10-QPeriod: Q3 FY2008

DANAHER CORP /DE/ Quarterly Report for Q3 Ended Sep 26, 2008

Filed October 16, 2008For Securities:DHR

Summary

Danaher Corporation's (DHR) third quarter 2008 filing shows solid top-line growth driven by acquisitions and a weaker U.S. dollar. Sales increased by 17.5% year-over-year for the quarter and 20.5% for the nine-month period, with acquisitions contributing significantly to this growth, particularly in the Professional Instrumentation segment. Despite this top-line expansion, operating profit margins saw a slight decline due to factors like acquisition-related inventory and deferred revenue charges, as well as the dilutive effect of new businesses. The company generated strong operating cash flow, a testament to its operational efficiency and the Danaher Business System. However, financing activities showed a significant outflow due to debt repayments, reflecting a strategic effort to manage its capital structure in a challenging economic environment. While the global financial crisis has not materially impacted DHR's current financial position, the company is closely monitoring market conditions and has plans for cost reductions in the fourth quarter to enhance its positioning.

Financial Highlights

31 data points
Beta

Revenue

$3.21B

47.1% Gross Margin

Net Income

$371.99M

11.6% Net Margin

EPS (Diluted)

$0.56

Cash & Equivalents

$286.52M

Free Cash Flow

$400.43M

Financial Statements
Beta
Revenue$3.21B
Cost of Revenue$1.70B
Gross Profit$1.51B
R&D Expenses$182.01M
SG&A Expenses$806.42M
Operating Expenses$2.69B
Operating Income$522.14M
Interest Expense$30.22M
Net Income$371.99M
EPS (Basic)$0.58
EPS (Diluted)$0.56
Shares Outstanding (Basic)639.77M
Shares Outstanding (Diluted)674.67M

Key Highlights

  • 1Consolidated sales grew 17.5% in Q3 2008 and 20.5% in the first nine months of 2008, driven by 11.0% and 12.5% from acquisitions respectively, alongside a 2.5% and 4.0% positive currency translation impact.
  • 2Operating profit margins slightly decreased to 16.3% in Q3 2008 (from 17.0% in Q3 2007) and 15.2% for the nine months (from 16.2% in 2007), impacted by acquisition-related inventory/deferred revenue charges and the dilutive effect of acquired businesses.
  • 3The company generated robust operating cash flow from continuing operations of $1.35 billion for the first nine months of 2008, a 20% increase from the prior year.
  • 4Danaher completed eleven acquisitions in the first nine months of 2008 for approximately $241 million, primarily in the life sciences, dental, product identification, environmental, and test & measurement markets.
  • 5Long-term debt decreased significantly from $3.4 billion at December 31, 2007, to $2.4 billion at September 26, 2008, reflecting net debt repayments of $1,035 million in the first nine months of 2008.
  • 6The company announced a cost reduction plan in October 2008, expected to result in pre-tax charges of approximately $75 million in Q4 2008, aimed at better positioning the company amidst an uncertain economic environment.
  • 7Despite global financial market distress, DHR reported no significant impact on its financial position, operations, or liquidity as of the filing date, though it continues to monitor conditions closely.

Frequently Asked Questions

Danaher's sales increased by 17.5% to $3.21 billion in the third quarter of 2008 compared to the same period in 2007. This growth was driven by a combination of factors: sales from existing businesses contributed 4.0% growth, acquisitions added 11.0%, and favorable currency translation (a weaker US dollar) provided an additional 2.5% boost. Significant acquisition activity, particularly in the Professional Instrumentation segment, was a major contributor to the top-line performance.

Operating profit margins decreased slightly from 17.0% in Q3 2007 to 16.3% in Q3 2008. This was primarily due to acquisition-related charges, including fair value adjustments for acquired inventory and deferred revenue from the Tektronix acquisition, which negatively impacted margins by 40 basis points. Additionally, the dilutive effect of recently acquired businesses contributed another 25 basis point reduction in operating profit margins.

Danaher demonstrated strong operating cash flow generation, which is its primary source of liquidity. The company actively managed its debt, showing a significant reduction in long-term debt from $3.4 billion at the end of 2007 to $2.4 billion by September 26, 2008, through net debt repayments. While the company has access to commercial paper programs and credit facilities, it is closely monitoring market conditions due to recent financial market distress and has plans for cost reductions to ensure it remains well-positioned.

Danaher continues to pursue a strategy of acquiring businesses that are either strategic fits with existing operations or establish new lines of business. In the first nine months of 2008, eleven companies were acquired for approximately $241 million. The company also regularly assesses the strategic fit of its existing businesses and may divest those that are not performing or aligned with its long-term plan, though no divestitures occurred in the first nine months of 2008.