Danaher (DHR)

Q3 2011 Earnings Call

October 20, 2011 8:00 am ET


Daniel L. Comas - Chief Financial Officer and Executive Vice President

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

Matt R. McGrew - Vice President of Investor Relations


Scott R. Davis - Morgan Stanley, Research Division

Nigel Coe - Deutsche Bank AG, Research Division

C. Stephen Tusa - JP Morgan Chase & Co, Research Division

John G. Inch - BofA Merrill Lynch, Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Shannon O'Callaghan - Nomura Securities Co. Ltd., Research Division

Jeffrey T. Sprague - Vertical Research Partners Inc.

Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division

Deane M. Dray - Citigroup Inc, Research Division



Good morning. My name is Dave, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Danaher Corporation Third Quarter 2011 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 R. McGrew

Good morning, everyone, and thanks for joining us. On the call today are Larry Culp, our President and Chief Executive Officer; and Dan Comas, our Executive Vice President and Chief Financial Officer.

I'd like to point out that our earnings release, a slide presentation supplementing today's call, our third quarter Form 10-Q and the reconciling and other information required by SEC Regulation G, relating to any non-GAAP financial measures provided during the call are all provided in the Investors section of our website, www.danaher.com, under the heading Financial Information and will remain available following the call.

The audio portion of this call will be archived on the Investors section of the 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 October 27, 2011. The replay number is (888) 203-1112 in the U.S., (719) 457-0820 internationally and the confirmation code is 4721216.

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, our third quarter 10-Q and other related presentation materials supplementing today's call for additional factors that impacted year-over-year performance.

All references in these remarks in the company's presentations to earnings, revenues and other company-specific financial metrics relate only to the continuing operation of Danaher's businesses, unless otherwise noted.

I'd also like to note that we will be making some statements during the call that are forward-looking statements within the meaning of the federal securities laws, 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 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, whether as a result of new information, future events and developments or otherwise.

With that, I'll turn the call over to Larry.

H. Lawrence Culp

Matt, thanks. Good morning, everyone, and thank you for joining us. We are pleased to report an outstanding third quarter result for Danaher. The quarter largely played out in line with expectations, the expectations we shared with you both in July and when we were together with many of your in early September.

Our core growth in the third quarter was 7.5%. While we are cognizant of the macro concerns, we continue to feel good about where we are today.

Danaher business system continues to be a competitive advantage, helping our businesses capture market share through innovation, new product introductions and go-to-market initiatives. We had a number of exciting new product introductions in the quarter, most notably at Tektronix where we launched 2 game-changing oscilloscopes, which I'll talk about more later.

From a geographic perspective, what we've seen thus far is again very much in line with what we saw in the second quarter: The emerging markets leading the way followed by the developed markets. While China remains healthy, third quarter revenue grew at a slower rate than what we saw in the first half. Those of you who did join us last month in Chicago saw our numerous examples of how we're building our premier global enterprise by investing in go-to-market initiatives in country leadership and localization of products in the emerging markets.

Sales from the emerging markets grew at a low double-digit rate in the third quarter, and this was the first quarter in which we surpassed $1 billion in total revenue. Sales from the developed markets grew at a mid-single-digit rate in the quarter with the U.S. doing better than Europe.

During the quarter, we delivered strong operational performance with our core operating margin improving 130 basis points year-over-year and 4 of our 5 segments delivering over 100 basis points of core margin improvement, all the while continuing to invest in growth opportunities. We were particularly pleased with the operating margin performance at Dental and Test & Measurement, as well as the better-than-expected operating margins at Beckman Coulter.

So with that as a backdrop, let me move to the details of the quarter.

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