DANAHER CORPORATION
1995 ANNUAL REPORT
SELECTED FINANCIAL DATA
(000's omitted except per share data)
1995 1994 1993 1992 1991
Net revenues $1,486,769 $1,113,973 $937,633 $845,684 $734,424
Operating
profit 180,257 124,427 87,058 58,899 36,950
Earnings from
continuing
operations 105,766 72,319 48,030 30,443 16,719
Per share 1.77 1.24 .83 .53 .29
Discontinued
operations 2,550 9,331 5,719 1,158 (3,398)
Per share .04 .16 .10 .02 (.06)
Earnings before
cumulative effect
of accounting
change 108,316 81,650 53,749 31,601 13,321
Per share 1.81 1.40 .93 .55 .23
Cumulative effect
of accounting
change* -- -- (36,000) -- --
Per share* -- -- (.62) -- --
Net earnings 108,316 81,650 17,749 31,601 13,321
Earnings per
common share 1.81 1.40 .31 .55 .23
Dividends
declared 4,672 3,710 3,412 -- --
Dividends
per share .08 .065 .06 -- --
* Adoption of accrual method specified by SFAS No.106 for
post retirement benefits.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Danaher Corporation (the "Company") operates a variety of
businesses through its wholly-owned subsidiaries. These
businesses are conducted in two business segments: Tools
andComponents and Process/Environmental Controls. In Tools
and Components, the Company is the principal manufacturer of
Sears, Roebuck and Co.'s Craftsman line, National Automotive
Parts Association line, K-D automotive line, and the Matco,
Armstrong and Allen lines of mechanics' hand tools. The
Company also manufactures Allen wrenches, Jacobs drill chucks
and diesel engine retarders, and Coats and Ammco wheel
service equipment. In its Process/Environmental Controls
segment, the Company is a leading producer of leak detection
sensors for underground fuel storage tanks and motion,
temperature, pressure, level, flow and power reliability and
quality control devices.
Presented below is a summary of revenues broken down by
business segment (000's omitted).
1995 1994 1993
$ % $ % $ %
Tools and
Components 1,005,005 67.6% $809,989 72.7% $691,344 73.7%
Process/
Environmental
Controls 481,764 32.4 303,984 27.3 244,400 26.1
Other - - - - 1,889 0.2
$1,486,769 100.0% $1,113,973 100.0% $937,633100.0%
Tools and Components
The Tools and Components segment is comprised of the
Danaher Hand Tool Group (including Special Markets and
Professional Tools divisions), Matco Tools, Jacobs Chuck
Manufacturing Company, Iseli Company, Delta Consolidated
Industries, Jacobs Vehicle Equipment Company, Hennessy
Industries and the hardware and electrical apparatus lines of
Joslyn Manufacturing Company ("JMC"), which was acquired in
September, 1995. This segment is one of the largest domestic
producers and distributors of general purpose and specialty
mechanics' hand tools. Other products manufactured by these
companies include tool boxes and storage devices, diesel
engine retarders, wheel service equipment, drill chucks,
custom designed headed tools and components, hardware and
components for the power generation and transmission
industries, high quality precision socket screws, fasteners,
and high quality miniature precision parts.
1995 COMPARED TO 1994
Revenues in 1995 were 24% higher than 1994.
Acquisitions accounted for 17%, while price increases
provided 1% and higher shipment volumes provided 6%. Demand
for drill chucks and diesel engine retarders was particularly
strong in 1995. Operating profit growth exceeded the sales
improvement at 39%, reflecting continued process improvements
in the manufacturing operations. The acquired operations of
Delta, which were only reflected for one month in 1994
operations, and the hardware and electrical apparatus lines
of JMC provided lesser profit margins than the existing
business units, partially offsetting the performance
improvements.
1994 COMPARED TO 1993
Revenues in this segment increased 17% from 1993. Of
this increase, acquisitions accounted for 1%, and higher unit
volumes of shipments accounted for 16%, as average pricing
was relatively unchanged. Sales levels were benefited by
particularly strong demand for consumer mechanics hand tools
and drill chucks. Operating margins increased to 10% from
8% in 1993. This reflects principally the impact of
continued manufacturing process improvements, particularly
within the hand tool manufacturing plants, and the effect of
increased volume.
Process/Environmental Controls
The Process/Environmental Controls segment is comprised
of the Veeder-Root Company, Danaher Controls,
Partlow/Anderson Instrument, Gulton Industries-Graphic
Instruments, West Instruments, Ltd., Qualitrol Corporation,
A.L. Hyde Company, Hengstler, and the controls product line
business units of Joslyn Corporation, which was acquired in
September, 1995. These companies produce and sell
underground storage tank leak detection systems and
temperature, level and position sensing devices, power
switches and controls, communication line products, power
protection products, liquid flow measuring devices and
electronic and mechanical counting and controlling devices.
These products are distributed by the Company's sales
personnel and independent representatives to original
equipment manufacturers, distributors and other end users.
1995 COMPARED TO 1994
Revenues in 1995 were 58% higher than in 1994 in this
segment. Business acquisitions in the segment contributed
52% of the increase. Of the remaining increase, higher unit
volumes contributed 5% and increased average pricing provided
1%. Demand for underground storage tank monitoring equipment
remained strong. Operating margins decreased from 18.6% to
16.8%, entirely due to the impact of the Hengstler and Joslyn
acquisitions. Base business showed a modest increase in
operating margin. The Hengstler acquisition has
significantly increased market position in Europe for the
counter and encoder product lines.
1994 COMPARED TO 1993
Revenues in this segment in 1994 increased 24% from
1993. The full year effect of business acquisitions made in
June, 1993 within this segment contributed 14% of this
increase. The balance of the increase was caused by higher
unit volumes of 8% and price increases averaging 2%. Demand
was very strong in the North American market, particularly
for the leak detector sensor line. In addition, demand
continued to strengthen in overseas markets. Operating
profit increased 32% from 1993, reflecting the higher volume
levels and the benefit of plant realignment and cost
reductions.
Discontinued Operations
In December, 1995, the Company signed an agreement to
sell its Fayette Tubular Products subsidiary. As the Company
no longer operates in the Transportation business segment,
Fayette's operation is shown as a discontinued operation.
Fayette's sales decreased 11% in 1995 due to lower North
American automobile and light truck production levels.
Profitability decreased 73% due mainly to lower volume levels
and unprofitable operations of a newly formed European
subsidiary. In 1994, sales increased 27% and profit
increased 63% due to strong demand from the automobile
manufacturers. The Fayette disposition was completed in
January, 1996, and a gain of approximately $80 million will
be recognized in the first quarter of 1996.
Gross Profit
Gross profit, as a percentage of sales, in 1995 was
30.1%, a 1.2 percentage point increase compared to the 28.9%
achieved in 1994. Productivity improvements, combined with
increased fixed cost leverage, resulted in margin
improvement. A shift in product mix associated with the
acquisitions also increased the gross profit margin.
Gross profit margin in 1994 was 28.9%, a 1.3 percentage
point improvement compared to 1993. Productivity
improvements were achieved in all business segments and
increased volume improved fixed cost leverage. A shift in
mix to the higher margin products of the
Process/Environmental Controls business segment also
contributed to the improvement.
Operating Expenses
Selling, general and administrative expenses for 1995 as
a percentage of sales were approximately 0.2 percentage
points higher than the 1994 level. This reflects higher cost
ratios in the businesses acquired.
In 1994, selling, general and administrative expenses
were 17.7% of sales, a decrease of .6 percentage points from
1993 levels. Total expenses increased 15%, substantially
less than the 19% increase in total revenues. This reflects
continued streamlining and cost reduction action as well as
the fixed nature of certain costs.
Interest Costs and Financing Transactions
On December 15, 1992, the Company received the proceeds
from a $100 million privately placed debt financing. The
notes have a final maturity on December 15, 1999, an average
life of approximately 5.5 years, and an average interest cost
of 7.3%. In April 1993, the Company received an additional
$30 million from a private placement which matures in April
2003 and has an interest cost of 6.99% per annum. These
proceeds were used to reduce borrowing under the revolving
credit facility.
The Company's revolving credit facility provides for
senior financing of $250 million for general corporate
purposes. The interest rates for borrowing under the
facility float with base rates.
The Company's financing requirements in these years were
satisfied by the financing discussed above and through
borrowings under uncommitted lines. Interest expense in 1995
was 125% higher than in 1994, due to higher average borrowing
levels caused primarily by the acquisitions made in the
fourth quarter of 1994 and the third quarter of 1995.
Interest expense in 1994 was 40% less than in 1993, due to
lower average borrowing levels.
Income Taxes
The effective tax rate decreased 1.4 percentage points
in 1995 to 38.9% of pre-tax income and 0.9 percentage points
in 1994 to 40.3% of pre-tax income. The decrease in 1995 is
principally due to a lower effective rate on certain foreign
earnings and the utilization of tax carryforwards in foreign
jurisdictions which were not previously recognized in earlier
years. The 1994 decrease relates principally to the lesser
impact of nondeductible goodwill amortization given higher
pre-tax income.
As of January 1, 1993, the Company adopted the liability
method of accounting for income taxes specified by SFAS No.
109. Its adoption had no impact on the results of operations
and resulted in certain reclassifications to the Company's
balance sheet. The one percent increase in the Corporate tax
rate enacted in 1993 did not materially impact deferred tax
balances reflected on the Company's balance sheet.
Inflation
The effect of inflation on the Company's operations has
been minimal in 1995, 1994, and 1993.
Liquidity and Capital Resources
In September, 1995, the Company acquired Joslyn
Corporation for approximately $245 million in cash
consideration. See Note 2 to Consolidated Financial
Statements for a further discussion of the impact of the
Joslyn acquisition. In December, 1995, the Company entered
into an agreement to sell its Fayette Tubular Products
subsidiary for $155 million in cash consideration. The
transaction closed in January, 1996, and the proceeds were
used to reduce short-term borrowings.
In 1994, the Company acquired Delta Consolidated
Industries, Hengstler GmbH, Armstrong Brothers Tool Company
and several smaller entities. Aggregate consideration for
these transactions was approximately $167 million including
approximately $31 million in common stock. These
acquisitions had no significant impact on the 1994 results of
operations as the larger acquisitions were not completed
until the fourth quarter. These entities have combined
annual sales levels of $220 million.
As discussed previously, $115 million of the Company's
debt is fixed at an average interest cost of 7.3%.
Substantially all remaining borrowings are short-term in
nature and float with referenced base rates. As of December
31, 1995, the Company has unutilized commitments under its
revolving credit facility of $250 million.
Cash flow has been strong in all periods from 1993
through 1995. Operations generated $174 million, $140
million, and $129 million in cash in 1995, 1994, and 1993,
respectively. The principal use of funds has been capital
expenditures of $59 million, $35 million, and $33 million in
1995, 1994 and 1993, respectively and cash paid for
acquisitions of $231 million, $136 million, and $54 million
in 1995, 1994, and 1993, respectively. The net result of the
above, combined with working capital changes was an increase
in debt of $98 million and $52 million in 1995 and 1994 and a
reduction in debt of $35 million in 1993.
The Company's funds provided from operations, as well as
the existing bank facility and available credit lines, should
provide sufficient available funds to meet the Company's
working capital, capital expenditure, dividend and debt
service requirements for the foreseeable future.
SHAREHOLDER'S INFORMATION
Auditors
Arthur Andersen LLP
Washington, D.C.
Shareholders' Information
Shareholder requests for information or assistance,
please write or call our corporate office.
Danaher Corporation
c/o Investor Relations
1250 24th Street, N.W. Suite 800
Washington, D.C. 20037
(202) 828-0850
Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges
Transfer Agent
Chemical Mellon Shareholder Services, LLC
Pittsburgh, Pennsylvania
Form 10-K
A copy of the Annual Report to the Securities and Exchange
Commission on Form 10-K may be obtained by writing to Danaher
Corporation.
MARKET PRICES OF COMMON STOCK
1995 1994
High Low High Low
First Quarter 29 7/8 24 1/4 20 1/4 18
Second Quarter 32 26 3/8 21 7/8 18 5/16
Third Quarter 34 3/8 30 1/4 23 1/2 20 15/16
Fourth Quarter 33 1/4 30 1/4 26 9/16 21 5/8
High and low per share data are as quoted on the
New York Stock Exchange.