10-QPeriod: Q1 FY2006

DANAHER CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2006

Filed April 20, 2006For Securities:DHR

Summary

Danaher Corporation (DHR) reported a strong first quarter for 2006, with net sales increasing by 17.5% to $2.14 billion compared to the same period in 2005. This growth was driven by both existing businesses, which saw a 7.5% increase, and strategic acquisitions, contributing 12.5% to the top line. Net earnings rose to $215.7 million, or $0.67 per diluted share, up from $188.3 million, or $0.58 per diluted share, in the prior year. The company continues to actively pursue its growth strategy through acquisitions, notably announcing a significant $2.0 billion tender offer for Sybron Dental Specialties Inc. during the quarter. Despite overall positive performance, operating profit margins slightly decreased to 13.9% from 14.9% year-over-year. This was attributed to the integration of lower-margin acquired businesses, particularly Leica, and the adoption of SFAS 123R for stock-based compensation, which added an estimated 50 basis points to operating expenses. The company remains focused on leveraging its Danaher Business System (DBS) to drive continuous improvement and operational efficiency across its diverse segments, including Professional Instrumentation and Industrial Technologies.

Key Highlights

  • 1Total sales increased by a robust 17.5% to $2.14 billion, indicating strong market demand and successful integration of acquisitions.
  • 2Net earnings grew to $215.7 million ($0.67 per diluted share), reflecting improved profitability compared to the prior year's $188.3 million ($0.58 per diluted share).
  • 3Significant acquisition activity continued, with four new companies acquired and a major $2.0 billion tender offer for Sybron Dental Specialties announced, demonstrating an ongoing commitment to strategic growth.
  • 4Operating profit margins saw a slight decrease to 13.9% from 14.9%, primarily due to the dilutive effect of recent acquisitions and the impact of adopting new accounting standards for stock-based compensation (SFAS 123R).
  • 5The Professional Instrumentation segment experienced substantial sales growth (27.5%), driven by acquisitions, particularly in Medical Technologies, though operating margins within the segment declined.
  • 6Industrial Technologies segment also showed solid growth (11.0%), with notable strength in its existing businesses and improved operating margins.
  • 7The company generated strong operating cash flow of $337.2 million, an increase of 8.1% year-over-year, underscoring its operational efficiency and financial health.

Frequently Asked Questions

Danaher reported a significant increase in net sales, up 17.5% to $2.14 billion in the first quarter of 2006 compared to $1.83 billion in the first quarter of 2005. Net earnings also grew to $215.7 million ($0.67 per diluted share) from $188.3 million ($0.58 per diluted share) in the prior year.

Acquisitions played a substantial role in Danaher's growth, contributing 12.5% to the reported sales increase. The company acquired four businesses during the quarter and announced a significant $2.0 billion tender offer for Sybron Dental Specialties. While driving revenue, acquisitions also impacted profitability, with newer, lower-margin businesses like Leica diluting overall operating profit margins.

The operating profit margin decreased from 14.9% in Q1 2005 to 13.9% in Q1 2006. This was primarily due to the dilutive effect of lower-margin acquired businesses and the adoption of SFAS 123R for stock-based compensation, which increased operating expenses. However, existing businesses saw margin improvements due to cost reductions and operational efficiencies from the Danaher Business System.

Danaher plans to finance the approximately $2.0 billion Sybron Dental acquisition through a combination of available cash, commercial paper issuance, and other borrowings. The company is also expected to enter into a new credit facility in the second quarter of 2006 to support its financing needs.