $1.45 for 2001, down 7 percent
from $1.56 in 2000. Excluding several unusual items in
2000 [the gain on the sale of the Jackson MSC, Inc. (Jackson)
business ($15.0 million after tax), special charges recorded
in 2000 ($4.3 million after tax) and the cumulative effect
of a change in accounting for revenue recognition ($2.4 million
after tax)] diluted net income per share decreased 3 percent
from $1.50 in 2000.
Return
on beginning shareholders’ equity was 25 percent for
2001 compared with 26 percent for 2000
which was based
on income excluding unusual items. This
was the tenth
consecutive year the company exceeded
this long-term
financial objective.
The company maintained its debt rating within the “A”
categories of the major rating agencies
during 2001. This
was the ninth consecutive year this objective
was
accomplished.
Even with the slowdown in the economy, the company’s stock
price outperformed the Standard & Poor’s 500 index. Ecolab’s
stock price decreased 7 percent during 2001 compared
with a decrease of 12 percent in the Standard & Poor’s
500 index. Including cash dividends, Ecolab’s total return
to shareholders was a negative 6 percent for 2001.
Net sales for 2001 reached an all-time high of nearly $2.4 billion
and increased 4 percent over 2000.
Operating income was $318 million for 2001, a decrease of 7 percent
from $343 million in 2000. Excluding the unusual items in
2000, operating income decreased 2
percent. Operating income represented 13.5
percent of net sales, down from last year’s all-time high
of
14.3 percent excluding the unusual items.
The company increased its annual dividend rate for the tenth consecutive
year. The dividend was increased 4 percent
in December 2001 to an annual rate of $0.54 per common share.
Strategic accomplishments in 2001 reflect the company’s plans
for future growth. Management completed
the acquisition of the remaining 50 percent of the Henkel-Ecolab
joint venture that Ecolab did not own
on November 30, 2001. This is the largest acquisition in Ecolab’s
history and is expected to provide additional
growth opportunities for the company in Europe. The company
also completed several other acquisitions
during 2001 in order to continue to broaden its product and
service offerings in line with its Circle
the Customer - Circle the Globe strategy.
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