SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[ X ] SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended June 26, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-8089
DANAHER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-1995548
(State of incorporation) (I.R.S. Employer
Identification number)
1250 24th Street, N.W., Suite 800
Washington, D.C. 20037
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
202-828-0850
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of common stock outstanding at July
16, 1998 was 117,170,527.
DANAHER CORPORATION
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
at June 26, 1998 and December 31, 1997 3
Consolidated Condensed Statements of
Earnings for the three months and
six months ended June 26, 1998 and
June 27, 1997 4
Consolidated Condensed Statements of
Cash Flow for the six months ended
June 26, 1998 and June 27, 1997 5
Notes to Consolidated Condensed
Financial Statements 6-7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7-8
PART II - OTHER INFORMATION
Item 6. (a) Exhibits: 8-9
(b) Reports on Form 8-K: None
DANAHER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(000's omitted)
June 26, December 31,
1998 1997
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 32,916 $ 33,317
Accounts receivable, net 359,589 322,600
Inventories:
Finished goods 114,807 82,451
Work in process 72,342 54,544
Raw material and supplies 100,164 72,421
Total inventories 287,313 209,416
Prepaid expenses and other
current assets 42,906 53,006
Total current assets 722,724 618,339
Property, plant and equipment, net
of accumulated depreciation of
$292,047 and $263,227,
respectively 382,907 335,223
Other assets 63,980 72,739
Excess of cost over net assets of
acquired companies, net 1,201,664 853,416
Total assets $2,371,275 $1,879,717
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
portion of long-term debt $ 162,310 $ 35,527
Accounts payable 158,144 135,190
Accrued expenses 454,009 353,518
Total current liabilities 774,463 524,235
Other liabilities 272,467 275,881
Long-term debt 323,399 162,720
Stockholders' equity:
Common stock-$.01 par value 1,287 1,287
Additional paid-in capital 339,231 335,465
Retained earnings 736,992 655,692
Cumulative foreign translation
adjustment and other (7,123) (6,122)
Treasury Stock (69,441) (69,441)
Total stockholders' equity 1,000,946 916,881
Total liabilities and
stockholders' equity $2,371,275 $1,879,717
See notes to consolidated condensed financial
statements.
DANAHER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(000's omitted except per share amounts)
(unaudited)
Quarter Ended Six Months Ended
June 26, June 27, June 26, June 27,
1998 1997 1998 1997
Net revenues $622,271 $502,789 $1,156,689 $969,230
Operating costs
and expenses:
Cost of sales 409,399 338,725 773,215 657,686
Selling, general
and administrative
expenses 123,213 92,266 222,872 178,532
Goodwill and other
amortization 7,597 5,856 13,493 11,613
Total operating
costs and
expenses 540,209 436,847 1,009,580 847,831
Operating profit 82,062 65,942 147,109 121,399
Interest expense,
net 6,970 3,236 10,156 7,100
Earnings from
continuing operations
before income taxes 75,092 62,706 136,953 114,299
Income taxes 28,910 24,448 52,727 44,506
Net Earnings $ 46,182 $ 38,258 $ 84,226 $ 69,793
Basic earnings
per share $ .39 $ .33 $ .72 $ .59
Average shares
outstanding 117,549 117,314 117,499 117,774
Diluted earnings
per share $ .38 $ .32 $ .69 $ .58
Average common stock and
equivalent shares
outstanding 121,295 120,058 121,257 120,407
See notes to consolidated condensed financial statements.
DANAHER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(000's omitted)
(unaudited)
Six Months Ended
June 26, June 27,
1998 1997
Cash flows from operating activities:
Net earnings from operations $ 84,226 $ 69,793
Noncash items, depreciation
and amortization 42,492 38,273
(Increase) decrease in accounts
receivable 11,391 (21,769)
(Increase) decrease in
inventories (29,992) (1,270)
Increase in accounts payable 6,527 10,654
Change in other assets and
liabilities 59,732 40,188
Total operating cash flows 174,376 135,869
Cash flows from investing activities:
Payments for additions to property,
plant, and equipment, net (34,191) (25,976)
Cash paid for acquisitions (375,441) (58,962)
Net cash provided by (used in)
investing activities (409,632) (84,938)
Cash flows from financing activities:
Acquisition of treasury stock -- (19,842)
Proceeds from issuance of
common stock 3,766 1,029
Borrowing (repayments) of debt 234,176 (20,605)
Payment of dividends (2,926) (2,938)
Net cash used in financing
activities 235,016 (42,356)
Effect of exchange rate changes
on cash (161) 29
Net change in cash and cash
equivalents (401) 8,604
Beginning balance of cash and cash
equivalents 33,317 26,444
Ending balance of cash and cash
equivalents $ 32,916 $ 35,048
Supplemental disclosures:
Cash interest payments $ 9,825 $ 6,693
Cash income tax payments $ 29,104 $ 44,266
See notes to consolidated condensed financial statements.
DANAHER CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. GENERAL
The consolidated condensed financial statements
included herein have been prepared by Danaher Corporation
(the Company) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the
disclosures are adequate to make the information
presented not misleading. The condensed financial
statements included herein should be read in conjunction
with the financial statements and the notes thereto
included in the Company's 1997 Annual Report on Form
10-K.
In the opinion of the registrant, the
accompanying financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company
at June 26, 1998 and December 31, 1997, its results of
operations for the three months and six months ended June
26, 1998 and June 27, 1997, and its cash flows for the
six months ended June 26, 1998 and June 27, 1997.
NOTE 2. MERGER WITH FLUKE CORPORATION
On July 7, 1998, Fluke Corporation was acquired
and merged into the Company. The Company issued
17,748,572 shares of common stock in exchange for all
outstanding Fluke shares. The transaction was a tax-free
reorganization and will be accounted for as a pooling-of-
interests. Accordingly, future financial statements will
be restated to reflect the combined companies. Sales
reported will increase $441 million in 1997 and $421
million in 1996. Reported net income will increase $21.8
million in 1997 and $26.4 million in 1996. 1997 reported
diluted earnings per share will be unchanged and 1996
reported diluted earnings per share from continuing
operations will increase from $1.07 to $1.13 per share.
Results for interim periods in 1998 have not yet been
determined on a combined company basis. It is
anticipated that third quarter results will include a
one-time after-tax charge of approximately $25 million to
$30 million to reflect the costs of the transaction and
integrating and implementing efficiencies associated with
information, operational and administrative systems.
Fluke is engaged in the manufacture and marketing of
compact, professional electronic test tools.
NOTE 3. ACQUISITION OF PACIFIC SCIENTIFIC COMPANY
The Company obtained control of Pacific
Scientific Company as of March 9, 1998. Total
consideration for Pacific Scientific was approximately
$420 million. The fair value of assets acquired was
approximately $520 million and approximately $100 million
of liabilities were assumed. The transaction is being
accounted for as a purchase.
The unaudited pro forma information for the
period set forth below give effect to the transaction as
if it had occurred at the beginning of each period. The
pro forma information is presented for information
purposes only and is not necessarily indicative of the
results of operations that actually would have been
achieved had the acquisition been consummated as of that
time (unaudited, 000's omitted):
Year Ended Six Months Ended Six Months Ended
December 31, June 27, June 26,
1997 1997 1998
Net Sales $2,361,428 $1,120,297 $1,228,271
Net Earnings 147,810 65,799 82,570
Earnings per Share $ 1.22 $ .55 $ .68
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the 1998 quarter were 24% higher than
the 1997 quarter. Net sales for the six-month period were 19%
higher than the corresponding period in 1997. This is due both
to continued increases in shipment volume in all segments and
the effect of acquisitions, with comparable companies
accounting for approximately 5% and 6% of sales growth in both
the quarter and six-month periods, respectively.
Gross profit margin in 1998, as a percentage of
sales, was approximately 34.2% for the quarter and 33.2% for
the six-month period, an increase of 1.6 and 1.1 percentage
points, respectively, from 1997 levels. The gross margin
increase was attributable to both the effect of the acquired
companies which provide a higher gross margin and productivity
improvements within the existing business units.
Selling, general and administrative expenses for the
1998 quarter and six-month period increased in total dollars
principally due to the higher volume levels. Selling, general
and administrative expenses as a percentage of sales was 19.8%
for the 1998 quarter and 19.3% for the six month period,
respectively. This represents an increase of 1.4 and 0.9
percentage points, respectively, from prior periods. This
reflects principally the impact of acquired businesses which
have higher cost percentages in this area.
Interest expense for the quarter and six-month
period was 115% and 43% higher than the 1997 levels,
respectively, due to higher average debt levels, reflecting
the funding of the Pacific Scientific acquisition, offset in
part by strong cash flow experienced in 1998 and 1997.
The effective tax rate for both the second quarter
and six-month periods is .5 percent points less in 1998 than
1997, reflecting lower tax rates associated with higher
expected earnings from foreign operations.
Liquidity and Capital Resources
Since December 31, 1997, the Company has experienced
increases in inventory and accounts payable. This is due to
the lower activity levels experienced in the last weeks of
1997 caused by the holiday season. Total debt increased to
$486 million at June 26, 1998, primarily as a result of the
acquisition of Pacific Scientific, offset in part by strong
operating cash flow.
A regular quarterly dividend of $.0125 per share was
declared, payable on July 31, 1998 to holders of record on
June 26, 1998.
The Company's cash provided from operations, as well
as credit facilities available, should provide sufficient
available funds to meet anticipated working capital
requirements, capital expenditures, acquisitions, dividends
and scheduled debt repayments.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:(10) Material Contracts:
(a) As Amended Employment Agreement between Danaher
Corporation and George M. Sherman dated as of
January 2, 1990
(b) As Amended Credit Agreement Dated As of
September 7, 1990. Among Danaher Corporation,
the Financial Institutions Listed Therein and
Bankers Trust Company as Agent.
(c) As Amended Agreement as of November 1, 1990
between Danaher Corporation, Easco Hand Tools,
Inc. and Sears, Roebuck and Co.
(d) As Amended Note Agreements as of November 1,
1992 and April 1, 1993 Between Danaher Corporation
and Lenders Referenced Therein.
Exhibits: (3)
(a) As Amended Articles of Incorporation
Exhibits: (27) Financial Data Schedules
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DANAHER CORPORATION:
Date: July 16, 1998 By: /s/ Patrick W. Allender
Patrick W. Allender
Chief Financial Officer
Date: July 16, 1998 By: /s/ C. Scott Brannan
C. Scott Brannan
Controller