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Ecolab Inc. (NYSE:ECL)

Annual Meeting of Stockholders

May 03, 2012 11:00 am ET

Executives

Douglas M. Baker - Chairman of The Board and Chief Executive Officer

James J. Seifert - General Counsel and Secretary

Douglas M. Baker

Well, if I can call the meeting to order. Good morning, how is everyone doing? Weather is holding off, we had worried about rain, but it looks like we're okay so far. So welcome to Ecolab's annual meeting of stockholders. I'm Doug Baker, Chairman and Chief Executive Officer of Ecolab. And joining me up on stage is Jim Siefert, our Executive Vice President, General Counsel and Secretary. Jim is going to be conducting the formal business section of the meeting. And later in the meeting, I will also talk our recent financial performance and speak to you about our business opportunities and, following that presentation, we'll have a chance for question and answer should you have any.

So let me open by welcoming and a special welcome to any former Ecolab associates and retirees who are joining us in the room today or listening to the broadcast of this meeting over the Internet. You have built and were key to building a great company. We appreciate all the efforts and we are working very hard to make sure that we continue upon that great legacy.

A webcast replay of this meeting, because it'll be worth listening to again, will be available on Ecolab's website through May 11. I would also, if I could, introduce and welcome our corporate officers, a number are in the audience. And if you're here, would you just stand up? I know it wasn't in the script. Part of our wellness program, a little exercise. The reason I want to do it, I just wanted to recognize -- what really makes a company is the team and of all the things that I believe we all collectively are most proud about is that the team that's been built over the years and we view that as one of the most important things we do and I'm particularly proud of this team. They do a great job everyday driving this business the right way, getting results, but also doing it in a way that we can all be very proud of. So thank you for being here and thanks for all you do.

So the first order of business is going through and introducing our Directors. So although we are phasing out our classified board structure, the Ecolab Board of Directors is currently divided into three classes. The term of our Class II Directors expires with this meeting, therefore, 5 Class II nominees are standing for election today for a one-year term ending in 2013. And so I'm going to start by introducing the nominees and then I will introduce the balance of the board. So the first nominee is Les Biller, who is Chief Executive Officer of Greendale Capital, and been a board member, and a great board member since 1997. So Les is the first. Second is Gerry Grundhofer, Chairman of the Board of Santander holdings USA, and Chairman Emeritus, a retired Chairman of U.S. Bancorp and been a board member, a great one since 1999. Now that I've started saying they're great, I've got to say they're all great, because they are. Michael Larson. Michael Larson is a Chief Investment Officer to William H. Gates III, has been -- was invited to join the board, joined in February, been a board member since earlier this year and is also up for election, is going to be a great addition to the board. We have Victoria Reich. Vicky, former Senior Vice President and Chief Financial Officer of United Stationers Incorporated, board member since 2009, brings a great financial perspective to the board. John Zillmer, Executive Chairman of Univar, board member since 2006 and has a number of experiences including industry experience, which is particularly relevant and then continuing in office are a number of our other board members.

Barbara Beck, Chief Executive Officer of Learning Care Group Incorporated, a board member since 2008. Mr. Arthur Higgins, consultant for Blackstone Healthcare Partners of Blackstone Group, long experience at Abbott previously, and been a board member since 2010. Joel Johnson, Joel is a retired Chairman and Chief Executive Officer of Hormel Foods Corporation, been a board member since 1996. We have Jerry Levin, Chairman and Chief Executive Officer of Wilton Brands and been a board member since 1992. And Jerry also serves as our Lead Director. Bob Lumpkins, Chairman of the Board of the Mosaic Company, prior to that, he was vice chair and CFO at Cargill for many years, board member since 1999. Scott O'Hara, board member since 2009, Executive Vice President of H.J. Heinz Company. Dan Sanders, retired President of Exxon Mobil Chemical Company and Vice President of Exxon Mobil Corporation, been a board member since 2011. Previously was a boardmember of Nalco. We were very excited to have Dan come on over and bring his experience and his perspective, particularly in the Energy segment. We have "Meg" Mary VanDeWeghe, who is Chief Executive Officer and President of Forte Consulting, board member since 2011. And again, a member coming over from the Nalco board. And again, very excited to have Meg on the team, bringing her experience. And then finally myself, Chairman of the board and currently CEO also of Ecolab, been a member of the board since 2004.

So with that, I'm going to turn it over to Jim for the formal part of the meeting and then again I'll get up and share perspective on the business and then we'll have Q&A. So to Seifert.

James J. Seifert

Thank you, Doug, and good morning, everyone. Notice of the meeting was timely given to the holders of our common stock with more than 88% of the issued and outstanding shares represented. A quorum is present for the conducting of business. There are 6 items properly brought before the stockholders today. The first item is to elect 5 Class II Directors, Les Biller, Gerry Grundhofer, Michael Larson, Vicky Reich and John Zillmer, for a one year term ending at the 2013 Annual Meeting. The second item is ratification of the appointment of Price Waterhouse Coopers as the company's independent registered public accounting firm for the current year ending December 31, 2012. The third item is to approve amendments to the Ecolab restated certificate of incorporation to eliminate super-majority voting. The fourth item is to approve, on an advisory basis, the compensation of the executives disclosed in the Proxy Statement. The board recommends the vote for each of the Director nominees and a vote for items 2, 3 and 4, for the reasons set forth in the Proxy Statement.

The fifth item is a stockholder proposal requesting the board to provide an annual advisory vote on political contributions in the communication expenditures. I now recognize a representative of NorthStar Asset Management to present their proposal. Meeting rules allot 3 minutes for your comments.

Unknown Shareholder

Good morning, my name is Romy Sarasote [ph] from NorthStar Asset Management in Boston. Northstar is a beneficial owner of over 40,000 shares of Ecolab stock. I'm here to ask for your support of resolution number 5. Shareholders need a say on political contribution. Our values at Ecolab have been meticulously developed and marketed. Our public commitment to enhance the well-being of people and communities, the stewardship of natural resources and to protect the environment, exemplify Ecolab's values and priorities. These values are the cornerstone for our business decisions and are the foundation of our success in our industry. Why then do our political contributions violate company values? Our websites says that we respect and support the human right to water by conserving, reusing and recycling water and renewing water quality. Why did the East Ecopack give $26,000 in the last decade to Collin Clark Peterson, a politician who sponsored an amendment that would prohibit the EPA from acquiring a national pollutant discharge elimination system permit under the Clean Water Act.

If Ecolab is committed to promoting the well-being of the natural environment, then why did Ecopack designate 43% of its contribution since 2009 to politicians voting against the American Queen Energy and Security Act of 2009 and voting to deregulate greenhouse gases. Our company states that it is committed to fair and equal treatment of Associates. Why then did Ecopack designate more than 57% of its contributions to politicians voting against hate crimes legislation, voting against the repeal of don't ask, don't tell and sponsoring the Federal Marriage Amendment Act. This includes John Paul Kline, Jr. who has received a significant $35,000 from Ecopack in the past decade. Since the citizen's united decision, political spending of any kind has come under increasing scrutiny. It is vital that stated company values are reflected in our political spending decision or diminished shareholder value may result. In the citizens United decision, Anthony M. Kennedy put the onous on shareholders to ensure that corporate free speech does not divert corporate assets for the benefit of a few executives. He suggested that any abuse could be corrected by shareholders through the procedures of corporate democracy. At Ecolab, our success depends on 100% of our ability to communicate and uphold our corporate values. We must exercise our rights as shareholders to hold management accountable for anticipated electioneering contribution. We ask you to advance the rights of all shareholders by voting yes, for resolution 5.

James J. Seifert

Thank you. The board recommends the vote against this proposal for the reason set forth in the company's proxy statement. The sixth and final item is a stockholder proposal requesting the board of directors to adopt a rule to redeem any current or future stockholder rights plan unless such plan is submitted to a stockholder vote within 12 months. I recognize the same representative for the proponent to present the proposal. Again you have 3 minutes for the proponent's comments.

Unknown Shareholder

Proposal 6. Make our poison pill subject to vote by John [ph] of Redondo Beach, California. Resolved. Shareholder's request that our board adopt a rule to redeem any current or future poison pill, ironically called a rights plan by some. Unless such plan or amendments to the plan are submitted to a shareholder vote as a separate ballot item within 12 months. Arthur Levitt, former SEC Chairman said, poison pills prevent shareholders and the overall market from exercising their right to discipline management by turning it out. They entrench the current management even when it's doing a poor job. They water down shareholder's votes and deprive them of a meaningful voice in corporate affairs. Morningstar.com said, that's the key negative of poison pills. Instead of protecting investors, they can also preserve the interest of management deadwood as well. We have a poison pill that triggers at a low 15% threshold and does not expire until 2016. This proposal should also be evaluated in the context of our company's overall corporate governance as reported in 2011. The Corporate Library, an Independent Investment Research firm downgraded our company to D, with high governance risk and high concerning executive pay. $11 million in total realized pay for our CEO, Douglas Baker. Mr. Baker's annual cash bonus was determined solely by earnings per share results, which created a potential to artificially focus on only one aspect of company growth. In addition, 50% of long-term equity given to named executive officers in 2010 consisted of stock options that simply vest after time without any performance requirement.

Five directors had tenure of 12 to 19 years including the chairs of all 4 board committees. It is increasingly difficult to consider board members independent after so many years of service. Three directors, including our CEO, served together on the board of U.S. Bancorp. Intraboard relationships can compromise our Director's ability to act independently. Please encourage our Board to respond positively to this proposal to support improved corporate governance. Make our poison pill subject to vote, proposal 6.

James J. Seifert

Thank you. The board recommends a vote against this proposal for the reason set forth in the Proxy Statement. I will now open the floor for discussion on the matters to be voted on. Please limit your remarks to those matters, there will be a general Q&A period at the end of the meeting. If you have any comments regarding any of the 6 proxy items, please proceed to the microphone located up front. After you've been recognized, please state your name, whether you are a stockholder or proxy for a stockholder and the item you wish to discuss.

Douglas M. Baker

Any of the items people would like to comment on? Going once.

James J. Seifert

If there is no further discussion, we'll proceed with the voting on the matters. The polls are now open and will remain open until any ballots cast during the meeting are collected. If you have already sent in your proxy, your shares will be voted as you designated on the proxy and you will not need a ballot. However, if you wish to revoke your proxy and change your vote, you will do so without -- with the ballot. If any stockholder wishes to vote by ballot at this time, would you please raise your hand so that we can distribute the ballot to you.

Any hands raised? Very well. If you are voting by ballot, please pass your ballots to the aisles, I didn't see any. The polls will be closed when all the ballots have been collected, again I didn't see any.

I will now give you the preliminary voting results based on the proxies already received. The Director nominees were overwhelmingly approved with each receiving at least 90% of the votes cast. The proposals to ratify the appointment of the auditors to amend the Ecolab restated certificate of incorporation and the advisory vote on executive compensation were overwhelmingly approved with each of those matters receiving at least 97% of the votes. With respect to the proposal to adopt an annual advisory vote on political contributions and communication expenditures, that proposal was not approved and received less than 5% of the shares cast in favor. Finally, the proposal requesting the board to adopt a rule to redeem any current or future stockholder rights plan, unless such plan is submitted to a stockholder vote within 12 months, was approved with approximately 68% of the shares cast in favor. The final vote results will be reported to the SEC on form 8-K, a copy of which may be found on Ecolab's website.

This concludes the formal business portion of our meeting. Before turning the meeting over to Mr. Baker, let me note that the remarks made during the following presentation by Mr. Baker concerning future expectations, plans and prospects for Ecolab constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected by these forward-looking statements. Information concerning factors that could cause actual results to so differ, include those factors discussed in the company's annual report on Form 10-K for the year ended December 31, 2011 found under item 1A risk factors. I now turn the meeting back over to Doug Baker. Doug?

Douglas M. Baker

Thank you, Jim. So let me start where I ended last year and this is a slide that we closed with when sharing our perspective on the business and how we viewed the prospects going forward. So we said 3 simple things. We're confident in the position we find ourselves in and have built. We're very excited about our future and we are absolutely committed to reaching our potential.

So I'm going to talk about last year and I may do it in the context of ignoring the merger for a point, because I think it gets to -- we are really doing this from a position of strength. So results last year had sales up 6% on a 6-rate basis and 8% on a public basis, excluding Nalco. Adjusted EPS was up 14%, excluding Nalco and was above our target. So again, a very strong year. Importantly, as we went through the year, we developed and built earnings momentum. As you can see in the first half, 10%, 14% and then 14% -- and 17% in Q4. This momentum and the ultimate results were driven by fundamentals. To continue to grow in these markets, we know we have to continue to build share with an excellent team who is focused on getting after new customers, clean strike at the time was a name of our new account initiatives around the company. And as you can see, these are net gain results year-on-year. We continue to build on very strong past momentum and had a record year in 2011, securing nearly $400 million of net new business from corporate accounts.

Another very important part of our growth is, are we driving innovation? How fresh is our product line? And so these are the amount of products with the value of the programs that we introduced in any given year that we estimate on a 5-year basis i.e. at going run rates. So again last year, a record $425 million of programs were introduced last year, which is important in driving topline results, but also offsetting costs increases and making sure that we have a healthy gross margin.

So as you add up and you look at 2011 in context, and positions against our history, it's another great year and very solid year and a pattern of excellence. So we have built this business steadily over time, driving topline success and turning it into earnings per share results, which has been the reason that we continue to outperform the S&P 500 over almost any time period. One year, we're up 15% last year, S&P was up 0. So again the outperformance, we're up 22% right now year-to-date if you compare us to where the stock price was a year ago. Our 5 year CAGR is -- we're up 5%, so that includes the difficult years of '08, '09 and the market was down 2%. And then over a 10-year time period, outperform by over 10 points.

And this again is a continuation of a long-term trend. If you look at our returns, where you see S&P since 1960, it's a staggering number. We are up nearly 150,000% over the S&P. We're disappointed we did-- 150 even, but you have to have targets to work for going forward. And a lot of you in this room are the reason that number is where it is. So we're also excited about our future.

So we have -- we believe done a very smart thing for this business and for this company. We believe we entered this year a much stronger company with much more opportunity in front of us than we've ever had before. So we have, as we just showed, fundamentally our core business, our historic business is strengthening. Great new business activity, strong innovation, we're improving our profitability in Europe, we wish it was going faster, but we made more money and had a higher margin in 2011 than 2010. The Nalco merger makes a very good company even better. And that makes it stronger for a number of reasons. We have a better growth profile, which I'll touch on, we have more predictable business results because we believe that now when you look at the business in total, you look at our geographic diversity and our industry segment diversity, we are stronger than we've ever been and we have maintained a strong balance sheet, which means we can continue to fund the business internally to get after opportunities as they come along.

So in that we believe we have a combination that's better in all condition. And really, if you put Nalco and this merger in context, it is a continuation of the moves that have built this company over time. So if you go back to 1990, we talked about the market opportunity as a $15 billion opportunity. But then we entered an agreement with Henkel where we bought, if you will, their Asia-Pacific and Latin America operations, which, for the first-time, really accelerated our operations internationally as we talked about it then. That then moved the opportunity that we chased to $18 billion. Then we added QSR, we bought K, entered the Food Retail market, also started a small water treatment business and got in the audit business, which then expanded the opportunity we are chasing from $18 billion to $32 billion. We bought Alta joint venture in 2000, 2001 which expanded the scope of opportunity that we chase and allowed us to move from $32 billion to $39 billion. We entered health care in a much more material way post-2005 and got after the infection control infection prevention and here we find ourselves premerger, chasing a $57 billion opportunity.

By merging with Nalco and bringing the Nalco business under our umbrella, what we now chase is over $100 billion opportunity globally. On a pro forma basis, last year we'd be $11 billion if we had done this merger January 1, 2011. We have an 11% share of $100 billion market opportunity. We have a leadership position and we have growth markets. We are in great shape to continue to drive topline growth and translate that into earnings growth, so we can continue to fund the growth and continue the very virtuous cycle that we built.

So the opportunity when we look at this, really comes from addressing critical global needs. One of those needs, growing population, which means there's going to be a growing need for food. There's an aging population, which puts additional pressure on healthcare and we know there are going to be resource shortages. All this growth drives energy demand, it drives more food and calorie needs, all these things are dependent upon water. So if you start looking at where the macro trends are and where we're positioned, we are in a very strong place. So recently, somebody announced that the global population had just tripped over the 7 billion line. We're not sure who makes this count or how accurate it is, but the point is, we continue to add more people to the Earth's population and it is projected to grow at a 9 billion people, sometime around 2030.

This population growth going from 6 billion to 9 billion, over about a 40-year period is going to put huge demand on calories. Anywhere from 70% to 100% more calories is going to be needed to feed the 50% increase in the population. Why more calories? And why is it disproportionate? Because as the population grows, they are also shifting their diets in the emerging market from grains, rice and cereals to protein and protein is much less efficient because you have to feed the animals before you consume them.

People are getting older, this is particularly an issue in, ironically, China, Japan, Western Europe and it may or may not be an issue in this country, fundamentally dependent on immigration policy. But this puts pressure on societies in a number of ways, on the retirement programs and on the healthcare systems. And we know that it's going to continue to drive needs in both areas. And all this requires more resources. So the estimate is that water demand is going to exceed supply, so it's fresh water demand by 50% by 2025. There is huge pressure on the globe's freshwater supply. Hence, why it was important to us for many years to become very proficient in this area. Global Energy demand will be 30% higher by 2040 and 60% higher in developing countries. There is continued need for us to fuel the Earth's energy demand needs as we move forward. It is not static. All this impacts our customers. So we have a creed in Ecolab, which is we succeed when our customers succeed. It is foundational, and we need to understand the pressures our customers are going to be under if we want to position ourselves to make sure that we are there to help them and address them and help them to continue to grow, because fundamentally that's how we grow. And water has always been central to this strategy. So customers use lots of water, they create lots of waste. The bad thing is a natural thing. So we're going to do the responsible thing. So if you look at our Food & Beverage customer group, it's one of the top 5 industries for water consumption. This isn't even looking at the agricultural in place. 70% of the freshwater that we consume in the world is for agriculture, that's where it goes, to feed us, but hotels, restaurants, hospitals are all large consumers in water as are many other industries.

Cleaning and water treatment are deeply connected. You cannot understand how to clean without understanding water. And so water capability has always been inate in our organization and we need to continue to build them, but you are not going to have human hygiene or clean, safe food without having available water and treated water. And so fundamentally water is a $400 billion opportunity total. We're chasing more like about a $50 billion opportunity of that $400 billion, it is a tremendous opportunity for us moving.

So quick stats on freshwater. Of the water on Earth, 3% is fresh. Of the freshwater supply, only 40% is available for human consumption. So there's a very small sliver of the total water. When we don't use it properly and it gets up, spread on our lawns or wherever else it is, and it evaporates back up, it falls back to the earth in rainfall and 97% of it is going to turn back into saltwater. So you have got a very difficult situation if we don't manage this more effectively. And as luck would have it, available water is not where we need it. So I don't know where your retirement homes are, if you have them out there, I don't happen to have one, plenty are in the desert. We seem to all migrate where water is not available. And so this puts additional challenges on water supplies, because we start diverting it from other places, we start growing food where it doesn't make sense. So all these practices are going to come under more scrutiny and it's going to take technology and know-how to help the world deal with this. So at the end of the day, water connects every aspect of our businesses. Food safety, it's fundamentally a water issue. Water is integral to cleaning, sanitizing and hygiene. Plays a key role in energy production. When you pull oil out of ground, in the best conditions, 3 parts of what you pull out of the ground is water, 1 part is oil. In the new deeper finds of oil, it could be anywhere from 10 parts to 20 parts water.

You've got to separate the oil and the water, you have to clean the water and you've got to find a place to put it back that is environmentally friendly. And all we know is, regulations in this area are increasing, not decreasing. So fundamentally, sustainability, the ability to operate in society is becoming more important to our customers, not less, and we see this pressure increasing, not decreasing and we want to be there to help them.

So with this, let me share a water video and then I'll continue.

[Presentation]

So let's talk about our strategy and how this is incorporated. So prior to the merger, here were the points that I shared with you. Our goal is to extend our corporate account leadership globally in every market that we compete because the large people are going to play better in a dynamic market than will small players. So we want an outside share with the largest players in the industries we serve, we still do. We wanted to develop a leadership position in the emerging markets, particularly China and Brazil. Brazil because it is a breadbasket, China because we have a lot of confidence in its growth projections long term. We wanted to become the energy water and waste experts in our market for all the reasons that we just identified. So this has been part of our strategic platform since 2005. We wanted to build Healthcare to be one of our 3 core businesses, we want to expand our leverage globally.

The Nalco opportunity to us was a one-of-a-kind. We had the opportunity to put the water leader under our umbrella and to start driving the technologies that they have spent decades developing, which is world-class, to make sure that we understand how to meet our customer needs both traditional Ecolab and continue to build Nalco competence as well. So what do we got, we get the best-in-class company in water. Nalco is to water what Ecolab is to food safety, cleaning and hygiene. They have a great reputation in the industrial space, they have been in business since 1925, they had great field sales in service technology capabilities, very similar to Ecolab. We got a great business.

The customer value proposition, how they go to market, what they talk about is precisely what we talk about. Their businesses were broken into 3 critical areas, water, services, broadly across industry. Starting an institutional type markets to Food & Beverage, but also extending through light and heavy industry. Paper Services is one of the markets that they served and they called out, and then importantly, energy services. Helping our energy companies make sure that they could provide the energy we need and do it in as sustainable a way as possible. And they have great technology in this area.

So these are the 3 core businesses. Underneath these businesses, the culture and the way they go to market was very similar to the way Ecolab went to market. The way they drove value was taking technology, like Ecolab did, and sales and service in unit and combining them to drive maximum value for customers. As a result of this shared model, you end up with shared cultural characteristics because we both end up looking at the world similarly. The reason this is important is culture often is a thing that really gets in the way of maximizing value and our cultures are very compatible. Not identical, but very compatible.

So what's the new Ecolab look like? In total, I mentioned earlier we have much more significant scale, the business is an $11 billion business on a pro forma basis looking at 2011, generates just under $1 billion in net income, market cap now exceeding $18 billion and we have 40,000 world-class associates.

We have also a better, more diverse and balanced portfolio. So if you look at this, what Ecolab's portfolio was pre-merger and post, you can see several things. More balance from a customer segment standpoint, we have opened ourselves up to some faster growth segments and it's a better geographic mix. We, combined, serve customers in over 167 countries around the world. We have reach that nobody else does and this is important to our customers because they are expanding and continuing to expand around the world. So our company profile today extends, still, all the way to the food chain, we take care of customers beginning at dairy farms, all the way through production, through distribution, through food service and hospitality, restaurant chains, hotel chains and the like. We continue to focus on our acute care business, our hospital business, making sure that we can help them do a better job preserving patient's health. We also have a water services and an energy services business today. So we have, in our minds, a fantastic future. We are really excited about what we have moving forward. And so then it gets to commitment to reach our full potential, which is a significant potential.

So let me just talk about the start. It's very difficult to have good endings without good starts. But good starts do not, by themselves, mean you're going to have a successful venture. So we view this in a positive light, but by no means feeling our work is done. But the first quarter that we just announced, as a merged company, was very strong. Sales on a pro forma basis, if we compare it like we owned this business last year, we're up 9%. Obviously reported sales are up 85%. But this is the important number. This is what's going on underneath and really is an indication of the health of the business. Sales on a public rate or adjusted was -- or fixed was both 9%. Adjusted earnings per share were up 11%. Earnings pro forma were up 20%. Our profit of these businesses year-on-year. So it was a very strong start. Healthy P&Ls are generally indications of healthy businesses. We certainly run ours that way. So the strong results were driven by several standout performances. Energy, water, Institutional, North America has been building momentum and really has done a very good job capitalizing on all the good work that they've done. Latin America had a knockout quarter, this is kind of historic key collab Latin America. We had record new business sales in the first quarter. We sold more corporate accounts than we've ever sold in the first quarter. It was dramatically up over last year. Why is this important, we don't want synergies in the merger to get in the way of the foundation of the business, which is taking care of customers and convincing new customers to join the fold.

So our projection for the year is a strong year. Right? Our full-year EPS growth, as we look through the year, is expected to be in the 16% to 20% range, which means this business has added us to grow. That will be one of the strongest growth years we've had in a long time. So that is in the midst, in year 1, of a very large merger where we believe underneath the business is going to strengthen and we're going to manage to successfully integration as we go forward.

So we will work hard to make sure that you continue to be proud of this company. We are committed to doing the right thing and to continuing to grow this company and position it, just as you did in the past, for our future success. So I appreciate your attention there and what I'll do now is open up the floor to any questions and answers you may have about the business or any other comments you would like to make.

Question-and-Answer Session

Unknown Attendee

My name is Todd Anderson and I'm here representing MCG for the AFL CIO reserve fund. I rise today to talk about Mr. John Zillmer, a member of the Board of Directors and is also a member of Rentals American Board of Directors. Rentals American is one of the largest tobacco companies in the U.S. Farm labor organizing committee AFL-CIO represents tobacco farmer workers and advocates for the elimination of human rights abuses in the tobacco fields of North and South Carolina. Since 2008, flock has been communicating its concern for the living and working conditions of tobacco farm workers to Mr. Zillmer, he has never responded to or acknowledged communication he has received from flock about these matters. I have with me a copy of the most recent correspondence to Mr. Zillmer dated February 29, 2012. And since Mr. Zillmer is a member of the Ecolab Board of Directors, would you ensure Mr. Zillmer receives this letter?

Douglas M. Baker

No. I would say I think you can find a way to get Mr. Zillmer the letter. This is an Ecolab board meeting, if you have got matters pertaining to another company, I would ask that you address those matters at that company's annual meeting.

Unknown Shareholder

Mark Bradley, a stockholder. I'm glad that you're looking at South America because of the fact is, I have been seeing a lot of lemming mentality where most of the corporations are doing their investment into Asia and they are actually giving the production up to China, as it were -- and I like the idea that we're not giving up anything at this point, but also because of the stability of South America and the opportunities that are there, I like that attitude very much. But I would also like to point out the one thing that I don't see, that I would like to see the board actually look into is inter and intra-structure. And the difference between the 2 is that, with intra-structure, you're looking at your construction using more ecological type of construction that guarantees that you're not so dependent upon outside sources like using the solar and that, so that your facilities are not being held up to special costs, but also it can also demonstrate to the hospitality industry in the future, how they can construct in areas that have problems, as you've mentioned, which happened to be with water, electricity and all those things by using something that you haven't actually investigated at this point. Your actual architectural design and construction. And this is where I'd see there is a future the Ecolab can actually lead, but also expand on this opportunities that are there. And that's what I've been trying to get at to as inter rather than intra where more of your materials and needs are supplied because if you can draw them from nature as it is right now, like your water, which you already have the facilities to clean it and improve it and use it for your manufacture. But also can be used by the hospitality industry in expanding in locations that are in need of special consideration.

Douglas M. Baker

I'll just -- I guess, I'll just offer 2 small points. One, our manufacturing strategy is, we want to produce where our products are sold for a number of reasons. We don't want to be caught in foreign exchange issues and the others. So we do have manufacturing in Latin America, we also have it in China, but really that manufacturing is to meet those needs. The needs that we meet in U.S., the manufacturing is done in the U.S. If we have any exporting, we still have export from U.S. out, but our goal is ultimately that we want to produce locally for a number of reasons. But we do, I would say we build very few facilities, we are much more prone to buy used buildings than new, we will retrofit as much as we can environmentally. We are expanding and we are going to be a having a very high leads certification. So it is a priority when we're doing ground-up constructions. So I appreciate your comments. Any others? You guys looking for cookies or something?

All right. Well, if there are no other questions or comments, thank you, again, for your trust in us and for your ownership. We will make sure that we continue to do the right things. Thanks.

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