10-QPeriod: Q3 FY2010

DANAHER CORP /DE/ Quarterly Report for Q3 Ended Jul 2, 2010

Filed July 22, 2010For Securities:DHR

Summary

Danaher Corporation reported a strong second quarter and first half of 2010, with consolidated sales increasing by 24.0% and 20.5% respectively compared to the prior year periods. This growth was driven by a combination of increased demand in emerging markets, stabilization in global economic conditions, and significant contributions from acquisitions. The company successfully integrated the $1.1 billion acquisition of MDS Inc.'s Analytical Technologies division, including AB Sciex and Molecular Devices, bolstering its Medical Technologies segment. Operationally, Danaher saw improvements in gross profit margin due to higher sales volumes and the ongoing benefits of its 2009 restructuring activities. While SG&A expenses as a percentage of sales decreased, this was partially offset by investments in growth initiatives and the dilutive impact of recent acquisitions. The company also announced a significant joint venture with Cooper Industries, plc, forming Apex Tool Group, LLC, which is expected to result in a substantial pre-tax gain in the third quarter. Financially, Danaher maintained a solid liquidity position with $1.2 billion in cash and cash equivalents as of July 2, 2010. Acquisitions were the primary use of cash in the first half of the year, with approximately $1.4 billion invested in 14 new businesses. The company expects continued year-over-year sales growth for the remainder of 2010, albeit at a moderating rate.

Financial Highlights

48 data points
Beta

Revenue

$3.15B

50.3% Gross Margin

Net Income

$372.50M

11.8% Net Margin

EPS (Diluted)

$0.55

Total Assets

$20.08B

Cash & Equivalents

$1.23B

Free Cash Flow

$486.09M

Financial Statements
Beta
Revenue$3.15B
Cost of Revenue$1.61B
Gross Profit$1.58B
R&D Expenses$191.20M
SG&A Expenses$896.59M
Operating Income$504.50M
Interest Expense$28.94M
Net Income$372.50M
EPS (Basic)$0.57
EPS (Diluted)$0.55
Shares Outstanding (Basic)652.48M
Shares Outstanding (Diluted)682.34M

Key Highlights

  • 1Total sales increased by 24.0% for the three months ended July 2, 2010, and 20.5% for the six months ended July 2, 2010, compared to the prior year periods.
  • 2Significant acquisition activity, including the $1.1 billion acquisition of MDS Inc.'s Analytical Technologies division (AB Sciex and Molecular Devices), bolstering the Medical Technologies segment.
  • 3Formation of Apex Tool Group, LLC, a 50/50 joint venture with Cooper Industries, plc, expected to result in a pre-tax gain of approximately $300 million.
  • 4Gross profit margin improved to 49.5% for the quarter and 49.0% for the half-year, driven by higher sales volumes and cost savings from 2009 restructuring.
  • 5Operating profit increased significantly in most segments, with strong performance in Professional Instrumentation and Industrial Technologies.
  • 6Solid liquidity maintained with $1.2 billion in cash and cash equivalents as of July 2, 2010.
  • 7Year-over-year sales growth was led by emerging markets, with particular strength in China.

Frequently Asked Questions

Danaher's sales growth was driven by several factors, including a general stabilization in global economic conditions, easier year-over-year comparisons to the recessionary period of 2009, growth in emerging markets (especially China), and the contribution of recent acquisitions. Existing businesses also contributed positively to sales growth.

Acquisitions were a major focus, with the $1.1 billion purchase of MDS Inc.'s Analytical Technologies division being significant. These acquisitions contributed substantially to the Medical Technologies segment's revenue and overall company sales growth. However, they also had a dilutive effect on operating profit margins in the short term, with acquisition-related charges and integration costs impacting profitability.

The formation of Apex Tool Group, LLC, through a joint venture with Cooper Industries, plc, involved combining significant portions of Danaher's Tools and Components segment. This strategic move is expected to result in a substantial pre-tax gain of approximately $300 million, which will be recognized in the third quarter of 2010. Danaher will account for its remaining interest using the equity method.

Danaher maintained a strong liquidity position with $1.2 billion in cash and cash equivalents. The company generated substantial cash from operations, which was used to fund significant investments in acquisitions (approximately $1.4 billion in 14 businesses), capital expenditures, and dividends. The company has access to credit facilities and commercial paper programs for its short-term liquidity needs.