SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ X ] SECURITIES AND EXCHANGE ACT OF 1934 For the Quarter ended June 29, 2001 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 1-8089 DANAHER CORPORATION (Exact name of registrant as specified in its charter) Delaware 59-1995548 - ----------------------- ---------------------- (State of incorporation) (I.R.S. Employer Identification number) 2099 Pennsylvania Ave., N.W., 12/th/ Fl. Washington, D.C. 20006 - -------------------------------------- --------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 202-828-0850 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of common stock outstanding at July 16, 2001 was 143,259,968.
DANAHER CORPORATION ------------------- INDEX FORM 10-Q PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Condensed Balance Sheets at June 29, 2001 and December 31, 2000 1 Consolidated Condensed Statements of Earnings for the three months and six months ended June 29, 2001 and June 30, 2000 2 Consolidated Condensed Statements of Stockholders' Equity for the six months ended June 29, 2001 3 Consolidated Condensed Statements of Cash Flow for the six months ended June 29, 2001 and June 30, 2000 4 Notes to Consolidated Condensed Financial Statements 5-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. (a) Exhibits: 10 Exhibit 6.1: Credit Agreement between Bank of America and Danaher Corporation Dated June 28, 2001 11 (b) Reports on Form 8-K: None
DANAHER CORPORATION ------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- (000's omitted) --------------- June 29, December 31, 2001 2000 ---- ---- (unaudited) (Note 1) ASSETS ------ Current Assets: Cash and cash equivalents $ 675,310 $ 176,924 Accounts receivable, net 635,295 704,214 Inventories: Finished goods 159,199 152,509 Work in process 97,473 95,402 Raw material and supplies 198,661 212,699 ---------- ---------- Total inventories 455,333 460,610 Prepaid expenses and other current assets 123,174 132,558 ---------- ---------- Total current assets 1,889,112 1,474,306 Property, plant and equipment, net of accumulated depreciation of $689,000 and $633,000, respectively 545,448 575,531 Other assets 116,481 117,942 Excess of cost over net assets of acquired companies, net 2,068,854 1,863,900 ---------- ---------- Total assets $4,619,895 $4,031,679 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Notes payable and current portion of long-term debt $ 72,982 $ 81,633 Accounts payable 270,735 262,095 Accrued expenses 629,684 674,812 ---------- ---------- Total current liabilities 973,401 1,018,540 Other liabilities 425,783 357,249 Long-term debt 1,101,110 713,557 Stockholders' equity: Common stock-$.01 par value 1,569 1,556 Additional paid-in capital 387,862 364,426 Retained earnings 1,806,588 1,635,481 Accumulated other comprehensive income (76,418) (59,130) ---------- ---------- Total stockholders' equity 2,119,601 1,942,333 ---------- ---------- Total liabilities and stockholders' equity $4,619,895 $4,031,679 ========== ========== See notes to consolidated condensed financial statements. 1
DANAHER CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS --------------------------------------------- (000's omitted except per share amounts) (unaudited) <TABLE> <CAPTION> Quarter Ended Six Months Ended June 29, June 30, June 29, June 30, 2001 2000 2001 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales $956,641 $890,775 $1,961,924 $1,758,622 Operating costs and expenses: Cost of sales 581,300 541,185 1,209,698 1,079,143 Selling, general and administrative expenses 203,347 202,136 427,209 404,622 Goodwill and other amortization 15,381 10,789 29,986 20,563 Total operating costs and -------- -------- ---------- ---------- expenses 800,028 754,110 1,666,893 1,504,328 -------- -------- ---------- ---------- Operating profit 156,613 136,665 295,031 254,294 Interest expense, net 5,845 5,591 12,141 7,804 -------- -------- ---------- ---------- Earnings before income taxes 150,768 131,074 282,890 246,490 Income taxes 56,538 49,807 106,083 93,666 -------- -------- ---------- ---------- Net Earnings $ 94,230 $ 81,267 $ 176,807 $ 152,824 ======== ======== ========== ========== Basic earnings per share $ .65 $ .57 $ 1.23 $ 1.07 ======== ======== ========== ========== Average shares outstanding 144,016 142,246 143,445 142,498 ======== ======== ========== ========== Diluted earnings per share $ .63 $ .56 $ 1.19 $ 1.05 ======== ======== ========== ========== Average common stock and equivalent shares outstanding 152,642 145,243 151,554 145,306 ======== ======== ========== ========== </TABLE> See notes to consolidated condensed financial statements. 2
DANAHER CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY --------------------------------------------------------- (000's omitted) (unaudited) <TABLE> <CAPTION> 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, 2000 155,650 $1,556 $364,426 $1,635,481 $(59,130) -- Net earnings for the period -- -- -- 176,807 -- $176,807 Dividends declared -- -- -- (5,700) -- -- Common stock issued for options exercised 1,219 13 23,436 -- -- -- Decrease from translation of foreign financial statements -- -- -- -- (17,288) (17,288) ------- ------ -------- ---------- -------- -------- Balance, June 29, 2001 156,869 $1,569 $387,862 $1,806,588 $(76,418) $159,519 ======= ====== ======== ========== ======== ======== </TABLE> See notes to consolidated condensed financial statements. 3
DANAHER CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW ------------------------------------------------------- (000's omitted) (unaudited) Six Months Ended June 29, June 30, 2001 2000 ---- ---- Cash flows from operating activities: Net earnings from operations $ 176,807 $ 152,824 Noncash items, depreciation and amortization 86,117 69,847 Change in accounts receivable 52,015 27,553 Change in inventories 10,915 (48,587) Change in accounts payable (6,365) (943) Change in other assets and liabilities (8,236) 84,382 --------- -------- Total operating cash flows 311,253 285,076 --------- -------- Cash flows from investing activities: Payments for additions to property, plant, and equipment, net (39,418) (39,809) Cash paid for acquisitions (193,578) (445,803) --------- -------- Net cash used in investing activities (232,996) (485,612) --------- -------- Cash flows from financing activities: Proceeds from issuance of common stock 23,449 12,108 Proceeds from Borrowing of debt, net 403,072 199,070 Payment of dividends (5,700) (4,283) Purchase of common stock -- (82,174) --------- -------- Net cash provided by financing activities 420,821 124,721 --------- -------- Effect of exchange rate changes on cash (692) (753) --------- -------- Net change in cash and cash equivalents 498,386 (76,568) Beginning balance of cash and cash equivalents 176,924 260,281 --------- -------- Ending balance of cash and cash equivalents $ 675,310 $ 183,713 ========= ======== Supplemental disclosures: Cash interest payments $ 3,211 $ 7,118 ========= ======== Cash income tax payments $ 15,992 $ 17,627 ========= ======== See notes to consolidated condensed financial statements. 4
DANAHER CORPORATION ------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (unaudited) NOTE 1. GENERAL The consolidated condensed financial statements included herein have been prepared by Danaher Corporation (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed financial statements included herein should be read in conjunction with the financial statements and the notes thereto included in the Company's 2000 Annual Report on Form 10-K. In the opinion of the registrant, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company at June 29, 2001 and December 31, 2000, its results of operations for the three months and six months ended June 29, 2001 and June 30, 2000, and its cash flows for the six months ended June 29, 2001 and June 30, 2000. Total comprehensive income was as follows: 2001 2000 ---- ---- (millions) Quarter $ 76.0 $ 71.4 Six Months $159.5 $135.1 Total comprehensive income for all periods represents net income and the change in cumulative foreign translation adjustment. NOTE 2. SEGMENT INFORMATION Segment information is presented consistently with the basis described in the 2000 Annual Report. There has been no material change in total assets or liabilities by segment. Segment results for 2001 are shown below: Sales-Quarter Sales-Six Months 2001 2000 2001 2000 ---- ---- ---- ----- Process/Environmental Controls $666,948 $550,277 $1,391,118 $1,070,725 5
Tool and Components 289,693 340,498 570,806 687,897 -------- -------- ---------- ---------- $956,641 $890,775 $1,961,924 $1,758,622 ======== ======== ========== ========== Op Profit-Quarter Op Profit-Six Months 2001 2000 2001 2000 ---- ---- ---- ---- Process/Environmental Controls $117,356 $ 90,815 $ 233,126 $ 172,474 Tool and Components 43,342 50,550 71,420 90,770 Other (4,085) (4,700) (9,515) (8,950) -------- -------- ---------- ---------- $156,613 $136,665 $ 295,031 $ 254,294 ======== ======== ========== ========== NOTE 3. EARNINGS PER SHARE Basic EPS is calculated by dividing earnings by the weighted average number of common shares outstanding for the applicable period. Diluted EPS is calculated after adjusting the numerator and the denominator of the basic EPS calculation for the effect of all potential dilutive common shares outstanding during the period. Information related to the calculation of earnings per share of common stock is summarized as follows: Net Earnings Shares Per Share (Numerator) (Denominator) Amount --------------------------------------- For the Three Months Ended June 29, 2001 Basic EPS: $94,230 144,016 $.65 Adjustment for interest on convertible debentures: 1,691 - Incremental shares from assumed exercise of dilutive options: - 2,595 Incremental shares from assumed conversion of the convertible debenture: - 6,031 ------------------------- Diluted EPS: $95,921 152,642 $.63 ============ ======= ==== Net Earnings Shares Per Share (Numerator) (Denominator) Amount --------------------------------------- For the Three Months Ended June 30, 2000 Basic EPS: $81,267 142,246 $.57 Incremental shares from assumed exercise of dilutive options: - 2,997 -------------------------- 6
Diluted EPS: $81,267 145,243 $.56 ========= ======= ==== Net Earnings Shares Per Share (Numerator) (Denominator) Amount --------------------------------------- For the Six Months Ended June 29, 2001 Basic EPS: $176,807 143,445 $1.23 Adjustment for interest on convertible debentures: 3,368 - Incremental shares from assumed exercise of dilutive options: - 2,938 Incremental shares from assumed conversion of the convertible debenture: - 5,171 -------- ------- Diluted EPS: $180,175 151,554 $1.19 ======== ======= ===== Net Earnings Shares Per Share (Numerator) (Denominator) Amount --------------------------------------- For the Six Months Ended June 30, 2000 Basic EPS: $152,824 142,498 $1.07 Incremental shares from assumed exercise of dilutive options: - 2,808 -------- ------- Diluted EPS: $152,824 145,306 $1.05 ======== ======= ===== NOTE 4. ACQUISITIONS On January 2, 2001, the Company acquired United Power Corporation. The consideration was approximately $108 million. The fair value of the assets acquired was approximately $118 million, and approximately $10 million of liabilities were assumed. In the second quarter of 2001, the Company acquired several small companies for total consideration of approximately $118 million. All acquisitions have been accounted for as purchases. On July 3, 2000, the motion control businesses of Warner Electric Company were acquired and merged into the Company. Total consideration was approximately $147 million. The fair value of the 7
assets acquired was approximately $185 million and approximately $38 million of liabilities were assumed. The transaction is being accounted for as a purchase. On June 20, 2000, Kollmorgen Corporation was acquired and merged into the Company. Total consideration was approximately $363 million, including the assumption of approximately $96 million of debt. The fair value of the assets acquired was approximately $537 million and approximately $174 million of liabilities were assumed. The transaction is being accounted for as a purchase. On March 27, 2000, American Precision Industries was acquired and merged into the Company. Total consideration was approximately $246 million, including assumption of approximately $60 million of debt. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ------- --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Results of Operations --------------------- Net sales for the 2001 second quarter were 7.4% higher than the 2000 quarter. Acquisitions accounted for 13% of this increase, offsetting a core volume revenue decline of 4.5% and negative currency effects of 1%. Sales declines in the Company's engine retarder, hand tool, drill chuck, and power quality product lines accounted for the majority of the total sales shortfall. Net sales for the six-month period were 11.6% higher than the corresponding period in 2000. Acquisitions accounted for 16% of the increase, core volume showed a 3.5% decrease, and negative currency effects caused a 1% decrease. Weakness in the engine retarder and hand tool product lines have caused the majority of the sales decline. Gross profit margin in 2001, as a percentage of sales, was approximately 39.2% for the quarter and 38.3% for the six-month period. Margins for the quarter were flat compared to last year, and fell 0.3 points for the six month period. Decreases in gross margin are attributable to the addition of lower gross margin product lines from the 2000 and 2001 acquisitions, and lower shipment volumes. These declines have been partially offset by productivity improvements and manufacturing overhead cost reductions implemented in both business segments. Selling, general and administrative expenses for the 2001 second quarter increased $1.2 million versus the 2000 second quarter. Expenses added from the 2000 and 2001 acquisitions were almost entirely offset by overhead cost reductions and reductions in variable costs in existing businesses across both segments. Selling, general and administrative expenses as a percentage of sales was 21.3% for the 2001 quarter and 21.8% for the six month 8
period. This represents a decrease of 1.4 and 1.2 percentage points, respectively, from prior periods. This reflects principally cost reduction efforts across both business segments. Interest expense for the quarter was 4.5% higher than the 2000 second quarter. Average net debt levels were higher during 2001, reflecting borrowings undertaken to finance acquisitions. For the six-month period, interest expense was $4.3 million higher than in 2000, also reflective of higher net debt levels. The effective tax rate of 37.5% for the second quarter and the six-month period in 2001, .5 percentage points lower than the respective periods in the prior year, is mainly due to a higher proportion of foreign earnings in 2001 compared to 2000. On June 30, 2001, the Financial Accounting Standards Board approved Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets." The new standard requires that goodwill will not be amortized, but will be reviewed annually for impairment. With respect to acquisitions completed prior to June 30, 2001, the Company intends to implement the new standard in the 1st quarter of 2002 and is currently in the process of assessing the impact of adoption. Liquidity and Capital Resources ------------------------------- The Company continues to experience strong operating cash flow, driven primarily by reductions in working capital and a 16% increase in net earnings for the six month period. Operating cash flow of $311.3 million for the six month period reached record levels and was 9% over the same period last year. Total debt increased to $1,174 million at June 29, 2001, compared to $795.2 million at December 31, 2000. During the first quarter of 2001, the Company issued $830 million (value at maturity) in zero-coupon convertible senior notes due 2021 known as Liquid Yield Option Notes or LYONS. The net proceeds to the Company were approximately $505 million, of which approximately $100 million was used to pay down debt, and the balance will be used for general corporate purposes, including potential future acquisitions. The LYONS are convertible into approximately 6.0 million common shares of the Company, and carry a yield to maturity of 2.375%. Net cash paid for acquisitions was $118 million and $194 million, respectively, for the quarter and six months ended June 30, respectively. In the first quarter of 2001, the Company acquired United Power Corporation for a cash price of approximately $108 million. The Company also disposed of two small product lines during the first quarter of 2001, yielding cash proceeds of approximately $32 million. There was no material gain or loss recognized on the sale of these product lines. In the second quarter of 2001, the Company acquired several smaller companies for an aggregate cash price of $118 million. In the first quarter of 2000, the Company repurchased $82 million of the Company's common stock and acquired American Precision Industries, Inc. for a cash price of approximately $246 million including assumption of debt, or $19.25 per share. In the second quarter of 2000, the Company acquired Kollmorgen 9
Corporation for a cash price of approximately $363 million including the assumption of debt, or $23 per share. On June 28, 2000, the Company replaced its $250 million bank credit facility with a new $500 million credit facility. The new facility provides funds for general corporate purposes and has a five year term. There have been no borrowings under either facility during 2001. A regular quarterly dividend of $.02 per share was declared, payable on July 31, 2001 to holders of record on June 29, 2001. The cash and cash equivalents of $675 million on the June 29, 2001 balance sheet were invested in highly liquid investment grade short term instruments. Interest income of $12.0 million was recognized in the first six months of 2001. The Company's cash provided from operations, as well as credit facilities available, should provide sufficient available funds to meet normal working capital requirements, capital expenditures, dividends, scheduled debt repayments, and to fund acquisitions, if applicable. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ----------------------------------------------------------- At the Company's Annual Meeting of Shareholders on May 1, 2001, our stockholders voted on the following proposals: 1. Proposal to elect two directors: For Withheld --- -------- Steven M. Rales 119,345,495 11,279,334 Alan G. Spoon 129,517,587 1,107,242 2. Proposal to approve the appointment of Arthur Andersen LLP as the Company's independent auditors for the year ending December 31, 2001: For 129,978,307 Against 251,189 Abstain 405,983 3. Proposal to amend the Company's 1998 Stock Option Plan to increase the aggregate number of shares that may be issued pursuant to the exercise of stock options to 22,500,000 shares: For 113,981,105 Against 5,402,011 Abstain 1,232,409 Broker non-vote 10,019,954 4. Proposal to amend the Company's Certificate of Incorporation to increase the number of authorized shares of capital stock of the Company to a total of 600,000,000 shares: For 76,374,792 Against 43,637,919 Abstain 599,217 Broker non-vote 10,023,551 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ----------------------------------------- (a) Exhibits: Exhibit 6.1: Credit Agreement between Bank of America and Danaher Corporation Dated June 28, 2001 (b) Reports on Form 8-K: None 10
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DANAHER CORPORATION: Date: July 18, 2001 By: /s/ Patrick W. Allender ------------- ----------------------- Patrick W. Allender Chief Financial Officer Date: July 18, 2001 By: /s/ Christopher C. McMahon ------------- -------------------------- Christopher C. McMahon Vice President and Controller 11