DANAHER  CORPORATION  (NYSE:  DHR)  

Long  Pitch  for  MII  Maya  Venkatraman    

Agenda  • Company Overview • Financials • Thesis Points • VAR • Misperceptions • Risks • Summary • Questions

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Business  Overview  •  Danaher  Corpora,on  (NYSE:  DHR)  •  Diversified  Technology  Leader.    •  Based  in  DC.  •  Began  in  1969.  •  Focuses  in  6  sectors:  

•  Medical  Technologies  •  Product  IdenJficaJon  •  Test  and  Measurement  •  Environmental  •  MoJon  •  Dental  

•  Specialty  businesses  in  aerospace  &  defense,  sensors  &  controls,  full-­‐line  wheel-­‐service  equipment,  and  vehicle  systems  sectors.    

 

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Divisions  •  Accu-­‐Sort  

Systems,  Inc.  •  AB  Sciex  •  Allen  •  ALLTEC  •  American  Sigma  •  Amprobe  •  Anatel  •  Anderson  •  Arbor  Networks  •  Armstrong  Tools  •  Artus  •  AviaJon  

Services  •  AviaJon  

Services  Europe  •  Bindicator  •  Buhler  Montec  •  Calzoni  •  Chemtreat  •  Comark  Ltd  •  CraSsman  Hand  

Tools  •  Danaher  MoJon  •  Danaher  Tool  

Group  

•  Delta  Consolidated  Industries  

•  DEXIS  •  DH  Instruments  •  Dover  •  Dynapar  /  

Northstar  •  Eagle-­‐Signal  /  

Veeder-­‐Root  •  Easco  Hand  

Tools  •  ELE  •  Electro-­‐KineJcs  •  EskoArtwork  •  EnergeJc  

Materials  •  Environmental  

Test  Systems  •  Fisher  Pierce  •  Fluke  

CorporaJon  •  Fluke  Networks  •  GearWrench  •  Gems  Sensors  &  

Controls  

•  Gendex  •  Gilbarco  Veeder-­‐

Root  •  GLI  •  Guardian  VoJng  

Systems    •  G&L  MoJon  

Control,  Inc  •  Hach  Company  •  HACH  LANGE  

(Europe)    •  Harowe  •  Hart  ScienJfic  •  HECON  •  Hengstler  GmbH  •  Hennessy  

Industries  •  Holo-­‐Krome  •  HTL/Kin-­‐Tech  •  Hydrolab  •  Imaging  Sciences  

InternaJonal  •  Invetech  •  Iseli  •  Jacobs  Chuck  

Manufacturing  

•  Jacobs  Vehicle  Systems  

•  Joslyn  Clark  •  KaVo  Dental  •  K-­‐D  Tools  •  Kerr    •  Kistler  Morse  •  Kobalt  Hand  

Tools  •  Kollmorgen  •  Kollmorgen  

Electro-­‐OpJcal  •  Lachat  

Instruments  •  Leica  

Microsystems  •  Linx  PrinJng  

Technologies  •  Matco  Tools  •  Marsh  

McBerney  Industries  

•  McCrometer  •  Namco  /  Dolan  

Jenner  •  Negele  

Messtechnik  GmbH  

•  OECO  •  Orbisphere  •  Ormco  •  Pacific  ScienJfic  

Instruments  •  Partlow  •  Pelton  &  Crane  •  PMA  •  Polymetron  •  Portescap  •  Qualitrol  Corp  •  Radiometer  •  Radiometer  

AnalyJcal  •  Raytek  •  Red  Jacket  •  Robin  

Electronics  •  Sata  •  Securaplane  

Technologies  •  Setra  •  Spline  Gauges  •  Sunbank  

•  SybronEndo  •  Tektronix  •  Tektronix  

CommunicaJons  •  Thomson  •  Trojan  

Technologies-­‐  Videojet  

•  Vision  Systems  Limited  

•  Visual  Network  Systems  Ltd  

•  West  Instruments  

•  Wille^  

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DHR  Stock  Chart  

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Stock  Summary  

•  Share  Price………………………………………………………………..…………….  51.96  •  Market  Capitaliza,on..…………………….........................................34.25B  •  P/E……………………………………………………………………………….….……….19.68  •  EPS..……………………………………………………………………………………………2.64  •  52-­‐week  Range.………………………………………………………..…  ..35.24–53.01    

•  Average  Volume………………………………………................................  3.29M  

•  Revenue  Growth………………………………………………………………………..  18%  •  Interest  Coverage  Ra,o……………………………………………………………..  20.8  •  Gross  Profit  Margin……………….………………………………………………..  50.2%  •  Cash  …………………………………………………….……………………………….…1.63B  •  Free  Cash  Flow  to  Net  Income  Conversion  Ra,o….......................120%  

•  Forecasted  5yr.  Earnings  Growth………………………………………….....15.0%  

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Revenue  Growth  • Revenue  growth  categorized  as  “high”  in  comparison  to  other  conglomerates  

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Financial  Highlights  

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DHR  is  a  Long    World-­‐wide  Industry  Leader/Brand  Recogni,on  

Unique  Posi,oning  in  the  Market  

 Significant  Poten,al  for  Growth  and  Innova,on  

Prominent  in  Emerging  Markets  

Cost  Effec,ve  Business  Model  (DBS)  

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Leading  in  All  Sectors  

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Danaher  is  an  Industry  Leader  •  Danaher  is  an  ac,ve  acquirer  of  great,  global  companies  with  strong,  market-­‐leading  brands.    

 • Well  diversified  through  emerging  markets.    •  In  2009,  Danaher  expanded  interna,onally  in  response  to  a  declining  economy.  It  profits  as  the  economy  recovers,  since  those  acquisi,ons  are  now  genera,ng  profits.  

 •  Outstanding,  experienced  management.   11  

Industry  SegmentaJon  

22%  

21%  

17%  

14%  

24%  

2%  

Revenue  DistribuJon  

Test  &  Measurement  

Environmental  

Life  Sciences  &  Diagnos,cs  

Dental  

Industrial  Technologies  

Specialty  Businesses   12  

Environmental  

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Test  &  Measurement  

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Industrial  Technologies  

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Dental  

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Life  Sciences  &  DiagnosJcs  

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Wide-­‐Ranging  Product  Mix  

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Growth  

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Growth  &  InnovaJon  

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AcquisiJons  made  solely  in  2010  

New  IniJaJves  •  Danaher  subsidiary,  Hach,  created  The  Virtual  Tradeshow,  an  online  tool  which  lets  poten,al  customers  interact  with  water  quality  experts  through  video  demonstra,ons,  webex,  and  live  chats.  

 •  Another  subsidiary,  Pelton  Crane  started  a  Den,stry  Technology  Seminar  called  “Driven  to  Excellence”  where  they  introduce  their  newest  dental  equipment.  •  Resulted  in  a  $50  million  sales  funnel  

 

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Research  &  Development  • More  than  1800  new  products  introduced  in  2010  alone.  

• Circa  $3.5B  of  2010  revenue  gained  from  new  products  introduced  in  past  3  years  alone.  

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Prominence  in  Emerging  Markets  

•  20%  YTD  emerging  market  growth  in  sales  •  Over  50%  of  annual  revenue  comes  from  Interna,onal  Markets.  

•  Industry  leader  in  BRIC  countries.  •  Introduced  major  subsidiaries  in  China:  Leica,  Hach,  &  Tektronix.  

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Danaher  Business  System  

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If  you  don’t  measure  it,  you  can’t  improve  it.  

Personalized  Balance  Scorecard.  Focus  on  Quality,  Delivery,  Cost,  &  InnovaJon  

Danaher  Business  System  (DBS)    

•  Danaher  Corp.  started  going  “lean”  in  1987;  one  of  the  earliest  companies  in  the  US  to  do  so.    

•   "Lean,"  is  a  produc,on  prac,ce  that  considers  the  expenditure  of  resources  for  any  goal  other  than  the  creaJon  of  value  for  the  customer  to  be  wasteful,  and  thus  a  target  for  elimina,on.    

•  Even  before  a  deal/acquisi,on  is  made,  the  DBS  team,  works  with  the  acquisi,on  target  to  inject  a  heavy  dose  of  Danaher  DNA.    

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Synergizing  organic  and  inorganic  growth  through  focus  on  3  key  factors:    

Create  Value  Increase  Efficiency  Inculcate  Growth  and  InnovaJon  

 Perceived  CompeJtors  •  General  Electric  (GE)  

•  Sells  mainly  Capital  Intensive  products.  So,  more  complex  purchasing  decisions  for  buyers.  ROI  is  dissipated  over  5-­‐10  years.  

•  Failed  to  recover  from  the  recession.  Low  growth  rate.  

•  3M  (MMM)  •  Sensi,ve  to  product  cycles  and  seasonality.  Higher  risk.  overextended.  •  Domes,c  slowdown  over  the  recent  past.  Revenue  from  Display  &  Graphics  

division  directly  ,ed  to  North  American  consumer  habits.  More  elas,c  demand.  •  Downsizing  pharmaceu,cal  sector  

•  Tyco  InternaJonal  (TYC),  United  Technologies  (UTX)  •  General  conglomerates.  Operate  in  different  segments  .  Falsely  perceived  as  

compe,tors  to  DHR  by  analysts  •  Low  revenue  growth.  Overextended,  currency  risks.  

26  Conglomerate  Industry’s  high  barriers  to  success  keep  compeJJon  in  check  

MispercepJons  •  Danaher  is  compared  to  general  conglomerates  

•  Clarifica,on:  Analysts  onen  don’t  know  where  to  posi,on  it  &  with  what  other  companies  to  compare  it.    

•  Danaher  is  considered  overextended  •  Clarifica,on:  Danaher  has  a  lot  of  capacity  for  growth.  Only  half  the  size  of  3M  but  

much  more  efficient  

•  Analysts  overlook  the  potenJal  value  created  by  Danaher’s  acquisiJons  

•  Danaher’s  management  team  has  successfully  integrated  acquisi,ons  by  leveraging  the  companies’  untapped  growth  poten,al  and  buying  very  undervalued  companies.  

•  Analysts  judge  Danaher’s  value  by  looking  at  its  net  assets  alone  •  Clarifica,on:  R&D  on  internally  developed  assets  is  overlooked,  since  it  is  expensed  

when  incurred  

•  Danaher  focuses  in  the  Water  market,  which  is  overlooked  by  Wall  Street  

•  Clarifica,on:  The  water  market  is  actually  long-­‐term  profitable  endeavor  due  to  poten,al  shortage  of  water.    

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VAR  

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“We  really  didn’t  even  look  at  anything  else.  I  think  the  product’s  great.  It  solves  a  lot  of  issues  for  me.”  

–  Steven  O,  Senior,  Metrologist,  Defense  Industry,  Washington  DC    (In  reference  to  MET/CAL  sonware,  Test  and  Measurement,  Fluke  Calibra,ons)  

“HealOzone  has  changed  the  way  I  pracJce  denJstry.”  -­‐  Dr.  S.  Y.  P.  Cheng,  Den=st,  London        (In  reference  to  HealOzone,  a  root-­‐canal  disinfec,on  product  by  KaVo)  

“Hach  Lange  has  enriched  the  water  and  sewage  market  with  many  innovaJve  products  during  their  75-­‐year-­‐old  history.  Hach  Lange  does  not  only  sell  products,  but  shows  engagement,  a  pioneer's  mind,  and  customer  proximity  in  order  to  find  pracJcal  soluJons  and  open  the  market  for  new  measuring  and  regulatory  ideas.”  -­‐  Dr.  G.  Seibert-­‐Erling,  Consultant  Engineer,  Water  treatment  plant,  Kressbronn-­‐Langenargen,  Germany  (In  reference  to  Danaher’s  leading  water  treatment  subsidiary,  Hach  Lange)  

VAR  

• “Danaher  is  probably  the  best-­‐run  conglomerate  in  America.  It's  clearly  the  best  performing:  Over  20  years,  it  has  returned  a  remarkable  25%  to  shareholders  annually,  far  be^er  than  GE  (16%),  Berkshire  Hathaway  (21%),  or  the  Standard  &  Poor's  500-­‐stock  index  (12%).”  

29  -­‐Brian  Hindo,  Corporate  Strategies  Editor,  Bloomberg  BusinessWeek.  

Possible  Risks  

• Danaher  uses  metals  in  manufacturing  its  various  products  so  non-­‐ferrous  metal  prices  may  affect  its  gross  margin.  

•  If  oil  prices  soar  for  long  periods  of  ,me,  it  may  lessen  Danaher’s  opera,ng  margin.  

•  Li,ga,on  over  patents  on  new  products  • Risk  from  changing  exchange  rates  since  Danaher  is  a  global  company  

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The  Bo^om  Line  •  Danaher  has  a  niche  since  it  is  wide-­‐ranging,  but  focuses  in  high-­‐tech  products  across  mul,ple  sectors,  demographics,  and  countries.    

•  Danaher  is  very  futuris,c.  Danaher  understands  future  world  and  it  is  deeply  invested  in  planning  for  tomorrow’s  needs  while  sa,sfying  today’s.    

•  Due  to  exceedingly  high  barriers  to  success,  it  is  difficult  for  new  compe,,on  to  enter  and  pose  a  threat  to  Danaher.  

•  Stable  management.  They  understand  the  repercussions  of  what  they  are  doing.    

•  Danaher  Corpora,on  is  not  dependent  on  a  single  ver,cal  industry;  it  is  mul,faceted.  Risk  is  mi,gated  due  to  product  diversity.  

 

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QuesJons?  

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