SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES 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 (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: 202-828-0850
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Exchanges
Title of each class on which registered
Common Stock $.01 par Value New York Stock Exchange, Inc.
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 19, 1999, the number of shares of common stock outstanding was
135.3 million and were held by approximately 3,000 holders. The aggregate
market value of common shares held by non-affiliates of the Registrant on
such date was approximately $4.3 billion, based upon the closing price of
the Company's common shares as quoted on the New York Stock Exchange
composite tape on such date.
EXHIBIT INDEX APPEARS ON PAGE 13
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part II and Part IV incorporate certain information by
reference from the registrant's Annual Report to Shareholders
for the year ended December 31, 1998. With the exception of
the pages of the Annual Report to Shareholders specifically
incorporated herein by reference, the Annual Report to
Shareholders is not deemed to be filed as part of this Form
10-K.
Part III incorporates certain information by reference from
the registrant's proxy statement for its 1999 annual meeting
of stockholders. With the exception of the pages of the 1999
Proxy Statement specifically incorporated herein by
reference, the 1998 Proxy Statement is not deemed to be filed
as part of this Form 10-K.
Certain information included or incorporated by reference in
this document may be deemed to be "forward looking
statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, that
address activities, events or developments that the Company
intends, expects, projects, believes or anticipates will or
may occur in the future are forward looking statements. Such
statements are characterized by terminology such as
"believe," "anticipate," "should," "intend," "plan," "will,"
"expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions. These statements are based on
assumptions and assessments made by the Company management in
light of its experience and its perception of historical
trends, current conditions, expected future developments and
other factors it believes to be appropriate. These forward
looking statements are subject to a number of risks and
uncertainties, including but not limited to continuation of
the Company's longstanding relationship with major customers,
the Company's ability to integrate acquired businesses into
its operations and realize planned synergies, the extent to
which acquired businesses are able to meet the Company's
expectations and operate profitably, changes in regulations
(particularly environmental regulations) which could affect
demand for products in the Process/Environmental Controls
segment and unanticipated developments that could occur with
respect to contingencies such as environmental matters and
litigation. In addition, the Company is subject to risks and
uncertainties that affect the manufacturing sector generally
including, but not limited to, economic, competitive,
governmental and technological factors affecting the
Company's operations, markets, products, services and prices.
Any such forward looking statements are not guarantees of
future performances and actual results, developments and
business decisions may differ from those envisaged by such
forward looking statements. The Company disclaims any duty
to update any forward looking statements, all of which are
expressly qualified by the foregoing.
ITEM 1. BUSINESS
The Company conducts its operations through two business
segments: Process/Environmental Controls and Tools and
Components.
Process/Environmental Controls
The Process/Environmental Controls segment is comprised
of the Fluke Corporation ("Fluke"), Veeder-Root Company
("Veeder-Root"), Danaher Controls, Partlow/West, Anderson
Instruments, West Instruments, QualiTROL Corporation, A.L.
Hyde Company, Hengstler, McCrometer, the controls product
line business units of Joslyn Corporation and Pacific
Scientific Company, Namco Controls, Dolan-Jenner, M&M
Precision Systems, Communications Technology Corporation,
Gems Sensors and Dr. Bruno Lange GmbH. These companies
produce and sell compact, professional electronic test tools,
underground storage tank leak detection systems and motion,
position, speed, temperature, level and position instruments
and sensing devices, power switches and controls,
communication line products, power protection products,
liquid flow and quality measuring devices, quality assurance
products and systems, safety 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.
The Company's strategy in the Process/Environmental
Controls segment is to concentrate on the rapid expansion of
its environmental controls product line, including the
Veeder-Root storage tank leak detection systems business.
The Company believes that Veeder-Root is the premier
manufacturer of state-of-the-art tank measuring and leak
detection systems for underground fuel storage tanks and,
accordingly, is uniquely positioned to respond to the
increased demand for these products.
The Company is also expanding its other offerings in the
environmental controls product line to encompass applications
related to markets other than petroleum storage and to
address nonregulatory business requirements. Offerings
include analytical instruments for air and water quality
monitoring. This expansion program includes both internally
developed new product offerings as well as selective product
line acquisitions.
Fluke is engaged in the design, manufacture and
marketing of compact, professional electronic test tools.
Fluke's principal products are portable instruments that
measure voltage, current, power quality, frequency,
temperature, pressure and other key functional parameters of
electronic equipment. Fluke distributes its products in over
100 countries, serving two major markets: industrial tools
and networks.
In its instruments product line, the Company's strategy
is to continue enhancing its global controls and instrument
position by both new product development and complementary
acquisitions. Danaher's instrument companies have
significant synergies in both product offerings and channels
of distribution. The Company's plan is to leverage these
synergies in product design, engineering and manufacturing,
and product marketing.
M&M Precision Systems provides both quality assurance
products and systems which enhance both quality and
manufacturing effectiveness as well as motion products which
are generally components of other devices.
Other business lines within this segment include
extruded thermoplastic mill shapes and custom molded plastic
products.
In March, 1998, the Company acquired Pacific Scientific
Company. Pacific Scientific has two major business segments:
(i) Electrical Equipment and (ii) Safety Equipment. Nearly
half of the company's sales consists of electric motors,
drives and controls. These electric motors and controls are
sold primarily to original equipment manufacturers who
incorporate them into a wide variety of products. Pacific
Scientific motors are used in factory automation, medical,
printing, plastic extrusion and molding, paper converting,
vending, textile, aerospace, fitness and many other types of
equipment. Safety equipment includes mainly fire detection
and suppression equipment, crew restraints, flight control
and pyrotechnic devices. Safety equipment is sold mainly in
the aviation and aerospace industry. The company also
provides worldwide sales, service and repair of its products
for airlines and other users of safety equipment. Operating
results from Pacific Scientific have been included with the
Company's results, beginning with the first quarter of 1998.
The raw materials utilized by companies in this segment
are stock items, principally metals and plastic, electrical
and electronic components. These materials are readily
available from a number of sources in sufficient quantities.
Tools and Components
The Tools and Components segment is comprised of the
Danaher Hand Tool Group (including Special Markets,
Professional Tool Division and Asian Tool Division), Matco
Tools ("Matco"), Jacobs Chuck Manufacturing Company
("Jacobs"), Delta Consolidated Industries, Jacobs Vehicle
Systems Company, Hennessy Industries and the hardware and
electrical apparatus lines of Joslyn Manufacturing Company
(JMC). This segment is one of the largest domestic producers
and distributors of general purpose mechanics' hand tools and
automotive specialty 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.
The Company's business strategy in this segment is
focused on increasing sales to existing customers, broadening
channels of distribution, developing new products, geographic
expansion and achieving production efficiencies and enhanced
quality and customer service through "Just-In-Time" and
related manufacturing techniques.
Danaher Tool Group (DTG) is one of the largest domestic
producers of general purpose mechanics' hand tools (primarily
ratchets, sockets and wrenches) and specialized automotive
service tools for the professional and "do-it-yourself"
markets. DTG has been the principal manufacturer of Sears,
Roebuck and Co.'s Craftsman line of mechanics' hand tools
for over 50 years. Approximately 80% of the over 100 million
pieces sold to Sears annually are sold in tool sets that
include from three to 900 pieces. Net sales to Sears were
approximately 10% of total Company sales in 1998.
DTG's Special Markets Group sells to Sears under a five
year evergreen agreement, that requires Sears to purchase a
significant portion of its annual requirements for its
private-label Craftsman mechanics' hand tool line from DTG,
subject to certain conditions.
For over 30 years, DTG has also been a primary supplier
of specialized automotive service tools to NAPA, which has
approximately 6,500 outlets at present. In addition, DTG has
been the designated supplier of general purpose mechanics'
hand tools to NAPA since 1983. DTG specialized automotive
service tools are also sold under the K-D Tools brand, its
industrial tools and products are also sold under the
Armstrong and Allen brand names, and fastener products
under the Holo-Krome name are sold to independent
distributors and other customers in the "do-it-yourself,"
professional automotive, commercial and industrial markets.
Professional mechanics' tools are distributed by Matco
which has approximately 1,300 independent mobile distributors
who sell primarily to individual professional mechanics.
Matco is one of the leading suppliers in this market.
The Company believes Jacobs is the market leader in the
drill chuck business with its highly respected and well
recognized brand name.
The Company believes Delta is the market leader in boxes
and other storage containers serving the vehicle aftermarket
and manufactures and markets containers serving numerous
specialty areas.
Wheel service equipment is manufactured under the
Coats , Bada and Ammco brand names. Products include tire
changers, wheel balancers, wheel weights and brake service
equipment. Wheel service equipment is sold primarily to
wholesale distributors and national accounts. These markets
are served by the Company's sales personnel.
Diesel engine retarders are manufactured at Jacobs
Vehicle Systems Company. The "Jake Brake " technology was
developed by Jacobs Vehicle and represents the leading brand
of engine retarders. The product is sold by Jacobs' sales
personnel to original equipment manufacturers and aftermarket
distributors.
JMC manufactures a wide variety of products used in the
construction and maintenance of electric power, telephone and
cable television systems. Its products range from
specialized fasteners to sophisticated castings and forgings.
JMC also manufactures surge protection devices for the
electric power utility industry.
The major raw materials used by this segment, including
high quality steel, are available from a variety of sources
in sufficient quantities.
Patents, Licenses, etc.
The Company has patents of its own and has acquired
licenses under patents of others. The Company does not
consider that its business, as a whole, is dependent on any
single patent, group of patents, trademark or franchise. The
Company does, however, offer many patented products and is
periodically engaged in litigation concerning patents and
licenses.
Seasonal Nature of Business
As a whole, the Company's businesses are not subject to
material seasonal fluctuations.
Backlog
The Company's products are manufactured primarily in
advance of order and either shipped or assembled from stock.
Backlogs are not significant as sales are often dependent on
orders requiring immediate shipment from inventory.
Employee Relations
At December 31, 1998, the Company employed approximately
18,000 persons. Of these, approximately 2,300 were
hourly-rated unionized employees. The Company considers its
labor relations to be good.
Research and Development
The Company's research and development expenditures were
$111 million for 1998, $88 million for 1997 and $77 million
for 1996.
Environmental and Safety Regulations
Certain of the Company's operations are subject to
federal, state and local environmental laws and regulations
which impose limitations on the discharge of pollutants into
the air and water and establish standards for treatment,
storage and disposal of solid and hazardous wastes. The
Company believes that it is in substantial compliance with
applicable environmental laws and regulations.
JMC previously operated wood treating facilities that
chemically preserved utility poles, pilings and railroad
ties. All such treating operations were discontinued or sold
prior to 1982. These facilities used wood preservatives that
included creosote, pentachlorophenol and chromium-arsenic-
copper. While preservatives were handled in accordance with
then existing law, environmental law now imposes retroactive
liability, in some circumstances, on persons who owned or
operated wood-treating sites. JMC is remediating some of its
former sites and will remediate other sites in the future.
The Company has made a provision for environmental
remediation; however, there can be no assurance that
estimates of environmental liabilities will not change.
In addition to environmental compliance costs, the
Company may incur costs related to alleged environmental
damage associated with past or current waste disposal
practices or other hazardous materials handling practices.
For example, generators of hazardous substances found in
disposal sites at which environmental problems are alleged to
exist, as well as the owners of those sites and certain other
classes of persons, are subject to claims brought by state
and federal regulatory agencies pursuant to statutory
authority. The Company believes that its liability, if any,
for past or current waste handling practices will not have a
material adverse effect on its results of operation,
financial condition and cash flow.
The Company must also comply with various federal, state
and local safety regulations in connection with its
operations. The Company's compliance with these regulations
has had no material adverse effect on its financial
condition.
Major Customers
The Company has a customer in the tools segment, Sears,
Roebuck and Co. ("Sears"), which accounted for 10% of
consolidated sales in 1998. Although the relationship with
Sears is long-standing, the Company believes the loss or
material reduction of this business could have a material
adverse effect on its operations.
ITEM 2. PROPERTIES
The Company occupies over 5 million square feet of
manufacturing, distribution, service and office space at
various domestic and foreign locations. The principal
properties are listed below and are constructed of concrete,
brick, cement, cinderblock or some combination of these
materials. The Company believes that its plants have
adequate productive capacity and are suitably used for the
manufacture of its products and that its warehouses,
distribution centers and sales offices are suitably located
and utilized for the marketing of its products and services.
Location Principal Use Owned/Leased
.............................................................
....
Process/Environmental Controls
Altoona, PA Manufacturing Owned
Elizabethtown, NC Manufacturing Owned
Market Harborough, England Manufacturing Leased
Sao Paulo, Brazil Manufacturing Owned
New Hartford & Fairport, NY Manufacturing Owned
Gurnee, IL Manufacturing Leased
Grenloch, NJ Manufacturing Owned
Brighton, England Manufacturing Leased
Aldingen, Germany Manufacturing Owned
Aldingen, Germany (2) Manufacturing Leased
Wehingen, Germany (2) Manufacturing Leased
Eatontown, NJ Distribution Leased
Broxbourne, England Distribution Leased
Cleveland, OH (3) Manufacturing Owned
Goleta, CA Manufacturing Owned
Lachine, Quebec Manufacturing Leased
Lancaster, SC Manufacturing Owned
Paso Robles, CA Manufacturing Leased
San Jose, CA Manufacturing Owned
Hemet, CA Manufacturing Owned
Madison, AL Manufacturing Leased
Etobicoke, Canada Manufacturing Leased
Highland Heights, OH Manufacturing Owned
Herzhorn, Germany Manufacturing Owned
West Carollton, OH Manufacturing Owned
Loffingen, Germany Manufacturing Owned
Tamworth, England Manufacturing Leased
Basingstoke, England Manufacturing Owned
Baretswil, Switzerland Manufacturing Owned
Plainville, CT Manufacturing Owned
Everett, WA Manufacturing Owned
Einhoven, Netherlands Manufacturing Leased
Chandler, AZ Manufacturing Leased
Duarte, CA Manufacturing Leased
Yorba Linda, CA Manufacturing Leased
Rockford, IL Manufacturing Leased
Grants Pass, OR Manufacturing Owned
Wilmington, MA Manufacturing Leased
Kazmarek, Slovakia Manufacturing Leased
Weymouth, MA Manufacturing Owned
Tools and Components
Springdale, AK Manufacturing Owned
Springfield, MA Manufacturing Owned
Gastonia, NC Manufacturing Leased
Fayetteville, AK (2) Manufacturing Owned
Baltimore, MD Distribution Leased
Brampton, Ontario Distribution Leased
Lakewood, NY Manufacturing Owned
Nashville, TN Distribution Owned
Stow, OH Distribution Owned
West Hartford, CT Manufacturing Owned
Terryville, CT Manufacturing Owned
Walworth, WI Manufacturing Owned
Dundee, Scotland Manufacturing Owned
Sheffield, England Manufacturing Owned
Clemson, SC Manufacturing Owned
Jonesboro, AK Manufacturing Owned
Raleigh, NC Manufacturing Leased
Chicago, IL (3) Manufacturing Owned
Bloomfield, CT Manufacturing Owned
LaVergne, TN Manufacturing Owned
Bowling Green, KY Manufacturing Owned
Suzhou, China Manufacturing Owned
Shanghai, China (3) Manufacturing Owned
Taichung, Taiwan Manufacturing Leased
Dallas, TX Manufacturing Leased
Atlanta, GA Manufacturing Owned
In addition to the facilities listed, the Company owns
or leases various facilities including offices or properties
in Washington, District of Columbia; Simsbury, Connecticut;
as well as facilities in Uppermill, Livingston, Gloucester
and Richmond, Great Britain; Melbourne and Sydney, Australia;
Nagoya, Osaka and Tokyo, Japan; Toronto, Canada; Paris, Bron,
Toulouse, Bordeaux, Tours and Selestat, France; and
Stuttgart, Germany.
ITEM 3. LEGAL PROCEEDINGS
A former subsidiary of the Company is engaged in
litigation in several states with respect to product
liability. The principal case, Patton, et al v. Chicago
Pneumatic Tool Company, was filed in United States District
Court in Jackson Co., MS in 1989. There are other related
cases. The Company sold the subsidiary in 1987. Under the
terms of the sale agreement, the Company agreed to indemnify
the buyer of the subsidiary for product liability related to
tools manufactured by the subsidiary prior to June 4, 1987.
The cases involve approximately 3,000 plaintiffs, in state
and federal courts. All other major U.S. air tool
manufacturers are also defendants. The gravamen of these
complaints is that the defendants' air tools, when used in
different types of manufacturing environments over extended
periods of time, were defective in design and caused various
physical injuries. The plaintiffs seek compensatory and
punitive damages. The Company's maximum indemnification
obligation under the contract is approximately $85,000,000.
The Company has accepted an agreement in principle to settle
all claims. Completion of this settlement agreement will not
result in a material adverse effect on the Company's results
of operations or financial condition.
JMC is a defendant in a class action tort suit, Henry L.
Johnson, et. al. v. Lincoln Creosote Company, Inc., et. al.,
filed in the 26th Judicial District Court of the State of
Louisiana, in Bossier Parish, Louisiana. The suit alleges
exposure to chemicals and property devaluation resulting from
wood treating operations previously conducted at a Louisiana
site. Both the size of the class and the damages are
uncertain. The Company has tendered the defense of the suit
to its insurance carrier. JMC has reached agreement with its
insurance carrier which fixes its liability for this matter
to a stated amount which will not have a material adverse
effect on the Company's results of operations or financial
condition.
In addition to the litigation noted above, the Company
and its subsidiaries are from time to time subject to
ordinary routine litigation incidental to their business.
The Company believes that the results of the above noted
litigation and other pending legal proceedings would not have
a materially adverse effect on the Company's financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
No matters were submitted to a vote of security holders
during the fourth quarter of 1998.
PART II
ITEMS 5 THROUGH 8.
The information required under Items 5 through 8 is
included in the Registrant's Annual Report to its
Shareholders for the year ended December 31, 1998, and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
ITEMS 10 THROUGH 13.
The information required under Items 10 through 13 is
included in the Registrant's Proxy Statement for its 1999
annual meeting, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
a) Document List
1. Financial Statements
Response to this portion of Item 14 is submitted per
the Index to Financial Statement Schedules on page 12
of this report.
2. Supplementary Data and Financial Statement
Schedules Response to this portion of Item 14 is
submitted per the Index to Financial Statement Schedules
on page 12 of this report.
b) Reports on Form 8-K filed in the fourth quarter of
1998.
NONE
c) An Index of Exhibits is on page 13 of this report.
<PAGE>
DANAHER CORPORATION
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND
FINANCIAL STATEMENT SCHEDULES
Page Number in:
Annual Report
Form 10K To Shareholders
Annual Report:
Report of Independent Public
Accountants on Schedule 15
Financial Statements:
Consolidated Statements of
Earnings, year ended December 31,
1998, 1997, and 1996 18
Consolidated Balance Sheets,
December 31, 1998 and 1997 19
Consolidated Statements of
Cash Flows, years ended
December 31, 1998, 1997, and 1996 20
Consolidated Statements of
Stockholders' Equity, years
ended December 31, 1998,
1997, and 1996 21
Notes to Consolidated
Financial Statements 22
Supplemental Data:
Selected Financial Data 12
Market Prices of Common Stock 31
Schedules:
II - Valuation and Qualifying Accounts 16
Schedules other than those listed above have been
omitted from this Annual Report because they are not
required, are not applicable or the required information is
included in the financial statements or the notes thereto.
<PAGE>
Exhibits:
(3) Articles of Incorporation and By-Laws.
(a) The Articles of In corporation of Incorporated by
Danaher Reference to Exh 3
of 6/26/98 Form 10-Q
(b) The By-Laws of Danaher. Incorporated by
Reference to Exh 3
of 6/26/98 Form 10-Q
(10) Material Contracts:
(a) Employment Agreement between Danaher Incorporated by
Corporation and George M. Sherman dated Reference to
as of January 2, 1990 Exh 10(a) of
6/26/98 Form 10-Q
(b) Credit Agreement Dated As of Incorporated by
September 7, 1990. Among Danaher Corporation, Reference to
the Financial Institutions Listed Therein, Exh 10(b) of
and Bankers Trust Company as Agent. 6/26/98 Form 10-Q
(c) Agreement as of November 1, 1990 Incorporated by
betweenDanaher Corporation, Reference to
Easco Hand Tools, Inc. Exh 10(c)of
and Sears, Roebuck and Co. 6/26/98 Form 10-Q
(d) Note Agreement as of November 1, 1992 Incorporated by
Between Danaher Corporation and Lenders Reference to
Referenced Therein. Exh 10(d) of
6/26/98 Form 10-Q
(e) Note Agreement as of April 1, 1993 Incorporated by
Between Danaher Corporation and Lenders Reference to
Referenced Therein Exh 10(d) of
. 6/26/9 8 Form 10-Q
(f) Danaher Corporation 1997 Stock Option Incorporated by
Plan Reference to
Exh A of Proxy
statement dated
March 30, 1998
(g) Employment Agreement between Danaher Incorporated by
Corporation and John P. Watson, dated Reference to
January 17, 1991 Form 8-K
dated July 9, 1998
(h) Indenture Agreement as of October 28, Incorporated by
1998 Between Danaher Corporation and The First Reference to
National Bank of Chicago, as Trustee Form S-3
(File 333-63591)
(13) Annual Report to Securityholders
(21) Subsidiaries of Registrant.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedules
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ GEORGE M. SHERMAN
George M. Sherman
President and Chief
Executive Officer
Date: March 19, 1999
/s/ GEORGE M. SHERMAN President and Chief Executive
George M. Sherman Officer
/s/ STEVEN M. RALES Chairman of the Board
Steven M. Rales
/s/ MITCHELL P. RALES Chairman of the Executive
Mitchell P. Rales Committee
/s/ WALTER G. LOHR, JR. Director
Walter G. Lohr, Jr.
/s/ DONALD J. EHRLICH Director
Donald J. Ehrlich
/s/ MORTIMER M. CAPLIN Director
Mortimer M. Caplin
/s/ A. EMMET STEPHENSON, JR. Director
A. Emmet Stephenson, Jr.
/s/ PATRICK W. ALLENDER Senior Vice President-Chief
Patrick W. Allender Financial Officer and Secretary
/s/ C. SCOTT BRANNAN Vice President and Controller
C. Scott Brannan
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON THE FINANCIAL STATEMENT SCHEDULES
To Danaher Corporation:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements included in the
Danaher Corporation and Subsidiaries' Annual Report to
Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 27, 1999. Our
audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in the
index are the responsibility of the Company's management and
are presented for the purpose of complying with the
Securities and Exchange Commission's rules and are not a part
of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to
be set forth therein in relation to the financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 27, 1999
<PAGE>
DANAHER CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(000's omitted)
Additions
Write
Balance Charged Offs,
Classification at to Charged Write Balance
Beginning Costs to Down at End
of & other & of
Period Expenses Accounts Deductions Period
Year Ended December 31, 1998
Allowances deducted
from asset accounts:
Allowance for
doubtful accounts $19,000 $ 9,442 $ 2,698(a) $ 7,140 $24,000
Year Ended December 31, 1997
Allowances deducted
from asset accounts:
Allowance for
doubtful accounts:$16,000 $ 6,986 $ 510(a) $ 4,496 $19,000
Year Ended December 31, 1996
Allowances deducted
from asset accounts:
Allowance for
doubtful accounts:$14,000 $ 6,161 $ 507(a) $ 4,668 $16,000
Notes:(a) - Amounts related to businesses acquired, net of
amounts related to businesses disposed.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by
reference) in this Form 10-K, into the Company's previously
filed Registration Statement File No. 33-32402.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 22, 1999
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Danaher Corporation and Subsidiaries
Exhibit to 1996 Annual Report on Form 10K
(21) Subsidiaries of Registrant
STATE OR JURIS- DOING
DICTION OF BUSINESS
NO. CORPORATION INCORPORATION AS(DBA)
1 Danaher Corporation Delaware -
2 DHR Services Delaware -
3 DMG Plastics, Inc. Delaware -
4 FJ900 Inc. Delaware -
5 Armstrong Tools, Inc. Delaware -
6 Diversified Mortgage
Investors, Inc. Florida -
7 Utica Holding Company Delaware -
8 DH Holdings Corp. Delaware -
9 Easco Hand Tools Inc. Delaware Danaher Tool
Group
10 Hand Tool Design
Corporation Delaware -
11 KD Tools of Puerto
Rico, Inc. Delaware -
12 Beamco, Inc. Wisconsin -
13 Old Tide Corp. Califonia -
14 Dynapar Corporation Illinois Danaher
Controls
15 Encoders Incorporated Delaware -
16 KACO Gmbh Germany -
17 Namco Controls Gmbh Germany -
18 Piccadilly Precision Engineering Ltd. Ohio -
19 Spline Gauges Ltd. Delaware -
20 Hennessy Industries Inc. Delaware Hennessy/Ammco
21 Service Station Products
Company Delaware -
22 Hennessy Industries Canada Inc. Canada -
23 KD Tools of Canada Canada -
24 Ammco Tools Inc. Illinois Hennessy/Ammco
25 Wheel Service Equipment
Corporation Delaware
26 Jacobs Vehicle Systems, Inc. Delaware -
27 Diesal Engine Retarders, Inc. Delaware -
28 Jacobs Chuck Manufacturing
Company Delaware -
29 Jacobs Japan Inc. Delaware -
30 Power Tool Holders Incorporated Delaware -
31 Matco Tools Corporation New Jersey -
32 Chicago Pneumatic Tool Company
West Germany Delaware -
33 Chicago Pneumatic World Trade
Corp. Delaware -
34 Mechanics Custom Tools
Corporation Delaware -
35 NMTC, Inc. Delaware Matco Tools Corporation
36 Qualitrol Corporation New York -
37 Power Transformer Controls
Company Delaware -
38 Qualitrol Canada Canada -
39 Qualitrol GmbH Germany -
40 Hengstler GmbH i.G. Germany -
41 Hengstler Feinwerktechnik GmbH Germany -
42 Hengstler Japan Corp. Japan -
43 Hengstler Controle Numerique
SARL France -
44 SCI Hengstler France -
45 Hengstler Italia SRL Italy -
46 Hengstler Espana SA Spain -
47 Hengstler Canada Inc. Canada -
48 Hengstler Belgium SPRL Belgium -
49 Hengstler Nederland BV Netherlands -
50 Hengstler Tid och Passage AB Sweden -
51 Veeder-Root GmbH Germany -
52 The Partlow Corporation New York Partlow/
Anderson
53 Time & Temperature Controls
Corp. Delaware -
54 Anderson Instrument Company New York Partlow/
Anderson
55 Flow Measurement Corporation Delaware -
56 Western Pacific Industries Delaware Iseli Company
57 Swiss Precision Parts Corp. Delaware -
58 A.L. Hyde Company Delaware -
59 Extrusions Plastics, Inc. Delaware -
60 World Plastic Extruders, Inc. New York -
61 Holo-Krome Company Delaware Danaher Tool Group
62 The Allen Manufacturing Company Delaware Danaher Tool Group
63 Industrial Fasteners Inc. Delaware -
64 Holo-Krome Uniform Fasteners Inc. California -
65 Holo-Krome Australia Australia -
66 Quality Wire Inc. Delaware Danaher Tool Group
67 Veeder-Root Company Delaware -
68 Petroleum Industry Controls, Inc. Delaware -
69 Veeder-Root of N.C. Inc. Delaware Danaher Controls
70 Veeder-Root do Brazil Brazil -
71 Veeder-Root SARL France -
72 Launchchange Limited U.K. -
73 West Instruments Ltd. U.K. -
74 Veeder-Root Ltd. U.K. -
75 Veeder-Root Environmental
Systems Ltd. U.K. -
76 Danaher Canada Canada -
77 Gwendolene Holdings Ltd. U.K. -
78 Qualitrol Instruments Ltd. U.K. -
79 CGF Automation Ltd. U.K. -
80 Contents Measuring Systems
Limited U.K. -
81 Hengstler Industries Ltd. U.K. -
82 Hengstler Great Britain Ltd. U.K. -
83 Hengstler Flexitime Ltd. U.K. -
84 Hengstler Leasing Ltd. U.K. -
85 Jacobs Manufacturing Co. Ltd. U.K. -
86 Holo-Krome Ltd. U.K. -
87 Exidyne Instruments Technologies, Inc. Pennsylvania -
88 GID Acquisition Companu Delaware GID Instruments
89 Data Recorders Incorporated Delaware -
90 Middle Road Company Delaware -
91 CEI Acquisition Company Delaware Veeder-Root Company
92 Warrick Controls, Inc. Delaware -
93 Danaher Finance Company Delaware -
94 Normandy Court Company Delaware -
95 Houma Realty Company Delaware -
96 Commercial Avenue Company Delaware -
97 JS Technology, Inc. Delaware -
98 DCI Consolidated Industries,Inc. Delaware -
99 Delta Consolidated Industries,Inc. Arkansas -
100 Truck Storage Incorporated Delaware -
101 Hecon Industries Inc. New Jersey -
102 Hecon Properties New Jersey -
103 Joslyn Company, LLC Delaware -
104 Joslyn Manufacturing Co., LLC Delaware -
105 Joslyn Electronic Systems Corp., LLC Delaware -
106 Joslyn Hi-Voltage Corp., LLC Delaware -
107 Joslyn Power Products Corp., LLC Delaware -
108 Joslyn Research & Development
Corp. Delaware -
109 Joslyn Clark Controls, LLC Delaware -
110 Sunbank Family of Companies, Inc., LLC Delaware -
111 Joslyn Sunbank Corporation, LLC Delaware -
112 Air Dry Corporation of America, LLC Delaware -
113 Jennings Technology Corporation, LLC Delaware Joslyn Jennings Corp.
114 Jennings Land Company Delaware -
115 Cyberex, LLC Delaware -
116 Cyberex Limited U.K. -
117 Cyberex B.V. Netherlands -
118 Joslyn Foreign Sales Corp. Virgin Islands -
119 Joslyn Canada, Inc. Canada -
120 Joslyn Holding Company Delaware -
121 McCrometer, Inc. Delaware -
122 Kistler-Morse Corporation Delaware -
123 Acme-Cleveland Corp. Ohio -
124 AC Intermediate Co. Ohio -
125 ACMS Incorporated Ohio -
126 Acme-Cleveland Laser Systems Ohio -
127 Acme Communications Technology Systems Corp. Ohio -
128 Amtronx Inc. Ohio -
129 Ball Screws and Actuators Co., Inc. California -
130 Communications Technology Corp. California -
131 Communications Technology (Canada) Ltd. British Columbia -
132 Communications Technology Corp. Mexico, S.A. Mexico -
133 Fire Networks, Inc. Delaware -
134 Dolan-Jenner Industries, Inc. Massachusetts -
135 Dolan-Jenner Europe, B.V. Netherlands -
136 LSMT Corp. Michigan -
137 143420 Ontario. Inc. Ontario -
138 M & M de France, Inc. Ohio -
139 M & M Precision Systems Corp. Ohio -
140 Namco Controls Corp. Ohio -
141 Phoenix Microsystems, Inc. Alabama -
142 TxPort Inc. Delaware -
143 TxPort Data Inc. Canada -
144 Danaher Alberta Inc. Alberta -
145 American Sigma, Inc. New York -
146 Plastifab, Inc. Canada -
147 Sullivan Property Holding Company Delaware -
148 Cleveland Precision Systems Gmbh Germany -
DANAHER CORPORATION
1998 ANNUAL REPORT
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
(000's omitted except per share data)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Sales $2,910,038 $2,492,002 $2,233,193 $1,899,463 $1,486,680
Operating profit 366,838 301,0562 67,406 215,992 147,840
Earnings from continuing
operations 182,946* 176,606 154,357 128,289 86,404
Per share
Diluted 1.32* 1.28 1.13 0.95 0.65
Basic 1.36* 1.32 1.16 0.97 0.66
Discontinued operations -- -- 79,811 2,550 9,331
Per share
Diluted -- -- 0.59 0.02 0.07
Basic -- -- 0.60 0.02 0.07
Net earnings 182,946* 176,606 234,168 130,839 95,735
Earnings per share
Diluted 1.32* 1.28 1.72 0.96 0.72
Basic 1.36* 1.32 1.76 0.99 0.73
Dividends per share 0.07 0.09 0.08 0.07 0.06
Total assets 2,738,715 2,183,875 2,046,731 1,755,978 1,343,908
Total debt 472,557 199,019 239,927 294,547 204,441
</TABLE>
* Includes $28.6 million after-tax costs ($0.21 per share) from the merger
with Fluke Corporation
<PAGE>
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: Process/Environmental Controls and Tools and
Components. In its Process/Environmental Controls segment, the Company is a
leading producer of compact electronic test instruments, leak detection
sensors for underground fuel storage tanks and motion, position,
temperature, pressure, level, flow, water quality and power reliability and
quality control devices. In Tools and Components, the Company is the
principal manufacturer of Sears, Roebuck and Co.'s Craftsman line, National
Automotive Parts Association (NAPA ) 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, Delta storage containers and Coats and Ammco wheel service
equipment.
Presented below is a summary of sales by business segment (000's
omitted).
1998 1997 1996
Process/Environmental
Controls $1,615,529 55.5% $1,299,241 52.1% $1,129,750 50.6%
Tools and Components 1,294,509 44.5% 1,192,761 47.9% 1,103,443 49.4%
$2,910,038 100.0% $2,492,002 100.0% $2,233,193 100.0%
Process/Environmental Controls
The Process/Environmental Controls segment includes Fluke Corporation,
Veeder-Root Company, Danaher Controls, Partlow, Anderson Instruments, West
Instruments, Ltd., QualiTROL Corporation, A.L. Hyde Company, Hengstler,
American Sigma, the controls product line business units of Joslyn
Corporation and Pacific Scientific Company, Namco Controls, Dolan-Jenner,
M&M Precision Systems, Communications Technology Corporation, Current
Technology, Inc., Gems Sensors, Inc. and Dr. Bruno Lange GmbH. These
companies produce and sell compact electronic test instruments, underground
storage tank leak detection systems and temperature, level, motion and
position sensing devices, water/wastewater test and monitoring instruments,
power switches and controls, power protection products, aviation safety
products, liquid flow measuring devices, quality assurance products and
systems, 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.
1998 COMPARED TO 1997
Sales in 1998 were 24% higher than in 1997. The acquisitions of
Pacific Scientific Company and Dr. Lange GmbH, the full year effect of the
Gems Sensors acquisition in August, 1997 and several minor business
acquisitions and dispositions provided a 22% increase from 1997. The
remainder of the sales change was generated by an increase in unit volume of
2%, with prices essentially flat. Operating margins increased from 13.2% to
13.8%, due to higher sales of environmental products, cost reductions and
the elimination of Fluke's 1997 European restructuring activities, offset by
lower operating margins of businesses acquired in 1998.
1997 COMPARED TO 1996
Sales in 1997 were 15% higher than in 1996 for this segment. The
acquisitions of Gems Sensors and Current Technology in 1997, as well as the
full-year effect of the Acme-Cleveland acquisition in July, 1996,
contributed 9% of the increase. Of the remaining increase, higher unit
volume contributed 5% and increased average pricing provided 1%, while
foreign currency translation resulted in a 2% decrease. Operating margins
decreased from 13.6% to 13.2%, largely from restructuring activities at
Fluke's European operations.
Tools and Components
The Tools and Components segment is comprised of the Danaher Hand Tool
Group (including Special Markets, Asian Tools and Professional Tools
divisions), Matco Tools, Jacobs Chuck Manufacturing Company, Delta
Consolidated Industries, Jacobs Vehicle Systems, Hennessy Industries and the
hardware and electrical apparatus lines of Joslyn Manufacturing Company
("JMC"). 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.
1998 COMPARED TO 1997
Sales increased 8.5% from 1997 to 1998. Unit volume increases of 10%,
offset by price decreases of 1.5%, accounted for this increase. Operating
profit margins increased from 12.1% in 1997 to 12.3% in 1998, driven by the
higher sales levels and productivity gains. Demand levels were strong
across the consumer, professional and international hand tool lines. Sales
of diesel engine retarders were also strong in 1998.
1997 COMPARED TO 1996
Sales in 1997 were 8% higher than in 1996. An acquisition in the
first quarter of 1997 accounted for 3%, price increases provided less than
1% and higher shipment volume provided 5%. Demand for drill chucks and
diesel engine retarders was particularly strong in 1997. Operating margins
increased from 11.6% to 12.1%, reflecting increased fixed cost leverage as
well as continued process improvements in manufacturing operations.
Discontinued Operations
In January, 1996, the Company divested 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.
A gain of approximately $80 million was recognized in the first quarter of
1996.
Gross Profit
Gross profit margin in 1998 was 37.4%, a 1.5 percentage point
improvement compared to 1997. Productivity improvements were achieved in
all business segments. Higher volume levels and a shift in mix to the
higher gross margin products of the acquired companies in the
Process/Environmental Controls business segment contributed to the
improvement.
Gross profit, as a percentage of sales, in 1997 was 35.9%, a 1.0 point
decrease compared to the 36.9% achieved in 1996. The Fluke European
restructuring was the largest contributor to this decline. A shift in
product mix associated with the acquisitions also impacted gross profit.
Operating Expenses
In 1998, selling, general and administrative expenses were 24.8% of
sales, an increase of 1 percentage point from 1997 levels. This principally
reflects the higher operating expense levels of the businesses acquired in
1998.
Selling, general and administrative expenses for 1997 as a percentage
of sales were approximately 1.1 percentage points lower than the 1996 level.
This reflects improved fixed cost ratios associated with higher sales
levels.
Interest Costs and Financing Transactions
The Company's debt financing is composed of publicly issued 6% notes
due 2008, privately placed debt maturing in April, 2003 at an average
interest cost of 7.2%, uncommitted lines and a revolving credit facility
which provides for senior financing of $250 million for general corporate
purposes. The interest rates for borrowing under the facility float with
base rates. Interest expense in 1998 was $11.7 million higher than in 1997
as average borrowing levels increased due to acquisitions. Interest expense
in 1997 was 21% lower than in 1996 due to substantial cash flow generated
from operations.
Income Taxes
The 1998 effective rate of 39.2% is 0.6 percentage points higher than
in 1997. This increase results from the nondeductible nature of certain
expenses associated with the Company's merger with Fluke Corporation in
July, 1998. The 1997 effective tax rate of 38.6% is 0.2 percentage points
higher than in 1996, reflecting a greater impact of nondeductible
amortization resulting from acquisitions.
Inflation
The effect of inflation on the Company's operations has been minimal
in 1998, 1997, and 1996.
Readiness for Year 2000
The Company continues to monitor progress against its Year 2000
Readiness Plan, which is discussed in the Current Report dated July 9, 1998.
There have been no significant changes in the plan or cost estimates since
that report and progress to date has been in accordance with the timetables
described in the plan. The plan described therein includes assessment,
remediation, testing and contingency planning. The assessment phase is
essentially complete. Remediation and testing activities at the Company's
operating units are at various stages, with the majority of work completed
on critical systems. Relevant third parties, particularly key suppliers,
have been contacted to assess and monitor their Year 2000 readiness. In
addition, the Company has developed contingency plans to mitigate the impact
of any unsuccessful remediation or third party failures.
The Company believes that its overall exposure to Year 2000 impacts is
substantially reduced by the diversity of the Company's operations and
information systems. The incremental costs associated with the Year 2000
program have not been material to the Company's financial results and are
not expected to be significant in the future. However, there can be no
assurance that the Company's efforts or those of relevant suppliers and
other third parties will be successful or that any potential failure would
not have a material adverse effect on the Company's operating results or
financial condition.
European Monetary Union
On January 1, 1999, several member countries of the European Union
established fixed conversion rates between their existing currencies and
adopted the Euro as their new common legal currency. This Euro conversion
may affect cross-border competition and pricing strategies in the broader
European market. The new currency also impacts the Company's information
systems. In addition, final accounting, tax and governmental legal and
regulatory guidance have not been provided. Based on the current state of
information and the Company's current assessment, the Euro conversion is not
expected to have a material adverse effect on the Company's operating
results or financial condition.
Financial Instruments and Risk Management
The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates, which could impact its results of
operations and financial condition. The Company manages its exposure to
these risks through its normal operating and financing activities. There
were no material derivative instrument transactions during any of the
periods presented. The Company has generally accepted the exposure to
exchange rate movements relative to its investment in foreign operations
without using derivative financial instruments to manage this risk.
The fair value of the Company's fixed rate long-term debt is sensitive
to changes in interest rates. The value of this debt is subject to change
as a result of movements in interest rates. Sensitivity analysis is one
technique used to evaluate this potential impact. Based on a hypothetical
immediate 100 basis point increase in interest rates at December 31, 1998,
the market value of the Company's fixed rate long-term debt would be
impacted by a net decrease of $19 million. This methodology has certain
limitations, and these hypothetical gains or losses would not be reflected
in the Company's results of operations or financial conditions under current
accounting principles.
Recent Accounting Pronouncements
In June, 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes new accounting and reporting
standards for derivative financial instruments and for hedging activities.
This statement is not expected to have a material impact on the Company's
results of operations, financial position or cash flows.
In March, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." This statement provides
guidance on accounting for the costs of computer software developed or
obtained for internal use. The adoption of this statement is also not
expected to have a material impact on the Company's results of operations,
financial position or cash flows.
Liquidity and Capital Resources
The Company acquired Pacific Scientific Company for approximately $420
million in cash in March, 1998 and Acme-Cleveland Corporation for
approximately $200 million in July, 1996. See Note 2 to Consolidated
Financial Statements for a further discussion of the impact of acquisitions.
In January, 1996, the Company sold its Fayette Tubular Products subsidiary
for $155 million in cash consideration; the proceeds were used to reduce
short-term borrowings.
As discussed previously, $250 million of the Company's debt is fixed
at an average interest cost of 6%, and $71 million is fixed at an interest
rate of 7.2%. Substantially all remaining borrowings are short-term in
nature and float with referenced base rates. As of December 31, 1998, the
Company has unutilized commitments under its revolving credit facility of
$250 million.
Cash flow has been strong in all periods from 1996 through 1998.
Operations generated $331 million, $302 million and $254 million in cash in
1998, 1997 and 1996, respectively. The principal use of funds has been
capital expenditures of $90 million, $87 million and $64 million in 1998,
1997 and 1996, respectively, and net cash paid for acquisitions of $526
million, $147 million and $246 million in 1998, 1997 and 1996, respectively.
Cash flow for 1996 included the $155 million proceeds from the Fayette sale.
The net result of the above, combined with working capital changes, was an
increase in debt of $274 million in 1998, and decreases in debt of $41
million in 1997 and $55 million in 1996.
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. <PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of
Directors of Danaher Corporation:
We have audited the accompanying consolidated balance sheets of
Danaher Corporation (a Delaware corporation) and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred
to above present fairly, in all material respects, the financial position of
Danaher Corporation and subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 27, 1999
<PAGE>
DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
Year Ended December 31,
1998 1997 1996
Sales . . . . . . . . . . $2,910,038 $2,492,002 $2,233,193
Cost of sales . . . . . . . 1,821,084 1,598,431 1,409,693
Selling, general and
administrative expenses.. 722,116 592,515 556,094
Total operating expenses. . 2,543,200 2,190,946 1,965,787
Operating profit. . . . . . . 366,838 301,056 267,406
Other Expense . . . . . . . 40,796 -- --
Interest expense. . . . . . . 24,931 13,211 16,813
Earnings from continuing
operations before income taxes 301,111 287,845 250,593
Income taxes. . . . . . . . . 118,165 111,239 96,236
Earnings from continuing
operations . . . . . . . . . 182,946 176,606 154,357
Gain on sale of discontinued
operations, net of income
taxes of $0 . . . .. . . . -- -- 79,811
Net earnings. . . . . . . . $ 182,946 $ 176,606 $ 234,168
Basic earnings per share:
Continuing operations . . $1.36 $1.32 $1.16
Discontinued operations . . -- -- .60
Net earnings . . . . . . . $1.36 $1.32 $1.76
Average shares outstanding . . 134,745 133,999 132,950
Diluted earnings per share:
Continuing operations . . $1.32 $1.28 $1.13
Discontinued operations . . -- -- .59
Net earnings . . . . . . . $1.32 $1.28 $1.72
Average common stock and
common equivalent shares
outstanding. . .. . . . . . . 138,885 137,730 136,123
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
As of December 31,
ASSETS 1998 1997
Current assets:
Cash and equivalents. .. . . . . . . . . $ 41,923 $ 70,821
Trade accounts receivable, less allowance
for doubtful accounts of $24,000 and
$19,000.. . . . . . . . . . . . . . . . . 467,108 403,858
Inventories. . . . . . . . . . . . . . . . 323,486 265,122
Prepaid expenses and other. . . . . . . . . 54,387 92,252
Total current assets . . . . . . . . 886,904 832,053
Property, plant and equipment, net. . . . 471,025 403,488
Other assets . . . . . . . . . . . . . . 96,213 84,982
Excess of cost over net assets of acquired
companies, less accumulated amortization
of $159,000 and $129,000. . . .. . . . . . 1,284,573 863,352
$2,738,715 $2,183,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of debt . $ 59,639 $ 35,910
Trade accounts payable . . . . . . . . . . 158,596 152,066
Accrued expenses. .. . . . . . . . . . . . 470,470 392,321
Total current liabilities.. . . . . . 688,705 580,297
Other liabilities. . . . . . . . . . . . . 285,261 301,250
Long-term debt . . . . . . . . . . . . . . 412,918 163,109
Stockholders' equity:
Common stock, one cent par value; 300,000
shares authorized; 146,702 and 146,337
issued; 135,107 and 134,741 outstanding.. . 1,467 1,464
Additional paid-in capital. . . . . . . . . 374,412 344,843
Accumulated other comprehensive income .. . (2,703) (13,259)
Retained earnings. .. . . . . . . . . . . 978,655 806,171
Total stockholders' equity.. . . . . 1,351,831 1,139,219
$2,738,715 $2,183,875
The accompanying Notes to Consolidated Financial Statements are an integral
part of these balance sheets.
<PAGE>
DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Year Ended December 31,
1998 1997 1996
Cash flows from operating activities:
Earnings from continuing operations $182,946 $176,606 $154,357
Depreciation and amortization.. . . . 108,651 91,702 82,424
(Increase)decrease in accounts receivable. 3,393 (54,195) (18,230)
Decrease in inventories . . . . . . . 12,543 9,921 40,189
(Decrease)increase in accounts payables (13,625) 23,842 11,145
Change in other assets and liabilities. 37,430 54,455 15,918)
Total operating cash flows. . 331,338 302,331 253,967
Cash flows from investing activities:
Payments for additions to property,
plant and equipment, net . . . . . (90,265) (86,881) (63,981)
Disposition of businesses . . . . . 16,250 -- 155,000
Net cash paid for acquisitions. . . . (525,713) (147,238) (246,427)
Net cash used in investing activities (599,728) (234,119) (155,408)
Cash flows from financing activities:
Proceeds from issuance of common stock. 29,572 8,742 8,893
Dividends paid .. . . . . . . . . . . (10,462) (11,932) (11,215)
Borrowings (repayments) of debt. .. . 219,177 (40,916) (55,371)
Purchase of common stock . . . . . . . -- (19,909) (12,110)
Net cash provided by (used in)
financing activities. . .. . . . . . 238,287 (64,015) (69,803)
Effect of exchange rate changes on cash. 1,205 (897) (299)
Net change in cash and equivalents. . . (28,898) 3,300 28,457
Beginning balance of cash and equivalents. 70,821 67,521 39,064
Ending balance of cash and equivalents. $ 41,923 $ 70,821 $ 67,521
Supplemental disclosures:
Cash interest payments. . . . . . $ 24,558 $ 13,782 $ 17,458
Cash income tax payments . . . . . $ 66,640 $ 79,972 $ 91,584
Common stock issued for acquisitions $ -- $ -- $ 8,883
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<CAPTION>
Accumulated Other
Common Stock Additional Retained Comprehensive Comprehensive
Shares Amount Paid-in Capital Earnings Income Income
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 144,597 $1,446 $344,453 $420,089 $6,398
Net earnings for the year. 234,168 $234,168
Dividends declared. . . .. (11,510)
Common stock issued for
options exercised. . .. . 966 10 13,855
Purchase of common stock . (12,110)
Unrealized gain on securities
held. . . . . . . . . . . 4,000 4,000
Common stock issued for
acquisitions. . . . . . . 594 6 8,877
Decrease from translation of
foreign financial statements. (3,949) (3,949)
Balance, December 31, 1996 146,157 $1,462 $355,075 $642,747 $6,449 $234,219
Net earnings for the year. . 176,606 176,606
Dividends declared. . . . . (12,278)
Common stock issued for
options exercised. . . . . 180 2 8,742
Purchase of common stock . . (19,909)
Decrease from translation of
foreign financial statements. (17,408) (17,408)
Unrealized gain on securities
held . . . . . . . .. . . . . 1,700 1,700
Sale of securities held . . . (4,000) (3,500)
Other . . . . . . . . . . . . 935 (904)
Balance, December 31, 1997 146,337 $1,464 $344,843 $806,171 $(13,259) $157,398
Net earnings for the year. 182,946 182,946
Dividends declared. . . . (10,462)
Common stock issued for
options exercised. . . . 365 3 29,569
Sale of securities held . (1,700) (1,700)
Increase from translation of
foreign financial statements. 12,256 12,256
Balance, December 31, 1998 146,702 $1,467 $374,412 $978,655 $(2,703) $193,502
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
(1) Summary of Significant Accounting Policies:
Accounting Principles - The consolidated financial statements include
the accounts of the Company and its subsidiaries. The accounts of certain
of the Company's foreign subsidiaries are included on the basis of a fiscal
year ending November 30. This procedure was adopted to allow sufficient
time to include these companies in the consolidated financial statements.
All significant intercompany balances and transactions have been eliminated
upon consolidation. Preparation of these consolidated financial statements
necessarily includes the use of management's estimates.
Inventory Valuation - Inventories include material, labor and overhead
and are stated principally at the lower of cost or market using the last-in,
first-out method (LIFO).
Property, Plant and Equipment - Property, plant and equipment are
carried at cost. The provision for depreciation has been computed
principally by the straight-line method based on the estimated useful lives
(3 to 35 years) of the depreciable assets.
Other Assets - Other assets include principally deferred income taxes,
equity securities, noncurrent trade receivables and capitalized costs
associated with obtaining financings which are being amortized over the term
of the related debt. Available for sale equity securities have been shown
at their fair market value.
Fair Value of Financial Instruments - For cash and equivalents, the
carrying amount is a reasonable estimate of fair value. For long-term debt,
rates available for debt with similar terms and remaining maturities are
used to estimate the fair value of existing debt.
Excess of Cost Over Net Assets of Acquired Companies - This asset is
being amortized on a straight-line basis over forty years. $29,824,000,
$25,786,000 and $22,796,000 of amortization was charged to expense for the
years ended December 31, 1998, 1997 and 1996, respectively. When events and
circumstances so indicate, all long-term assets, including the Excess of
Cost Over Net Assets of Acquired Companies, are assessed for recoverability
based upon cash flow forecasts. Should an impairment exist, fair value
estimates would be determined based on the cash flow forecasts, discounted
at a market rate of interest.
Foreign Currency Translation - Exchange adjustments resulting from
foreign currency transactions are generally recognized in net earnings,
whereas adjustments resulting from the translation of financial statements
are reflected as a component of accumulated other comprehensive income
within stockholders' equity. Net foreign currency transaction gains or
losses are not material in any of the years presented.
Statements of Cash Flows - The Company considers all highly liquid
investments with a maturity of three months or less at date of purchase to
be cash equivalents.
Income Taxes - The Company provides income taxes for unremitted
earnings of foreign subsidiaries which are not considered permanently
reinvested in that operation.
Earnings Per Share - The computation of diluted earnings per share is
based on the weighted average number of common shares and common stock
equivalents outstanding during the year.
Discontinued Operations - In January, 1996, the Fayette Tubular
Products subsidiary was sold for approximately $155 million. A gain of
approximately $80 million was recognized in 1996.
Accumulated Other Comprehensive Income - Consists of the following as
of December 31:
1998 1997 1996
Cumulative foreign translation
adjustment . . . . . . . . . $ (2,703) $(14,959) $ 2,449
Unrealized gain on securities.. -- 1,700 4,000
$ (2,703) $(13,259) $ 6,449
(2) Acquisitions:
On July 9, 1998, Fluke Corporation was acquired and merged into 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. Fluke Corporation's year end was a 52/53-week fiscal
year ending on the last Friday in April. To combine with the Company, the
twelve month periods ending January 23, 1998 and January 24, 1997 for Fluke
have been utilized. Fluke is engaged in the manufacture and marketing of
compact, professional electronic test tools. Reflected in Other Expense is a
one-time charge of $40.8 million ($28.6 million after-tax or $.21 per diluted
share) to reflect the costs of the transaction and integrating and
implementing efficiencies associated with information, operational and
administrative systems. The majority of these costs are cash expenses and
have been incurred during 1998.
The Company acquired 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 is being accounted for as a
purchase.
The unaudited pro forma information for the period set forth below
gives effect to this transaction as if it had occurred at the beginning of
the period. The pro forma information is presented for informational
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 December 31,
1998 1997
Net Sales .. . . . . . . . . $2,981,620 $2,802,462
Net Earnings from
continuing operations . . . . . 181,290 169,610
Earnings per share from
continuing operations (diluted) $1.31 $1.23
In 1997, the Company acquired Gems Sensors and Current Technology and
several other entities. Aggregate consideration for these transactions was
approximately $147 million. The fair value of the assets acquired was
approximately $167 million and approximately $20 million of liabilities were
assumed in the acquisitions. The transactions have been accounted for as
purchases. These acquisitions had no significant impact on 1997 results of
operations. These entities have combined annual sales levels of
approximately $130 million.
The Company obtained control of Acme-Cleveland Corporation (Acme) as of
July 2, 1996. Total consideration for Acme was approximately $200 million.
The fair value of assets acquired was approximately $240 million, including
$140 million of excess cost over net assets acquired, and approximately $40
million of liabilities were assumed. The transaction was accounted for as a
purchase.
(3) Inventory:
The major classes of inventory are summarized as follows (000's
omitted):
December 31, 1998 December 31, 1997
Finished goods. . . $ 122,141 $ 99,983
Work in process. . 74,385 67,056
Raw material . . . . 126,960 98,083
$ 323,486 $ 265,122
If the first-in, first-out (FIFO) method had been used for inventories valued
at LIFO cost, such inventories would have been $7,393,000 and $8,940,000
higher at December 31, 1998 and 1997, respectively.
(4) Property, Plant and Equipment:
The major classes of property, plant and equipment are summarized as
follows (000's omitted):
December 31, 1998 December 31, 1997
Land and improvements . $ 25,517 $ 23,926
Buildings . . . . .. 174,803 158,872
Machinery and equipment. 712,298 601,689
912,618 784,487
Less accumulated depreciation. (441,593) (380,999)
Property, plant and equipment $ 471,025 $ 403,488
(5) Financing:
Financing consists of the following (000's omitted):
December 31, 1998 December 31, 1997
Notes payable due 2008. . $ 250,000 $ --
Notes payable due 1999-2003 . 71,200 85,900
Other . .. .. . 151,357 113,119
472,557 199,019
Less-currently payable 59,639 35,910
$ 412,918 $ 163,109
The Notes due 2008 were issued in October 1998 at an average interest
cost of 6.1%. The Company has complied with covenants relating to
limitations on secured debt and sale and leaseback transactions. The
carrying amount approximates fair value.
The Notes due 1999-2003 had an original average life of approximately
6.5 years and an average interest cost of 7.2%. Principal amortization began
in December 1995 and continues through April 2003. The estimated fair value
of the Notes was approximately $73.0 million at December 31, 1998, and was
approximately equal to their carrying value as of December 31, 1997.
Other includes principally short-term borrowings under uncommitted
lines of credit which are payable upon demand. The carrying amount
approximates fair value. The Company has a bank credit facility which
provides revolving credit through September 30, 2001, of up to $250 million.
The Company has complied with covenants relating to maintenance of working
capital, net worth, debt levels, interest coverage, and payment of dividends
applicable to the Notes due 1999-2003 and the revolving credit facility. The
facility provides funds for general corporate purposes at an interest rate of
LIBOR plus .125%. There were no borrowings under the bank facility during
the three years ended December 31, 1998. The Company is charged a fee of
.075% per annum for the facility. Commitment and facility fees of $187,500,
$187,500 and $234,000 were incurred in 1998, 1997 and 1996, respectively.
The weighted average interest rate for short-term borrowings was 5.8%, 5.9%
and 5.8% for each of the three years ended December 31, 1998.
Other debt is classified as noncurrent as management intends to
refinance it and the bank credit facility provides the ability to refinance
maturities to September 30, 2001.
The minimum principal payments during the next five years are as
follows: 1999 - $59,639,000; 2000 - $885,000; 2001 - $127,271,000; 2002 -
$735,000; 2003 - $30,374,000 and $253,653,000 thereafter.
(6) Accrued Expenses and Other Liabilities:
Selected accrued expenses and other liabilities include the following
(000's omitted):
December 31, 1998 December 31, 1997
Current Noncurrent Current Noncurrent
Compensation and benefits. $107,386 $46,022 $79,640 $42,883
Claims, including self
insurance and litigation 15,051 85,286 12,171 80,452
Post retirement benefits. 5,000 75,500 5,000 75,553
Environmental and regulatory
compliance .. . . . . . . . 38,209 67,926 33,465 59,085
Taxes, income and other . . 57,548 1,174 53,457 1,091
Approximately $17 million of accrued expenses and other liabilities
were guaranteed by bank letters of credit.
(7) Pension and Employee Benefit Plans:
The Company has noncontributory defined benefit pension plans which
cover certain of its domestic hourly employees. Benefit accruals under most
of these plans have ceased, and pension expense for defined benefit plans is
not significant for any of the periods presented. It is the Company's policy
to fund, at a minimum, amounts required by the Internal Revenue Service.
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for some of its retired employees.
Certain employees may become eligible for these benefits as they reach normal
retirement age while working for the Company.
The following sets forth the funded status of the plans as of the most
recent actuarial valuations using a measurement date of September 30
(millions):
Pension Benefits Other Benefits
1998 1997 1998 1997
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $194.6 $164.7 $70.8 $72.2
Service cost 12.0 10.4 0.4 0.4
Interest cost 15.6 14.2 4.9 5.0
Plan participants' contributions -- -- -- --
Amendments (20.0) -- -- --
Actuarial gain 18.4 19.9 0.6 (5.6)
Acquisition 65.5 6.7 -- 3.5
Benefits Paid (18.3) (21.3) (3.9) (4.7)
Benefit obligation at end of year 267.8 194.6 72.8 70.8
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year 232.6 196.9
Actual return on plan assets 5.4 47.5
Acquisition 70.1 6.0
Employer contribution (2.0) (2.0)
Benefits paid (18.3) (15.8)
Fair value of plan assets at end of year 287.8 232.6 -- --
Funded status 20.0 38.0 (72.8) (70.8)
Unrecognized net actuarial (gain) (2.7) (18.1) (7.7) (9.8)
Prepaid (accrued) benefit cost $ 17.3 $ 19.9 $ (80.5)$(80.6)
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets 10.0% 10.0% -- --
For measurement purposes, an 8 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate
was assumed to decrease gradually to 6 percent by 2002 and remain at that
level thereafter.
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $12.0 $10.4 $0.4 $0.4
Interest cost 15.6 14.2 4.9 5.0
Expected return on plan assets (22.0) (18.8) -- --
Recognized net actuarial (gain) (0.3) -- (1.0) (1.0)
Net periodic benefit cost $ 5.3 $ 5.8 $4.3 $4.4
The Company acquired Pacific Scientific Company on March 9, 1998, including
their pension and postretirement benefit plans.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
1-Percentage 1-Percentage
Point Increase Point Decrease
Effect on total of service and
interest cost components. $ 0.5 $ (0.4)
Effect on postretirement benefit
obligation . . . . . . . . . 7.1 (6.8)
Substantially all employees not covered by defined benefit plans are
covered by defined contribution plans which generally provide funding based
on a percentage of compensation.
Pension expense for all plans amounted to $29,581,000, $29,791,000 and
$25,894,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
(8) Stock Transactions:
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.
The Company has adopted a non-qualified stock option plan for which it
is authorized to grant options to purchase up to 15,000,000 shares. Under
the plan, options are granted at not less than existing market prices, expire
ten years from the date of grant and generally vest ratably over a five-year
period. An option to acquire 2,000,000 shares was granted to a senior
executive outside of the plan in 1990.
Changes in stock options were as follows:
Number of Shares
Under Option
(thousands)
Outstanding at December 31, 1995
(average $7.12 per share) 6,880
Granted (average $18.81 per share) 1,774
Exercised (average $3.88 per share) (967)
Cancelled (377)
Outstanding at December 31, 1996
(average $10.18 per share) 7,310
Granted (average $24.78 per share) 3,204
Exercised (average $7.63 per share) (180)
Cancelled (207)
Outstanding at December 31, 1997 10,127
(average $14.86 per share)
Granted (average $43.11 per share) 1,154
Exercised (average $9.52 per share) (365)
Cancelled (611)
Outstanding at December 31, 1998 (at
$3.19 to $45.69 per share, average
$17.26 per share) 10,305
As of December 31, 1998, options with a weighted average remaining life
of 6.6 years covering 5,741,000 shares were exercisable at $3.19 to $30.63
per share (average $10.17 per share) and options covering 3,361,000 shares
remain available to be granted.
Options outstanding at December 31, 1998 are summarized below:
Average Average Average
Exercise Number Exercise Remaining Number Exercise
Price Outstanding Price Life Exercisable Price
(thousands) (thousands)
$3.19 to $4.71 1,496 $3.33 1 year 1,496 $3.33
$5.03 to $7.47 1,482 $6.35 4 years 1,482 $6.35
$7.97 to $11.75 1,236 $10.17 6 years 1,121 $10.03
$14.13 to $21.00 1,421 $15.69 7 years 786 $15.48
$21.25 to $30.63 3,665 $24.38 9 years 856 $24.04
$35.19 to $45.69 1,005 $43.11 10 years 0 N/A
Nonqualified options have been issued only at fair market value
exercise prices as of the date of grant during the periods presented herein,
and the Company's policy does not recognize compensation costs for options of
this type. Beginning in 1996, the pro-forma costs of these options granted
subsequent to January 1, 1995 have been calculated using the Black-Scholes
option pricing model and assuming a 6% risk-free interest rate, a 10-year
life for the option, a 15% expected volatility and dividends at the current
annual rate. The weighted average grant date fair market value of options
issued was $18 per share in 1998, $10 per share in 1997 and $8 per share in
1996. Had this method been used in the determination of income, net income
would have decreased by approximately $7.8 million in 1998, $5.3 million in
1997 and $1.4 million in 1996 and diluted earnings per share would have
decreased by $.06 in 1998, $.04 in 1997 and $.01 in 1996. These proforma
amounts may not be representative of the effects on proforma net income for
future years.
(9) Leases and Commitments:
The Company's leases extend for varying periods of time up to 10 years
and, in some cases, contain renewal options. Future minimum rental payments
for all operating leases having initial or remaining noncancelable lease
terms in excess of one year are $29,000,000 in 1999, $23,000,000 in 2000,
$17,000,000 in 2001, $13,000,000 in 2002, $10,000,000 in 2003 and $22,000,000
thereafter. Total rent expense charged to income for all operating leases
was $32,000,000, $25,000,000 and $23,000,000 for the years ended December 31,
1998, 1997, and 1996, respectively.
(10) Litigation and Contingencies:
A former subsidiary of the Company is engaged in litigation in multiple
states with respect to product liability. The Company sold the subsidiary in
1987. Under the terms of the sale agreement, the Company agreed to indemnify
the buyer of the subsidiary for product liability related to tools
manufactured by the subsidiary prior to June 4, 1987. The cases involve
approximately 3,000 plaintiffs, in state and federal courts in multiple
states. All other major U.S. air tool manufacturers are also defendants.
The gravamen of these complaints is that the defendants' air tools, when used
in different types of manufacturing environments over extended periods of
time, were defective in design and caused various physical injuries. The
plaintiffs seek compensatory and punitive damages. The Company's maximum
indemnification obligation under the contract is approximately $85,000,000.
The Company has accepted an agreement in principle to settle all claims.
Completion of this settlement agreement will not result in a material adverse
effect on the Company's results of operations or financial condition.
A subsidiary, Joslyn Manufacturing Company (JMC), previously operated
wood treating facilities that chemically preserved utility poles, pilings and
railroad ties. All such treating operations were discontinued or sold prior
to 1982. These facilities used wood preservatives that included creosote,
pentachlorophenol and chromium-arsenic-copper. While preservatives were
handled in accordance with then existing law, environmental law now imposes
retroactive liability, in some circumstances, on persons who owned or
operated wood-treating sites. JMC is remediating some of its former sites
and will remediate other sites in the future. The Company has made a
provision for environmental remediation; however, there can be no assurance
that estimates of environmental liabilities will not change.
JMC is a defendant in a class action tort suit. The suit alleges
exposure to chemicals, allegedly causing various physical injuries, and
property devaluation resulting from wood treating operations previously
conducted at a Louisiana site. The number of injuries related to the alleged
exposures and the amount of alleged damages are all disputed and uncertain.
The Company has tendered the defense of the suit to its insurance carrier.
The Company has reached agreement with its insurance carrier which fixes its
liability for this matter to a stated amount which will not have a material
adverse effect on its results of operations or financial condition.
In addition to the litigation noted above, the Company is from time to
time subject to routine litigation incidental to its business. These
lawsuits primarily involve claims for damages arising out of the use of the
Company's products, some of which include claims for punitive as well as
compensatory damages. The Company is also involved in proceedings with
respect to environmental matters including sites where the Company has been
identified as a potentially responsible party under federal and state
environmental laws and regulations. The Company believes that the results of
the above noted litigation and other pending legal proceedings will not have
a materially adverse effect on the Company's results of operations or
financial condition, notwithstanding any related insurance recoveries.
A subsidiary of the Company has sold, with limited recourse, certain of
its accounts and notes receivable. A provision for estimated losses as a
result of the limited recourse has been included in accrued expenses. No
gain or loss arose from these transactions.
(11) Income Taxes:
The provision for income taxes for the years ended December 31 consists
of the following (000's omitted):
1998 1997 1996
Federal:
Current.. . . . . . . $84,026 $95,249 $69,357
Deferred . . . . . . . 13,091 (1,276) 8,233
State and local. . . . . 6,007 12,925 6,600
Foreign. . . . . . . . . 15,041 4,341 12,046
Income tax provision . . $118,165 $111,239 $96,236
Deferred income taxes are reflected in prepaid expenses and other
current assets and in other assets. Deferred tax assets (the valuation
allowances relate to foreign jurisdictions where operating loss carryforwards
exist) consist of the following (000's omitted):
December 31,
1998 1997
Bad debt allowance .. . . . . $ 8,397 $ 6,686
Inventories . . . . . . . . . 8,183 3,656
Property, plant and equipment. (40,867) (37,478)
Post retirement benefits. . . 33,795 32,319
Insurance, including self
insurance . . . . . . . 24,316 21,755
Environmental compliance . . . 25,031 26,043
Other accruals . . . . . . . 35,392 47,062
All other accounts . . . . . . (15,873) (7,425)
Operating loss carryforwards . -- 15,203
Gross deferred tax asset. 78,374 107,821
Valuation allowances. .. . -- (10,852)
Net deferred tax asset . . . . $ 78,374 $ 96,969
The effective income tax rate for the years ended December 31 varies
from the statutory Federal income tax rate as follows:
Percentage of Pre-Tax Earnings
1998 1997 1996
Statutory Federal income tax rate.. 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
Permanent differences in
amortization of certain assets
for tax and financial reporting
purposes.. . . . . . . . . . . . 3.9 3.3 2.9
State income taxes
(net of Federal income tax benefit) 1.3 2.9 1.7
Taxes on foreign earnings. . . . . (1.7) (2.6) (1.2)
Costs of Fluke merger . . . . . . 0.7 -- --
Effective income tax rate. . . . 39.2% 38.6% 38.4%
(12) Segment Data:
The Company operates within two major business segments:
Process/Environmental Controls and Tools and Components. The Tools and
Components segment has a customer which accounted for approximately 10%, 11%
and 11% of total sales in 1998, 1997 and 1996, respectively.
Operating profit represents total revenues less operating expenses,
excluding interest and taxes on income. The identifiable assets by segment
are those used in each segment's operations. Intersegment amounts are
eliminated to arrive at consolidated totals.
The detail segment data is presented in the following table (000's
omitted):
Operations in Different Industries -
Year Ended December 31,
1998 1997 1996
Total Sales:
Process/Environmental Controls $1,615,529 $1,299,241 $1,129,750
Tools and Components 1,294,509 1,192,761 1,103,443
$2,910,038 $2,492,002 $2,233,193
Operating Profit:
Process/Environmental Controls $ 222,520 $ 171,141 $ 153,513
Tools and Components 159,225 144,370 128,118
Other (14,907) (14,455) (14,225)
$ 366,838 $ 301,056 $ 267,406
Identifiable Assets:
Process/Environmental Controls $1,680,998 $1,264,384 $1,130,856
Tools and Components 994,364 832,614 861,345
Other 63,353 86,877 54,530
$2,738,715 $2,183,875 $2,046,731
Liabilities:
Process/Environmental Controls $ 542,173 $ 404,883 $ 371,821
Tools and Components 374,726 421,526 412,850
Other 469,985 218,247 256,327
$1,386,884 $1,044,656 $1,040,998
Depreciation and Amortization:
Process/Environmental Controls $ 63,540 $ 46,794 $ 42,187
Tools and Components 45,111 44,908 40,237
$ 108,651 $ 91,702 $ 82,424
Capital Expenditures:
Process/Environmental Controls $ 50,073 $ 48,577 $ 32,635
Tools and Components 40,192 38,304 31,346
$ 90,265 $ 86,881 $ 63,981
Operations in Geographical Areas -
Year Ended December 31,
1998 1997 1996
Total sales:
United States . . . . . $2,328,352 $1,979,346 $1,796,303
Germany . . . . . . . . 149,841 115,618 119,149
United Kingdom . . . . . 121,084 121,679 100,710
All other . . . . . . . 310,761 275,359 217,031
$2,910,038 $2,492,002 $2,233,193
Long-lived assets:
United States . . . . . $1,765,211 $1,275,514 $1,224,919
Germany . . . . . . . . 22,931 19,187 20,887
United Kingdom . . . . . 21,157 17,570 14,289
All other . . . . . . . 42,512 39,551 40,352
Less: Deferred taxes and financial
instruments . . . . . . . . (78,374) (96,969) (98,364)
$1,773,437 $1,254,853 $1,202,083
Sales outside the United States:
Direct Sales . . . . . . . $ 581,686 $ 512,656 $ 436,890
Exports . . . . . . . . . 230,000 212,000 156,000
$ 811,686 $ 724,656 $ 592,890
(13) Quarterly Data-Unaudited (000's omitted except per share data)
1998
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Net Sales . . . $646,240 $736,428 $724,839 $802,531
Gross Profit . . 228,146 273,445 283,987 303,376
Operating Profit 74,014 91,874 99,127 101,823
Net earnings . . 44,203 52,208 28,460* 58,075
Earnings per share:
Basic . . . . $.33 $.39 $.21* $.43
Diluted . . . $.32 $.38 $.20* $.42
* Includes $28.6 million after-tax costs ($0.21 per share) from the merger
with Fluke Corporation
1997
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Net Sales . . . $581,530 $608,369 $626,785 $675,318
Gross Profit . . 198,316 220,824 232,815 241,616
Operating Profit 55,950 76,244 83,084 85,778
Net earnings . . . .31,756 44,838 49,258 50,754
Earnings per share:
Basic . .. . . . $.24 $.34 $.37 $.38
Diluted .. . . . $.23 $.33 $.36 $.37
<PAGE>
Danaher Corporation and Subsidiaries
Major Operating Company Executives
A.L. Hyde Company
Kurt C. Glaser
President
American Sigma, Inc.
Richard W. Wissenbach
President
Communications Technology
Corporation
Benjamin W. Jeffrey
President
Current Technology, Inc.
Joseph W. Roark
President
Cyberex, Inc.
Maureen F. Austin
President
Danaher Controls
James W. Appelgren
President
Danaher Tool Group
Professional Tools
Division
Jake R. Nichol
President
Danaher Tool Group
Special Markets Division
Thomas R. Sulentic
President
Delta Consolidated
Industries
Thomas P. Joyce, Jr.
President
Dr. Bruno Lange GmbH
Hermann E. Braun
President
Fluke Corporation
H. Lawrence Culp, Jr.
President
Gems Sensors
Joseph A. Hahn
President
Hengstler GmbH
Hermann E. Braun
President
Hennessy Industries, Inc.
Vincent E. Piacenti
President
Jacobs Chuck Manu-
facturing Company
C. Michael Heath
President
Jacobs Vehicle Systems,
Inc.
William J. Butler
President
Jennings Technology Company
John P. Williamson
President
Joslyn Hi-Voltage Company
James F. Domo
President
Joslyn Manufacturing
Company
Gary P. Prasser
President
Joslyn Sunbank Company
P. Edward Prutzman
President
Matco Tools Corporation
Thomas N. Willis
President
M&M Precision Systems
Corporation
James E. Helton
President
Namco Controls Corporation
Alex A. Joseph
President
Pacific Scientific
Automation Technology Group
William T. Fejes, Jr.
President
Pacific Scientific Company
Fisher Pierce Division
Steven L. Breitzka
President
Pacific Scientific Company
Instruments Division
Daniel A. Pryor
President
Pacific Scientific
Energetic
Materials Co.
Thomas L. Walsh
President
Pacific Scientific Safety &
Aviation Group
Richard G. Knoblock
President
Partlow/West Corporation
Craig B. Purse
President
QualiTROL Corporation
Ronald N. Meyer
President
Veeder-Root Company
Scott G. Clawson
President
Corporate Officers
George M. Sherman
President and Chief
Executive Officer
Patrick W. Allender
Senior Vice President,
Chief Financial Officer and
Secretary
C. Scott Brannan
Vice President -
Administration
and Controller
Dennis D. Claramunt
Vice President and Group
Executive
Daniel L. Comas
Vice President - Corporate
Development
H. Lawrence Culp, Jr.
Vice President and Group
Executive
Mark C. DeLuzio
Vice President - Danaher
Business System
James H. Ditkoff
Vice President - Finance &
Tax
Dennis A. Longo
Vice President - Human
Resources
Steven E. Simms
Vice President and Group
Executive
John P. Watson
Vice President and Group
Executive
<PAGE>
Directors
Mortimer M. Caplin
Partner
Caplin & Drysdale
Donald J. Ehrlich
President, Chairman and
Chief Executive Officer
Wabash National Corp.
Walter G. Lohr, Jr.
Partner
Hogan & Hartson
Mitchell P. Rales
Chairman of the
Executive Committee
Danaher Corporation
Steven M. Rales
Chairman of the Board
Danaher Corporation
George M. Sherman
President and Chief
Executive Officer
Danaher Corporation
A. Emmet Stephenson, Jr.
President
Stephenson and Company
<PAGE>
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
Internet Address: http://www.danaher.com
Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges
Transfer Agent
SunTrust Bank
Atlanta, Georgia
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.
<PAGE>
MARKET PRICES OF COMMON STOCK
1998 1997
High Low High Low
First Quarter . . .. 38 3/32 29 1/2 25 20 13/16
Second Quarter . . . 38 7/8 34 25/32 25 15/16 19 13/16
Third Quarter. . . . 45 3/4 30 29 7/32 24 29/32
Fourth Quarter.. . . 54 5/16 29 3/8 31 7/8 26 23/32
High and low per share data are as quoted on the New York Stock Exchange.
