Notes to Consolidated Financial Statements

NOTE 6. BUSINESS ACQUISITIONS AND DISPOSITIONS

Business Acquisitions

Business acquisitions made by the company during 2004, 2003 and 2002 were as follows:

Business   Acquired	Date of Acquisition	Ecolab Operating Segment - Type of Business	Estimated Annual Sales Prior to Acquisition (millions)
			(unaudited)
2004
Nigiko	Jan. 2004	Europe (Pest Elimination)	$55
Daydots International	Feb. 2004	Institutional	22
Elimco	May 2004	Europe (Pest Elimination)	4
Restoration and Maintenance unit of VIC International	June 2004	Professional Products	5
Alcide Corporation	July 2004	Food & Beverage	24
2003
Adams Healthcare	Dec. 2002	Europe (Healthcare)	19
2002
Kleencare Hygiene	Jan. 2002	Europe (Food & Beverage)	30
Audits International	Jan. 2002	Pest Elimination	3
Terminix Ltd.	Sept. 2002	Europe (Pest Elimination)	65

The total cash consideration paid by the company for acquisitions and investments in affiliates was approximately $130 million, $32 million and $63 million for 2004, 2003 and 2002, respectively. In addition, 1,834,759 shares of common stock were issued with a market value of $57 million in the Alcide acquisition, plus $23,000 of cash in lieu of fractional shares. Total cash paid also includes payments of restructuring costs related to the acquisition of the remaining 50 percent interest of the former Henkel-Ecolab joint venture that were accrued in 2002. The aggregate purchase price has been reduced for any cash or cash equivalents acquired with the acquisitions.

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 were not significant to the company's consolidated results of operations, financial position and cash flows.

Based upon purchase price allocations, the components of the aggregate purchase prices of the acquisitions made, the allocation of the purchase prices were as follows:

(millions)	2004	2003
Net tangible assets acquired	$  14	$ 18
Identifiable intangible assets	44	13
In-process research and development	2
Goodwill	127	1
Purchase price	$187	$ 32

The allocation of purchase price includes adjustments to preliminary allocations from prior periods, if any. During 2004, the company recorded a charge of $1.6 million for in-process research and development ("IPR&D") as part of the allocation of purchase price in the Alcide acquisition. The value assigned to IPR&D is based on an independent appraiser's valuation and was determined by identifying research projects in areas for which technological feasibility had not been established and no alternative uses for the technology existed. The values were determined by estimating the discounted amount of after-tax cash flows attributable to these projects. The future cash flows were discounted to present value utilizing a risk-adjusted rate of return that considered the uncertainty surrounding the successful development of the IPR&D.

In January 2005, the company acquired Associated Chemicals & Services, Inc. (aka Midland Research Laboratories), a Kansas-based provider of water treatment products, process chemicals and services serving the commercial, institutional, industrial, food and sugar processing markets. Midland has annual sales of approximately $16 million. These operations will become part of the company's United States Cleaning & Sanitizing operations in 2005.

The changes in the carrying amount of goodwill for each of the company's reportable segments for the years ended December 31, 2004, 2003 and 2002 are as follows:

	United States
(thousands)	Cleaning & Sanitizing	Other Services	Total United States	International	Consolidated
Balance      December 31, 2001	$ 121,046	$ 44,796	$ 165,842	$ 431,083	$ 596,925
Goodwill acquired      during year*	3,532	4,510	8,042	58,862	66,904
Foreign currency      translation				38,472	38,472
Impairment losses      upon adoption      of SFAS      No. 142 on      January 1, 2002				(4,002)	(4,002)
Impairment losses      during 2002	(2,599)		(2,599)		(2,599)
Balance      December 31, 2002	121,979	49,306	171,285	524,415	695,700
Goodwill acquired      during year*	367	(377)	(10)	825	815
Goodwill allocated      to business      dispositions				(2,708)	(2,708)
Foreign currency      translation				103,404	103,404
Balance      December 31, 2003	122,346	48,929	171,275	625,936	797,211
Goodwill acquired      during year*	54,936		54,936	72,270	127,206
Goodwill allocated      to business      dispositions	(69)		(69)	(25)	(94)
Foreign currency      translation				67,488	67,488
Balance      December 31, 2004	$ 177,213	$ 48,929	$ 226,142	$ 765,669	$ 991,811

* For 2004, all of the goodwill except approximately $34.4 million is expected to be tax deductible. All of the goodwill related to businesses acquired in 2003 and 2002 is expected to be tax deductible. Goodwill acquired in 2004, 2003 and 2002 also includes adjustments to prior year acquisitions. United States Other Services goodwill acquired during 2003 includes a reduction of $0.4 million for an adjustment related to the Audits International acquisition. International goodwill acquired during 2003 includes a reduction of $4.7 million for the Terminix acquisition primarily related to a finalization of the pension valuation at the date of acquisition.

Business Dispositions

In April 2004, the company sold its grease management product line to National Fire Services of Gurnee, Illinois. This sale resulted in a loss of approximately $4.0 million ($2.4 million after tax). Sales of the grease management product line totaled approximately $20 million in 2003 and were included in the company's U.S. Cleaning & Sanitizing operations. The company also recognized a gain of $0.3 million ($0.2 million after tax) on the sale of a small Hygiene Services business in its International operations.

In December 2002, the company sold its Darenas janitorial products distribution business based in Birmingham, United Kingdom. This sale resulted in a loss of approximately $1.7 million principally due to the amount of goodwill allocated to the disposed business. The annualized sales of this entity were approximately $30 million. In June 2003, the company sold its minority interest investment in Comac S.p.A., a floor care machine manufacturing company based in Verona, Italy, for a gain of approximately $11.1 million ($6.7 million after tax). The company accounted for this investment under the equity method of accounting. In September 2003, the company sold the consumer dermatology business of the Adams Healthcare business at a nominal gain. Goodwill allocated to the sale of the dermatology business was approximately $1.0 million. The annualized sales of the dermatology business that was sold were approximately $2.5 million. These operations and investment were a part of the company's International segment.