SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ X ] SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter ended June 26, 1998 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-8089 DANAHER CORPORATION (Exact name of registrant as specified in its charter) Delaware 59-1995548 (State of incorporation) (I.R.S. Employer Identification number) 1250 24th Street, N.W., Suite 800 Washington, D.C. 20037 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 202-828-0850 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of common stock outstanding at July 16, 1998 was 117,170,527.
DANAHER CORPORATION INDEX FORM 10-Q PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Condensed Balance Sheets at June 26, 1998 and December 31, 1997 3 Consolidated Condensed Statements of Earnings for the three months and six months ended June 26, 1998 and June 27, 1997 4 Consolidated Condensed Statements of Cash Flow for the six months ended June 26, 1998 and June 27, 1997 5 Notes to Consolidated Condensed Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II - OTHER INFORMATION Item 6. (a) Exhibits: 8-9 (b) Reports on Form 8-K: None
DANAHER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (000's omitted) June 26, December 31, 1998 1997 (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 32,916 $ 33,317 Accounts receivable, net 359,589 322,600 Inventories: Finished goods 114,807 82,451 Work in process 72,342 54,544 Raw material and supplies 100,164 72,421 Total inventories 287,313 209,416 Prepaid expenses and other current assets 42,906 53,006 Total current assets 722,724 618,339 Property, plant and equipment, net of accumulated depreciation of $292,047 and $263,227, respectively 382,907 335,223 Other assets 63,980 72,739 Excess of cost over net assets of acquired companies, net 1,201,664 853,416 Total assets $2,371,275 $1,879,717 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term debt $ 162,310 $ 35,527 Accounts payable 158,144 135,190 Accrued expenses 454,009 353,518 Total current liabilities 774,463 524,235 Other liabilities 272,467 275,881 Long-term debt 323,399 162,720 Stockholders' equity: Common stock-$.01 par value 1,287 1,287 Additional paid-in capital 339,231 335,465 Retained earnings 736,992 655,692 Cumulative foreign translation adjustment and other (7,123) (6,122) Treasury Stock (69,441) (69,441) Total stockholders' equity 1,000,946 916,881 Total liabilities and stockholders' equity $2,371,275 $1,879,717 See notes to consolidated condensed financial statements.
DANAHER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (000's omitted except per share amounts) (unaudited) Quarter Ended Six Months Ended June 26, June 27, June 26, June 27, 1998 1997 1998 1997 Net revenues $622,271 $502,789 $1,156,689 $969,230 Operating costs and expenses: Cost of sales 409,399 338,725 773,215 657,686 Selling, general and administrative expenses 123,213 92,266 222,872 178,532 Goodwill and other amortization 7,597 5,856 13,493 11,613 Total operating costs and expenses 540,209 436,847 1,009,580 847,831 Operating profit 82,062 65,942 147,109 121,399 Interest expense, net 6,970 3,236 10,156 7,100 Earnings from continuing operations before income taxes 75,092 62,706 136,953 114,299 Income taxes 28,910 24,448 52,727 44,506 Net Earnings $ 46,182 $ 38,258 $ 84,226 $ 69,793 Basic earnings per share $ .39 $ .33 $ .72 $ .59 Average shares outstanding 117,549 117,314 117,499 117,774 Diluted earnings per share $ .38 $ .32 $ .69 $ .58 Average common stock and equivalent shares outstanding 121,295 120,058 121,257 120,407 See notes to consolidated condensed financial statements.
DANAHER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (000's omitted) (unaudited) Six Months Ended June 26, June 27, 1998 1997 Cash flows from operating activities: Net earnings from operations $ 84,226 $ 69,793 Noncash items, depreciation and amortization 42,492 38,273 (Increase) decrease in accounts receivable 11,391 (21,769) (Increase) decrease in inventories (29,992) (1,270) Increase in accounts payable 6,527 10,654 Change in other assets and liabilities 59,732 40,188 Total operating cash flows 174,376 135,869 Cash flows from investing activities: Payments for additions to property, plant, and equipment, net (34,191) (25,976) Cash paid for acquisitions (375,441) (58,962) Net cash provided by (used in) investing activities (409,632) (84,938) Cash flows from financing activities: Acquisition of treasury stock -- (19,842) Proceeds from issuance of common stock 3,766 1,029 Borrowing (repayments) of debt 234,176 (20,605) Payment of dividends (2,926) (2,938) Net cash used in financing activities 235,016 (42,356) Effect of exchange rate changes on cash (161) 29 Net change in cash and cash equivalents (401) 8,604 Beginning balance of cash and cash equivalents 33,317 26,444 Ending balance of cash and cash equivalents $ 32,916 $ 35,048 Supplemental disclosures: Cash interest payments $ 9,825 $ 6,693 Cash income tax payments $ 29,104 $ 44,266 See notes to consolidated condensed financial statements.
DANAHER CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) NOTE 1. GENERAL The consolidated condensed financial statements included herein have been prepared by Danaher Corporation (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed financial statements included herein should be read in conjunction with the financial statements and the notes thereto included in the Company's 1997 Annual Report on Form 10-K. In the opinion of the registrant, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company at June 26, 1998 and December 31, 1997, its results of operations for the three months and six months ended June 26, 1998 and June 27, 1997, and its cash flows for the six months ended June 26, 1998 and June 27, 1997. NOTE 2. MERGER WITH FLUKE CORPORATION On July 7, 1998, Fluke Corporation was acquired and merged into the Company. The Company issued 17,748,572 shares of common stock in exchange for all outstanding Fluke shares. The transaction was a tax-free reorganization and will be accounted for as a pooling-of- interests. Accordingly, future financial statements will be restated to reflect the combined companies. Sales reported will increase $441 million in 1997 and $421 million in 1996. Reported net income will increase $21.8 million in 1997 and $26.4 million in 1996. 1997 reported diluted earnings per share will be unchanged and 1996 reported diluted earnings per share from continuing operations will increase from $1.07 to $1.13 per share. Results for interim periods in 1998 have not yet been determined on a combined company basis. It is anticipated that third quarter results will include a one-time after-tax charge of approximately $25 million to $30 million to reflect the costs of the transaction and integrating and implementing efficiencies associated with information, operational and administrative systems. Fluke is engaged in the manufacture and marketing of compact, professional electronic test tools. NOTE 3. ACQUISITION OF PACIFIC SCIENTIFIC COMPANY The Company obtained control of Pacific Scientific Company as of March 9, 1998. Total consideration for Pacific Scientific 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 give effect to the transaction as if it had occurred at the beginning of each period. The pro forma information is presented for information purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time (unaudited, 000's omitted): Year Ended Six Months Ended Six Months Ended December 31, June 27, June 26, 1997 1997 1998 Net Sales $2,361,428 $1,120,297 $1,228,271 Net Earnings 147,810 65,799 82,570 Earnings per Share $ 1.22 $ .55 $ .68 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the 1998 quarter were 24% higher than the 1997 quarter. Net sales for the six-month period were 19% higher than the corresponding period in 1997. This is due both to continued increases in shipment volume in all segments and the effect of acquisitions, with comparable companies accounting for approximately 5% and 6% of sales growth in both the quarter and six-month periods, respectively. Gross profit margin in 1998, as a percentage of sales, was approximately 34.2% for the quarter and 33.2% for the six-month period, an increase of 1.6 and 1.1 percentage points, respectively, from 1997 levels. The gross margin increase was attributable to both the effect of the acquired companies which provide a higher gross margin and productivity improvements within the existing business units. Selling, general and administrative expenses for the 1998 quarter and six-month period increased in total dollars principally due to the higher volume levels. Selling, general and administrative expenses as a percentage of sales was 19.8% for the 1998 quarter and 19.3% for the six month period, respectively. This represents an increase of 1.4 and 0.9 percentage points, respectively, from prior periods. This reflects principally the impact of acquired businesses which have higher cost percentages in this area. Interest expense for the quarter and six-month period was 115% and 43% higher than the 1997 levels, respectively, due to higher average debt levels, reflecting the funding of the Pacific Scientific acquisition, offset in part by strong cash flow experienced in 1998 and 1997. The effective tax rate for both the second quarter and six-month periods is .5 percent points less in 1998 than 1997, reflecting lower tax rates associated with higher expected earnings from foreign operations. Liquidity and Capital Resources Since December 31, 1997, the Company has experienced increases in inventory and accounts payable. This is due to the lower activity levels experienced in the last weeks of 1997 caused by the holiday season. Total debt increased to $486 million at June 26, 1998, primarily as a result of the acquisition of Pacific Scientific, offset in part by strong operating cash flow. A regular quarterly dividend of $.0125 per share was declared, payable on July 31, 1998 to holders of record on June 26, 1998. The Company's cash provided from operations, as well as credit facilities available, should provide sufficient available funds to meet anticipated working capital requirements, capital expenditures, acquisitions, dividends and scheduled debt repayments. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:(10) Material Contracts: (a) As Amended Employment Agreement between Danaher Corporation and George M. Sherman dated as of January 2, 1990 (b) As Amended Credit Agreement Dated As of September 7, 1990. Among Danaher Corporation, the Financial Institutions Listed Therein and Bankers Trust Company as Agent. (c) As Amended Agreement as of November 1, 1990 between Danaher Corporation, Easco Hand Tools, Inc. and Sears, Roebuck and Co. (d) As Amended Note Agreements as of November 1, 1992 and April 1, 1993 Between Danaher Corporation and Lenders Referenced Therein. Exhibits: (3) (a) As Amended Articles of Incorporation Exhibits: (27) Financial Data Schedules (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DANAHER CORPORATION: Date: July 16, 1998 By: /s/ Patrick W. Allender Patrick W. Allender Chief Financial Officer Date: July 16, 1998 By: /s/ C. Scott Brannan C. Scott Brannan Controller