Danaher (DHR)

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Danaher Corporation (DHR) engages in the design, manufacture, and marketing of professional, medical, industrial, and consumer products. The company, formerly known as DMG, Inc., was founded in 1969. It changed its name to Diversified Mortgage Investors, Inc. in 1978 and to Danaher Corporation in 1984. Danaher is headquartered in Washington DC and is a component of S&P500. As of 2007, DHR has 45000 employees.

DHR is a large conglomerate, operating in many business areas, which can fall into four major segments: Professional Instrumentation, Medical Technologies, Industrial Technologies, and Tools & Components. The Professional Instrumentation segment produces and sells compact, professional electronic test tools and calibration equipment; water quality instrumentation and consumables, and ultraviolet disinfection systems; and retail/commercial petroleum products and services, including underground storage tank leak detection and vapor recovery systems. The Medical Technologies segment designs and manufactures critical care diagnostic instruments, high-precision optical systems for the analysis of microstructures, and a range of products used by dental professionals. The Industrial Technologies segment manufactures products and sub-systems that are incorporated by customers and systems integrators into production and packaging lines, and by original equipment manufacturers into various end-products and systems. It offers product identification equipment and consumables; motion, position, speed, temperature, level instruments, and sensing devices; power switches and controls; power protection products; liquid flow and quality measuring devices; aerospace safety devices and defense articles; and electronic and mechanical counting and controlling devices. The Tools & Components segment produces and distributes general purpose and specialty mechanics' hand tools, as well as toolboxes and storage devices, diesel engine retarders, wheel service equipment, and drill chucks.

Danaher sells its products primarily in the United States, Europe, and Asia. 2006 sales reached $10 billion. Over the last ten years, Danaher revenues have grown over four-fold, a result of consistent organic growth coupled with a disciplined acquisition strategy. This success is also reflected in Danaher’s share price performance generating a ten year compounded annual growth rate of over 20% per year.

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[edit] Business Financials

[edit] Professional Instrumentation (32.1% of sales, 40.8% of operating profit)

The professional instrumentation segment sells environmental and measurement tools. These tools include calibration equipment, water quality instruments, and petroleum services. From 2006 to 2007, sales to professional instrumentation increased 21.7%.

[edit] Medical Technologies (27.2% of sales, 22.6% of operating profit)

The medical technologies segment manufactures dental, microscopy, and life sciences equipment. Products range from infection control products to surgical microscopes. DHR sells these products to professionals and health care institutions. From 2006 to 2007, sales to medical technologies increased 35%.

[edit] Industrial Technologies (28.6% of sales, 30.6% of operating profit)

The industrial technologies segment manufactures production and packaging line products as well as aerospace & defense products. Industrial products range from motors to brakes and aerospace & defense products range from security systems to smoke detectors. From 2006 to 2007, sales to industrial technologies increased 5.5%

[edit] Tools & Components (12.1% of sales, 10.1% of operating profit)

The Tools & Components segment manufactures tools and industrial parts. Products range from hand tools to gear boxes to automotive tools. These products are sold at hardware stores and to automotive end markets. From 2006 to 2007, sales to tools & components decreased 1.1%

From 2006 to 2007, DHR revenues increased 16.5%, total cost increased 16.6%, and operating profit increased 16.0%.^[1] In 2007, DHR had backlog of $1.7 billion, up 39.2% from the previous year.^[2]

[edit] Trends and Forces

[edit] Acquisitions

[edit] Danaher acquires Tektronix (TEK) for $2.8 billion.

On October 15, 2007, DHR acquired Tektronix for $2.8 billion.^[3] TEK is an electronic testing company that will expand DHR's product line.

[edit] Rising steel, oil and non-ferrous metals prices.

Steel is DHR's principle material used in manufacturing. From 2004 to 2008, scrap metal price has grown from $75 per ton to over $550 per ton.^[4] DHR also uses oil and gas in manufacturing and transportation. Oil prices have increased 35% since the end of 2007.^[5] From 2006 to 2007, DHR stabilized its operating margins (15.79% -- down from 15.84%) through pricing.^[6]

[edit] Competition

[edit] Conglomerates

• Danaher (DHR)
• General Electric Company (GE) GE leads the conglomerate industry in market cap and total revenue.^[7]
• United Technologies (UTX) UTX is second in the conglomerate industry in market cap and total revenue.^[7]
• 3M Company (MMM) -- 3M manufactures everything from LCD screens to post-it notes. Two-thirds of 3M sales are international.^[8]
• Textron (TXT) -- TXT manufactures automotive and aerospace & defense products, as well as provides commercial loans.^[9]
• PPG Industries (PPG) PPG lead the conglomerate industry in quarterly revenue growth ^[7]
• Cooper Industries (CBE) -- CBE manufactures electrical products, tools, hardware, and metal support products.^[10]
• Crane Company (CR) CR lead the conglomerate industry in quarterly earnings growth.^[7]

[edit] References

1. ↑ ^{1.0 1.1} DHR 2007 10-k, Item 6: Selected Financial Data, page 25
2. ↑ DHR 2007 10-k, Item 1: Business, page 10
3. ↑ Seeking Alpha, "Danaher to Buy Tektronix for 2.8B -- WSJ," 10/15/07
4. ↑ Forbes, "Timken Steeled by Steel," 4/30/08
5. ↑ Wikipedia, "Oil Price Increases Since 2003"
6. ↑ Google Finance: DHR
7. ↑ ^{7.0 7.1 7.2 7.3} Yahoo! Finance: Conglomerates Leaders and Laggards
8. ↑ 3M website, "About Us"
9. ↑ Textron website, "Textron Businesses"
10. ↑ Cooper Industries website, "About Cooper Industries"
11. ↑ GE 2007 10-k, Item 6: Selected Financial Data, page 21
12. ↑ UTX 2007 10-k, Item 6: Selected Financial Data, page 14
13. ↑ [http://www.sec.gov/Archives/edgar/data/66740/000110465908011226/a08-2453_110k.htm#Item6_SelectedFinancialData__190640 MMM 2007 10-k, Item 6: Selected Financial Data, page 11}
14. ↑ TXT 2007 10-k, Item 6: Selected Financial Data, page 14
15. ↑ PPG 2007 10-k, Item 6: Selected Financial Data, page 19
16. ↑ CBE 2007 10-k, Item 6: Selected Financial Data, page 16
17. ↑ CR 2007 10-k, Item 6: Selected Financial Data, page 17