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 September 25, 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: 1-08089
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 October 15, 1998 was
134,979,529.
DANAHER CORPORATION
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
at September 25, 1998 and December 31, 1997 . . . . . 1
Consolidated Condensed Statements of
Earnings for the three months and
nine months ended September 25, 1998 and
September 26, 1997 . . . . . . . . . . . . . .. . . . 2
Consolidated Condensed Statements of
Cash Flow for the nine months ended
September 25, 1998 and September 26, 1997 . . . . . 3
Notes to Consolidated Condensed
Financial Statements. . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 5
Liquidity and Capital Resources. . . . . . . . . . . 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . 7
DANAHER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(000's omitted)
September 25, December 31,
1998 1997
(NOTES 1 and 2)
ASSETS
Current Assets:
Cash and cash equivalents $ 39,286 $ 70,821
Accounts receivable, net 459,837 403,858
Inventories:
Finished goods 147,378 99,983
Work in process 83,011 67,056
Raw material and supplies 130,931 98,083
Total inventories 361,320 265,122
Prepaid expenses and other
current assets 69,182 92,252
Total current assets 929,625 832,053
Property, plant and equipment, net
of accumulated depreciation of
$477,622 and $380,999,
respectively 473,329 403,488
Other assets 71,885 84,982
Excess of cost over net assets of
acquired companies, net 1,296,346 863,352
Total assets $ 2,771,185 $2,183,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
portion of long-term debt $ 215,831 $ 35,910
Accounts payable 172,499 152,066
Accrued expenses 467,602 392,321
Total current liabilities 855,932 580,297
Other liabilities 298,088 301,250
Long-term debt 330,253 163,109
Stockholders' equity:
Common stock - $.01 par value 1,466 1,464
Additional paid-in capital 440,979 344,843
Retained earnings 853,615 806,171
Cumulative foreign translation
adjustment and other (9,148) (13,259)
Total stockholders' equity 1,286,912 1,139,219
Total liabilities and
stockholders' equity $ 2,771,185 $2,183,875
See notes to consolidated condensed financial statements.
DANAHER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(000's omitted except per share amounts)
(unaudited)
Quarter Ended Nine Months Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
1998 1997 1998 1997
Net revenues $724,839 $626,785 $2,107,507 $1,816,684
Operating costs and
expenses:
Cost of sales 440,852 393,970 1,321,929 1,164,729
Selling, general and
administrative expenses 177,206 143,831 498,640 419,164
Goodwill and other
amortization 7,654 5,900 21,923 17,513
Total operating costs
and expenses 625,712 543,701 1,842,492 1,601,406
Operating profit 99,127 83,084 265,015 215,278
Other (Note 2) 40,796 -- 40,796 --
Interest expense, net 7,360 2,910 17,540 10,071
Earnings before income
taxes 50,971 80,174 206,679 205,207
Income taxes 22,511 30,916 81,808 79,355
Net earnings $ 28,460 $ 49,258 $ 124,871 $ 125,852
Basic earnings per Share: $ .21 $ .37 $ .93 $ .94
Average shares
outstanding 135,369 133,818 134,514 134,029
Diluted earnings per
share $ .20 $ .36 $ .90 $ .91
Average common stock and
equivalent shares
outstanding 139,346 137,912 138,715 137,688
See notes to consolidated condensed financial statements.
DANAHER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(000's omitted)
(unaudited)
Nine Months Ended
Sept. 25, 1998 Sept. 26, 1997
Cash flows from operating activities:
Net earnings from operations $ 124,871 $ 125,852
Noncash items, depreciation
and amortization 79,327 67,846
(Increase) decrease in accounts
receivable 8,677 (50,343)
(Increase) decrease in inventories (27,328) (5,642)
Increase in accounts payable 1,609 18,841
Change in other assets and
liabilities 53,629 85,371
Total operating cash flows 240,785 241,925
Cash flows from investing activities:
Payments for additions to property,
plant and equipment, net (66,519) (53,819)
Cash paid for acquisitions (517,690) (147,238)
Net cash used in investing activities (584,209) (201,057)
Cash flow from financing activities:
Acquisition of treasury stock -- (19,842)
Proceeds from issuance of common stock 25,981 1,444
Borrowings (repayments) of debt 293,779 (16,343)
Payment of dividends (7,985) (8,854)
Net cash provided by (used in)
financing activities 311,775 (43,595)
Effect of exchange rate changes on cash 114 (807)
Net change in cash and cash equivalents (31,535) (3,534)
Beginning balance of cash and cash
equivalents 70,821 67,521
Ending balance of cash and cash
equivalents $ 39,286 $ 63,987
Supplemental disclosures:
Cash interest payments $ 17,227 $ 9,673
Cash income tax payments $ 79,724 $ 58,831
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, and the supplemental financial statements included
in the Company's Form 8-K dated July 9, 1998.
In the opinion of the registrant, the accompanying
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
financial position of the Company at September 25, 1998 and
December 31, 1997, its results of operations for the three
months and nine months ended September 25, 1998 and September
26, 1997, and its cash flows for the nine months ended September
25, 1998 and September 26, 1997. Comprehensive income exceeded
net income by approximately $2.4 million.
NOTE 2. MERGER WITH FLUKE CORPORATION
On July 9, 1998, Fluke Corporation was acquired by the
Company. The Company issued 17,785,122 shares of common stock
in exchange for all outstanding Fluke shares. The transaction
was a tax-free reorganization and was accounted for as a
pooling-of-interests. Accordingly, the financial statements as
presented have been restated to reflect the combined companies.
Sales reported have increased $334 million for the nine months
ended September 25, 1998 and $441 million in 1997. Fluke is
engaged in the manufacture and marketing of compact,
professional electronic test tools.
Third quarter results include a one-time charge of $40.8
million ($28.6 million after-tax or $0.21 per diluted share) to
reflect the costs of the transaction and integrating and
implementing efficiencies associated with information,
operational and administrative systems.
After consideration of the one-time charge above, net
income decreased $6.1 million for the nine months ended
September 25, 1998 and increased $21.8 million in 1997 due to
the Fluke acquisition.
NOTE 3. ACQUISITION OF PACIFIC SCIENTIFIC COMPANY
The Company obtained control of Pacific Scientific Company
as of March 9, 1998. Total consideration was approximately $420
million. The fair value of assets acquired was approximately
$520 million and approximately $100 million of liabilities were
assumed. The transaction was accounted for as a purchase. The
purchase price allocations have been completed on a preliminary
basis, subject to adjustment should new or additional facts
about the business become known.
The unaudited pro forma information for the periods set
forth below gives 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 Nine Months Nine Months
Ended Ended Ended
December 31, September 26, September 25,
1997 1997 1998
Net Sales $2,802,462 $2,044,428 $2,179,089
Net Earnings 169,610 120,177 123,215
Earnings per Share $ 1.23 $ .87 $ .89
NOTE 4. STOCK SPLIT
The common stock of the Company was split two-for-one to
holders of record as of May 5, 1998. All common stock and per
share amounts have been restated to reflect the stock split for
all periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net revenues for both the 1998 quarter and nine-month
period were 16% higher compared to the corresponding periods in
1997. Customer demand was higher in both business segments.
Acquisitions accounted for approximately 13% and 10% of sales
growth in the quarter and the nine-month period.
Gross profit margins for the 1998 third quarter and nine-
month period, as a percentage of sales, were approximately 39.2%
and 37.3%, respectively. For the quarter and nine-month period,
gross profit margins are up 2.0 and 1.4 percentage points
because the acquired companies provide a higher gross margin and
productivity improvements within the existing business units
were experienced.
Selling, general and administrative expenses for the 1998
third quarter and nine-month period as a percentage of sales
were approximately 1.5 and 0.6 percentage points higher than
the 1997 quarter and nine-month period, respectively. This
increase is principally due to the higher overall selling
expense structure of the acquired businesses.
Other reflects the costs of the transaction and integrating
and implementing efficiencies associated with information,
operational and administrative systems.
Interest expense for the 1998 quarter and nine-month period
was 153% and 74% higher than the 1997 levels due to higher
average debt levels, reflecting the funding of the Pacific
Scientific and other acquisitions, offset in part by strong
operating cash flows.
The effective tax rate is higher in 1998 due to the
nondeductible nature of certain one-time costs associated with
the acquisition of Fluke.
Liquidity and Capital Resources
Total debt increased $60 million from the second quarter to
$546 million. This reflects funding of acquisitions, offset in
part by strong operating cash flows. The Company anticipates
normal, seasonal reductions in working capital levels in the
fourth quarter.
The Company's regular quarterly dividend of $.015 per share
was declared for holders of record on September 25, 1998 payable
on October 30, 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
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits: (27) Financial Data Schedules
(b) Reports on Form 8-K: July 9, 1998.
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: October 15, 1998 By: /s/ Patrick W. Allender
Patrick W. Allender
Chief Financial Officer
Date: October 15, 1998 By: /s/ C. Scott Brannan
C. Scott Brannan
Controller