Michael Monahan - Senior Vice President of External Relations Doug Baker - Chairman and CEO.

Gary Bisbee - RBC Capital Markets Mike Ritzenthaler - Piper Jaffray Dmitry Silversteyn - Longbow Research David Begleiter - Deutsche Bank Nate Brochmann - William Blair John Quealy - Canaccord Genuity John McNulty - Crédit Suisse David Ridley-Lane - Merrill Lynch John Roberts - UBS Laurence Alexander - Jefferies Andy Wittmann - Baird Mike Harrison - First Analysis Rosemarie Morbelli - Gabelli & Company Manav Patnaik - Barclays Bob Koort - Goldman Sachs Eric Petrie - Citi Richard O’Reilly - Revere Associates.

Welcome to the Ecolab Third Quarter 2014 Earnings Release Conference Call. At this time, all participants are in a listen only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions). This call is being recorded. If you have any objections, you may disconnect at this time.

Now I’d like to turn over the call to Mr. Michael Monahan, Senior Vice President, External Relations. Sir, you may begin..

Hello everyone. And welcome to Ecolab’s Third Quarter Conference Call. With me today is Doug Baker, Ecolab’s Chairman and CEO. A copy of our earnings release and the accompanying slides referenced in this teleconference are available on Ecolab’s website at ecolab.com/investor.

Please take a moment to read the cautionary statements on slide 2, stating that this teleconference and the slides include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected.

Factors that could cause actual results to differ are described in the section of our most recent Forms 10-K and 10-Q item under Item 1A, Risk Factors, in our third quarter release and on slide 2. We also refer you to the supplemental diluted earnings per share information in the release.

Starting with an overview on slide 3, we delivered strong results in the third quarter. Sales volume growth was strong, improving from the second quarter rate.

We leveraged that growth along with pricing and our synergy and cost efficiency work to substantially increase our adjusted operating margins and produce a very strong adjusted earnings per share increase.

Looking ahead, we expect to continue to outperform our markets and show strong 13% to 17% adjusted earnings gains in the fourth quarter and upper-teens EPS growth for the full year as good sales growth, appropriate pricing, innovation, synergies and margin leverage more than offset weak international markets.

Moving to some highlights from the third quarter and as discussed in our press release, reported third quarter earnings per share were $1.19. On an adjusted basis, excluding special gains and charges and discrete tax items from both years, third quarter 2014 earnings per share increased a strong 16% to a record $1.21.

The adjusted earnings per share growth was driven by volume and pricing, new products, account gains, synergies and cost-savings actions. Our fixed-currency acquisition adjusted sales growth rate improved from the second quarter, rising 6% and was led by our Energy, Specialty and other businesses.

Latin America led the regional growth once again and we enjoyed good growth in North America and Asia-Pacific. We continue to be aggressive, focusing on top-line growth.

We are emphasizing our innovative product and service strength, as well as our wide range of effective solutions to help customers get better results and lower operating costs and through these, drive new account gains across all of our customer segments.

We also continue to implement appropriate price increases to help offset higher costs and investments in our business. We expanded our adjusted fixed-currency operating margins a 110 basis points in the quarter, as we continue to emphasize productivity and efficiency improvement as well as drive merger synergies.

We also continue to make investments in key growth businesses to sustain our technology, and sales and service leadership. We remain on plan for achieving our Nalco and Champion synergy targets. And our Europe margins are on track for further strong expansion again this year.

Looking ahead, while end markets present ongoing challenges, we look for the fourth quarter to show continued strong sales gains and margin improvement. Fourth quarter adjusted EPS is expected to increase 13% to 17% to the $1.18 to $1.22 range and compare with last year’s adjusted EPS of $1.04.

Business growth and the benefits from synergies and cost reductions should more than offset lackluster global economic trends. In addition, the quarter will compare against a 17% adjusted EPS gain in last year’s fourth quarter. For the full year 2014, we continue to look for a very strong 18% to 19% EPS increase to the $4.16 to $4.20 range.

In summary, our third quarter performed well. And we expect the fourth quarter to also show strong earnings growth as we more than offset challenging economic conditions while making the key investments to drive our superior results this year, as well as for the future.

Slide 4 shows our third quarter results, both as reported and with adjustments for special gains and charges, while slide five shows our sales growth detail. Ecolab’s consolidated fixed-currency sales for the third quarter increased 6%. Acquisition-adjusted fixed-currency sales also rose 6%. Looking at the growth components.

Volume and mix increased 5%; pricing rose 1%; acquisitions and divestitures and currency were not significant. Reported fixed-currency sales for the Global Industrial segment rose 3%; adjusted for acquisitions and divestitures sales increased 2%.

Third quarter fixed-currency global Food & Beverage sales increased 4%, growth was led by dairy and agri with the moderate sales growth in beverage which more than offset lower sales in the weak protein market.

Regionally, Asia-Pacific and Latin America led results with the other region showing modest growth, driven by share gains as we more than offset plant closures and weak volumes.

Food & Beverage continues to benefit from its Total Plant Assurance approach to the customers, in which we combine industry-leading Cleaning & Sanitizing, Water Treatment and Pest Elimination capabilities to deliver improved food safety results, lower operating costs and better product quality assurance for customers.

This has enabled us to win business with key global customers and offset difficult conditions in our North America and Europe markets, where lower volumes, as well as customer capacity reduction and plant closures, have impacted sales. Looking ahead, we expect modest organic sales growth in the fourth quarter.

We look for further benefits from growth synergies, better customer penetration and new business capture, as well as leverage from our innovation pipeline, including 3D TRASAR for clean-in-place systems in Food & Beverage plants to more than offset tough industry conditions. Acquisition-adjusted fixed-currency water sales increased 3%.

The heavy and light businesses showed good growth and mining recorded slight gains as industrial markets generally weaken during the quarter. Regionally, we saw a good growth in Latin America, moderate growth in North America and modest gains in both EMEA and Asia-Pacific.

Introduction of 3D TRASAR for hotel and other institutional cooling systems, utilizing solid chemistry and advance dispensing is going well. We also continue to drive better penetration in our other water markets using our innovative solutions to optimize water usage.

We remain focused on building our corporate account and enterprise sales team, delivering our growth synergies and improving product innovation to drive revenues. We expect to show further moderate growth in the fourth quarter as market share gains drive our heavy and light businesses to outperform end-markets.

Acquisition-adjusted third quarter fixed-currency paper sales declined 3%. Latin America recorded double-digit growth. Elsewhere we saw a sales decline resulting from continued low customer plant utilization and customer closures.

We expect Paper to show a modest sales decline in the fourth quarter as we drive new business and technology penetration to offset the difficult paper market conditions. Fixed-currency sales for the Global Institutional segment rose 4%. Turning to the businesses that make up the segment.

Divestiture adjusted fixed-currency sales for the Institutional business grew 4%. Institutional’s end markets remain mixed with moderate growth in global lodging room demand and still soft foodservice foot traffic across North America and Europe.

Looking at regional sales trends, Institutional posted solid sales growth in North America, Asia-Pacific and Latin America, while Europe’s ongoing business declined slightly. Sales initiatives targeting new customers and effective product and service programs around our core markets continue to drive our results.

We also continue to leverage our global technology through the rollout of Apex, our next-generation warewashing platform in Europe.

To drive our future growth and improve on our industry leadership position, we remain focused on executing global sales initiatives, globalizing core competencies and introducing product innovation that delivers increased value with solutions that reduce water, energy and labor costs.

We’re also making further investments in field technology to enhance execution in sales and service. And we have better aligned our local sales team efforts around our global value proposition.

We look for Institutional to show further good sales growth in the fourth quarter as we make further progress in our global sales initiative and continue our aggressive sales efforts to outperform challenging global market. Third quarter sales for Specialty grew 9% in fixed currency. Quick service enjoyed strong sales growth.

New accounts, along with increased service coverage and additional solutions for customers to drive their operating efficiency and food safety, leveraged generally modest industry trend. Regionally, the U.S.

and Europe saw a good growth from new accounts and additional customer solutions, while Asia-Pacific benefited from good quick service foot traffic growth. The Food Retail business saw solid gains in the third quarter, benefiting from customer additions, new products and increased penetration.

Fourth quarter Specialty sales could see steady progress in comparison to last year’s strong period may moderate the recorded growth. Fixed-currency Global Healthcare sales decreased 1%. New account growth and new product introductions were more than offset by continued weak hospital trends and delayed buying decisions in the U.S. healthcare markets.

Growth sales in this challenging environment, we’re strengthening our corporate accounts approach and our integrated value proposition, as well as improving our product portfolio.

We expect modest Global Healthcare sales growth in the fourth quarter as we continue our work to strengthen our business and succeed in North America and Europe healthcare market. Fixed-currency Energy segment sales grew 14%.

Our upstream business saw a robust foot growth in the third quarter led by a strong international performance and good North America results. Downstream business saw a good increase led by strong international performance and share gains in North America. As a side note, Russia represents less than 5% of our Energy sales.

Since the bulk of our business in Russia is in conventional wells, [print] sanctions have little impact on that business. In addition, while oil prices have declined in recent weeks, we believe they are still at levels that support continued industry investment in exploration and production.

Further, with our business model heavily weighted to more recurring revenue, production refining business were minimally impacted by short-term changes in oil prices.

Looking ahead, we expect acquisition-adjusted Energy segment sales to show a fourth quarter and full year 2014 sales increase in the 10% range as new business resulting from ongoing share gains and new production coming online drives growth. Sales for our Other segment increased 7%. Fixed-currency Global Pest sales increased 6% in the third quarter.

We enjoyed good growth in Food & Beverage and milder growth in restaurants. Regionally, we delivered double-digit growth in Latin America and Asia-Pacific and solid growth in EMEA and North America.

We continue to drive market penetration with innovative service offerings and technology to make progress in globalizing our market-focused capabilities and field technologies. We expect Global Pest sales to show continued good growth in the fourth quarter led by gains in all markets. Equipment Care sales grew 10% in the third quarter.

New account sales, better penetration, pricing actions and improved technician capacity and productivity drove strong service revenue growth. We expect Equipment Care to show further strong gains in the fourth quarter as continued good service trends, pricing initiatives and streamlined operations benefit results.

Slide 6 of our presentation shows selected income statement items. Third quarter gross margins were 46.7%. When adjusted for special charges, third quarter 2014 gross margins rose 10 basis points above last year.

Volume and pricing gains, as well as merger synergies and cost efficiencies more than offset higher cost input and the business mix impact of higher energy sales, which on average have a lower gross margin when compared with our other businesses. SG&A expenses represented 31% of third quarter sales.

The SG&A ratio improved 100 basis points versus last year. The improvement reflected sales gains, merger synergies and cost savings efforts as well as the mix of higher energy sales, which on average have a lower SG&A ratio when compared with our other businesses. Consolidated operating income margins were 15.5%.

Adjusted for special charges, fixed-currency operating income margins were 15.7%, rising 110 basis points over last year’s comparable margin. Fixed-currency operating income for Global Industrial increased 2%. Acquisition adjusted operating income grew 1%, with margins off 10 basis points.

Good improvements in Water and Food & Beverage income were partially offset by volume driven decline in Paper. Fixed currency operating income for Global Institutional increased 5%; results benefited from pricing, volume gains and cost efficiencies, which more than offset higher delivered product costs and investments in the business.

Fixed-currency Global Energy operating income increased 39% and margins expanded 290 basis points. Volume gains, operating leverage, synergies and pricing led the increase. Fixed-currency operating income for the other segment increased 15% and margins expanded 120 basis points.

Improved operating results offset investments in the business and higher costs. The Corporate segment and tax rate are discussed in the press. As before, please note that our tax rate assumptions for the full year assume passage of the R&D tax credit in the fourth quarter.

The net of this performance is that Ecolab reported third quarter diluted earnings per share of $1.19 compared with $1 reported a year ago. When adjusted for special gains and charges and discrete tax items in both years, adjusted earnings increased 16% to $1.21 when compared with $1.04 earned a year ago.

Turning to slide 7 and looking at Ecolab’s balance sheet. Net debt to total capital was 46%, with net debt to adjusted EBITDA at 2.5 times. Looking ahead and as outlined on slide eight, we continue to take aggressive actions to drive both our top and bottom line.

We’re expanding our market share and customer penetration among major accounts and leveraging our positions in key growth markets as we work to offset weak economies and unfavorable currency exchange rates, which will likely negatively impact fourth quarter reported sales by a couple of percentage points.

We expect to show good acquisition-adjusted sales growth and margin expansion, driven by innovation, pricing, merger synergies and better operating efficiencies. We expect to deliver on these aggressive goals while building growth for the future.

We expect adjusted fourth quarter 2014 diluted earnings per share to increase 13% to 17% to the $1.18 to $1.22 range. Further, the fourth quarter will also compare against the strong period last year when adjusted earnings per share rose 17% to $1.04.

We continue to look for the full year 2014 to show very strong growth as adjusted earnings per share are expected to increase 18% to 19% to the $4.16 to $4.20 range.

In summary, once again we delivered on our forecast in the third quarter with a solid sales gain and continued margin improvement, while offsetting market challenges and investing in our future.

We look for further solid acquisition-adjusted sales growth and continued double-digit profit gains in the fourth quarter, as well as for the full year 2014, as we work to deliver yet another strong year and build for our future. And now here’s Doug Baker with some comments..

Hi, good afternoon. Well first on the quarter, we had a very good quarter. We saw the improvement in the underlying business that we expected and predicted. Sales accelerated to 6%, new business was again very strong, up significantly versus last year’s record year. Our innovation is on track; we’re getting all synergy in Europe renaissance calls.

And energy is back to double-digits growing 14% in the quarter and on track to deliver double-digit growth for the year. This all occurred in extremely turbulent environment globally. This is an environment we don’t expect to change, but this is a challenge our team and business I believe is well equipped to manage.

So, looking forward, we expect to finish the year in a strong way. We forecast EPS growth for the full year of 18% to 19%.

We expect in Q4 similar sales growth driven by continued strong new business results and double-digit energy growth, which leads me to the topic of the day if not the week and that’s oil price and its potential impact on our business. Let me talk two scenarios because it’s easier than trying to go through every potential scenario.

I am going to talk about $80 and above oil, WTI and then also the $74 scenario which seems to be the popular scenario given Goldman Sachs’ recent call.

For $80 and above, I would just say it’s same as it ever was, meaning oil production is on; healthy industry, we like it close to $80 because also while you have full production in the oil and gas business, you also have economic benefits and favorable raw materials.

If price falls below $80 depending on how far and for how long, it would likely be a drop in activity. There isn’t any clear consensus on a simple number, but if it’s $70 over an extended period, we’d certainly see a pull back. At $75 we would expect a modest pull back.

The impact on us, so we’d say double-digit energy growth would likely turn into high single-digit growth as less than 25% of our energy business is exposed to the parts of the industry most impacted by pricing at that level.

So, this is of a small if any impact on the overall company operating income as we would take a number of steps to offset this top-line impact. Energy itself would shift from full on growth to growth and cost savings initiatives they would balance their portfolio if you will of activity.

Lower raw materials would probably occur across the company as we see lower oil prices. And three we would also likely see improved institutional market particularly in U.S., if consumers would have more discretionary dollars to spend as a price of the pump continues to lower.

Now when you look at our business, we’ve got a business well positioned to manage through either scenario and or other scenario. I’d say most importantly we have a team that’s quite good at reacting to a ever changing environment. I think we have proven that over the years.

So, my expectations that we’ll continue to grow and perform in any of the reasonable scenarios I have seen so far this year and beyond. So good quarter, we’re in good position. We like what we’re doing. We’re going to continue to do it going forward..

Thanks, Doug. That concludes our formal remarks. Operator, would you please begin the question-and-answer period..

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Gary Bisbee with RBC Capital Markets..

Hey, guys. Good afternoon. I guess the question is if we look at the Global Industrial and Global Institutional businesses, profit growth remains fairly low and energy I think at some point in the next two or three years is likely to slow quite a bit as the synergies are more fully achieved.

The question is what’s it going to take to drive faster revenue and particularly profit growth from the legacy Global Industrial and Institutional segments? Is it just better global economic growth or what else that you can control can drive better growth in those? Thanks..

Yes. Gary, I would say two things. Institutional underlying a number of things are going well. I would also say in Europe in particular we’ve taking a number of steps to get that business, what I would say right and get focused on the core Institutional business.

While, we’re going through the steps, it’s I would say having an impact on reported operating income to remains leverage in the Institutional business particularly in our AP, LA and European businesses as we go through and continue to drive volume. So by no means, do we feel like we’re pinned on Institutional profitability going forward.

I would say while you’ve got a couple of engines really firing, you often start working on the other engines to make sure that they’re going to be in good position as you move forward. On the Industrial side, it is more a function of sales volume.

And the sales volume in Industrial, which I’m sure we’ll end up having a conversation about, we’ve got a pretty mix result when you look at our Industrial businesses. We have our core Water business, which is up 5% globally, our F&B business which is up 4%, Mining is roughly flat and then you had Paper down 3%.

These businesses are ones that are probably most not knocked around economically. For the year, we’ve seen losses in the neighborhood of $50 million from plant closures in these businesses. And those closures have disproportionately impacted Mining and Paper. With that said, I think we’re in very good position.

We’re nearing if not any bottom of a cycle. And as we start moving out of that cycle and we start having volume leverage, you’re going to start seeing I think good OI returns as we move forward. So, the good news is we think we’re near the bottom. We think for sure closures are slowing. So at least we aren’t if you will running against our current.

And going forward, we would expect pretty similar results in Q4 as you saw on Q3 in Industrial, but significantly improved results as we go through 2015..

Great. And then the quick follow-up just what exact impact has the European weaker economic environment had like this quarter on results versus two or three quarters ago because I did note in the press release that it did say that there was a slight decline and I believe that was the Institutional segment in Europe.

And I think you’ve been talking about flattish. So, did it get a lot worse or is that more just that hasn’t gotten better? Thank you..

Yes. It’s significantly degrade. I think in total our European businesses were up 1% for the quarter. I mean it’s not a number we’ll celebrate, but there wasn’t any big degradation as a result of the European economic situation. We would anticipate that European situation is going to remain challenging.

We believe we’ll continue to keep our nose above water and we believe we’ll continue to show OI improvement as a result of all the efforts that we’ve undertaken under the Renaissance program..

Okay..

Our next question comes from Mike Ritzenthaler with Piper Jaffray..

Yes, good morning. Question on Food & Beverage, which continues to post a very resilient growth.

I was just wondering on the challenges that your customers are seeing from closures and things like that, is that -- is the growth for Ecolab mainly new product launches, is it account wins or something else?.

Yes, it certainly total plant assurance program which enables us to do more for existing customers but has also secured new business. I would say across the board we’ve had great success securing new business.

I mean it’s the only way you’re going to accelerate the economic situation we find ourselves in, and that’s true for F&B as well as the other businesses. And I think F&B is well poised to continue to perform well. So our expectation is that we continue to grow in spite of the economic condition.

We expect that we’ll still see some closures as the customer set tries to make sure that they economize wherever they can because it’s the tough environment for them.

But this makes sense that our total plant assurance programs, our efforts to lower energy and water costs are particularly important in difficult times which is why I believe we’re having such a good success securing new businesses..

Okay.

And then a follow-up on institutional is a bit harder to quantify, but are your customers noting anything whether it’s the order book or just anecdotally on the slowdown in foot traffic or occupancy that on these Ebola fears?.

No, I don’t, I mean outside of the obvious hotspots in West Africa, I mean no, we have not that anything I have heard of seen any impact. I mean Ebola conversation in United States is probably overblown to what we anticipate the real impact will be as we move forward, but we have not seen anything..

Fair enough. Thanks, Doug..

Our next question comes from Dmitry Silversteyn with Longbow Research.

Good morning. Just wanted to -- or I guess it’s afternoon, sorry. I found it interesting that in several of your businesses you talked about Latin America and Asia-Pacific as being the growth drivers.

We’ve seen Latin America struggle as a region for a lot of companies in various businesses in this sector and obviously the slowdown in China and in Asia-Pacific countries in general has got people concerned. So you seem to be sort of sailing against that tide.

Can you talk about what’s allowing you to actually have these territories be the driver of better performance rather than sort of an explanation for why the performance wasn’t quite so good?.

Well, I guess in Latin America, we continue to drive shares successfully in that market. And I don’t think there is any magic formula that we have. Some of our businesses are probably exposed to the challenges, but I would anticipate we’ll continue to perform well in Latin America.

We’re not completely immune from economic impacts, but we still believe we’re going to have healthy growth in Latin America moving forward. Asia, I think clearly on the industrial side, you’ve seen and we’ve seen and felt impact from slowdown particularly in China.

And so in our mining and paper business in particular, you can -- we clearly felt the slowdown in China. China tends to drop quickly and rebound quickly. And third quarter was not a great quarter for us in China.

I would still say we remain quite bullish in China overall and expect that that market is going to be a very important market for us long-term. So we don’t plan to play any differently there.

We’re doing quite well in institutional, quite well in F&B; and the industrial business we expect to rebound as we start having new business offset shutdowns and the like..

Okay, Doug. That’s helpful. Switching gears to the two businesses that continue to give you guys problems as far as getting consistent growth and that’s healthcare and paper. Paper sort of came to you via the Nalco acquisition and you’ve talked many times about it but not necessarily being a business that you’re interested in being longer term.

But healthcare was sort of an internal initiative, got a lot of promise and sort of expectations that haven’t been materializing over the last couple of years.

Anything changing either with the hospitals getting religion about disinfection with Ebola or anything else that you can point to on maybe perhaps some of your own initiatives that will give us comfort that healthcare at some point is going to be at least a mid-single-digit grower for you?.

Yes. Our ambitions for healthcare are higher than that.

I would -- I think if you go back to conversations we’ve had throughout the year, we basically said we’re putting healthcare in the shop for the year and that we had work to do on the healthcare business particularly around how do we better package our offering and talk about and merchandise our offerings.

And that work has been ongoing and I think moving along at a very good pace. We really said not to expect any great change in healthcare metrics throughout this year, but we would expect a change starting in 2015 and that’s still our view. So that hasn’t really changed from the conversation we had in the first quarter.

So healthcare, we still believe is a great growth opportunity for the company. We think what the healthcare market needs we’re in a unique position to deliver. I do believe that you see slowly and open this in the healthcare arena to different tactics to get after our healthcare acquired-infections.

Certainly I think Ebola shows how serious you have to be in a very serious predicament. And so, as we move forward we expect to gain traction there and have upper single-digit type organic growth in that business..

Okay. Thank you..

Our next question comes from David Begleiter with Deutsche Bank..

Thank you, Doug.

Just on energy how did the Nalco and Champion businesses do back in ‘08 when oil dropped quite a bit as well?.

Yes. Well, in ‘09 which is really the year, it was like 140 mid ‘08 and then it drop down to 40 and changed in ‘09. Volume was off in the Nalco energy business by 3% in ‘09 versus ‘08. In total, I’m looking at going back. In total the combined sales would have been down 6%.

But you had a pretty dramatic drop in price one that I don’t think anybody is predicting..

And any concerns that this current oil price that you can grow double-digits in energy in 2015 on top-line?.

As I said, my preamble I think certainly it depends on the price, David, is what I would say. I don’t think there is any reasonable scenario that says we’re not going to go grow. We believe the price is going to be north of 80 bucks. I would say is consensus is north of $90 at this point in time.

If it stays in this range, we believe we’re going to grow double-digits. A drops in the mid-to-low 70s, growth is going to be impacted somewhat, but I think you’re still talking upper single-digits..

Thank you very much..

Next question comes from Nate Brochmann with William Blair..

Good afternoon, everyone. Hey Doug, I wanted to go back to kind of a little bit of an earlier discussion regarding just like the portfolio and some of the puts, natural puts and takes. But as you said, you’ve got a great team in place to kind of react quickly as some of these different events change and economies do this or that.

Could you give us some examples of how things change like all of a sudden, and granted I know that you have the Renaissance program, they already gave you better OI profitability in general.

But what are some of the actions that you take when markets do kind of move on you pretty quickly in terms of moving maybe from offense to defense and how the business is naturally set up that way?.

Yes. I would say two things; traditionally and what I would call tough economic times. We have a very strong emphasis on new customer acquisition. Customers are more open to change when times are difficult because they’re seeking answers to their own internal challenges.

I think that’s one of the reasons we’ve been so successful with our net new sales success both last year and this year because of the difficult time and our emphasis on new business. Second, we also have I would say a larger portfolio of cost savings initiatives and efficiency initiatives and if you will kind of our workflow during difficult times.

We will ramp these up as times become more complicated, simply because you’re not necessarily chasing new volume and having to build new volume or capacity.

So, we have a pretty strong portfolio right now, but there are number of initiatives that frankly aren’t on green light right now that if they got worse, we would green light and start upping our capacity in terms of what kind of cost savings we could generate if we need to. So, it’s shipping the portfolio of work based on the economic environment.

I think we’ve got room on either side, if the economy turns to the positive which is not my prediction. I think we’ve got a number of very good initiatives that we would turn on. And if it gets a little worse on the other side, we’ve got plenty of initiatives there as well. And this is exactly how we’ve run the business over a long period of time..

And that makes perfect sense but thanks for that added color. And then just one more question on the energy business and given a lot of the great different examples here to support where you are at.

But could you give us a little bit of like terms of current discussions with some of your customers or potential customers regarding any new projects that might be coming on and whether there’s any apprehension there in terms of I know there’s a long sales cycle and these projects have long upfront lead times to it, which helps create that recurring revenue on the production side, but could you just talk about maybe some current examples of where those discussions are?.

I would say there has been zero discussions with people who are talking about major changes in their capital deployments or anything else. I would say it’s consistent with what we read in transcripts of other people in this industry. So, at this point in time, I would say there is no hard indications of any slowdown whatsoever.

I think what you have out there speculation that if in fact Goldman’s prediction of 74 is more accurate than their 08 prediction of 200 comes true that what might occur then. I would also say this is going to occur; these things don’t stop on a dime.

There’s momentum in this business, capital is being deployed that even if there was a shift in thinking, it’s likely not going to impact for several quarters..

Great. Thanks for that..

Next question comes from John Quealy with Canaccord Genuity..

Hi, good afternoon folks. First, back to energy if I could. Doug, thank you for the sensitivity analysis and detail you gave us. In terms of moving forward, I think in the quarter you talked about some customer capture on the downstream side.

How quick or what is the desire to potentially protect against slower E&P activity by moving to the downstream? That’s my first question..

Yes. John really the way we’re structured is we have focused business team, focused on downstream and oilfield than on WellChem, the upfront. And these teams are kind of on the gas the whole time.

So it’s not as simple as flooding downstream, it’s folks out of OFC that up activity; while it’s in the industry, it’s a different business and it’s got different needs and different technologies.

So I would really say the way we look at this is our OFC folks are going to be on share, no matter what the environment is; they may start adding a component of cost savings if the market turned against them, ultimately oil is a cyclical business. Our business that’s positioned here is not a cyclical business.

And we’ve gone through chart after chart showing this. We really believe our exposure of the production phase and downstream is going to mute any impacts that are going to occur either in the near-term or long-term in this industry. So I don’t -- this is probably the best answer I can give you..

Okay, thanks. And then as a follow-up, switching gears to the 3D TRASAR introduction, I think you talked about it more in that sort of 15ish timeframe.

Can you give us any anecdotes in terms of customers that have got 3D TRASAR in the industrial or institutional markets? Have they just deployed the first onsie twosie units? Have they started to deploy throughout their fleets? If you could just give us some flavor or your objectives for that in the next year or so? Thank you..

Yes, this year is really making sure that we underpin how to fully leverage the technology for our customers benefit. So I mean it’s nominal sales this year and it’s on track and doing what we had expected it to. But that will grow over the next few years.

Typically for us to realize full annual sales potential and a technology like this, it takes like five years. It takes a while for adoption. These are very sticky technologies. We build them for the long-term. We like what we’re seeing but this is going to be a ramp up over the next several years. .

Great. Thanks..

Next question comes from John McNulty with Crédit Suisse..

Good afternoon. Thanks for taking my questions.

So first question, with regard to the pricing that you saw, the 1% that you reported on a consolidated basis, can you give us a little bit of color as to how the pricing is working from segment to segment if there are any meaningful differences from one to the next?.

They’re pretty similar. I mean our strongest pricing activity across the board would be throughout institutional, energy be next and industrial would be third. And I don’t think that’s a real surprise given where the significant economic pressure is on the industrial side but all are rounding to the same numbers..

Okay, great. And then with regard to the oil price drop, it sounds like you’re not overly worried about it, which I think makes sense in this environment. That said there are a lot of stocks that have gotten clobbered because of it.

And I guess I am wondering with your balance sheet having been cleaned up a bit since the Champion acquisition, are you seeing opportunities for M&A that might be interesting to Ecolab just given kind of some of the price moves that we have seen in some of the stocks?.

Well, I can’t comment on M&A in particular, I guess I will say that we’d rather buy things that are cheap than expensive. So that goes to real words of wisdom..

All right. Thanks very much for the color..

Next question comes from David Ridley-Lane with Merrill Lynch..

Good afternoon. A few months ago a competitor of yours sold their water business to a private equity firm. Do you think this is an opportunity for potential market share gains and more broadly than not how would you judge Ecolab’s water segment versus its competitors, i.e.

are you gaining market share?.

Yes. We believe we are gaining market share in the water space against our key competitors. I don’t have the pleasure of saying I built this water business by any means. So, let me say this objectively, I think it’s the crown jewel of the water businesses.

The Nalco business has been the leader in the water business not only from a share standpoint, but the technology standpoint. And we planned to help strengthen that not diminish that. So, we’d like that business.

In terms of -- I would say the earlier part of your question, anytime there is change usually brings opportunity because certainly when companies are bought or sold there is distraction and when we buy companies we work to minimize it and move forward as quickly as possible because we don’t really want to be taking advantage of during those periods of transition.

Certainly, we’ve gone through this in a lot of industries and we work to go capitalize on transition like anybody would..

Got it. And then just staying with water for one second, I hear you that it takes time to build up for the new products in terms of 3D TRASAR for hotels and hospitals and for food and beverage plants.

But as you look at your other end markets, the heavy and light industries, are those feeling like they are getting a little bit of strength or are they continuing to sort of trudge along here in terms of the end markets?.

Yes. I guess two things. As I said earlier, combine the heavy and light business, we strip out the piece of it that we’re exiting on the P&L grew at 5% this last quarter. We call that good below our target growth rate. I think it certainly reflects challenging economic times, but we’re doing a pretty good job in that business offsetting it.

As they’re having a lot of success securing new business. We recently introduced new technologies in that business through some acquisitions that that teams made. We’ve got other technology being injected as a consequence of being part of the overall Ecolab team. I think that team is a very good team.

I think they are managing very well in a tough environment. Our expectation is that they grow in the 6 to 8 organic range as well, particularly in the core water business, which isn’t knocked around in the same degree as say mining and paper are economically. I think we were on track to get there..

Thank you very much..

Next question comes from John Roberts with UBS..

Good afternoon. I’m interested in how the water business for commercial buildings with the solids in TRASAR will scale.

Is it the janitor in the building that will be actually doing the dispensing of the solids? And are these going to be monitored by the Nalco center back in India like the other Nalco TRASAR systems are?.

Yes. One, I think there is every one of these large commercial buildings is going to have an engineering staff. So, we would have the capability of monitoring and if we choose to do that and that ends up to be a route that makes sense and is important.

But this system I would say has huge advantages versus the systems that they’re using today, which is I think the comparison that you’ve got to keep in mind, the solids bring a lot of advantage in both safety and convenience in terms of adding product and moving product around buildings, the capabilities that 3D brings to this in terms of using water and cooling towers, more cycles and reducing fresh water and flow and the resultant savings that this brings to these building, both at sustainability story but is outright lower end-use costs are quite material.

I would say the reception that we’ve had here, both from our customers and I’d say just as importantly from the sales team has been outstanding.

And so we are ahead of our projection; this will ramp up likely faster than 3D TRASAR and Food & Beverage simply because you don’t have the same food safety legislation covering these areas that you do or using 3D in the CIP arena.

So, we’re quite bullish on what this is going to do in terms of equipping our light team to get after important business that has higher margins in any of the other water business areas that we compete in. And it’s historically been quite sticky if you have the right program..

And if the TRASAR system signals an alert, is it a Nalco person that’s going to go check that out, or is it one of the Ecolab institutional salespeople?.

No, it’s going to be a Nalco person, somebody with water technology background..

Thank you..

Our next question comes from Laurence Alexander with Jefferies..

Just a quick question on the institutional business. Are there any areas where you are seeing a noticeable change in your ability to take share? I mean you have talked about accelerating different parts of the business over the last three quarters.

Are there any areas where that trend is looking like it’s getting more difficult?.

Well, I think our ongoing lament is that taking share is never as easy as you wish it was. I don’t -- I get that reflect in your question, I don’t have any areas that I would define as materially different in terms of competitive environment, i.e. a big change in terms of either much easier or much harder to take share.

I think throughout the segment, I mean we continue to do well in QSR, we continue to do well in Food Retail; we continue to do well in full service restaurants and hotels.

Regionally, the business is getting healthier, across the region it remains healthy in North America; it’s improving in Europe clearly as we look at the underlying trends; it’s doing well in Asia-Pacific and Latin America. So I don’t know global chains are doing well. So, I don’t have a point I would single out for you..

Okay. Thank you..

Next question comes from Andy Wittmann with Baird..

Hi, thanks for taking my questions. I just wanted to take a step back and kind of reflect on the cost synergies that you’ve outlined through the years with Nalco and then Champion. It sounds like things are generally on track.

Maybe from here Doug, can you give us a sense about I think 2014 was going to deliver $110 million of synergies and a similar amount in ‘15 and then falling off of a bit in ‘16.

But can you just give us a better sense of kind of where you are, has any of that been pulled forward, pushed back and where you see the biggest chunks of that being allocated to or coming from as we look ahead into ‘15?.

Well, the early chunk and as this goes, the early chunks were from one, purchasing; two, a lot of the G&A and regional overhead overlaps that we had. And we always said that the later in stage is going to be in the supply chain. That takes longer and it’s more difficult to get after.

Next year, we would expect again another about I think 105 is the number that we have used externally, it’s not materially different than your number. And a lot of that is still going to be if you will carry on effects from the work that we’ve done this year in procurement in G&A.

But increasingly as you go out in the later stages, it’s going to be in the supply chain, i.e. reducing plant footprint, warehouse footprints and the like..

Got you. So as you look at these numbers, that level of cost savings is about 70 or 80 basis points of improvement so far, you’re about 90 basis points year-to-date of margin expansion.

Is the 10 to 15 basis points of underling operating leverage, do you feel like this is the right amount for this economic environment or do you have a vision that it should be more that you could have delivered more or less from that.

I’m just curious as to how you feel like the underlying leverage of the business is performing against that?.

Yes. Andy I would say, we’re doing a little over a 100 this year on $14 billion. We’re going to be up a 110 basis points sort of north of that for the year and I think that’s what we had for the quarter. So, I would say I’m not sure, I’d say that indicate more like 40 plus outside of synergies.

I think you’ve got to also recognize that when you have this level of synergies, you are taking a number of resources that would be against cost savings initiatives that may not be labeled synergies, but that would still be generating saving.

So, the synergies aren’t completely additive because we don’t have resources that are completely distinct to work on synergies, these are up and a lot of the same people who end up working on cost savings.

So, getting back to our model, the back of the napkin model, I think when we talk about 68 organic, we talk about called 75 basis points of operating income leverage. We think that’s quite realistic and consistent with what we’re doing right now.

When you take an account, some of the people that are working on synergies would be working on other cost savings..

Got it. Maybe if I could just do one final question. You have alluded to a few times the potential that raw materials could be a benefit if oil prices come in.

Are you seeing any or having any discussions on that already today? It seems like it would be early for this, but what could that magnitude look like and what have you seen so far year-to-date on the raw?.

Well, early returns I mean fairly the only thing we’re probably seeing that everybody else is seeing is lower gas prices. It’s not one of our most significant if you will input costs. Yes, I would say it would be fairly pretty mature.

I think if our customers try to start talking about the impact on $35 oil, we might point out that oil on average around the world is trading in the 80s because that target gives away what we haven’t realized. And I think we would have the same conversation with raw material suppliers at this point in time.

The raw material markets have been I don’t know fairly steady moving up. And we would say we would expect that we’re going to continue to see modest inflation going forward..

Okay. Thank you very much..

Next question comes from Mike Harrison with First Analysis..

Hi. Good afternoon. I was a little bit surprised to hear you say that you had seen better foot traffic rather in Asia-Pacific given some of the issues that some of the fast food restaurants and chains have seen with food safety there.

Are you guys seeing the issues in China there as a challenge or an opportunity?.

Yes. I guess you’d have to -- China is a big, big market with a lot of restaurants. And while, you’re right there were some big food safety scares that had a real negative impact on a couple of large players. They’re large in the world, but they’re not really large as it pertains to all of China.

And our business in China is up double-digit in the food service arena, traffic is fairly strong, I think our traffic remark across Asia-Pacific which obviously encompasses a number of other markets. And that’s the data that we have..

And then looking at the energy business, can you talk about what the Champion business saw in terms of volumes from ‘08 into ‘09? I think of that as maybe a little bit more sensitive on the onshore side than the Nalco business, which is more offshore..

The number I have right here is the combined sales were down 6% of Champion and Nalco ‘09 versus 2008. So, I don’t think it’s going to be a dramatically a different result..

And then just real quickly, on the Nalco intangibles that $45 million in the quarter, do those start to decline anytime soon, or how long are those amortized?.

Yes, not for quite a while, never soon enough..

All right. Thanks very much..

Next question comes from Rosemarie Morbelli with Gabelli & Company..

Good afternoon and thank you. Looking at Europe, Doug you talked about a 2% impact on revenues from FX. Since that particular business has lower margin than the U.S.

or North America, is it fair to estimate that on the EBIT line, it will have a substantially smaller impact than the 2% on sales?.

Rosemarie, I apologize. Yes, it’s going to be a 2% overall obviously.

Non-U.S., are you saying where is the impact going to be most significant?.

Yes, I was just wondering looking at Europe specifically.

I thought that 2% negative impact on revenues was going to be on the European business, so since it is overall, could you touch on the Europe only?.

It’s on our whole basket of currencies as they roll off. I don’t know if I’ve got that the FX impact, so large as Canada and it’s a tie between Russia and Europe..

Okay..

Sales impact, absolute dollar, which means Canada would be as a percentage much higher..

All right.

And then sticking with Europe, when you are discussing business and expectations with your customers, is anyone thinking that they are going back into a recession or is it just more no growth?.

I think I don’t know that -- I don’t know if this has got any bearing on what’s actually going to happen. I think broadly I think people are fairly bearish on the European economic situation. But I can’t really remember last time they were really bullish.

So, I don’t know that it’s going to -- I guess our outlook on it is we expect to remain challenging given the share upside and the other. We’re not forecasting miraculous sales turnaround but we do expect to be able to continue to keep our nose above water i.e. modest growth going forward is what we think we’re going to be able to do.

So we do not see a huge material if you will spiral down in the European economic situation. I’d just say it’s weaker, softer but not dramatically..

That is helpful.

And if I may ask one last question, on the protein market, given the lower cost of feed, do you anticipate that particular side of your business will pick up in 2015, or does it take until 2016 before the herds can be built back up?.

Yes, I would say it’s typically that’s kind of a long cycle, because we’ve got to build herds up. It will take a while. It’s not a huge piece of our business, but my expectation probably strengthens back half of ‘15 or ‘16..

Okay. Thank you..

Next question comes from Manav Patnaik with Barclays..

Hi, thank you. Good afternoon. Two questions, one just from a modeling perspective. Can you remind us of how we should think about the FX currency exposure? And then the second one is just around to dig a little bit more into the healthcare business.

What is really sort of the roadblock if any in that business for you to sort of take it to the next level, like do you need an M&A or a deal to get that going, just curious on your thoughts there?.

Well the model question FX impact in the next quarter, we expect to be $0.03, but it’s built into our outlook. So, that’s what in our outlook right now. Next healthcare, I don’t think we’re missing any big pieces. I think this is a question of how we put the pieces together in terms of what our offer is and how we better articulate our offer.

How we think about going to market, most of the things that we’ve been working on and modeling and testing this year. And that’s the work that we’re undergoing. I guess what we said is we expect a change in performance beginning in 2015. And I think once we get out there proof is going to be in delivery.

If we start seeing improved results, you know we’re on the right track. If we don’t, we’re going to have to continue to work. But I believe that business will be a very good business for us for the long-term..

All right. Thanks, guys..

Next question comes from Bob Koort with Goldman Sachs..

Excellent. Thanks for your patience guys. Two quick ones. One is there any scope for fuel savings and can it become meaningful if oil stays down here? And then secondly, can you talk about the specific markets in Latin America that have been so healthy.

It seems like somewhat of an anomaly to what a lot of industrial companies face, so maybe it is more consumer-oriented that is helping you there?.

Yes. I would say Bob the fuel costs benefit or kind of loss in the wash of all the other input costs. We’ve got pluses and minuses. They’re certainly incorporated in our outlook for the balance of the year. In terms of Latin America, we’ve got the -- it’s hard to pay, this is a single industry.

And I have friends who are running other companies and there have been obviously in the capital business a very different time and some of the markets down there that’s not exactly the business we’re in. We continue to do well on most businesses down there.

Our Food & Beverage and our Institutional businesses, our position decently we have a lot of upside in share. We have done a good job I think in F&B in particular aligning our sales with some very important customers and we’re growing as a result in terms of water.

I think there has been additional talent put in the water team over the last year and a half which has proven to be a wise move and that team is performing well and continues to gain steam. And the Energy business is doing well down there.

I would say the outlook in that market particularly with changes in Mexico over the long haul remained quite positive..

Okay, great. Thanks for the help..

Next question comes from P. J. Juvekar with Citi..

Hi, Doug. This is Eric Petrie on for P.J.

Based on your experience with past health epidemics like bird flu and sars, how do you think Ebola may impact your businesses?.

What we saw on past sars and bird flu was you certainly -- you see an uptick most notably in healthcare. That impacts a bunch of division. I don’t think it’s going to be an impact that’s going to shine through the total number. But it will be an uplift for maybe some of our business segments. It typically comes in more broadly distributed disease.

It’s fairly limited I think it’s fairly easy for them to diagnose potential folks who’ve been impacted. And if we’re smart, we’ll continue to do the right types of quarantine when people are actually infected and that kind of work. So I don’t know that this is going to have a huge boon to our top-line..

Okay. And then my second question is you noted of your energy portfolio less than 25% is impacted from lower prices below $80 per barrel.

Is there a difference in profitability of your stimulation and enhanced oil recovery versus production?.

No, I don’t think, I don’t think I’d go make that case, so this kind of across the portfolio and it’s less than 25 and which is to say even if that impacted fairly significantly even on the overall energy business but still going to allow pretty healthy growth.

And I think energy would probably take a lot of steps to even mute the impact you would see on their specific P&L. And as I talked about there would be other if you will benefits from lower oil that would impact our other business’s P&L through lower raws and potentially more consumer spend in the more consumer facing businesses like institutional..

Thank you..

Next question comes from Richard O’Reilly with Revere Associates..

Thank you, thank you guys.

Two quick questions, the first, did you by any of your common shares back this quarter?.

No..

The first time you haven’t done that in some time, am I right?.

Yes, I think that’s right..

Okay. Second question on reverse of the raw material cost deflation.

In your slide you said the institutional segment had higher delivery costs and no comment on any of the other segments on that, what went up in the institutional cost wise?.

Yes, that have been more common about freight rate which in spite of I’d say lower diesel have been under pressure across a lot of industries, in some markets like U.S. shorter drivers et cetera so there is just pressure broadly on freight rates..

Okay, broader than just fuel cost, the diesel cost. Okay, all right.

Do you see that reversing in the near term, or is that more secular?.

I don’t know if it’s secular, we don’t see a reversing in the near term..

Okay, good. Thanks a lot now..

We have no further questions. I would like to turn the call back over to Mr. Monahan for closing comments..

Thank you. That wraps up our third quarter conference call. This conference call and associated slides will be available for replay on our website. Thanks for your time and participation today, and our best wishes for the rest of the day to you. Take care..

This concludes today’s conference. Please disconnect at this time..