10-QPeriod: Q1 FY2003

DANAHER CORP /DE/ Quarterly Report for Q1 Ended Mar 28, 2003

Filed April 17, 2003For Securities:DHR

Summary

Danaher Corporation's Q1 2003 filing shows a strong rebound in net earnings compared to the prior year, driven by significant sales growth in its Process/Environmental Controls segment. Sales increased by 26%, largely due to strategic acquisitions made in 2002 and early 2003, which added approximately 20% to segment revenue. The Tools and Components segment experienced a slight revenue decline of 1%, primarily due to a decrease in core unit sales volume. Despite increased selling, general, and administrative expenses due to investments in growth opportunities and the integration of new businesses, the company maintained stable operating profit margins in its Tools and Components segment and saw a slight improvement in its Process/Environmental Controls segment. Overall, Danaher demonstrated robust cash generation from operations, with free cash flow of $198.7 million. The company continues to actively pursue strategic acquisitions, particularly within its Process/Environmental Controls segment, while managing its capital structure effectively.

Key Highlights

  • 1Net earnings for Q1 2003 were $103.1 million, a significant improvement from a net loss of $91.0 million in Q1 2002, which was impacted by a large accounting change.
  • 2Total sales increased by 19.1% to $1.196 billion in Q1 2003 compared to $1.004 billion in Q1 2002.
  • 3The Process/Environmental Controls segment saw substantial sales growth of 26%, primarily driven by acquisitions and favorable currency translation, while the Tools and Components segment experienced a 1% sales decline.
  • 4Goodwill and other intangible assets increased significantly to $3.145 billion from $3.008 billion, reflecting ongoing acquisition activity.
  • 5Operating cash flow was $214.3 million in Q1 2003, while free cash flow was $198.7 million, indicating strong operational liquidity.
  • 6Danaher completed five business acquisitions in Q1 2003 within the Process/Environmental Controls segment for approximately $123 million.

Frequently Asked Questions

The primary driver of Danaher's improved net earnings was a significant increase in sales, particularly within the Process/Environmental Controls segment, which grew by 26%. This growth was substantially fueled by recent strategic acquisitions and a favorable currency translation impact. Additionally, the prior year's first quarter results were negatively impacted by a large accounting change, making the year-over-year comparison particularly favorable.

Danaher actively pursued its acquisition strategy, completing five acquisitions in the Process/Environmental Controls segment during Q1 2003 for a total of approximately $123 million. These acquisitions, along with those from 2002, were instrumental in driving the significant sales growth in that segment. The increase in goodwill on the balance sheet reflects the accounting for these transactions.

Danaher reported strong liquidity, with $214.3 million in operating cash flow and $198.7 million in free cash flow for Q1 2003. The company expects to meet its future cash requirements for working capital, capital expenditures, debt servicing, and dividends through internally generated funds and its revolving credit facility. Management believes these resources will be adequate for the foreseeable future.

The Tools and Components segment saw a slight revenue decline of 1% in Q1 2003. This was primarily attributed to a decrease in core unit sales volume. While Hand Tool revenues experienced modest growth, weakness in truck and industrial boxes offset gains in wheel service equipment. Operating profit margins in this segment remained stable at 12.9%.