10-KPeriod: FY2005

DANAHER CORP /DE/ Annual Report, Year Ended Dec 31, 2005

Filed March 15, 2006For Securities:DHR

Summary

Danaher Corporation's 2005 10-K filing reveals a year of significant growth driven by strategic acquisitions, particularly in the Medical Technologies segment. The company reported a 16% increase in sales, with acquisitions contributing approximately 11.5% of this growth. Professional Instrumentation emerged as the largest segment, fueled by expansion in environmental, electronic test, and medical technologies. Despite overall positive performance, the company navigated increasing raw material costs and a moderating growth rate compared to the prior year. Danaher's commitment to its Danaher Business System (DBS) remains central to its strategy for continuous improvement in quality, delivery, cost, and innovation, aiming for upper quartile financial performance and cash flow generation. The company also continued its share repurchase program and maintained a strong liquidity position with substantial cash reserves and available credit facilities.

Key Highlights

  • 1Total sales increased by approximately 16.0% in 2005 to $7.98 billion, up from $6.89 billion in 2004, with acquisitions contributing significantly to this growth.
  • 2The Professional Instrumentation segment became the largest revenue contributor, accounting for 47% of total sales, driven by strong performance in environmental, electronic test, and the rapidly expanding medical technologies businesses.
  • 3Danaher continued its aggressive acquisition strategy, completing 13 acquisitions in 2005, with a notable focus on the medical technologies sector, including the significant acquisition of Leica Microsystems AG.
  • 4Operating profit margins for the Tools & Components segment saw a slight improvement to 15.4% in 2005 from 15.2% in 2004, benefiting from pricing initiatives and cost reduction programs.
  • 5The company's gross profit margin improved to 43.1% in 2005 from 42.0% in 2004, attributed to higher margins in acquired businesses, sales leverage, and ongoing cost efficiencies.
  • 6Danaher generated strong operating cash flow of $1.2 billion in 2005, an increase of 16.5% from 2004, underscoring its ability to fund operations and strategic initiatives.
  • 7The company repurchased approximately 5 million shares of its common stock in 2005 for $257.7 million, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

Danaher operates in three segments: Professional Instrumentation, Industrial Technologies, and Tools & Components. In 2005, Professional Instrumentation became the largest segment, representing 47% of total sales, driven by strong growth in environmental, electronic test, and medical technologies. Industrial Technologies accounted for 37% of sales, and Tools & Components represented 16%.

Danaher's acquisition strategy was a key driver of its 2005 performance, contributing approximately 11.5% to the 16.0% overall sales growth. The company acquired 13 businesses, with a significant focus on expanding its Medical Technologies segment, notably through the acquisition of Leica Microsystems AG. These acquisitions led to a substantial increase in goodwill and other intangible assets.

Danaher aims for continued sales growth exceeding market growth and upper quartile financial performance. While the company observed moderating growth rates in 2005 compared to 2004, it anticipates ongoing growth opportunities, particularly in its Medical Technologies segment. The company's strategy relies on the Danaher Business System (DBS) for continuous improvement and cost efficiencies, which are expected to further enhance operating margins at both existing and newly acquired businesses.

Danaher generated strong operating cash flow of $1.2 billion in 2005, a 16.5% increase from 2004. The company reduced its total debt to $1.04 billion from $1.35 billion, primarily by repaying Eurobond notes. Danaher also repurchased approximately 5 million shares of its common stock and maintained $316 million in cash and cash equivalents, with $1 billion available under credit facilities, indicating a strong liquidity position.