<PAGE>
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, 1999
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)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: 202-828-0850
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of Exchanges
Title of each class on which registered
- ------------------- -------------------
Common Stock $.01 par Value New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
</TABLE>
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 17, 2000, the number of shares of common stock outstanding was
141.3 million and were held by approximately 3,500 holders. The aggregate
market value of common shares held by non-affiliates of the Registrant on such
date was approximately $4.1 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.
1
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EXHIBIT INDEX APPEARS ON PAGE 14
2
<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, 1999.
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 2000 annual meeting of stockholders. With the exception
of the pages of the 2000 Proxy Statement specifically incorporated herein by
reference, the 2000 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
3
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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 Hach Company,
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, Atlas Copco Controls, M&M Precision Systems,
Communications Technology Corporation, Gems Sensors and the Dr. Bruno Lange
Group. 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 key strategic product lines, including
environmental, electronic test and measurement, motion and others. One key
product in the environmental controls product line is the Veeder-Root storage
tank leak detection system. 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. Veeder-Root continues to expand its
environmental controls product and service offering to encompass applications
related to markets other than petroleum storage and to address nonregulatory
business requirements.
The Company has a leadership position in the water quality testing and
control market, into which is sold its Hach, Dr. Lange, Pacific Scientific, and
Sigma branded products. These products include analytical instruments used in
water quality
4
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monitoring, and chemicals and other consumables used in the process. The Company
markets these products worldwide, both direct to end users and through
distributors.
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.
Pacific Scientific has two major product lines, motion and safety
equipment. Nearly half of Pacific Scientific's sales consists of electric
motors, drives and controls. The Company also manufactures and sells electronic
drives as part of its Atlas Copco Controls division. 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.
Other business lines within this segment include extruded thermoplastic
mill shapes and custom molded plastic products.
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.
5
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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 ("Delta"), 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 worldwide
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.
Danaher Tool Group (DTG) is one of the largest worldwide 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/(R)/ line of mechanics' hand tools for over 60 years.
Approximately 80% of the over 200 million pieces sold to Sears annually are sold
in tool sets that include from three to over 1,000 pieces.
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 6,100 outlets. 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/(R)/ brand, its industrial tools and products are
also sold under the Armstrong/(R)/ and Allen brand names, and fastener products
under the Holo-Krome/(R)/ name are sold to independent distributors and other
customers in the "do-it-yourself," professional automotive, commercial and
industrial markets.
6
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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.
Jacobs/(R)/ is the market leader in the drill chuck business with its
highly respected and well recognized brand name.
Delta is a leading manufacturer of pickup truck toolboxes and industrial
storage boxes and its products are sold under the DELTA/(R)/ and JOBOX/(R)/
brand names.
Wheel service equipment is manufactured under the Coats/(R)/, Bada/(R)/ and
Ammco/(R)/ 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/(R)/" 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.
7
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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, 1999, the Company employed approximately 19,000 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 $119 million for
1999, $121 million for 1998 and $96 million for 1997.
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.
8
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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 no customers which accounted for more than 10% of
consolidated sales in 1999. The Company's largest single customer is Sears,
Roebuck and Co. ("Sears"), and 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 6 million square feet of manufacturing,
distribution, service and office space at various domestic and foreign
locations. The principal properties are listed below. 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.
<TABLE>
<CAPTION>
Location Principal Use Owned/Leased
- -------- ------------- ------------
Process/Environmental Controls
- --------------------------------
<S> <C> <C>
Altoona, PA Manufacturing Owned
Elizabethtown, NC Manufacturing Owned
</TABLE>
9
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<TABLE>
<CAPTION>
Location Principal Use Owned/Leased
- -------- ------------- ------------
Process/Environmental Controls
- --------------------------------
<S> <C> <C>
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
Birmingham,
England Manufacturing Leased
Juarez, Mexico Manufacturing Leased
Lachine, Quebec Manufacturing Leased
Lancaster, SC Manufacturing Owned
Paso Robles, CA Manufacturing Leased
San Jose, CA Manufacturing Owned
Hemet, CA Manufacturing Owned
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
Rockford, IL Manufacturing Leased
Grants Pass, OR Manufacturing Owned
</TABLE>
10
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<TABLE>
<CAPTION>
Location Principal Use Owned/Leased
- -------- ------------- ------------
Process/Environmental Controls
- --------------------------------
<S> <C> <C>
Wilmington, MA Manufacturing Leased
Kazmarek, Slovakia Manufacturing Leased
Weymouth, MA Manufacturing Owned
Loveland, CO Manufacturing Owned
Ames, IA Manufacturing Owned
Elkhart, IN Manufacturing Owned
Stockholm, Sweden Manufacturing Owned
Hertfordshire,
England Distribution Owned
Enis, Ireland Manufacturing Leased
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
Mexico City,
Mexico Manufacturing Leased
</TABLE>
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, Lyon, Bordeaux,
Tours and Selestat, France; and Stuttgart, Germany.
11
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ITEM 3. LEGAL PROCEEDINGS
- --------------------------
A former subsidiary of the Company is engaged in litigation in several
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. 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 has accepted an agreement in principle to settle these
claims. Completion of this settlement agreement will not result in 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 1999.
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,
1999, and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
NONE
12
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PART III
ITEMS 10 THROUGH 13.
- -------------------
The information required under Items 10 through 13 is included in the
Registrant's Proxy Statement for its 2000 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 13 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 13 of this
report.
3. An Index of Exhibits is on page 14 of this report.
b) Reports on Form 8-K filed in the fourth quarter of 1999.
NONE
13
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DANAHER CORPORATION
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page Number in:
---------------
Annual Report
-------------
Form 10K To Shareholders
-------- ---------------
Annual Report:
- --------------
<S> <C>
Report of Independent Public
Accountants on Schedule 17
Financial Statements:
- ---------------------
Consolidated Statements of
Earnings, year ended December 31,
1999, 1998, and 1997 18
Consolidated Balance Sheets,
December 31, 1999 and 1998 19
Consolidated Statements of
Cash Flows, years ended
December 31, 1999, 1998, and 1997 20
Consolidated Statements of
Stockholders' Equity, years
ended December 31, 1999,
1998, and 1997 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 18
</TABLE>
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.
14
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Exhibits:
- ---------
<TABLE>
<S> <C>
(3) Articles of Incorporation and By-Laws
(a) The Articles of Incorporation of Danaher Incorporated by
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 Reference to Exh 10(a)
dated as of January 2, 1990 of 6/26/98 Form 10-Q
(b) Credit Agreement Dated As of September 7, Incorporated by
1990. Among Danaher Corporation, the Reference to Exh 10(b)
Financial Institutions Listed Therein of 6/26/98 10-Q
and Bankers Trust Company as Agent
(c) Agreement as of November 1, 1990 between Incorporated by
Danaher Corporation, Easco Hand Tools, Inc. Reference to Exh 10(c)
and Sears, Roebuck and Co. of 6/26/98 Form 10-Q
(d) Note Agreement as of November 1, 1992 Incorporated by
Between Danaher Corporation and Lenders Reference to Exh 10(d)
Referenced Therein of 6/26/98 Form 10-Q
(e) Note Agreement as of April 1, 1993 Incorporated by
Between Danaher Corporation and Lenders Reference to Exh 10(d)
Referenced Therein Of 6/26/98 Form 10-Q
(f) Danaher Corporation 1998 Stock Option Plan Incorporated by
Reference to Exh A of
Proxy statement dated
March 30, 1998
(g) Indenture Agreement as of October 28, 1998 Incorporated by
Between Danaher Corporation and The First Reference to Form S-3
National Bank of Chicago, as Trustee (File 333-63591)
(13) Annual Report to Securityholders
(21) Subsidiaries of Registrant
(23) Consent of Independent Public Accountants
(27) Financial Data Schedules
</TABLE>
15
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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 17, 2000
<TABLE>
<S> <C>
/s/ GEORGE M. SHERMAN President and Chief Executive Officer
- -------------------------------
George M. Sherman
/s/ STEVEN M. RALES Chairman of the Board
- -------------------------------
Steven M. Rales
/s/ MITCHELL P. RALES Chairman of the Executive Committee
- -------------------------------
Mitchell P. Rales
/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/ ALAN G. SPOON Director
- -------------------------------
Alan G. Spoon
/s/ A. EMMET STEPHENSON, JR. Director
- -------------------------------
A. Emmet Stephenson, Jr.
/s/ PATRICK W. ALLENDER Executive Vice President-Chief Financial
- -------------------------------
Patrick W. Allender Officer and Secretary
/s/ CHRISTOPHER C. MCMAHON Vice President and Controller
- -------------------------------
Christopher C. McMahon
</TABLE>
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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, 2000. 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
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the consolidated 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 consolidated
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
January 27, 2000
17
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DANAHER CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(000's omitted)
<TABLE>
<CAPTION>
Additions
Write
Balance Charged Offs,
Classification at to Charged Write Balance
Beginning Costs to Downs at End
of & other & of
Period Expenses Accounts Deductions Period
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999
Allowances deducted
from asset accounts:
Allowance for
doubtful accounts: $24,000 $10,756 $ 185(a) $ 6,941 $28,000
======= ======= ====== ======= =======
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
======= ======= ====== ======= =======
</TABLE>
Notes:(a) - Amounts related to businesses acquired, net of amounts related
to businesses disposed.
18
<PAGE>
SHAREHOLDERS' INFORMATION
Auditors
Arthur Andersen LLP
Baltimore, MD
Shareholders' Information
Shareholder requests for information or assistance, please write or call our
corporate office.
Danaher Corporation
c/o Investor Relations
1250 24th Street, NW Suite 800
Washington, D.C. 20037
(202) 828-0850
Internet Address
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.
Market Prices of Common Stock
- -------------------------------------------------------------
1999 1998
- -------------------------------------------------------------
High Low High Low
---------------------------------------------
First Quarter 55 46 3/8 38 3/32 29 1/2
Second Quarter 69 51 3/8 38 7/8 34 25/32
Third Quarter 62 5/8 47 1/2 45 3/4 30
Fourth Quarter 54 3/8 42 3/4 54 5/16 29 3/8
- -------------------------------------------------------------------------
High and low per share data are as quoted on the New York Stock Exchange.
- -------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
(000's omitted, except per share data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Sales $3,197,238 $3,047,061 $2,619,100 $ 2,352,249 $ 2,011,529
Operating profit 458,007 384,112 319,346 284,411 230,906
Earnings from continuing operations 261,624** 192,186* 188,576 166,511 138,899
Per share
Diluted 1.79** 1.33* 1.31 1.17 0.97
Basic 1.84** 1.37* 1.35 1.19 1.00
Discontinued operations -- -- -- 79,811 2,550
Per share
Diluted -- -- -- 0.56 0.02
Basic -- -- -- 0.57 0.02
Net earnings 261,624** 192,186* 188,576 246,322 141,449
Earnings per share
Diluted 1.79** 1.33* 1.31 1.72 0.99
Basic 1.84** 1.37* 1.35 1.76 1.01
Dividends per share 0.07 0.09 0.10 0.10 0.10
Total assets 3,047,071 2,840,859 2,264,741 2,148,888 1,848,335
Total debt 374,634 503,639 229,095 239,927 294,547
</TABLE>
* Includes $28.6 million in after-tax costs ($0.20 per share) from the merger
with the Fluke Corporation
** Includes $9.8 million in after-tax costs ($0.07 per share) from the merger
with the Hach Company
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATION
- --------------------------------------------------------------------------------
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
Company's Craftsman(R) line, National Automotive Parts Association (NAPA(R))
line, K-D(R) automotive line, and the Matco(R), Armstrong(R) and Allen(TM) lines
of mechanics' hand tools. The Company also manufactures Allen(TM) wrenches,
Jacobs(R) drill chucks and diesel engine retarders, Delta(R) storage containers
and Coats(R) and Ammco(R) wheel service equipment.
Presented below is a summary of sales by business segment (000's omitted).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ % $ % $ %
Process/Environmental Controls 1,854,184 58.0 1,752,552 57.5 1,426,339 54.5
Tools and Components 1,343,054 42.0 1,294,509 42.5 1,192,761 45.5
---------------------------------------------------------
3,197,238 100.0 3,047,061 100.0 2,619,100 100.0
</TABLE>
- --------------------------------------------------------------------------------
THE PROCESS/ENVIRONMENTAL CONTROLS
- --------------------------------------------------------------------------------
The Process/Environmental Controls segment includes Hach Company, Fluke
Corporation, Veeder-Root Company, Danaher Controls, Partlow, Anderson
Instruments, West Instruments, QualiTROL Corporation, A.L. Hyde Company,
Hengstler, the controls product line business units of Joslyn Corporation and
Pacific Scientific Company, Namco Controls, Atlas Copco Controls, M&M Precision
Systems, Communications Technology Corporation, Current Technology, Gems
Sensors, and the Dr. Bruno Lange Group. These companies produce and sell water
testing instruments and chemicals, 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 end-users.
- --------------------------------------------------------------------------------
1999 COMPARED TO 1998
- --------------------------------------------------------------------------------
1999 sales increased 6% from 1998 levels. Net unit volume increases of 3.5% were
driven by gains in the water quality and power quality product lines, offset by
lower sales of underground storage tank monitoring systems. 1999 was negatively
impacted by price decreases and foreign currency translation decreases totaling
over 1%. Acquisition activity contributed 4% of the increase, due primarily to
the full-year impact of the Pacific Scientific Company and Dr. Bruno Lange Group
acquisitions. Operating margins increased from 13.7% to 15.5% due to overall
cost reductions and improvements in margins of the businesses acquired in 1998.
- --------------------------------------------------------------------------------
1998 COMPARED TO 1997
- --------------------------------------------------------------------------------
Sales in 1998 were 23% higher than in 1997 for this segment. The acquisitions of
Pacific Scientific Company and the Dr. Bruno Lange Group, the full-year effect
of the Gems Sensors acquisition in August, 1997 and several minor business
acquisitions and dispositions provided a 20% increase from 1997. The remainder
of the sales change was generated by an increase in unit volume of 3%, with
prices essentially flat. Operating margins increased from 13.3% to 13.7%, 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.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
TOOLS AND COMPONENTS
- --------------------------------------------------------------------------------
The Tools and Components segment is comprised of the Danaher Hand Tool Group
(including Special Markets, Asian Tools, Professional Tools and Matco Tools
divisions), Jacobs Chuck Manufacturing Company, Delta Consolidated Industries,
Jacobs Vehicle Systems, Hennessy Industries and the hardware and electrical
apparatus lines of Joslyn Manufacturing Company. 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
toolboxes 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.
- --------------------------------------------------------------------------------
1999 COMPARED TO 1998
- --------------------------------------------------------------------------------
Sales in 1999 were 4% higher than in 1998. This increase consists of higher unit
shipment volume of 5%, offset by price decreases of 1%. Demand for diesel engine
retarders and professional mechanics' tools was particularly strong in 1999.
Operating margins increased from 12.3% to 14.0%, driven by higher sales volumes
spread over a fixed cost base and continued manufacturing cost improvements.
- --------------------------------------------------------------------------------
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 higher sales levels and
productivity gains. Demand levels were strong across consumer, professional and
international hand tool lines. Sales of diesel engine retarders were also strong
in 1998.
- --------------------------------------------------------------------------------
GROSS PROFIT
- --------------------------------------------------------------------------------
Gross profit, as a percentage of sales, was 38.7% in 1999, a 0.7 percentage
point improvement compared to 38.0% achieved in 1998. Product and manufacturing
overhead cost reductions, combined with increases in higher margin product
lines, drove this improvement.
Gross profit margin was 38.0% in 1998, a 1.5 percentage point increase 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.
- --------------------------------------------------------------------------------
OPERATING EXPENSES
- --------------------------------------------------------------------------------
In 1999, selling, general and administrative expenses were 24.3% of sales, an
improvement of 1.1 percentage points from 1998 levels. Cost reductions in
administrative overhead expenses and higher sales levels spread over a fixed
cost base generated this improvement.
Selling, general and administrative expenses for 1998 as a percentage of sales
were 1.1 percentage points higher than the 1997 level. This reflects the higher
operating expense levels of the businesses acquired in 1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
INTEREST COSTS AND FINANCING TRANSACTIONS
- --------------------------------------------------------------------------------
The Company's debt financing is composed primarily of publicly issued 6% notes
due 2008, privately placed debt maturing in April 2003 at an average interest
cost of 7%, uncommitted lines and a revolving credit facility which provides
senior financing of $250 million for general corporate purposes. The interest
rates for borrowing under the facility float with base rates. Interest expense
in 1999 was $9.6 million lower than in 1998, due to lower debt and higher cash
levels generated primarily by substantial cash flow from operations. Interest
expense in 1998 was $13.3 million higher than in 1997, as average borrowing
levels increased due to acquisitions.
- --------------------------------------------------------------------------------
INCOME TAXES
- --------------------------------------------------------------------------------
The 1999 effective rate of 39.1% is 0.3 percentage points lower than in 1998.
This decrease results primarily from a lower ratio of nondeductible amortization
compared to taxable income. The 1998 effective tax rate of 39.4% is 1.0
percentage point higher than in 1997, resulting from the nondeductible expenses
associated with the Fluke Corporation merger in July 1998.
- --------------------------------------------------------------------------------
INFLATION
- --------------------------------------------------------------------------------
The effect of inflation on the Company's operations has been minimal in 1999,
1998 and 1997.
- --------------------------------------------------------------------------------
READINESS FOR YEAR 2000
- --------------------------------------------------------------------------------
The Company experienced no significant systems or other Y2K effects with
transitioning into the new year. No disturbance arose from customers or vendors
associated with the new year. Although the Company believes there is no material
risk exposure, the Year 2000 Readiness Plan as discussed in the Current Report
dated July 9, 1998 remains in place.
- --------------------------------------------------------------------------------
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, 1999, the market value of
the Company's fixed-rate long-term debt would be impacted by a net decrease of
$17 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.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
In 1999, the Company acquired Atlas Copco Controls and additional smaller
businesses for a total of $65 million. The Company also acquired Pacific
Scientific Company for approximately $420 million in cash in March 1998. 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.
As discussed previously, $250 million of the Company's debt is fixed at an
average interest cost of 6%, and $30 million is fixed at an interest rate of 7%.
Substantially all remaining borrowings are short-term in nature and float with
referenced base rates. As of December 31, 1999, the Company has unutilized
commitments under its revolving credit facility of $250 million. As of December
31, 1999, the Company held $260 million of cash and cash equivalents. These
amounts are invested in highly liquid investment grade debt instruments with a
maturity of ninety days or less.
Cash flow has been strong in all periods from 1997 through 1999. In July, 1999,
the Company sold $70 million of treasury stock through its Hach Company
subsidiary. Operations generated $419 million, $353 million and $343 million in
cash in 1999, 1998 and 1997, respectively. The principal use of funds has been
capital expenditures of $89 million, $102 million and $97 million in 1999, 1998
and 1997, respectively, and net cash paid for acquisitions of $65 million, $532
million and $147 million in 1999, 1998 and 1997, respectively. The net result of
the above, combined with working capital changes, was a decrease in debt of $130
million in 1999, an increase in debt of $215 million in 1998 and a decrease of
$11 million in 1997.
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.
16
<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, 1999
and 1998, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1999. 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, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Baltimore, MD
January 27, 2000
17
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
- --------------------------------------------------------------------------------
Year Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------
Sales $3,197,238 $3,047,061 $2,619,100
Cost of sales 1,960,822 1,889,229 1,663,491
Selling, general and administrative expenses 778,409 773,720 636,263
----------------------------------
Total operating expenses 2,739,231 2,662,949 2,299,754
Operating profit 458,007 384,112 319,346
Other expense 11,778 40,796 --
Interest expense 16,667 26,307 12,993
----------------------------------
Earnings before income taxes 429,562 317,009 306,353
Income taxes 167,938 124,823 117,777
----------------------------------
Net earnings $ 261,624 $ 192,186 $ 188,576
==================================
Basic earnings per share:
Net earnings $ 1.84 $ 1.37 $ 1.35
----------------------------------
Average shares outstanding 141,832 139,816 139,725
==================================
Diluted earnings per share:
Net earnings $ 1.79 $ 1.33 $ 1.31
----------------------------------
Average common stock and common equivalent
shares outstanding 146,089 143,987 143,479
==================================
- --------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
- --------------------------------------------------------------------------------
18
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
- --------------------------------------------------------------------------------
As of December 31 1999 1998
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and equivalents $ 260,281 $ 47,798
Trade accounts receivable, less allowance for doubtful
accounts of $28,000 and $24,000 544,738 485,543
Inventories 324,673 337,481
Prepaid expenses and other 72,425 60,874
-----------------------
Total current assets 1,202,117 931,696
Property, plant and equipment, net 500,189 510,198
Other assets 52,476 111,203
Excess of cost over net assets of acquired companies,
less accumulated amortization of $196,000
and $159,000 1,292,289 1,287,762
-----------------------
$3,047,071 $ 2,840,859
=======================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of debt $ 33,597 $ 59,721
Trade accounts payable 213,209 161,782
Accrued expenses 461,980 479,743
-----------------------
Total current liabilities 708,786 701,246
Other liabilities 288,494 294,907
Long-term debt 341,037 443,918
Stockholders' equity:
Common stock, one cent par value; 300,000
shares authorized; 154,035 and 153,297
issued; 142,440 and 141,701 outstanding 1,540 1,533
Additional paid-in capital 420,036 332,057
Accumulated other comprehensive income (34,105) (2,373)
Retained earnings 1,321,283 1,069,571
-----------------------
Total stockholders' equity 1,708,754 1,400,788
-----------------------
$3,047,071 $ 2,840,859
=======================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations $ 261,624 $ 192,186 $ 188,576
Depreciation and amortization 126,419 114,527 98,338
Change in accounts receivable (60,327) 4,409 (50,978)
Change in inventories 11,149 13,851 10,742
Change in accounts payable 45,852 (13,869) 22,956
Change in other assets and liabilities 34,390 41,578 73,548
----------------------------------------------
Total operating cash flows 419,107 352,682 343,182
==============================================
Cash flows from investing activities:
Payments for additions to property, plant and equipment, net (88,909) (101,614) (96,946)
Disposition of businesses -- 16,250 --
Net cash paid for acquisitions (64,834) (532,368) (147,238)
----------------------------------------------
Net cash used in investing activities (153,743) (617,732) (244,184)
==============================================
Cash flows from financing activities:
Proceeds from sale of treasury stock 69,845 -- --
Proceeds from issuance of common stock 18,141 30,545 9,075
Dividends paid (9,912) (12,840) (14,525)
Borrowings (repayments) of debt (129,851) 214,905 (10,801)
Purchase of common stock -- (2,066) (80,223)
----------------------------------------------
Net cash provided by (used in) financing activities (51,777) 230,544 (96,474)
Effect of exchange rate changes on cash (1,104) 1,726 (1,453)
----------------------------------------------
Net change in cash and equivalents 212,483 (32,780) 1,071
----------------------------------------------
Beginning balance of cash and equivalents 47,798 80,578 79,507
----------------------------------------------
Ending balance of cash and equivalents $ 260,281 $ 47,798 $ 80,578
==============================================
Supplemental disclosures:
Cash interest payments $ 16,348 $ 26,495 $ 14,875
==============================================
Cash income tax payments $ 114,617 $ 79,301 $ 86,156
==============================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
- --------------------------------------------------------------------------------
20
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other
Common Stock Paid-in Retained Comprehensive Comprehensive
Shares Amount Capital Earnings Income Income
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 152,752 $1,528 $ 365,135 $ 717,078 $ 7,516 --
Net earnings for the year -- -- -- 188,576 -- $ 188,576
Dividends declared -- -- -- (14,525) -- --
Common stock issued for options exercised 180 2 9,073 -- -- --
Purchase of common stock -- -- (80,223) -- -- --
Unrealized gain on securities held -- -- -- -- 1,700 1,700
Sale of securities held -- -- -- -- (4,000) (3,500)
Decrease from translation of foreign
financial statements -- -- -- -- (18,666) (18,666)
Other -- -- 935 (904) -- --
---------------------------------------------------------------------------
Balance, December 31, 1997 152,932 $1,530 $ 294,920 $ 890,225 $(13,450) $ 168,110
===========================================================================
Net earnings for the year -- -- -- 192,186 -- 192,186
Dividends declared -- -- -- (12,840) -- --
Common stock issued for options exercised 365 3 30,542 -- -- --
Purchase of common stock -- -- (2,066) -- -- --
Common stock issued for acquisitions -- -- 8,661 -- -- --
Increase from translation of foreign
financial statements -- -- -- -- 12,777 12,777
Sale of securities held -- -- -- -- (1,700) (1,700)
---------------------------------------------------------------------------
Balance, December 31, 1998 153,297 $1,533 $ 332,057 $ 1,069,571 $ (2,373) $ 203,263
===========================================================================
Net earnings for the year -- -- -- 261,624 -- 261,624
Dividends declared -- -- -- (9,912) -- --
Common stock issued for options exercised 738 7 18,134 -- -- --
Sale of treasury stock -- -- 69,845 -- -- --
Decrease from translation of foreign
financial statements -- -- -- -- (31,732) (31,732)
---------------------------------------------------------------------------
Balance, December 31, 1999 154,035 $1,540 $ 420,036 $ 1,321,283 $(34,105) $ 229,892
===========================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
- --------------------------------------------------------------------------------
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(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.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those 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, noncurrent
trade receivables and capitalized costs associated with obtaining financings
which are being amortized over the term of the related debt.
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. $37,268,000, $34,269,000
and $25,786,000 of amortization was charged to expense for the years ended
December 31, 1999, 1998 and 1997, 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 the 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.
ACCUMULATED OTHER COMPREHENSIVE INCOME This consists of the following as of
December 31 (000's omitted):
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Cumulative foreign
translation adjustment $(34,105) $(2,373) $(15,150)
Unrealized gain on
securities -- -- 1,700
-----------------------------------
$(34,105) $(2,373) $(13,450)
================================================================================
- --------------------------------------------------------------------------------
(2) Acquisitions:
- --------------------------------------------------------------------------------
On July 14, 1999, Hach Company was acquired and merged into the Company. The
Company issued 0.2987 shares of common stock in exchange for each outstanding
share of Hach; 6,594,430 shares were exchanged for all outstanding Hach 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. Hach Company's year-end was a
fiscal year ending on April 30. To combine with the Company, the twelve month
periods ending January 30, 1999 and January 31, 1998 for Hach have been
utilized. Hach is engaged in the manufacture and marketing of instruments and
kits to analyze chemical and other properties of water and aqueous solutions.
Reflected in Other expense is a one-time charge of $11.8 million ($9.8 million
after-tax or $.07 per share) to reflect the costs of the transaction and the
elimination of redundant activities and operations. The majority of these costs
are cash expenses and were incurred during 1999.
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; 0.90478 shares were exchanged for each Fluke share. 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,
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
professional electronic test tools. Reflected in Other expense is a one-time
charge of $40.8 million ($28.6 million after-tax or $.20 per 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 were 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 $3,118,643 $2,929,560
Net earnings from
continuing operations 190,530 181,580
Earnings per share
from continuing
operations (diluted) $ 1.32 $ 1.27
==========================================================================
- --------------------------------------------------------------------------------
(3) Inventory
- --------------------------------------------------------------------------------
The major classes of inventory are summarized as follows (000's omitted):
- --------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Finished goods $128,134 $130,463
Work in process 67,437 75,768
Raw material 129,102 131,250
----------------------------
$324,673 $337,481
================================================================================
If the first-in, first-out (FIFO) method had been used for inventories valued at
LIFO cost, such inventories would have been $11,394,000 and $10,615,000 higher
at December 31, 1999 and 1998, respectively.
- --------------------------------------------------------------------------------
(4) Property, Plant and Equipment
- --------------------------------------------------------------------------------
The major classes of property, plant and equipment are summarized as follows
(000's omitted):
- --------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Land and
improvements $ 25,595 $ 26,607
Buildings 209,118 207,933
Machinery and
equipment 818,200 768,990
-----------------------------
1,052,913 1,003,530
Less accumulated
depreciation (552,724) (493,332)
-----------------------------
$ 500,189 $ 510,198
================================================================================
- --------------------------------------------------------------------------------
(5) Financing
- --------------------------------------------------------------------------------
Financing consists of the following (000's omitted):
- --------------------------------------------------------------------------------
December 31, December 31,
1999 1998
- --------------------------------------------------------------------------------
Notes payable due 2008 $250,000 $250,000
Notes payable due 2003 30,000 30,000
Notes payable due 1999 -- 41,200
Other 94,634 182,439
----------------------------
374,634 503,639
Less-currently payable 33,597 59,721
----------------------------
$341,037 $443,918
================================================================================
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 2003 had an original average life of approximately 10 years
and an average interest cost of 7%. The carrying amount approximates fair value.
The Notes due 1999 had an original average life of approximately 7 years
and an average interest cost of 7.3%. The estimated fair value of the Notes was
approximately $41.7 million at December 31, 1998.
Other includes principally short-term borrowings under uncommitted lines of
credit which are payable upon demand. The carrying amount approximates fair
value. The weighted
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
average interest rate for short-term borrowings was 5.3%, 5.8% and 5.9% for each
of the three years ended December 31, 1999, 1998 and 1997, respectively. The
Company also 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 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, 1999. The Company is
charged a fee of .075% per annum for the facility. Commitment and facility fees
of $187,500 were incurred in 1999, 1998 and 1997.
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:
2000 -$33,597,000; 2001 - $57,061,000; 2002 - $724,000; 2003 - $30,356,000;
2004 -$310,000; and $252,586,000 thereafter.
- --------------------------------------------------------------------------------
(6) Accrued Expenses and Other Liabilities:
- --------------------------------------------------------------------------------
Selected accrued expenses and other liabilities include the following (000's
omitted):
- --------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Current Noncurrent Current Noncurrent
Compensation
and benefits $126,130 $54,057 $114,393 $49,143
Claims, including
self insurance
and litigation 16,221 91,920 15,051 85,286
Post retirement
benefits 5,000 73,006 5,000 75,500
Environmental
and regulatory
compliance 34,156 60,719 38,209 67,926
Taxes, income
and other 45,065 7,950 59,814 7,699
================================================================================
Approximately $7 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):
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 267.8 $ 194.6 $ 72.8 $ 70.8
Service cost 12.9 12.0 0.5 0.4
Interest cost 17.2 15.6 4.7 4.9
Plan participants' contributions -- -- -- --
Amendments -- (20.0) -- --
Actuarial gain (loss) (27.0) 18.4 (8.2) 0.6
Acquisition -- 65.5 -- --
Benefits paid (21.1) (18.3) (6.1) (3.9)
---------------------------------------------------------
Benefit obligation at end of year 249.8 267.8 63.7 72.8
Change in plan assets:
Fair value of plan assets at beginning of year 287.8 232.6 -- --
Actual return on plan assets 47.7 5.4 -- --
Acquisition -- 70.1 -- --
Employer distribution -- (2.0) -- --
Benefits paid (21.1) (18.3) -- --
---------------------------------------------------------
Fair value of plan assets at end
of year 314.4 287.8 -- --
Funded status 64.6 20.0 (63.7) (72.8)
Unrecognized net actuarial gain (47.7) (2.7) (14.3) (7.7)
---------------------------------------------------------
Prepaid (accrued) benefit cost $ 16.9 $ 17.3 $ (78.0) $ (80.5)
====================================================================================================================================
Weighted-average assumptions as of December 31:
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 10.0% 10.0% -- --
</TABLE>
For measurement purposes, an 8 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate
was assumed to decrease gradually to 6 percent by 2002 and remain at that
level thereafter.
<TABLE>
<CAPTION>
Components of net periodic benefit cost:
<S> <C> <C> <C> <C>
Service cost $12.9 $12.0 $ 0.5 $ 0.4
Interest cost 17.2 15.6 4.7 4.9
Expected return on plan assets (27.4) (22.0) -- --
Recognized net actuarial gain (2.2) (0.3) (1.0) (1.0)
-------------------------------------------------------
Net periodic benefit cost $ 0.5 $ 5.3 $ 4.2 $ 4.3
====================================================================================================================================
</TABLE>
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 Increase
- --------------------------------------------------------------------------------
Effect on total of service and
interest cost components $0.5 $(0.5)
Effect on postretirement
benefit obligation 6.5 (5.9)
================================================================================
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 $35,624,000, $33,303,000 and
$33,450,000 for the years ended December 31, 1999, 1998 and 1997, 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.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 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
(average $14.86 per share) 10,127
Granted (average $43.11 per share) 1,154
Exercised (average $9.52 per share) (365)
Cancelled (611)
-------
Outstanding at December 31, 1998
(average $17.26 per share) 10,305
Granted (average $49.66 per share) 942
Exercised (average $9.54 per share) (738)
Cancelled (292)
-------
Outstanding at December 31, 1999
(at $3.19 to $67.75 per share,
average $20.48 per share) 10,217
================================================================================
As of December 31, 1999, options with a weighted average remaining life of
3.8 years covering 5,717,000 shares were exercisable at $3.19 to $45.38 per
share (average $11.59 per share) and options covering 2,711,000 shares remain
available to be granted.
Options outstanding at December 31, 1999 are summarized below:
- --------------------------------------------------------------------------------
Number Average Average Number Average
Exercise Outstanding Exercise Remaining Exercisable Exercise
Price (thousands) Price Life (thousands) Price
- --------------------------------------------------------------------------------
$3.19 to $4.25 1,380 $ 3.28 0.1 years 1,380 $ 3.28
$5.03 to $7.47 1,240 $ 6.39 3 years 1,240 $ 6.39
$7.97 to $11.75 1,028 $10.26 4 years 1,028 $10.26
$14.13 to $20.81 1,366 $15.67 6 years 1,151 $15.34
$21.25 to $32.22 3,473 $24.25 7 years 738 $24.35
$35.19 to $67.75 1,730 $46.64 9 years 180 $38.23
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 37% expected volatility and dividends at the current annual rate. The weighted
average grant date fair market value of options issued was $28 per share in
1999, $18 per share in 1998 and $10 per share in 1997. Had this method been used
in the determination of income, net earnings would have decreased by
approximately $10.7 million in 1999, $7.8 million in 1998 and $5.3 million in
1997 and diluted earnings per share would have decreased by $.07 in 1999, $.05
in 1998 and $.04 in 1997. These pro forma amounts may not be representative of
the effects on pro forma net earnings 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 $28,000,000 in 2000, $23,000,000 in 2001, $19,000,000 in 2002,
$14,000,000 in 2003, $10,000,000 in 2004 and $22,000,000 thereafter. Total rent
expense charged to income for all operating leases was $34,000,000, $32,000,000
and $25,000,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(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 has accepted an agreement in principle to settle these
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.
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):
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Federal:
Current $ 111,809 $ 90,560 $ 101,385
Deferred 16,139 12,151 (1,751)
State and local 11,665 6,647 13,611
Foreign 28,325 15,465 4,532
---------------------------------------
Income tax provision $ 167,938 $ 124,823 $ 117,777
================================================================================
Deferred income taxes are reflected in Prepaid expenses and other and in
Other assets. Deferred tax assets consist of the following (000's omitted):
- --------------------------------------------------------------------------------
December 31, 1999 1998
- --------------------------------------------------------------------------------
Bad debt allowance $ 10,242 $ 8,492
Inventories 9,913 9,086
Property, plant and equipment (41,564) (42,669)
Post retirement benefits 33,827 33,795
Insurance, including self-
insurance 27,108 24,243
Environmental compliance 23,946 25,031
Other accruals 15,538 36,700
All other accounts (19,575) (19,104)
--------------------------
Net deferred tax asset $ 59,435 $ 75,574
================================================================================
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The effective income tax rate for the years ended December 31 varies from the
statutory federal income tax rate as follows:
- --------------------------------------------------------------------------------
Percentage of PreTax Earnings
1999 1998 1997
- --------------------------------------------------------------------------------
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 2.7 3.7 3.1
State income taxes
(net of federal
income tax benefit) 1.8 1.4 2.7
Taxes on foreign earnings (0.9) (1.4) (2.4)
Costs of Hach (1999)
and Fluke (1998) mergers 0.5 0.7 --
------------------------------
Effective income tax rate 39.1% 39.4% 38.4%
================================================================================
- --------------------------------------------------------------------------------
(12) Segment Data:
- --------------------------------------------------------------------------------
Operating profit represents total revenues less operating expenses,
excluding Other expense, Interest expense and Income taxes. The identifiable
assets by segment are those used in each segment's operations. Intersegment
amounts are eliminated to arrive at consolidated totals.
Detailed segment data is presented in the following table (000's omitted):
- --------------------------------------------------------------------------------
Operations in Different Industries--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Total Sales:
Process/
Environmental
Controls $1,854,184 $1,752,552 $1,426,339
Tools and
Components 1,343,054 1,294,509 1,192,761
----------------------------------------
$3,197,238 $3,047,061 $2,619,100
==================================================================== ===========
Operating Profit:
Process/
Environmental
Controls $ 286,997 $ 239,794 $ 189,431
Tools and
Components 187,511 159,225 144,370
Other (16,501) (14,907) (14,455)
----------------------------------------
$ 458,007 $ 384,112 $ 319,346
================================================================================
Identifiable Assets:
Process/
Environmental
Controls $1,793,873 $1,783,142 $1,345,250
Tools and
Components 995,234 994,364 832,614
Other 257,964 63,353 86,877
----------------------------------------
$3,047,071 $2,840,859 $2,264,741
================================================================================
Liabilities:
Process/
Environmental
Controls $ 596,332 $ 595,360 $ 451,743
Tools and
Components 381,025 374,726 421,526
Other 360,960 469,985 218,247
----------------------------------------
$1,338,317 $1,440,071 $1,091,516
================================================================================
Depreciation and Amortization:
Process/
Environmental
Controls $ 81,647 $ 69,416 $ 53,430
Tools and
Components 44,772 45,111 44,908
----------------------------------------
$ 126,419 $ 114,527 $ 98,338
================================================================================
Capital Expenditures:
Process/
Environmental
Controls $ 53,358 $ 61,422 $ 58,642
Tools and
Components 35,551 40,192 38,304
----------------------------------------
$ 88,909 $ 101,614 $ 96,946
================================================================================
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Operations in Geographical Areas--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Total sales:
United States $ 2,507,517 $ 2,418,500 $ 2,061,875
Germany 166,268 151,136 116,796
United Kingdom 138,066 123,511 124,065
All other 385,387 353,914 316,364
------------------------------------------
$ 3,197,238 $ 3,047,061 $ 2,619,100
================================================================================
Long-lived assets:
United States $ 1,747,086 $ 1,821,142 $ 1,308,569
Germany 22,101 22,931 19,187
United Kingdom 24,967 21,157 17,570
All other 50,800 43,933 40,950
Less: Deferred taxes and
financial instruments (59,435) (75,574) (97,588)
------------------------------------------
$ 1,785,519 $ 1,833,589 $ 1,288,688
================================================================================
Sales outside the United States:
Direct sales $ 689,721 $ 628,561 $ 557,225
Exports 263,000 259,000 242,000
------------------------------------------
$ 952,721 $ 887,561 $ 799,225
================================================================================
- --------------------------------------------------------------------------------
(13) Quarterly Data-Unaudited (000's omitted except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1999
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $793,044 $774,133 $781,867 $848,194
Gross profit 295,484 301,930 311,068 327,934
Operating profit 102,681 113,857 119,216 122,253
Net earnings 59,122 66,353 61,846* 74,303
Earnings per share:
Basic $ .42 $ .47 $ .43* $ .52
Diluted $ .41 $ .46 $ .42* $ .51
</TABLE>
- --------------------------------------------------------------------------------
* Includes $9.8 million after-tax costs ($0.07 per share) from the merger with
Hach Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $680,005 $773,204 $758,253 $835,599
Gross profit 245,170 292,141 300,607 319,914
Operating profit 76,514 97,662 103,489 106,447
Net earnings 44,628 55,658 31,010* 60,890
Earnings per share:
Basic $ .32 $ .40 $ .22* $ .43
Diluted $ .31 $ .39 $ .21* $ .42
</TABLE>
- --------------------------------------------------------------------------------
* Includes $28.6 million after-tax costs ($0.20 per share) from the merger with
Fluke Corporation
- --------------------------------------------------------------------------------
29
<PAGE>
DANAHER CORPORATION AND SUBSIDIARIES
Major Operating
Company Executives
A.L. Hyde Company
Kurt C. Glaser
President
Atlas Copco Controls
Hermann E. Braun
President (acting)
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 Group
Elmar F. Illek
President
Fluke Corporation
Thomas S. Gross
President
Gems Sensors
Frank A. Wilson
President (acting)
Hach Company
Elmar F. Illek
President
Hengstler GmbH
Hermann E. Braun
President
Hennessy Industries, Inc.
Vincent E. Piacenti
President
Jacobs Chuck Manufacturing Company
C. Michael Heath
President
Jacobs Vehicle Systems, Inc.
Gary A. Masse
President
Jennings Technology Company
John P. Williamson
President
Joslyn Hi-Voltage Company
James F. Domo
President
Joslyn Manufacturing Company
Joseph A. Hahn
President
Joslyn Sunbank Company
Donald G. McClintock, Jr.
President
Matco Tools Corporation
Thomas N. Willis
President
M&M Precision Systems Corporation
Gerald W. Blankenship
President
Namco Controls Corporation
Robert E. Joyce
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
Simon R. Appleby
President
Pacific Scientific Energetic
Materials Company
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
Executive Vice President,
Chief Financial Officer and Secretary
H. Lawrence Culp, Jr.
Executive Vice President
Brian M. McNeill
Executive Vice President
Steven E. Simms
Executive Vice President
William J. Butler
Vice President and Group Executive
Dennis D. Claramunt
Vice President and Group Executive
Thomas S. Gross
Vice President and Group Executive
Elmar F. Illek
Vice President and Group Executive
Daniel L. Comas
Vice President - Corporate Development
Mark C. DeLuzio
Vice President - Danaher Business System
James H. Ditkoff
Vice President - Finance & Tax
Dennis A. Longo
Vice President - Human Resources
Christopher C. McMahon
Vice President - Controller
Uldis K. Sipols
Vice President - Procurement
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
Alan G. Spoon
President
The Washington Post Company
A. Emmet Stephenson, Jr.
Chairman of the Board
Startek, Inc.
<PAGE>
DANAHER CORPORATION AND SUBSIDARIES
EXHIBIT TO 1999 ANNUAL REPORT ON FORM 10K
(21) SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
STATE OR DOING
JURISDICTION OF BUSINESS
NO. Corporation INCORPORATION AS (DBA)
<S> <C> <C> <C>
1 Danaher Corporation Delaware -
2 Danaher Insurance Company Delaware -
3 DMG Plastics, Inc. Delaware -
4 FJ 900 Inc. Delaware -
5 Armstrong Tools, Inc. Delaware -
6 Utica Holding Company Delaware -
7 Fluke Corporation Washington -
8 Fluke Electronics Corporation Washington -
9 Fluke International Corporati Washington -
10 Fluke Deutschland GmbH Germany -
11 Fluke Electronics Canada Canada -
12 Fluke Electronics (Malaysia) Malaysia -
13 Fluke South East Asia Pte.Ltd Singapore -
14 KK Fluke Japan -
15 Fluke Australia Pty Ltd Australia -
16 Fluke do Brazil Ltda. Brazil -
17 Fluke Europe B.V. Netherlands -
18 Fluke Holding B.V. Netherlands -
19 Fluke Industrial B.V. Netherlands -
20 Fluke Nederland B.V. Netherlands -
21 Fluke Vertriebsgesellschaft m Austria -
22 Fluke Belgium N.V./S.A. Belgium -
23 Fluke Danmark A/S Denmark -
24 Fluke Finland Oy Finland -
25 Fluke France S.A. France -
26 Fluke Italia S.r.l. Italy -
27 Fluke Norge A/S Norway -
28 Fluke Iberica S.L. Spain -
29 Fluke Sverige AB Sweden -
30 Contronic Development AB - AC Sweden -
31 Advanced Motion Controls AB - Sweden -
32 Fluke Switzerland AG Switzerland -
33 Fluke U.K. Ltd. U.K. -
34 DH Holdings Corp. Delaware -
35 DCI Consolidated Industries, Delaware -
36 Delta Consolidated Industries Arkansas -
37 Truck Storage Incorporated Delaware -
38 Danaher Finance Company Delaware -
39 Sonix, Inc. Virginia -
40 Sonix Technologies SDV.BHD. Malaysia -
41 Gems Sensors Inc. Delaware -
42 Industrial Sensors, Inc.- AF Delaware -
43 Jacobs Chuck Manufacturing Co Delaware -
44 Jacobs Chuck Mfg. (Suzhou) Co China -
45 Jacobs Chuck Trading (Shangha China -
46 Jacobs Japan Inc. Delaware -
47 Power Tool Holders Incorporat Delaware -
48 Kistler-Morse Corporation Delaware -
49 AB Kihlstroms Manometerfabrik Sweden -
50 Jessie & J Company, Ltd. - Y Hong Kong -
51 Gems Sensors AG Switzerland -
52 The Partlow Corporation New York -
53 Time & Temperature Controls C Delaware -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR DOING
JURISDICTION OF BUSINESS
NO. Corporation INCORPORATION AS (DBA)
<S> <C> <C> <C>
54 Anderson Instrument Co. Inc. New York -
55 Flow Measurement Corporation Delaware -
56 Western Pacific Industries In Delaware -
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 -
62 The Allen Manufacturing Compa Delaware -
63 Industrial Fasteners, Inc. Delaware -
64 Quality Wire Processing, Inc. Delaware -
65 Holo-Krome Australia Pty Ltd. Australia -
66 Danaher Canada, Inc. Alberta -
67 Veeder-Root Company Delaware -
68 Launchchange Limited - Z U.K. -
69 West Instruments Ltd. - W U.K. -
70 Veeder-Root Environmental Sys U.K. -
71 Gwendolene Holdings Ltd. U.K. -
72 Gems Sensors Ltd. - W U.K. -
73 Holo-Krome Ltd. - W U.K. -
74 Jacobs Manufacturing Co. Ltd. U.K. -
75 Piccadilly Precision Engineer U.K. -
76 Danaher UK Industries Ltd. - U.K. -
77 Pacific Scientific Ltd.- AE U.K. -
78 CGF Automation Ltd. U.K. -
79 Contents Measuring Systems Li U.K. -
80 Buhler Montec Group Ltd. - AK U.K. -
81
82 Veeder-Root Ltd. U.K. -
83 QualiTROL Instruments Ltd. U.K. -
84 Robin Electronics Ltd. U.K. -
85 Petroleum Industry Controls, Delaware -
86 Veeder-Root of N.C., Inc. Delaware -
87 Veeder-Root do Brasil Brazil -
88 Veeder-Root SARL - U France -
89 Veeder-Root Service Company Delaware -
90 Old Tide Corp. California -
91 Jacobs Vehicle Systems, Inc. Delaware -
92 Jacobs Mexico, S.A.de C.V. Mexico -
93 Diesel Engine Retarders, Inc. Delaware -
94 McCrometer, Inc. Delaware -
95 Commercial Avenue Company Delaware -
96 Hach Company Delaware -
97 Hach Europe, S.A. Belgium -
98 Hach Sales & Service Canada L Canada -
99 Environmental Test Systems, I Delaware -
100 Lea Way Hand Tool Corp. Taiwan -
101 Joslyn Holding Company Delaware -
102 Joslyn Company, LLC Delaware -
103 Joslyn Manufacturing Company, Delaware -
104 Joslyn Electronic Systems Com Delaware -
105 Joslyn Hi-Voltage Company, LL Delaware -
106 Joslyn Clark Controls, LLC Delaware -
107 Sunbank Family of Companies, California -
108 Joslyn Sunbank Company, LLC California -
109 Air Dry Company of America, L Delaware -
110 Jennings Technology Company, Delaware -
111 Jennings Land Company Delaware -
112 Cyberex, LLC Delaware -
113 Cyberex, B.V. Netherlands -
114 Danaher Canadian Holdings Inc Ontario -
115 Plastifab Industries Ontario -
116 Joslyn Canada Ontario -
117 Hengstler Canada LP Ontario -
118 QualiTROL Canada LP Ontario -
119 Hennessy Industries Canada LP Ontario -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR DOING
JURISDICTION OF BUSINESS
NO. Corporation INCORPORATION AS (DBA)
<S> <C> <C> <C>
120 Danaher Tool Group LP Ontario -
121 Danaher Canada Partners Inc. Ontario -
122 Acme-Cleveland Corp. Ohio -
123 AC Intermediate Co. Ohio -
124 ACMS Incorporated Ohio -
125 Acme-Cleveland Laser Systems, Ohio -
126 Acme Communications Technolog Ohio -
127 Ball Screws and Actuators Co. California -
128 Communications Technology Cor California -
129 Communications Technology (Ca Brit.Colum. -
130 Communications Technology Cor Mexico -
131 Phoenix Microsystems, Inc. Alabama -
132 Dolan-Jenner Industries, Inc. Massachusetts -
133 Dolan-Jenner Europe, B.V. (60 Netherlands -
134 LSMT Corp. Michigan -
135 143420 Ontario, Inc. Ontario -
136 M & M de France, Inc. Ohio -
137 M & M Precision Systems Corp. Ohio -
138 Master Gears Corp.- AF Delaware -
139 Precision Gauges, Inc.- AF Delaware -
140 Namco Controls Corp. Ohio -
141 American Sigma, Inc. New York -
142 Kingsley Tools, Inc. Delaware -
143 Easco Hand Tools Inc. Delaware -
144 Hand Tool Design Corporation Delaware -
145 KD Tools of Puerto Rico, Inc. Delaware -
146 Beamco, Inc. Wisconsin -
147 Dynapar Corporation Illinois -
148 Encoders Incorporated Delaware -
149 Hennessy Industries Inc. Delaware -
150 Service Station Products Comp Delaware -
151 Wheel Service Equipment Corpo Delaware -
152 Hengstler Espana SA Spain -
153 Current Technology, Inc. Delaware -
154 GID Acquisition Company Delaware -
155 Data Recorders Incorporated Delaware -
156 Hecon Properties, Inc. New Jersey -
157 Hengstler Italia SRL - T Italy -
158 Hengstler Japan Corp. Japan -
159 Matco Tools Corporation New Jersey -
160 Mechanics Custom Tools Corpor Delaware -
161 NMTC, Inc. Delaware -
162 Danaher Alberta Inc. Alberta -
163 Pacific Scientific Company California -
164 Pacific Scientific Instrument California -
165 Fisher Pierce Company California -
166 PacSci Motion Control, Inc. Massachusetts -
167 Pacific Scientific Energetic Delaware -
168 Wermex Corporation Texas -
169 Bobinas del Sur Mexico -
170 Pacific Scientific Internatio California -
171 Pacific Scientific SARL France -
172 Advanced Servo Systems Limite Ireland -
173 Light Controls Corp.- AF Delaware -
174 QualiTROL Corporation New York -
175 QualiTROL GmbH - X Germany -
176 Hengstler GmbH Germany -
177 KACO GmbH - Y Germany -
178 Hengstler Controle Numerique France -
179 Societe Civile Immobiliere France -
180 Gems Sensors GmbH Germany -
181 Veeder-Root GmbH Germany -
182 Dr.Bruno Lange GmbH & Co.KG - Germany -
183 Namco Controls GmbH - X Germany -
184 Cleveland Precision Systems G Germany -
185 Pacific Scientific GmbH - X Germany -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR DOING
JURISDICTION OF BUSINESS
NO. Corporation INCORPORATION AS (DBA)
<S> <C> <C> <C>
186 Eduard Bautz GmbH & Co.KG Germany -
187 Danaher GbR Germany -
188 Power Transformer Controls Co Delaware -
189 JS Technology, Inc. Delaware -
</TABLE>
<PAGE>
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.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland
March 17, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 260,281
<SECURITIES> 0
<RECEIVABLES> 572,738
<ALLOWANCES> 28,000
<INVENTORY> 324,673
<CURRENT-ASSETS> 1,202,117
<PP&E> 1,052,913
<DEPRECIATION> 552,724
<TOTAL-ASSETS> 3,047,071
<CURRENT-LIABILITIES> 708,786
<BONDS> 0
0
0
<COMMON> 1,540
<OTHER-SE> 1,707,214
<TOTAL-LIABILITY-AND-EQUITY> 3,047,071
<SALES> 3,197,238
<TOTAL-REVENUES> 3,197,238
<CGS> 1,960,822
<TOTAL-COSTS> 2,739,231
<OTHER-EXPENSES> 11,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,667
<INCOME-PRETAX> 429,562
<INCOME-TAX> 167,938
<INCOME-CONTINUING> 261,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 261,624
<EPS-BASIC> 1.84
<EPS-DILUTED> 1.79
</TABLE>
