ENERGIZED BY
THE CHALLENGE
2003 ANNUAL REPORT
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
202.828.0850
www.danaher.com
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DANAHER
Danaher, a diversified technology leader, designs, manufactures, and markets innovative products and
services with strong brand names and significant market positions. Driven by strong core values and a
foundation provided by the Danaher Business System, Danaher’s associates are pursuing a focused
strategy aimed at creating a Premier Global Enterprise.
THE DANAHER BUSINESS SYSTEM
In the mid-1980s, a Danaher division faced with intensifying competition launched an improvement effort
based on the then-new principles of lean manufacturing. The initiative succeeded beyond expectations –
reinforcing the division's industry leadership as well as spawning the Danaher Business System (DBS).
Since this modest beginning, DBS has evolved from a collection of manufacturing improvement tools
into a philosophy, set of values, and series of management processes that collectively define who we are
and how we do what we do.
Fueled by Danaher's core values, the DBS engine drives the company through a never-ending cycle of
change and improvement: exceptional people develop outstanding plans and execute them using world-
class tools to construct sustainable processes, resulting in superior performance. Superior performance
and high expectations attract additional exceptional people, who continue the cycle. Guiding all efforts
is a simple approach rooted in four customer-facing priorities: Quality, Delivery, Cost, and Innovation.
CONTENTS
Danaher’s Business Portfolio
fold-out
Financial Operating Highlights
Letter to Shareholders
The Challenge: See the Invisible
The Challenge:
Accelerate Global Growth
The Challenge:
Acquire, Integrate, and Grow
Board and Management Listing
Form 10-K
2
3
6
8
10
12
13
DANAHER AT-A-GLANCE
Fluke Corporation is a world leader in the manufacture, distribution
and service of electronic test tools and software. From industrial
electronic installation, maintenance, and service, to precision meas-
urement and quality control, Fluke tools help keep business and
industry around the globe up and running.
ELECTRONIC TEST
KEY BRANDS
KEY CUSTOMERS/VERTICAL MARKETS
Fluke, Raytek, Meterman,
Fluke Biomedical,
Hart Scientific, Beha
Technicians, Engineers, Metrologists, Commercial
and Residential Electricians
Fluke Networks is a leading provider of innovative solutions for
ensuring data communications and Internet uptime. Fluke Networks
products combine speed, accuracy, and ease of use for maximizing
network performance.
Fluke Networks, OptiView,
MicroTools, OmniScanner,
DSP, Loop Expert
Network Engineers and Technicians, Network
Installation and Maintenance Professionals,
Telecommunication Technicians
Hach/Lange is a worldwide market leader in analytical instrumentation
for water quality and applications. Hach/Lange provides advanced
analytical systems and technical support for water quality testing,
with solutions for the lab, plant, and field.
Hach, Lange, Orbisphere,
Hach Ultra Analytics, OTT,
McCrometer, Pacific Scientific
Drinking Water Facilities, Waste Water Plants,
Pharmaceuticals, Environmental Monitoring
Agencies
APPROXIMATELY 80% OF EXPECTED 2004
REVENUES FROM SIX STRATEGIC PLATFORMS
ENVIRONMENTAL
Gilbarco Veeder-Root enjoys a leading position providing solutions and
technologies that provide convenience, control, and environmental
integrity for retail fueling and adjacent markets.
Gilbarco, Veeder-Root,
Red Jacket, Gasboy
Major Oil Companies, Convenience Stores, Retail
Fueling Franchises, Commercial Fueling Operators
Medical
Technology
Motion
Electronic Test
17% compounded annual
growth rate
MOTION
Danaher Motion is changing the way things move, by providing innova-
tive solutions offering flexibility, precision, efficiency, and reliability for
applications as diverse as robotics, wheelchairs, lift trucks, electric
vehicles, and packaging machines.
Kollmorgen, Pacific Scientific,
Thomson, Superior Electric,
Portescap
Factory Automation, Medical, Health & Fitness,
Factory and Personal Mobility, Aerospace and
Defense
PRODUCT
IDENTIFICATION
MECHANICS
HAND TOOLS
MEDICAL
TECHNOLOGY
Danaher’s printing and marking technology applies codes to more than
one trillion products each year worldwide. The output of our product
identification technology can be seen every day, from the lot code on
a pill bottle to the expiration date on a beverage can. Danaher’s scan-
ning and tracking products currently sort a majority of the packages
shipped in the U.S.
Videojet, Willett, Accu-Sort
Food and Beverage, Pharmaceutical, Print & Mail,
Retail Distribution, Mail and Parcel Services
Danaher Tool Group and Matco enjoy a leading share position in the
U.S. mechanics hand tool market. Danaher is committed to delivering
customer-driven innovation with new products that improve safety,
strength, speed, and access.
Sears Craftsman®, Armstrong,
Matco, AllenTM, KD-Tools,
Holo-Krome, NAPA®, SATA
Sears Roebuck & Co., Professional Automotive
Mechanics, NAPA, Industrial Manufacturing,
Consumer Retail
Radiometer is a leading in-vitro diagnostic company focused on critical
care applications for the measurement of blood gases in both a hospi-
tal’s central lab as well as point-of-care locations.
Gendex is a leading manufacturer of digital imaging dental products
including intra-oral and panoramic X-ray machines, digital radiography
systems, intra-oral cameras, and film processors.
Radiometer
Physicians, Hospitals, Point-of-Care Centers
Gendex
Dental Professionals
17% compounded annual
growth rate
*Before effect of accounting
change and reduction of
income tax reserves related
to previously discontinued
operations.
FOCUSED NICHE BUSINESSES
Aerospace and Defense
Industrial Controls
Power Quality
Delta Consolidated Industries
Hennessy Industries
Jacobs Chuck Manufacturing Company
Jacobs Vehicle Systems
Joslyn Manufacturing Company
Environmental
Product Identification
Mechanics
Hand Tools
TOOLS AND
COMPONENTS
TOOLS AND
COMPONENTS
Focused Niche
Businesses
PROCESS/
ENVIRONMENTAL
CONTROLS
PROCESS/ENVIRONMENTAL
CONTROLS
Annual Meeting:
Danaher’s annual shareholder meeting will be held on May 4, 2004 in
Washington, D.C. Shareholders who would like to attend the meet-
ing should register with Investor Relations by calling 202-828-0850
or via e-mail at ir@danaher.com.
Auditors
Ernst & Young LLP
Baltimore, Maryland
Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges
SHAREHOLDER INFORMATION
www.danaher.com
Account Questions:
Our transfer agent can help you with a variety of shareholder
related services including:
Change of Address
Lost stock certificates
Transfer of stock to another person
Additional administrative services
Contacting our Transfer Agent:
SunTrust Bank
Stock Transfer Department
Mail Code 258
P.O. Box 4625
Atlanta, Georgia 30302
Toll Free: 1-800-568-3476
Outside of the U.S.: 404-588-7815
Fax: 404-332-3875
Investor Relations
This annual report along with a variety of other financial
materials can be viewed at www.danaher.com.
Additional inquiries may be directed to Danaher Investor Relations at:
Danaher Corporation
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
Phone: 1-202-828-0850
Fax: 1-202-828-0860
E-mail: ir@danaher.com
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DANAHER AT-A-GLANCE
Fluke Corporation is a world leader in the manufacture, distribution
and service of electronic test tools and software. From industrial
electronic installation, maintenance, and service, to precision meas-
urement and quality control, Fluke tools help keep business and
industry around the globe up and running.
ELECTRONIC TEST
KEY BRANDS
KEY CUSTOMERS/VERTICAL MARKETS
Fluke, Raytek, Meterman,
Fluke Biomedical,
Hart Scientific, Beha
Technicians, Engineers, Metrologists, Commercial
and Residential Electricians
Fluke Networks is a leading provider of innovative solutions for
ensuring data communications and Internet uptime. Fluke Networks
products combine speed, accuracy, and ease of use for maximizing
network performance.
Fluke Networks, OptiView,
MicroTools, OmniScanner,
DSP, Loop Expert
Network Engineers and Technicians, Network
Installation and Maintenance Professionals,
Telecommunication Technicians
Hach/Lange is a worldwide market leader in analytical instrumentation
for water quality and applications. Hach/Lange provides advanced
analytical systems and technical support for water quality testing,
with solutions for the lab, plant, and field.
Hach, Lange, Orbisphere,
Hach Ultra Analytics, OTT,
McCrometer, Pacific Scientific
Drinking Water Facilities, Waste Water Plants,
Pharmaceuticals, Environmental Monitoring
Agencies
APPROXIMATELY 80% OF EXPECTED 2004
REVENUES FROM SIX STRATEGIC PLATFORMS
ENVIRONMENTAL
Gilbarco Veeder-Root enjoys a leading position providing solutions and
technologies that provide convenience, control, and environmental
integrity for retail fueling and adjacent markets.
Gilbarco, Veeder-Root,
Red Jacket, Gasboy
Major Oil Companies, Convenience Stores, Retail
Fueling Franchises, Commercial Fueling Operators
Medical
Technology
Motion
Electronic Test
17% compounded annual
growth rate
MOTION
Danaher Motion is changing the way things move, by providing innova-
tive solutions offering flexibility, precision, efficiency, and reliability for
applications as diverse as robotics, wheelchairs, lift trucks, electric
vehicles, and packaging machines.
Kollmorgen, Pacific Scientific,
Thomson, Superior Electric,
Portescap
Factory Automation, Medical, Health & Fitness,
Factory and Personal Mobility, Aerospace and
Defense
PRODUCT
IDENTIFICATION
MECHANICS
HAND TOOLS
MEDICAL
TECHNOLOGY
Danaher’s printing and marking technology applies codes to more than
one trillion products each year worldwide. The output of our product
identification technology can be seen every day, from the lot code on
a pill bottle to the expiration date on a beverage can. Danaher’s scan-
ning and tracking products currently sort a majority of the packages
shipped in the U.S.
Videojet, Willett, Accu-Sort
Food and Beverage, Pharmaceutical, Print & Mail,
Retail Distribution, Mail and Parcel Services
Danaher Tool Group and Matco enjoy a leading share position in the
U.S. mechanics hand tool market. Danaher is committed to delivering
customer-driven innovation with new products that improve safety,
strength, speed, and access.
Sears Craftsman®, Armstrong,
Matco, AllenTM, KD-Tools,
Holo-Krome, NAPA®, SATA
Sears Roebuck & Co., Professional Automotive
Mechanics, NAPA, Industrial Manufacturing,
Consumer Retail
Radiometer is a leading in-vitro diagnostic company focused on critical
care applications for the measurement of blood gases in both a hospi-
tal’s central lab as well as point-of-care locations.
Gendex is a leading manufacturer of digital imaging dental products
including intra-oral and panoramic X-ray machines, digital radiography
systems, intra-oral cameras, and film processors.
Radiometer
Physicians, Hospitals, Point-of-Care Centers
Gendex
Dental Professionals
17% compounded annual
growth rate
*Before effect of accounting
change and reduction of
income tax reserves related
to previously discontinued
operations.
FOCUSED NICHE BUSINESSES
Aerospace and Defense
Industrial Controls
Power Quality
Delta Consolidated Industries
Hennessy Industries
Jacobs Chuck Manufacturing Company
Jacobs Vehicle Systems
Joslyn Manufacturing Company
Environmental
Product Identification
Mechanics
Hand Tools
TOOLS AND
COMPONENTS
TOOLS AND
COMPONENTS
Focused Niche
Businesses
PROCESS/
ENVIRONMENTAL
CONTROLS
PROCESS/ENVIRONMENTAL
CONTROLS
Annual Meeting:
Danaher’s annual shareholder meeting will be held on May 4, 2004 in
Washington, D.C. Shareholders who would like to attend the meet-
ing should register with Investor Relations by calling 202-828-0850
or via e-mail at ir@danaher.com.
Auditors
Ernst & Young LLP
Baltimore, Maryland
Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges
SHAREHOLDER INFORMATION
www.danaher.com
Account Questions:
Our transfer agent can help you with a variety of shareholder
related services including:
Change of Address
Lost stock certificates
Transfer of stock to another person
Additional administrative services
Contacting our Transfer Agent:
SunTrust Bank
Stock Transfer Department
Mail Code 258
P.O. Box 4625
Atlanta, Georgia 30302
Toll Free: 1-800-568-3476
Outside of the U.S.: 404-588-7815
Fax: 404-332-3875
Investor Relations
This annual report along with a variety of other financial
materials can be viewed at www.danaher.com.
Additional inquiries may be directed to Danaher Investor Relations at:
Danaher Corporation
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
Phone: 1-202-828-0850
Fax: 1-202-828-0860
E-mail: ir@danaher.com
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D
ENERGIZED BY
THE CHALLENGE
2003 ANNUAL REPORT
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
202.828.0850
www.danaher.com
2
0
0
3
A
N
N
U
A
L
R
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P
O
R
T
DANAHER
Danaher, a diversified technology leader, designs, manufactures, and markets innovative products and
services with strong brand names and significant market positions. Driven by strong core values and a
foundation provided by the Danaher Business System, Danaher’s associates are pursuing a focused
strategy aimed at creating a Premier Global Enterprise.
THE DANAHER BUSINESS SYSTEM
In the mid-1980s, a Danaher division faced with intensifying competition launched an improvement effort
based on the then-new principles of lean manufacturing. The initiative succeeded beyond expectations –
reinforcing the division's industry leadership as well as spawning the Danaher Business System (DBS).
Since this modest beginning, DBS has evolved from a collection of manufacturing improvement tools
into a philosophy, set of values, and series of management processes that collectively define who we are
and how we do what we do.
Fueled by Danaher's core values, the DBS engine drives the company through a never-ending cycle of
change and improvement: exceptional people develop outstanding plans and execute them using world-
class tools to construct sustainable processes, resulting in superior performance. Superior performance
and high expectations attract additional exceptional people, who continue the cycle. Guiding all efforts
is a simple approach rooted in four customer-facing priorities: Quality, Delivery, Cost, and Innovation.
CONTENTS
Danaher’s Business Portfolio
fold-out
Financial Operating Highlights
Letter to Shareholders
The Challenge: See the Invisible
The Challenge:
Accelerate Global Growth
The Challenge:
Acquire, Integrate, and Grow
Board and Management Listing
Form 10-K
2
3
6
8
10
12
13
building T H E B E S T T E A M .
pursuing G R O W T H T H R O U G H
C U S T O M E R S A T I S F A C T I O N .
achieving O U T S T A N D I N G P E R F O R M A N C E .
These challenges are an inherent part of
any business. We strive to question con-
stantly, never settle, always improve – every
aspect of our businesses. This process has
consistently created value for our share-
holders. Today, the drive behind this process
is stronger than ever as we continue to be
E N E R G I Z E D B Y T H E C H A L L E N G E .
HIGHLIGHTS
FINANCIAL OPERATING HIGHLIGHTS
DANAHER
(dollars in thousands except per share data and number of associates)
2003
2002
Sales
Operating profit
Net earnings before accounting change and tax reserve reduction
Net earnings
Earnings per share before accounting change and tax reserve reduction
Earnings per share
Operating cash flow
Capital expenditures
Free cash flow (operating cash flow less capital expenditures)
Number of associates (permanent and temporary)
Total assets
Total debt
Stockholders’ equity
Total capitalization (total debt plus stockholders’ equity)
Total debt as a percent of total capitalization
Return on equity before pension curtailment gain, accounting change
and tax reserve reduction
$5,293,876
$ 845,995
$ 536,834
$ 536,834
$
$
3.37
3.37
$ 861,544
$
80,343
$ 781,201
30,000
$6,890,050
$1,298,883
$3,646,709
$4,945,592
$ 4,577,232
$ 701,122
$ 434,141
$ 290,391
$
$
2.79
1.88
$ 710,347
$
65,430
$ 644,917
29,000
$6,029,145
$1,309,964
$3,009,599
$4,319,563
26.3%
14.4%
30.3%
13.8%
Sales
(dollars in billions)
9
2
5
$
.
8
5
.
4
$
8
7
.
3
$
8
7
.
3
$
0
2
3
$
.
Operating Profit
(dollars in millions)
Operating Cash Flow
(dollars in millions)
6
4
8
$
1
0
7
$
2
5
5
$
2
0
5
$
8
5
4
$
2
6
8
$
0
1
7
$
8
0
6
$
2
1
5
$
9
1
4
$
99 00 01 02 03
13% compounded annual
growth rate over the last
five years
99 00 01 02 03
17% compounded annual
growth rate over the last
five years
99 00 01 02 03
20% compounded annual
growth rate over the last
five years
2
H. Lawrence Culp, Jr.
President and Chief Executive Officer
DEAR SHAREHOLDERS:
Again in 2003, Danaher delivered a record performance in sales, earnings, and cash flow. We generated
these results in an operating environment that was weak at the outset, but stabilized and strengthened
throughout the year. This welcome macro-economic strength, coupled with the long list of initiatives
taken and investments made during the three and a half-year industrial downturn, give us increased
optimism about 2004 and beyond.
2003 PERFORMANCE HIGHLIGHTS INCLUDE:
n Revenues increased approximately 15.5% to $5.29 billion. With the addition of Radiometer
and Gendex, our annualized revenue run-rate in early 2004 is over $6 billion, an increase
of more than 60% from our pre-recession level.
n Organic growth of 6% (excluding positive currency effects) in the fourth quarter drove a
1.5% revenue increase for the year.
n Earnings Per Share grew 20% to $3.37.
n Operating Cash Flow of $862 million was an all-time high.
n Free Cash Flow increased 21% to a record $781 million and exceeded net income, a key
barometer of earnings quality and operating efficiency, for the 12th year in a row.
n Product Identification, the strategic platform created in 2002, was strengthened with the
acquisitions of Willett and Accu-Sort. Product Identification’s annualized revenues are now
above $600 million entering 2004.
n Our sixth strategic platform, Medical Technology, was announced on December 11, 2003,
anchored by the early 2004 acquisitions of Radiometer and Gendex.
n The stock price ended the year at $91.75, a 40% increase for the year and 1.5 times the
change in the S&P 500 Index during 2003, and 3.9 times that same index over the last
three years.
DANAHER 2003
3
RECESSION IN RETROSPECT
Now that we have tangible evidence that the industrial econ-
omy is recovering from its recent malaise, I share here some
thoughts on our experiences and what they say about Danaher.
We first saw the signs of economic weakness back in the
third quarter of 2000 and immediately began to take action. Our
subsequent performance – sustained annual increases in revenues,
earnings, and cash flow throughout the period – is widely praised
but sometimes misunderstood. Quick and decisive countermea-
sures aimed at reducing expenses were implemented. I am still
impressed that since July of 2000 we increased our actual revenues
by 42% while expanding our facility count by only 2% and our
associate population by just 10% over the same period. Our early
actions to tighten operating budgets certainly helped, but I
believe two other dynamics – essential aspects of Danaher and
the Danaher Business System (DBS) – had a far greater impact
on our subsequent performance.
The first dynamic is kaizen. Kaizen, the Japanese word for
continuous improvement, aims to eliminate waste. We constantly
uncover examples of waste, even in our best facilities and within
our most productive processes. Our kaizen methods continue to
be so integral to our organization that the “spirit of kaizen,” the
simple philosophy that no matter how good today's performance
is, we can do better tomorrow, is a Danaher core value. Since the
kaizen process is continuous and focuses energies on eliminating
waste, when the downturn in the economy became evident and
cost reduction actions became necessary, we did not have to pull
rusty, infrequently used tools out of the DBS toolbox. We simply
accelerated the kaizen processes already in motion across Danaher.
So rather than the “early” start we are given credit for, what we
really enjoyed was a “running” start given our longstanding
commitment to kaizen.
The second dynamic is what Jim Collins, author of Good to
Great and co-author of Built to Last, calls “The Genius of AND.”
Collins’ thesis is that outstanding companies reject conventional
“either A or B but not both”-type trade-offs. That was exactly the
approach we sought to adhere to throughout the entire down-
turn with respect to reducing costs while protecting the funding
for our growth strategies. Not that it was always easy. The tough
decisions only got tougher as the downturn wore on. Yet, we
consistently strove to outperform with respect to earnings and
cash flow without compromising our long-term vision. We con-
tinued to invest heavily in DBS training and staffing across the
organization. We strengthened competitive positions and increased
our investments in our long-term “corporate breakthroughs” –
those growth opportunities with at least $30 million of growth
potential in a 3-5 year timeframe. I am proud of what our team
did to outperform AND enhance our long-term growth prospects
during the last three years. I know we have not yet realized the
full benefits of these efforts.
STRATEGIC PLATFORMS IN 2003
Our 2003 results were again driven by Danaher’s high-quality busi-
ness portfolio, comprised of five key strategic platforms generat-
ing more than three-quarters of our revenues for the year and
providing key leadership positions in very attractive global mar-
kets. In December of 2003 we announced the creation of our sixth
platform, Medical Technology, with the acquisitions of Radiometer
and Gendex. Medical Technology is our first platform based out-
side of the United States. Radiometer, based in Copenhagen,
Denmark, is a leading manufacturer of arterial blood gas analysis
equipment and consumables, with approximately $300 million in
annual revenues. Gendex is a leading brand in the dental imaging
market. We think that both of these acquisitions represent an
excellent opportunity to grow in new areas, while staying close
to the technologies, processes, and products where we believe
the application of DBS can add significant value.
Environmental – Hach/Lange, a leader in water quality analytical
instrumentation, continued to show consistent core growth on a
global basis. During 2003, Hach/Lange introduced the Luminescense
Dissolved Oxygen sensor (LDO), a key innovation for the waste
water analysis market – an accurate, low-maintenance sensor that
does not require calibration. The team also made excellent progress
in China, winning the analytics contract for the largest waste water
facility in Pudong, Shanghai.
Gilbarco Veeder-Root is a premier brand in integrated
automation and environmental systems and services for the retail
petroleum industry. Gilbarco Veeder-Root continues to develop
innovative product and service offerings which include enhanced
vapor recovery systems and leak containment sensors for both
U.S. and international markets. Gaining share in 2003, the
team made excellent progress in the high volume retail chan-
nel, while revenues in China doubled over 2002. For all of 2003,
the group showed positive revenue growth, a stark contrast with
the double-digit declines at the beginning of the year, prior to
the Iraq war.
Motion, a global manufacturer of innovative solutions for
complex, high-speed, high-precision motion applications, has now
delivered six consecutive quarters of core growth. During the year,
the group broadened manufacturing capability in China to sup-
port production of Otis Gen2 Elevators – addressing a growing
opportunity in that region. We continue to gain traction with our
lift truck initiative with over $160 million of annualized orders
booked, as well as flat-panel display equipment order revenues
that we expect to increase significantly in 2004.
4
DANAHER 2003
Product Identification is a leader in printing, marking and scan-
ning applications serving the food and beverage, pharmaceutical,
print, and mail markets. The February 2003 acquisition of Willet
complemented our existing Videojet business, providing both
product line and geographic expansions helping to drive solid
mid-single-digit core growth from existing businesses for the
year. Additionally, we saw strong growth in newer technologies
such as laser, thermal transfer overlay, and binary array. Accu-Sort,
acquired in November 2003, adds a leadership position in
scanning technology and addresses a key need of many of our
existing Videojet customers.
The Electronic Test platform, led by Fluke, a premier global
brand in hand-held test instrumentation, ended the fourth quarter
with sequential and year-over-year growth in both the Fluke and
Fluke Networks businesses. Fluke Networks enjoyed growth in
both fiber- and copper-testing equipment as well as distributed-
analysis products, with Europe and China showing the most
significant revenue gains – an outstanding performance despite
the difficult technology market in 2003. Raytek, a Fluke brand,
launched the Ti30, an innovative new thermal imaging product,
targeting a new segment of that market. The acquisition of Beha
in the fourth quarter significantly strengthens our existing Fluke
European presence in electrical products.
Mechanics Hand Tools grew as a result of our Craftsman
Industrial and Lowe’s initiatives, coupled with stronger retail sales
at Sears and in our Matco business. Sales in China grew at a
double-digit rate, driven by the SATA brand expansion into
automotive and hardware markets. New products, such as the
thin profile ratchet and high-visibility sockets, position us well
for continued growth in 2004.
Our focused, niche businesses also made significant progress
during the year, many providing positive returns and improving
their competitive positions in their respective markets, and, at
times, serving as excellent developmental assignments for our
future leaders.
OUTLOOK – 2004 AND BEYOND
During the second half of 2003, we saw multiple signs of strength-
ening end-user demand building across Danaher. That strength
accelerated in the fourth quarter where we achieved 6% organic
growth, and this momentum has continued into early 2004. Though
America’s “twin deficits,” combined with the prospects of interest
rate increases and a deceleration of the economic growth in China
have some observers concerned about the state of the economy
at large, we are optimistic that 2004 may be the first year since
1999 in which we do not see a softening of demand. We expect
Danaher to do well on a relative basis in an improved economy
as our six strategic platforms enjoy stronger competitive positions
today than when we entered the recession. Our investments in
new products, people development, and enhanced DBS capabil-
ities drove our out-performance in recent years, and we expect
this impact to expand in a growing economy.
The overall quality of the portfolio is improved with approxi-
mately 80% of 2004 revenues expected to come from strategic
platforms. Two of these platforms did not even exist within Danaher
three years ago, and we are not yet finished augmenting our
organic growth efforts with acquisitions. Even with the comple-
tion of Radiometer and Gendex, we have a healthy list of strategic
acquisition ideas. As of December 31, 2003, we are underleveraged
with a debt to capital ratio of 26%. In addition we had $1.2 billion
in cash at year end, approximately $750 million of which was used
to fund the Radiometer and Gendex acquisitions. Rest assured that
we remain both humble and hungry as we look ahead to the oppor-
tunities and challenges an improved economy presents for Danaher.
As we prepare for our twentieth anniversary this fall, we
believe our best days are still very much ahead of us. Our long-
term view of Danaher’s future remains unchanged: Our team
believes that the powerful combination of DBS and our high-
quality portfolio of businesses can create superior value for our
shareholders as we continue the journey of becoming a Premier
Global Enterprise.
RECOGNITION AND APPRECIATION
I would like to bring attention to, and thank, Danaher’s 30,000
associates worldwide. Our record performance in 2003 and, more
importantly, during the entire course of the recent economic
downturn, is largely due to their dedication, perseverance, intel-
ligence, customer focus, and competitive spirit. Countless others,
especially amongst our supplier and customer bases, also made
significant contributions. Energized by the challenge, the col-
lective commitment of all of these individuals to our long-term
success continues to impress and motivate me. I thank all of them
for their support.
Sincerely,
H. Lawrence Culp, Jr.
President and Chief Executive Officer
March 10, 2004
5
THE CHALLENGE:
SEE THE INVISIBLE
At Danaher, we not only create products, we create solutions.
We envision ways to fill customer needs. Sometimes, even
before they realize them. Leveraging innovative technology
with a disciplined process, we make it happen.
THE RESULT: RAYTEK CREATES A NEW PRODUCT FOR A NEW MARKET
Infrared technology has been utilized successfully
in industrial and research settings for decades –
and Raytek, a Fluke brand, is a worldwide leader in
infrared thermography, focusing on handheld prod-
ucts for industrial and lab applications since 1963.
Thermographic instruments “see the invisible” by
translating the infrared radiation emitted from an
object as a range of temperatures.
In 1981, domestic plants spent more than
$600 billion to maintain their critical plant systems.
By 1991, the costs had increased to more than
$800 billion and topped $1.2 trillion in 2000.
Studies indicated that between one-third and
one-half of these maintenance dollars are wasted
through ineffective maintenance management
methods. Many facility managers would readily
admit that inspections utilizing infrared thermo-
graphic technology provide tremendous value for
users to better identify potential maintenance needs
for critical machinery, equipment, and systems
within a plant or facility. But these inspections are
constrained by the high cost of consultants and the
equally high cost of purchasing complex equipment
as well as training associates on how to use them.
In 2001, the Raytek team envisioned an
invisible opportunity… create a low-cost ther-
mographic tool that could be easily used by any
maintenance professional. Listening to the Voice
of the Customer (VOC), the team identified the
key value elements required in thermal imaging
equipment: good resolution, the ability to scan
and get an immediate temperature reading, and
easy-to-use software that would help with data
analysis… and the price had to be at least half
of alternative products.
In 2002, Raytek became a part of Danaher
and the full potential of the technology was rec-
ognized. A breakthrough goal was set to launch
the technology within 12 months. In July 2003,
Raytek shipped the first ThermoView™ Ti30
thermal imager. This new product allows plant
maintenance personnel with minimal training to
conduct cost-effective and highly accurate pre-
dictive maintenance inspections and equipment
troubleshooting. The product has already earned
industry recognition, including the NASA 2003
Product of the Year Award.
By making the ThermoView affordable and
easy to use, Raytek found a new customer base.
Today, over 70% of sales to date are to users who
had never purchased a thermal imager or a Raytek
product. The Voice of the Customer has clearly
identified the need for a portfolio of products for
plant-predictive and preventative maintenance,
and we believe the strength of the Fluke channel
can bring that to them.
6
INVISIBLE
IINNVVIISSIIBBLLEE
DANAHER 2003
7
THE CHALLENGE:
ACCELERATE
GLOBAL GROWTH
GLOBAL
Expanding into the world’s biggest marketplace takes teamwork. We continue to
leverage our efforts across Danaher to bring our broad product offering to this
important growth market.
THE RESULT: DANAHER MOVES INTO THE WORLD'S BIGGEST MARKET
Danaher has long recognized China as a key opportunity for
growth. Fluke, our Electronic Test platform, first began doing
business in China in 1982 and since that time, Danaher’s business
in China has continued to grow. China’s gross domestic product
has grown at over 8% annually for the last five years and is con-
servatively estimated to provide 10-15% of global economic
expansion in 2004. China is fast replacing Japan as Asia’s most
important economy, generating eight million jobs annually.
Our approach to China is multifaceted – investing in compre-
hensive direct sales and marketing efforts as well as establishing
manufacturing capability and sourcing partners to create a strong
footprint for organic growth. In 2003, we established the China
Management Board to accelerate breakthrough growth. Danaher
revenues in China now exceed a quarter of a billion dollars with
an overall growth rate of more than 20% in 2003. Each of our
five strategic platforms has a presence in China today.
Hach/Lange has enjoyed high rates of growth in one of
the largest served market segments in China. In 2003, the team
achieved a significant project win at the Pudong Shanghai waste-
water facility, the largest wastewater facility in China. That initial
contract has resulted in the group’s first locally produced product,
delivering a more than 35% cost savings driven by 90% locally
sourced content.
During the year, the Danaher Motion group teamed with
Otis, a key customer, and utilized its Tianjin facility to produce
elevator motors in supporting Otis’ expanded Asian initiative. The
Motion group established an in-country supply chain and moved
complex final assembly processes to this facility. During the transi-
tion, taking care of the customer was the first priority. Aided by
DBS tools to help ensure consistent quality, delivery and cost, the
transition generated reduced freight and product cost and more
importantly, the ability to provide just-in-time delivery to Otis.
These are but a few examples of Danaher’s unique position
in China. The end markets we serve in China represent signifi-
cant growth opportunities in this fast-growing economy. Aided
by the leadership of the China Management Board, our efforts
to drive organic growth opportunities are more focused and we
are better leveraging our existing capabilities. This in turn has
helped us to accelerate growth in China as we continue to expand
our presence globally.
8
DANAHER 2003
TE
ROWTH
THE CHALLENGE:
ACQUIRE,
INTEGRATE, AND GROW
INTEGRATE,
It starts with a good
strategy. Acquire com-
panies that can extend
our reach, leverage our
capability, and advance
our product offering.
We continually strive to
improve our integration
proficiency, ultimately
driving growth.
10
DANAHER 2003
E, AND GROW
E,
THE RESULT: PRODUCT IDENTIFICATION MAKES A MARK
We believe a disciplined approach is critical for successful acquisition
integration, regardless of changing economic conditions. We strive to
adhere to a rigorous set of criteria that begins with an understanding
of the market potential, how we can utilize the Danaher Business
System, and ultimately how we and our customers can win.
In February of 2002, Danaher acquired Videojet, to create our
Product Identification platform, giving Danaher a leading position
in high-speed, high-precision variable marking technology prima-
rily focused on food and beverage and pharmaceutical applications.
An example of this type of technology can be found on the bottom
of a can of soda, where variable information such as date codes or
“best if used by” information can be applied to these containers at a
rate of 2,200 cans per minute. Ten months later, a key competitor,
Willett, was acquired complementing Videojet’s existing business.
The acquisition of Willett added leverage with lower price points
and a strong position in fast-growing markets such as China, Brazil,
Turkey, Russia, and Eastern Europe. While the acquisition provided
expanded global sales reach, additional opportunities remained to
improve Willett’s financial position which was slightly above a
break-even profitability level.
Utilizing a combination of Danaher Business System tools, signif-
icant improvements were realized in less than a year. The two sales
forces were integrated – offices in the U.S., Europe, and Asia were
combined, creating a more effective geographic presence, driving a
more than 10% increase in per-associate sales, and providing the
sales force with a broader, more competitive product portfolio. Product
quality improved as defects were reduced by 25%, eleven manufac-
turing sites became six, driving productivity up over 10%.
The balance of the challenge was focused on growth. Estab-
lished channels now give customers a larger range of product alter-
natives. The number of new product offerings for the business
is up 30% when compared to the year prior to the acquisition.
The first co-developed product utilizing resources from both the
Videojet and Willett organizations was launched in April of 2003.
The ability to provide a global service footprint in a variety of
marking technologies led to significant new wins with several
major global customers.
By combining the two businesses, Danaher has built a strong
platform providing compelling product solutions. We enjoy a
leading position in the U.S., Europe and China. Videojet and Willett,
with the recent addition of Accu-Sort, are expected to generate
approximately $600 million in revenue in 2004, and operating
margins approaching 20% – a tangible example of the combined
power of strategy and the Danaher Business System.
11
DIRECTORS
Mortimer M. Caplin
Founder and Senior Partner
Caplin & Drysdale
Walter G. Lohr, Jr.
Partner
Hogan & Hartson
Steven M. Rales
Chairman of the Board
Danaher Corporation
Alan G. Spoon
Managing General Partner
Polaris Venture Partners
H. Lawrence Culp, Jr.
Mitchell P. Rales
John T. Schwieters
A. Emmet Stephenson, Jr.
President and Chief Executive Officer
Danaher Corporation
Chairman of the Executive Committee
Danaher Corporation
Vice Chairman
Perseus, LLC
Chairman of the Board
StarTek, Inc.
Donald J. Ehrlich
Chief Executive Officer
Schwab Corporation
EXECUTIVE OFFICERS
H. Lawrence Culp, Jr.
Philip W. Knisely
James H. Ditkoff
Robert S. Lutz
President and Chief Executive Officer
Executive Vice President
Senior Vice President – Finance & Tax
Patrick W. Allender
Executive Vice President,
Chief Financial Officer and Secretary
Steven E. Simms
Executive Vice President
Donald E. Doles
Vice President – Danaher Business
Systems and Corporate Procurement
Daniel L. Comas
Vice President – Corporate Development
Vice President – Chief Accounting
Officer
Daniel A. Pryor
Vice President – Strategic Development
CORPORATE OFFICERS
Rick L. Bentzinger
Thomas P. Joyce
Craig B. Purse
Frank T. McFaden
Vice President – Human Resources
Vice President and Group Executive
Vice President and Group Executive
Vice President and Treasurer
J. David Bergman
Vice President – Audit
Alex Joseph
Vice President – Corporate
General Manager
James A. Lico
John S. Stroup
Frank Anders Wilson
Vice President and Group Executive
Vice President and Group Executive
Vice President – Investor Relations
Gary A. Masse
Jeffrey A. Svoboda
Vice President and Group Executive
Vice President and Group Executive
MAJOR OPERATING COMPANY PRESIDENTS
Accu-Sort
Robert E. Joyce
Danaher Industrial Controls Group
Lawrence D. Kingsley
Fluke
James A. Lico
Fluke Networks
Chris L. Odell
Hennessy Industries, Inc.
Vincent E. Piacenti
Matco Tools Corporation
Thomas N. Willis
Jacobs Chuck Manufacturing Company
Vincent E. Piacenti
McCrometer
Kerry F. McCall
Danaher Motion
John S. Stroup
Danaher Power Solutions
Kurt F. Gallo
Danaher Tool Group Professional
Tools Division
Jake R. Nichol
Danaher Tool Group Special
Markets Division
Thomas R. Sulentic
Delta Consolidated Industries
John W. Allenbach
Gems Sensors
Steven E. Breitzka
Jacobs Vehicle Systems
Scott W. Wine
Gendex
Philip W. Knisely (acting)
Joslyn Hi-Voltage Company
Eric D. Ashleman
Gilbarco Veeder-Root
Gary A. Masse
Hach / Lange
Thomas P. Joyce, Jr.
Hach Ultra Analytics
Yves Ducommun
Joslyn Manufacturing Company
David A. Nies
Kollmorgen Artus
Robert Perrin
Kollmorgen Electro-Optical
H. Kenyon Bixby
Pacific Scientific Energetic
Materials Company
Thomas L. Walsh
Pacific Scientific Safety & Aviation Group
Richard G. Knoblock
QualiTROL Corporation
Ronald N. Meyer
Radiometer
Peter Kürstein
Videojet
Craig B. Purse
12
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - K
nn ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
X
For the fiscal year ended December 31, 2003
nn TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from ______ to ______
Commission File Number: 1-8089
Danaher Corporation
(Exact name of registrant as specified in its charter)
Delaware
59-1995548
(State of incorporation)
(I.R.S. Employer Identification number)
2099 Pennsylvania Ave. NW, 12th Floor
Washington, D.C.
(Address of Principal Executive Offices)
20006-1813
(Zip Code)
Registrant’s telephone number, including area code: 202-828-0850
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Name of Exchanges 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.
X
Yes ____
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.
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange act Rule 12b-2).
X
Yes ____
No ____
As of February 27, 2004, the number of shares of Danaher common stock outstanding was 153.9 million shares. The
aggregate market value of common shares held by non-affiliates of the Registrant on June 27, 2003 was approximately
$7.8 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. Shares of Company common stock held by each executive officer and director and by each
person known to beneficially own more than 10% of Danaher’s outstanding common stock have been excluded from
such calculation in that such persons may be deemed affiliates. The determination of affiliate status for purposes of the
foregoing calculation is not necessarily a conclusive determination for other purposes.
13
DANAHER 2003 FORM 10-K
• risks customarily encountered in foreign oper-
ations, including transportation interruptions,
changes in a country’s or region’s political or eco-
nomic conditions, trade protection measures,
import or export licensing requirements, difficulty
in staffing and managing widespread operations,
differing labor regulation, differing protection
of intellectual property, and unexpected changes
in laws or licensing or regulatory requirements;
• risks related to terrorist activities and the U.S. and
international response thereto;
• changes in the environment for making acquisitions
and divestitures, including changes in accounting
or regulatory requirements or in the market value
of acquisition candidates;
• the Company’s ability to integrate acquired busi-
nesses into its operations, realize planned synergies
and operate such businesses profitably in accor-
dance with expectations;
• the challenge of managing asset levels, including
inventory;
• assumptions relating to pension and other post-
retirement costs;
• the Company’s ability to achieve projected levels
of efficiencies and cost reduction measures; and
• other risks and uncertainties that affect the manu-
facturing sector generally including, but not lim-
ited to, economic, political, governmental and
technological factors affecting the Company’s
operations, markets, products, services and prices.
Any such forward looking statements are not guaran-
tees of future performances and actual results, devel-
opments and business decisions may differ from those
envisaged by such forward looking statements. These
forward looking statements speak only as of the date
of this Annual Report. The Company disclaims any
duty to update any forward looking statement, all of
which are expressly qualified by the foregoing.
INFORMATION RELATING TO FORWARD
LOOKING STATEMENTS
Certain information included or incorporated by refer-
ence in this document may be deemed to be “forward
looking statements” within the meaning of the federal
securities laws. All statements other than statements
of historical fact are statements that could be deemed
forward looking statements, including projections of
revenue, gross margin, expenses, earnings or losses
from operations, synergies or other financial items;
any statements of the plans, strategies and objectives
of management for future operations; any statement
concerning developments, performance or industry
rankings relating to products or services; any state-
ments regarding future economic conditions or per-
formance; any statements of assumptions underlying
any of the foregoing; and any other statements that
address activities, events or developments that Danaher
Corporation (“Danaher,” the “Company,” “we,” “us,”
“our”) intends, expects, projects, believes or anticipates
will or may occur in the future. Forward looking state-
ments may be 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’s
management in light of its experience and its percep-
tion of historical trends, current conditions, expected
future developments and other factors it believes to be
appropriate. These forward looking statements are sub-
ject to a number of risks and uncertainties, including
but not limited to:
• the Company’s ability to continue longstanding
relationships with major customers and penetrate
new channels of distribution;
• increased competition;
• demand for and market acceptance of new and
existing products, including changes in regulations
(particularly environmental regulations) which
could affect demand for products;
• adverse changes in currency exchange rates or raw
material commodity prices;
• unanticipated developments that could occur with
respect to contingencies such as litigation, prod-
uct liability exposures and environmental matters;
14
DANAHER 2003 FORM 10-K
PART I
ITEM 1. BUSINESS
OPERATING SEGMENTS
Danaher conducts its operations through two business
segments: Process/Environmental Controls and Tools
& Components. The Process/Environmental Controls
segment accounted for approximately 77% of Danaher’s
revenues in 2003 and the Tools & Components seg-
ment accounted for approximately 23% of Danaher’s
revenues in 2003. For additional information regarding
the Company’s segments, please refer to Note 15 in
the Consolidated Financial Statements included in this
Annual Report.
PROCESS/ENVIRONMENTAL CONTROLS
As of December 31, 2003, the Process/Environmental
Controls segment encompassed four strategic plat-
forms (Motion, Environmental, Electronic Test, and
Product Identification) and three focused niche busi-
nesses (Power Quality, Aerospace and Defense, and
Industrial Controls).
Process/Environmental Controls products are distrib-
uted by the Company’s sales personnel and independent
representatives to distributors, end-users, and original
equipment manufacturers.
In the first quarter of 2004 a fifth strategic platform,
Medical Technology, was added to the segment through
the acquisitions of substantially all of the outstanding
shares of Radiometer A/S and the Gendex business of
Dentsply International Inc. On January 27, 2004, Danaher
acquired 95.4% of the share capital of, and 97.9% of the
voting rights in, Radiometer pursuant to a tender offer
announced on December 11, 2003. Danaher submitted
a mandatory tender offer for the remaining outstanding
shares of Radiometer on February 4, 2004 as required
under Danish law and intends to effect a compulsory
redemption of the remaining outstanding shares as per-
mitted under Danish law. In addition, Danaher acquired
substantially all of the assets and certain liabilities of
the Gendex business of Dentsply International Inc. on
February 27, 2004.
Radiometer designs, manufactures, and markets a
variety of instruments used to measure blood gases and
related critical care parameters, primarily in hospital
applications. The company also provides consumables
and services for its instruments. Radiometer is a world-
wide leader in its served segments. Gendex is a leading
provider of conventional and digital dental radiogra-
phy equipment, intra-oral cameras, dental air abrasion
system, and related products.
STRATEGIC PLATFORMS
ENVIRONMENTAL. As of December 31, 2003, Environ-
mental, representing approximately 30% of segment
revenue in 2003, was Danaher’s largest strategic plat-
form. The Environmental platform serves two main
markets: water quality and retail/commercial petroleum.
Danaher’s water quality operations provide a wide
range of instruments, related consumables, and serv-
ices used to detect and measure chemical, physical,
and microbiological parameters in drinking water,
wastewater, groundwater, and ultrapure water. Typical
users of these products include municipal drinking
water and wastewater treatment plants, industrial
process water and wastewater treatment facilities, and
third-party testing laboratories. The Company is a
worldwide leader in this market, providing products
under a variety of well-known brands. We entered the
water quality sector in 1996 and have enhanced our
geographical coverage and product and service breadth
through subsequent acquisitions including Dr. Lange,
Hach Company, and Viridor Instrumentation.
Through the Gilbarco Veeder-Root business,
Danaher is a leading worldwide provider of technolo-
gies and services for the retail/commercial petroleum
market. The Company designs, manufactures, and
markets a wide range of products including monitor-
ing and leak detection systems, vapor recovery equip-
ment, fuel dispensers, point-of-sale and merchandising
systems, and submersible turbine pumps. Within our
target markets, we also provide remote monitoring
and outsourced fuel management services, including
compliance services, fuel system maintenance, and
inventory planning and supply chain support. Danaher
has participated in the retail/commercial petroleum
market since the mid-1980s through its Veeder-Root
business, and substantially enhanced its geographic
coverage and product and service breadth through the
acquisitions of Red Jacket and of Gilbarco (formerly
known as Marconi Commerce Systems).
MOTION. Danaher’s Motion platform, representing
approximately 20% of segment revenue in 2003, pro-
vides motors, drives, controls, mechanical components
(such as ball screws, linear bearings, clutches/brakes,
and linear actuators) and related products for various
15
DANAHER 2003 FORM 10-K
precision motion markets such as packaging equipment,
medical equipment, robotics, circuit board assembly
equipment, and electric vehicles such as lift trucks.
The Company is currently one of the leading world-
wide providers of precision motion control equipment.
Danaher entered the motion industry through the acqui-
sition of Pacific Scientific Company in 1998, and has
subsequently expanded its product and geographic
breadth with various additional acquisitions, including
American Precision Industries, Kollmorgen Corporation,
the motion businesses of Warner Electric Company,
and Thomson Industries.
ELECTRONIC TEST. The Electronic Test platform, rep-
resenting approximately 16% of segment revenue in
2003, was created through the acquisition of Fluke Cor-
poration in 1998, and has since been supplemented by
various acquisitions. Fluke designs, manufactures, and
markets a variety of compact professional test tools, as
well as calibration equipment, for electrical, industrial,
electronic, and calibration applications. These test
products measure voltage, current, resistance, power
quality, frequency, temperature, pressure, and other
key electrical parameters.
In 2000, Fluke Networks was separated from Fluke
as a stand-alone business unit. Fluke Networks pro-
vides software and hardware products used for the
testing, monitoring, and analysis of local and wide
area (“enterprise”) networks and the fiber and copper
infrastructure of those networks.
The Company believes that the Fluke and Fluke Net-
works brand names and trade dress are well-recognized
and well-regarded among targeted customers. Both
Fluke and Fluke Networks are leaders in their served
market segments.
PRODUCT IDENTIFICATION. The Product Identification
platform, which accounted for approximately 12% of
segment revenues in 2003, designs, manufactures, and
markets a variety of equipment used to print and read
bar codes, date codes, lot codes, and other tracking
and marketing information on primary and secondary
packaging. Typical users of these products include
food and beverage manufacturers, pharmaceutical
manufacturers, retailers, package and parcel delivery
companies, the United States Postal Service and com-
mercial printing and mailing operations. Danaher
entered the Product Identification market through the
acquisition of Videojet (formerly known as Marconi
Data Systems) in 2002, and has expanded its product
and geographic coverage through the subsequent
acquisitions of Willett International Limited in January
2003 and Accu-Sort Systems Inc. in November 2003.
Today, Danaher is a leader in its served Product
Identification market segments.
FOCUSED NICHE BUSINESSES
AEROSPACE AND DEFENSE. Aerospace and Defense
designs, manufactures, and markets a variety of aircraft
safety equipment, including smoke detection and fire
suppression systems, energetic material systems, elec-
tronic security systems, motors and actuators, and elec-
trical power generation and management subsystems,
as well as submarine periscopes and photonic masts.
These product lines came principally from the Pacific
Scientific and Kollmorgen acquisitions, and are mar-
keted under the Pacific Scientific, Sunbank, Securaplane,
Kollmorgen Electro-Optical, and Calzoni brands.
INDUSTRIAL CONTROL. Danaher’s Industrial Control
products include instruments that measure and control
discrete manufacturing variables such as temperature,
position, quantity, and time, as well as level and flow
measurement devices for various non-water-related
end-markets. These products are marketed under a
variety of brands, including Dynapar, Eagle Signal,
Hengstler, Partlow, Anderson, West, Dolan-Jenner,
Namco, GEMS Sensors, and Setra.
POWER QUALITY. Power Quality serves two general
markets. Through the Danaher Power Solutions busi-
ness, Danaher provides products such as digital static
transfer switches, power distribution units, and tran-
sient voltage surge suppressors. Sold under the Cyberex,
Current Technology, Joslyn and United Power brands,
these products are typically incorporated within sys-
tems used to ensure high-quality, reliable power in com-
mercial and industrial environments. Danaher’s other
power quality businesses provide a variety of products,
marketed under the Joslyn Hi-Voltage, Joslyn, Qualitrol,
Jennings, and Hathaway brands, and are mainly used
in power transmission and distribution systems.
Customers are primarily electric utilities.
TOOLS & COMPONENTS
The Tools & Components segment encompasses one
strategic platform, Mechanics’ Hand Tools, and five
focused niche businesses. Products are distributed by
the Company’s sales personnel and independent rep-
resentatives to distributors, end-users, and original
equipment manufacturers.
16
DANAHER 2003 FORM 10-K
STRATEGIC PLATFORM
MECHANICS’ HAND TOOLS. The Mechanics’ Hand
Tools platform, representing approximately two-thirds
of segment revenue in 2003, encompasses two busi-
nesses: Danaher Tool Group (“DTG”) and Matco Tools
Corporation (“Matco”). DTG is one of the largest
worldwide producers of general purpose mechanics’
hand tools, primarily ratchets, sockets, and wrenches,
and specialized automotive service tools for the pro-
fessional 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
60 years. DTG has also been the primary supplier of
specialized automotive service tools to the National
Automotive Parts Association (NAPA) for over 30 years,
and the designated supplier of general purpose mechan-
ics’ hand tools to NAPA since 1983. In addition to this
private label business, Danaher also markets various
products under its own brand names, including mechan-
ics’ hand tools for industrial and consumer markets
under the Armstrong, Allen and Sata brands, auto-
motive service tools under the K-D Tools brand, and
specialty fasteners under the Holo-Krome brand.
Matco manufactures and distributes professional
automotive equipment, tools, and toolboxes through
independent mobile distributors, who sell primarily
to professional mechanics. The business is one of the
leaders in the hand tool mobile distribution channel.
FOCUSED NICHE BUSINESSES
DELTA CONSOLIDATED INDUSTRIES. Delta is a leading
manufacturer of automotive truckboxes and industrial
gang boxes, which it sells under the DELTA and
JOBOX brands.
HENNESSY INDUSTRIES. Hennessy is a leading
North American full-line wheel service equipment
manufacturer, providing brake lathes, vehicle lifts,
tire changers, wheel balancers, and wheel weights
under the Ammco, Bada, and Coats brands.
JACOBS CHUCK MANUFACTURING COMPANY. Jacobs
designs, manufactures, and markets chucks and preci-
sion tool and workholders, primarily for the portable
power tool industry. Founded by the inventor of the
three-jaw drill chuck, Jacobs maintains a worldwide
leadership position in drill chucks.
JACOBS VEHICLE SYSTEMS (“JVS”). JVS is a leading
worldwide supplier of supplemental braking systems
for commercial vehicles, selling Jake Brake brand
engine retarders for class 6 through 8 vehicles and
bleeder and exhaust brakes for class 2 through 7 vehi-
cles. With over 2.5 million engine retarders installed,
JVS has maintained a leadership position in its indus-
try since introducing the first engine retarder in 1961.
JOSLYN MANUFACTURING COMPANY. Joslyn
Manufacturing designs, manufactures, and markets
pole line hardware, electrical apparatus, and termi-
nation enclosures for the electrical utility and tele-
communications markets.
The following discussions of Raw Materials,
Patents/Trademarks, Competition, Seasonal Nature of
Business, Backlog, Employee Relations, Research and
Development, Government Contracts, Environmental
and Safety Regulations, International Operations and
Major Customers include information common to
both of our segments.
Raw Materials
The Company’s manufacturing operations employ a
wide variety of raw materials. While certain raw mate-
rials such as steel and certain electrical components
are subject to supply constraints, Danaher believes
that it will generally be able to obtain adequate sup-
plies of major raw material requirements or reasonable
substitutes at reasonable costs.
Patents/Trademarks
The Company owns numerous patents and trade-
marks, and has also acquired licenses under patents
and trademarks owned by others. Although in aggre-
gate the Company’s intellectual property is important
to its operations, the Company does not consider any
single patent or trademark to be of material importance
to either segment or to the business as a whole. From
time to time, however, the Company does engage in
litigation to protect its patents and trademarks. Any of
the Company’s patents, trademarks or other proprietary
rights could be challenged, invalidated or circumvented,
or may not provide significant competitive advantages.
17
DANAHER 2003 FORM 10-K
Competition
Our served markets are generally highly competitive
and global in nature. Because of the diversity of prod-
ucts the Company manufactures and the variety of
markets it serves, the Company encounters a wide
variety of competitors. The Company faces numerous
regional or specialized competitors, many of which
are well-established in their markets. In addition, some
of the Company’s competitors are larger companies or
divisions of larger companies that have greater sales,
marketing, research, and financial resources than the
Company. Key competitive factors typically include
price, quality, delivery speed, service and support,
innovation, product features and performance, and
brand name.
Seasonal Nature of Business
Although certain Danaher businesses experience
seasonal fluctuations in demand, as a whole, the
Company is not subject to material seasonality.
Backlog
Backlog is generally not considered a significant factor
in the Company’s business as relatively short delivery
periods and rapid inventory turnover are characteristic
of most of its products.
Employee Relations
At December 31, 2003, the Company employed approx-
imately 30,000 persons, of which approximately 17,000
were employed in the United States. Of these United
States employees, approximately 3,000 were hourly-
rated unionized employees. The Company also has
government-mandated collective bargaining arrange-
ments or union contracts in other countries. The
Company considers its labor relations to be good.
Research and Development
The Company’s research and development expenditures
were approximately $207 million for 2003, $174 mil-
lion for 2002 and $119 million for 2001. Our research
and development expenditures by business segment
were as follows: for Process/ Environmental Controls,
$197 million for 2003, $163 million for 2002 and
$111 million for 2001; for Tools and Components,
$10 million for 2003, $11 million for 2002 and $8 mil-
lion for 2001. The Company conducts research and
development activities for the purpose of developing
new products and services and improving existing
products and services.
Government Contracts
The Company has agreements relating to the sale of
products to government entities, primarily defense-
related products and water and wastewater related
products, and, as a result, is subject to various statutes
and regulations that apply to companies doing busi-
ness with the government. The laws governing govern-
ment contracts differ from the laws governing private
contracts. For example, many government contracts
contain pricing and other terms and conditions that
are not applicable to private contracts. The Company’s
agreements relating to the sale of products to govern-
ment entities may be subject to termination, reduction
or modification in the event of changes in government
requirements, reductions in federal spending and other
factors. The Company is also subject to investigation
and audit for compliance with the requirements gov-
erning government contracts, including requirements
related to procurement integrity, export control,
employment practices, the accuracy of records and the
recording of costs. A failure to comply with these
requirements might result in suspension of these con-
tracts, criminal or civil sanctions, administrative penal-
ties or suspension or debarment from U.S. government
contracting or subcontracting for a period of time.
Environmental and Safety Regulations
Certain of the Company’s operations are subject to
environmental laws and regulations in the jurisdictions
in which they operate, which impose limitations on
the discharge of pollutants into the ground, air and
water and establish standards for the generation, treat-
ment, use, storage and disposal of solid and hazardous
wastes. The Company must also comply with various
health and safety regulations in both the United States
and abroad in connection with its operations. The
Company believes that it is in substantial compliance
with applicable environmental, health and safety laws
and regulations. Compliance with these laws and regu-
lations has not had and, based on current information
and the applicable laws and regulations currently in
effect, is not expected to have a material adverse effect
on the Company’s capital expenditures, earnings or
competitive position.
In addition to environmental compliance costs,
the Company may incur costs related to alleged
18
DANAHER 2003 FORM 10-K
environmental damage associated with past or current
waste disposal practices or other hazardous materials
handling practices. For example, generators of hazard-
ous substances found in disposal sites at which environ-
mental problems are alleged to exist, as well as the
owners of those sites and certain other classes of per-
sons, are subject to claims brought by state and federal
regulatory agencies pursuant to statutory authority.
The Company has received notification from the U.S.
Environmental Protection Agency, and from state and
foreign environmental agencies, that conditions at a
number of sites where the Company and others dis-
posed of hazardous wastes require clean-up and other
possible remedial action and may be the basis for mone-
tary sanctions, including sites where the Company has
been identified as a potentially responsible party under
federal and state environmental laws and regulations.
The Company has projects underway at several cur-
rent and former manufacturing facilities, in both the
United States and abroad, to investigate and remediate
environmental contamination resulting from past oper-
ations. In particular, Joslyn Manufacturing Company
(“JMC”), a subsidiary of the Company, previously
operated wood treating facilities that chemically pre-
served utility poles, pilings and railroad ties. All such
treating operations were discontinued or sold prior to
1982. Danaher acquired JMC in September 1995.
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. In addition, the Company is
from time to time party to personal injury or other
claims brought by private parties alleging injury due to
the presence of or exposure to hazardous substances.
The Company has made a provision for environ-
mental remediation and environmental-related personal
injury claims; however, there can be no assurance that
estimates of environmental liabilities will not change.
The Company generally makes an assessment of the
costs involved for its remediation efforts based on
environmental studies as well as its prior experience
with similar sites. If the Company determines that it
has potential liability for properties currently owned
or previously sold, it accrues the total estimated costs,
including investigation and remediation costs, asso-
ciated with the site. The Company estimates its
exposure for environmental-related personal injury
claims and accrues for this estimated liability as such
claims become known. While the Company actively
pursues appropriate insurance recoveries as well as
appropriate recoveries from other potentially responsi-
ble parties, it does not recognize any insurance recov-
eries for environmental liability claims until realized.
The ultimate cost of site cleanup is difficult to predict
given the uncertainties of the Company’s involvement
in certain sites, uncertainties regarding the extent of
the required cleanup, the availability of alternative
cleanup methods, variations in the interpretation of
applicable laws and regulations, the possibility of
insurance recoveries with respect to certain sites and
the fact that imposition of joint and several liability
with right of contribution is possible under the Com-
prehensive Environmental Response, Compensation
and Liability Act of 1980 and other environmental
laws and regulations. As such, there can be no assur-
ance that the Company’s estimates of environmental
liabilities will not change. In view of the Company’s
financial position and reserves for environmental mat-
ters and based on current information and the appl-
icable laws and regulations currently in effect, the
Company believes that its liability, if any, related to
past or current waste disposal practices and other
hazardous materials handling practices will not have
a material adverse effect on its results of operation,
financial condition and cash flow.
International Operations
The Company’s net revenue originating outside the
U.S., as a percentage of the Company’s total net rev-
enue, was approximately 31 percent in 2003, 28 percent
in 2002 and 31 percent in 2001. By business segment,
net revenue originating outside the U.S., as a percent-
age of the segment’s total net revenue, was as follows:
for Process/Environmental Controls, 37 percent in 2003,
34 percent in 2002 and 39 percent in 2001; for Tools
and Components, 11 percent in 2003, 11 percent in
2002 and 11 percent in 2001.
The Company’s long-lived assets located outside of
the U.S., as a percentage of the Company’s total long-
lived assets, was approximately 18 percent in 2003,
15 percent in 2002 and 12 percent in 2001. By business
segment, long-lived assets located outside of the U.S.,
as a percentage of the segment’s total long-lived assets,
was as follows: for Process/Environmental Controls,
19 percent in 2003, 16 percent in 2002 and 13 percent
in 2001; for Tools and Components, 5 percent in 2003,
5 percent in 2002 and 5 percent in 2001.
19
DANAHER 2003 FORM 10-K
For additional information related to revenues and
long-lived assets by country, please refer to Note 15
to the Consolidated Financial Statements.
Most of the Company’s sales in international mar-
kets are made by foreign sales subsidiaries and through
various representatives and distributors. However, the
Company also sells into international markets directly
from the U.S.
The Company’s international business is subject
to risks customarily encountered in foreign operations,
including interruption in the transportation of materi-
als and products to the Company and finished goods
to the Company’s customers, changes in a specific
country’s or region’s political or economic conditions,
trade protection measures, import or export licensing
requirements, unexpected changes in tax laws and reg-
ulatory requirements, difficulty in staffing and manag-
ing widespread operations, differing labor regulations
and differing protection of intellectual property. The
Company is also exposed to foreign currency exchange
rate risk inherent in its operating results and assets and
liabilities denominated in currencies other than the
United States dollar. Terrorist activities and the U.S.
and international response thereto could exacerbate
these risks. Financial information about the Company’s
international operations is contained in Note 15 of the
Consolidated Financial Statements included in Item 8,
Financial Statements and Supplementary Data, and
additional information about the possible effects on
the Company of foreign currency fluctuations is set
forth in Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
Major Customers
The Company has no customers which accounted
for more than 10% of consolidated sales in 2003. The
Company’s largest single customer is Sears, Roebuck and
Co. (“Sears”). The Company has had a long-standing
relationship with Sears. The Company believes the
loss or material reduction of this business could have
a material adverse effect on the results of operations
of the Tools and Components segment and of the
Company as a whole.
Available Information
The Company maintains an internet website at
www.danaher.com. The Company makes available free
of charge on the website its annual reports on Form
10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act, as soon as reasonably practicable
after filing such material electronically with, or furnish-
ing such material to, the SEC. The Company’s Internet
site and the information contained therein or connected
thereto are not incorporated by reference into this
Form 10-K.
Danaher Corporation, originally DMG, Inc., was
organized in 1969 as a Massachusetts real estate invest-
ment trust. In 1978 it was reorganized as a Florida
corporation under the name Diversified Mortgage
Investors, Inc. (“DMI”) which in a second reorganiza-
tion in 1980 became a subsidiary of a newly created
holding company named DMG, Inc. The Company
adopted the name Danaher in 1984 and was reincor-
porated as a Delaware corporation following the 1986
annual meeting of shareholders.
Code of Ethics
Danaher has adopted a code of business conduct
and ethics for directors, officers (including Danaher’s
principal executive officer, principal financial officer
and principal accounting officer) and employees,
known as the Standards of Conduct. The Standards
of Conduct are available in the Investor Information
section of Danaher’s website at www.danaher.com.
Stockholders may request a free copy of the Standards
of Conduct from:
Danaher Corporation
Attention: Investor Relations
2099 Pennsylvania Avenue, N.W.
12th Floor
Washington, D.C. 20006
Danaher intends to disclose any amendment to
the Standards of Conduct that relates to any element
of the code of ethics definition enumerated in Item
406(b) of Regulation S-K, and any waiver from a pro-
vision of the Standards of Conduct granted to any
director, principal executive officer, principal financial
officer, principal accounting officer, or any other exec-
utive officer of Danaher, in the Investor Information
section of Danaher’s website, at www.danaher.com,
within five business days following the date of such
amendment or waiver.
20
DANAHER 2003 FORM 10-K
Corporate Governance Guidelines
and Committee Charters
Danaher has adopted Corporate Governance Guide-
lines, which are available in the Investor Information
section of Danaher’s website at www.danaher.com.
The charters of each of the Audit Committee, the
Compensation Committee and the Nominating and
Governance Committee of the Board of Directors are
also available in the Investor Information section of
the Company’s website at www.danaher.com. Stock-
holders may request a free copy of these committee
charters and the Corporate Governance Guidelines from
the address set forth above under “– Code of Ethics.”
ITEM 2. PROPERTIES
The Company’s corporate headquarters are located
in Washington, D.C. At December 31, 2003, the
Company had 156 significant manufacturing and dis-
tribution locations worldwide, comprising approximately
17 million square feet, of which approximately 11 mil-
lion square feet are owned and approximately 6 million
square feet are leased. Of these manufacturing and distri-
bution locations, 98 facilities are located in the United
States and 58 are located outside the United States, pri-
marily in Europe and to a lesser extent in Asia-Pacific,
Canada, and Latin America. The number of manufactur-
ing and distribution locations by business segment are:
Process/Environmental Controls, 116; and Tools and
Components, 40. The Company considers its facilities
suitable and adequate for the purposes for which they are
used and does not anticipate difficulty in renewing exist-
ing leases as they expire or in finding alternative facilities.
ITEM 3. LEGAL PROCEEDINGS
In addition to the litigation noted above under Item 1,
Business – Environmental and Safety Regulations, the
Company is, from time to time, subject to routine liti-
gation incidental to its business. These lawsuits prima-
rily involve claims for damages arising out of the use
of the Company’s products, allegations of patent and
trademark infringement, and litigation and administra-
tive proceedings involving employment matters and
commercial disputes. Some of these lawsuits include
claims for punitive as well as compensatory damages.
The Company estimates its exposure for product lia-
bility and accrues for this estimated liability up to the
limits of the deductibles under available insurance cov-
erage. All other claims and lawsuits are handled on a
case-by-case basis. As previously noted under Item 1,
the Company is also involved in proceedings with
respect to environmental matters, including sites
where it has been identified as a potentially responsi-
ble 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, cash
flows or financial condition, even before taking into
account any related insurance recoveries.
21
DANAHER 2003 FORM 10-K
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2003.
Executive Officers of the Registrant
Set forth below are the names, ages, positions and experience of the Company’s executive officers. All executive
officers hold office at the pleasure of the Board of Directors.
Name
Age
Position
Steven M. Rales
Mitchell P. Rales
H. Lawrence Culp, Jr.
Patrick W. Allender
Philip W. Knisely
Steven E. Simms
James H. Ditkoff
Daniel L. Comas
Donald E. Doles
Robert S. Lutz
Daniel A. Pryor
52
47
41
57
49
48
57
40
58
46
36
Chairman of the Board
Chairman of the Executive Committee
Chief Executive Officer and President
Executive Vice President, Chief Financial Officer
and Secretary
Executive Vice President
Executive Vice President
Senior Vice President- Finance and Tax
Vice President–Corporate Development
Vice President–Danaher Business System and
Corporate Procurement
Vice President–Chief Accounting Officer
Vice President–Strategic Development
Officer
Since
1984
1984
1995
1987
2000
1996
1991
1996
2003
2002
2000
Steven M. Rales has served as Chairman of the Board
since January 1984. In addition, during the past five
years, he has been a principal in a number of private
business entities with interests in manufacturing com-
panies and publicly traded securities. Mr. Rales is a
brother of Mitchell P. Rales.
Mitchell P. Rales has served as Chairman of the
Executive Committee since 1990. In addition, during
the past five years, he has been a principal in a num-
ber of private business entities with interests in manu-
facturing companies and publicly traded securities.
Mr. Rales is a brother of Steven M. Rales.
H. Lawrence Culp, Jr. was appointed President and
Chief Executive Officer in 2001. He has served in
general management positions within the Company
for more than the past five years, including serving as
Chief Operating Officer from July 2000 to May 2001.
Patrick W. Allender has served as Chief Financial
Officer of the Company since March 1987 and was
appointed Executive Vice President in 1999.
Philip W. Knisely was appointed Executive Vice
President in June 2000. He had previously served
Colfax Corporation, a diversified industrial manufac-
turing company, as Chief Executive Officer, since
22
DANAHER 2003 FORM 10-K
Robert S. Lutz joined the Company as Vice President–
Audit and Reporting in July 2002 and was appointed
Vice President–Chief Accounting Officer in March
2003. Prior to joining the Company, he served in vari-
ous positions at Arthur Andersen LLP from 1979 until
2002, most recently as partner from 1991 to July 2002.
Daniel A. Pryor was appointed Vice President–
Strategic Development in November 2000. He has
served in general management positions within the
Company for more than the past five years, including
service as Executive Vice President of Hach Company
from June 1999 through November 2000.
1995. Colfax Corporation is majority-owned by
Steven and Mitchell Rales.
Steven E. Simms was appointed Executive Vice
President in November 2000. He joined the Company
in 1996 as Vice President and Group Executive.
James H. Ditkoff served as Vice President-Finance
and Tax from January 1991 to December 2002 and has
served as Senior Vice President-Finance and Tax since
December 2002.
Daniel L. Comas has served as Vice President–Corporate
Development since 1996.
Donald E. Doles has served as Vice President–
Danaher Business System and Corporate Procurement
since June 2003. Mr. Doles joined the Company in 1989
and has served in a variety of management positions
within the Company, most recently as Vice President–
Procurement from October 2002 to June 2003, Vice
President–Supply, Danaher Tool Group from September
2001 until October 2002, President of Jacobs Chuck
Co. North America from March 2001 until September
2001, and as Corporate Director-Danaher Business
System Office from July 1999 until March 2001.
23
DANAHER 2003 FORM 10-K
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company’s common stock is traded on the New York Stock Exchange and the Pacific Stock Exchange
under the symbol DHR. On February 27, 2004, there were approximately 2,600 registered holders of record of
the Company’s common stock. The high and low common stock prices per share as reported on the New York
Stock Exchange, and the dividends paid per share, in each case for the periods described below, were as follows:
First quarter
Second quarter
Third quarter
Fourth quarter
2003
Low
$59.55
64.10
65.32
73.36
High
$68.50
72.25
78.62
92.35
Dividends
Per Share
$.025
.025
.025
.025
High
$74.25
75.46
66.36
67.19
2002
Low
$58.51
61.28
52.60
52.98
Dividends
Per Share
$.02
.02
.025
.025
The payment of dividends by the Company in the future will be determined by the Company’s Board of
Directors and will depend on business conditions, the Company’s financial earnings and other factors.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands except per share data)
Sales
Operating profit
Net earnings before effect of accounting change
and reduction of income tax reserves related
to previously discontinued operation
Net earnings
Earnings per share before accounting change
and reduction of income tax reserves related
to previously discontinued operation
Basic
Diluted
Earnings per share
Basic
Diluted
Dividends per share
Total assets
Total debt
2003
$5,293,876
2002
$4,577,232
2001
$3,782,444
845,995(a)
701,122(b)
502,011(b)
2000
$3,777,777
552,149
1999
$3,197,238
458,007
536,834(a)
536,834(a)
434,141(b)
290,391(b)
297,665(b)
297,665(b)
324,213
324,213
261,624(c)
261,624(c)
3.50(a)
3.37(a)
3.50(a)
3.37(a)
2.89(b)
2.79(b)
1.93(b)
1.88(b)
2.07(b)
2.01(b)
2.07(b)
2.01(b)
2.28
2.23
2.28
2.23
1.84(c)
1.79(c)
1.84(c)
1.79(c)
0.10
6,890,050
1,298,883
0.09
6,029,145
1,309,964
0.08
4,820,483
1,191,689
0.07
4,031,679
795,190
0.07
3,047,071
374,634
(a) Includes a benefit of $22.5 million ($14.6 million after-tax or $0.09 per share) from a gain on curtailment of the Company’s Cash Balance
Pension Plan.
(b) Includes $69.7 million ($43.5 million after-tax or $0.29 per share) in costs from restructuring charges taken in the fourth quarter of 2001
and a benefit of $6.3 million ($4.1 million after-tax or $0.03 per share) from the reversal of unutilized restructuring accruals recorded
in the fourth quarter of 2002.
(c) Includes $9.8 million in after-tax costs ($0.07 per share) from the merger with the Hach Company.
24
DANAHER 2003 FORM 10-K
ITEM 7. MANAGEMENT’S
DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company’s
financial condition and results of operations should
be read in conjunction with its audited consolidated
financial statements.
OVERVIEW
Danaher Corporation derives its revenue from the design,
manufacture and marketing of industrial and consumer
products, which are typically characterized by strong
brand names, proprietary technology and major market
positions, in two business segments: Process/Environmental
Controls and Tools and Components. As discussed in
greater detail below, subsequent to December 31, 2003
the Company acquired Radiometer A/S and substantially
all of the assets and certain liabilities of the Gendex
business of Dentsply International, Inc., adding med-
ical technology products to the Process/Environmental
Controls segment for 2004. These businesses, the core
of a new Medical Technology platform, are expected
to provide additional revenue and earnings growth
opportunities for the Company both through growth
of the existing businesses and through the potential
acquisition of complementary businesses.
The Company strives to create shareholder value
through delivering revenue growth, excluding the
impact of acquired businesses, in excess of the overall
market growth for its products and services; upper
quartile financial performance when compared against
peer companies; and upper quartile cash flow genera-
tion from operations. To accomplish these goals, the
Company uses a set of tools and processes, known as
the Danaher Business System (“DBS”), which are
designed to continuously improve business performance
in critical areas of quality, delivery, cost and innova-
tion. The Company will also acquire other businesses
when they strategically fit with existing operations or
when they are of such a nature and size as to establish
a new strategic platform. The extent to which appro-
priate acquisitions are made and integrated can affect
the Company’s overall growth and operating results.
As a global business, Danaher’s operations are
affected by worldwide, regional and industry economic
and political factors. However, Danaher’s geographic
and industry diversity, as well as the diversity of its
product sales and services, has helped limit the impact
of any one industry or the economy of any single
country on the consolidated operating results. For the
majority of 2003, market indicators of the global man-
ufacturing economy remained mixed. While differences
exist among the Company’s businesses, the Company’s
markets strengthened in the second half of 2003 and
the Company experienced strong revenue growth in
the fourth quarter of 2003 when compared against the
fourth quarter of 2002. Given order and revenue trends
in December 2003, January and February 2004, we
expect the higher level of revenues experienced in the
fourth quarter of 2003, adjusted for the seasonality of
certain of our businesses, to continue into the early
part of the 2004 fiscal year.
Consolidated revenues for 2003 increased approxi-
mately 15.5% over 2002. Acquisitions accounted for
approximately 10% growth, favorable currency trans-
lation, primarily as a result of the strengthening of the
Euro, contributed approximately 4% growth and rev-
enues from existing businesses for the year (defined as
businesses that have been part of the Company for each
comparable period reported excluding currency effect)
contributed 1.5% growth. Substantially all of this sales
growth from existing businesses occurred in the fourth
quarter as the Company’s revenues from existing busi-
nesses for the first three quarters of 2003 were generally
consistent with 2002’s comparable revenues.
The Company continues to operate in a highly com-
petitive business environment in most of the markets
and geographies served. The Company will continue to
assess market needs with the objective of positioning
itself to provide superior products and services to its
customers in a cost efficient manner. With the forma-
tion of the Medical Technology platform noted above,
the Company expects to devote significant attention to
the successful integration of these acquired businesses
into the organization. Management believes it has the
resources to successfully integrate these businesses into
the Company. In addition, as noted above the Company
benefited from the impact of favorable currency trends
in its international businesses in 2003. The Company
has generally accepted the exposure to exchange rate
movements relative to its investment in foreign opera-
tions without using derivative financial instruments to
manage this risk. Therefore, both positive and negative
movements in currency exchange rates against the U.S.
dollar will continue to affect the reported amount of rev-
enue and profit in the consolidated financial statements.
25
DANAHER 2003 FORM 10-K
RESULTS OF OPERATIONS
The following table summarizes sales by business segment for each of the past three years:
(in thousands)
Process/Environmental Controls
Tools and Components
2003
2002
2001
$ 4,096,686
1,197,190
$ 5,293,876
77.4%
22.6%
100.0%
$ 3,385,154
1,192,078
$ 4,577,232
74.0%
26.0%
100.0%
$ 2,616,797
1,165,647
$ 3,782,444
69.2%
30.8%
100.0%
PROCESS/ENVIRONMENTAL CONTROLS
The Process/Environmental Controls segment is com-
prised of businesses which produce and sell compact,
professional electronic test tools; product identification
equipment and consumables; water quality instrumen-
tation and consumables; retail petroleum automation
products; 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.
Process/Environmental Controls
Selected Financial Data
($ in millions)
Sales
Operating profit
Operating profit as a
% of sales
For the years ended
December 31,
2002
$3,385.2
$ 540.5
2001
$2,616.8
$ 388.6
2003
$4,096.7
$ 674.3
16.5%
16.0%
14.9%
2003 COMPARED TO 2002
Segment Overview
Sales of the Process/Environmental Controls segment
increased 21% in 2003 compared to 2002. The fourth
quarter 2002 acquisition of Thomson Industries, and
the 2003 acquisition of Willett International Limited
(“Willett”), together with several other smaller acquisi-
tions provided a 14% increase in segment sales. This
increase was in addition to an approximate 5% favor-
able currency translation impact. Sales from existing
businesses for this segment were up approximately 2%
compared to 2002, principally from sales increases in
the motion, environmental and product identification
businesses. Prices were essentially flat compared to 2002.
26
Operating profit margins for the segment were
16.5% in 2003 compared to 16% in 2002. Operating
profit margins for 2002 included approximately 40 basis
points of benefit associated with gains on the sale of
real estate and adjustments to the restructuring reserves
established in 2001. The overall improvement in oper-
ating profit margins was driven primarily by on-going
cost reductions associated with our DBS initiatives com-
pleted during 2003, and margin improvements in recently
acquired businesses, which typically have higher cost
structures than the Company’s existing operations.
Business Overview
ENVIRONMENTAL. Revenues from the Company’s envi-
ronmental businesses, representing approximately 30%
of segment revenue in 2003, increased approximately
15.5% in 2003 compared to 2002. Acquisitions com-
pleted in 2002 and 2003 accounted for approximately
7.5% growth, revenues from existing businesses pro-
vided 2% growth and favorable currency translation
provided 6% growth. Operations were impacted by
strength in the second half of 2003 in the Gilbarco
Veeder-Root retail petroleum equipment business,
resulting in part from market-share gains in the U.S.
due to the addition of a number of distributors as a
result of financial difficulties of a competitor. Increased
sales to high-volume retailers and strong year-end pur-
chasing activity from major oil companies with respect
to both retail automation and environmental systems
also contributed to the strength in the second half of
2003. Sales from existing businesses in the Company’s
water quality businesses also contributed to the
increase as strength in laboratory instrumentation sales
in Europe was partially offset by softness in the U.S.
laboratory instrumentation and ultrapure markets due to
continued weakness in the semiconductor and electri-
cal assembly markets and due to several large contracts
in 2002 not repeating in 2003. The US laboratory
equipment markets showed strength in the fourth quar-
ter of 2003 compared against the first three quarters of
2003. The business continues to focus on faster grow-
ing markets in developing countries such as China to
enhance its growth prospects.
DANAHER 2003 FORM 10-K
MOTION. Sales in the Company’s motion businesses,
representing approximately 20% of 2003’s segment rev-
enues, grew 33%, as acquisitions provided growth of
21% (primarily from the Thomson Industries acquisition
in the fourth quarter of 2002) and favorable currency
translation effects provided 8% growth to drive this
increase. The existing businesses’ revenues accounted
for 4% growth, reflecting share gains in certain of its
end markets, including electric vehicles and direct drives,
partially offset by year over year low-single digit declines
in the Company’s linear actuator product businesses
resulting from integration of the sales channels associ-
ated with the Thomson acquisition. The Company’s
linear actuator businesses showed low-single digit growth
in the fourth quarter representing the first quarter of
growth for this business in 2003, reflecting increased
shipments for military programs as well as increased
sales to the Company’s distribution network.
ELECTRONIC TEST. Electronic test revenues, represent-
ing approximately 16% of 2003’s segment revenues,
grew 13% during 2003 compared to 2002. Acquisitions,
principally the Raytek Corporation acquisition, com-
pleted in August 2002, provided 9% growth, which
includes strong sales of Raytek’s non-contact tempera-
ture measurement and thermal imaging products.
Favorable currency translation provided 5% growth.
These factors were partially offset by an approximate
1% decline in sales from existing businesses due pri-
marily to continued softness in telecommunications
and data network markets. The Company’s network-
test business strengthened in the second half of 2003,
compared to the first half of 2003, to post low-single
digit declines for the year.
PRODUCT IDENTIFICATION. In February 2002, the
Company established its Product Identification busi-
ness with the acquisition of Videojet Technologies. In
January 2003 Willett was added to this business and
Accu-Sort Systems, Inc. was acquired in November
2003. The Product Identification business accounted
for approximately 12% of segment revenues in 2003.
For 2003, Product Identification revenues grew 65%
compared to 2002, with the Willett and Accu-Sort
acquisitions providing 55% growth, favorable currency
impacts of approximately 5%, and existing operations
providing 5% growth, based largely on broad based
equipment sales increases.
FOCUSED NICHE BUSINESSES. The segment’s niche
businesses in the aggregate showed high-single digit
revenue growth in 2003, primarily from acquisitions in
the Company’s Aerospace and Defense and Industrial
Controls businesses.
2002 COMPARED TO 2001
Segment Overview
Sales of the Process/Environmental Controls segment
increased 29% in 2002 compared to 2001. The acqui-
sitions in February 2002 of Gilbarco and Videojet
Technologies as well as several smaller 2001 and 2002
acquisitions provided a 36% increase in segment sales.
This increase was offset by an 8% unit volume decline
in existing businesses. A favorable currency translation
impact provided a 1% revenue increase, and prices
were essentially flat compared to 2001.
Operating profit margins for the segment were
16.0% in 2002 compared to 14.9% in 2001. Approx-
imately 130 basis points of the change in operating
margin resulted from the dilutive impact of lower
operating margins of the new businesses acquired dur-
ing 2001 and 2002. Additionally, margin declines from
lower sales volumes at the business units described
above, and increases in expenditures on growth oppor-
tunities in the segment, were offset by the cessation of
goodwill amortization as of January 1, 2002, and other
cost reductions including the partial benefit of the
2001 restructuring actions.
Business Overview
Revenues from the Company’s environmental business,
representing approximately 30% of segment revenue,
increased over 90% in 2002 compared to 2001, result-
ing primarily from the acquisitions of Gilbarco and
Viridor in February 2002 and two smaller acquisitions
completed in 2002 and 2001. Acquisitions provided the
entirety of this growth, as revenues from existing busi-
nesses declined approximately 2%. Modest growth in
the Company’s water quality business units was offset
by weakness in demand for ultrapure instrumentation,
brought on primarily by weakness in semiconductor
end markets, and in Veeder-Root’s leak detection mar-
ket. The Company believes geopolitical uncertainties
in oil-producing regions contributed to the decline in
demand in the end markets served by the Gilbarco/
Veeder-Root business in 2002. Electronic test revenues,
representing approximately 20% of segment revenues,
grew 6% during 2002, also due to acquisition activity.
27
DANAHER 2003 FORM 10-K
Acquisitions contributed 11% of this growth, which
was offset by a revenue decline from existing busi-
nesses of 5%, resulting from weakness in both indus-
trial and network test equipment sales. Sales in the
Company’s motion businesses, representing approxi-
mately 20% of segment revenues, declined 3%, as a
revenue decline from existing businesses of 9% was
offset by acquisition growth of 6%. Continued softness
in semiconductor and electronic assembly end market
demand was a leading factor in motion’s revenue
decline from existing businesses.
Aerospace and defense revenues increased 7% in
2002, resulting from acquisition activity of 5% and
revenue growth from existing businesses of 2%. Power
quality sales declined 28% in 2002, due to a significant
decline in end user demand that began in early 2001
and has continued through 2002. Sales of the Company’s
industrial controls product lines fell 7% due to reces-
sion-related weakness in their served end markets. In
February 2002, the Company established its product
identification business with the acquisition of Videojet
Technologies, which accounted for approximately
11% of the segment’s growth during 2002.
TOOLS AND COMPONENTS
The Tools and Components segment is one of the
largest domestic producers and distributors of general
purpose and specialty mechanics’ hand tools. Other
products manufactured by the businesses in this seg-
ment include toolboxes and storage devices; diesel
engine retarders; wheel service equipment; drill chucks;
custom-designed headed tools and components; hard-
ware and components for the power generation and
transmission industries; and high-quality precision
socket screws, fasteners, and miniature precision parts.
Tools and Components
Selected Financial Data
there were no acquisitions in this segment during either
2002 or 2003. Price and currency impacts on revenues
were negligible. Mechanics Hand Tools revenues, rep-
resenting approximately two-thirds of segment sales in
2003, grew approximately 3.5% for the year, driven
primarily by increases in sales from the group’s retail
hand tool product lines which rebounded in the second
half of 2003 as sales to the group’s largest customer
strengthened through the third and fourth quarters of
2003. In addition, both the Company’s Matco and
Asian distribution channels showed growth for 2003.
Offsetting these increases was a net sales decline in
the segment’s niche businesses, as continued weakness
in shipments of truck and industrial boxes, drill chucks
and pole-line hardware driven by weak end markets
and increased competition from low-cost competitors
was partially offset by revenue gains in the Company’s
wheel service equipment product lines. Also, sales of
diesel engine retarders fell during 2003, reflecting
decreased end-user demand as compared to 2002. In
2002, the business experienced an inventory build-up
by customers in advance of regulatory changes imple-
mented in 2002.
Operating profit margins for the segment were 14.5%
in 2003 compared to 15.2% in 2002. Operating profit
margins in 2002 benefited by 10 basis points from the
reversal of unutilized accruals established for the 2001
restructuring program. Margin improvements at the
Jacobs Chuck business unit related to the 2001 restruc-
turing program, and other cost reductions, were offset
by margin declines at the Delta Industries business unit
related to the volume decrease noted above, the impact
of lower engine retarder sales, and by spending on certain
cost reduction and growth opportunities. The Company
believes operating profit margins will return to the levels
experienced in 2002 as the impact of spending initiatives
are expected to yield benefits in 2004.
($ in millions)
Sales
Operating profit
Operating profit
as a % sales
For the years ended
December 31,
2003
$1,197.2
$ 173.8
2002
$1,192.1
$ 181.4
2001
$1,165.6
$ 131.8
14.5%
15.2%
11.3%
2003 COMPARED TO 2002
Revenues in the Tools and Components segment grew
0.4% in 2003. The entirety of this growth represents
growth in sales volume from existing businesses, as
2002 COMPARED TO 2001
Revenues in the Tools and Components segment grew
2% in 2002. The entirety of this growth represents
sales volume growth from existing businesses, as there
were no acquisitions in this segment during 2001 and
2002, and price and currency impacts were negligible.
Mechanics Hand Tool revenues, representing approxi-
mately 65% of segment sales, grew 2%, generated pri-
marily by increases in the Matco sales channel as a
result of continued market share gains. Additionally,
hand tool revenues in the Company’s Asian channels
grew, but were offset by declines in domestic retail
28
DANAHER 2003 FORM 10-K
channels. Sales of diesel engine retarders at the Jacobs
Vehicle Systems business unit increased significantly,
as OEM customers accelerated their 2002 order rates
to meet a regulatory deadline. Diesel engine retarder
demand declined sharply following passage of the reg-
ulatory deadline in October 2002. Increases in this
segment in 2002 were offset by declines in the Delta
and Jacobs Chuck business units.
Operating profit margins for the segment were
15.2% in 2002 compared to 11.3% in 2001. This
increase resulted from the effect of higher revenue
levels, the cessation of goodwill amortization as of
January 1, 2002, and other cost reductions including
the partial benefit of the 2001 restructuring actions.
GROSS PROFIT
For the years ended
December 31,
($ in millions)
Sales
Cost of sales
Gross profit
Gross profit margin
2003
$5,293.9
$3,154.8
2,139.1
2002
$4,577.2
$2,791.2
1,786.0
2001
$3,782.4
$2,338.0
1,444.4
40.4%
39.0%
38.2%
Gross profit margin for 2003 was 40.4%, an increase
of 140 basis points compared to 39.0% in 2002. This
increase results from the benefits of the 2001 restructur-
ing program, on-going cost improvements in existing
business units driven by our DBS processes, generally
higher gross profit margins in businesses acquired, cost
reductions in business units acquired during the first
quarter of 2002 and the leverage created from higher
revenues during the year. The Company’s restructuring
program announced in the fourth quarter of 2001 is
estimated to have provided approximately $38 million
of savings to the full year 2003 when compared against
the 2001 period. This restructuring was complete at the
beginning of 2003. Gross profit margins are expected
to improve in 2004, reflecting ongoing cost improve-
ments in existing business units driven by the Company’s
DBS processes, continued cost savings from low-cost
region sourcing initiatives as well as the impact of higher
margins from recent acquisitions. These improvements
could be affected by higher raw material costs and
supply constraints resulting from the improving over-
all economy.
Gross profit margin in 2002 was 39.0%, a 80 basis
point increase compared to 38.2% achieved in 2001.
This increase resulted from the benefits of the 2001
restructuring program and other improvements in the
gross margins of core business units, in addition to the
effect of slightly higher gross margins of newly
acquired businesses.
OPERATING EXPENSES
For the years ended
December 31,
2003
$5,293.9
2002
$4,577.2
2001
$3,782.4
$1,315.6
$1,091.2
$ 872.7
($ in millions)
Sales
Selling, general and
administrative
expenses
SG&A as a
% of sales
24.9%
23.8%
23.1%
In 2003, selling, general and administrative (SG&A)
expenses were 24.9% of sales, an increase of 110 basis
points from 2002 levels. This increase is due primarily
to additional spending to fund growth opportunities
throughout the Company, as well as the impact of newly
acquired businesses and their higher relative operating
expense structures. In addition, SG&A expenses in 2002
included approximately 20 basis points of benefit asso-
ciated with gains from the sale of real estate recorded
in 2002.
Selling, general and administrative expenses in 2002
were 23.8% of sales, an increase of 70 basis points from
2001 levels. This increase is due primarily to the effect
of newly acquired businesses and their higher relative
cost structures, partially offset by the elimination of
goodwill amortization effective January 1, 2002 and
the gains on real estate sales mentioned above.
GAIN ON PENSION PLAN CURTAILMENT
The Company recorded a curtailment gain in 2003 as
a result of freezing substantially all associates’ ongoing
participation in its Cash Balance Plan effective Decem-
ber 31, 2003. The gain totaled $22.5 million ($14.6 mil-
lion after tax, or $0.09 per share) and represents the
unrecognized benefits associated with prior plan amend-
ments that were being amortized into income over the
remaining service period of our participating associates
prior to freezing the plan. As discussed in more detail
below, the Company will continue recording pension
expense related to this plan, primarily representing
interest costs on the accumulated benefit obligation
and amortization of actuarial losses accumulated in the
plan prior to the above curtailment.
29
DANAHER 2003 FORM 10-K
RESTRUCTURING CHARGE
In the fourth quarter of 2001, the Company recorded
a charge of $69.7 million ($43.5 million after tax, or
$0.29 per share) related to restructuring certain of its
product lines, principally its drill chuck, power quality
and industrial controls divisions, to improve financial
performance. The primary objective of the restructur-
ing plan was to reduce operating costs by consolidat-
ing, eliminating and/or downsizing existing operating
locations. No significant product lines were discontin-
ued. A table describing the components of the restruc-
turing accrual is included in Note 4 to the Company’s
Consolidated Financial Statements.
This restructuring is estimated to have provided
annual pre-tax cost reduction, net of increased costs at
other facilities, of approximately $38 million of which
approximately 50% was realized in 2002 with the full
annual benefit realized in 2003. As of December 31,
2002, the restructuring program had been substantially
completed as planned. Due to minor changes to the
original restructuring plan and to costs incurred being
less than estimated, in December 2002, the Company
recorded a benefit related to adjusting its unutilized
restructuring reserves by approximately $6.3 million
($4.1 million after tax, or $0.03 per share).
INTEREST COSTS AND
FINANCING TRANSACTIONS
For a description of the Company’s outstanding
indebtedness, please refer to “–Liquidity and Capital
Resources – Financing Activities and Indebtedness”
below. Interest expense of $59 million in 2003 was
approximately $5 million higher than the correspon-
ding 2002 period. The increase in interest expense is
due primarily to the unfavorable impact of the Euro/
US Dollar exchange rate on interest expense related to
the Company’s $378 million of 6.25% Eurobond notes
due 2005 partially offset by reduced debt levels result-
ing from net repayments of approximately $146 million
of outstanding indebtedness during 2003. Interest
expense of approximately $54 million in 2002 was
$6 million higher than 2001.
Interest income of $10 million, $10 million, and
$22 million was recognized in 2003, 2002 and 2001,
respectively. Average invested cash balances have
grown over the period from 2001 to 2003, but have
been largely offset by lower average interest rates
earned on these deposits.
INCOME TAXES
The 2003 effective tax rate of 32.6% is 1.4% lower
than the 2002 effective rate, mainly due to the effect
of a higher proportion of foreign earnings in 2003
compared to 2002 and the impact of additional research
and experimentation credits available to reduce the
U.S. tax liabilities. The Company expects to further
reduce its effective tax rate for 2004 to 31.5% reflecting
the continuing benefit of deriving an increasing pro-
portion of the Company’s earnings from international
operations. In addition, the impact on the Company’s
effective tax rate resulting from the Radiometer acqui-
sition completed in the first quarter of 2004 has not
been fully analyzed but the addition of the Radiometer
business, which is based in Denmark and has significant
operations outside the United States, could further
reduce the effective tax rate.
The 2002 effective tax rate of 34.0% was 3.5% lower
than the 2001 effective rate, mainly due to the effect
of adopting SFAS No. 142 and the resulting cessation
of goodwill amortization, and also due to a higher pro-
portion of foreign earnings in 2002 compared to 2001.
In connection with the completion of a federal income
tax audit, the Company adjusted certain income tax
related reserves established related to the sale of a pre-
viously discontinued operation and recorded a $30 mil-
lion credit to its fourth quarter 2002 income statement.
This credit has been classified separately below net
earnings from continuing operations since the tax
reserves related to a previously discontinued operation.
INFLATION
The effect of inflation on the Company’s operations
has been minimal in 2003, 2002 and 2001.
FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT
The Company is exposed to market risk from changes
in foreign currency exchange rates, interest rates, and
credit risk, 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. In addition, the Company’s
broad-based business activities help to reduce the
impact that volatility in any particular area or related
areas may have on its operating earnings as a whole.
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
30
technique used to evaluate this potential impact. Based
on a hypothetical, immediate 100 basis-point increase
in interest rates at December 31, 2003, the market
value of the Company’s fixed-rate long-term debt
would decrease by approximately $17 million. This
methodology has certain limitations, and these hypo-
thetical gains or losses would not be reflected in the
Company’s results of operations or financial conditions
under current accounting principles. In January 2002,
the Company entered into two interest rate swap
agreements for the term of the $250 million aggregate
principal amount of 6% notes due 2008 having an
aggregate notional principal amount of $100 million
whereby the effective interest rate on $100 million of
these notes is the six month LIBOR rate plus approxi-
mately 0.425%. In accordance with SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities”, as amended, the Company accounts for
these swap agreements as fair value hedges. These
instruments qualify as “effective” or “perfect” hedges.
The Company has a number of manufacturing sites
throughout the world and sells its products in more than
30 countries. As a result, it is exposed to movements
in the exchange rates of various currencies against the
United States dollar and against the currencies of coun-
tries in which it manufactures and sells products and
services. In particular, the Company has more sales in
European currencies than it has expenses in those curren-
cies. Therefore, when European currencies strengthen
or weaken against the U.S. dollar, operating profits are
increased or decreased, respectively. The Company’s
issuance of Eurobond notes in 2000 provides a natural
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
foreign operations without using derivative financial
instruments to manage this risk.
Other than the above noted swap arrangements,
there were no material derivative instrument transac-
tions during any of the periods presented. Additionally,
the Company does not have significant commodity
contracts or derivatives.
Financial instruments that potentially subject the
Company to significant concentrations of credit risk
consist of cash and temporary investments, our interest
rate swap agreements and trade accounts receivable. The
Company is exposed to credit losses in the event of
nonperformance by counter parties to its financial
instruments. The Company anticipates, however, that
counter parties will be able to fully satisfy their obliga-
DANAHER 2003 FORM 10-K
tions under these instruments. The Company places cash
and temporary investments and its interest rate swap
agreements with various high-quality financial institu-
tions throughout the world, and exposure is limited at
any one institution. Although the Company does not
obtain collateral or other security to support these finan-
cial instruments, it does periodically evaluate the credit
standing of the counter party financial institutions. In
addition, concentrations of credit risk arising from trade
accounts receivable are limited due to selling to a large
number of customers. The Company performs ongoing
credit evaluations of its customers’ financial conditions
and obtains collateral or other security when appropriate.
LIQUIDITY AND CAPITAL RESOURCES
Overview of Cash Flows and Liquidity
For the years ended
December 31,
2002
2003
$ 861.5
$
2001
710.3 $ 608.5
$ (80.3) $
(312.3)
24.5
(65.4) $ (84.5)
(439.8)
36.7
(1,158.1)
79.0
($ in millions)
Total operating cash flows
Purchases of property,
plant and equipment
Cash paid for acquisitions
Other sources
Net cash used in
investing activities
$(368.1) $(1,144.5) $(487.6)
Proceeds from the issuance
of common stock
Proceeds (repayments)
of borrowings, net
Other uses
Net cash provided by
(used in) financing
activities
$ 50.5
$
512.1 $ 28.2
(145.5)
(15.3)
17.7
(13.5)
410.5
(29.0)
$(110.3) $
516.3 $ 409.7
• Operating cash flow, a key source of the
Company’s liquidity, was $862 million for 2003,
an increase of $151 million, or approximately
21% as compared to 2002. The increase in oper-
ating cash flow was driven primarily by earnings
growth as well as continued improvements in the
Company’s working capital management.
• As of December 31, 2003, the Company held
approximately $1.2 billion of cash and cash equiv-
alents, approximately $772 million (net of cash
acquired) of which were used to fund the acquisi-
tions completed subsequent to December 31,
2003 noted below.
31
DANAHER 2003 FORM 10-K
• Acquisitions constituted the most significant use
of cash in all periods presented. The Company
acquired twelve companies and product lines dur-
ing 2003 for total consideration of approximately
$312 million in cash, including transaction costs.
Subsequent to December 31, 2003 and prior to
the date of the Annual Report on Form 10-K, the
Company acquired three additional businesses for
total consideration of approximately $772 million
in cash (net of cash acquired), including transac-
tion costs.
• Due to declines in the equity markets in 2001
and 2002, the fair value of the Company’s pension
fund assets has decreased below the accumulated
benefit obligation due to the participants in the
plan. After recording a minimum pension liability
adjustment of $76.9 million (net of tax benefit of
$39.6 million) at December 31, 2002, the Company
increased the minimum pension liability to
$114.1 million (net of tax benefit of $59.6 million)
at December 31, 2003 as a result of changes in
actuarial assumptions, including the impact of the
plan curtailment noted above. While not statuto-
rily required to make contributions to the plan for
2003, the Company contributed $10 million to
the plan before December 31, 2003. The Company
anticipates there will be no statutory funding
requirements for the defined benefit plan in 2004.
Operating Activities
The Company continues to generate substantial
cash from operating activities and remains in a strong
financial position, with resources available for rein-
vestment in existing businesses, strategic acquisitions
and managing its capital structure on a short and
long-term basis. Operating cash flow, a key source of
the Company’s liquidity, was $862 million for 2003,
an increase of $151 million, or approximately 21%
as compared to 2002. The increase in operating cash
flow was driven primarily by earnings growth as well
as the impact of the timing of payments for certain of
the Company’s benefit programs, including 401(k) and
employee health plan contributions. In addition, work-
ing capital improved in 2003 compared to 2002 but at
a slower level than in 2002.
Investing Activities
Net cash used in investing activities was $368 million
in 2003 compared to approximately $1.1 billion of net
cash used in 2002. Gross capital spending of $80 million
for 2003 increased $15 million from 2002, due to capi-
tal spending relating to new acquisitions and spending
related to the Company’s low-cost region sourcing ini-
tiatives. Capital expenditures are made primarily for
machinery, equipment and the improvement of facili-
ties. Gross capital spending of $65 million for 2002
decreased $19 million from 2001, as increased capital
spending from new acquisitions was more than offset
by declines in core businesses. In 2004, the Company
expects capital spending of approximately $100 mil-
lion. Disposals of fixed assets yielded approximately
$13 million of cash proceeds for 2003, primarily due
to the sale of four facilities and other real property.
Disposals of fixed assets yielded $26 million of cash
proceeds for 2002, primarily due to the sale of six facili-
ties during the year. Net pre-tax gains of $0.9 million and
$6.0 million were recorded in 2003 and 2002, respec-
tively, on these sales and are included as a reduction
of selling, general and administrative expenses in the
accompanying statements of earnings.
In addition, as discussed below, the Company
completed several business acquisitions during 2003,
2002 and 2001. As of the date of this Annual Report
on Form 10-K, the Company had also completed three
acquisitions subsequent to December 31, 2003. All of
the acquisitions during this time period have resulted
in the recognition of goodwill in the Company’s finan-
cial statements. This goodwill typically arises because
the purchase prices for these targets reflect the com-
petitive nature of the process by which we acquired
the targets and the complementary strategic fit and
resulting synergies these targets bring to existing oper-
ations. For a discussion of other factors resulting in the
recognition of goodwill see Note 3 to the accompany-
ing Consolidated Financial Statements.
2003 Acquisitions
The Company acquired twelve companies and product
lines during 2003 for total consideration of approximately
$312 million in cash, including transaction costs and net
of cash acquired. The Company also assumed debt with
an estimated fair market value of approximately $45 mil-
lion in connection with these acquisitions. In connection
32
DANAHER 2003 FORM 10-K
with one of the 2003 acquisitions, the Company entered
into an agreement to pay an additional maximum contin-
gent consideration of up to $36.8 million in November
2008 based on future performance of the acquired busi-
ness through November 2008. In general, each company
is a manufacturer and assembler of environmental or
instrumentation products, in markets such as Product
Identification, Environmental and Aerospace and Defense.
These companies were all acquired to complement exist-
ing units of the Process/Controls segment. The aggre-
gated annual revenue of the acquired businesses is
approximately $361 million and each of these twelve
companies individually has less than $125 million in
annual revenues. In addition, the Company sold one
facility acquired in connection with a prior acquisition
for approximately $11.6 million in net proceeds. No gain
or loss was recognized on the sale and the proceeds have
been included in proceeds from divestitures in the
accompanying Consolidated Statements of Cash Flows.
2002 Acquisitions
On February 25, 2002, the Company completed the
divestiture of API Heat Transfer, Inc. to an affiliate of
Madison Capital Partners for approximately $63 mil-
lion (including $53 million in net cash and a note
receivable in the principal amount of $10 million), less
certain liabilities of API Heat Transfer, Inc. paid by the
Company at and subsequent to closing. On February 5,
2002, the Company acquired 100% of Marconi Data
Systems, formerly known as Videojet Technologies,
from Marconi plc in a stock acquisition, for approxi-
mately $400 million in net cash including transaction
costs. On February 4, 2002, the Company acquired
100% of Viridor Instrumentation Limited from the
Pennon Group plc in a stock acquisition, for approxi-
mately $137 million in net cash including transaction
costs. On February 1, 2002, the Company acquired
100% of Marconi Commerce Systems, formerly known
as Gilbarco, from Marconi plc in a stock acquisition,
for approximately $309 million in cash including
transaction costs (net of $17 million of acquired cash).
On October 18, 2002, the Company acquired 100%
of Thomson Industries, Inc. in a stock and asset acqui-
sition, for approximately $147 million in cash includ-
ing transaction costs (net of $2 million of acquired
cash), an agreement to pay $15 million over the next
six years, and an additional maximum contingent con-
sideration of up to $60 million cash based on the future
performance of Thomson through December 31, 2005.
In addition, during the year ended December 31, 2002,
the Company acquired eight smaller companies, for
total consideration of approximately $186 million in
net cash including transaction costs.
2001 Acquisitions
On January 2, 2001, the Company acquired 100% of
the assets of United Power Corporation for approxi-
mately $108 million in net cash including transaction
costs. The Company acquired 11 smaller companies
during 2001 for total net cash consideration of approx-
imately $343 million including transaction costs. The
Company also disposed of two small product lines
during 2001, yielding cash proceeds of approximately
$33 million.
Recent Acquisition Developments
On January 27, 2004, Danaher acquired 95.4% of
the share capital of, and 97.9% of the voting rights in,
Radiometer S/A for approximately $652 million in cash
(net of $77 million in acquired cash), including trans-
action costs, pursuant to a tender offer announced on
December 11, 2003. In addition, Danaher assumed
$65 million of debt in connection with the acquisition.
Danaher submitted a mandatory tender offer for the
remaining outstanding shares of Radiometer on February
4, 2004 as required under Danish law and intends to
effect a compulsory redemption of the remaining out-
standing shares as permitted under Danish law. Once
all of the Radiometer shares are acquired, it is expected
that the total consideration for such shares, including
transaction costs, will be approximately $687 million
in cash (net of $77 million in acquired cash). Radiometer
has total annual revenues of approximately $300 mil-
lion. In addition, on February 27, 2004, the Company
acquired substantially all of the assets and certain liabili-
ties of the Gendex business of Dentsply International,
Inc. for approximately $105 million in net cash, includ-
ing transaction costs. Gendex has annual revenues of
approximately $100 million. The Company also com-
pleted the acquisition of a small instrument company
subsequent to December 31, 2003. The Company funded
all three acquisitions from existing cash reserves.
33
DANAHER 2003 FORM 10-K
Financing Activities and Indebtedness
Financing activities used cash of $110 million during
2003 compared to $516 million generated during
2002. The primary reason for the difference was the
Company’s issuance of 6.9 million shares of the
Company’s common stock in March 2002. Proceeds
of the common stock issuance, net of the related
expenses, were approximately $467 million. The
Company used the proceeds to repay approximately
$230 million of short-term borrowings incurred in the
first quarter of 2002 related to the Videojet, Gilbarco
and Viridor acquisitions noted above. The balance of
the proceeds was used for general corporate purposes.
Total debt decreased to $1,298.8 million at
December 31, 2003, compared to $1,310.0 million at
December 31, 2002. This decrease was due primarily to
net repayments of $146 million of debt, offset in part
by the change in the U.S. Dollar/Euro exchange rates,
and the resulting increase in the carrying value of the
Company’s Euro denominated debt. All significant
debt obligations assumed related to 2003 acquisitions
have been repaid.
The Company’s debt financing as of December 31,
2003 was composed primarily of $555 million of zero
coupon convertible notes due 2021 Liquid Yield Option
Notes or LYONs (“LYONs”), $378 million of 6.25%
Eurobond notes due 2005 and $250 million of 6% notes
due 2008 (subject to the interest rate swaps described
above). The Company’s LYONs obligations (described
in further detail below) carry a yield to maturity of
2.375% (with contingent interest payable as described
below). Substantially all remaining borrowings have
interest costs that float with referenced base rates. The
Company maintains two revolving senior unsecured
credit facilities totaling $1 billion available for general
corporate purposes. Borrowings under the revolving
credit facilities bear interest of Eurocurrency rate plus
.21% to .70%, depending on the Company’s debt rat-
ing. The credit facilities, each $500 million, have a
fixed term expiring June 28, 2006 and July 23, 2006,
respectively. There were no borrowings outstanding
under either of the Company’s credit facilities at any
time during 2003.
During the first quarter of 2001, the Company
issued $830 million (value at maturity) in LYONs. The
net proceeds to the Company were approximately
$505 million, of which approximately $100 million
was used to pay down debt, and the balance was used
for general corporate purposes, including acquisitions.
The LYONs carry a yield to maturity of 2.375%.
Holders of the LYONs may convert each of their
LYONs into 7.2676 shares of Danaher common stock
(in the aggregate for all LYONs, approximately
6.0 million shares of Danaher common stock) at any
time on or before the maturity date of January 22,
2021. The Company may redeem all or a portion of
the LYONs for cash at any time. Holders may require
the Company to purchase all or a portion of the notes
for cash and/or Company common stock, at the
Company’s option, on January 22, 2011. The holders
had a similar option to require the Company to pur-
chase all or a portion of the notes as of January 22,
2004, which resulted in notes with an accreted value
of $1.1 million being redeemed by the Company.
These notes were redeemed for cash and therefore this
amount has been classified as a current liability in the
accompanying financial statements. The Company
will pay contingent interest to the holders of LYONs
during any six-month period commencing after
January 22, 2004 if the average market price of a
LYON for a measurement period preceding such six-
month period equals 120% or more of the sum of the
issue price and accrued original issue discount for such
LYON. Except for the contingent interest described
above, the Company will not pay interest on the
LYONs prior to maturity.
Cash and Cash Requirements
As of December 31, 2003, the Company held approxi-
mately $1.2 billion of cash and cash equivalents that
were invested in highly liquid investment grade debt
instruments with a maturity of 90 days or less, approx-
imately $772 million of which were used to fund the
acquisitions completed subsequent to December 31,
2003 noted above. As of December 31, 2003, the
Company was in compliance with all debt covenants
under the aforementioned debt instruments, including
limitations on secured debt and debt levels. None of
the Company’s debt instruments contain trigger clauses
requiring the Company to repurchase or pay off its
debt if rating agencies downgrade the Company’s debt
rating. In addition, as of the date of this Form 10-K,
the Company could issue up to $1 billion of securities
under its shelf registration statement with the Securities
and Exchange Commission.
34
DANAHER 2003 FORM 10-K
The Company will continue to have cash require-
ments to support working capital needs and capital
expenditures and acquisitions, to pay interest and serv-
ice debt, fund its pension plans as required and to pay
dividends to shareholders. In order to meet these cash
requirements, the Company generally intends to use
available cash and internally generated funds. The
Company currently anticipates that any additional
acquisitions consummated during 2004 would be
funded from available cash and internally generated
funds and, if necessary, through borrowings under its
credit facilities, under uncommitted lines of credit or
by accessing the capital markets.
Pension Fund Assets and Liabilities
Due to declines in the equity markets in 2001 and
2002, the fair value of the Company’s pension fund
assets has decreased below the accumulated benefit
obligation due to the participants in the plan. In
accordance with SFAS No. 87, “Employers’ Accounting
for Pensions,” the Company recorded a minimum pen-
sion liability adjustment of $76.9 million (net of tax
benefit of $39.6 million) at December 31, 2002. Based
on changes in actuarial assumptions, including the
impact of the plan curtailment noted above, the mini-
mum pension liability was increased to $114.1 million
(net of tax benefit of $59.6 million) as of December
31, 2003. The minimum pension liability is calculated
as the difference between the actuarially determined
accumulated benefit obligation and the value of the
plan assets as of September 30, 2003 (see Note 10 to
the consolidated financial statements for the year
ended December 31, 2003 for additional information).
This adjustment results in a direct charge to stock-
holders’ equity and does not immediately impact net
earnings, but is included in other comprehensive
income. Calculations of the amount of pension and
other postretirement benefits costs and obligations
depend on the assumptions used in such calculations.
These assumptions include discount rates, expected
return on plan assets, rate of salary increases, health
care cost trend rates, mortality rates, and other factors.
While the Company believes that the assumptions used
in calculating its pension and other postretirement
benefits costs and obligations are appropriate, differ-
ences in actual experience or changes in the assump-
tions may affect the Company’s financial position or
results of operations. The Company used a 6.0% dis-
count rate in computing the amount of the minimum
pension liability to be recorded at December 31, 2003,
which represented a decrease in the discount rate of
1.0% from the rate used at December 31, 2002. A fur-
ther 25 basis point reduction in the discount rate would
have increased the after-tax minimum pension liability
approximately $18 million from the amount recorded
in the financial statements at December 31, 2003.
For 2003, the Company lowered the expected
long-term rate of return assumption from 9% to 8.5%
for the Company’s defined benefit pension plan reflect-
ing lower expected long-term returns on equity and debt
investments included in plan assets. The plan maintains
between 60 to 70% of its assets in equity portfolios,
which are invested in funds that are expected to mir-
ror broad market returns for equity securities. The bal-
ance of the asset portfolio is invested in high-quality
corporate bonds and bond index funds. Including the
effect of this change, pension expense for this plan for
the year ended December 31, 2003 was approximately
$8.5 million (or $5.7 million on an after-tax basis), com-
pared with $1.9 million (or $1.2 million after tax) for
this plan in 2002. While not statutorily required to make
contributions to the plan for 2003, the Company con-
tributed $10 million to the plan before December 31,
2003. The Company anticipates there will be no statu-
tory funding requirements for the defined benefit plan
in 2004.
As noted above, the Company curtailed benefits
for substantially all associates under the defined bene-
fit plan as of December 31, 2003. The Company will
maintain this curtailed plan for the foreseeable future
and, as a result, will continue to record the effect of
changes in discount rates and expected rates of returns
on plan assets on both the minimum pension liability
recorded as well as the amount of pension expense
reflected in the statement of earnings for future peri-
ods. In addition, as part of curtailing benefits under
this plan, the Company expanded benefits under its
available defined contribution (401-K) plan. The net
effect of these plan changes are expected to increase
the Company’s total pension expense by approxi-
mately $15.9 million (or $10.9 million after tax) for
2004 compared to 2003.
35
DANAHER 2003 FORM 10-K
CONTRACTUAL OBLIGATIONS
The following table sets forth, by period due or year of expected expiration, as applicable, a summary of the
Company’s contractual obligations as of December 31, 2003 under (1) long-term debt obligations, (2) leases,
(3) purchase obligations and (4) other long-term liabilities reflected on the Company’s balance sheet under GAAP.
(in millions)
Debt and Leases:
Long-Term Debt Obligations(a)
Capital Lease Obligations
Total Long-Term Debt
Operating Lease Obligations(b)
Other:
Purchase Obligations(c)
Other Long-Term Liabilities Reflected
on the Company’s Balance Sheet
Under GAAP(d)
Total
$1,277.7
21.2
$1,298.9
200.0
Less than
1 Year
$12.2
2.2
$14.4
44.0
1-3 Years
3-5 Years
More Than
5 Years
$458.7
4.7
$463.4
$250.5
5.3
$255.8
$556.3
9.0
$565.3
71.0
53.0
32.0
45.1
22.9
22.2
–
–
578.8
–
160.5
90.0
328.3
Total
$2,122.8
$81.3
$717.1
$398.8
$925.6
(a) As described in Note 8 to the Consolidated Financial Statements
(b) As described in Note 12 to the Consolidated Financial Statements
(c) Consist of agreements to purchase goods or services for consideration greater than $1 million that are enforceable and legally binding on
the Company and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable
price provisions; and the approximate timing of the transaction.
(d) Primarily consist of obligations under product service and warranty policies, performance and operating cost guarantees and estimated
environmental remediation costs, post-retirement health, pension obligations, deferred tax liabilities and deferred compensation liabilities.
The timing of cash flows associated with these obligations are based upon management’s estimates over the terms of these agreements and
are largely based upon historical experience.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or
future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources that is material to investors.
The following table sets forth, by period due or year of expected expiration, as applicable, a summary
of certain commercial commitments of the Company.
(in thousands)
Standby Letters of Credit and Performance Bonds
Guarantees
Contingent Acquisition Consideration
Amount of Commitment Expiration Per Period
Total
Amounts
Committed
$111.0
84.0
97.1
Less than
1 Year
$ 55.0
81.0
10.3
1-3 Years
$39.0
2.0
20.0
3-5 Years
$ 2.0
–
46.8
More than
5 Years
$15.0
1.0
20.0
Total Commercial Commitments
$292.1
$146.3
$61.0
$48.8
$36.0
36
DANAHER 2003 FORM 10-K
Standby letters of credit and performance bonds are
generally issued to secure the Company’s obligations
under short-term contracts to purchase raw materials
and components for manufacture and for performance
under specific manufacturing agreements.
Guarantees reflected in the table above primarily
relate to the Company’s Matco subsidiary, which has
sold, with recourse, or provided credit enhancements
for certain of its accounts receivable and notes receiv-
able. Amounts outstanding under this program approx-
imated $75 million, $93 million and $92 million as of
December 31, 2003, 2002 and 2001, respectively. The
subsidiary accounts for such sales in accordance with
SFAS No. 140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities –
a replacement of SFAS No. 125.” A provision for
estimated losses as a result of the recourse has been
included in accrued expenses. No gain or loss arose
from these transactions.
In connection with the Company’s acquisition of
Thomson, the Company has entered into agreements to
pay $15 million over the next 6 years, and an additional
maximum contingent consideration of up to $60 million
cash based on the future performance of Thomson
through December 31, 2005. In connection with one
of the 2003 acquisitions, the Company entered into an
agreement to pay an additional maximum contingent
consideration of up to $36.8 million in November 2008
based on future performance of the acquired business
through November 2008.
The Company has from time to time divested certain
of its businesses and assets. In connection with these
divestitures, the Company often provides representa-
tions, warranties and/or indemnities to cover various
risks and unknown liabilities, such as environmental
liabilities and tax liabilities. The Company cannot
estimate the potential liability from such representa-
tions, warranties and indemnities because they relate
to unknown conditions. However, the Company does
not believe that the liabilities relating to these repre-
sentations, warranties and indemnities will have a
material adverse effect on the Company’s financial
position, results of operations or liquidity.
Due to the Company’s downsizing of certain oper-
ations pursuant to acquisitions, restructuring plans or
otherwise, certain properties leased by the Company
have been sublet to third parties. In the event any of
these third parties vacates any of these premises, the
Company would be legally obligated under master
lease arrangements. The Company believes that the
financial risk of default by such sublessors is individu-
ally and in the aggregate not material to the Company’s
financial position, results of operations or liquidity.
Except as described above, the Company has not
entered into any off-balance sheet financing arrange-
ments as of December 31, 2003. Also, the Company
does not have any unconsolidated special purpose
entities as of December 31, 2003.
Other Contingent Liabilities
Certain of the Company’s operations are subject to
environmental laws and regulations in the jurisdictions
in which they operate. The Company must also com-
ply with various health and safety regulations in both
the United States and abroad in connection with its
operations. Compliance with these laws and regula-
tions has not had and, based on current information
and the applicable laws and regulations currently in
effect, is not expected to have a material adverse effect
on the Company’s capital expenditures, earnings or
competitive position. In addition to the 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. The Company
has projects underway at several current and former
manufacturing facilities, in both the United States and
abroad, to investigate and remediate environmental
contamination resulting from past operations. The
ultimate cost of site cleanup is difficult to predict
given the factors described above under Item 1.
Business – Environmental and Safety Regulations. In
addition, the Company is from time to time party to
personal injury or other claims brought by private par-
ties alleging injury due to the presence of or exposure
to hazardous substances. In view of the Company’s
financial position and based on current information
and the applicable laws and regulations currently in
effect, the Company believes that its liability, if any,
related to past or current waste disposal practices and
other hazardous material handling practices will not
have a material adverse effect on its cash flow. In addi-
tion, the ongoing cost of compliance with existing
environmental laws and regulations has not had, and is
not expected to have, a material adverse effect on the
Company’s cash flows or financial position.
In addition, the Company is, from time to time,
subject to routine litigation incidental to its business.
These lawsuits primarily involve claims for damages
37
DANAHER 2003 FORM 10-K
arising out of the use of the Company’s products,
allegations of patent and trademark infringement, and
litigation and administrative proceedings involving
employment matters and commercial disputes. Some
of these lawsuits include claims for punitive as well as
compensatory damages. The Company believes that
the results of this litigation and other pending legal
proceedings will not have a materially adverse effect
on the Company’s cash flows, even before taking into
account any related insurance recoveries.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of the
Company’s financial condition and results of opera-
tions are based upon the Company’s Consolidated
Financial Statements, which have been prepared in
accordance with accounting principles generally
accepted in the United States. The preparation of
these financial statements requires management to
make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabili-
ties. The Company bases these estimates on historical
experience and on various other assumptions that are
believed to be reasonable under the circumstances, the
results of which form the basis for making judgments
about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual
results may differ from these estimates.
The Company believes the following critical
accounting policies affect management’s more signifi-
cant judgments and estimates used in the preparation
of the Consolidated Financial Statements. For a detailed
discussion on the application of these and other
accounting policies, see Note 1 in the Company’s
Consolidated Financial Statements.
ACCOUNTS RECEIVABLE. The Company maintains
allowances for doubtful accounts for estimated losses
resulting from the inability of the Company’s customers
to make required payments. The Company estimates
its anticipated losses from doubtful accounts based on
historical collection history as well as by specifically
reserving for known doubtful accounts. Estimating
losses from doubtful accounts is inherently uncertain
because the amount of such losses depends substantially
on the financial condition of the Company’s customers,
and the Company typically has limited visibility as
to the specific financial state of its customers. If the
financial condition of the Company’s customers were
to deteriorate beyond estimates, resulting in an
impairment of their ability to make payments, the
Company would be required to write off additional
accounts receivable balances, which would adversely
impact the Company’s net earnings, cash flows and
balance sheet.
INVENTORIES. The Company records inventory at the
lower of cost or market. The Company estimates the
market value of its inventory based on assumptions for
future demand and related pricing. Estimating the mar-
ket value of inventory is inherently uncertain because
levels of demand, technological advances and pricing
competition in many of the Company’s markets can
fluctuate significantly from period to period due to
circumstances beyond the Company’s control. As a
result, such fluctuations can be difficult to predict. If
actual market conditions are less favorable than those
projected by management, the Company would be
required to reduce the value of its inventory, which
would adversely impact the Company’s cash flows and
balance sheet.
ACQUIRED INTANGIBLES. The Company’s business
acquisitions typically result in goodwill and other
intangible assets, which affect the amount of future
period amortization expense and possible impairment
expense that the Company will incur. The Company
has adopted Statement of Financial Accounting Stan-
dards (“SFAS”) No. 142, the new accounting standard
for goodwill, which requires that the Company, on an
annual basis, calculate the fair value of the reporting
units that contain the goodwill and compare that to
the carrying value of the reporting unit to determine
if impairment exists. Impairment testing must take
place more often if circumstances or events indicate a
change in the impairment status. In calculating the fair
value of the reporting units, management relies on a
number of factors including operating results, business
plans, economic projections, anticipated future cash
flows, and transactions and market place data. There
are inherent uncertainties related to these factors and
management’s judgment in applying them to the anal-
ysis of goodwill impairment. If actual fair value is less
than the Company’s estimates, goodwill and other
intangible assets may be overstated on the balance
sheet and a charge would need to be taken against
net earnings.
38
DANAHER 2003 FORM 10-K
process, the Company’s experience in acquiring other
companies, and information obtained after the closing
about the acquired company’s business, assets and lia-
bilities. The accruals established by the Company are
inherently uncertain because they are based on limited
information of the fair value of the assets and liabilities
of the acquired business as well as the uncertainty of
the cost to execute the integration plans for the busi-
ness. If the accruals established by the Company are
insufficient to account for all of the activities required
to integrate the acquired entity, the Company would
be required to incur an expense, which would adversely
affect the Company’s results of operations. To the extent
these accruals are not utilized for the intended purpose,
the excess is recorded as a reduction of the purchase
price, typically by reducing recorded goodwill balances.
ITEM 7A. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT
MARKET RISK
The information required by this item is included
under Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
LONG-LIVED ASSETS. The Company reviews its long-
lived assets for impairment whenever events or changes
in circumstances indicate the carrying amount of an
asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of
the carrying amount of the assets to the future net
cash flows expected to be generated by the assets. If
such assets are considered to be impaired, the impair-
ment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds their
fair value. Judgments made by the Company relate to
the expected useful lives of long-lived assets and its
ability to realize any undiscounted cash flows in excess
of the carrying amounts of such assets and are affected
by factors such as the ongoing maintenance and
improvements of the assets, changes in the expected
use of the assets, changes in economic conditions,
changes in operating performance and anticipated
future cash flows. Since judgment is involved in deter-
mining the fair value of long-lived assets, there is risk
that the carrying value of the Company’s long-lived
assets may require adjustment in future periods. If actual
fair value is less than the Company’s estimates, long-
lived assets may be overstated on the balance sheet and
a charge would need to be taken against net earnings.
PURCHASE ACCOUNTING. In connection with its
acquisitions, the Company formulates a plan related
to the future integration of the acquired entity. In
accordance with Emerging Issues Task Force Issue
No. 95-3, “Recognition of Liabilities in Connection
with a Purchase Business Combination,” the Company
accrues estimates for certain of the integration costs
anticipated at the date of acquisition, including per-
sonnel reductions and facility closures or restructur-
ings. Adjustments to these estimates are made up to
12 months from the acquisition date as plans are final-
ized. The Company establishes these accruals based
on information obtained during the due diligence
39
DANAHER 2003 FORM 10-K
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended December 31 (in thousands)
Sales
Cost of sales
Selling, general and administrative expenses
Gain on pension plan curtailment
Restructuring expenses
Total operating expenses
Operating profit
Interest expense
Interest income
Earnings before income taxes
Income taxes
Net earnings, before effect of accounting change
and reduction of income tax reserves
Reduction of income tax reserves related
to previously discontinued operation
Effect of accounting change, net of tax,
adoption of SFAS No. 142
Net earnings
Basic net earnings per share:
Net earnings before effect of accounting change
and reduction of income tax reserves
Add: Reduction of income tax reserves
Less: Effect of accounting change
Net earnings
Diluted net earnings per share:
Net earnings before effect of accounting change
and reduction of income tax reserves
Add: Reduction of income tax reserves
Less: Effect of accounting change
Net earnings
Average common stock and common equivalent
shares outstanding:
Basic
Diluted
2003
$5,293,876
3,154,809
1,315,572
(22,500)
–
4,447,881
845,995
(59,049)
10,089
797,035
260,201
2002
$4,577,232
2,791,175
1,091,208
–
(6,273)
3,876,110
701,122
(53,926)
10,272
657,468
223,327
2001
$3,782,444
2,338,027
872,680
–
69,726
3,280,433
502,011
(48,147)
22,400
476,264
178,599
536,834
434,141
297,665
–
30,000
–
–
$ 536,834
(173,750)
$ 290,391
–
$ 297,665
$
$
$
$
3.50
–
–
3.50
3.37
–
–
3.37
$
$
$
$
2.89
0.20
(1.16)
1.93
2.79
0.19
(1.10)
1.88
$
$
$
$
2.07
–
–
2.07
2.01
–
–
2.01
153,396
161,570
150,224
158,482
143,630
151,848
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
40
DANAHER 2003 FORM 10-K
DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
As of December 31 (in thousands)
2003
2002
ASSETS
Current assets:
Cash and equivalents
Trade accounts receivable, less allowance for doubtful accounts
of $64,341 and $63,635
Inventories
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Other assets
Goodwill
Other intangible assets, net
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current portion of long-term debt
Trade accounts payable
Accrued expenses
Total current liabilities
Other liabilities
Long-term debt
Stockholders’ equity:
Common stock, one cent par value; 500,000 shares authorized;
167,694 and 166,545 issued; 153,681 and 152,532 outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
$1,230,156
$ 810,463
868,097
536,227
307,671
2,942,151
573,365
32,562
3,064,109
277,863
$6,890,050
759,028
485,587
332,188
2,387,266
597,379
36,796
2,776,774
230,930
$6,029,145
$
14,385
472,994
892,624
1,380,003
578,840
1,284,498
$ 112,542
366,587
786,183
1,265,312
556,812
1,197,422
1,677
999,786
(74,607)
2,719,853
3,646,709
$6,890,050
1,665
915,562
(105,973)
2,198,345
3,009,599
$6,029,145
The accompanying Notes to the Consolidated Financial Statements are an integral part of these balance sheets.
41
DANAHER 2003 FORM 10-K
DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 (in thousands)
2003
2002
2001
Cash flows from operating activities:
Net earnings
Reduction of income tax reserves
Effect of change in accounting principle
Net earnings, before effect of accounting change
Depreciation and amortization
Change in trade accounts receivable
Change in inventories
Change in accounts payable
Change in accrued expenses and other liabilities
Change in prepaid expenses and other assets
Total operating cash flows
Cash flows from investing activities:
Payments for additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Cash paid for acquisitions
Proceeds from divestitures
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock
Dividends paid
Proceeds from debt borrowings
Debt repayments
Purchase of treasury stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Net change in cash and equivalents
Beginning balance of cash and equivalents
Ending balance of cash and equivalents
$ 536,834
–
–
536,834
133,436
1,505
21,061
58,209
72,097
38,402
861,544
(80,343)
12,926
(312,283)
11,648
(368,052)
50,497
(15,326)
5,262
(150,771)
–
(110,338)
36,539
419,693
810,463
$1,230,156
$ 290,391
(30,000)
173,750
434,141
129,565
59,030
77,544
54,008
27,595
(71,536)
710,347
(65,430)
26,466
(1,158,129)
52,562
(1,144,531)
512,105
(13,516)
37,528
(19,820)
–
516,297
21,791
103,904
706,559
$ 810,463
$ 297,665
–
–
297,665
178,390
142,308
66,833
(38,138)
24,054
(62,641)
608,471
(84,457)
3,872
(439,814)
32,826
(487,573)
28,169
(11,676)
517,564
(107,048)
(17,299)
409,710
(973)
529,635
176,924
$ 706,559
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
42
DANAHER 2003 FORM 10-K
DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
(in thousands)
Balance, December 31, 2000
Net earnings for the year
Dividends declared
Common stock issued for
options exercised
Purchase of treasury stock
Decrease from translation
of foreign financial statements
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other Compre- Compre-
hensive
Income
hensive
Income
155,650
–
–
$ 1,556
–
–
$ 364,426 $ 1,635,481
297,665
(11,676)
–
–
$ (59,130)
–
–
297,665
–
1,677
–
–
17
–
–
28,152
(17,299)
–
–
–
–
–
–
–
–
(10,606)
(10,606)
Balance, December 31, 2001
157,327
$ 1,573
$ 375,279 $ 1,921,470
$ (69,736) $ 287,059
Net earnings for the year
Dividends declared
Sale of common stock
Common stock issued
for options exercised
Increase from translation
of foreign financial statements
Minimum pension liability
(net of tax benefit of $39,637)
–
–
6,900
2,318
–
–
–
–
69
23
–
–
–
–
466,936
73,347
–
–
290,391
(13,516)
–
–
–
–
–
–
–
–
290,391
–
–
–
40,704
40,704
(76,941)
(76,941)
Balance, December 31, 2002
166,545
$ 1,665
$ 915,562 $ 2,198,345
$(105,973) $ 254,154
Net earnings for the year
Dividends declared
Amendment of deferred compensation
plan and common stock issued
for options exercised
Increase from translation
of foreign financial statements
Minimum pension liability
(net of tax benefit of $19,985)
–
–
–
–
–
–
536,834
(15,326)
1,149
12
84,224
–
–
–
–
–
–
–
–
–
–
–
–
536,834
–
–
68,481
68,481
(37,115)
(37,115)
Balance, December 31, 2003
167,694 $1,677
$999,786 $2,719,853 $ (74,607) $568,200
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
43
DANAHER 2003 FORM 10-K
(1) BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES:
BUSINESS – Danaher Corporation designs, manufac-
tures 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 Compo-
nents. The Process/Environmental Controls segment is
a leading producer of environmental products, includ-
ing water quality analytical instrumentation and leak
detection systems for underground fuel storage tanks;
retail petroleum automation products; compact profes-
sional electronic test tools; product identification equip-
ment and consumables; 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. Subsequent to December
31, 2003 and prior to the date of this Annual Report
on Form 10-K, the Company acquired two medical
technology companies that will be included in the
Process/Environmental Controls segment.
ACCOUNTING PRINCIPLES – The consolidated financial
statements include the accounts of the Company and its
subsidiaries. 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 man-
agement 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 mate-
rial, 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, 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, where
quoted market prices are not available, rates available
for debt with similar terms and remaining maturities
are used to estimate the fair value of existing debt.
GOODWILL AND OTHER INTANGIBLE ASSETS –
Goodwill and other intangible assets result from the
Company’s acquisition of existing businesses. In accor-
dance with Statement of Financial Accounting Standard
(SFAS) No. 142, amortization of recorded goodwill
balances ceased effective January 1, 2002, however
amortization of certain intangible assets continues over
the estimated useful lives of the identified asset. Amor-
tization expense for all goodwill and other intangible
assets was $11,132,000, $8,177,000 and $64,705,000
for the years ended December 31, 2003, 2002 and
2001, respectively. See Notes 2, 3, and 17 for addi-
tional information.
SHIPPING AND HANDLING – Shipping and handling
costs are included as a component of cost of sales.
Shipping and handling costs billed to customers are
included in sales.
REVENUE RECOGNITION – As described above, the
Company derives revenues primarily from the sale of
industrial and consumer products and services. For
revenue related to a product or service to qualify for
recognition, there must be persuasive evidence of a
sale, delivery must have occurred or the services must
have been rendered, the price to the customer must be
fixed and determinable and collectibility of the bal-
ance must be reasonably assured. The Company’s stan-
dard terms of sale are FOB Shipping Point and, as
such, the Company principally records revenue upon
shipment. If any significant obligations to the cus-
tomer with respect to such sale remain to be fulfilled
44
DANAHER 2003 FORM 10-K
following shipment, typically involving obligations
relating to installation and acceptance by the buyer,
revenue recognition is deferred until such obligations
have been fulfilled. Product returns consist of esti-
mated returns for products sold and are recorded as a
reduction in reported revenues at the time of sale as
required by SFAS No. 48. Customer allowances and
rebates, consisting primarily of volume discounts and
other short-term incentive programs, are recorded as
a reduction in reported revenues at the time of sale
because these allowances reflect a reduction in the pur-
chase price for the products purchased in accordance
with EITF 01-9. Product returns, customer allowances
and rebates are estimated based on historical experience
and known trends. Revenue related to maintenance
agreements is recognized as revenue over the term of the
agreement as required by FASB Technical Bulletin 90-1.
FOREIGN CURRENCY TRANSLATION – Exchange
adjustments resulting from foreign currency transac-
tions are generally recognized in net earnings, whereas
adjustments resulting from the translation of financial
statements are reflected as a component of accumu-
lated other comprehensive income within stockhold-
ers’ 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 SFAS No. 109, “Accounting
for Income Taxes.”
ACCUMULATED OTHER COMPREHENSIVE INCOME –
Accumulated other comprehensive income consists of
cumulative foreign translation gain (loss) adjustments
of $39,449,000, $(29,032,000), and $(69,736,000) as
of December 31, 2003, 2002 and 2001, respectively
and a cumulative minimum pension liability loss adjust-
ment of $114,056,000 (net of $59,622,000 tax benefit),
$76,941,000 (net of $39,637,000 tax benefit) and $0 as
of December 31, 2003, 2002 and 2001, respectively.
See Note 10.
Accounting Principles Board (APB) Statement No. 25,
“Accounting for Stock Issued to Employees” and the
disclosure requirements of SFAS Nos. 123 and 148,
“Accounting for Stock-Based Compensation.”
Nonqualified options have been issued at grant
prices equal to the fair market value of the underlying
security as of the date of grant during all the periods
presented. Under APB No. 25, the Company’s policy
does not recognize compensation costs for options
of this type. The pro-forma costs of these options
granted in 2003 have been calculated using the Black-
Scholes option pricing model and assuming a 3.6%
risk-free interest rate, a 7-year life for the option, a
25% expected volatility and dividends at the current
annual rate. The weighted-average grant date fair mar-
ket value of options issued was $25 per share in 2003,
$28 per share in 2002, and $27 per share in 2001.
The following table illustrates the effect of net
earnings and earnings per share if the fair value based
method had been applied to all outstanding and
unvested awards in each year ($ in thousands, except
per share amounts):
2003
2002
2001
Net earnings before
effect of accounting
change and reduction
of income tax reserves –
as reported
Deduct: Stock-based
employee compensation
expense determined
under fair value based
method for all awards,
net of related tax effects
$536,834 $434,141 $297,665
(26,755)
(20,960)
(20,344)
Proforma net earnings
$510,079 $413,181 $277,321
Earnings per share before
effect of accounting
change and reduction
of income tax reserves
Basic – as reported
Basic – proforma
Diluted – as reported
Diluted – proforma
$3.50
$3.33
$3.37
$3.21
$2.89
$2.76
$2.79
$2.66
$2.07
$1.94
$2.01
$1.88
ACCOUNTING FOR STOCK OPTIONS – As described in
Note 11, the Company accounts for the issuance of
stock options under the intrinsic value method under
NEW ACCOUNTING PRONOUNCEMENTS –
See Note 17.
45
DANAHER 2003 FORM 10-K
(2) ACQUISITIONS AND
DIVESTITURES:
The Company has completed numerous acquisitions
of existing businesses during the years ended Decem-
ber 31, 2003, 2002 and 2001. These acquisitions have
either been completed because of their strategic fit
with an existing Company business or because they are
of such a nature and size as to establish a new strategic
platform for growth for the Company. All of the acqui-
sitions during this time period have been additions to
the Company’s Process/Environmental Controls seg-
ment, have been accounted for as purchases and have
resulted in the recognition of goodwill in the Company’s
financial statements. This goodwill arises because the
purchase prices for these targets reflect a number of
factors including the future earnings and cash flow
potential of these target companies; the multiple to
earnings, cash flow and other factors at which com-
panies similar to the target have been purchased by
other acquirers; the competitive nature of the process
by which we acquired the target; and because of the
complementary strategic fit and resulting synergies
these targets bring to existing operations.
The Company makes an initial allocation of the
purchase price at the date of acquisition based upon its
understanding of the fair market value of the acquired
assets and liabilities. The Company obtains this infor-
mation during due diligence and through other sources.
In the months after closing, as the Company obtains
additional information about these assets and liabilities
and learns more about the newly acquired business, it
is able to refine the estimates of fair market value and
more accurately allocate the purchase price. Examples
of factors and information that we use to refine the
allocations include: tangible and intangible asset apprais-
als; cost data related to redundant facilities; employee/
personnel data related to redundant functions; product
line integration and rationalization information; man-
agement capabilities; and information systems com-
patibilities. The only items considered for subsequent
adjustment are items identified as of the acquisition
date. The Company’s acquisitions in 2003, 2002, and
2001 have not had any significant pre-acquisition con-
tingencies (as contemplated by SFAS No. 38, “Account-
ing for Preacquisition Contingencies of Purchased
Enterprises”) which were expected to have a signifi-
cant effect on the purchase price allocation.
The Company also periodically disposes of existing
operations that are not deemed to strategically fit with
its ongoing operations or are not achieving the desired
return on investment. The following briefly describes
the Company’s acquisition and divestiture activity for
the above-noted periods.
The Company completed twelve business acquisi-
tions during 2003 for total consideration of approxi-
mately $312 million in cash including transaction costs
and net of cash acquired. The Company also assumed
debt with an aggregate fair market value of approxi-
mately $45 million in connection with these acquisi-
tions. In connection with one of the 2003 acquisitions,
the Company entered into an agreement to pay an
additional maximum contingent consideration of up to
$36.8 million in November 2008 based on future per-
formance of the acquired business through November
2008. In general, each Company is a manufacturer and
assembler of environmental or instrumentation prod-
ucts, in market segments such as product identification,
environmental and aerospace and defense. These com-
panies were all acquired to complement existing units
of the Process/Environmental Controls segment. The
aggregated annual revenue of the acquired businesses
is approximately $361 million and each of these twelve
companies individually has less than $125 million in
annual revenues and were purchased for a purchase
price of less than $125 million. In addition, the
Company sold one facility in connection with a prior
acquisition for approximately $11.6 million in net
proceeds. No gain or loss was recognized on the sale
and the proceeds have been included in proceeds from
the divestiture in the accompanying Consolidated
Statements of Cash Flows.
On October 18, 2002, the Company acquired
100% of Thomson Industries, Inc. in a stock and asset
acquisition, for approximately $147 million in cash
including transaction costs (net of $2 million of
acquired cash), an agreement to pay $15 million over
the next 6 years, and additional maximum contingent
consideration of up to $60 million cash based on the
future performance of Thomson through December 31,
2005. Thomson is a leading U.S. producer of linear
motion control products. The acquisition resulted in
the recognition of goodwill of $73 million primarily
related to the anticipated future earnings and cash
flow potential of Thomson and its leadership in the
motion industry. The future earnings and cash flow
potential is expected to be enhanced through cost
reduction activities as well as by potential synergies to
be gained by integrating Thomson’s operations with
existing Danaher operations in complimentary product
lines. The results of Thomson’s operations have been
included in the Company’s Consolidated Statement of
Earnings since October 18, 2002.
46
DANAHER 2003 FORM 10-K
On February 25, 2002, the Company completed
the divestiture of API Heat Transfer, Inc. to an affiliate
of Madison Capital Partners for approximately $63 mil-
lion (including $53 million in net cash and a note
receivable in the principal amount of $10 million), less
certain liabilities of API Heat Transfer, Inc. paid by the
Company at closing and subsequent to closing. API
Heat Transfer, Inc. was part of the Company’s acquisi-
tion of American Precision Industries, Inc. and was
recorded as an asset held for sale as of the time of the
acquisition. No gain or loss was recognized at the
time of sale.
On February 5, 2002, the Company acquired 100%
of Marconi Data Systems, formerly known as Videojet
Technologies (“Videojet”), from Marconi plc in a stock
acquisition, for approximately $400 million in cash
including transaction costs. Videojet is a worldwide
leader in the market for non-contact product marking
equipment and consumables. The acquisition resulted
in the recognition of goodwill of $276 million prima-
rily related to the anticipated future earnings and cash
flow potential and worldwide leadership of Videojet in
the product marking equipment and consumables mar-
ket. Videojet represented a new strategic platform for
Danaher and was acquired in a competitive acquisition
process. The results of Videojet’s operations have been
included in the Company’s Consolidated Statement of
Earnings since February 5, 2002.
On February 4, 2002, the Company acquired
100% of Viridor Instrumentation Limited (“Viridor”)
from the Pennon Group plc in a stock acquisition, for
approximately $137 million in cash including transac-
tion costs. Viridor is a global leader in the design and
manufacture of analytical instruments for clean water,
waste water, ultrapure water and other fluids and
materials. The acquisition resulted in the recognition
of goodwill of $109 million primarily related to the
anticipated future earnings and cash flow potential of
Viridor and its global leadership in the area of “process
water” instrumentation. The future earnings and cash
flow potential is expected to be enhanced through
cost reduction activities as well as by potential syner-
gies to be gained by integrating Viridor’s operations
with existing Danaher operations in complementary
product lines. The results of Viridor’s operations have
been included in the Company’s Consolidated
Statement of Earnings since February 4, 2002.
On February 1, 2002, the Company acquired 100%
of Marconi Commerce Systems, formerly known as
Gilbarco (“Gilbarco”), from Marconi plc in a stock
acquisition, for approximately $309 million in cash
including transaction costs (net of $17 million of
acquired cash). Gilbarco is a global leader in retail
automation and environmental products and services.
The acquisition resulted in the recognition of goodwill
of $226 million primarily related to the anticipated
future earnings and cash flow potential of Gilbarco
and its worldwide leadership in retail automation and
environmental products and services. The future earn-
ings and cash flow potential is expected to be enhanced
through cost reduction activities as well as the poten-
tial synergies to be gained by integrating Gilbarco’s
operations with existing Danaher subsidiaries in com-
plementary product lines. The results of Gilbarco’s
operations have been included in the Company’s Con-
solidated Statement of Earnings since February 1, 2002.
In addition, during the year ended December 31,
2002, the Company acquired 8 smaller companies, for
total consideration of approximately $166 million in
cash including transaction costs. These companies
were all acquired to complement existing units of the
Process/Environmental Controls segment. Each of
these 8 companies individually has less than $60 mil-
lion in annual revenues and were purchased for a price
of less than $75 million.
On January 2, 2001, the Company acquired 100%
of the assets of United Power Corporation (“UPC”)
from UPC for approximately $108 million in cash
including transaction costs. UPC operates in the power
conditioning industry and manufactures products
ranging from high isolation transformers to rotary
uninterruptible power supply systems. The acquisition
resulted in the recognition of goodwill of $102 million.
The results of operations for UPC have been included
in the Company’s Consolidated Statement of Earnings
since January 2, 2001.
The Company acquired 11 smaller companies dur-
ing 2001 for total cash consideration of approximately
$343 million including transaction costs. In general,
each company is a manufacturer and assembler of light
electronic control and instrumentation products, in mar-
kets including electronic and network test, aerospace,
industrial controls, and water quality. These companies
were all acquired to complement existing units of the
Process/Environmental Controls segment. Each of
these 11 companies individually has less than $50 mil-
lion in annual revenues and were purchased for a price
of less than $70 million.
The Company also disposed of two small product
lines during 2001, yielding cash proceeds of approxi-
mately $33 million. There were no material gains or
losses recognized on the sale of these product lines.
47
DANAHER 2003 FORM 10-K
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the
date of acquisition for all acquisitions consummated during 2003, 2002 and 2001 and the individually significant
acquisitions discussed above (in thousands):
Overall
Accounts Receivable
Inventory
Property, Plant and Equipment
Goodwill
Other Intangible Assets, Primarily Trade Names and Patents
Accounts Payable
Other Assets and Liabilities, net*
Assumed Debt
Net Cash Consideration
Significant Acquisitions
2002
Accounts Receivable
Inventory
Property, Plant and Equipment
Goodwill
Other Intangible Assets, Primarily
Trade Names and Patents
Accounts Payable
Other Assets and Liabilities, net
Assumed Debt
Net Cash Consideration
Thomson
$ 21,665
32,211
31,417
72,943
20,670
(11,709)
(19,872)
–
$147,325
VideoJet
$ 61,206
24,759
36,880
275,612
50,600
(9,725)
(16,692)
(23,839)
$398,801
2003
$ 64,794
48,366
25,163
253,503
48,468
(31,061)
(52,342)
(44,608)
$312,283
Viridor
$ 12,747
14,462
8,181
108,918
7,400
(3,884)
(10,971)
–
$136,853
2002
$ 214,333
139,750
131,893
834,404
123,226
(70,492)
(166,849)
(48,136)
$1,158,129
Gilbarco
$ 97,888
49,455
48,636
225,513
30,800
(37,521)
(82,001)
(23,369)
$309,401
2001
$ 41,986
52,385
33,198
369,260
17,000
(14,190)
(55,765)
(4,060)
$439,814
2001
UPC
$ 8,502
6,054
331
101,705
–
(3,742)
(5,287)
–
$107,563
*Included in other assets and liabilities for 2001 is approximately $11 million of accrued transaction costs related to 2001 acquisitions.
As of December 31, 2003, the Company does not
anticipate further material adjustments to the purchase
price allocations of any of the above transactions.
The unaudited pro forma information for the peri-
ods set forth below gives effect to the above noted
acquisitions 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 acquisitions been
consummated as of that time (unaudited, in thousands
except per share amounts):
Net sales
Net earnings before change
in accounting principle
and reversal of income
tax reserves
Net earnings
Diluted earnings per share
before change in accounting
principle and reversal of
income tax reserves
Diluted earnings per share
2003
2002
$5,462,583 $5,229,848
540,223
426,905
540,223
283,155
3.40
3.40
2.74
1.83
In connection with its acquisitions, the Company
assesses and formulates a plan related to the future
integration of the acquired entity. This process begins
during the due diligence process and is concluded
within twelve months of the acquisition. The Company
accrues estimates for certain costs, related primarily to
personnel reductions and facility closures or restruc-
turings, anticipated at the date of acquisition, in accor-
dance with Emerging Issues Task Force (EITF) Issue
No. 95-3, “Recognition of Liabilities in Connection
with a Purchase Business Combination.” Adjustments
to these estimates are made up to 12 months from the
acquisition date as plans are finalized. To the extent
these accruals are not utilized for the intended pur-
pose, the excess is recorded as a reduction of the pur-
chase price, typically by reducing recorded goodwill
balances. Costs incurred in excess of the recorded
accruals are expensed as incurred. While the Company
is still finalizing its exit plans with respect to certain of
its acquisitions, it does not anticipate significant changes
to the current accrual levels related to any acquisitions
completed prior to December 31, 2003.
48
DANAHER 2003 FORM 10-K
Accrued liabilities associated with these exit activities include the following (in thousands, except headcount):
Videojet
Viridor
Gilbarco
Thomson All Others
Total
300
442
(856)
1,876
1,762
252
(1,094)
(766)
154
756
(757)
(27)
126
$19,806
10,272
(27,474)
40,162
42,766
5,665
(22,961)
(9,351)
16,119
9,073
(15,341)
(3,529)
300
442
(856)
1,876
1,762
2,252
(1,839)
(766)
1,409
756
(1,496)
(278)
391
$19,806
10,272
(27,474)
40,162
42,766
61,819
(43,299)
(9,351)
51,935
9,073
(33,110)
(11,102)
Planned Headcount Reduction:
Balance December 31, 2000
Headcount related to 2001 acquisitions
Headcount reductions in 2001
Adjustments to previously provided
headcount estimates
Balance December 31, 2001
Headcount related to 2002 acquisitions
Headcount reductions in 2002
Adjustments to previously provided
headcount estimates
Balance December 31, 2002
Headcount related to 2003 acquisitions
Headcount reductions in 2003
Adjustments to previously provided
headcount estimates
Balance December 31, 2003
Involuntary Employee Termination Benefits:
Balance December 31, 2000
Accrual related to 2001 acquisitions
Costs incurred in 2001
Adjustments to previously provided reserves
$
–
–
–
–
–
223
(217)
–
6
–
(6)
–
–
–
–
–
–
–
–
–
–
–
147
(105)
–
42
–
(32)
(10)
–
–
–
–
–
$
–
–
–
–
–
640
(369)
–
271
–
(181)
(34)
56
–
–
–
–
–
990
(54)
–
936
–
(520)
(207)
209
$
$
–
–
–
–
–
–
–
–
Balance December 31, 2001
Accrual related to 2002 acquisitions
Costs incurred in 2002
Adjustments to previously provided reserves
Balance December 31, 2002
Accrual related to 2003 acquisitions
Costs incurred in 2003
Adjustments to previously provided reserves
Balance December 31, 2003
Facility Closure and Restructuring Costs:
Balance December 31, 2000
Accrual related to 2001 acquisitions
Costs incurred in 2001
Adjustments to previously provided reserves
Balance December 31, 2001
Accrual related to 2002 acquisitions
Costs incurred in 2002
Adjustments to previously provided reserves
Balance December 31, 2002
Accrual related to 2003 acquisitions
Costs incurred in 2003
Adjustments to previously provided reserves
–
8,367
(6,754)
–
1,613
–
(1,613)
–
$
$
–
–
–
–
–
–
2,166
(1,252)
–
914
–
(770)
(18)
–
3,694
(2,099)
–
1,595
–
(1,521)
–
–
27,322
(11,255)
–
16,067
–
(9,314)
–
–
16,771
(230)
–
16,541
–
(5,321)
(7,573)
$
$
74
$ 6,753
$ 3,647
$ 6,322
$16,796
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
3,578
(1,189)
–
2,389
–
(942)
–
–
3,190
(617)
–
2,573
–
(1,031)
–
–
7,582
(1,158)
–
6,424
–
(4,291)
2,773
$15,649
8,424
(10,941)
13,744
26,876
20,272
(15,210)
(9,329)
22,609
5,676
(12,979)
(3,450)
$15,649
8,424
(10,941)
13,744
26,876
36,788
(19,426)
(9,329)
34,909
5,676
(20,013)
(695)
Balance December 31, 2003
$ 126
$1,447
$ 1,542
$ 4,906
$11,856
$19,877
49
DANAHER 2003 FORM 10-K
In 2001, the Company recorded purchase price
adjustments related to certain motion businesses
acquired in 2000 primarily related to finalization of
the cost estimates for severance and facility closure
costs associated with its integration activities ($49 mil-
lion) and the determinations of the fair values of the
assets and liabilities acquired including accounts
receivable, inventories and warranty costs ($54 mil-
lion). These adjustments increased goodwill by
approximately $103 million. In 2002, the Company
recorded a reduction of goodwill related to these
acquisitions of approximately $27 million, which had
no impact on net earnings. This reduction related to
reserves that were not necessary and reserves associated
with facilities that were not closed due to unexpected
delays in commencing certain planned integration
activities. Involuntary employee termination benefits
are presented as a component of the Company’s com-
pensation and benefits accrual included in accrued
expenses in the accompanying balance sheet. Facility
closure and restructuring costs are reflected in accrued
expenses (See Note 9).
(3) GOODWILL:
As discussed in Note 2, goodwill arises from the
excess of the purchase price for acquired businesses
exceeding the fair value of tangible and intangible
assets acquired. Management assesses goodwill for
impairment for each of its reporting units at least
annually at the beginning of the fourth quarter or as
“triggering” events occur. Danaher has nine reporting
units closely aligned with the Company’s strategic plat-
forms and specialty niche businesses. They are as fol-
lows: Tools, Motion, Electronic Test, Power Quality,
Environmental, Aerospace and Defense, Industrial
Controls, Level/Flow, and Product Identification. In
making this assessment, management relies on a num-
ber of factors including operating results, business
plans, economic projections, anticipated future cash
flows, and transactions and market place data. There
are inherent uncertainties related to these factors and
management’s judgment in applying them to the analysis
of goodwill impairment which may effect the carrying
value of goodwill.
The following table shows the rollforward of good-
will reflected in the financial statements resulting from
the Company’s acquisition activities for 2001, 2002
and 2003 ($ in millions).
Balance December 31, 2000
Attributable to 2001 acquisitions
Amortization
Adjustments due to finalization
of purchase price allocations
Effect of foreign currency translation
Balance December 31, 2001
Attributable to 2002 acquisitions
Adjustments due to finalization
of purchase price allocations
Effect of foreign currency translation
Write down associated with
Power Quality Business
Balance December 31, 2002
Attributable to 2003 acquisitions
Adjustments due to finalization
of purchase price allocations
Effect of foreign currency translation
$1,762
369
(62)
113
(5)
2,177
834
(67)
33
(200)
2,777
254
(22)
55
Balance December 31, 2003
$3,064
The carrying amount of goodwill changed by
approximately $287 million in 2003. The components
of the change were $254 million of additional good-
will associated with business combinations completed
in the year ended December 31, 2003, a net decrease
of $22 million in adjustments related to finalization of
purchase price allocations associated with acquisitions
consummated in prior years and foreign currency
translation adjustments of $55 million.
There were no dispositions of businesses with
related goodwill in 2003. The Company reduced previ-
ously recorded goodwill related to acquisitions that
occurred in 2002 primarily as a result of finalization of
the integration plans with respect to the Thomson busi-
ness and other smaller acquisitions, the receipt of infor-
mation relative to the fair market value of other assets
acquired and the finalization of the acquired businesses
deferred tax position reflecting the above changes.
The carrying value of goodwill at December 31, 2003
for the Tools and Components segment and Process/
Environmental Controls segment is approximately
$212 million and $2,852 million, respectively.
50
DANAHER 2003 FORM 10-K
The carrying amount of goodwill changed by
approximately $600 million in 2002. The components
of the change were $834 million of additional good-
will associated with business combinations completed
in the year ended December 31, 2002, a net decrease
of $67 million in adjustments, related to finalization of
purchase price allocations associated with acquisitions
consummated in prior years, foreign currency transla-
tion adjustments of $33 million, and a $200 million
reduction of goodwill related to the impairment
charge recorded in connection with the adoption of
SFAS No. 142. See Note 17 for further discussion.
Included in other changes in goodwill for 2001 are
changes made to the preliminary purchase price alloca-
tions made in 2000 for acquired assets and liabilities
($58.3 million) related to finalization of estimated fair
market values associated with these acquisitions as well
as accruals for direct costs related to exiting certain
acquired operations ($53.9 million) arising from the
Company’s integration plan with respect to these busi-
nesses. In 2002, the Company recorded a reduction of
goodwill related to certain acquisitions that occurred in
2000 of approximately $27 million related to reserves
that were not necessary and reserves associated with
facilities that were not closed due to unexpected delays
in commencing certain planned integration activities.
(4) RESTRUCTURING CHARGE:
In the fourth quarter of 2001, the Company recorded
a restructuring charge of $69.7 million ($43.5 million
after tax, or $0.29 per share). During the fourth quar-
ter of 2001, management determined that it would
restructure certain of its product lines, principally its
drill chuck, power quality and industrial controls divi-
sions, to improve financial performance. The primary
objective of the restructuring plan was to reduce oper-
ating costs by consolidating, eliminating and/or down-
sizing existing operating locations. No significant
product lines were discontinued. Severance costs for
the termination of approximately 1,100 employees
approximated $49 million. These employees included
all classes of employees, including hourly direct, indi-
rect salaried and management personnel, at the affected
facilities. Approximately $16 million of the charge was
to impair assets associated with the closure of 16 man-
ufacturing and distribution facilities in North America
and Europe. The assets impaired were principally
equipment and leasehold improvements associated
with the 16 facilities to be closed. The remainder of
the charge was for other exit costs including lease ter-
mination costs. Approximately $25.5 million of the
$69.7 million charge related to our Tools and Com-
ponents segments and approximately $44.2 million of
the charge related to our Process/Environmental
Controls segment.
Due to minor changes to the original restructuring
plan and to costs incurred being less than estimated,
in December 2002, the Company adjusted its restruc-
turing reserves accrued as part of the fourth quarter
2001 restructuring charge by approximately $6.3 mil-
lion ($4.1 million after tax, or $0.03 per share).
In conjunction with the closing of the facilities,
approximately $4 million of inventory was written off
as unusable in future operating locations. This inven-
tory consisted principally of component parts and raw
materials, which were either redundant to inventory at
the facilities being merged and/or were not economi-
cally feasible to relocate since the inventory was pur-
chased to operate on equipment and tooling which
was not being relocated. The inventory write-off was
included in cost of sales in the fourth quarter of 2001
and was not part of the restructuring charge.
51
DANAHER 2003 FORM 10-K
The table below presents a rollforward of the activity in the restructuring accrual.
(in thousands, except headcount)
Total Restructuring Charge
Amounts Expended/ Recognized in 2001
Balance December 31, 2001
Amounts Expended in 2002
Amounts Reversed in 2002
Balance December 31, 2002
Amounts Expended in 2003
Balance December 31, 2003
Headcount
Reductions
1,120
(67)
1,053
(934)
–
119
(119)
–
Employee
Separation
Costs
$49,000
(3,300)
45,700
(31,118)
(6,273)
8,309
(7,821)
488
$
Impairment
of Facility
Assets
$15,700
(15,035)
665
(665)
–
–
–
–
$
Lease
Termination
and Other
Restructuring
Costs
$5,000
–
5,000
(2,367)
–
2,633
(1,985)
$ 648
Total
$69,700
(18,335)
51,365
(34,150)
(6,273)
10,942
(9,806)
$ 1,136
(5) EARNINGS PER SHARE (EPS):
Basic EPS is calculated by dividing earnings by the
weighted-average number of common shares outstand-
ing for the applicable period. Diluted EPS is calculated
after adjusting the numerator and the denominator of
the basic EPS calculation for the effect of all potential
dilutive common shares outstanding during the period.
Information related to the calculation of earnings per
share of common stock before the effect of the account-
ing change and reduction of income tax reserves related
to a previously discontinued operation is summarized
as follows:
Net Earnings
Before the
Effect of the
Accounting
Change and
Reduction of
Income Tax
Reserves
(Numerator)
Shares
Per Share
(Denominator) Amount
$536,834
153,396
$3.50
(in thousands,
except per share amounts)
For the Year Ended
December 31, 2003:
Basic EPS
Adjustment for interest
on convertible debentures
8,412
–
Incremental shares from
assumed exercise of
dilutive options
Incremental shares from
assumed conversion
|of the convertible
debenture
Diluted EPS
–
2,143
–
$545,246
6,031
161,570
$3.37
Net Earnings
Before the
Effect of the
Accounting
Change and
Reduction of
Income Tax
Reserves
(Numerator)
Shares
Per Share
(Denominator) Amount
$434,141
150,224
$2.89
7,901
–
–
2,227
–
$442,042
6,031
158,482
$2.79
$297,665
143,630
$2.07
7,246
–
–
2,618
–
$304,911
5,600
151,848
$2.01
(in thousands,
except per share amounts)
For the Year Ended
December 31, 2002:
Basic EPS
Adjustment for interest on
convertible debentures
Incremental shares from
assumed exercise of
dilutive options
Incremental shares from
assumed conversion of
the convertible debenture
Diluted EPS
For the Year Ended
December 31, 2001:
Basic EPS
Adjustment for interest on
convertible debentures
Incremental shares from
assumed exercise of
dilutive options
Incremental shares from
assumed conversion of
the convertible debenture
Diluted EPS
52
DANAHER 2003 FORM 10-K
(6) INVENTORY:
The major classes of inventory are summarized as
follows (in thousands):
Finished goods
Work in process
Raw material
December 31, December 31,
2003
$191,494
121,760
222,973
$536,227
2002
$165,061
119,872
200,654
$485,587
If the first-in, first-out (FIFO) method had been used
for inventories valued at LIFO cost, such inventories
would have been $5,409,000 and $5,947,000 higher
at December 31, 2003 and 2002, respectively.
(7) PROPERTY, PLANT
AND EQUIPMENT:
The major classes of property, plant and equipment
are summarized as follows (in thousands):
December 31, December 31,
2003
Land and improvements
43,954
326,108
Buildings
Machinery and equipment $1,142,906
1,512,968
$
$
2002
37,802
350,293
1,041,206
1,429,301
Less accumulated
depreciation
(939,603)
$ 573,365
(831,922)
$ 597,379
(8) FINANCING:
Financing consists of the following (in thousands):
Notes payable due 2008
Notes payable due 2005
Notes payable due 2003
Zero-coupon convertible
senior notes due 2021
Other
Less – currently payable
December 31, December 31,
2003
$ 250,000
377,850
–
554,679
116,354
1,298,883
14,385
$1,284,498
2002
$ 250,000
314,760
30,000
541,737
173,467
1,309,964
112,542
$1,197,422
The Notes due 2008 were issued in October 1998 at
an average interest cost of 6.1%. The fair value of the
2008 Notes, after taking into account the interest rate
swaps discussed below, is approximately $266.2 million
at December 31, 2003. In January 2002, the Company
entered into two interest rate swap agreements for the
term of the $250 million aggregate principal amount
of 6% notes due 2008 having an aggregate notional
principal amount of $100 million whereby the effective
net interest rate on $100 million of the Notes is the
six-month LIBOR rate plus approximately .425%. Rates
are reset twice per year. At December 31, 2003, the net
interest rate on $100 million of the Notes was 1.61%
after giving effect to the interest rate swap agreement.
In accordance with SFAS No. 133 (“Accounting for
Derivative Instruments and Hedging Activities”, as
amended), the Company accounts for these swap
agreements as fair value hedges. These instruments
qualify as “effective” or “perfect” hedges.
The Notes due 2005 (the Eurobond Notes), with a
stated amount of €300 million were issued in July 2000
and bear interest at 6.25% per annum. The fair value of
the Eurobond Notes is approximately $396.7 million
at December 31, 2003.
The Notes due 2003 had an original average life
of approximately 10 years and an average interest
cost of 7%.
During the first quarter of 2001, the Company
issued $830 million (value at maturity) in LYONs. The
net proceeds to the Company were approximately
$505 million, of which approximately $100 million
was used to pay down debt, and the balance was used
for general corporate purposes, including acquisitions.
The LYONs carry a yield to maturity of 2.375%.
Holders of the LYONs may convert each of their
LYONs into 7.2676 shares of Danaher common stock
(in the aggregate for all LYONs, approximately 6.0 mil-
lion shares of Danaher common stock) at any time on
or before the maturity date of January 22, 2021. The
Company may redeem all or a portion of the LYONs
for cash at any time. Holders may require the Company
to purchase all or a portion of the notes for cash and/or
Company common stock, at the Company’s option,
on January 22, 2011. The holders had a similar option
to require the Company to purchase all or a portion
of the notes as of January 22, 2004, which resulted in
notes with an accreted value of $1.1 million being
redeemed by the Company. These notes were redeemed
for cash and therefore this amount has been classified
as a current liability in the accompanying financial
statements. The Company will pay contingent interest
to the holders of LYONs during any six-month period
commencing after January 22, 2004 if the average
market price of a LYON for a measurement period
preceding such six-month period equals 120% or more
of the sum of the issue price and accrued original issue
discount for such LYON. Except for the contingent
53
DANAHER 2003 FORM 10-K
interest described above, the Company will not pay
interest on the LYONs prior to maturity. The fair value
of the LYONs notes is approximately $577 million at
December 31, 2003.
The borrowings under uncommitted lines of credit
are principally short-term borrowings payable upon
demand. There were no outstanding amounts under
uncommitted lines of credit at either December 31,
2003 or 2002.
The Company maintains two revolving senior unse-
cured credit facilities totaling $1 billion available for
general corporate purposes. Borrowings under the
revolving credit facilities bear interest of Eurocurrency
rate plus .21% to .70%, depending on the Company’s
debt rating. The credit facilities, each $500 million, have
a fixed term expiring June 28, 2006 and July 23, 2006,
respectively. There were no borrowings under bank facil-
ities during the three years ended December 31, 2003.
The Company is charged a fee of .065% to .175% per
annum for the facility, depending on the Company’s
current debt rating. Commitment and facility fees of
$613,000, $406,000 and $301,000 were incurred in
2003, 2002 and 2001, respectively.
The Company has complied with all debt covenants,
including limitations on secured debt and debt levels.
None of the Company’s debt instruments contain trigger
clauses requiring the Company to repurchase or pay
off its debt if rating agencies downgrade the Company’s
debt rating.
The minimum principal payments during the next
five years are as follows: 2004 – $14,385,000; 2005 –
$460,563,000; 2006 – $2,865,000; 2007 – $2,891,000;
2008 – $252,957,000; and $565,222,000 thereafter.
The Company made interest payments of
$47,403,000, $44,024,000 and $38,789,000 in 2003,
2002 and 2001, respectively.
(9) ACCRUED EXPENSES AND OTHER LIABILITIES:
Selected accrued expenses and other liabilities include the following (in thousands):
Compensation and benefits
Claims, including self-insurance and litigation
Postretirement benefits
Environmental and regulatory compliance
Taxes, income and other
Sales and product allowances
Warranty
Restructuring costs (See Note 4)
Other, individually less than 5% of overall balance
December 31, 2003
December 31, 2002
Current
$262,848
41,682
9,000
37,121
231,358
59,156
53,660
1,136
196,663
$892,624
Noncurrent
$213,495
65,886
103,000
70,967
94,970
–
16,805
–
13,717
$578,840
Current
$308,156
33,011
7,000
32,094
110,142
53,443
46,539
10,942
184,856
$786,183
Noncurrent
$134,760
61,306
100,800
82,528
133,247
–
14,696
–
29,475
$556,812
Approximately $110.0 million of accrued expenses and other liabilities were guaranteed by standby letters of
credit and performance bonds as of December 31, 2003.
54
DANAHER 2003 FORM 10-K
(10) PENSION AND EMPLOYEE BENEFIT PLANS:
The Company has noncontributory defined benefit pension plans which cover certain of its domestic employ-
ees. 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 Company acquired Gilbarco, Inc. on February 1, 2002, Videojet Technologies on February 5, 2002,
Viridor Instrumentation Limited on February 4, 2002 and Thomson Industries on October 18, 2002, including
each of their pension and post retirement plans. One of Gilbarco’s pension plans was transferred to its employ-
ees collective bargaining organization in 2003. The Company recorded no gain or loss on this transfer.
In addition to providing pension benefits, the Company provides certain health care and life insurance bene-
fits 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 domes-
tic plans as of the most recent actuarial valuations using a measurement date of September 30 (in millions):
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial loss
Acquisition (transfer)
Benefits paid
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Acquisition (transfer)
Benefits paid
Fair value of plan assets at end of year
Funded status
Accrued contribution
Unrecognized transition obligation
Unrecognized loss
Unrecognized prior service cost
Prepaid (accrued) benefit cost
Pension Benefits
Other Benefits
2003
2002
2003
2002
$526.6
16.8
34.0
1.1
46.6
(27.0)
(33.9)
564.2
446.9
62.7
0.6
(27.0)
(33.9)
449.3
(114.9)
10.0
(0.1)
204.4
–
$ 99.4
$333.5
18.5
33.5
(14.1)
19.9
168.4
(33.1)
526.6
352.7
(45.8)
0.5
172.6
(33.1)
446.9
(79.7)
–
(0.3)
175.5
(26.9)
$ 68.6
$ 147.0
2.0
10.3
(8.3)
18.8
–
(10.0)
159.8
–
–
–
–
–
–
(159.8)
2.7
–
53.0
(7.9)
$(112.0)
$ 78.7
1.1
9.4
0.5
39.9
24.9
(7.5)
147.0
–
–
–
–
–
–
(147.0)
2.0
–
36.9
0.3
$(107.8)
55
DANAHER 2003 FORM 10-K
Weighted average assumptions used to determine benefit obligations measured at September 30:
Discount rate
Rate of compensation increase
Medical trend rate – initial
Medical trend rate – grading period
Medical trend rate – ultimate
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of (gain) loss
Amortization of prior service cost
Curtailment gain
Net periodic (benefit) cost
2003
6.00%
4.00%
11.00%
6 years
5.00%
2002
7.00%
4.00%
11.00%
5 years
6.00%
2001
7.50%
4.00%
11.00%
5 years
6.00%
Pension Benefits
Other Benefits
2003
2002
2003
2002
$ 16.8
34.0
(42.3)
(0.1)
3.4
(3.3)
(22.5)
$(14.0)
$18.5
33.5
(48.1)
(0.1)
–
(1.9)
–
$ 1.9
$ 2.0
10.3
–
–
2.7
(0.1)
–
$14.9
$ 1.1
9.4
–
–
1.3
(0.7)
–
$11.1
2001
7.75%
10.00%
4.00%
11.00%
5 years
6.00%
Weighted average assumptions used to determine net periodic benefit cost measured at September 30
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
Medical trend rate – initial
Medical trend rate – grading period
Medical trend rate – ultimate
2003
7.00%
8.50%
4.00%
11.00%
5 years
6.00%
2002
7.50%
9.00%
4.00%
11.00%
5 years
6.00%
For measurement purposes at September 30, 2003, an
11% and 10% annual rate of increase in the per capita of
covered health care benefits was assumed in 2004 and
2005, respectively. The rate was assumed to decrease to
5% by 2010 and remain at that level thereafter.
Effect of a one-percentage-point change in assumed
health care cost trend rates ($ in millions)
Investment Policy
The plan’s goal is to maintain between 60% to 70%
of its assets in equity portfolios, which are invested in
funds that are expected to mirror broad market returns
for equity securities. The balance of the asset portfolio
is invested in high-quality corporate bonds and bond
index funds.
1% Point
Increase
1% Point
Decrease
Asset Information
% of measurement date assets by asset categories
Effect on the total of service
and interest cost components
Effect on postretirement
benefit obligation
1.7
18.6
(1.4)
(15.3)
Selection of Expected Rate of Return
on Assets
For 2003, the Company lowered the expected long-
term rate of return assumption from 9% to 8.5% for
the Company’s defined benefit pension plan reflecting
lower expected long-term returns on equity and debt
investment included in plan assets.
Equity securities
Debt securities
Cash
Total
2003
61%
37%
2%
100%
2002
58%
41%
1%
100%
Expected Contributions
While not statutorily required to make contributions
to the plan for 2003, the Company contributed $10
million to the plan before December 31, 2003. The
Company anticipates there will be no statutory fund-
ing requirements for the defined benefit plan in 2004.
56
DANAHER 2003 FORM 10-K
The Company made benefit payments under “other
benefits” of $10 million in 2003. The Company does
not expect material increases in these payments over
the next five years.
Other Matters
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans.
At this time, no adjustment in the future liability has
been made for the effect of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003.
At the Act’s core is a prescription drug benefit for
Medicare enrollees beginning in 2006, plus federal sub-
sidies for employers providing comparable (or more
generous) drug coverage to retirees. The impact of this
legislation on the calculated benefit liability and/or
benefit costs has not been determined as the accounting
for this change has not been finalized by regulators.
The Company recorded a curtailment gain in 2003
as a result of freezing the ongoing contributions to its
Cash Balance Pension Plan effective December 31,
2003. The gain totaled $22.5 million ($14.6 million
after tax, or $0.09 per share) and represents the unrec-
ognized benefits associated with prior plan amendments
that had been being amortized into income over the
remaining service period of our participating associates
prior to freezing the plan. The Company will continue
recording pension expense related to this plan, repre-
senting interest costs on the accumulated benefit obli-
gation and amortization of actuarial losses.
Due to declines in the equity markets in 2001 and
2002, the fair value of the Company’s pension fund
assets has decreased below the accumulated benefit
obligation due to the participants in the plan. After
recording a minimum pension liability adjustment of
$76.9 million (net of tax benefit of $39.6 million) at
December 31, 2002, the Company increased the mini-
mum pension liability to $114.1 million (net of tax
benefit of $59.6 million) at December 31, 2003 as a
result of changes in actuarial assumptions, including
the impact of the plan curtailment noted above.
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, including the gain
on curtailment of $22,500,000 in 2003, amounted to
$22,941,000, $45,490,000, and $38,002,000 for the years
ended December 31, 2003, 2002 and 2001, respectively.
In addition to the plans discussed above, the
Company maintains several smaller defined benefit
plans in countries outside the United States.
(11) STOCK TRANSACTIONS:
On July 1, 2002, the Company amended its cer-
tificate of incorporation to increase its authorized
number of shares of common stock from 300,000,000
to 500,000,000 shares. This amendment was approved
by the Company’s shareholders at its May 7, 2002
annual meeting.
On March 8, 2002, the Company completed
the issuance of 6.9 million shares of the Company’s
common stock for net proceeds to the Company of
$467 million.
On March 1, 2001, the Company’s Board of
Directors authorized an increase in the number of
common shares to be issued under the Company’s
non-qualified stock option plan to 22.5 million from
15.0 million. The Company’s stockholders approved
this increase in May 2001. 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:
(in thousands,
except per share data)
Outstanding at December 31, 2000
(average $31.65 per share)
Granted (average $48.21 per share)
Exercised (average $14.13 per share)
Cancelled (average $49.17 per share)
Outstanding at December 31, 2001
(average $38.28 per share)
Granted (average $62.37 per share)
Exercised (average $22.38 per share)
Cancelled (average $47.24 per share)
Outstanding at December 31, 2002
(average $45.09 per share)
Granted (average $71.63 per share)
Exercised (average $30.77 per share)
Cancelled (average $46.50 per share)
Outstanding at December 31, 2003
(at $11.75 to $83.48 per share,
average $54.28 per share)
Number of Shares
Under Option
10,751
1,546
(1,677)
(597)
10,023
1,524
(1,872)
(275)
9,400
3,231
(1,060)
(696)
10,875
57
DANAHER 2003 FORM 10-K
As of December 31, 2003, options with a weighted average remaining life of 7 years covering
3,071,000 shares were exercisable at $11.75 to $69.98 per share (average $39.35 per share) and options
covering 3,329,000 shares remain available to be granted.
Options outstanding at December 31, 2003 are summarized below:
Exercise Price
$11.75 to $15.63
$18.75 to $27.16
$29.69 to $41.44
$45.38 to $61.27
$63.70 to $83.48
Outstanding
Average
Exercise Price
$13.94
23.39
32.06
50.06
70.85
Average
Remaining
Life
1
3
4
7
9
Shares
(thousands)
270
850
360
5,321
4,074
Exercisable
Shares
(thousands)
270
850
338
1,257
356
Average
Exercise Price
$13.94
23.39
32.12
49.32
68.42
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 in 2003 have been calculated using
the Black-Scholes option pricing model and assuming
a 3.6% risk-free interest rate, a 7-year life for the option,
a 25% expected volatility and dividends at the current
annual rate. The weighted-average grant date fair mar-
ket value of options issued was $25 per share in 2003,
$28 per share in 2002, and $27 per share in 2001.
The following table illustrates the effect of net
income and earnings per share if the fair value based
method had been applied to all outstanding and
unvested awards in each year ($ in thousands, except
per share amounts):
2003
2002
2001
Net earnings before
effect of accounting
change and reduction
of income tax
reserves – as reported $536,834 $434,141 $297,665
Deduct: Stock-based
employee compen-
sation expense
determined under
fair value based
method for all
awards, net of
related tax effects
(26,755)
(20,960)
(20,344)
Proforma net earnings
$510,079 $413,181 $277,321
Earnings per share before
effect of accounting
change and reduction
of income tax reserves
Basic – as reported
Basic – proforma
Diluted – as reported
Diluted – proforma
$3.50
$3.33
$3.37
$3.21
$2.89
$2.76
$2.79
$2.66
$2.07
$1.94
$2.01
$1.88
58
DANAHER 2003 FORM 10-K
In May 2003, the Company’s shareholders, as rec-
ommended by the Board of Directors, approved an
award to an officer of the Company the right to receive
388,600 shares of Company common stock on January 2,
2010 upon the satisfaction of certain conditions. The
Company has expensed $3.6 million in 2003 in connec-
tion with this award.
In August 2003, the Company amended its Executive
Deferred Incentive Program available to certain of the
Company’s executives. In connection with this amend-
ment, certain deferred compensation amounts, that
previously could have been settled for cash, will be
settled in Company stock. Due this change, approxi-
mately $14 million was reclassified as additional paid-in-
capital from other liabilities in 2003.
During 2002, the Company issued approximately
400,000 shares of the Company’s common stock to a
former officer of the Company pursuant to a previ-
ously existing employment contract, earned in prior
years. These amounts are included as a component
of common stock issued for options exercised in the
Consolidated Statement of Stockholders’ Equity.
In the third and fourth quarters of 2001, the Company
repurchased 375,500 shares of the Company’s common
stock for total consideration of $17.3 million.
(12) 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
$44,000,000 in 2004, $39,000,000 in 2005, $32,000,000
in 2006, $29,000,000 in 2007, $24,000,000 in 2008,
and $32,000,000 thereafter. Total rent expense charged
to income for all operating leases was $56,000,000,
$56,000,000, and $42,000,000, for the years ended
December 31, 2003, 2002, and 2001, respectively.
The Company generally accrues estimated warranty
costs at the time of sale. In general, manufactured
products are warranted against defects in material and
workmanship when properly used for their intended
purpose, installed correctly, and appropriately main-
tained. Warranty period terms depend on the nature
of the product and range from 90 days up to the life
of the product. The amount of the accrued warranty
liability is determined based on historical information
such as past experience, product failure rates or num-
ber of units repaired, estimated cost of material and
labor, and in certain instances estimated property
damage. The liability, shown in the following table, is
reviewed on a quarterly basis and may be adjusted as
additional information regarding expected warranty
costs becomes known.
In certain cases the Company will sell extended
warranty or maintenance agreements. The proceeds
from these agreements is deferred and recognized as
revenue over the term of the agreement.
The following is a roll forward of the Company’s
warranty accrual for the year ended December 31,
2003 ($ in 000’s):
Balance December 31, 2002
Accruals for warranties issued
during the period
Changes in estimates related
to pre-existing warranties
Settlements made
Additions due to acquisitions
Balance December 31, 2003
(13) LITIGATION AND
CONTINGENCIES:
$61,235
51,441
10,853
(56,206)
3,142
$70,465
Certain of the Company’s operations are subject to
environmental laws and regulations in the jurisdictions
in which they operate, which impose limitations on
the discharge of pollutants into the ground, air and
water and establish standards for the generation, treat-
ment, use, storage and disposal of solid and hazardous
wastes. The Company must also comply with various
health and safety regulations in both the United States
and abroad in connection with its operations. The
Company believes that it is in substantial compliance
with applicable environmental, health and safety laws
and regulations. Compliance with these laws and regu-
lations has not had and, based on current information
and the applicable laws and regulations currently in
effect, is not expected to have a material adverse effect
on the Company’s capital expenditures, earnings or
competitive position.
In addition to environmental compliance costs, the
Company may incur costs related to alleged environ-
mental damage associated with past or current waste
disposal practices or other hazardous materials han-
dling practices. For example, generators of hazardous
59
DANAHER 2003 FORM 10-K
substances found in disposal sites at which environ-
mental problems are alleged to exist, as well as the
owners of those sites and certain other classes of per-
sons, are subject to claims brought by state and federal
regulatory agencies pursuant to statutory authority.
The Company has received notification from the U.S.
Environmental Protection Agency, and from state and
foreign environmental agencies, that conditions at a
number of sites where the Company and others dis-
posed of hazardous wastes require clean-up and other
possible remedial action and may be the basis for
monetary sanctions, including sites where the Company
has been identified as a potentially responsible party
under federal and state environmental laws and regula-
tions. The Company has projects underway at several
current and former manufacturing facilities, in both the
United States and abroad, to investigate and remediate
environmental contamination resulting from past oper-
ations. In particular, Joslyn Manufacturing Company
(“JMC”), a subsidiary of the Company, previously
operated wood treating facilities that chemically pre-
served utility poles, pilings and railroad ties. All such
treating operations were discontinued or sold prior to
1982. Danaher acquired JMC in September 1995.
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. In addition, the Company is
from time to time party to personal injury or other
claims brought by private parties alleging injury due to
the presence of or exposure to hazardous substances.
The Company has made a provision for environ-
mental remediation and environmental-related personal
injury claims; however, there can be no assurance that
estimates of environmental liabilities will not change.
The Company generally makes an assessment of the
costs involved for its remediation efforts based on
environmental studies as well as its prior experience
with similar sites. If the Company determines that it
has potential liability for properties currently owned
or previously sold, it accrues the total estimated costs,
including investigation and remediation costs, associ-
ated with the site. The Company estimates its expo-
sure for environmental-related personal injury claims
and accrues for this estimated liability as such claims
become known. While the Company actively pursues
appropriate insurance recoveries as well as appropriate
recoveries from other potentially responsible parties, it
does not recognize any insurance recoveries for envi-
ronmental liability claims until realized. The ultimate
cost of site cleanup is difficult to predict given the
uncertainties of the Company’s involvement in certain
sites, uncertainties regarding the extent of the required
cleanup, the availability of alternative cleanup meth-
ods, variations in the interpretation of applicable laws
and regulations, the possibility of insurance recoveries
with respect to certain sites and the fact that imposition
of joint and several liability with right of contribution
is possible under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 and
other environmental laws and regulations. As such,
there can be no assurance that the Company’s estimates
of environmental liabilities will not change. In view of
the Company’s financial position and reserves for envi-
ronmental matters and based on current information
and the applicable laws and regulations currently in
effect, the Company believes that its liability, if any,
related to past or current waste disposal practices and
other hazardous materials handling practices will not
have a material adverse effect on its results of operation,
financial condition and cash flow.
In addition to the litigation noted above, the
Company is, from time to time, subject to routine liti-
gation incidental to its business. These lawsuits pri-
marily involve claims for damages arising out of the
use of the Company’s products, allegations of patent
and trademark infringement, and litigation and admin-
istrative proceedings involving employment matters
and commercial disputes. Some of these lawsuits
include claims for punitive as well as compensatory
damages. The Company estimates its exposure for
product liability and accrues for this estimated liability
up to the limits of the deductibles under available
insurance coverage. All other claims and lawsuits are
handled on a case-by-case basis. The Company believes
that the results of the above-noted litigation and other
pending legal proceedings will not have a material
adverse effect on the Company’s results of operations
or financial condition, notwithstanding any related
insurance recoveries.
The Company’s Matco subsidiary has sold, with
recourse, or provided credit enhancements for certain
of its accounts receivable and notes receivable. Amounts
outstanding under this program approximated $75 mil-
lion, $93 million and $92 million as of December 31,
2003, 2002 and 2001, respectively. The Company and
60
DANAHER 2003 FORM 10-K
the subsidiary account for such sales in accordance with
SFAS No. 140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities –
a replacement of FASB Statement No. 125.” A provision
for estimated losses as a result of the recourse has been
included in accrued expenses. No gain or loss arose
from these transactions.
As of December 31, 2003, the Company had no
known probable but inestimable exposures that are
expected to have a material effect on the Company’s
financial position and results of operations.
(14) INCOME TAXES:
The provision for income taxes for the years ended
December 31 consists of the following (in thousands):
2003
2002
2001
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
2001
2002
2003
Statutory federal income
tax rate
35.0%
35.0%
35.0%
Increase (decrease) in
tax rate resulting from:
Permanent differences in
amortization of goodwill
State income taxes (net of
Federal income tax
benefit)
Taxes on foreign earnings
Research and experimen-
tation credits and other
Effective income tax rate
–
–
2.9
1.5
(3.0)
1.5
(2.5)
1.6
(2.0)
(0.9)
32.6%
–
34.0%
–
37.5%
Federal:
Current
Deferred
State and local
Foreign
Income tax provision
$
– $
163,944
18,000
78,257
– $ 76,666
60,601
160,302
12,483
15,315
28,849
47,710
$260,201 $223,327 $178,599
Current deferred income tax assets are reflected in
prepaid expenses and other current assets. Long-term
deferred income tax liabilities are included in other
long-term liabilities in the accompanying balance
sheets. Deferred income taxes consist of the following
(in thousands):
Bad debt allowance
Inventories
Property, plant and equipment
Postretirement benefits
Insurance, including self-insurance
Basis difference in LYONs Notes
Environmental compliance
Other accruals and prepayments
Deferred service income
All other accounts
Net deferred tax liability
2003
$ 13,918
31,246
(22,704)
51,352
22,744
(34,440)
18,637
(41,520)
(133,247)
21,196
$ (72,818)
2002
$ 13,394
33,207
(32,317)
66,823
21,846
(20,614)
14,667
(26,073)
(126,806)
40,993
$(14,880)
The Company made income tax payments of
$93,675,000, $98,773,000 and $52,048,000 in 2003, 2002
and 2001, respectively. The Company recognized a tax
benefit of approximately $27,506,000, $28,267,000, and
$12,562,000 in 2003, 2002, and 2001, respectively, related
to the exercise of employee stock options, which has been
recorded as an increase to additional paid-in capital.
During 2003 and 2002, the Company made US Federal
payments of $65 million and $50 million, respectively,
related to the reviews of prior years’ tax return filings.
The Company provides income taxes for unremitted
earnings of foreign subsidiaries which are not con-
sidered permanently reinvested overseas. As of Decem-
ber 31, 2003, the approximate amount of earnings
from foreign subsidiaries that the Company considers
permanently reinvested and for which deferred taxes
have not been provided was approximately $820 mil-
lion. It is not practical to estimate the additional
Federal income taxes, if any, that might be payable on
the remittance of such earnings.
Deferred taxes associated with temporary differ-
ences resulting from timing of recognition for income
tax purposes of fees paid for services rendered between
consolidated entities are reflected as deferred service
income in the above table. These fees are fully elimi-
nated in consolidation and have no effect on reported
income or reported income tax expense.
The Company’s legal and tax structure reflects both
the number of acquisitions and dispositions that have
occurred over the years as well as the multi-jurisdictional
nature of our businesses. Management performs a com-
prehensive review of its global tax positions on an
annual basis and accrues amounts for potential tax
61
DANAHER 2003 FORM 10-K
contingencies. Based on these reviews and the result
of discussions and resolutions of matters with certain
tax authorities and the closure of tax years subject to
tax audit, reserves are adjusted as necessary. Reserves for
these tax matters are included in “Taxes, income and
other” in our accrued expenses as detailed in Note 9 in
the accompanying financial statements. In connection
with the completion of a federal income tax audit in
2002, the Company adjusted certain income tax related
reserves established related to the sale of a previously
discontinued operation and recorded a $30 million
credit to its fourth quarter 2002 income statement. This
credit has been classified separately below net earn-
ings from continuing operations since the tax reserves
related to a previously discontinued operation.
(15) 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 for the years ended December 31,
2003, 2002 and 2001 is presented in the following
table (in thousands):
2003
2002
2001
Total Sales:
Process/
Environmental
Controls
Tools and
Components
Operating Profit:
Process/
Environmental
Controls
Tools and
Components
Other
Pension
curtailment
Identifiable Assets:
Process/
Environmental
Controls
Tools and
Components
Other
62
$4,096,686 $3,385,154 $2,616,797
1,197,190
1,165,647
1,192,078
$5,293,876 $4,577,232 $3,782,444
$ 674,343 $ 540,457 $ 388,616
173,821
(24,669)
181,359
(20,694)
131,810
(18,415)
22,500
–
$ 845,995 $ 701,122 $ 502,011
–
$5,313,815 $4,691,604 $3,180,092
786,949
789,286
967,983
672,408
$6,890,050 $6,029,145 $4,820,483
811,803
525,738
Liabilities:
Process/
Environmental
Controls
Tools and
Components
Other
Depreciation and
Amortization:
Process/
Environmental
Controls
Tools and
Components
Capital Expenditures,
Gross:
Process/
Environmental
Controls
Tools and
Components
$1,315,407 $1,149,800 $1,092,012
313,224
1,614,710
337,512
311,106
1,162,373
1,558,640
$3,243,341 $3,019,546 $2,591,897
$ 104,622 $
93,176 $ 124,194
28,814
54,196
$ 133,436 $ 129,565 $ 178,390
36,389
$
68,289 $
52,792 $
63,660
12,054
80,343 $
12,638
65,430 $
20,797
84,457
$
Operations in Geographical Areas
Year Ended December 31
2002
2003
2001
Total Sales:
United States
Germany
United Kingdom
All other
Long-lived assets:
United States
Germany
United Kingdom
All other
Sales outside the
United States:
Direct Sales
Exports
398,317
246,959
1,013,295
$3,635,305 $3,304,796 $2,622,077
292,712
143,404
724,251
$5,293,876 $4,577,232 $3,782,444
256,131
209,954
806,351
$3,256,113 $3,104,370 $2,596,063
95,512
54,951
199,342
$3,947,899 $3,641,879 $2,945,868
201,819
234,824
255,143
147,790
169,676
220,043
$1,658,571 $1,272,436 $1,160,367
324,000
$2,269,571 $1,768,436 $1,484,367
496,000
611,000
DANAHER 2003 FORM 10-K
Sales by Major Product Group:
(in thousands)
Analytical and
physical
instrumentation
Motion and
industrial
automation
controls
Mechanics and
2003
2002
2001
$2,023,821 $1,784,955 $1,204,683
1,098,222
869,820
902,664
related hand tools
787,678
760,533
747,605
Product
identification
Aerospace and
defense
Power quality
and reliability
All other
Total
472,888
285,857
–
311,921
278,066
259,395
264,708
334,638
325,072
343,025
$5,293,876 $4,577,232 $3,782,444
251,783
346,218
(16) QUARTERLY DATA-UNAUDITED:
(In Thousands, Except Per Share Data):
Net sales
Gross profit
Operating profit
Net earnings
Earnings per share:
Basic
Diluted
Net sales
Gross profit
Operating profit
Net earnings, before change in accounting
principle and reduction of income tax reserves
Net earnings
Earnings per share:
Basic – before change in accounting principle
and reduction in income tax reserves
Diluted – before change in accounting principle
and reduction in income tax reserves
Basic
Diluted
1st Quarter
$1,196,215
467,399
166,993
103,126
$
$
0.67
0.65
1st Quarter
$1,004,207
376,023
137,221
2003
2nd Quarter
$1,299,432
524,886
201,211
125,144
3rd Quarter
$1,309,451
542,503
215,765
138,618
4th Quarter
$1,488,778
604,279
262,026
169,946
$
$
0.82
0.79
$
$
0.90
0.87
$
$
1.11
1.06
2002
2nd Quarter
$1,146,326
444,418
169,575
3rd Quarter
$1,151,721
460,073
187,430
4th Quarter
$1,274,978
505,543
206,896
82,735
(91,015)
103,665
103,665
116,029
116,029
131,712
161,712
$
$
$
$
.57
.55
(.63)
(.58)
$
$
$
$
.69
.66
.69
.66
$
$
$
$
.76
.74
.76
.74
$
$
$
$
.87
.84
1.07
1.03
63
DANAHER 2003 FORM 10-K
(17) NEW ACCOUNTING
PRONOUNCEMENTS:
In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 142, “Goodwill and
Other Intangible Assets.” This statement requires that
goodwill and intangible assets deemed to have an
indefinite life not be amortized. Instead of amortizing
goodwill and intangible assets deemed to have an indef-
inite life, the statement requires a test for impairment
to be performed annually, or immediately if conditions
indicate that such an impairment could exist. The
Company adopted the statement effective January 1,
2002 and will no longer record goodwill amortization.
The Company has recorded an impairment from the
implementation of SFAS No. 142 as a change in
accounting principle in the first quarter of 2002 of
$200 million ($173.8 million after tax). The evaluation
of goodwill of reporting units on a fair value basis
from the implementation of SFAS No. 142, indicated
that an impairment existed at the Company’s power
quality business unit. In accordance with SFAS No. 142,
once impairment is determined at a reporting unit,
SFAS No. 142 requires that the amount of goodwill
impairment be determined based on what the balance
of goodwill would have been if purchase accounting
were applied at the date of impairment. Under SFAS
No. 142, if the carrying amount of goodwill exceeds
its fair value, an impairment loss must be recognized
in an amount equal to that excess. Once an impair-
ment loss is recognized, the adjusted carrying amount
of goodwill will be its new accounting basis.
The following table provides the comparable
effects of adoption of SFAS No. 142 for the year
ended December 31, 2001 (in thousands, except
per share data).
Reported Net Earnings
Add back: Goodwill Amortization (net of tax)
Adjusted Net Earnings
$297,665
54,978
$352,643
Basic Earnings per Share
Reported Net Earnings
Add back: Goodwill Amortization (net of tax)
Adjusted Net Earnings per Basic Share
Diluted Net Earnings per Share
Reported Net Earnings
Add back: Goodwill Amortization (net of tax)
Adjusted Net Earnings per Diluted Share
$
$
$
$
2.07
.39
2.46
2.01
.36
2.37
In October 2001, the FASB issued SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-
lived Assets,” which supersedes SFAS No. 121. Though
it retains the basic requirements of SFAS No. 121
regarding when and how to measure an impairment
loss, SFAS No. 144 provides additional implementa-
tion guidance. SFAS No. 144 applies to long-lived
assets to be held and used or to be disposed of, includ-
ing assets under capital leases of lessees; assets subject
to operating leases of lessors; and prepaid assets. SFAS
No. 144 also expands the scope of a discontinued
operation to include a component of an entity, and
eliminates the current exemption to consolidation
when control over a subsidiary is likely to be tempo-
rary. This statement was effective January 1, 2002.
Implementation of this SFAS did not have a material
impact on its financial statements.
In July 2002, the FASB issued SFAS No. 146,
“Accounting for Costs Associated with Exit or Disposal
Activities.” SFAS No. 146 addresses financial account-
ing and reporting for costs associated with exit or dis-
posal activities and nullifies EITF Issue No. 94-3,
“Liability Recognition for Certain Employee Termina-
tion Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring).”
SFAS No. 146 requires that a liability for a cost associ-
ated with an exit or disposal activity be recognized
when the liability is incurred, rather than at the date
of the entity’s commitment to an exit plan. This state-
ment is effective for exit and disposal activities that are
initiated after December 31, 2002 and has not had a
material impact on the consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148,
“Accounting for Stock-Based Compensation-Transition
and Disclosure” which amends SFAS No. 123, “Account-
ing for Stock-Based Compensation.” FAS 148 provides
alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-
based employee compensation and amends the disclo-
sure requirements of FAS 123 to require disclosures in
both the annual and interim financial statements about
the method of accounting for stock-based employee
compensation and the effect of the method used on
reported results. As allowed by SFAS 123, the Company
follows the disclosure requirements of FAS 123, but
continues to account for its employee stock option
plans in accordance with Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to
Employees”, which results in no charge to earnings
when options are issued at fair market value. Therefore,
the adoption of this statement did not have a material
64
DANAHER 2003 FORM 10-K
In May 2003, the FASB issued SFAS No. 150,
“Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” SFAS
No. 150 establishes standards for how an issuer classi-
fies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS
No. 150 applies specifically to a number of financial
instruments that companies have historically presented
within their financial statements either as equity or
between the liabilities section and the equity section,
rather than as liabilities. SFAS 150 is effective for finan-
cial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The
Company’s implementation of this SFAS did not have a
material impact on its financial statements.
(18) SUBSEQUENT EVENTS –
ACQUISITIONS:
On January 27, 2004, Danaher acquired 95.4% of the
share capital of, and 97.9% of the voting rights in,
Radiometer S/A for approximately $652 million in cash
(net of $77 million in acquired cash), including trans-
action costs, pursuant to a tender offer announced on
December 11, 2003. In addition, Danaher assumed
$65 million of debt in connection with the acquisition.
Danaher submitted a mandatory tender offer for the
remaining outstanding shares of Radiometer on
February 4, 2004 as required under Danish law and
intends to effect a compulsory redemption of the remain-
ing outstanding shares as permitted under Danish law.
Once all of the Radiometer shares are acquired, it is
expected that the total consideration for such shares,
including transaction costs, will be approximately
$687 million in cash (net of $77 million in acquired
cash). Radiometer, a maker of blood gas analysis and
other medical equipment, has total annual revenues of
approximately $300 million.
impact on the Company’s financial position or results
of operations. The Company has adopted the disclo-
sure requirements of this statement.
In December 2002, the FASB issued Interpretation
No. 45 (FIN 45), “Guarantor’s Accounting and Disclo-
sure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.” FIN 45 requires
a guarantor to make additional disclosures in its interim
and annual financial statements regarding the guarantor’s
obligations. In additions, FIN 45 requires, under certain
circumstances, that a guarantor recognize, at the incep-
tion of the guarantee, a liability for the fair value of the
obligation undertaken when issuing the guarantee. The
adoption of this interpretation did not have a material
impact on the consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation
No. 46, “Consolidation of Variable Interest Entities”
(FIN 46). This interpretation of Accounting Research
Bulletin No. 51, “Consolidated Financial Statements”,
addresses consolidation of variable interest entities.
FIN 46 requires certain variable interest entities (“VIE’s”)
to be consolidated by the primary beneficiary if the
entity does not effectively disperse risks among the
parties involved. The provisions of FIN 46 are effec-
tive immediately for those variable interest entities
created after January 31, 2003. The provisions, as
amended, are effective for the first interim or annual
period ending after March 15, 2004 for those variable
interest entities held prior to February 1, 2003. While
the Company believes this Interpretation will not have
material effect on its financial position or results of
operations, it is continuing to evaluate the effect of
adoption of this Interpretation.
In April 2003, the FASB released SFAS No. 149,
“Amendment of Statement 133 on Derivative Instru-
ments and Hedging Activities.” SFAS No. 149 clarifies
the accounting for derivatives, amending the previ-
ously issued SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” SFAS No. 149
clarifies under what circumstances a contract with an
initial net investment meets the characteristics of a
derivative, amends the definition of an underlying
contract, and clarifies when a derivative contains a
financing component in order to increase the compa-
rability of accounting practices under SFAS No. 133.
SFAS No. 149 was effective for contracts entered into
or modified after June 30, 2003. The adoption of
SFAS No. 149 did not have a material impact on the
consolidated financial statements.
65
DANAHER 2003 FORM 10-K
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Danaher Corporation:
We have audited the consolidated balance sheets of
Danaher Corporation and subsidiaries as of Decem-
ber 31, 2003 and 2002 and the related consolidated
statements of earnings, stockholders’ equity and cash
flows for the years then ended. These financial state-
ments are the responsibility of the Company’s manage-
ment. Our responsibility is to express an opinion on
these financial statements based on our audits. The
consolidated financial statements of Danaher Corpora-
tion and subsidiaries for the year ended December 31,
2001 were audited by other auditors who have ceased
operations and whose report dated January 23, 2002,
(except with respect to the matters discussed in Note 17
as to which the date is March 8, 2002) expressed an
unqualified opinion on those financial statements, prior
to the disclosures related to the adoption of Statement
of Financial Accounting Standards (Statement) No. 142,
“Goodwill and Other Intangible Assets,” discussed in
Note 17.
We conducted our audits in accordance with audit-
ing 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 misstate-
ment. 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the con-
solidated financial position of Danaher Corporation
and subsidiaries at December 31, 2003 and 2002 and
the consolidated results of their operations and their
cash flows for the years then ended, in conformity
with accounting principles generally accepted in the
United States.
As discussed in Note 17 to the consolidated
financial statements the Company adopted Statement
No.142, “Goodwill and Other Intangible Assets” as of
January 1, 2002.
As discussed above, the financial statements of
Danaher Corporation and subsidiaries for the year
ended December 31, 2001 were audited by other
auditors who have ceased operations. As described in
Note 17, these financial statements have been revised
to include disclosures required by Statement No. 142.
Our procedures with respect to the disclosures in
Note 17 included (a) agreeing the previously reported
goodwill and net income to the previously issued
financial statements and agreeing the changes in
goodwill and the adjustments to reported net income
representing amortization expense, net of tax, recog-
nized in those periods related to goodwill to the
Company’s underlying records obtained from manage-
ment, (b) testing the mathematical accuracy of (i) the
reconciliation of adjusted net income to reported net
income, and the related earnings-per-share amounts
and (ii) the roll forward of goodwill balances. In our
opinion, the disclosures for 2001 in Note 17 are appro-
priate. However, we were not engaged to audit, review,
or apply any procedures to the 2001 financial state-
ments of the Company other than with respect to
such disclosures and, accordingly, we do not express
an opinion or any other form of assurance on the
2001 financial statements taken as a whole.
Ernst & Young LLP
Baltimore, Maryland
January 27, 2004
66
DANAHER 2003 FORM 10-K
REPORT OF
INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF
DIRECTORS OF DANAHER CORPORATION
The following report is a copy of a report previously
issued by Arthur Andersen LLP (“Andersen”), which
report has not been reissued by Andersen. Certain
financial information for the year ended December 31,
2001 was not reviewed by Andersen and includes:
(i) reclassifications to conform to our fiscal 2003 and
2002 financial statement presentation and (ii) addi-
tional disclosures to conform with new accounting
pronouncements and SEC rules and regulations issued
during such fiscal year. The reference to Note 17 in
the dating of their opinion refers to a footnote regard-
ing certain acquisition and divestiture events that
occurred subsequent to December 31, 2001, which is
not repeated in the current year financial statements.
We have audited the accompanying consolidated bal-
ance sheets of Danaher Corporation (a Delaware cor-
poration) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of
earnings, stockholders’ equity, and cash flows for each
of the three years in the period ended December 31,
2001. These consolidated financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these con-
solidated financial statements based on our audits.
We conducted our audits in accordance with audit-
ing 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 misstate-
ment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assess-
ing the accounting principles used and significant esti-
mates 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 finan-
cial position of Danaher Corporation and subsidiaries
as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the
three years in the period ended December 31, 2001,
in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Baltimore, Maryland
January 23, 2002
(except with respect to the
matter discussed in Note 17,
as to which the date is
March 8, 2002)
67
DANAHER 2003 FORM 10-K
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH
ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
ITEM 9A. CONTROLS AND
PROCEDURES
The Company’s management, with the participation of
the Company’s President and Chief Executive Officer,
and Executive Vice President and Chief Financial
Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the
“Exchange Act”) as of the end of the period covered
by this report. Based on such evaluation, the Company’s
President and Chief Executive Officer, and Executive
Vice President and Chief Financial Officer, have con-
cluded that, as of the end of such period, the Company’s
disclosure controls and procedures are effective.
There have been no changes in the Company’s
internal control over financial reporting that occurred
during the Company’s most recent completed fiscal
quarter that have materially affected, or are reasonably
likely to materially affect, the Company’s internal con-
trol over financial reporting.
68
DANAHER 2003 FORM 10-K
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/ H. LAWRENCE CULP, JR.
–––––––––––––––––––
H. Lawrence Culp, Jr.
President and Chief Executive Officer
Date: March 9, 2004
/s/ H. LAWRENCE CULP, JR.
/s/ JOHN T. SCHWIETERS
President, Chief Executive Officer and Director
Director
H. Lawrence Culp, Jr.
John T. Schwieters
/s/ STEVEN M. RALES
Chairman of the Board
Steven M. Rales
/s/ ALAN G. SPOON
Director
Alan G. Spoon
/s/ MITCHELL P. RALES
/s/ A. EMMET STEPHENSON, JR.
Chairman of the Executive Committee
Director
Mitchell P. Rales
A. Emmet Stephenson, Jr.
/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/ PATRICK W. ALLENDER
Executive Vice President –
Chief Financial Officer and Secretary
Patrick W. Allender
/s/ ROBERT S. LUTZ
Vice President and Chief Accounting Officer
Robert S. Lutz
69
DANAHER 2003 FORM 10-K
Exhibit 31.1
CERTIFICATION
I, H. Lawrence Culp, Jr., certify that:
1. I have reviewed this report on Form 10-K of
Danaher Corporation;
c. Disclosed in this report any change in the regis-
trant’s internal control over financial reporting
that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materi-
ally affected, or is reasonably likely to materially
affect, the registrant’s internal control over
financial reporting; and
2. Based on my knowledge, this report does not con-
tain any untrue statement of a material fact or omit
to state a material fact necessary to make the state-
ments made, in light of the circumstances under
which such statements were made, not misleading
with respect to the period covered by this report;
5. The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons perform-
ing the equivalent functions):
a. All significant deficiencies and material weak-
nesses in the design or operation of internal con-
trol over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a sig-
nificant role in the registrant’s internal control
over financial reporting.
Date: March 9, 2004
By: /s/ H. Lawrence Culp, Jr.
Name: H. Lawrence Culp, Jr.
Title: President and Chief Executive Officer
3. Based on my knowledge, the financial statements,
and other financial information included in this
report, fairly present in all material respects the
financial condition, results of operations and cash
flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are
responsible for establishing and maintaining dis-
closure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities, par-
ticularly during the period in which this report is
being prepared;
b. Evaluated the effectiveness of the registrant’s dis-
closure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of
the end of the period covered by this report
based on such evaluation; and
70
DANAHER 2003 FORM 10-K
Exhibit 31.2
CERTIFICATION
I, Patrick W. Allender, certify that:
1. I have reviewed this report on Form 10-K of
Danaher Corporation;
c. Disclosed in this report any change in the regis-
trant’s internal control over financial reporting
that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter
in the case of an annual report) that has materi-
ally affected, or is reasonably likely to materially
affect, the registrant’s internal control over
financial reporting; and
2. Based on my knowledge, this report does not con-
tain any untrue statement of a material fact or omit
to state a material fact necessary to make the state-
ments made, in light of the circumstances under
which such statements were made, not misleading
with respect to the period covered by this report;
5. The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the regis-
trant’s auditors and the audit committee of the regis-
trant’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weak-
nesses in the design or operation of internal con-
trol over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a sig-
nificant role in the registrant’s internal control
over financial reporting.
Date: March 9, 2004
By: /s/ Patrick W. Allender
Name: Patrick W. Allender
Title: Executive Vice President –
Chief Financial Officer and Secretary
3. Based on my knowledge, the financial statements,
and other financial information included in this
report, fairly present in all material respects the
financial condition, results of operations and cash
flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are
responsible for establishing and maintaining dis-
closure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the registrant and have:
a. Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities, par-
ticularly during the period in which this report is
being prepared;
b. Evaluated the effectiveness of the registrant’s dis-
closure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of
the end of the period covered by this report
based on such evaluation; and
71
DANAHER 2003 FORM 10-K
Exhibit 32.1
Exhibit 32.2
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
AS ADOPTED PURSUANT
TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
I, H. Lawrence Culp, Jr., certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowl-
edge, Danaher Corporation’s Annual Report on Form
10-K for the fiscal year ended December 31, 2003
fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and
that information contained in such Annual Report on
Form 10-K fairly presents in all material respects the
financial condition and results of operations of
Danaher Corporation.
I, Patrick W. Allender, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowl-
edge, Danaher Corporation’s Annual Report on Form
10-K for the fiscal year ended December 31, 2003
fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and
that information contained in such Annual Report on
Form 10-K fairly presents in all material respects the
financial condition and results of operations of
Danaher Corporation.
Date: March 9, 2004
Date: March 9, 2004
By: /s/ H. Lawrence Culp, Jr.
Name: H. Lawrence Culp, Jr.
Title: President and Chief Executive Officer
By: /s/ Patrick W. Allender
Name: Patrick W. Allender
Title: Executive Vice President,
A signed original of this written statement required
by Section 906 has been provided to Danaher
Corporation and will be retained by Danaher
Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
Chief Financial Officer and Secretary
A signed original of this written statement required
by Section 906 has been provided to Danaher
Corporation and will be retained by Danaher
Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
72
DANAHER AT-A-GLANCE
Fluke Corporation is a world leader in the manufacture, distribution
and service of electronic test tools and software. From industrial
electronic installation, maintenance, and service, to precision meas-
urement and quality control, Fluke tools help keep business and
industry around the globe up and running.
ELECTRONIC TEST
KEY BRANDS
KEY CUSTOMERS/VERTICAL MARKETS
Fluke, Raytek, Meterman,
Fluke Biomedical,
Hart Scientific, Beha
Technicians, Engineers, Metrologists, Commercial
and Residential Electricians
Fluke Networks is a leading provider of innovative solutions for
ensuring data communications and Internet uptime. Fluke Networks
products combine speed, accuracy, and ease of use for maximizing
network performance.
Fluke Networks, OptiView,
MicroTools, OmniScanner,
DSP, Loop Expert
Network Engineers and Technicians, Network
Installation and Maintenance Professionals,
Telecommunication Technicians
Hach/Lange is a worldwide market leader in analytical instrumentation
for water quality and applications. Hach/Lange provides advanced
analytical systems and technical support for water quality testing,
with solutions for the lab, plant, and field.
Hach, Lange, Orbisphere,
Hach Ultra Analytics, OTT,
McCrometer, Pacific Scientific
Drinking Water Facilities, Waste Water Plants,
Pharmaceuticals, Environmental Monitoring
Agencies
APPROXIMATELY 80% OF EXPECTED 2004
REVENUES FROM SIX STRATEGIC PLATFORMS
ENVIRONMENTAL
Gilbarco Veeder-Root enjoys a leading position providing solutions and
technologies that provide convenience, control, and environmental
integrity for retail fueling and adjacent markets.
Gilbarco, Veeder-Root,
Red Jacket, Gasboy
Major Oil Companies, Convenience Stores, Retail
Fueling Franchises, Commercial Fueling Operators
Medical
Technology
Motion
Electronic Test
17% compounded annual
growth rate
MOTION
Danaher Motion is changing the way things move, by providing innova-
tive solutions offering flexibility, precision, efficiency, and reliability for
applications as diverse as robotics, wheelchairs, lift trucks, electric
vehicles, and packaging machines.
Kollmorgen, Pacific Scientific,
Thomson, Superior Electric,
Portescap
Factory Automation, Medical, Health & Fitness,
Factory and Personal Mobility, Aerospace and
Defense
PRODUCT
IDENTIFICATION
MECHANICS
HAND TOOLS
MEDICAL
TECHNOLOGY
Danaher’s printing and marking technology applies codes to more than
one trillion products each year worldwide. The output of our product
identification technology can be seen every day, from the lot code on
a pill bottle to the expiration date on a beverage can. Danaher’s scan-
ning and tracking products currently sort a majority of the packages
shipped in the U.S.
Videojet, Willett, Accu-Sort
Food and Beverage, Pharmaceutical, Print & Mail,
Retail Distribution, Mail and Parcel Services
Danaher Tool Group and Matco enjoy a leading share position in the
U.S. mechanics hand tool market. Danaher is committed to delivering
customer-driven innovation with new products that improve safety,
strength, speed, and access.
Sears Craftsman®, Armstrong,
Matco, AllenTM, KD-Tools,
Holo-Krome, NAPA®, SATA
Sears Roebuck & Co., Professional Automotive
Mechanics, NAPA, Industrial Manufacturing,
Consumer Retail
Radiometer is a leading in-vitro diagnostic company focused on critical
care applications for the measurement of blood gases in both a hospi-
tal’s central lab as well as point-of-care locations.
Gendex is a leading manufacturer of digital imaging dental products
including intra-oral and panoramic X-ray machines, digital radiography
systems, intra-oral cameras, and film processors.
Radiometer
Physicians, Hospitals, Point-of-Care Centers
Gendex
Dental Professionals
17% compounded annual
growth rate
*Before effect of accounting
change and reduction of
income tax reserves related
to previously discontinued
operations.
FOCUSED NICHE BUSINESSES
Aerospace and Defense
Industrial Controls
Power Quality
Delta Consolidated Industries
Hennessy Industries
Jacobs Chuck Manufacturing Company
Jacobs Vehicle Systems
Joslyn Manufacturing Company
Environmental
Product Identification
Mechanics
Hand Tools
TOOLS AND
COMPONENTS
TOOLS AND
COMPONENTS
Focused Niche
Businesses
PROCESS/
ENVIRONMENTAL
CONTROLS
PROCESS/ENVIRONMENTAL
CONTROLS
Annual Meeting:
Danaher’s annual shareholder meeting will be held on May 4, 2004 in
Washington, D.C. Shareholders who would like to attend the meet-
ing should register with Investor Relations by calling 202-828-0850
or via e-mail at ir@danaher.com.
Auditors
Ernst & Young LLP
Baltimore, Maryland
Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges
SHAREHOLDER INFORMATION
www.danaher.com
Account Questions:
Our transfer agent can help you with a variety of shareholder
related services including:
Change of Address
Lost stock certificates
Transfer of stock to another person
Additional administrative services
Contacting our Transfer Agent:
SunTrust Bank
Stock Transfer Department
Mail Code 258
P.O. Box 4625
Atlanta, Georgia 30302
Toll Free: 1-800-568-3476
Outside of the U.S.: 404-588-7815
Fax: 404-332-3875
Investor Relations
This annual report along with a variety of other financial
materials can be viewed at www.danaher.com.
Additional inquiries may be directed to Danaher Investor Relations at:
Danaher Corporation
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
Phone: 1-202-828-0850
Fax: 1-202-828-0860
E-mail: ir@danaher.com
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ENERGIZED BY
THE CHALLENGE
2003 ANNUAL REPORT
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
202.828.0850
www.danaher.com
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DANAHER
Danaher, a diversified technology leader, designs, manufactures, and markets innovative products and
services with strong brand names and significant market positions. Driven by strong core values and a
foundation provided by the Danaher Business System, Danaher’s associates are pursuing a focused
strategy aimed at creating a Premier Global Enterprise.
THE DANAHER BUSINESS SYSTEM
In the mid-1980s, a Danaher division faced with intensifying competition launched an improvement effort
based on the then-new principles of lean manufacturing. The initiative succeeded beyond expectations –
reinforcing the division's industry leadership as well as spawning the Danaher Business System (DBS).
Since this modest beginning, DBS has evolved from a collection of manufacturing improvement tools
into a philosophy, set of values, and series of management processes that collectively define who we are
and how we do what we do.
Fueled by Danaher's core values, the DBS engine drives the company through a never-ending cycle of
change and improvement: exceptional people develop outstanding plans and execute them using world-
class tools to construct sustainable processes, resulting in superior performance. Superior performance
and high expectations attract additional exceptional people, who continue the cycle. Guiding all efforts
is a simple approach rooted in four customer-facing priorities: Quality, Delivery, Cost, and Innovation.
CONTENTS
Danaher’s Business Portfolio
fold-out
Financial Operating Highlights
Letter to Shareholders
The Challenge: See the Invisible
The Challenge:
Accelerate Global Growth
The Challenge:
Acquire, Integrate, and Grow
Board and Management Listing
Form 10-K
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