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 29, 2001
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 Ave., N.W., 12/th/ Fl.
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 July 16, 2001 was
143,259,968.
DANAHER CORPORATION
-------------------
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
at June 29, 2001 and December 31, 2000 1
Consolidated Condensed Statements of
Earnings for the three months and
six months ended June 29, 2001 and
June 30, 2000 2
Consolidated Condensed Statements of
Stockholders' Equity for the six
months ended June 29, 2001 3
Consolidated Condensed Statements of
Cash Flow for the six months ended
June 29, 2001 and June 30, 2000 4
Notes to Consolidated Condensed
Financial Statements 5-8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8-10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. (a) Exhibits: 10
Exhibit 6.1: Credit Agreement between
Bank of America and
Danaher Corporation Dated
June 28, 2001 11
(b) Reports on Form 8-K: None
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(000's omitted)
---------------
June 29, December 31,
2001 2000
---- ----
(unaudited) (Note 1)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 675,310 $ 176,924
Accounts receivable, net 635,295 704,214
Inventories:
Finished goods 159,199 152,509
Work in process 97,473 95,402
Raw material and supplies 198,661 212,699
---------- ----------
Total inventories 455,333 460,610
Prepaid expenses and other
current assets 123,174 132,558
---------- ----------
Total current assets 1,889,112 1,474,306
Property, plant and equipment, net
of accumulated depreciation of
$689,000 and $633,000,
respectively 545,448 575,531
Other assets 116,481 117,942
Excess of cost over net assets of
acquired companies, net 2,068,854 1,863,900
---------- ----------
Total assets $4,619,895 $4,031,679
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable and current
portion of long-term debt $ 72,982 $ 81,633
Accounts payable 270,735 262,095
Accrued expenses 629,684 674,812
---------- ----------
Total current liabilities 973,401 1,018,540
Other liabilities 425,783 357,249
Long-term debt 1,101,110 713,557
Stockholders' equity:
Common stock-$.01 par value 1,569 1,556
Additional paid-in capital 387,862 364,426
Retained earnings 1,806,588 1,635,481
Accumulated other comprehensive
income (76,418) (59,130)
---------- ----------
Total stockholders' equity 2,119,601 1,942,333
---------- ----------
Total liabilities and
stockholders' equity $4,619,895 $4,031,679
========== ==========
See notes to consolidated condensed financial statements.
1
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
---------------------------------------------
(000's omitted except per share amounts)
(unaudited)
Quarter Ended Six Months Ended
June 29, June 30, June 29, June 30,
2001 2000 2001 2000
---- ---- ---- ----
Net sales $956,641 $890,775 $1,961,924 $1,758,622
Operating costs and expenses:
Cost of sales 581,300 541,185 1,209,698 1,079,143
Selling, general and
administrative expenses 203,347 202,136 427,209 404,622
Goodwill and other
amortization 15,381 10,789 29,986 20,563
Total operating costs and -------- -------- ---------- ----------
expenses 800,028 754,110 1,666,893 1,504,328
-------- -------- ---------- ----------
Operating profit 156,613 136,665 295,031 254,294
Interest expense, net 5,845 5,591 12,141 7,804
-------- -------- ---------- ----------
Earnings before income taxes 150,768 131,074 282,890 246,490
Income taxes 56,538 49,807 106,083 93,666
-------- -------- ---------- ----------
Net Earnings $ 94,230 $ 81,267 $ 176,807 $ 152,824
======== ======== ========== ==========
Basic earnings per share $ .65 $ .57 $ 1.23 $ 1.07
======== ======== ========== ==========
Average shares outstanding 144,016 142,246 143,445 142,498
======== ======== ========== ==========
Diluted earnings per share $ .63 $ .56 $ 1.19 $ 1.05
======== ======== ========== ==========
Average common stock and
equivalent shares
outstanding 152,642 145,243 151,554 145,306
======== ======== ========== ==========
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
------------------------------------------------------------------------
Balance, December 31, 2000 155,650 $1,556 $364,426 $1,635,481 $(59,130) --
Net earnings for the period -- -- -- 176,807 -- $176,807
Dividends declared -- -- -- (5,700) -- --
Common stock issued for
options exercised 1,219 13 23,436 -- -- --
Decrease from translation
of foreign financial
statements -- -- -- -- (17,288) (17,288)
------- ------ -------- ---------- -------- --------
Balance, June 29, 2001 156,869 $1,569 $387,862 $1,806,588 $(76,418) $159,519
======= ====== ======== ========== ======== ========
See notes to consolidated condensed financial statements.
3
DANAHER CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
-------------------------------------------------------
(000's omitted)
(unaudited)
Six Months Ended
June 29, June 30,
2001 2000
---- ----
Cash flows from operating activities:
Net earnings from operations $ 176,807 $ 152,824
Noncash items, depreciation
and amortization 86,117 69,847
Change in accounts receivable 52,015 27,553
Change in inventories 10,915 (48,587)
Change in accounts payable (6,365) (943)
Change in other assets and liabilities (8,236) 84,382
--------- --------
Total operating cash flows 311,253 285,076
--------- --------
Cash flows from investing activities:
Payments for additions to property,
plant, and equipment, net (39,418) (39,809)
Cash paid for acquisitions (193,578) (445,803)
--------- --------
Net cash used in
investing activities (232,996) (485,612)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 23,449 12,108
Proceeds from Borrowing of debt, net 403,072 199,070
Payment of dividends (5,700) (4,283)
Purchase of common stock -- (82,174)
--------- --------
Net cash provided by financing activities 420,821 124,721
--------- --------
Effect of exchange rate changes on cash (692) (753)
--------- --------
Net change in cash and cash equivalents 498,386 (76,568)
Beginning balance of cash and cash
equivalents 176,924 260,281
--------- --------
Ending balance of cash and cash
equivalents $ 675,310 $ 183,713
========= ========
Supplemental disclosures:
Cash interest payments $ 3,211 $ 7,118
========= ========
Cash income tax payments $ 15,992 $ 17,627
========= ========
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 2000 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 29, 2001 and December 31, 2000, its results of operations for the
three months and six months ended June 29, 2001 and June 30, 2000, and its
cash flows for the six months ended June 29, 2001 and June 30, 2000.
Total comprehensive income was as follows:
2001 2000
---- ----
(millions)
Quarter $ 76.0 $ 71.4
Six Months $159.5 $135.1
Total comprehensive income 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 2000 Annual Report. There has been no material change in total
assets or liabilities by segment. Segment results for 2001 are shown below:
Sales-Quarter Sales-Six Months
2001 2000 2001 2000
---- ---- ---- -----
Process/Environmental Controls $666,948 $550,277 $1,391,118 $1,070,725
5
Tool and Components 289,693 340,498 570,806 687,897
-------- -------- ---------- ----------
$956,641 $890,775 $1,961,924 $1,758,622
======== ======== ========== ==========
Op Profit-Quarter Op Profit-Six Months
2001 2000 2001 2000
---- ---- ---- ----
Process/Environmental Controls $117,356 $ 90,815 $ 233,126 $ 172,474
Tool and Components 43,342 50,550 71,420 90,770
Other (4,085) (4,700) (9,515) (8,950)
-------- -------- ---------- ----------
$156,613 $136,665 $ 295,031 $ 254,294
======== ======== ========== ==========
NOTE 3. EARNINGS 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
of common stock is summarized as follows:
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
---------------------------------------
For the Three Months Ended
June 29, 2001
Basic EPS: $94,230 144,016 $.65
Adjustment for interest
on convertible debentures: 1,691 -
Incremental shares from
assumed exercise of
dilutive options: - 2,595
Incremental shares from
assumed conversion of the
convertible debenture: - 6,031
-------------------------
Diluted EPS: $95,921 152,642 $.63
============ ======= ====
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
---------------------------------------
For the Three Months Ended
June 30, 2000
Basic EPS: $81,267 142,246 $.57
Incremental shares from
assumed exercise of
dilutive options: - 2,997
--------------------------
6
Diluted EPS: $81,267 145,243 $.56
========= ======= ====
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
---------------------------------------
For the Six Months Ended
June 29, 2001
Basic EPS: $176,807 143,445 $1.23
Adjustment for interest
on convertible debentures: 3,368 -
Incremental shares from
assumed exercise of
dilutive options: - 2,938
Incremental shares from
assumed conversion of the
convertible debenture: - 5,171
-------- -------
Diluted EPS: $180,175 151,554 $1.19
======== ======= =====
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
---------------------------------------
For the Six Months Ended
June 30, 2000
Basic EPS: $152,824 142,498 $1.07
Incremental shares from
assumed exercise of
dilutive options: - 2,808
-------- -------
Diluted EPS: $152,824 145,306 $1.05
======== ======= =====
NOTE 4. ACQUISITIONS
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 $118 million, and
approximately $10 million of liabilities were assumed. In the second
quarter of 2001, the Company acquired several small companies for total
consideration of approximately $118 million. All acquisitions have been
accounted for as purchases.
On July 3, 2000, the motion control businesses of Warner Electric
Company were acquired and merged into the Company. Total consideration was
approximately $147 million. The fair value of the
7
assets acquired was approximately $185 million and approximately $38
million of liabilities were assumed. The transaction is being accounted for
as a purchase.
On June 20, 2000, Kollmorgen Corporation was acquired and merged
into the Company. Total consideration was approximately $363 million,
including the assumption of approximately $96 million of debt. The fair
value of the assets acquired was approximately $537 million and
approximately $174 million of liabilities were assumed. The transaction is
being accounted for as a purchase.
On March 27, 2000, American Precision Industries was acquired and
merged into the Company. Total consideration was approximately $246
million, including assumption of approximately $60 million of debt.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
---------------------
Net sales for the 2001 second quarter were 7.4% higher than the
2000 quarter. Acquisitions accounted for 13% of this increase, offsetting a
core volume revenue decline of 4.5% and negative currency effects of 1%.
Sales declines in the Company's engine retarder, hand tool, drill chuck,
and power quality product lines accounted for the majority of the total
sales shortfall. Net sales for the six-month period were 11.6% higher than
the corresponding period in 2000. Acquisitions accounted for 16% of the
increase, core volume showed a 3.5% decrease, and negative currency effects
caused a 1% decrease. Weakness in the engine retarder and hand tool product
lines have caused the majority of the sales decline.
Gross profit margin in 2001, as a percentage of sales, was
approximately 39.2% for the quarter and 38.3% for the six-month period.
Margins for the quarter were flat compared to last year, and fell 0.3
points for the six month period. Decreases in gross margin are attributable
to the addition of lower gross margin product lines from the 2000 and 2001
acquisitions, and lower shipment volumes. These declines have been
partially offset by productivity improvements and manufacturing overhead
cost reductions implemented in both business segments.
Selling, general and administrative expenses for the 2001 second
quarter increased $1.2 million versus the 2000 second quarter. Expenses
added from the 2000 and 2001 acquisitions were almost entirely offset by
overhead cost reductions and reductions in variable costs in existing
businesses across both segments. Selling, general and administrative
expenses as a percentage of sales was 21.3% for the 2001 quarter and 21.8%
for the six month
8
period. This represents a decrease of 1.4 and 1.2 percentage points,
respectively, from prior periods. This reflects principally cost reduction
efforts across both business segments.
Interest expense for the quarter was 4.5% higher than the 2000
second quarter. Average net debt levels were higher during 2001, reflecting
borrowings undertaken to finance acquisitions. For the six-month period,
interest expense was $4.3 million higher than in 2000, also reflective of
higher net debt levels.
The effective tax rate of 37.5% for the second quarter and the
six-month period in 2001, .5 percentage points lower than the respective
periods in the prior year, is mainly due to a higher proportion of foreign
earnings in 2001 compared to 2000.
On June 30, 2001, the Financial Accounting Standards Board
approved Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets." The new standard requires that goodwill will not be
amortized, but will be reviewed annually for impairment. With respect to
acquisitions completed prior to June 30, 2001, the Company intends to
implement the new standard in the 1st quarter of 2002 and is currently in
the process of assessing the impact of adoption.
Liquidity and Capital Resources
-------------------------------
The Company continues to experience strong operating cash flow,
driven primarily by reductions in working capital and a 16% increase in net
earnings for the six month period. Operating cash flow of $311.3 million
for the six month period reached record levels and was 9% over the same
period last year. Total debt increased to $1,174 million at June 29, 2001,
compared to $795.2 million at December 31, 2000. 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 used to pay down debt, and the balance
will be used for general corporate purposes, including potential future
acquisitions. The LYONS are convertible into approximately 6.0 million
common shares of the Company, and carry a yield to maturity of 2.375%.
Net cash paid for acquisitions was $118 million and $194 million,
respectively, for the quarter and six months ended June 30, respectively.
In the first quarter of 2001, the Company acquired United Power Corporation
for a cash price of approximately $108 million. The Company also disposed
of two small product lines during the first quarter of 2001, yielding cash
proceeds of approximately $32 million. There was no material gain or loss
recognized on the sale of these product lines. In the second quarter of
2001, the Company acquired several smaller companies for an aggregate cash
price of $118 million.
In the first quarter of 2000, the Company repurchased $82 million
of the Company's common stock and acquired American Precision Industries,
Inc. for a cash price of approximately $246 million including assumption of
debt, or $19.25 per share. In the second quarter of 2000, the Company
acquired Kollmorgen
9
Corporation for a cash price of approximately $363 million including the
assumption of debt, or $23 per share.
On June 28, 2000, the Company replaced its $250 million bank
credit facility with a new $500 million credit facility. The new facility
provides funds for general corporate purposes and has a five year term.
There have been no borrowings under either facility during 2001.
A regular quarterly dividend of $.02 per share was declared,
payable on July 31, 2001 to holders of record on June 29, 2001.
The cash and cash equivalents of $675 million on the June 29,
2001 balance sheet were invested in highly liquid investment grade short
term instruments. Interest income of $12.0 million was recognized in the
first six months of 2001. 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.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
At the Company's Annual Meeting of Shareholders on May 1, 2001, our stockholders
voted on the following proposals:
1. Proposal to elect two directors:
For Withheld
--- --------
Steven M. Rales 119,345,495 11,279,334
Alan G. Spoon 129,517,587 1,107,242
2. Proposal to approve the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending December 31, 2001:
For 129,978,307
Against 251,189
Abstain 405,983
3. Proposal to amend the Company's 1998 Stock Option Plan to increase the
aggregate number of shares that may be issued pursuant to the exercise of
stock options to 22,500,000 shares:
For 113,981,105
Against 5,402,011
Abstain 1,232,409
Broker non-vote 10,019,954
4. Proposal to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of capital stock of the Company to a total of
600,000,000 shares:
For 76,374,792
Against 43,637,919
Abstain 599,217
Broker non-vote 10,023,551
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits:
Exhibit 6.1: Credit Agreement between Bank of America and Danaher
Corporation Dated June 28, 2001
(b) Reports on Form 8-K: None
10
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 18, 2001 By: /s/ Patrick W. Allender
------------- -----------------------
Patrick W. Allender
Chief Financial Officer
Date: July 18, 2001 By: /s/ Christopher C. McMahon
------------- --------------------------
Christopher C. McMahon
Vice President and Controller
11