Danaher (DHR)

Q4 2010 Earnings Call

January 27, 2011 8:00 am ET

Executives

Matt McGrew - Vice President of Investor Relations

H. Culp - Chief Executive Officer, President, Director, Member of Finance Committee and Member of Executive Committee

Daniel Comas - Chief Financial Officer and Executive Vice President

Analysts

Scott Davis - Morgan Stanley

John Inch - BofA Merrill Lynch

Shannon O'Callaghan - Lehman Brothers

Steven Winoker - Bernstein Research

Robert Cornell - Barclays Capital

C. Stephen Tusa - JP Morgan Chase & Co

Jeffrey Sprague - Citigroup

Jon Wood - Jefferies & Company, Inc.

Deane Dray - Citigroup Inc

Presentation

Operator

Good morning. My name is Erin, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Danaher Corporation Fourth Quarter 2010 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Matt McGrew, Vice President of Investor Relations. Mr. McGrew, you may begin your conference.

Matt McGrew

Thanks, Erin. Good morning, everyone, and thanks for joining us. On the call today are Larry Culp, our President and Chief Executive Officer, who's joining us from London instead of snowy Washington; and Dan Comas, our Executive Vice President and Chief Financial Officer, who's joining me here in D.C.

I'd like to point out that our earnings release, a slide presentation supplementing today's call and the reconciling and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call, are all available in the Investors section of our website, www.danaher.com., under the heading Earnings and will remain available following the call. As our year-end Form 10-K is not yet been filed, we will include it as part of the earnings release in the fourth quarter and full year income statement, year-end balance sheet and full year cash flow statement.

In addition, we've included data in the release reflecting our business segment results as well as supplemental income statement data to facilitate your analysis. The audio portion of this call will be archived in the Investors section of our website later today under the heading Investor Events and will remain archived until our next quarterly call. A replay of this call will also be available until February 1. The replay number is (888) 203-1112 in the U.S. and (719) 457-0820 internationally and the confirmation code is 4535370.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Please refer to the accompanying slide presentation, our earnings release, the other related presentation materials supplementing today's call and our annual report on Form 10-K when it is filed for additional factors that impacted year-over-year performance.

I'd also like to note that we'll be making some forward-looking statements during the call, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.

It is possible that actual results might differ materially from any forward-looking statements that we might make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements. With that, and I'd like to turn the call over to Larry.

H. Culp

Matt, thanks. Good morning, everyone. 2010 was an outstanding year for Danaher. We grew 13% organically in the fourth quarter, wrapping up an exceptionally strong year for all of our businesses. Core growth in the fourth quarter was broad based across the segments led by Test & Measurement, up 24%; Industrial Technology is up 15.5%; and Life Sciences & Diagnostics, up 10%.

The double-digit core growth seen throughout the year was certainly helped by the economic recovery but also by all the work we've been doing the last several years reshaping the portfolio, expanding margins, which in turn has allowed us to accelerate organic investment, while obviously executing well with Danaher Business System.

We've re-weighted many of our investments with a focus on the emerging markets, which positions us well in the fastest-growing parts of the world. Those investments are paying off as the emerging markets were our best performer in the quarter, up more than 25%. China grew in excess of 30% despite challenging year-over-year comps with our Life Sciences & Diagnostics and Environmental businesses leading the way. We are pleased to report that four brands reached the $100 million revenue mark in China in 2010, Fluke, Hach, Tektronix and Leica, a great achievement for those businesses and an example of how solid execution and the best team win.

The growth model we've developed in China is being aggressively exported around the world, most notably to India, which we believe will be a significant contributor to our long-term growth. We were also encouraged by the continued strength in the developed economies as both the U.S. and Europe grew about 10%.

The quality of our core growth was evidenced in the outstanding margin performance in the quarter with our core operating margin improving 230 basis points year-over-year, which each of our segments achieving at least 150 basis points of core margin improvement. So with that as a backdrop, let me move to the details of the quarter.

Today, we reported fourth quarter GAAP diluted net earnings per share of $0.69, up 72.5% from last year. Adjusted diluted net earnings per diluted share was $0.67, up 19.5% year-over-year. Included in our fourth quarter results is over $60 million of accelerated restructuring and incremental growth spending, which will benefit us in 2011 and beyond.

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