-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PzHmnRzU5ymPeBr3A7xE1Nf9XNj9g/8YdpCxQWThu8KdtOQ4aKMtP1Kyx4YKTJtz OAxKExnyR26Ww0VdNPJ6sQ== 0000313616-98-000004.txt : 19980318 0000313616-98-000004.hdr.sgml : 19980318 ACCESSION NUMBER: 0000313616-98-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980317 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANAHER CORP /DE/ CENTRAL INDEX KEY: 0000313616 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 591995548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08089 FILM NUMBER: 98567257 BUSINESS ADDRESS: STREET 1: 1250 24TH ST NW STREET 2: SUITE 800 CITY: WASHINGTON STATE: DC ZIP: 20037 BUSINESS PHONE: 2028280850 MAIL ADDRESS: STREET 1: 1250 24TH STREET NW STREET 2: SUITE 800 CITY: WASHINGTON STATE: DC ZIP: 20037 FORMER COMPANY: FORMER CONFORMED NAME: DMG INC DATE OF NAME CHANGE: 19850221 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE [ X ] SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____to___Commission File Number:1-8089 DANAHER CORPORATION (Exact name of registrant as specified in its charter) Delaware 59-1995548 (State of incorporation) (I.R.S.Employer Identification number) 1250 24th Street, N.W., Suite 800 Washington, D.C. 20037 (Address of Principal (Zip Code) Executive Offices) Registrant's telephone number, including area code: 202-828-0850 Securities Registered Pursuant to Section 12(b) of the Act: Name of Exchanges Title of each class on which registered Common Stock $.01 par Value New York Stock Exchange, Inc. Pacific Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: NONE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. [X] As of March 16, 1998, the number of shares of common stock outstanding was 58,537,110 and were held by approximately 3,000 holders. The aggregate market value of common shares held by non-affiliates of the Registrant on such date was approximately $2.5 billion, based upon the closing price of the Company's common shares as quoted on the New York Stock Exchange composite tape on such date. EXHIBIT INDEX APPEARS ON PAGE 8 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, 1997. 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 1998 annual meeting of stockholders. With the exception of the pages of the 1998 Proxy Statement specifically incorporated herein by reference, the 1998 Proxy Statement is not deemed to be filed as part of this Form 10-K. Certain information included or incorporated by reference in this document may be deemed to be "forward looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future are forward looking statements. Such statements are characterized by terminology such as "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions. These statements are based on assumptions and assessments made by the Company management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These forward looking statements are subject to a number of risks and uncertainties, including but not limited to continuation of the Company's longstanding relationship with major customers, the Company's ability to integrate acquired businesses into its operations and realize planned synergies, the extent to which acquired businesses are able to meet the Company's expectations and operate profitably, changes in regulations (particularly environmental regulations) which could affect demand for products in the Process/Environmental Controls segment and unanticipated developments that could occur with respect to contingencies such as environmental matters and litigation. In addition, the Company is subject to risks and uncertainties that affect the manufacturing sector generally including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. Any such forward looking statements are not guarantees of future performances and actual results, developments and business decisions may differ from those envisaged by such forward looking statements. The Company disclaims any duty to update any forward looking statements, all of which are expressly qualified by the foregoing. ITEM 1. BUSINESS The Company conducts its operations through two business segments: Tools and Components and Process/Environmental Controls. Tools and Components The Tools and Components segment is comprised of the Danaher Hand Tool Group (including Special Markets, Professional Tool Division and Asian Tool Division), Matco Tools ("Matco"), Jacobs Chuck Manufacturing Company ("Jacobs"), Delta Consolidated Industries, Jacobs Vehicle Systems Company, Hennessy Industries and the hardware and electrical apparatus lines of Joslyn Manufacturing Company (JMC). This segment is one of the largest domestic producers and distributors of general purpose mechanics' hand tools and automotive specialty tools. Other products manufactured by these companies include tool boxes and storage devices, diesel engine retarders, wheel service equipment, drill chucks, custom designed headed tools and components, hardware and components for the power generation and transmission industries, high quality precision socket screws, fasteners, and high quality miniature precision parts. The Company's business strategy in this segment is focused on increasing sales to existing customers, broadening channels of distribution, developing new products, geographic expansion and achieving production efficiencies and enhanced quality and customer service through "Just-In-Time" and related manufacturing techniques. Danaher Tool Group (DTG) is one of the largest domestic producers of general purpose mechanics' hand tools (primarily ratchets, sockets and wrenches) and specialized automotive service tools for the professional and "do-it-yourself" markets. DTG has been the principal manufacturer of Sears, Roebuck and Co.'s Craftsman line of mechanics' hand tools for over 50 years. Approximately 80% of the over 100 million pieces sold to Sears annually are sold in tool sets that include from three to 900 pieces. Net sales to Sears were approximately 13% of total Company sales in 1997. DTG's Special Markets Group sells to Sears under a five year evergreen agreement, that requires Sears to purchase a significant portion of its annual requirements for its private-label Craftsman mechanics' hand tool line from DTG, subject to certain conditions. For over 30 years, DTG has also been a primary supplier of specialized automotive service tools to NAPA, which has approximately 6,500 outlets at present. In addition, DTG has been the designated supplier of general purpose mechanics' hand tools to NAPA since 1983. DTG specialized automotive service tools are also sold under the K-D Tools brand, its industrial tools and products are also sold under the Armstrong and Allen brand names, and fastener products under the Holo-Krome name are sold to independent distributors and other customers in the "do-it-yourself," professional automotive, commercial and industrial markets. Professional mechanics' tools are distributed by Matco which has approximately 1,300 independent mobile distributors who sell primarily to individual professional mechanics. Matco is one of the leading suppliers in this market. The Company believes Jacobs is the market leader in the drill chuck business with its highly respected and well recognized brand name. The Company believes Delta is the market leader in boxes and other storage containers serving the vehicle aftermarket and manufactures and markets containers serving numerous specialty areas. Wheel service equipment is manufactured under the Coats , Bada and Ammco brand names. Products include tire changers, wheel balancers, wheel weights and brake service equipment. Wheel service equipment is sold primarily to wholesale distributors and national accounts. These markets are served by the Company's sales personnel. Diesel engine retarders are manufactured at Jacobs Vehicle Systems Company. The "Jake Brake " technology was developed by Jacobs Vehicle and represents the leading brand of engine retarders. The product is sold by Jacobs' sales personnel to original equipment manufacturers and aftermarket distributors. JMC manufactures a wide variety of products used in the construction and maintenance of electric power, telephone and cable television systems. Its products range from specialized fasteners to sophisticated castings and forgings. The electrical apparatus division of JMC manufactures surge protection devices rated as high as 468,000 volts for the electric power utility industry. Surge arresters are designed to eliminate the damaging effects of electrical surges caused by lightning and other overvoltage conditions on a utility's power system. The major raw materials used by this segment, including high quality steel, are available from a variety of sources in sufficient quantities. Process/Environmental Controls The Process/Environmental Controls segment is comprised of the 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, Namco Controls, Dolan-Jenner, M&M Precision Systems, TxPort, Communications Technology Corporation and Gems Sensors, acquired in August, 1997. These companies produce and sell underground storage tank leak detection systems and temperature, level and position sensing devices, power switches and controls, communication line products, power protection products, liquid flow measuring devices, telecommunications products, quality assurance products and systems, and electronic and mechanical counting and controlling devices. These products are distributed by the Company's sales personnel and independent representatives to original equipment manufacturers, distributors and other end users. The Company's strategy in the Process/Environmental Controls segment is to concentrate on the rapid expansion of its environmental controls product line, including the Veeder-Root storage tank leak detection systems business. The Company believes that Veeder-Root is the premier manufacturer of state-of-the-art tank measuring and leak detection systems for underground fuel storage tanks and, accordingly, is uniquely positioned to respond to the increased demand for these products fueled by environmental regulations. The Company is also expanding its other offerings in the environmental controls product line to encompass applications related to markets other than petroleum storage and to address nonregulatory business requirements. This expansion program includes both internally developed new product offerings as well as selective product line acquisitions. 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. The companies within the Instrument Group 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. Namco is a provider of part presence, part position and machine status sensing solutions for industrial process automation applications. 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. Telecommunications products include automated data transmission analyzers, single and multi-function test equipment, computerized cable test and database management systems, digital data access devices and molded cable closures and terminals used in outside plant and network applications. Other business lines within this segment include extruded thermoplastic mill shapes and custom molded plastic products. In March, 1998, the Company acquired Pacific Scientific Company. Pacific Scientific has two major business segments: (i) Electrical Equipment and (ii) Safety Equipment. Nearly half of the Company's sales consists of electric motors, drives and controls. These electric motors and controls are sold primarily to original equipment manufacturers who incorporate them into a wide variety of products. Pacific Scientific motors are used in factory automation, medical, printing, plastic extrusion and molding, paper converting, vending, textile, aerospace, fitness and many other types of equipment. Safety equipment includes mainly fire detection and suppression equipment, crew restraints, flight control and pyrotechnic devices. Safety equipment is sold mainly in the aviation and aerospace industry. The Company also provides worldwide sales, service and repair of its products for airlines and other users of safety equipment. Operating results from Pacific Scientific will be included with the Company's results, beginning with the first quarter of 1998. The raw materials utilized by companies in this segment are stock items, principally metals and plastic, electrical and electronic components. These materials are readily available from a number of sources in sufficient quantities. Patents, Licenses, etc. The Company has patents of its own and has acquired licenses under patents of others. The Company does not consider that its business, as a whole, is dependent on any single patent, group of patents, trademark or franchise. The Company does, however, offer many patented products and is periodically engaged in litigation concerning patents and licenses. Seasonal Nature of Business As a whole, the Company's businesses are not subject to material seasonal fluctuations. Backlog The Company's products are manufactured primarily in advance of order and either shipped or assembled from stock. Backlogs are not significant as sales are often dependent on orders requiring immediate shipment from inventory. Employee Relations At December 31, 1997, the Company employed approximately 13,200 persons. Of these, approximately 2,200 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 $57,008,000 for 1997, $46,964,000 for 1996 and $36,400,000 for 1995. Environmental and Safety Regulations Certain of the Company's operations are subject to federal, state and local environmental laws and regulations which impose limitations on the discharge of pollutants into the air and water and establish standards for treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. JMC previously operated wood treating facilities that chemically preserved utility poles, pilings and railroad ties. All such treating operations were discontinued or sold prior to 1982. These facilities used wood preservatives that included creosote, pentachlorophenol and chromium-arsenic-copper. While preservatives were handled in accordance with then existing law, environmental law now imposes retroactive liability, in some circumstances, on persons who owned or operated wood-treating sites. JMC is remediating some of its former sites and will remediate other sites in the future. The Company has made a provision for environmental remediation; however, there can be no assurance that estimates of environmental liabilities will not change. In addition to environmental compliance costs, the Company may incur costs related to alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices. For example, generators of hazardous substances found in disposal sites at which environmental problems are alleged to exist, as well as the owners of those sites and certain other classes of persons, are subject to claims brought by state and federal regulatory agencies pursuant to statutory authority. The Company believes that its liability, if any, for past or current waste handling practices will not have a material adverse effect on its results of operation, financial condition and cash flow. The Company must also comply with various federal, state and local safety regulations in connection with its operations. The Company's compliance with these regulations has had no material adverse effect on its financial condition. Major Customers The Company has a customer in the tools segment, Sears, Roebuck and Co. ("Sears"), which accounted for 13% of consolidated sales in 1997. 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 4 million square feet of manufacturing, distribution, service and office space at various domestic and foreign locations. The principal properties are listed below and are constructed of concrete, brick, cement, cinderblock or some combination of these materials. The Company believes that its plants have adequate productive capacity and are suitably used for the manufacture of its products and that its warehouses, distribution centers and sales offices are suitably located and utilized for the marketing of its products and services. Location Principal Use Owned/Leased ...................................................................... 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 Jonesboro, AK Manufacturing Leased 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 Manufacturing Owned Taichung, Taiwan Manufacturing Leased Dallas, TX Manufacturing Leased Process/Environmental Controls Altoona, PA Manufacturing Owned Elizabethtown, NC Manufacturing Owned Market Harborough, England Manufacturing Leased Sao Paulo, Brazil Manufacturing Owned New Hartford & Fairport, NY Manufacturing Owned Gurnee, IL Manufacturing Leased Grenloch, NJ Manufacturing Owned Brighton, England Manufacturing Leased Aldingen, Germany Manufacturing Owned Aldingen, Germany (2) Manufacturing Leased Wehingen, Germany (2) Manufacturing Leased Eatontown, NJ Distribution Leased Broxbourne, England Distribution Leased Cleveland, OH (3) Manufacturing Owned Goleta, CA Manufacturing Owned Lachine, Quebec Manufacturing Leased Lancaster, SC Manufacturing Owned Moorpark, CA Manufacturing Leased Paso Robles, CA Manufacturing Leased San Jose, CA Manufacturing Owned Hemet, CA Manufacturing Owned Atlanta, GA Manufacturing Owned Madison, AL Manufacturing Leased Etobicoke, Canada Manufacturing Leased Highland Heights, OH Manufacturing Owned Herzhorn, Germany Manufacturing Owned West Carollton, OH Manufacturing Owned Loffingen, Germany Manufacturing Owned Tamworth, England Manufacturing Leased Basingstoke, England Manufacturing Owned Baretswil, Switzerland Manufacturing Owned Plainville, CT Manufacturing Owned In addition to the facilities listed, the Company owns or leases various facilities including offices or properties in Washington, District of Columbia; Simsbury, Connecticut; as well as facilities in Uppermill, Livingston, Gloucester and Richmond, Great Britain; Melbourne and Sydney, Australia; Nagoya, Osaka and Tokyo, Japan; Toronto, Canada; Paris, Bron, Toulouse, Bordeaux, Tours and Selestat, France; and Stuttgart, Germany. ITEM 3. LEGAL PROCEEDINGS A former subsidiary of the Company is engaged in litigation in several states with respect to product liability. The principal case, Patton, et al v. Chicago Pneumatic Tool Company, was filed in United States District Court in Jackson Co., MS in 1989. There are other related cases. The Company sold the subsidiary in 1987. Under the terms of the sale agreement, the Company agreed to indemnify the buyer of the subsidiary for product liability related to tools manufactured by the subsidiary prior to June 4, 1987. The cases involve approximately 3,000 plaintiffs, in state and federal courts. All other major U.S. air tool manufacturers are also defendants. The gravamen of these complaints is that the defendants' air tools, when used in different types of manufacturing environments over extended periods of time, were defective in design and caused various physical injuries. The plaintiffs seek compensatory and punitive damages. The cases are in preliminary stages of discovery and pleading and the Company intends to defend its position vigorously. The Company's maximum indemnification obligation under the contract is approximately $85,000,000. The Company believes it has insurance coverage for all or a substantial part of the damages, if any. The outcome of this litigation is not currently predictable. JMC is a defendant in a class action tort suit, Henry L. Johnson, et. al. v. Lincoln Creosote Company, Inc., et. al., filed in the 26th Judicial District Court of the State of Louisiana, in Bossier Parish, Louisiana. The suit alleges exposure to chemicals and property devaluation resulting from wood treating operations previously conducted at a Louisiana site. Both the size of the class and the damages are uncertain. The Company has tendered the defense of the suit to its insurance carrier. JMC believes that it may have adequate insurance coverage for the litigation; however, because of the above uncertainties, JMC is unable to determine at this time the potential liability, if any. 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 1997. 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, 1997, and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE PART III ITEMS 10 THROUGH 13. The information required under Items 10 through 13 is included in the Registrant's Proxy Statement for its 1998 annual meeting, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a) Document List 1. Financial Statements Response to this portion of Item 14 is submitted per the Index to Financial Statement Schedules on page 12 of this report. 2. Supplementary Data and Financial Statement Schedules Response to this portion of Item 14 is submitted per the Index to Financial Statement Schedules on page 12 of this report. 3. An Index of Exhibits is on page 13 of this report. b) Reports on Form 8-K filed in the fourth quarter of 1997. NONE DANAHER CORPORATION INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES Page Number in: Annual Report Form 10K To Shareholders Annual Report: Report of Independent Public Accountants on Schedule 15 Financial Statements: Consolidated Statements of Earnings, year ended December 31, 1997, 1996, and 1995 7 Consolidated Balance Sheets, December 31, 1997 and 1996 8 Consolidated Statements of Cash Flows, years ended December 31, 1997, 1996, and 1995 9 Consolidated Statements of Stockholders' Equity, years ended December 31, 1997, 1996, and 1995 10 Notes to Consolidated Financial Statements 11-23 Supplemental Data: Selected Financial Data 1 Market Prices of Common Stock 27 Schedules: II - Valuation and Qualifying Accounts 16 Schedules other than those listed above have been omitted from this Annual Report because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto. Exhibits: (3) Articles of Incorporation and By-Laws. (a)The Articles of Incorporation of Danaher Incorporated by (filed as Annex B to Danaher's Proxy Reference Statement dated October 7, 1986). (b)The By-Laws of Danaher. Incorporated By Reference (10) Material Contracts: (a)Employment Agreement between Danaher Incorporated by Corporation and George M. Sherman dated Reference as of January 2, 1990 (b)Credit Agreement Dated As of September 7, Incorporated by 1990. Among Danaher Corporation, the Reference Financial Institutions Listed Therein and Bankers Trust Company as Agent. (c)Agreement as of November 1, 1990 between Incorporated by Danaher Corporation, Easco Hand Tools, Inc. Reference and Sears, Roebuck and Co. (d)Note Agreement as of November 1, 1992 Incorporated by Between Danaher Corporation and Lenders Reference Referenced Therein. (e)Note Agreement as of April 1, 1993 Incorporated by Between Danaher Corporation and Lenders Reference Referenced Therein. (f)Danaher Corporation 1987 Stock Option Plan Incorporated by Reference (g)Employment Agreement between Danaher Incorporated by Corporation and John P. Watson dated as Reference of January 17, 1991 (13) Annual Report to Securityholders (22) Subsidiaries of Registrant. (24) Consent of Independent Public Accountants. (27) Financial Data Schedules SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DANAHER CORPORATION By: /s/ GEORGE M. SHERMAN George M. Sherman President and Chief Executive Officer Date: March 16, 1998 /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/ A. EMMET STEPHENSON, JR. Director A. Emmet Stephenson, Jr. /s/ PATRICK W. ALLENDER Senior Vice President-Chief Financial Patrick W. Allender Officer and Secretary /s/ C. SCOTT BRANNAN Vice President and Controller C. Scott Brannan REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON THE FINANCIAL STATEMENT SCHEDULES To Danaher Corporation: We have audited in accordance with generally accepted auditing standards, the financial statements included in pages 7 to 10 of 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 29, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index are the responsibility of the Company's management and are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not a part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the financial statements taken as a whole. ARTHUR ANDERSEN LLP Washington, D.C. January 29, 1998 DANAHER CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (000's omitted) Additions Write Balance Charged Offs, Classification at to Charged Write Balance Beginning Costs to Downs at End of & other & of Period Expenses Accounts Deductions Period Year Ended December 31, 1997 Allowances deducted from asset accounts: Allowance for doubtful accounts $14,868 $ 6,820 $ 510(a) $ 3,688 $18,510 Year Ended December 31, 1996 Allowances deducted from asset accounts: Allowance for doubtful accounts: $13,431 $ 5,763 $ 507(a) $ 4,833 $14,868 Year Ended December 31, 1995 Allowances deducted from asset accounts: Allowance for 4,148 doubtful accounts: $11,638 $ 4,847 $ 2,961(a) $ 1,867(b) $13,431 Notes:(a) - Amounts related to businesses acquired. (b) - Amounts related to businesses disposed of. EXHIBIT 24 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included (or incorporated by reference) in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-32402. ARTHUR ANDERSEN LLP Washington, D.C. March 17, 1998 EX-27 2
5 1000 YEAR DEC-31-1997 DEC-31-1997 33317 0 341110 18510 209416 618339 598450 263227 1879717 524235 0 0 0 643 916238 1879717 2050968 2050968 1382475 1784083 0 0 13104 253781 98975 154806 0 0 0 154806 2.57 2.57
EX-21 3 Danaher Corporation and Subsidiaries Exhibit to 1997 Annual Report on Form 10K (22) Subsidiaries of Registrant STATE OR JURIS- DOING DICTION OF BUSINESS NO. CORPORATION INCORPORATION AS(DBA) 1 Danaher Corporation Delaware - 2 DHR Services Delaware - 3 DMG Plastics, Inc. Delaware - 4 FJ900 Inc. Delaware - 5 Armstrong Tools, Inc. Delaware - 6 Diversified Mortgage Investors, Inc. Florida - 7 Utica Holding Company Delaware - 8 DH Holdings Corp. Delaware - 9 Easco Hand Tools Inc. Delaware Danaher Tool Group 10 Hand Tool Design Corporation Delaware - 11 KD Tools of Puerto Rico, Inc. Delaware - 12 Beamco, Inc. Wisconsin - 13 Old Tide Corp. Califonia - 14 Dynapar Corporation Illinois Danaher Controls 15 Encoders Incorporated Delaware - 16 KACO Gmbh Germany - 17 Namco Controls Gmbh Germany - 18 Piccadilly Precision Engineering Ltd. Ohio - 19 Spline Gauges Ltd. Delaware - 20 Hennessy Industries Inc. Delaware Hennessy/Ammco 21 Service Station Products Company Delaware - 22 Hennessy Industries Canada Inc. Canada - 23 KD Tools of Canada Canada - 24 Ammco Tools Inc. Illinois Hennessy/Ammco 25 Wheel Service Equipment Corporation Delaware 26 Jacobs Vehicle Systems, Inc. Delaware - 27 Diesal Engine Retarders, Inc. Delaware - 28 Jacobs Chuck Manufacturing Company Delaware - 29 Jacobs Japan Inc. Delaware - 30 Power Tool Holders Incorporated Delaware - 31 Matco Tools Corporation New Jersey - 32 Chicago Pneumatic Tool Company West Germany Delaware - 33 Chicago Pneumatic World Trade Corp. Delaware - 34 Mechanics Custom Tools Corporation Delaware - 35 NMTC, Inc. Delaware Matco Tools Corporation 36 Qualitrol Corporation New York - 37 Power Transformer Controls Company Delaware - 38 Qualitrol Canada Canada - 39 Qualitrol GmbH Germany - 40 Hengstler GmbH i.G. Germany - 41 Hengstler Feinwerktechnik GmbH Germany - 42 Hengstler Japan Corp. Japan - 43 Hengstler Controle Numerique SARL France - 44 SCI Hengstler France - 45 Hengstler Italia SRL Italy - 46 Hengstler Espana SA Spain - 47 Hengstler Canada Inc. Canada - 48 Hengstler Belgium SPRL Belgium - 49 Hengstler Nederland BV Netherlands - 50 Hengstler Tid och Passage AB Sweden - 51 Veeder-Root GmbH Germany - 52 The Partlow Corporation New York Partlow/ Anderson 53 Time & Temperature Controls Corp. Delaware - 54 Anderson Instrument Company New York Partlow/ Anderson 55 Flow Measurement Corporation Delaware - 56 Western Pacific Industries Delaware Iseli Company 57 Swiss Precision Parts Corp. Delaware - 58 A.L. Hyde Company Delaware - 59 Extrusions Plastics, Inc. Delaware - 60 World Plastic Extruders, Inc. New York - 61 Holo-Krome Company Delaware Danaher Tool Group 62 The Allen Manufacturing Company Delaware Danaher Tool Group 63 Industrial Fasteners Inc. Delaware - 64 Holo-Krome Uniform Fasteners Inc. California - 65 Holo-Krome Australia Australia - 66 Quality Wire Inc. Delaware Danaher Tool Group 67 Veeder-Root Company Delaware - 68 Petroleum Industry Controls, Inc. Delaware - 69 Veeder-Root of N.C. Inc. Delaware Danaher Controls 70 Veeder-Root do Brazil Brazil - 71 Veeder-Root SARL France - 72 Launchchange Limited U.K. - 73 West Instruments Ltd. U.K. - 74 Veeder-Root Ltd. U.K. - 75 Veeder-Root Environmental Systems Ltd. U.K. - 76 Danaher Canada Canada - 77 Gwendolene Holdings Ltd. U.K. - 78 Qualitrol Instruments Ltd. U.K. - 79 CGF Automation Ltd. U.K. - 80 Contents Measuring Systems Limited U.K. - 81 Hengstler Industries Ltd. U.K. - 82 Hengstler Great Britain Ltd. U.K. - 83 Hengstler Flexitime Ltd. U.K. - 84 Hengstler Leasing Ltd. U.K. - 85 Jacobs Manufacturing Co. Ltd. U.K. - 86 Holo-Krome Ltd. U.K. - 87 Exidyne Instruments Technologies, Inc. Pennsylvania - 88 GID Acquisition Companu Delaware GID Instruments 89 Data Recorders Incorporated Delaware - 90 Middle Road Company Delaware - 91 CEI Acquisition Company Delaware Veeder-Root Company 92 Warrick Controls, Inc. Delaware - 93 Danaher Finance Company Delaware - 94 Normandy Court Company Delaware - 95 Houma Realty Company Delaware - 96 Commercial Avenue Company Delaware - 97 JS Technology, Inc. Delaware - 98 DCI Consolidated Industries,Inc. Delaware - 99 Delta Consolidated Industries,Inc. Arkansas - 100 Truck Storage Incorporated Delaware - 101 Hecon Industries Inc. New Jersey - 102 Hecon Properties New Jersey - 103 Joslyn Company, LLC Delaware - 104 Joslyn Manufacturing Co., LLC Delaware - 105 Joslyn Electronic Systems Corp., LLC Delaware - 106 Joslyn Hi-Voltage Corp., LLC Delaware - 107 Joslyn Power Products Corp., LLC Delaware - 108 Joslyn Research & Development Corp. Delaware - 109 Joslyn Clark Controls, LLC Delaware - 110 Sunbank Family of Companies, Inc., LLC Delaware - 111 Joslyn Sunbank Corporation, LLC Delaware - 112 Air Dry Corporation of America, LLC Delaware - 113 Jennings Technology Corporation, LLC Delaware Joslyn Jennings Corp 114 Jennings Land Company Delaware - 115 Cyberex, LLC Delaware - 116 Cyberex Limited U.K. - 117 Cyberex B.V. Netherlands - 118 Joslyn Foreign Sales Corp. Virgin Islands - 119 Joslyn Canada, Inc. Canada - 120 Joslyn Holding Company Delaware - 121 McCrometer, Inc. Delaware - 122 Kistler-Morse Corporation Delaware - 123 Acme-Cleveland Corp. Ohio - 124 AC Intermediate Co. Ohio - 125 ACMS Incorporated Ohio - 126 Acme-Cleveland Laser Systems Ohio - 127 Acme Communications Technology Systems Corp. Ohio - 128 Amtronx Inc. Ohio - 129 Ball Screws and Actuators Co., Inc. California - 130 Communications Technology Corp. California - 131 Communications Technology (Canada) Ltd. British Columbia - 132 Communications Technology Corp. Mexico, S.A. Mexico - 133 Fire Networks, Inc. Delaware - 134 Dolan-Jenner Industries, Inc. Massachusetts - 135 Dolan-Jenner Europe, B.V. Netherlands - 136 LSMT Corp. Michigan - 137 143420 Ontario. Inc. Ontario - 138 M & M de France, Inc. Ohio - 139 M & M Precision Systems Corp. Ohio - 140 Namco Controls Corp. Ohio - 141 Phoenix Microsystems, Inc. Alabama - 142 TxPort Inc. Delaware - 143 TxPort Data Inc. Canada - 144 Danaher Alberta Inc. Alberta - 145 American Sigma, Inc. New York - 146 Plastifab, Inc. Canada - 147 Sullivan Property Holding Company Delaware - 148 Cleveland Precision Systems Gmbh Germany - 149 Current Technology, Inc. Delaware - 150 GEMS Sensors GmbH Germany - 151 GEMS Sensors, Inc Delaware - 152 GEMS Sensors LTD England - 153 GEMS Sensors SARL France - 154 GEMS Sensors SRL Italy - EX-13 4 DANAHER CORPORATION 1997 ANNUAL REPORT SELECTED FINANCIAL DATA (000's omitted except per share data) _____________________________________________________________ 1997 1996 1995 1994 1993 Sales $2,050,968 $1,811,878 $1,486,769 $1,113,973 $937,633 Operating profit 266,885 226,136 180,257 124,427 87,058 Earnings from continuing operations 154,806 127,959 105,766 72,319 48,030 Per share Diluted 2.57 2.13 1.77 1.24 0.83 Basic 2.63 2.18 1.80 1.26 0.84 Discontinued operations -- 79,811 2,550 9,331 5,719 Per share Diluted -- 1.33 0.04 0.16 0.10 Basic -- 1.36 0.04 0.16 0.10 Earnings before cumulative effect of accounting change 154,806 207,770 108,316 81,650 53,749 Per share Diluted 2.57 3.47 1.81 1.40 0.93 Basic 2.63 3.54 1.85 1.42 0.94 Cumulative effect of accounting change* -- -- -- -- (36,000) Per share* Diluted -- -- -- -- (0.62) Basic -- -- -- -- (0.63) Net earnings 154,806 207,770 108,316 81,650 17,749 Earnings per common share Diluted 2.57 3.47 1.81 1.40 0.31 Basic 2.63 3.54 1.85 1.42 0.31 Dividends declared 5,887 5,360 4,672 3,710 3,412 Dividends per share 0.10 0.09 0.08 0.07 0.06 Total assets 1,879,717 1,765,074 1,485,991 1,105,645 872,472 Total debt 198,247 236,327 283,587 185,286 133,585 * Adoption of accrual method specified by SFAS No. 106 for post retirement benefits. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Danaher Corporation (the "Company") operates a variety of businesses through its wholly-owned subsidiaries. These businesses are conducted in two business segments: Tools and Components and Process/Environmental Controls. In Tools and Components, the Company is the principal manufacturer of Sears, Roebuck and Co.'s Craftsman line, National Automotive Parts Association (NAPA ) line, K-D automotive line, and the Matco , Armstrong and Allen lines of mechanics' hand tools. The Company also manufactures Allen wrenches, Jacobs drill chucks and diesel engine retarders, Delta storage containers and Coats and Ammco wheel service equipment. In its Process/Environmental Controls segment, the Company is a leading producer of leak detection sensors for underground fuel storage tanks and motion, position, temperature, pressure, level, flow and power reliability and quality control devices. Presented below is a summary of sales by business segment (000's omitted). 1997 1996 1995 Tools and Components $1,192,761 58.2% $1,103,443 60.9% $1,005,005 67.6% Process/ Environmental Controls 858,207 41.8 708,435 39.1 481,764 32.4 $2,050,968 100.0% $1,811,878 100.0% $1,486,769 100.0% Tools and Components The Tools and Components segment is comprised of the Danaher Hand Tool Group (including Special Markets and Professional Tools divisions), Matco Tools, Jacobs Chuck Manufacturing Company, Delta Consolidated Industries, Jacobs Vehicle Systems, Hennessy Industries and the hardware and electrical apparatus lines of Joslyn Manufacturing Company ("JMC"). This segment is one of the largest domestic producers and distributors of general purpose and specialty mechanics' hand tools. Other products manufactured by these companies include tool boxes and storage devices, diesel engine retarders, wheel service equipment, drill chucks, custom designed headed tools and components, hardware and components for the power generation and transmission industries, high quality precision socket screws, fasteners, and high quality miniature precision parts. 1997 COMPARED TO 1996 Sales in 1997 were 8% higher than in 1996. An acquisition in the first quarter of 1997 accounted for 3%, price increases provided less than 1% and higher shipment volume provided 5%. Demand for drill chucks and diesel engine retarders was particularly strong in 1997. Operating margins increased from 11.6% to 12.1%, reflecting increased fixed cost leverage as well as continued process improvements in manufacturing operations. 1996 COMPARED TO 1995 Sales in this segment increased 10% from 1995. Of this increase, acquisitions accounted for approximately 5%, higher unit volumes accounted for approximately 5% and increased average pricing accounted for less than 1%. Sales levels were benefitted by particularly strong demand in the mobile tool distribution and storage device areas, offset somewhat by decreased demand for diesel engine retarders as North American and Asian heavy truck production decreased in 1996. Operating margins increased from 11.2% to 11.6%. This margin increase reflects the benefits of the higher sales volumes and continued manufacturing process improvements, offset by the full year effect of the lesser margins associated with the hardware and electrical apparatus lines of JMC. Process/Environmental Controls The Process/Environmental Controls segment includes the Veeder-Root Company, Danaher Controls, Partlow, Anderson Instruments, West Instruments, Ltd., QualiTROL Corporation, A.L. Hyde Company, Hengstler, American Sigma, the controls product line business units of Joslyn Corporation, the operating businesses of Acme-Cleveland Corporation (Namco Controls, Dolan-Jenner, M&M Precision Systems, TxPort, Inc., Communications Technology Corporation) and Current Technology, Inc. and Gems Sensors, Inc., both acquired in 1997. These companies produce and sell underground storage tank leak detection systems and temperature, level, motion and position sensing devices, power switches and controls, communication line products, power protection products, liquid flow measuring devices, telecommunication products, quality assurance products and systems, and electronic and mechanical counting and controlling devices. These products are distributed by the Company's sales personnel and independent representatives to original equipment manufacturers, distributors and other end users. 1997 COMPARED TO 1996 Sales in 1997 were 21% higher than in 1996 for this segment. The acquisitions of Gems Sensors and Current Technology in 1997, as well as the full-year effect of the Acme-Cleveland acquisition in July, 1996, contributed 14% of the increase. Of the remaining increase, higher unit volume contributed 8% and increased average pricing provided 1%, while foreign currency translation resulted in a 2% decrease. Operating margins increased from 15.8% to 16.0% as productivity and efficiency enhancements offset the lower operating margins of the acquired businesses. 1996 COMPARED TO 1995 Sales growth of 47% in 1996 was largely the result of the full year effect of the September, 1995 Joslyn acquisition and the 1996 Acme-Cleveland acquisition. Acquisitions contributed 44% of the growth, with the balance coming from higher unit volumes of 3% and price increases averaging less than 1%. Demand was very strong in the North American market, which was largely offset by sluggish economic conditions in international markets, particularly in Germany. Operating profit increased 39% from 1995, reflecting the acquired businesses' contributions and a steady overall contribution from the base businesses. Discontinued Operations In January, 1996, the Company divested its Fayette Tubular Products subsidiary. As the Company no longer operates in the Transportation business segment, Fayette's operation is shown as a discontinued operation. A gain of approximately $80 million was recognized in the first quarter of 1996. Gross Profit Gross profit, as a percentage of sales, in 1997 was 32.6%, a 1.0 point increase compared to the 31.6% achieved in 1996. Productivity improvements, combined with increased fixed cost leverage, resulted in margin improvement. A shift in product mix associated with the acquisitions also increased gross profit. Gross profit margin in 1996 was 31.6%, a 1.5 percentage point improvement compared to 1995. Productivity improvements were achieved in all business segments and a shift in mix to the higher margin products of the acquired companies in the Process/Environmental Controls business segment contributed to the improvement. Operating Expenses Selling, general and administrative expenses for 1997 as a percentage of sales were approximately 0.5 percentage points higher than the 1996 level. This reflects higher cost ratios in the businesses acquired, and selective investments in marketing and research and development for future growth. In 1996, selling, general and administrative expenses were 19.1% of sales, an increase of 1.1 percentage points from 1995 levels. This principally reflects the higher operating expense levels of the businesses acquired in 1996 and 1995. Interest Costs and Financing Transactions The Company debt financing is privately placed debt maturing in April, 2003 at an average interest cost of 7.2%, uncommitted lines and a revolving credit facility which provides for senior financing of $250 million for general corporate purposes. The interest rates for borrowing under the facility float with base rates. Interest expense in 1997 was 20% lower than in 1996 due to substantial cash flow generated from operations. Interest expense in 1996 was $9.2 million higher than in 1995 as average borrowing levels increased due to acquisitions. Income Taxes The 1997 effective tax rate of 39.0% is consistent with 1996. The 0.1 percentage point increase in 1996 reflects a greater impact of nondeductible amortization resulting from the acquisitions and higher taxes on foreign earnings as loss carryforwards were not available to reduce tax expense in 1996. Inflation and Other The effect of inflation on the Company's operations has been minimal in 1997, 1996, and 1995. The Company has conducted a review of the impact of Year 2000 on its information systems, as well as reviewing its impact on relationships with key customers and vendors. Based on this review, a plan to ensure minimal disruption to Company operations has been developed and is currently being implemented. The costs associated with this program are not expected to be material. Liquidity and Capital Resources The Company acquired Acme-Cleveland Corporation for approximately $200 million in July, 1996 and, in September, 1995, acquired Joslyn Corporation for approximately $245 million in cash consideration. See Note 2 to Consolidated Financial Statements for a further discussion of the impact of these acquisitions. In January, 1996, the Company sold its Fayette Tubular Products subsidiary for $155 million in cash consideration; the proceeds were used to reduce short-term borrowings. As discussed previously, $86 million of the Company's debt is fixed at an average interest cost of 7.2%. Substantially all remaining borrowings are short-term in nature and float with referenced base rates. As of December 31, 1997, the Company has unutilized commitments under its revolving credit facility of $250 million. Cash flow has been strong in all periods from 1995 through 1997. Operations generated $278 million, $217 million and $174 million in cash in 1997, 1996 and 1995, respectively. The principal use of funds has been capital expenditures of $63 million, $51 million and $59 million in 1997, 1996 and 1995, respectively, and cash paid for acquisitions of $147 million, $246 million and $208 million in 1997, 1996 and 1995, respectively. Cash flow for 1996 included the $155 million proceeds from the Fayette sale. The net result of the above, combined with working capital changes, was a decrease in debt of $38 million in 1997, $48 million in 1996, and an increase of $98 million in 1995 . 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. 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, 1997 and 1996, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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, the financial statements referred to above present fairly, in all material respects, the financial position of Danaher Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Washington, D.C. January 29, 1998 DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands of dollars, except share and per share data) Year Ended December 31, 1997 1996 1995 Sales. . . . . . . $2,050,968 $1,811,878 $1,486,769 Cost of sales . . . 1,382,475 1,239,846 1,039,622 Selling, general and administrative expenses. . . . . 401,608 345,896 266,890 Total operating expenses. . . . . 1,784,083 1,585,742 1,306,512 Operating profit. . 266,885 226,136 180,257 Interest expense. . 13,104 16,376 7,198 Earnings from continuing operations before income taxes . 253,781 209,760 173,059 Income taxes. . . . . 98,975 81,801 67,293 Earnings from continuing operations . . . . . 154,806 127,959 105,766 Discontinued operations, net of income taxes of $0 and $1,630 (1996 - gain on sale; 1995 - earnings from operations) -- 79,811 2,550 Net earnings. . . . . . $ 154,806 $ 207,770 $ 108,316 Basic earnings per share: Continuing operations $2.63 $2.18 $1.80 Discontinued operations -- 1.36 .04 Net earnings $2.63 $3.54 $1.85 Average shares outstanding 58,769,164 58,623,470 58,661,849 Diluted earnings per share: Continuing operations $2.57 $2.13 $1.77 Discontinued operations -- 1.33 .04 Net earnings $2.57 $3.47 $1.81 Average common stock and common equivalent shares outstanding . . 60,256,475 59,954,636 59,862,673 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of dollars) As of December 31, ASSETS 1997 1996 Current assets: Cash and equivalents . . $ 33,317 $ 26,444 Trade accounts receivable, less allowance for doubtful accounts of $18,510 and $14,868 . . . . . . . . . . 322,600 266,668 Inventories. . . . . . . . . 209,416 204,236 Prepaid expenses and other. . 53,006 49,393 Total current assets . . . 618,339 546,741 Property, plant and equipment, net. . . . . . . . . . . . . 335,223 319,606 Other assets . .. . . . . . . 72,739 105,903 Excess of cost over net assets of acquired companies, less accumulated amortization of $116,357 and $92,583 . . . . 853,416 792,824 $1,879,717 $1,765,074 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of debt . . . . . . . $ 35,527 $ 16,757 Trade accounts payable. . . . 135,190 110,194 Accrued expenses . . . . . . . 353,518 347,622 Total current liabilities. . 524,235 474,573 Other liabilities. . . . . . . 275,881 270,670 Long-term debt .. . . . . . . . 162,720 219,570 Stockholders' equity: Common stock, one cent par value; 125,000,000 shares authorized; 64,275,868 and 64,186,673 issued; 58,478,262 and 58,889,067 outstanding. . . . . . . . . . . 643 642 Additional paid-in capital. . . . 336,109 333,587 Cumulative foreign translation adjustment and other . . . . . . (6,122) 8,858 Retained earnings. . . . . . . . 655,692 506,773 Treasury stock, at cost; 5,797,606 and 5,297,606 shares. (69,441) (49,599) Total stockholders' equity. . 916,881 800,261 $1,879,717 $1,765,074 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) Year Ended December 31, 1997 1996 1995 Cash flows from operating activities: Earnings from continuing operations . . . . . . . . . . $154,806 $127,959 $105,766 Earnings from discontinued operations . . . . . . . . . . -- -- 2,550 Depreciation and amortization. . . . . . . . . . 76,116 68,626 58,527 Increase in accounts receivable. . . . . . . . . . . (46,175) (11,818) (20,098) (Increase) decrease in inventories . . . . . . . . . . 14,691 38,866 (15,589) Increase in accounts payable. . . 19,579 10,385 626 Change in other assets and liabilities. . . . . . . . . . . 59,355 (16,904) 42,374 Total operating cash flows. . . 278,372 217,114 174,156 Cash flows from investing activities: Payments for additions to property, plant and equipment, net . . . . . . . . . . . . . . (62,808) (51,255) (59,172) Sale of Fayette Tubular Products . -- 155,000 -- Net cash paid for acquisitions (147,238) (246,427) (207,941) Net cash used in investing activities . . . . . . . . . (210,046) (142,682) (267,113) Cash flows from financing activities: Proceeds from issuance of common stock. . . .. . . . . . . 2,523 9,507 3,559 Dividends paid .. . . . . . . . . (5,887) (5,065) (4,672) Borrowings(repayments) of debt . .(38,080) (48,407) 98,301 Purchase of common stock . . . . .(19,842) (12,110) -- Net cash provided by(used in) financing activities. . . . . (61,286) (56,075) 97,188 Effect of exchange rate changes on cash. . . . . . . . . (167) 149 108 Net change in cash and equivalents. . . . . . . . . . . 6,873 18,506 4,339 Beginning balance of cash and equivalents. . .. . . . . . 26,444 7,938 3,599 Ending balance of cash and equivalents . . . .. . . . . $33,317 $26,444 $ 7,938 Supplemental disclosures: Cash interest payments. . . . $13,666 $16,981 $13,699 Cash income tax payments . . . $66,588 $80,152 $69,853 Common stock issued for acquisitions . . . . . . . . $ -- $ 8,883 $ -- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands of dollars) Common Stock Additional Shares Amount Paid-in Capital Balance, December 31, 1994 63,198,208 $ 632 $ 311,648 Net earnings for the year. . . . . . - - - Dividends declared. . - - - Common stock issued for options exercised. . . . . . 208,006 2 3,557 Increase from translation of foreign financial statements. . . . . . - - - Balance, December 31, 1995 63,406,214 634 315,205 Net earnings for the year. . . . . . . 207,770 Dividends declared. . . (5,360) Common stock issued for options exercised. . . . . . 483,233 5 9,502 Purchase of common stock . . . .. . . . . Unrealized gain on securities held. . . . - - - Common stock issued for acquisitions . . . 297,226 3 8,880 Increase from translation of foreign financial statements. . . . . . Balance, December 31, 1996 64,186,673 642 333,587 Net earnings for the year. . . . . . Dividends declared. . Common stock issued for options exercised. . . . . 89,195 1 2,522 Purchase of common stock . .. . . . . . Decrease from translation of foreign financial statements. .. . . . Unrealized gain on securities held . . Sale of securities held . . Balance, December 31, 1997 64,275,868 $ 643 $ 336,109 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED) (in thousands of dollars) Cumulative Foreign Retained Treasury Translation Adjustment Earnings Stock and Other Balance, December 31, 1994 $ 200,719 $ (37,489) $ 590 Net earnings for the year. . . . . . 108,316 - - Dividends declared. . (4,672) - - Common stock issued for options exercised. . . . . . - - - Increase from translation of foreign financial statements. . . . . . - - 3,008 Balance, December 31, 1995 304,363 (37,489) 3,598 Net earnings for the year. . . . . . . 207,770 Dividends declared. . . (5,360) Common stock issued for options exercised. . . . . . Purchase of common stock . . . .. . . . . (12,110) Unrealized gain on securities held. . . . - - 4,000 Common stock issued for acquisitions . . . - - - Increase from translation of foreign financial statements. . . . . . 1,260 Balance, December 31, 1996 506,773 (49,599) 8,858 Net earnings for the year. . . . . . 154,806 Dividends declared. . (5,887) Common stock issued for options exercised. . . . . Purchase of common stock . .. . . . . . (19,842) Decrease from translation of foreign financial statements. .. . . . (12,680) Unrealized gain on securities held . . 1,700 Sale of securities held . . (4,000) Balance, December 31, 1997 $ 655,692 $ (69,441) $ (6,122) The accompanying Notes to Consolidated Financial Statements are an integral part of these 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. Preparation of these consolidated financial statements necessarily includes the use of management's estimates. Inventory Valuation - Inventories include material, labor and overhead and are stated principally at the lower of cost or market using the last-in, first-out method (LIFO). Property, Plant and Equipment - Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives (3 to 35 years) of the depreciable assets. Other Assets - Other assets include principally deferred income taxes, equity securities, noncurrent trade receivables and capitalized costs associated with obtaining financings which are being amortized over the term of the related debt. Available for sale equity securities have been shown at their fair market value. Fair Value of Financial Instruments - For cash and equivalents, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Excess of Cost Over Net Assets of Acquired Companies - This asset is being amortized on a straight-line basis over forty years. $23,774,000, $20,458,000 and $14,482,000 of amortization was charged to expense for the years ended December 31, 1997, 1996 and 1995, 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 separate component of stockholders' equity. Net foreign currency transaction gains or losses are not material in any of the years presented. Statements of Cash Flows - The Company considers all highly liquid investments with a maturity of three months or less at date of purchase to be cash equivalents. Income Taxes - The Company provides income taxes for unremitted earnings of foreign subsidiaries which are not considered permanently reinvested in that operation. Earnings Per Share - The computation of diluted earnings per share is based on the weighted average number of common shares and common stock equivalents outstanding during the year. Discontinued Operations - In January, 1996, the Fayette Tubular Products subsidiary was sold for approximately $155 million. A gain of approximately $80 million was recognized in 1996. Net sales for Fayette were $155 million in 1995. Comprehensive Income - The total of net income and all other nonowner changes in equity consists of: Year Ended December 31, 1997 1996 1995 Net Income $154,806 $207,770 $108,316 Other Comprehensive Income: Currency Translation (12,680) 1,260 3,008 Unrealized gains on securities: Arising during year 1,700 4,000 -- Included in net income (3,500) -- -- (14,480) 5,260 3,008 Comprehensive Income $140,326 $213,030 $111,324 (2) Acquisitions: The Company obtained control of Acme-Cleveland Corporation (Acme) as of July 2, 1996. Total consideration for Acme was approximately $200 million. The fair value of assets acquired was approximately $240 million, including $140 million of excess cost over net assets acquired, and approximately $40 million of liabilities were assumed. The transaction was accounted for as a purchase. The unaudited pro forma information for the period set forth below gives effect to this transaction as if it had occurred at the beginning of the period. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time (unaudited, 000's omitted): Year Ended December 31, 1996 Net Sales . . . . . . . . . .. . . . . . . . . . . . . .$ 1,885,700 Net Earnings from continuing operations . . . . . . . . . 129,197 Earnings per share from continuing operations (diluted). . $ 2.15 The Company obtained control of Joslyn Corporation (Joslyn) as of September 1, 1995 when Joslyn's shareholders tendered approximately 75% of the outstanding shares to the Company for $34 per share in cash. The remaining 25% was acquired in October, 1995. Total consideration for Joslyn was approximately $245 million. The fair value of assets acquired was approximately $345 million, including $180 million of excess of cost over net assets acquired, and approximately $100 million of liabilities were assumed. The transaction was accounted for as a step acquisition purchase. Results of operations reflect a minority interest elimination for the two-month period between the change in control and the merger of Joslyn. In 1997, the Company acquired Gems Sensors and Current Technology and several other entities. Aggregate consideration for these transactions was approximately $147 million. The fair value of the assets acquired was approximately $167 million and approximately $20 million of liabilities were assumed in the acquisitions. The transactions have been accounted for as purchases. These acquisitions had no significant impact on 1997 results of operations. These entities have combined annual sales levels of approximately $130 million. (3) Inventory: The major classes of inventory are summarized as follows (000's omitted): December 31, 1997 December 31, 1996 Finished goods. . . . . . . . $ 82,451 $ 88,083 Work in process. . . . .. . . 54,544 49,681 Raw material . . . . . .. . . 72,421 66,472 $ 209,416 $ 204,236 If the first-in, first-out (FIFO) method had been used for inventories valued at LIFO cost, such inventories would have been $8,940,000 and $10,959,000 higher at December 31, 1997 and 1996, respectively. (4) Property, Plant and Equipment: The major classes of property, plant and equipment are summarized as follows (000's omitted): December 31, 1997 December 31, 1996 Land and improvements . . . . . $ 19,369 $ 17,457 Buildings . . . . . . . . . . . 112,629 107,343 Machinery and equipment.. . . . 466,452 413,636 598,450 538,436 Less accumulated depreciation. . (263,227) (218,830) Property, plant and equipment. . $ 335,223 $ 319,606 (5) Financing: Financing consists of the following (000's omitted): December 31, 1997 December 31, 1996 Notes payable . . . . . . . . $ 85,900 $ 100,600 Other . . . . . . . . . . . . 112,347 135,727 198,247 236,327 Less-currently payable. . . . 35,527 16,757 $162,720 $ 219,570 The Notes had an original average life of approximately 6.5 years and an average interest cost of 7.2%. Principal amortization began in December 1995 and continues through April 2003. The estimated fair value of the Notes was approximately equal to their carrying value as of December 31, 1997 and 1996. Other includes principally short-term borrowings under uncommitted lines of credit which are payable upon demand. The carrying amount approximates fair value. The Company has a bank credit facility which provides revolving credit through September 30, 2001, of up to $250 million. The Company has complied with covenants relating to maintenance of working capital, net worth, debt levels, interest coverage, and payment of dividends applicable to the Notes and the revolving credit facility. The facility provides funds for general corporate purposes at an interest rate of LIBOR plus .125%. Weighted average borrowings under the bank facility were $-0-, $-0- and $5,000,000 for the years ended December 31, 1997, 1996 and 1995. Maximum amounts outstanding for these years were $-0-, $-0- and $60,000,000, respectively. The Company is charged a fee of .075% per annum for the facility. Commitment and facility fees of $187,500, $234,000 and $216,000 were incurred in 1997, 1996 and 1995, respectively. Interest expense of $7,150,000 is included in discontinued operations for the year ended December 31, 1995. The weighted average interest rate for short-term borrowings was 5.9%, 5.8% and 6.0% for each of the three years ended December 31, 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: 1998 - $35,527,000; 1999 - $43,010,000; 2000 - $202,000; 2001 - $88,900,000; 2002 - $225,000 and $30,383,000 thereafter. (6) Accrued Expenses and Other Liabilities: Selected accrued expenses and other liabilities include the following (000's omitted): December 31, 1997 December 31, 1996 Current Noncurrent Current Noncurrent Employee compensation. . . $ 44,908 $ 35,284 $ 43,380 $ 34,022 Insurance, including self insurance . . . . . . . . . 7,867 58,160 9,992 48,372 Post retirement benefits. . 5,000 75,553 5,000 71,819 Environmental compliance . . 27,729 49,296 29,725 52,866 Approximately $17 million of accrued expenses and other liabilities were guaranteed by bank letters of credit. (7) Pension and Employee Benefit Plans: The Company has noncontributory defined benefit pension plans which cover certain of its domestic hourly employees. Benefit accruals under most of these plans have ceased, and pension expense for defined benefit plans is not significant for any of the periods presented. It is the Company's policy to fund, at a minimum, amounts required by the Internal Revenue Service. The following sets forth the funded status of the plans as of the most recent actuarial valuations (000's omitted): 1997 1996 Assets Exceed Assets Exceed Accumulated Accumulated Accumulated Benefits Benefits Benefits Exceed Assets Actuarial present value of benefit obligations: Vested benefit obligation.. $131,578 $56,216 $55,587 Accumulated benefit obligation. . . . . . . . 136,087 57,637 58,371 Projected benefit obligation.. 136,087 57,650 58,371 Fair value of plan assets (consisting of stocks, bonds and temporary cash investments) . . . . . . . . 166,743 79,226 55,040 Projected benefit obligation (in excess of) or less than plan assets. . . . . . . . . 30,656 21,576 (3,331) Unrecognized net (gain) loss.. (22,927) (14,360) 4,257 Unrecognized net asset . . . . (1,359) (487) (1,129) Pension (liability) prepaid recognized in the balance sheet. . . . . . . . . . . . . $ 6,370 $ 6,729 $ (203) The expected long-term rate of return on plan assets was 10%. The discount rate used in determining pension cost and benefit obligations was 7.5% at January 1, 1997 and 7.25% at December 31, 1997. 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 $21,269,000, $16,754,000 and $11,870,000 for the years ended December 31, 1997, 1996 and 1995, respectively. 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. Post retirement benefits cost included the following components (000's omitted): 1997 1996 1995 Service cost . . . . $ 336 $ 536 $ 298 Interest cost . . . 4,058 4,295 4,734 $4,394 $4,831 $5,032 The following sets forth the program's funded status (000's omitted): December 31, 1997 December 31, 1996 Accumulated Post Retirement Benefit Obligation (APBO): Retirees. . . . . . . . . . $61,123 $52,387 Fully eligible active participants. . . . . . . . 7,175 10,563 Other active participants .. 2,463 9,243 Total APBO . . . . . . . . 70,761 72,193 Net Gains . . . . . . . . . . . 9,792 4,626 Plan assets . . . . . . . . . . -- -- Accrued Liability . . . . . . $80,553 $76,819 A 10% annual rate of increase in per capita costs of covered health care benefits was assumed for 1998, decreasing to 6% by 2002. A 1% increase in the assumed cost trend assumption would increase the APBO by $6.4 million and would have increased 1997 costs by approximately $500,000. Discount rates of 7.25% and 7.50% were used to determine both Plan costs and the APBO as of December 31, 1997 and 1996, respectively. (8) Stock Transactions: The Company has adopted a non-qualified stock option plan for which it is authorized to grant options to purchase up to 5,000,000 shares. Under the plan, options are granted at not less than 85% of existing market prices, expire ten years from the date of grant and generally vest ratably over a five-year period. An option to acquire 1,000,000 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 Outstanding at December 31, 1994 3,401,102 Granted (average $30.71 per share) 383,300 Exercised (average $9.54 per share) (208,006) Cancelled (136,520) Outstanding at December 31, 1995 (average $14.23 per share) 3,439,876 Granted (average $37.61 per share) 887,100 Exercised (average $7.76 per share) (483,233) Cancelled (188,508) Outstanding at December 31, 1996 (average $20.35 per share) 3,655,235 Granted (average $49.56 per share) 1,601,900 Exercised (average $15.25 per share) (89,195) Cancelled (104,700) Outstanding at December 31, 1997 (at $5.94 to $60.19 per share, average $29.72 per share) 5,063,240 As of December 31, 1997, options with a weighted average remaining life of 4.6 years covering 2,357,086 shares were exercisable at $5.94 to $45.63 per share (average $15.20 per share) and options covering 1,452,000 shares remain available to be granted. Options outstanding at December 31, 1997 are summarized below: Average Average Average Average Exercise Number Exercise Remaining Number Exercise Price Outstanding Price Life Exercisable Price $5.94 to $8.50 810,350 $6.70 2 years 810,350 $6.70 $9.00 to $13.50 700,626 $12.12 5 years 615,626 $11.93 $14.94 to $22.25 523,884 $17.65 6 years 413,916 $17.61 $22.63 to $28.88 574,360 $26.33 7 years 283,816 $25.79 $31.13 to $45.63 1,472,920 $40.84 9 years 233,378 $36.54 $45.88 to $60.19 981,100 $53.41 10 years -- -- 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 7% risk-free interest rate, a 10-year life for the option, a 15% expected volatility and dividends at the current annual rate. The weighted average grant date fair market value of options issued was approximately $13 per share in 1995, $15 per share in 1996 and $20 per share in 1997. Had this method been used in the determination of income, net income would have decreased by, approximately $5.3 million in 1997 and $1.4 million in 1996 and diluted earnings per share would have decreased by $.09 in 1997 and $.02 in 1996. Since this amount represents only the proforma effect of options granted since January 1, 1995, there was only a negligible impact on reported net income for 1995, and these proforma amounts are not likely to be representative of the effects on proforma net income for future years. (9) Leases and Commitments: The Company's leases extend for varying periods of time up to 10 years and, in some cases, contain renewal options. Future minimum rental payments for all operating leases having initial or remaining noncancelable lease terms in excess of one year are $17,110,000 in 1998, $14,584,000 in 1999, $10,559,000 in 2000, $7,625,000 in 2001, $6,529,000 in 2002 and $16,260,000 thereafter. Total rent expense charged to income for all operating leases was $18,341,000, $16,009,000 and $16,067,000 for the years ended December 31, 1997, 1996, and 1995, respectively. (10) Litigation and Contingencies: A former subsidiary of the Company is engaged in litigation in multiple states with respect to product liability. The Company sold the subsidiary in 1987. Under the terms of the sale agreement, the Company agreed to indemnify the buyer of the subsidiary for product liability related to tools manufactured by the subsidiary prior to June 4, 1987. The cases involve approximately 3,000 plaintiffs, in state and federal courts in multiple states. All other major U.S. air tool manufacturers are also defendants. The gravamen of these complaints is that the defendants' air tools, when used in different types of manufacturing environments over extended periods of time, were defective in design and caused various physical injuries. The plaintiffs seek compensatory and punitive damages. The cases are in preliminary stages of discovery and pleading and the Company intends to defend its position vigorously. The Company's maximum indemnification obligation under the contract is approximately $85,000,000. The Company believes it has insurance coverage for all or a substantial part of the damages, if any. The outcome of this litigation is not currently predictable. A subsidiary, Joslyn Manufacturing Company (JMC), previously operated wood treating facilities that chemically preserved utility poles, pilings and railroad ties. All such treating operations were discontinued or sold prior to 1982. These facilities used wood preservatives that included creosote, pentachlorophenol and chromium-arsenic-copper. While preservatives were handled in accordance with then existing law, environmental law now imposes retroactive liability, in some circumstances, on persons who owned or operated wood-treating sites. JMC is remediating some of its former sites and will remediate other sites in the future. The Company has made a provision for environmental remediation; however, there can be no assurance that estimates of environmental liabilities will not change. JMC is a defendant in a class action tort suit. The suit alleges exposure to chemicals, allegedly causing various physical injuries, and property devaluation resulting from wood treating operations previously conducted at a Louisiana site. The size of the class, the number of injuries related to the alleged exposures and the amount of alleged damages are all disputed and uncertain. The Company has tendered the defense of the suit to its insurance carrier. The Company believes that it may have adequate insurance coverage for the litigation; however, because of the above uncertain ties, the Company is unable to determine at this time the potential liability, if any. 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): 1997 1996 1995 Current: Federal. . . . . . . $85,653 $62,908 $62,225 State and local. . . 10,625 5,000 7,000 Foreign. . . . . . . 4,800 7,000 4,000 Total current ... $101,078 $74,908 $73,225 Deferred: Federal. . . . . . . (1,963) 6,449 (5,917) Other . . . . . . . (140) 444 (15) Total deferred . . (2,103) 6,893 (5,932) Income tax provision . . $98,975 $81,801 $67,293 Deferred income taxes are reflected in prepaid expenses and other current assets and in other assets. Deferred tax assets (the valuation allowances relate to foreign jurisdictions where operating loss carryforwards exist) consist of the following (000's omitted): December 31, 1997 1996 Bad debt allowance .. . .. . $ 6,386 $ 5,505 Inventories . . .. . . . . . (773) (171) Property, plant and equipment. (32,470) (29,100) Post retirement benefits. .. . 32,319 30,552 Insurance, including self insurance . . . . . .. . . . 21,755 18,920 Environmental compliance . . . 26,043 28,102 Other accruals . . . . . . . . 41,730 42,559 All other accounts . . . . . . (1,341) (4,793) Operating loss carryforwards . -- 8,265 Gross deferred tax asset. . . 93,649 99,839 Valuation allowances. .. . . . -- (8,265) Net deferred tax asset . . . . $ 93,649 $ 91,574 The effective income tax rate for the years ended December 31 varies from the statutory Federal income tax rate as follows: Percentage of Pre-Tax Earnings 1997 1996 1995 Statutory Federal income tax rate. . 35.0% 35.0% 35.0% Increase (decrease) in tax rate resulting from: Permanent differences in amortization of certain assets for tax and financial reporting purposes. . . 3.7 3.4 2.9 State income taxes (net of Federal income tax benefit).. . . . . . . . . 2.7 1.6 2.6 Taxes on foreign earnings. . . . . . . (2.4) (1.0) (1.6) Effective income tax rate. . . . . . . 39.0% 39.0% 38.9% (12) Segment Data: The Company operates within two major business segments: Tools and Components, and Process/Environmental Controls. The Tools and Components segment has a customer which accounted for approximately 13%, 14% and 16% of total sales in 1997, 1996 and 1995, respectively. Operating profit represents total revenues less operating expenses, excluding interest and taxes on income. The identifiable assets by segment are those used in each segment's operations. Intersegment amounts are eliminated to arrive at consolidated totals. The detail segment data is presented in the following table (000's omitted): Operations in Different Industries - Year Ended December 31, 1997 1996 1995 Total Sales: Tools and Components $1,192,761 $1,103,443 $1,005,005 Process/Environmental Controls 858,207 708,435 481,764 $2,050,968 $1,811,878 $1,486,769 Operating Profit: Tools and Components $ 144,370 $ 128,118 $ 112,981 Process/Environmental Controls 136,970 112,243 80,804 Other (14,455) (14,225) (13,528) $ 266,885 $ 226,136 $ 180,257 Identifiable Assets: Tools and Components $ 832,614 $ 861,345 $ 821,604 Process/Environmental Controls 960,226 849,199 599,466 Other 86,877 54,530 64,921 $1,879,717 $1,765,074 $1,485,991 Depreciation and Amortization: Tools and Components $ 44,908 $ 40,237 $ 35,211 Process/Environmental Controls 31,208 28,389 23,316 $ 76,116 $ 68,626 $ 58,527 Capital Expenditures: Tools and Components $ 38,304 $ 31,346 $ 48,500 Process/Environmental Controls 24,504 19,909 10,672 $ 62,808 $ 51,255 $ 59,172 Operations in Geographical Areas - Year Ended December 31, 1997 1996 1995 Total Sales: United States. . . . . . . . . $1,727,086 $1,565,110 $1,235,933 Europe . . . . . . . . . . . . 222,245 205,416 205,228 Other.. . . . . . . . . . . . . 101,637 41,352 45,608 $2,050,968 $1,811,878 $1,486,769 Operating Profit: United States. . . . . . . . . $ 234,662 $ 207,433 $ 156,170 Europe . . . . . . . . . . . . 21,959 15,107 20,348 Other. . . . . . . . . . . . . 10,264 3,596 3,739 $ 266,885 $ 226,136 $ 180,257 Identifiable Assets: United States. . . . . . . . . $1,521,393 $1,552,665 $1,292,166 Europe . . . . . . . . . . . . 281,701 188,660 173,949 Other. . . . . . . . . . . . . 76,623 23,749 19,876 1,879,717 $ 1,765,074 $1,485,991 Sales outside United States: Direct Sales . . . . . . . . . .$ 323,882 $ 246,768 $ 250,836 Exports . . . . . . . . . . . . 163,000 144,000 107,000 $ 486,882 $ 390,768 $ 357,836 (13) Quarterly Data-Unaudited (000's omitted except per share data) 1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Net sales . . . . . $ 466,441 $ 502,789 $ 516,601 $ 565,137 Gross profit. . . . 147,480 164,064 173,134 183,815 Operating profit. . 55,457 65,942 71,383 74,103 Net earnings. . . . 31,535 38,258 41,781 43,232 Earnings per share: Basic. . . . . . . $ .53 $ .65 $ .71 $ .74 Diluted. . . . . . $ .52 $ .64 $ .69 $ .72 1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Net sales . . . .. . $409,557 $434,897 $470,787 $496,637 Gross profit. . . . 124,293 137,988 149,021 160,730 Operating profit.. . 47,128 56,302 60,293 62,413 Earnings from continuing operations . . . . . . 26,928 32,525 33,577 34,929 Gain on sale from discontinued operations 79,811 - - - Net earnings. . . . . . 106,739 32,525 33,577 34,929 Basic earnings per share: Continuing operations $ .46 $ .56 $ .57 $ .59 Discontinued operations 1.37 - - - Net earnings $1.83 $ .56 $ .57 $ .59 Diluted earnings per share: Continuing operations $ .45 $ .54 $ .56 $ .58 Discontinued operations 1.34 - - - Net earnings $1.79 $ .54 $ .56 $ .58 Danaher Corporation and Subsidiaries Operating Executives A.L. Hyde Company Richard L. Garthwaite President American Sigma, Inc. Richard W. Wissenbach President Communications Technology Corporation Benjamin W. Jeffrey President Current Technology, Inc./Joslyn Electronic Systems Company Walter D. Rogers, Jr. President Cyberex, Inc. H. Lawrence Culp, Jr. Acting President Danaher Controls James W. Appelgren President Danaher Tool Group Asian Division C. Michael Heath 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 Gems Sensors R.J. Pabers President Hengstler GmbH Hermann E. Braun President Hennessy Industries, Inc. Steven E. Simms Acting President Jacobs Chuck Manu- facturing Company Dennis D. Claramunt President Jacobs Vehicle Systems, Inc. William J. Butler President Jennings Technology Company John P. Williamson President Joslyn Hi-Voltage Company James F. Domo President Joslyn Manufacturing Company Gary P. Prasser President Joslyn Sunbank Company P. Edward Prutzman President Matco Tools Corporation Thomas N. Willis President M&M Precision Systems Corporation James E. Helton President Namco Controls Corporation Alex A. Joseph President Partlow/West Corporation Craig B. Purse President QualiTROL Corporation Ronald N. Meyer President TxPort, Inc. Mark H. Hoffman President Veeder-Root Company H. Lawrence Culp, Jr. President Officers and Senior Executives George M. Sherman President and Chief Executive Officer Patrick W. Allender Senior Vice President, Chief Financial Officer and Secretary C. Scott Brannan Vice President - Administration and Controller Dennis D. Claramunt Vice President and Group Executive Daniel L. Comas Vice President - Corporate Development H. Lawrence Culp, Jr. Vice President and Group Executive Mark C. DeLuzio Vice President - Danaher Business System James H. Ditkoff Vice President - Finance & Tax Dennis A. Longo Vice President - Human Resources Steven E. Simms Vice President and Group Executive John P. Watson Vice President and Group Executive 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 Partner Equity Group Holdings Chairman of the Executive Committee Danaher Corporation Steven M. Rales Partner Equity Group Holdings Chairman of the Board Danaher Corporation George M. Sherman President and Chief Executive Officer Danaher Corporation A. Emmet Stephenson, Jr. President Stephenson and Company Auditors Arthur Andersen LLP Washington, D.C. Shareholders' Information Shareholder requests for information or assistance, please write or call our corporate office. Danaher Corporation c/o Investor Relations 1250 24th Street, N.W. Suite 800 Washington, D.C. 20037 (202) 828-0850 Internet Address: http://www.danaher.com Stock Listing Symbol: DHR New York and Pacific Stock Exchanges Transfer Agent ChaseMellon Shareholder Services, LLC Pittsburgh, Pennsylvania 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 1997 1996 High Low High Low First Quarter... 50 41 5/8 37 1/4 29 1/2 Second Quarter... 51 7/8 39 5/8 43 1/2 36 1/8 Third Quarter... 58 7/16 49 13/16 43 1/8 36 1/8 Fourth Quarter... 63 3/4 53 7/16 46 5/8 40 1/2 High and low per share data are as quoted on the New York Stock Exchange. EX-10 5 January 17, 1991 Mr. John P. Watson General Manager - Marketing & International Danaher Corporation Thompson Road East Windsor Industrial Park East Windsor, CT 06088 Dear Jack: We recognize that your contribution to the future growth and success of our Company is expected to be substantial. Consequently, we hope this letter will outline certain matters relative to the employment and benefit package that will reinforce and encourage your continued attention and dedication to the Company. This letter is intended solely for the purpose of describing the continuation of compensation under certain circumstances and is not intended to create any limitation on your right to terminate your employment, or the Company's right to terminate it, at any time, with or without cause. The Company will provide you salary continuance at the date of your initiation of salary continuance, for a 12 month period if your employment is severed for reasons other than for cause, death, disability or voluntary resignation. The 12 month salary continuance can also be activated by you if we change your job responsibilities substantially or your geographic location without your agreement. For purpose of this agreement, cause shall mean fraud, dishonesty, acts of gross negligence in the course of employment, usurping corporate opportunities and other serious breaches of duty of loyalty, breach of this Agreement, willful misrepresentation to shareholders or directors which is materially injurious to the Corporation, willful failure to comply with a reasonable written order of the Board of Directors, a willful and material neglect of his duties, or the commission of a felony. Should the salary continuance agreement by activated, the Company agrees to pay you the pro-rata portion of your incentive compensation for the year in which salary continuance is activated by March 15th of the following year. The amount to be prorated will be based on the achievement for that current full year's financial objectives only (i.e. excluding subjective strategic objectives.) Mr. John P. Watson January 17, 1991 Page 2 The Company also agrees to continue your current benefits such as medical, disability and retirement during the salary continuance period as well as other executive benefits such as Company car (or an equivalent car allowance at the Company's option), or club membership dues, to the extent such types of benefits existed at the date of this Agreement. Additionally, if requested, the Company will provide outplacement services or secretarial support following activation of salary continuance. Should the salary continuance be activated and you find employment before the 12 month period ends, the salary continuance and benefits will cease immediately upon your starting your new employment. In consideration of the above, if salary continuance is activated, you agree that for two (2) years following that date you will not, without the written consent of the Company, directly, individually or as an employee, agent, partner, shareholder, consultant or in any other capacity, participate in, engage in or have a financial interest or management position or other interest in any business operation of any enterprise if such operation engages in substantial and direct competition with any business operation actively conducted by the Company or its subsidiaries or any successor or assign thereof or solicit any other person to engage in any of the foregoing activities. Additionally, if salary continuance is activated, you agree that you will not recruit or solicit the employment of any employee of the Company for a period of 24 months. Very truly yours, /s/ GEORGE M. SHERMAN George M. Sherman President and Chief Executive Officer Acknowledged and agreed to: /s/ JOHN P. WATSON -----END PRIVACY-ENHANCED MESSAGE-----