ITEM 1. BUSINESS
General
Danaher Corporation ("Danaher" or the "Company"), originally DMG, Inc., was organized in 1969 as a Massachusetts real estate investment trust. In 1978 it was reorganized as a Florida corporation under the name Diversified Mortgage Investors, Inc. ("DMI") which in a second reorganization in 1980 became a subsidiary of a newly created holding company named DMG, Inc. The Company adopted the name Danaher in 1984 and was reincorporated as a Delaware corporation following the 1986 annual meeting of shareholders.
The Company conducts its operations through three business segments: Tools, Process/Environmental Controls and Transportation Products.
Tools
The Tools segment is comprised of the Danaher Tool Group (including Special Markets and Professional Tool Division, which includes Armstrong Bros. Tool Co., a premier manufacturer and marketer of industrial hand tools), Matco Tools ("Matco"), Jacobs Chuck Manufacturing Company ("Jacobs"), Iseli Company ("Iseli") and Delta Consolidated Industries, which was acquired in November, 1994. 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 drill chucks, custom designed headed tools and components, high quality precision fasteners, tool boxes and storage containers, and high quality miniature precision parts.
The Company's Tools business strategy is focused on increasing sales to existing customers, broadening channels of distribution, developing new products 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 17% of total sales in 1994.
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.
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 1,100 independent mobile distributors who sell primarily to individual professional mechanics. Matco is one of the leading suppliers in this market.
Jacobs is the market leader in the drill chuck business with its highly respected and well recognized brand name and Iseli is a leader in the manufacture of miniature precision parts produced on Swiss screw machines.
Delta is the market leader in boxes and other storage containers serving the vehicle aftermarket and manufactures and markets containers serving numerous specialty areas.
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"), the Danaher Instruments Group (comprised of Danaher Controls, Partlow Corporation, Gulton Industries-Graphic Instruments, Eagle Signal Instruments, LFE Instruments West Instruments, Ltd., and QualiTROL Corporation), Hengstler GmbH (which was acquired in December, 1994) and the A.L. Hyde Company. These companies produce and sell underground storage tank leak detection systems and temperature, level and position sensing devices, liquid flow measuring devices and electronic and mechanical counting and controlling devices. These products are distributed by the Company's sales personnel and independent representatives to original equipment manufacturers, distributors and other end users.
The Company's strategy in the Process/ Environmental Controls segment is to concentrate on the rapid expansion of its environmental controls product line, including the Veeder-Root TM 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.
Veeder-Root is also the predominant worldwide supplier of mechanical gasoline pump computing devices and a manufacturer of other measuring and counting devices.
Other business lines within this segment include extruded thermoplastic mill shapes and custom molded plastic products.
The raw materials utilized by companies in this segment are stock items, principally metals and plastic, electrical and electronic components. These materials are readily available from a number of sources in sufficient quantities.Transportation
The Transportation segment includes Hennessy Industries, Inc. ("Hennessy"), Jacobs Brake and Fayette Tubular Products ("Fayette"). These companies are leading manufacturers and distributors of automotive and transportation products used by the automotive aftermarket and original equipment manufacturers. Products in this segment include wheel service equipment, diesel engine retarders and automobile air conditioning components.
The results of the Transportation Products business are affected by the level of sales in the automotive aftermarket, heavy duty diesel truck and domestic automobile industries. The Company's strategy is to reduce the impact of the cyclicality in this business segment by expanding its customer base for the wheel service equipment products and "Jake Brake" and achieving production efficiencies and enhanced quality and customer service through "Just-In-Time" and related manufacturing techniques.
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. The "Jake Brake" technology was developed by Jacobs and represents the premier brand of engine retarders. The product is sold by Jacobs' sales personnel to original equipment manufacturers and aftermarket distributors.
Automotive air-conditioning components and other tubular products are produced by Fayette which sells its products to original equipment manufacturers through its direct sales force. The major raw materials used by this segment include high quality steel forgings and castings, aluminum and steel tubing, rubber hose, metal couplings, paints, adhesives and chemical coatings. These materials are available in sufficient quantities from a variety of sources.
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, 1994, the Company employed approximately 9,960 persons. Of these, approximately 1,800 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 $26,800,000 for 1994, $24,000,000 for 1993 and $19,300,000 for 1992.
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.
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 financial condition.
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 17% of consolidated sales in 1994. Although the relationship with Sears is long-standing, the Company believes the loss of this business could have an adverse effect on its operations.
ITEM 2.
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 and 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 Approx. Sq.Ft of Floor Area
Tools
Springdale, AK Manufacturing Owned 207,000
Springfield,MA Manufacturing Owned 276,000
Gastonia, NC Manufacturing Leased 225,000
Fayetteville,AK (2) Manufacturing Owned 134,000
Baltimore, MD Distribution Leased 167,000
Brampton, Ontario Distribution Leased 14,000
Chicago, IL Manufacturing Owned 216,000
Lakewood, NY Manufacturing Owned 112,000
Nashville, TN Distribution Owned 132,000
Stow, OH Distribution Owned 50,000
West Hartford, CT Manufacturing Owned 234,000
Terryville, CT Manufacturing Owned 120,000
Walworth, WI Manufacturing Owned 85,000
Dundee, Scotland Manufacturing Owned 114,000
Sheffield, England Manufacturing Owned 146,000
Clemson, SC Manufacturing Owned 74,000
Jonesboro, AK Manufacturing Owned 77,000
Jonesboro, AK Manufacturing Leased 315,000
Raleigh, NC Manufacturing Leased 215,000
Process/ Environmental Controls Altoona, PA Manufacturing Owned 146,000
Elizabethtown, NC Manufacturing Owned 182,000
Marketharborough, England Manufacturing Leased 10,000
Sao Paulo, Brazil Manufacturing Owned 52,000
New Hartford & Fairport, NY Manufacturing Owned 121,000
Gurnee, Il Manufacturing Leased 36,000
Grenloch, NJ Manufacturing Owned 93,000
Providence, RI Manufacturing Owned 58,000
Brighton, England Manufacturing Leased 26,000
Chesterland, OH Manufacturing Owned 44,000
Aldingen, Germany Manufacturing Owned 216,000
Aldingen, Germany (2) Manufacturing Leased 85,000
Wehingen, Germany (2) Manufacturing Leased 48,000
Eatontown, NJ Distribution Leased 22,700
Aulmay-sons-Bois, France Manufacturing Owned 41,000
Broxbounrem, England Distribution Leased 25,000
Transportation
Fayette, OH Manufacturing Owned 200,000
Reading, MI Manufacturing Owned 73,000
Livingston, TN Manufacturing Owned 60,000
Bloomfield, CT Manufacturing Owned 283,000
LaVergne, TN Manufacturing Owned 172,000
Bowling Green, KY Manufacturing Owned 103,000
In addition to the facilities listed, the Company owns or leases various facilities including offices or properties in Washington, District of Columbia; Simsbury, Connecticut; Troy, Michigan; 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.
ITEM 3. LEGAL PROCEEDINGS
A former subsidiary of the Company is engaged in litigation in six 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 six 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.
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.
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 1994.
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, 1994, and is incorporated herein by reference.
ITEM 9.
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 1995 annual meeting, and is incorporated herein by reference.
PART IV
ITEM 14.
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 8 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 8 of this report.
3. An Index of Exhibits is on page 9 of this report.
b) Reports on Form 8-K filed in the fourth quarter of 1994.
NONE
DANAHER CORPORATION INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULES
Page Number in Annual Report
Annual Report
Form 10K To Share- holders
Report of Independent Public Accountants on Schedules: 11
Financial Statements:
Consolidated Statements of Earnings, year ended December 31, 1994, 1993, and 1992. . . . . . 14
Consolidated Balance Sheets, December 31, 1994 and 1993.. 15
Consolidated Statements of Cash Flows, years ended December 31, 1994, 1993, and 1992. 16
Consolidated Statements of Stockholders' Equity, years ended December 31, 1994, 1993, and 1992. . . . . . . . 17
Notes to Consolidated Financial Statements. . . . . . 18
Supplemental Data:
Selected Financial Data. . . . . . . 10
Market Prices of Common Stock. . . . . 26
Schedules:
II - Valuation and Qualifying Accounts. 12
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 state-ments or the notes thereto.
Exhibits
(3) Articles of Incorporation and By-Laws.
(a) The Articles of Incorporation of Danaher (filed as Annex B to Danaher's Proxy Statement dated October 7, 1986). Incorporated By Reference
(b) The By-Laws of Danaher. Incorporated By Reference
(10) Material Contracts:
(a) Employment Agreement between Danaher Corporation and George M. Sherman dated as of January 2, 1990 Incorporated By Reference
(b) Credit Agreement Dated As of September 7, 1990. Among Danaher Corporation, the Financial Institutions Listed Therein and Bankers Trust Company as Agent. Incorporated By Reference
(c) Agreement as of November 1, 1990 between Danaher Corporation, Easco Hand Tools, Inc. and Sears, Roebuck and Co. Incorporated By Reference
(d) Note Agreement as of November 1, 1992 Between Danaher Corporation and Lenders Referenced Therein. Incorporated By Reference
(e) Note Agreement as of April 1, 1993 Between Danaher Corporation and Lenders Referenced Therein. Incorporated By Reference
(13) Annual Report to Securityholders
(22) Subsidiaries of Registrant.
(24) Consent of Independent Public Accountants.
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 20, 1995
/s/ GEORGE M. SHERMAN President and Chief George M. Sherman Executive Officer
/s/ STEVEN M. RALES Chairman of the Steven M. Rales Board
/s/ MITCHELL P. RALES Chairman of the Mitchell P. Rales Executive Committee
/s/ WALTER G. LOHR, JR. Director Walter G. Lohr, Jr.
/s/ DONALD J. EHRILCH 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 Patrick W. Allender President-Chief Financial Officer and Secretary
/s/ C. SCOTT BRANNAN Vice President and C. Scott Brannan Controller
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 Danaher Corporation and Subsidiaries' Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 25, 1995. 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 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 25, 1995
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 20, 1995 DANAHER CORPORATION AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (000's omitted)
Additions
Classification
Balance at Begin- ning of Period
Charged to Costs & Expense s
Charg ed to
other Accou nts
Write Offs Write downs & deduct ions
Balanc e at End of
Period
Year Ended December 31,
Allowances deducted from asset accounts:
Allowance for doubtful accounts. . . . . . $8,043 $6,630 $487 a $3,522 $11,63
Year Ended December 31,
Allowances deducted from asset accounts:
Allowance for doubtful accounts. . . . . . $6,350 $4,188 $ -
$2,495 $8,043
Year Ended December 31,
Allowances deducted from asset accounts:
Allowance for doubtful accounts. . . . . . $5,613 $2,360 $ - $1,623 $6,350
Note (a) - Amounts related to businesses acquired.