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 March 29, 2002
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)
2099 Pennsylvania Avenue, NW
Washington, D.C. 20006
--------------------------------- ----------
(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 April 12, 2002 was
150,972,430.
DANAHER CORPORATION
-------------------
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
- ------ ----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
at March 29, 2002 and December 31, 2001 1
Consolidated Condensed Statements of
Earnings (Losses) for the three months ended
March 29, 2002 and March 30, 2001 2
Consolidated Condensed Statements of
Stockholders' Equity for the three months
ended March 29, 2002 3
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 29, 2002 and March 30, 2001 4
Notes to Consolidated Condensed
Financial Statements 5-10
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 11-15
PART II - OTHER INFORMATION
- -------
Item 6. Exhibits and Reports on Form 8-K 16
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(000's omitted)
March 29, December 31,
2002 2001
----------- -----------
(unaudited) (NOTE 1)
ASSETS
------
Current Assets:
Cash and equivalents $ 571,452 $ 706,559
Accounts receivable, net 721,209 585,318
Inventories:
Finished goods 163,913 131,316
Work in process 115,498 95,119
Raw material and supplies 207,665 181,801
----------- -----------
Total inventories 487,076 408,236
Prepaid expenses and other
current assets 154,131 174,502
----------- -----------
Total current assets 1,933,868 1,874,615
----------- -----------
Property, plant and equipment, net
of accumulated depreciation of
767,000 and 731,000 respectively 600,708 533,572
Other assets 73,547 119,639
Excess of cost over net assets of
acquired companies, net 2,825,389 2,292,657
----------- -----------
Total assets $ 5,433,512 $ 4,820,483
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable and current
portion of long-term debt $ 81,249 $ 72,356
Accounts payable 303,252 235,501
Accrued expenses 857,730 709,437
----------- -----------
Total current liabilities 1,242,231 1,017,294
----------- -----------
Other liabilities 469,838 455,270
Long-term debt 1,103,844 1,119,333
Stockholders' equity:
Common stock - $.01 par value 1,650 1,573
Additional paid-in capital 856,894 375,279
Retained earnings 1,827,436 1,921,470
Accumulated other comprehensive
income (68,381) (69,736)
----------- -----------
Total stockholders' equity 2,617,599 2,228,586
----------- -----------
Total liabilities and
stockholders' equity $ 5,433,512 $ 4,820,483
=========== ===========
See notes to consolidated condensed financial statements.
1
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (LOSSES)
------------------------------------------------------
(000's omitted except per share amounts)
(unaudited)
Three Months Ended
March 29, March 30,
2002 2001
---- ----
Net sales $ 1,004,207 $ 1,005,283
Cost of sales 628,184 628,398
Selling, general and
administrative expenses 236,053 223,862
Goodwill and other amortization 2,749 14,605
----------- -----------
Total operating expenses 866,986 866,865
----------- -----------
Operating profit 137,221 138,418
Interest expense, net 10,908 6,296
----------- -----------
Earnings before income taxes and
effect of accounting change 126,313 132,122
Income taxes 43,578 49,545
----------- -----------
Net earnings, before effect of
accounting change 82,735 82,577
----------- -----------
Effect of accounting change, net of tax (173,750) --
----------- -----------
Net earnings (loss) $ (91,015) $ 82,577
=========== ===========
Per-share amounts before accounting change
Basic earnings per share $ .57 $ .58
=========== ===========
Weighted average shares outstanding- Basic 145,173 142,874
=========== ===========
Diluted earnings per share $ .55 $ .56
=========== ===========
Weighted average shares outstanding- Diluted 153,942 150,466
=========== ===========
Per-share amounts after accounting change
Basic earnings (loss) per share $ (.63) $ .58
=========== ===========
Diluted earnings (loss) per share $ (.58) $ .56
=========== ===========
Per-share effect of accounting change- Basic $ (1.20) --
=========== ===========
Per-share effect of accounting change- Diluted $ (1.13) --
=========== ===========
See notes to consolidated condensed financial statements.
2
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
---------------------------------------------------------
(000's omitted)
(unaudited)
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive Comprehensive
Shares Amount Capital Earnings Income Income (Loss)
-------------------------------------------------------------------------------------
Balance, December 31, 2001 157,327 $ 1,573 $ 375,279 $ 1,921,470 $ (69,736)
Net loss for the period (91,015) (91,015)
Dividends declared -- -- -- (3,019) -- --
Sale of common stock 6,900 69 467,303
Common stock issued for
options exercised 735 8 14,312 -- -- --
Increase from translation
of foreign
financial statements -- -- -- -- 1,355 1,355
-------- ----------- ----------- ----------- ----------- -----------
Balance, March 29, 2002 164,962 $ 1,650 $ 856,894 $ 1,827,436 $ (68,381) $ (89,660)
======== =========== =========== =========== =========== ===========
See notes to consolidated condensed financial statements.
3
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(000's omitted)
(unaudited)
Three Months Ended
March 29, March 30,
2002 2001
--------- ---------
Cash flows from operating activities:
Net earnings (loss) $ (91,015) $ 82,577
Effect of change in accounting principle 173,750 --
--------- ---------
Net earnings, before effect of accounting change 82,735 82,577
Noncash items, depreciation and
amortization 32,777 43,632
Change in accounts receivable 53,234 39,127
Change in inventories 19,398 (11,953)
Change in accounts payable 12,720 (9,525)
Change in other assets and liabilities 62,383 29,836
--------- ---------
Total operating cash flows 263,247 173,694
--------- ---------
Cash flows from investing activities:
Payments for additions to property,
plant, and equipment, net (10,014) (21,104)
Cash paid for acquisitions, net (815,741) (75,980)
--------- ---------
Net cash generated in investing activities (825,755) (97,084)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 481,692 13,115
Dividends paid (3,019) (2,850)
Proceeds (repayment) of debt, net (49,027) 406,342
--------- ---------
Net cash generated in financing activities 429,646 416,607
--------- ---------
Effect of exchange rate changes on cash (2,245) (911)
--------- ---------
Net change in cash and equivalents (135,107) 492,306
Beginning balance of cash equivalents 706,559 176,924
--------- ---------
Ending balance of cash equivalents $ 571,452 $ 669,230
========= =========
Supplemental disclosures:
Cash interest payments $ 1,760 $ 1,569
========= =========
Cash income tax payments $ 10,578 $ 11,360
========= =========
See notes to consolidated condensed financial statements.
4
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 accounting principles generally accepted in the
United States 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 2001 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 March 29, 2002 and
December 31, 2001, its results of operations for the three months ended March
29, 2002, and March 30, 2001, and its cash flows for the three months ended
March 29, 2002 and March 30, 2001.
Total comprehensive income (loss) was ($89.7 million) and $83.5 million for
the 2002 and 2001 first quarters, respectively.
Total comprehensive income (loss) for all periods represents net income and
the change in cumulative foreign translation adjustment.
NOTE 2. SEGMENT INFORMATION
-------------------
Segment information is presented consistently with the basis described in
the 2001 Annual Report. There has been no material change in total assets or
liabilities by segment, except for 2002 acquisitions and divestitures (See Note
4) and the effect of the change in accounting principle (See Note 6). Segment
results for the 2002 and 2001 first quarters are shown below:
5
Sales Operating Profit
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Process/Environmental Controls $ 734,229 $ 724,170 $107,444 $115,770
Tools and Components 269,978 281,113 34,780 28,078
Other - - (5,003) (5,430)
---------- ---------- -------- --------
$1,004,207 $1,005,283 $137,221 $138,418
========== ========== ======== ========
NOTE 3. EARNINGS (LOSS) PER SHARE
Basic EPS is calculated by dividing earnings by the weighted average number
of common shares outstanding for the applicable period. Diluted EPS is
calculated after adjusting the numerator and the denominator of the basic EPS
calculation for the effect of all potential dilutive common shares outstanding
during the period. Information related to the calculation of earnings per share
before the effect of accounting change of common stock is summarized as follows:
Earnings Before Effect
of Accounting Change Shares Per Share
(Numerator) (Denominator) Amount
------------------------------------------
For the Three Months Ended
March 29, 2002
Basic EPS: $ 82,735 145,173 $.57
Adjustment for interest
on convertible debentures: 1,958 -
Incremental shares from
assumed exercise of
dilutive options: - 2,739
Incremental shares from
assumed conversion of the
convertible debenture: - 6,030
----------------------------
Diluted EPS: $ 84,693 153,942 $.55
========= ======= ====
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
------------------------------------------
For the Three Months Ended
March 30, 2001
Basic EPS: $ 82,577 142,874 $.58
Adjustment for interest on
convertible debentures 1,677 -
6
Incremental shares from
assumed exercise of
dilutive options: - 3,282
Incremental shares from
assumed conversion of the
convertible debenture - 4,310
----------------------------
Diluted EPS: $ 84,254 150,466 $.56
========== ======== ====
NOTE 4. ACQUISITIONS AND DIVESTITURES
-----------------------------
On February 25, 2002, the Company completed the divestiture of API Heat
Transfer, Inc. to an affiliate of Madison Capital Partners for approximately $66
million (including $56 million in cash and a note receivable in the principal
amount of $10 million), less certain liabilities of API Heat Transfer, Inc. paid
by Danaher at closing. API Heat Transfer, Inc. was part of the Company's
acquisition of American Precision Industries, Inc. and was recorded as an asset
held for sale as of the time of the acquisition. No gain or loss was recognized
at the time of sale.
On February 5, 2002, the Company closed the acquisition of Marconi Data
Systems, formerly known as Videojet Technologies, from Marconi plc for
approximately $400 million. Videojet Technologies, with approximately $300
million in revenues, is a worldwide leader in the market for non-contact product
marking equipment and consumables. Videojet Technologies is being included in
the Company's Process/Environmental Controls segment. The fair value of the
assets acquired was approximately $468.3 million, and approximately $79.3
million of liabilities were assumed and accrued. Based on the preliminary
allocation of purchase price, Videojet Technologies fair value of assets
acquired includes approximately $13 million of intangible assets with an average
life of 5 to 8 years, primarily patents and proprietary technologies, and $34
million of trade names, with the remainder of the intangible assets allocated to
goodwill.
On February 4, 2002, the Company closed the acquisition of Viridor
Instrumentation Limited from the Pennon Group plc for approximately $135
million in cash. Viridor, with $75 million in revenues, designs and manufactures
analytical instruments for clean water, wastewater, ultrapure water and other
fluids and materials. Viridor is being included in the Company's
Process/Environmental Controls segment. The fair value of the assets acquired
was approximately $152.2 million, and approximately $17.3 million of liabilities
were assumed and accrued. Based on the preliminary allocation of purchase price,
Viridor's fair value of assets acquired includes approximately $5 million of
intangible assets with an average life of 5 years, primarily software and
technology, and $12 million of trade names, with the remainder of intangible
assets allocated to goodwill.
7
On February 1, 2002, the Company closed the acquisition of Marconi Commerce
Systems, formerly known as Gilbarco, from Marconi plc for approximately $318
million in cash in addition to $7 million of assumed net debt. Gilbarco, with
approximately $500 million in revenues, is a global leader in retail automation
and environmental products and services. Gilbarco is being included in the
Company's Process/ Environmental Controls segment. The fair value of the assets
acquired was approximately $465.3 million, and approximately $140.3 million of
liabilities were assumed and accrued. Based on the preliminary allocation of
purchase price, Gilbarco's fair value of assets acquired included approximately
$6.5 million of intangible assets with an average life of 5 years, primarily
patents and software, and $21 million of trade names with the remainder of
intangible assets allocated to goodwill.
In addition, the Company acquired two small companies, additions to the
Process/Environmental Controls segment, for total consideration of $29.9
million. The fair value of the two smaller acquired companies was approximately
$39.6 million, and approximately $9.7 million of liabilities were assumed and
accrued.
On January 2, 2001, the Company acquired United Power Corporation. The
consideration was approximately $108 million. The fair value of the assets
acquired was approximately $117 million, and approximately $9 million of
liabilities were assumed. The transaction was accounted for as a purchase.
NOTE 5. RESTRUCTURING CHARGE
--------------------
In the fourth quarter of 2001, the Company recorded a restructuring charge
of $69.7 million ($43.5 million after tax, or $.29 per share). During the fourth
quarter of 2001, management determined that it would restructure certain of its
product lines, principally its drill chuck, power quality, and industrial
controls businesses due to deteriorating financial performance, and higher cost
excess facility capacity. Severance costs for the termination of approximately
1,100 employees approximates $49 million. Approximately $16 million of the
charge was to write-off assets associated with the closure of 16 facilities in
North America and Europe. The remainder of the charge of $5 million was for
other exit costs including lease termination costs. The majority of the cash
expenditures and cost savings related to the restructuring are expected to be
spent and realized in 2002. As of March 29, 2002, Danaher has spent $15.0
million ($11.7 million in the first quarter of 2002) in cash and written down
approximately $16 million in assets.
8
NOTE 6. NEW ACCOUNTING STANDARDS
------------------------
In June 2001, the Financial Accounting Standards Board issued statement of
Financial Accounting Standards No. 141, "Business Combinations." This statement
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, and establishes specific criteria
for the recognition of intangible assets separately from goodwill. The Company
has followed the requirements of this statement for business acquisitions made
after June 30, 2001.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
This statement requires that goodwill and intangible assets deemed to have an
indefinite life not be amortized. Instead of amortizing goodwill and intangible
assets deemed to have an indefinite life, the statement requires a test for
impairment to be performed annually, or immediately if conditions indicate that
such an impairment could exist. This statement is effective January 1, 2002. The
Company adopted the statement effective January 1, 2002. As a result of adopting
SFAS No. 142, the Company will no longer record goodwill amortization of
approximately $62 million per year. Using the fair value measurement
requirement, rather than the undiscounted cash flows approach, the Company has
recorded an impairment from the implementation of SFAS No. 142 as a change in
accounting principle in the first quarter of 2002. The evaluation of reporting
units on a fair value basis, adjusted for what the balance of goodwill would
have been if purchase accounting were applied at the date of impairment, as
required from the implementation of SFAS No. 142, indicates that an impairment
exists at the Company's power quality business unit. Based upon the evaluation,
impairment is approximately $200.0 million ($173.8 million after tax),
approximately 8.7% of intangible assets recorded as of December 31, 2001. In
accordance with SFAS No. 142, once impairment is determined at a reporting unit,
SFAS No. 142 requires that the amount of goodwill impairment be determined based
on what the balance of goodwill would have been if purchase accounting were
applied at the date of impairment. Under SFAS No. 142, if the carrying amount of
goodwill exceeds its fair value, an impairment loss must be recognized in an
amount equal to that excess. Once an impairment loss is recognized, the adjusted
carrying amount of goodwill will be its new accounting basis.
The following table provides the comparable effects of adoptions of SFAS
No. 142 for the quarters ended March 29, 2002 and 2001.
9
March 29 March 30
(in thousands, except per share data) 2002 2001
-----------------------
Reported net income, before change in
accounting principle $ 82,735 $ 82,577
Add back: goodwill amortization
(net of tax) -- 12,490
---------- ----------
Adjusted net income $ 82,735 $ 95,067
========== ==========
Basic Net Income Per Share, Before Change
In Accounting Principle
Reported net income, before change
in accounting principle $ .57 $ .58
Add back: goodwill amortization
(net of tax) -- .09
---------- ----------
Adjusted net income per basic share $ .57 $ .67
========== ==========
Diluted Net Income Per Share
Reported net income, before change
in accounting principle $ .55 $ .56
Add back: goodwill amortization
(net of tax) -- .08
---------- ----------
Adjusted net income per diluted share $ .55 $ .64
========== ==========
In June, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for fiscal years beginning
after June 15, 2002. The Company does not believe that implementation of this
SFAS will have material impact on its financial statements.
In October 2001, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-lived Assets," which supersedes SFAS No. 121. Though it retains the basic
requirements of SFAS No. 121 regarding when and how to measure an impairment
loss, SFAS No. 144 provides additional implementation guidance. SFAS No. 144
applies to long-lived assets to be held and used or to be disposed of, including
assets under capital leases of lessees; assets subject to operating leases of
lessors; and prepaid assets. SFAS No. 144 also expands the scope of a
discontinued operation to include a component of an entity, and eliminates the
current exemption to consolidation when control over a subsidiary is likely to
be temporary. This statement is effective for fiscal years beginning after
December 15, 2001. The Company's adoption of this SFAS has not had a material
impact on its financial statements.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- ------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Results of Operations
- ---------------------
Process/Environmental Controls
Sales in the first quarter of 2002 of $734.2 million were 1.4% higher than
the 2001 first quarter. The acquisition in February 2002 of Gilbarco, Videojet
Technologies and Viridor as well as the impact of several smaller 2001
acquisitions provided a 21% increase from the 2001 first quarter. The remainder
of the sales change was generated by a decrease in unit volume of 19% and a 1%
negative currency translation impact. Overall segment prices remained relatively
flat for the 2002 first quarter compared to the 2001 first quarter.
Core volume for the environmental and water quality businesses, 30% of
segment revenue, was flat in the quarter because of general economic weakness in
European markets. Core volume for the motion control businesses, representing
approximately 20% of segment revenues, decreased approximately 25% from 2001
levels, driven by recession-related weakness, reported in end markets is
particularly semiconductor and electronic assembly. The electronic test
businesses, with 18% of segment revenues, reported core volume declines at high
single digit rates, with the rate of decline somewhat higher at Fluke Networks,
particularly for cable and media test products. Power quality revenues declined
53% in the 2002 first quarter, primarily due to significant declines in data
center and web hosting end-user demand.
Operating profit margins for the segment decreased from 16.0% to 14.6%.
Approximately 1.5% of this decline resulted from the dilutive impact of lower
operating margins of the new businesses acquired during 2001 and 2002.
Additionally, margin declines from lower core volumes were largely offset by the
cessation of goodwill amortization as of January 1, 2002.
Tools and Components
Sales in the first quarter of 2002 of $270 million declined 4.0% from the
2001 first quarter. Continued declines in the Delta Industries product lines,
drill chuck lines, and the Joslyn hardware and electrical apparatus product
lines caused the majority of the total
11
segment sales decline. Hand Tool Group revenues, 63% of segment revenue, were
flat from 2001 to 2002. Price and currency impacts were negligible for this
segment. Operating profit margins increased from 10.0% to 12.9%. The unfavorable
impact of lower production volumes was more than offset by aggressive cost
reduction actions taken across all business units, and the cessation of goodwill
amortization as of January 1, 2002.
Gross Profit
Gross profit margin for the first quarter of 2002, as a percentage of
sales, was 37.4%, consistent with 2001 levels. Lower fixed cost absorption from
lower core sales volumes was offset by cost reduction programs implemented
across both business segments.
Operating Expenses
Selling, general and administrative expenses for the 2002 first quarter
were 5% higher than in 2001. Acquisitions completed since the first quarter of
last year added approximately $50 million to first quarter spending levels,
while existing businesses accounted for a 15% decline, as a result of cost
reduction measures. As a percentage of sales, these costs were 23.5% and 22.3%
in 2002 and 2001, respectively, reflecting the higher relative spending levels
of recently acquired businesses.
Interest Expense
Interest expense of $10.9 million in 2002 was $4.6 million higher than the
corresponding 2001 period. Average net debt levels (total debt less cash) were
significantly higher in 2002, reflecting borrowings undertaken to finance
acquisitions, and lower interest income rates on invested cash balances in 2002.
Income Taxes
The 2002 effective tax rate of 34.5% is 3.0% lower than the 2001 effective
rate, mainly due to the effect of adopting SFAS No. 142 and its resulting
non-amortization of goodwill and also to a higher proportion of foreign earnings
in 2002 compared to 2001.
Liquidity and Capital Resources
- -------------------------------
The 2002 first quarter operating cash flow grew 52% from 2001 levels.
Year-over-year core revenue declines contributed to decreases in accounts
receivable, and improved turnover in all other working capital components also
contributed to this increase. Net capital spending decreased $11.1 million from
the 2001 first quarter.
In January 2002, the Company entered into two interest rate swap
12
agreements for the term of the notes due 2008 having a notional principal amount
of $100 million whereby the effective interest rate on $100 million of the notes
will be the six month LIBOR rate plus approximately 0.425%. In accordance with
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, the Company accounts for these swap agreements as fair value hedges.
Since these instruments qualify as "effective" or "perfect" hedges, they will
have no impact on net income or stockholders' equity.
On March 8, 2002, the Company completed the issuance of 6.9 million shares
of the Company's common stock. Proceeds of the common stock issuance, net of the
related expenses were approximately $467 million. The Company intends to use and
has used the proceeds to repay approximately $230 million of short-term
borrowings incurred in the 2002 first quarter by the Company under uncommitted
lines of credit and intends to use the remainder for general corporate purposes,
including future acquisitions.
Total debt under the Company's borrowing facilities decreased to $1,185
million at March 29, 2002, compared to $1,192 million at December 31, 2001.
During the first quarter of 2001, the Company issued $830 million (value at
maturity) in zero-coupon convertible senior notes due 2021 known as Liquid Yield
Option Notes or LYONS. The net proceeds to the Company were approximately $505
million, of which approximately $100 million was and will be used to pay down
debt, and the balance was used for general corporate purposes, including
acquisitions. The LYONS are convertible into approximately 6.0 million common
shares of the Company, and carry a yield to maturity of 2.375%. The Company may
redeem all or a portion of the LYONs for cash at any time on or after January
22, 2004. Holders may require the Company to purchase all or a portion of the
notes for cash and/or Company common stock, at the Company's option, on January
22, 2004 or on January 22, 2011.
Net cash paid for acquisitions was $816 million for the 2002 first quarter.
On February 25, 2002, the Company completed the divestiture of API Heat
Transfer, Inc. to an affiliate of Madison Capital Partners for approximately $66
million (including $56 million in cash and a note receivable in the principal
amount of $10 million), less certain liabilities of API Heat Transfer, Inc. paid
by Danaher at closing. On February 5, 2002, the Company acquired Marconi Data
Systems, formerly known as Videojet Technologies, from Marconi plc for
approximately $400 million. On February 4, 2002, the Company acquired Viridor
Instrumentation Limited from the Pennon Group plc for approximately $135
million. On February 1, 2002, the Company acquired Marconi Commerce Systems,
formerly known as Gilbarco, from Marconi plc for approximately $318 million in
cash in addition to $7 million of assumed net debt. In addition, the Company
acquired two small companies for a total cash consideration of approximately $30
million.
13
On January 2, 2001, the Company acquired United Power Corporation for
approximately $108 million in cash. The Company also disposed of two small
product lines during the quarter, yielding cash proceeds of approximately $32
million. There was no material gain or loss recognized on the sale of these
product lines.
The Company declared a regular quarterly dividend of $0.02 per share
payable on April 30, 2002, to holders of record on March 29, 2002.
Operating cash flow is an important source of liquidity for the Company.
The Company attempts to maximize the cash flow from our operating businesses and
attempts to keep the working capital employed in the business to the minimum
level required for efficient operations. A decrease in demand for the Company's
products would reduce the availability of funds generated from operations.
The cash and cash equivalents of $571.5 million on the March 29, 2002
balance sheet were invested in highly liquid investment grade short term
instruments. Interest income of $2.0 million and $5.3 million was recognized in
the 2002 and 2001 first quarters. The Company's cash provided from operations,
as well as credit facilities available, should provide sufficient available
funds to meet normal working capital requirements, capital expenditures,
dividends, scheduled debt repayments, and to fund acquisitions, if applicable.
Accounting Policies
- -------------------
The Company believes the following critical accounting policies affect
management's more significant judgments and estimates used in the preparation of
its Consolidated Financial Statements. For a detailed discussion on the
application of these and other accounting policies, see Note 1 in the 2001
Consolidated Financial Statements.
Accounts receivables - The Company maintains allowances for doubtful accounts
for estimated losses resulting from the inability of the Company's customers to
make required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventory - The Company records inventory at the lower of cost or market. The
estimated market value is based on assumptions for future demand and related
pricing. If actual market conditions are less favorable than those projected by
management, reductions in the value of inventory may be required.
Acquired intangibles - The Company's business acquisitions typically result in
goodwill and other intangible assets, which effect the amount
14
of future period amortization expense and possible impairment expense that the
Company will incur. The determination of the value of such intangible assets
requires management to make estimates and assumptions that affect the Company's
Consolidated Financial Statements.
Long-lived assets - The Company periodically evaluates the net realizable value
of long-lived assets, including property, plant and equipment, relying on a
number of factors including operating results, budgets, economic projections and
anticipated future cash flows.
Purchase accounting - In connection with its acquisitions, management assesses
and formulates a plan related to the future integration of the acquired entity.
This process begins during the due diligence process and is concluded within
twelve months of the acquisition. The Company accrues estimates for certain
costs related to these acquisitions, in accordance with Emerging Issues Task
Force Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase
Business Combination."
NEW ACCOUNTING STANDARDS - SEE NOTE 6 OF ITEM 1
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Reports on Form 8-K:
(1) The Company filed a Current Report on Form 8-K dated
January 24, 2002 reporting on its fourth quarter and
2001 results.
(2) The Company filed a Current Report on Form 8-K dated
March 11, 2002 reporting on its first quarter 2002
common stock offering
(b) Exhibits: NONE
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SIGNATURES
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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: April 17, 2002 By: /s/ Patrick W. Allender
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Patrick W. Allender
Chief Financial Officer
Date: April 17, 2002 By: /s/ Christopher C. McMahon
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Christopher C. McMahon
Controller
17