2010 ANNUAL REPORT Segmentation Voice of the Customer Dynamic Resource Allocation Brand Management Policy Deployment MEASURING Risk Management Value Selling Innovation Talent SUCCESS Accelerated Product Development Sales Force Initiatives Emerging Markets Digital Marketing DBS 2010 ANNUAL REPORT In 2010, Danaher updated reporting segments to reflect the evolution of our business to a science and technology company. We now report results in five business segments: Test & Measurement; Environmental; Life Sciences & Diagnostics; Dental; and Industrial Technologies. TEST & MEASUREMENT Our Test & Measurement segment is a leading, global provider of electronic measurement instruments and monitoring, management and optimization tools for communications and enterprise networks and related services. Our products are used in the design, development, manufacture, installation, deployment and operation of electronics equipment and communications networks and services. Customers for our products and services include manufacturers of electronic instruments; service, installation and maintenance professionals; network equipment manufacturers who design, develop, manufacture and install network equipment and service providers who implement, maintain and manage communications networks and services. Also included in our Test & Measurement segment are our mobile tool and wheel service businesses. Financial Operating Highlights 2010 2009 (dollars in thousands except per share data and number of associates) Sales $ 13,202,602 $ 11,184,938 Operating profit $ 2,166,374 $ 1,542,476 Net earnings $ 1,793,000 $ 1,151,704 Earnings per share (diluted) $ 2.64 $ 1.73 Operating cash flow $ 2,084,351 $ 1,800,834 Capital expenditures $ 217,328 $ 188,547 Free cash flow (operating cash flow less capital expenditures) $ 1,867,023 $ 1,612,287 Number of associates 48,000 46,600 Total assets $ 22,217,130 $ 19,595,420 Total debt $ 2,824,668 $ 2,933,209 Stockholders’ equity $ 13,772,766 $ 11,630,176 Total capitalization (total debt plus stockholders’ equity) $ 16,597,434 $ 14,563,385 2010 ANNUAL REPORT ENVIRONMENTAL Our Environmental segment provides products that help protect our water supply and air quality and serves two primary markets: water quality and retail/commercial petroleum. Our water quality business is a global leader in water quality analysis and treatment, providing instrumentation and disinfection systems to help analyze and manage the quality of DENTAL ultra-pure, potable and wastewater in Our Dental segment is a leading, worldwide provider residential, commercial and industrial of a broad range of equipment, consumables and applications. Our retail/commercial petroleum business is a leading services focused on developing, manufacturing and worldwide provider of products and marketing innovative solutions for dental professionals. services for the global petroleum Customers for our products and services include market. Our solutions and services are general dentists, dental specialists, hygienists, and focused on fuel dispensing, point-of- educational, medical and government entities. Our sale systems, payment systems and products and services are sold directly and through environmental compliance. dealer networks around the world. LIFE SCIENCES & DIAGNOSTICS Our Life Sciences businesses offer a broad range of research and clinical tools used by scientists to study cells and cell components to gain a better understanding of complex biological matters. Our Diagnostics businesses offer a broad range of analytical instruments, reagents, consumables, software and services used to diagnose diseases and make treatment decisions in histopathology labs, hospitals and other critical care settings. INDUSTRIAL TECHNOLOGIES Our Industrial Technologies segment designs and manufactures components and systems that are typically incorporated by original equipment manufacturers and systems integrators for sale into a diverse set of applications and end-markets. The businesses also provide a full range of service and support, including helping customers with integration and installation to ensure maximum performance and uptime. Our Product Identification platform provides equipment and consumables for variable printing, marking and coding on a wide variety of consumer and industrial products. Our Motion platform delivers innovative, electromechanical solutions for the industrial automation and packaging markets. Our Specialty Products businesses offer focused product technologies to targeted industrial markets. 4 4 3 3 2 2 1 1 5 6 7 8 5 6 7 8 9 2010 ANNUAL REPORT DEAR FELLOW SHAREHOLDER: I am pleased to report that 2010 was an outstanding year of execution at Danaher. Aided by the global economic recovery, our team took full advantage of the opportunities for growth to deliver exceptional results, all the while evolving the portfolio toward a more global, higher quality, more scientific and technological set of businesses. MEASURING SUCCESS One of the core tenets of the Danaher Business System (DBS) is “If you don’t measure it, you can’t improve it.” For more than 20 years, DBS has provided our associates the necessary tools to measure performance, as we serve our customers. This results-driven approach to running our business has served us well over the long-term with consistently strong financial performance and improvements in every aspect of our business. A year ago, I reported to you the good work our team was doing to drive innovation, to expand our customer facing initiatives, to increase our exposure in the fast growing emerging markets and to evolve our portfolio through acquisitions. In 2010, we continued to focus our time in these critical areas with measurable success. 2010 Financial Highlights • We delivered record revenues of $13.2 billion with core revenue growth of 11.5% • Our gross margin exceeded 50% for the first time in Danaher’s history • We exceeded $1.8 billion in free cash flow, surpassing our previous all-time high achieved in 2008 • We generated a free cash flow to net income conversion ratio of 120%, excluding the gain from the Apex joint venture, representing the 19th consecutive year in which free cash flow exceeded net income • Adjusted diluted net earnings per share increased more than 30% to $2.31 • We deployed over $2 billion of capital to acquire 19 new companies across all of our five segments, with an emphasis on our growth platforms • Our market capitalization surpassed $30 billion 4 3 2 1 5 6 7 8 2010 ANNUAL REPORT New Product Development Investing in innovation is an important part of the Danaher growth story. More than 6% of our annual sales are now directed to research and development (R&D) initiatives; nearly double what it was just a few years ago. This is very much a deliberate reallocation of resources on our part. Using Accelerated Product Development and other DBS tools, we are bringing innovative new products to market faster than ever with measurable results – $3.5 billion of our revenue in 2010 came from products introduced within the last 36 months. In 2010 alone, we launched over 1,800 new products, including: • Trojan Technologies introduced the TrojanUV Signa, its most advanced, open channel wastewater UV disinfection system designed for large-scale disinfection applications. It makes the conversion to UV disinfection easier, by reducing the total footprint needed, simplifying maintenance and lowering the total cost of ownership. • Fluke’s new 381 Remote Display Clamp Meter is the first of its kind with a detachable, remote display and flexible current probe, providing technicians with easier, faster and safer measurements. RADIOMETER Radiometer launched the ABL90 FLEX blood gas • Leica Microsystems launched the M320 microscope, analyzer targeting mid-volume point-of-care designed for the dental practitioner and developed using testing in clinical applications and the ABL80 open innovation with KaVo. FLEX designed for the emerging markets. Shortly after launch, the ABL90 was awarded the Medical • Veeder-Root launched the Phase-Two™ Water Detector, the Design Excellence Award for in-vitro diagnostics. first and only solution to continuously monitor underground storage tanks and detect ethanol-blended fuel phase separation, which can occur when water finds its way into the tanks, often leading to infrastructure corrosion at the service station and costly damage to vehicle engines. 4 3 2 1 5 6 7 8 2010 ANNUAL REPORT AB SCIEX TripleTOF ™ 5600 SySTeM The Australian Proteome Analysis Facility (“APAF”) has chosen the AB SCIEX TripleTOF ™ 5600 System to help advance proteomics research, by significantly expanding its proteome coverage. The TripleTOF™ 5600 System is the life science industry’s fastest and most sensitive, high-resolution mass spectrometer for high-performance qualitative and quantitative analysis. APAF is among the first laboratories in the world to adopt this groundbreaking scientific technology. APAF’s core proteomic services are focused on differential protein expression analysis, which drives the search for biomarkers that can be used to improve human health, agriculture and food research. The TripleTOF™ 5600 System will enable APAF scientists to characterize which proteins are changing within a biological system with much greater depth and accuracy than what they can currently achieve with existing systems. 4 3 2 1 5 6 7 8 20102010 ANNU ANNUALA L REPO REPORTRT DANAHER IN CHINA In 2010 and for the first time, we had four brands – Fluke, Hach, Leica and Tektronix – surpass $100 million of in-country