EX-13 4 dex13.txt EXHIBIT 13 Exhibit 13 Auditors Arthur Andersen LLP Baltimore, Maryland Shareholders' Information For shareholder information or assistance, please write or call our corporate office. Danaher Corporation c/o Investor Relations 1250 24th Street, NW Suite 800 Washington, D.C. 20037 (202) 828-0850 Internet Address: http://www.danaher.com Stock Listing Symbol: DHR New York and Pacific Stock Exchanges Transfer Agent SunTrust Bank Atlanta, Georgia Form 10-K A copy of the Annual Report to the Securities and Exchange Commission on Form 10-K may be obtained by writing to Danaher Corporation 1 MARKET PRICES OF COMMON STOCK
2000 1999 ---- ---- High Low High Low --------------------------------------------------- First quarter....... 51 1/4 36 7/16 55 46 3/8 Second quarter....... 58 15/16 46 13/16 69 51 3/8 Third quarter........ 56 3/4 45 3/16 62 5/8 47 1/2 Fourth quarter....... 69 13/16 49 54 3/8 42 3/4
High and low per share data are as quoted on the New York Stock Exchange. 2 SELECTED FINANCIAL DATA (000's omitted except per share data) -------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- Sales $3,777,777 $3,197,238 $3,047,061 $2,619,100 $2,352,249 Operating profit 552,149 458,007 384,112 319,346 284,411 Earnings from continuing operations 324,213 261,624** 192,186* 188,576 166,511 Per share Diluted 2.23 1.79** 1.33* 1.31 1.17 Basic 2.28 1.84** 1.37* 1.35 1.19 Discontinued operations -- -- -- -- 79,811 Per share Diluted -- -- -- -- 0.56 Basic -- -- -- -- 0.57 Net earnings 324,213 261,624** 192,186* 188,576 246,322 Earnings per share Diluted 2.23 1.79** 1.33* 1.31 1.72 Basic 2.28 1.84** 1.37* 1.35 1.76 Dividends per share 0.07 0.07 0.09 0.10 0.10 Total assets 4,031,679 3,047,071 2,840,859 2,264,741 2,148,888 Total debt 795,190 374,634 503,639 229,095 239,927
* Includes $28.6 million in after-tax costs ($0.20 per share) from the merger with the Fluke Corporation ** Includes $9.8 million in after-tax costs ($0.07 per share) from the merger with the Hach Company 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Results of Operations Danaher Corporation (the "Company") designs, manufactures and markets industrial and consumer products with strong brand names, proprietary technology and major market positions in two business segments: Process/Environmental Controls and Tools and Components. The Process/Environmental Controls Segment is a leading producer of environmental products, including water quality analytical instrumentation and leak detection systems for underground fuel storage tanks; compact professional electronic test tools; and motion, position, speed, temperature, pressure, level, flow, particulate and power reliability and quality control and safety devices. In its Tools and Components Segment, the Company is a leading producer and distributor of general-purpose mechanics' hand tools and automotive specialty tools, as well as of toolboxes and storage devices, diesel engine retarders, wheel service equipment, drill chucks, and hardware and components for the power generation and transmission industries. Presented below is a summary of sales by business segment. (000's omitted) 2000 1999 1998 --------------------------------------------------------------- $ % $ % $ % Process/Environmental Controls $2,441,986 64.6% $1,854,184 58.0% $1,752,552 57.5% Tools and Components 1,335,791 35.4% 1,343,054 42.0% 1,294,509 42.5% ---------- ------ ---------- ------ --------- ------ $3,777,777 100.0% $3,197,238 100.0% $3,047,061 100.0% ========== ====== ========== ====== ========== ======
Process/Environmental Controls ------------------------------ The Process/Environmental Controls segment is comprised of Hach Company, the Dr. Bruno Lange Group, McCrometer, Fluke Corporation, Fluke Networks, Veeder-Root Company, the Danaher Industrial Controls Group, the Danaher Motion Control Group (including the General Purpose Systems Division, the Motion Components Division and the Special Purpose Systems Division), the controls business units of Joslyn Corporation and Pacific Scientific Company, M&M Precision Systems, Cyberex, Current Technology, United Power Corporation, QualiTROL Corporation, Gems Sensors, Kollmorgen Artus, and Kollmorgen Electro- Optical. These companies produce and sell compact, professional electronic test tools; underground storage tank leak detection systems; motion, position, speed, temperature, and level instruments and sensing devices; power switches and controls; communication line products; power protection products; liquid flow and quality measuring devices; quality assurance products and systems; safety devices; and electronic and mechanical counting and controlling devices. These products are distributed by the Company's sales personnel and independent representatives to original equipment manufacturers, distributors and other end- users. 2000 COMPARED TO 1999 Sales in 2000 were 32% higher than in 1999 for this segment. The acquisitions of American Precision Industries, Kollmorgen Corporation, Warner Electric Motion and several smaller businesses provided a 24% increase from 1999. The remainder of the sales change was generated by an increase in unit volume of 10.5%, offset by a 2.5% negative currency translation impact. Double- digit volume increases were achieved in the power quality, water quality, motion and electronic test businesses. The motion control business units contributed the majority of the acquisition sales increase. Operating margins increased from 15.5% to 15.7% due to higher sales volumes which were spread over a fixed cost base, continued margin improvements in the electronic test businesses and cost reductions which were offset by lower operating margins of those businesses acquired during 2000. 4 1999 COMPARED TO 1998 Sales in 1999 increased 6% from 1998 levels. Net unit volume increases of 3.5% were driven by gains in the water quality and power quality product lines, offset by lower sales of underground storage tank monitoring systems. 1999 was negatively impacted by price decreases and foreign currency translation decreases totaling over 1%. Acquisition activity contributed 4% of the increase, due primarily to the full-year impact of the Pacific Scientific Company and Dr. Bruno Lange Group acquisitions. Operating margins increased from 13.7% to 15.5% due to overall cost reductions and improvements in the margins of those businesses acquired in 1998. Tools and Components -------------------- The Tools and Components Segment is comprised of the Danaher Hand Tool Group (including the Special Markets, Asian Tools, Professional Tools and Matco Tools Divisions), Jacobs Chuck Manufacturing Company, Delta Consolidated Industries, Jacobs Vehicle Systems, Hennessy Industries, and the hardware and electrical apparatus lines of Joslyn Manufacturing Company. This segment is one of the largest domestic producers and distributors of general-purpose and specialty mechanics' hand tools. Other products manufactured by these companies include toolboxes and storage devices; diesel engine retarders; wheel service equipment; drill chucks; custom-designed headed tools and components; hardware and components for the power generation and transmission industries; and high- quality precision socket screws, fasteners, and miniature precision parts. 2000 COMPARED TO 1999 Comparable sales for the segment were flat from 1999 to 2000, as reported sales showed a 0.5% decline after a small divestiture. A sharp decline in diesel engine retarder sales accounted for a 3% drop in segment sales and was offset by growth in the hand tool and related products business units, while prices were essentially flat. Operating profit margins increased from 14.0% to 14.2% as a result of cost reductions implemented throughout the segment. 1999 COMPARED TO 1998 Sales in 1999 were 4% higher than in 1998. This increase consists of a higher unit shipment volume of 5%, offset by price decreases of 1%. Demand for diesel engine retarders and professional mechanics' tools was particularly strong in 1999. Operating margins increased from 12.3% to 14.0%, driven by higher sales volumes spread over a fixed cost base and continued manufacturing cost improvements. Gross Profit ------------ Gross profit margin was 38.7%, the same as the 1999 gross margin. Productivity improvements and manufacturing overhead cost reductions were offset by the lower margins of businesses acquired in 2000. Gross profit, as a percentage of sales, was 38.7% in 1999, a 0.7 point improvement compared to 38.0% achieved in 1998. Product and manufacturing overhead cost reductions, combined with increases in higher margin product lines, drove this improvement. Operating Expenses ------------------ Selling, general and administrative expenses for 2000 as a percentage of sales were 0.2 points lower than in 1999. Higher spending levels in acquired businesses were offset by cost reductions and the leverage of higher sales. 5 In 1999, selling, general and administrative expenses were 24.3% of sales, an improvement of 1.1 percentage points from 1998 levels. Cost reductions in administrative overhead expenses and higher sales levels spread over a fixed- cost base generated this improvement. Interest Costs and Financing Transactions ----------------------------------------- The Company's debt financing is composed primarily of $283 million of 6.25% Eurobond notes due 2005, $250 million of publicly issued 6% notes due 2008, uncommitted lines and a revolving credit facility which provides senior financing of $250 million for general corporate purposes. The interest rates for borrowing under the revolving credit facility float with base rates. In January 2001, the Company completed a $450 million 2.375% convertible debt offering. Interest expense in 2000 was $12.6 million higher than in 1999 due to higher debt and lower cash levels which resulted from acquisitions completed during 2000. Interest expense in 1999 was $9.6 million lower than in 1998 due to lower debt and higher cash levels which were generated primarily by substantial cash flow from operations. Income Taxes ------------ The 2000 effective tax rate of 38.0% is 1.1 percentage points lower than in 1999, driven primarily by an increase in taxable income in lower rate foreign jurisdictions and the nondeductible expenses associated with the Hach merger in 1999. The 1999 effective rate of 39.1% is 0.3 percentage points lower than in 1998. This decrease results primarily from a lower ratio of nondeductible amortization compared to taxable income. Inflation --------- The effect of inflation on the Company's operations has been minimal in 2000, 1999 and 1998. Financial Instruments and Risk Management ----------------------------------------- The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates, which could impact its results of operations and financial condition. The Company manages its exposure to these risks through its normal operating and financing activities. There were no material derivative instrument transactions during any of the periods presented. The Company's issuance of Eurobond notes in 2000 provides a hedge to a portion of the Company's European net asset position. The Company has generally accepted the exposure to exchange rate movements relative to its investment in foreign operations without using derivative financial instruments to manage this risk. The fair value of the Company's fixed-rate long-term debt is sensitive to changes in interest rates. The value of this debt is subject to change as a result of movements in interest rates. Sensitivity analysis is one technique used to evaluate this potential impact. Based on a hypothetical, immediate 100 basis-point increase in interest rates at December 31, 2000, the market value of the Company's fixed-rate long-term debt would be impacted by a net decrease of $27 million. This methodology has certain limitations, and these hypothetical gains or losses would not be reflected in the Company's results of operations or financial conditions under current accounting principles. Liquidity and Capital Resources ------------------------------- In 2000, the Company acquired American Precision Industries, Kollmorgen Corporation, Warner Electric Motion and additional smaller businesses for a total of $707 million in cash. In 1999, the 6 Company acquired Atlas Copco Controls and additional smaller businesses for a total of $65 million. The Company also acquired Pacific Scientific Company for approximately $420 million in cash in March 1998. See Note 2 to the Consolidated Financial Statements for a further discussion of the impact of acquisitions. As discussed previously, $283 million of the Company's debt is fixed at a rate of 6.25%, and $250 million is fixed at an average interest cost of 6%. Substantially all remaining borrowings are short-term in nature and float with referenced base rates. As of December 31, 2000, the Company has unutilized commitments under its revolving credit facility of $250 million. As of December 31, 2000, the Company held $177 million of cash and cash equivalents. These amounts are invested in highly liquid investment grade debt instruments with a maturity of 90 days or less. During January 2001, the Company acquired United Power Corporation for approximately $108 million in cash. Also in January 2001, the Company issued $722 million in zero-coupon convertible senior notes due 2021, yielding gross cash proceeds of $450 million, with an effective yield to maturity of 2.375%. See Note 14 to the Consolidated Financial Statements for a further discussion of these subsequent events. Operating cash flow has been strong in all periods. During the first quarter of 2000, the Company repurchased $82 million of its common stock. In July 1999, the Company sold $70 million of treasury stock through its Hach Company subsidiary. Operations generated $512 million, $419 million and $353 million in cash in 2000, 1999 and 1998, respectively. The principal use of funds has been capital expenditures of $89 million, $89 million, and $102 million in 2000, 1999 and 1998, respectively, and net cash paid for acquisitions of $707 million, $65 million and $532 million in 2000, 1999 and 1998, respectively. The net result of the above, combined with working capital changes, was an increase in debt of $421 million in 2000, a decrease in debt of $130 million in 1999, and an increase in debt of $215 million in 1998. 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. 7 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, 2000 and 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Baltimore, Maryland January 24, 2001 8 DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data)
Year Ended December 31, ------------------------------------------------ 2000 1999 1998 ---------- ---------- ---------- Sales.......................................... $3,777,777 $3,197,238 $3,047,061 Cost of sales.................................. 2,315,731 1,960,822 1,889,229 Selling, general and administrative expenses... 909,897 778,409 773,720 ---------- ---------- ---------- Total operating expenses.................. 3,225,628 2,739,231 2,662,949 ---------- ---------- ---------- Operating profit............................... 552,149 458,007 384,112 Other expense.................................. -- 11,778 40,796 Interest expense............................... 29,225 16,667 26,307 ---------- ---------- ---------- Earnings before income taxes................... 522,924 429,562 317,009 Income taxes................................... 198,711 167,938 124,823 ---------- ---------- ---------- Net earnings................................... $ 324,213 $ 261,624 $ 192,186 ========== ========== ========== Basic earnings per share: Net earnings............................... $2.28 $1.84 $1.37 ========== ========== ========== Average shares outstanding..................... 142,469 141,832 139,816 ========== ========== ========== Diluted earnings per share: Net earnings.............................. $ 2.23 $ 1.79 $ 1.33 ========== ========== ========== Average common stock and common equivalent shares outstanding........................ 145,499 146,089 143,987 ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 9 DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
As of December 31, -------------------------------- 2000 1999 ---------- ---------- ASSETS Current assets: Cash and equivalents........................................ $ 176,924 $ 260,281 Trade accounts receivable, less allowance for doubtful accounts of $37,000 and $28,000........................ 704,214 544,738 Inventories................................................. 460,610 324,673 Prepaid expenses and other.................................. 132,558 72,425 ---------- ---------- Total current assets................................... 1,474,306 1,202,117 Property, plant and equipment, net.......................... 575,531 500,189 Other assets................................................ 117,942 52,476 Excess of cost over net assets of acquired companies, less accumulated amortization of $245,000 and $196,000.......... 1,863,900 1,292,289 ---------- ---------- $4,031,679 $3,047,071 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of debt................... $ 81,633 $ 33,597 Trade accounts payable...................................... 262,095 213,209 Accrued expenses............................................ 674,812 461,980 ---------- ---------- Total current liabilities.............................. 1,018,540 708,786 Other liabilities........................................... 357,249 288,494 Long-term debt.............................................. 713,557 341,037 Stockholders' equity: Common stock, one cent par value; 300,000 shares authorized; 155,650 and 154,035 issued; 142,013 and 142,440 outstanding........................ 1,556 1,540 Additional paid-in capital.................................. 364,426 420,036 Accumulated other comprehensive income...................... (59,130) (34,105) Retained earnings........................................... 1,635,481 1,321,283 ---------- ----------
10
Total stockholders' equity............................. 1,942,333 1,708,754 ----------- ---------- $4,031,679 $3,047,071 =========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 11 DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Year Ended December 31, ----------------------------------------- 2000 1999 1998 ---- ---- ---- Cash flows from operating activities: Net earnings.............................................. $ 324,213 $ 261,624 $ 192,186 Depreciation and amortization............................. 149,721 126,419 114,527 Change in trade accounts receivable....................... (15,926) (60,327) 4,409 Change in inventories..................................... (38,451) 11,149 13,851 Change in accounts payable................................ (81) 45,852 (13,869) Change in other assets, accrued expenses and other liabilities.............................................. 92,769 34,390 41,578 --------- --------- ------------ Total operating cash flows........................... 512,245 419,107 352,682 --------- --------- ----------- Cash flows from investing activities: Payments for additions to property, plant and equipment, net...................................................... (88,503) (88,909) (101,614) Proceeds from disposition of businesses................... -- -- 16,250 Net cash paid for acquisitions............................ (706,794) (64,834) (532,368) --------- --------- ----------- Net cash used in investing activities............... (795,297) (153,743) (617,732) --------- --------- ----------- Cash flows from financing activities: Proceeds from sale of treasury stock...................... -- 69,845 -- Proceeds from issuance of common stock.................... 26,580 18,141 30,545 Dividends paid............................................ (10,015) (9,912) (12,840) Borrowings (repayments) of debt, net...................... 266,090 (129,851) 214,905 Purchase of treasury stock................................ (82,174) -- (2,066) --------- --------- ----------- Net cash provided by (used in) financing activities. 200,481 (51,777) 230,544 --------- --------- ----------- Effect of exchange rate changes on cash................... (786) (1,104) 1,726 --------- --------- ----------- Net change in cash and equivalents........................ (83,357) 212,483 (32,780) Beginning balance of cash and equivalents................. 260,281 47,798 80,578 --------- --------- ----------- Ending balance of cash and equivalents.................... $ 176,924 $ 260,281 $ 47,798 ========= ========= =========== Supplemental disclosures: Cash interest payments............................... $ 21,057 $ 16,348 $ 26,495 ========= ========= =========== Cash income tax payments............................. $ 40,102 $ 114,617 $ 79,301 ========= ========= ===========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 12 DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands)
--------------------- Common Stock --------------------- ------------------------------------------------------------------------------------------------------------------ Accumulated Additional Other Paid-in Retained Comprehensive Comprehensive Shares Amount Capital Earnings Income Income ------------------------------------------------------------------------------------------------------------------ Balance, December 152,932 $1,530 $294,920 $ 890,225 $(13,450) 31, 1997 ------------------------------------------------------------------------------------------------------------------ Net earnings for the year..... -- -- -- 192,186 -- $192,186 Dividends declared......... -- -- -- (12,840) -- -- Common stock issued for options exercised......... 365 3 30,542 -- -- -- Purchase of common stock..... -- -- (2,066) -- -- -- Common stock issued for acquisitions..... -- -- 8,661 -- -- -- Increase from translation of foreign financial statements....... -- -- -- -- 12,777 12,777 Sale of securities held.. -- -- -- -- (1,700) (1,700) ------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1998 153,297 $1,533 $332,057 $1,069,571 $ (2,373) $203,263 ======== ------------------------------------------------------------------------------------------------------------------ Net earnings for the year..... -- -- -- 261,624 -- 261,624 Dividends declared......... -- -- -- (9,912) -- -- Common stock issued for options exercised........ 738 7 18,134 -- -- -- Sale of treasury stock... -- -- 69,845 -- -- -- Decrease from translation of foreign financial statements....... -- -- -- -- (31,732) (31,732) ------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 154,035 $1,540 $420,036 $1,321,283 $(34,105) $229,892 ======== ------------------------------------------------------------------------------------------------------------------ Net earnings for the year..... -- -- -- 324,213 -- 324,213 Dividends declared......... -- -- -- (10,015) -- -- Common stock issued for options exercised........ 1,615 16 26,564 -- -- -- Purchase of treasury stock... -- -- (82,174) -- -- -- Decrease from translation of foreign financial statements....... -- -- -- -- (25,025) (25,025) ------------------------------------------------------------------------------------------------------------------ Balance, December 31, 2000 155,650 $1,556 $364,426 $1,635,481 $(59,130) $299,188 ======== ----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 13 (1) Summary of Significant Accounting Policies: Accounting Principles - The consolidated financial statements include the accounts of the Company and its subsidiaries. The accounts of certain of the Company's foreign subsidiaries are included on the basis of a fiscal year ending November 30. This procedure was adopted to allow sufficient time to include these companies in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated upon consolidation. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Inventory Valuation - Inventories include material, labor and overhead and are stated principally at the lower of cost or market using the last-in, first- out method (LIFO). Property, Plant and Equipment - Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives (3 to 35 years) of the depreciable assets. Other Assets - Other assets include principally deferred income taxes, assets held for sale, noncurrent trade receivables and capitalized costs associated with obtaining financings which are amortized over the term of the related debt. Fair Value of Financial Instruments - For cash and equivalents, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Excess of Cost Over Net Assets of Acquired Companies - This asset is being amortized on a straight-line basis over 40 years. $48,586,000, $37,268,000 and $34,269,000 of amortization was charged to expense for the years ended December 31, 2000, 1999 and 1998, 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 cash flow forecasts discounted at a market rate of interest. Shipping and Handling - The Company adopted Emerging Issues Task Force Issue 00-10, "Accounting for Shipping and Handling Fees and Costs," which requires amounts billed to customers for shipping and handling to be included as a component of sales. The impact of implementing this statement was not significant to any periods presented. Shipping and handling costs are included as a component of cost of sales. Foreign Currency Translation - Exchange adjustments resulting from foreign currency transactions are generally recognized in net earnings, whereas adjustments resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income within stockholders' equity. Net foreign currency transaction gains or losses are not material in any of the years presented. Cash and Equivalents - The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company provides income taxes for unremitted earnings of foreign subsidiaries which are not considered permanently reinvested in that operation. 14 Earnings Per Share - The computation of diluted earnings per share is based on the weighted-average number of common shares and common stock equivalents outstanding during the year. Accumulated Other Comprehensive Income - This consists of primarily cumulative foreign translation loss adjustments of $59,130,000, $34,105,000 and $2,373,000, for 2000, 1999 and 1998, respectively. New Accounting Pronouncements - In June 1998, Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," (FAS 133) was issued. FAS 133, as subsequently amended, establishes accounting and reporting standards for derivative instruments and hedging activities. The Company will be required to implement FAS 133 effective January 1, 2001. The Company expects that the adoption of this pronouncement will not have a material effect on operations. (2) Acquisitions: On July 3, 2000, the motion control businesses of Warner Electric Company were acquired and merged into the Company. Total consideration was approximately $147 million. The fair value of the assets acquired was approximately $185 million, and approximately $38 million of liabilities were assumed. The transaction is being accounted for as a purchase. On June 20, 2000, Kollmorgen Corporation was acquired and merged into the Company. Total consideration was approximately $363 million, including the assumption of approximately $96 million of debt. The fair value of the assets acquired was approximately $537 million, and approximately $174 million of liabilities were assumed. The transaction is being accounted for as a purchase. On March 27, 2000, American Precision Industries was acquired and merged into the Company. Total consideration was approximately $246 million, including assumption of approximately $60 million of debt. The heat transfer businesses of American Precision Industries are being carried as assets held for sale and are included in other assets at December 31, 2000. The fair value of the assets acquired was approximately $317 million, and approximately $71 million of liabilities were assumed. The transaction is being accounted for as a purchase. The above three transactions, in addition to several smaller transactions, resulted in approximately $620 million of additional excess cost over net assets of acquired companies in 2000. On July 14, 1999, Hach Company was acquired and merged into the Company. The Company issued 0.2987 shares of common stock in exchange for each outstanding share of Hach; 6,594,430 shares were exchanged for all outstanding Hach shares. The transaction was a tax-free reorganization and was accounted for as a pooling-of-interests. Accordingly, the 1999 and prior financial statements were restated to reflect the combined companies. Reflected in other expense is a one-time charge of $11.8 million ($9.8 million after-tax or $.07 per diluted share) to reflect the costs of the transaction and the elimination of redundant activities and operations. The majority of these costs are cash expenses and were incurred during 1999. On July 9, 1998, Fluke Corporation was acquired and merged into the Company. The Company issued 17,785,122 shares of common stock in exchange for all outstanding Fluke shares; 0.90478 shares were exchanged for each Fluke share. The transaction was a tax-free reorganization and was accounted for as a pooling-of-interests. Accordingly, the 1998 and prior financial statements were restated to reflect the combined companies. Reflected in other expense is a one-time charge of $40.8 million ($28.6 million after-tax or $.20 per diluted share) to reflect the costs of the transaction and integrating and implementing efficiencies associated with information, operational and administrative systems. The majority of these costs are cash expenses and were incurred during 1998. The Company acquired Pacific Scientific Company as of March 9, 1998. Total consideration was approximately $420 million. The fair value of assets acquired was approximately $520 million, and approximately $100 million of liabilities were assumed. The transaction is being accounted for as a 15 purchase. The unaudited pro forma information for the period set forth below gives effect to these transactions as if they 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, 2000 1999 1998 --------------------------- ---------- ---------- ---------- Net sales............................... $4,045,629 $3,754,460 $3,646,567 Net earnings............................ 321,984 243,057 185,580 Earnings per share (diluted)........... $ 2.21 $ 1.66 $ 1.29
(3) Inventory: The major classes of inventory are summarized as follows (000's omitted): December 31, 2000 December 31, 1999 ----------------- ----------------- Finished goods............ $ 152,509 $ 128,134 Work in process........... 95,402 67,437 Raw material.............. 212,699 129,102 ----------- ---------- $ 460,610 $ 324,673 =========== ==========
If the first-in, first-out (FIFO) method had been used for inventories valued at LIFO cost, such inventories would have been $11,177,000 and $11,394,000 higher at December 31, 2000 and 1999, respectively. (4) Property, Plant and Equipment: The major classes of property, plant and equipment are summarized as follows (000's omitted):
December 31, 2000 December 31, 1999 ------------------ ----------------- Land and improvements.......... $ 29,692 $ 25,595 Buildings...................... 248,024 209,118 Machinery and equipment........ 930,388 818,200 ---------- ---------- 1,208,104 1,052,913 Less accumulated depreciation.. (632,573) (552,724) ---------- ---------- $ 575,531 $ 500,189 ========== ==========
(5) Financing: Financing consists of the following (000's omitted):
December 31, 2000 December 31, 1999 ----------------- ----------------- Notes payable due 2008....... $250,000 $250,000 Notes payable due 2005....... 282,780 -- Notes payable due 2003....... 30,000 30,000 Uncommitted lines of credit.. 115,000 55,000 Other........................ 117,410 39,634 -------- -------- 795,190 374,634 Less-currently payable....... 81,633 33,597 -------- -------- $713,557 $341,037 ======== ========
16 The Notes due 2008 were issued in October 1998 at an average interest cost of 6.1%. The carrying amount approximates fair value. The Notes due 2005 (the Eurobond Notes), with a stated amount of EU 300 million were issued in July 2000 and bear interest at 6.25% per annum. The carrying amount of the Eurobond Notes approximates fair value. The Notes due 2003 had an original average life of approximately 10 years and an average interest cost of 7%. The carrying amount approximates fair value. The borrowings under uncommitted lines of credit are principally short-term borrowings payable upon demand. The carrying amount approximates fair value. The weighted-average interest rate for short-term borrowings under the uncommitted lines of credit was 6.2%, 5.3% and 5.8% for each of the three years ended December 31, 2000. The Company also has a bank credit facility which provides revolving credit through September 30, 2001, of up to $250 million. The facility provides funds for general corporate purposes at an interest rate of LIBOR plus .125%. There were no borrowings under the bank facility during the three years ended December 31, 2000. The Company is charged a fee of .075% per annum for the facility. Commitment and facility fees of $190,000 were incurred in 2000, 1999 and 1998. The Company has complied with all debt covenants, including limitations on secured debt, sale and lease-back transactions, maintenance of working capital, net worth, debt levels, interest coverage, and payment of dividends. Uncommitted lines of credit and certain other debt are classified as noncurrent since management intends to refinance it and expects to use the proceeds of the LYONS (Note 14) to repay the debt. The minimum principal payments during the next five years are as follows: 2001 - $81,633,000; 2002 - $27,951,000; 2003 - $31,533,000; 2004 - $115,635,000; 2005 - $283,389,000; and $255,049,000 thereafter. (6) Accrued Expenses and Other Liabilities: Selected accrued expenses and other liabilities include the following (000's omitted):
December 31, 2000 December 31, 1999 ----------------- ----------------- Current Noncurrent Current Noncurrent -------- ---------- --------- ---------- Compensation and benefits $194,205 $68,618 $126,130 $54,057 Claims, including self- insurance and litigation 15,553 88,134 16,221 91,920 Postretirement benefits 5,000 77,400 5,000 73,006 Environmental and regulatory compliance 31,422 55,861 34,156 60,719 Taxes, income and other 137,018 66,499 45,065 7,950
Approximately $16.3 million of accrued expenses and other liabilities were guaranteed by bank letters of credit as of December 31, 2000. 17 (7) Pension and Employee Benefit Plans: The Company has noncontributory defined benefit pension plans which cover certain of its domestic hourly employees. Benefit accruals under most of these plans have ceased, and pension expense for defined benefit plans is not significant for any of the periods presented. It is the Company's policy to fund, at a minimum, amounts required by the Internal Revenue Service. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for some of its retired employees. Certain employees may become eligible for these benefits as they reach normal retirement age while working for the Company. The following sets forth the funded status of the plans as of the most recent actuarial valuations using a measurement date of September 30 (millions):
Pension Benefits Other Benefits ---------------------------- ------------------------------ 2000 1999 2000 1999 ------ ------ ------ ------ Change in benefit obligation Benefit obligation at beginning of year $249.8 $267.8 $ 63.7 $ 72.8 Service cost 13.4 12.9 0.3 0.5 Interest cost 20.5 17.2 4.8 4.7 Actuarial gain (loss) 7.6 (27.0) (2.3) (8.2) Acquisition 55.0 -- 6.7 -- Benefits paid (23.8) (21.1) (5.9) (6.1) ------ ------ ------ ------ Benefit obligation at end of year 322.5 249.8 67.3 63.7 Change in plan assets Fair value of plan assets at beginning of year 314.4 287.8 -- -- Actual return on plan assets 37.4 47.7 -- -- Acquisition 93.5 -- -- -- Benefits paid (23.8) (21.1) -- -- ------ ------ ------ ------ Fair value of plan assets at end of year 421.5 314.4 -- -- Funded status 99.0 64.6 (67.0) (63.7) Unrecognized net actuarial gain (42.1) (47.7) (15.4) (14.3) ------ ------ ------ ------ Prepaid (accrued) benefit cost $ 56.9 $ 16.9 $(82.4) $(78.0) ====== ====== ====== ====== Weighted-average assumptions as of December 31: Discount rate 7.75% 7.75% 7.75% 7.75% Expected return on plan assets 10.0% 10.0% -- --
18 For measurement purposes, an eight percent annual rate of increase in the per capita cost of covered health care benefits was assumed in 2001. The rate was assumed to decrease to six percent by 2002 and remain at that level thereafter. Components of net periodic benefit cost Service cost $ 13.4 $ 12.9 $ 0.3 $ 0.5 Interest cost 20.5 17.2 4.8 4.7 Expected return on plan assets (33.4) (27.4) -- -- Recognized net actuarial gain (2.2) (2.2) (1.8) (1.0) ------ ------ ----- ----- Net periodic benefit cost $ (1.7) $ 0.5 $ 3.3 $ 4.2 ====== ====== ===== =====
The Company acquired Kollmorgen Corporation on June 20, 2000, including their pension and postretirement benefit plans. The Company acquired American Precision Industries on March 27, 2000, including their pension plans. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One-Percentage One-Percentage Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components . . . . . . . . . . . . . . . . . $0.5 $(0.5) Effect on postretirement benefit obligation . . 6.8 (6.2)
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 $36,555,000, $35,624,000 and $33,303,000 for the years ended December 31, 2000, 1999 and 1998, 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 15 million shares. Under the plan, options are granted at not less than existing market prices, expire ten years from the date of grant and generally vest ratably over a five-year period. Changes in stock options were as follows: 19
Number of Shares Under Option ------------- (thousands) Outstanding at December 31, 1997 10,127 (average $14.86 per share) Granted (average $43.11 per share) 1,154 Exercised (average $9.52 per share) (365) Cancelled (611) ------ Outstanding at December 31, 1998 (average $17.26 per share) 10,305 Granted (average $49.66 per share) 942 Exercised (average $9.54 per share) (738) Cancelled (292) ------ Outstanding at December 31, 1999 (average $20.48 per share) 10,217 ------ Granted (average $52.56 per share) 3,268 Exercised (average $12.95 per share) (1,615) Cancelled (1,119) ------ Outstanding at December 31, 2000 10,751 (at $5.03 to $68.31 per share, average ====== $31.65 per share)
As of December 31, 2000, options with a weighted average remaining life of 6.7 years covering 4,267,454 shares were exercisable at $5.03 to $60.38 per share (average $17.36 per share), and options covering 562,000 shares remain available to be granted. Options outstanding at December 31, 2000 are summarized below:
Outstanding Exercisable --------------------------------------- ------------------- Average Average Average Exercise Exercise Remaining Exercise Price Shares Price Life Shares Price -------- ------ -------- --------- ------ --------- (thousands) (thousands) $5.03 to $7.47 1,051 $ 6.44 2 years 1,051 $ 6.44 $7.97 to $11.75 755 10.20 3 years 755 10.20 $14.13 to $20.81 1,285 15.63 5 years 1,236 15.72 $21.25 to $32.22 3,124 24.11 6 years 742 23.89 $35.19 to $68.31 4,536 50.80 9 years 484 46.44
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. The pro forma costs of these options granted have been calculated using the Black-Scholes option pricing model and assuming a 6% risk-free interest rate, a 10-year life for the option, a 37.6% expected volatility and dividends at the current annual rate. The weighted-average grant date fair market value of options issued was $32 per share in 2000, $28 per share in 1999 and $18 per share in 1998. Had this method been used in the determination of income, net earnings would have decreased by 20 approximately $17.9 million in 2000, $10.7 million in 1999 and $7.8 million in 1998 and diluted earnings per share would have decreased by $.12 in 2000, $.07 in 1999, and $.05 in 1998. These proforma amounts may not be representative of the effects on proforma net earnings for future years. (9) Leases and Commitments: The Company's leases extend for varying periods of time up to 10 years and, in some cases, contain renewal options. Future minimum rental payments for all operating leases having initial or remaining noncancelable lease terms in excess of one year are $33,000,000 in 2001, $26,000,000 in 2002, $20,000,000 in 2003, $15,000,000 in 2004, $11,000,000 in 2005 and $35,000,000 thereafter. Total rent expense charged to income for all operating leases was $35,000,000, $34,000,000 and $32,000,000 for the years ended December 31, 2000, 1999 and 1998, respectively. (10) Litigation and Contingencies: A former subsidiary of the Company is engaged in litigation in multiple states with respect to product liability. The Company sold the subsidiary in 1987. Under the terms of the sale agreement, the Company agreed to indemnify the buyer of the subsidiary for product liability related to tools manufactured by the subsidiary prior to June 4, 1987. The cases involve approximately 3,000 plaintiffs in state and federal courts in multiple states. All other major U.S. air tool manufacturers are also defendants. The gravamen of these complaints is that the defendants' air tools, when used in different types of manufacturing environments over extended periods of time, were defective in design and caused various physical injuries. The plaintiffs seek compensatory and punitive damages. The Company has accepted an agreement, in principle, to settle these claims. Completion of this settlement agreement will not result in a material adverse effect on the Company's results of operations or financial condition. A subsidiary, Joslyn Manufacturing Company (JMC), previously operated wood- treating facilities that chemically preserved utility poles, pilings and railroad ties. All such treating operations were discontinued or sold prior to 1982. These facilities used wood preservatives that included creosote, pentachlorophenol and chromium-arsenic-copper. While preservatives were handled in accordance with then existing law, environmental law now imposes retroactive liability, in some circumstances, on persons who owned or operated wood-treating sites. JMC is remediating some of its former sites and will remediate other sites in the future. The Company has made a provision for environmental remediation; however, there can be no assurance that estimates of environmental liabilities will not change. In addition to the litigation noted above, the Company is, from time to time, subject to routine litigation incidental to its business. These lawsuits primarily involve claims for damages arising out of the use of the Company's products, some of which include claims for punitive as well as compensatory damages. The Company is also involved in proceedings with respect to environmental matters, including sites where it 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. The subsidiary accounts for this sale in accordance with Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". 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. 21 (11) Income Taxes: The provision for income taxes for the years ended December 31 consists of the following (000's omitted):
2000 1999 1998 -------- -------- -------- Federal: Current.............. $ 85,955 $111,809 $ 90,560 Deferred............. 67,150 16,139 12,151 State and local....... 12,645 11,665 6,647 Foreign............... 32,961 28,325 15,465 -------- -------- -------- Income tax provision.. $198,711 $167,938 $124,823 ======== ======== ========
Deferred income taxes are reflected in prepaid expenses and other current assets and in other assets. Deferred tax assets consist of the following (000's omitted):
December 31, ------------------- 2000 1999 -------- -------- Bad debt allowance............. $ 14,555 $ 10,242 Inventories.................... 7,672 9,913 Property, plant and equipment.. (47,952) (41,564) Postretirement benefits........ 37,276 33,827 Insurance, including self- insurance..................... 27,886 27,108 Environmental compliance....... 22,979 23,946 Other accruals................. (15,594) 15,538 All other accounts............. (46,044) (19,575) -------- -------- Net deferred tax asset......... $ 778 $ 59,435 ======== ========
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 --------------------------------- 2000 1999 1998 ---- ---- ---- 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..................................... 3.1 2.7 3.7 State income taxes (net of Federal income tax benefit)..................................... 1.6 1.8 1.4 Taxes on foreign earnings...................... (1.7) (0.9) (1.4) Costs of Hach (1999) and Fluke (1998) mergers.. -- 0.5 0.7 ---- ---- ---- Effective income tax rate......................... 38.0% 39.1% 39.4% ==== ==== ====
22 (12) Segment Data: Operating profit represents total revenues less operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in each segment's operations. Intersegment amounts are eliminated to arrive at consolidated totals. Detailed segment data is presented in the following table (000's omitted): Operations in Different Industries ----------------------------------
Year Ended December 31, --------------------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Total Sales: Process/Environmental Controls $2,441,986 $1,854,184 $1,752,552 Tools and Components 1,335,791 1,343,054 1,294,509 ---------- ---------- ---------- $3,777,777 $3,197,238 $3,047,061 ========== ========== ========== Operating Profit: Process/Environmental Controls $ 382,354 $ 286,997 $ 239,794 Tools and Components 189,062 187,511 159,225 Other (19,267) (16,501) (14,907) ---------- ---------- ---------- $ 552,149 $ 458,007 $ 384,112 ========== ========== ========== Identifiable Assets: Process/Environmental Controls $2,863,930 $1,793,873 $1,783,142 Tools and Components 987,207 995,234 994,364 Other 180,542 257,964 63,353 ---------- ---------- ---------- $4,031,679 $3,047,071 $2,840,859 ========== ========== ========== Liabilities: Process/Environmental Controls $1,026,463 $ 596,332 $ 595,360 Tools and Components 347,484 381,025 374,726 Other 715,399 360,960 469,985 ---------- ---------- ---------- $2,089,346 $1,338,317 $1,440,071 ========== ========== ========== Depreciation and Amortization: Process/Environmental Controls $ 101,605 $ 81,647 $ 69,416 Tools and Components 48,116 44,772 45,111 ---------- ---------- ---------- $ 149,721 $ 126,419 $ 114,527 ========== ========== ========== Capital Expenditures: Process/Environmental Controls $ 51,067 $ 53,358 $ 61,422 Tools and Components 37,436 35,551 40,192 ---------- ---------- ---------- $ 88,503 $ 88,909 $ 101,614 ========== ========== ==========
23 Operations in Geographical Areas --------------------------------
Year Ended December 31, ----------------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Total sales: United States.................. $2,883,392 $2,507,517 $2,418,500 Germany........................ 199,064 166,268 151,136 United Kingdom................. 154,731 138,066 123,511 All other...................... 540,590 385,387 353,914 ---------- ---------- ---------- $3,777,777 $3,197,238 $3,047,061 ========== ========== ========== Long-lived assets: United States.................. $2,418,590 $1,747,086 $1,821,142 Germany........................ 29,405 22,101 22,931 United Kingdom................. 22,134 24,967 21,157 All other...................... 87,244 50,800 43,933 Less: Deferred taxes................ (778) (59,435) (75,574) ---------- ---------- ---------- $2,556,595 $1,785,519 $1,833,589 ========== ========== ========== Sales outside the United States: Direct Sales................... $ 894,385 $ 689,721 $ 628,561 Exports........................ 298,000 263,000 259,000 ---------- ---------- ---------- $1,192,385 $ 952,721 $ 887,561 ========== ========== ===========
(13) Quarterly Data-Unaudited (000's omitted, except per share data) 2000 ---------------------------------------------------------- 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- Net sales......................... $867,847 $890,775 $986,786 $1,032,369 Gross profit...................... 329,889 349,590 386,972 395,595 Operating profit.................. 117,629 136,665 146,844 151,011 Net earnings...................... 71,557 81,267 83,625 87,764 Earnings per share: Basic........................ $ .50 $ .57 $ .59 $ .62 Diluted...................... $ .49 $ .56 $ .58 $ .60
24
1999 ---------------------------------------------------------- 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- Net sales....................... $793,044 $774,133 $781,867 $848,194 Gross profit.................... 295,484 301,930 311,068 327,934 Operating profit................ 102,681 113,857 119,216 122,253 Net earnings.................... 59,122 66,353 61,846* 74,303 Earnings per share: Basic...................... $ .42 $ .47 $ .43* $ .52 Diluted.................... $ .41 $ .46 $ .42* $ .51
* Includes $9.8 million in after-tax costs ($0.07 per share) from the merger with Hach Company (14) Subsequent Events In January 2001, the Company acquired United Power Corporation. The consideration was approximately $108 million. The fair value of the assets acquired was approximately $118 million and approximately $10 million of liabilities were assumed. The transaction is being accounted for as a purchase. In January 2001, the Company issued $722 million (value at maturity) in zero-coupon convertible senior notes due 2021 known as Liquid Yield Option Notes or LYONS. The gross proceeds to the Company of approximately $450 million will be used to pay down debt and for general corporate purposes, including potential future acquisitions. The initial purchaser has a 30 day option to purchase additional LYONS to cover over-allotments, which would give the Company approximately $68 million in additional gross proceeds. The LYONS will be convertible into approximately 5.2 million common shares of the Company assuming the over-allotment option is not exercised. The LYONS carry a yield to maturity of 2.375%. The LYONS are not redeemable by the Company prior to January 22, 2004, but it may be required to purchase LYONS at the accreted value thereof, at the option of the holders, on January 22, 2004 or 2011. The Company may choose to pay the purchase price for the repurchases in cash and/or common shares. 25 Danaher Corporation and Subsidiaries ------------------------------------ Major Operating Company Presidents Current Technology, Inc. Joseph W. Roark President Cyberex, Inc. Maureen F. Austin President Danaher Industrial Controls Group Craig B. Purse President Danaher Motion Control Group General Purpose Systems Division John S. Stroup President Danaher Motion Control Group Motion Components Division William T. Fejes, Jr. President Danaher Motion Control Group Special Purpose Systems Division Lawrence D. Kingsley President Danaher Tool Group Professional Tools Division Jake R. Nichol President Danaher Tool Group Special Markets Division Thomas R. Sulentic President Delta Consolidated Industries Thomas P. Joyce, Jr. President Dr. Bruno Lange GmbH Dr. Michael Romberg President Fluke Corporation James A. Lico President Fluke Networks Chris L. Odell President Gems Sensors Steven E. Breitzka President Hach Company Steven E. Simms President (Acting) Hennessy Industries, Inc. Vincent E. Piacenti President Jacobs Chuck Manufacturing Company C. Michael Heath President Jacobs Vehicle Systems, Inc. Gary A. Masse President Jennings Technology Company Kurt F. Gallo President Joslyn Hi-Voltage Company James F. Domo President Joslyn Manufacturing Company Michael J. Gallant President Joslyn Sunbank Company P. Edward Prutzman President Kollmorgen Artus Robert Perrin President Kollmorgen Electro-Optical Division H. Kenyon Bixby President M&M Precision Systems Corporation Gerald W. Blankenship President Matco Tools Corporation Thomas N. Willis President Pacific Scientific Company Instruments Division Simon R. Appleby President Pacific Scientific Energetic Materials Company Thomas L. Walsh President Pacific Scientific Safety & Aviation Group Richard G. Knoblock President QualiTROL Corporation Ronald N. Meyer President United Power Corporation Robert J. Van Sickle President Veeder-Root Industries Scott Clawson President Corporate Officers George M. Sherman President and Chief Executive Officer H. Lawrence Culp, Jr. Executive Vice President and Chief Operating Officer 26 Patrick W. Allender Executive Vice President, Chief Financial Officer and Secretary Philip W. Knisely Executive Vice President Steven E. Simms Executive Vice President William J. Butler Vice President and Group Executive Thomas S. Gross Vice President and Group Executive Daniel L. Comas Vice President - Corporate Development James H. Ditkoff Vice President - Finance & Tax W. Bruce Graham Vice President - Danaher Business System Dennis A. Longo Vice President - Human Resources Christopher C. McMahon Vice President - Controller Daniel A. Pryor Vice President - Strategic Development Uldis K. Sipols Vice President - Procurement Directors Mortimer M. Caplin Partner Caplin & Drysdale Donald J. Ehrlich President, Chairman and Chief Executive Officer Wabash National Corp. Walter G. Lohr, Jr. Partner Hogan & Hartson Mitchell P. Rales Chairman of the Executive Committee Danaher Corporation Steven M. Rales Chairman of the Board Danaher Corporation George M. Sherman President and Chief Executive Officer Danaher Corporation Alan G. Spoon General Partner Polaris Venture Partners A. Emmet Stephenson, Jr. Chairman of the Board Startek, Inc. 27