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2013 Annual Report Annu a R L Repo T 3/19/14 11:15 AM 441583 Cov Cs6.Indd 20 441583 Cov cs6.indd 20 DANAHER 2013 ANNUAL REPORT ANNU A L REPOL R T 3/19/14 11:15 AM 441583 Cov cs6.indd 20 DANAHER 2013 ANNUAL REPORT ANNU A L REPOL R T 3/19/14 11:15 AM TABLE OF CONTENTS Danaher Overview 1-6 Letter to the Shareholders 7-11 2013 Form 10-K 12-116 Supplemental Financial Information 117-118 Directors and Executive Officers 119 Shareholder Information 120 DANAHER FINANCIAL OPERATING HIGHLIGHTS (dollars in millions, except per share data and number of associates) 2013 2012 Sales* $ 19,118 $ 18,260 Operating Profit* $ 3,275 $ 3,165 Net Earnings* $ 2,695 $ 2,299 Net Earnings Per Share (diluted)* $ 3.80 $ 3.23 Operating Cash Flow* $ 3,585 $ 3,502 Capital Expenditures* $ 552 $ 458 Free Cash Flow (Operating Cash Flow less Capital Expenditures)* $ 3,033 $ 3,044 Number of Associates 66,000 63,000 Total Assets $ 34,672 $ 32,941 Total Debt (Long-Term Debt ($3,437) plus Notes Payable and Current Portion of Long-Term Debt ($62)) $ 3,499 $ 5,343 Stockholders’ Equity $ 22,451 $ 19,084 Total Capitalization (Total Debt plus Stockholders’ Equity) $ 25,950 $ 24,427 *from continuing operations 1 FLUKE NETWORKS ENABLES InnOVATORS AT DENTAL We enable dental professionals to provide the highest level of patient care and optimize their work environments. Our KAVO KERR GROUP Dental platform develops products that are used to diagnose, treat and prevent disease and ailments of the teeth, gums PROUDLY SERVES and supporting bone, as well as improve the aesthetics of the human smile. We are a leading, worldwide provider % OF U.S. of a broad range of dental consumables, equipment and services, and are dedicated to driving technological innovations that help dental professionals improve clinical 99DENTAL outcomes and enhance productivity. PRACTICES 441583.TEXT.cs6.indd 2 3/19/14 1:26 PM TEST & MEASUREMENT Our customers count on us to help them design cutting-edge innovations, keep their businesses up and running and safeguard their network operations. Our Instruments platform offers test, measurement and monitoring products that are used in electronic design, manufacturing and advanced technology development, as well as for installation, service and maintenance of electrical, industrial, electronic and calibration applications. Our Communications platform offers monitoring, management and optimization tools, as well as intelligence and security solutions for communications and enterprise networks. FLUKE NETWORKS ENABLES InnOVATORS AT 98 OF FORTUNE’S TOP 100 COMPANIES 441583.TEXT.cs6.indd 3 3/19/14 1:26 PM INDUSTRIAL OUT TECHNOLOGIES OF Our solutions help protect the world’s 9 10 food supply, improve packaging design and quality, verify pharmaceutical RETAIL dosages and authenticity, and power innovative machines. Our Product PACKAGES Identification platform develops and manufactures equipment, consumables ARE TOUCHED and software for various printing, marking, coding, design and color BY ESKO management applications on consumer and industrial products. Our Motion platform provides mechanical and electromechanical motion control solutions for the automation market. 441583.TEXT.cs6.indd 4 3/20/14 3:28 PM LIFE SCIENCES & DIAGNOSTICS We are at the leading edge of scientific research and advancing patient health with the highest diagnostic confidence. Our Life Sciences platform offers a broad range of research tools that scientists use to study cells and cell components in order to understand the causes of disease, identify new therapies and test new drugs and vaccines. Our Diagnostics platform offers analytical instruments, reagents, consumables, software and services that hospitals, physicians’ offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions. LEICA BIOSYSTEMS IS TRUSTED BY % OF THE TOP 50 100 RANKED U.S. CANCER CENTERS (AS RANKED BY U.S. NEWS & WORLD REPORT) 441583.TEXT.cs6.indd 5 3/19/14 1:27 PM 23 OF THE TOP 25 ENVIRONMENTAL GLOBAL OIL Our products help protect the global water supply, ensure environmental stewardship, COMPANIES enhance the safety of personal data and improve business efficiencies. Our Water USE GILBARCO Quality platform provides instrumentation and disinfection systems to help analyze, treat VEEDER-ROOT and manage the quality of ultra-pure, potable, waste, ground and ocean water in residential, TECHNOLOGY commercial, industrial and natural resource applications. Our Gilbarco Veeder-Root platform is a leading, worldwide provider of solutions and services focused on fuel dispensing, remote fuel management, point-of-sale and payment systems, environmental compliance, vehicle tracking and fleet management. 441583.TEXT.cs6.indd 6 3/19/14 1:27 PM DEAR SHAREHOLDERS, 2013 was a good year at Danaher. Our team continued to leverage the Danaher Business System (DBS) to drive relative top-line outperformance, solid core operating margin H. LAWRENCE CULP, JR. expansion and excellent cash flow throughout President & Chief Executive Officer the year. Revenue increased 4.5% to $19.1 billion with core revenue growth of 2.5%. Approximately 40% of our revenue was generated from consumables, software and services, evidence of our important place in our customers’ workflows. Our gross margin exceeded 52%. Our core operating margin expanded approximately 80 basis points and our reported operating margin was 17.1%. We generated $3 billion of free cash flow, marking the 22nd consecutive year in which free cash flow exceeded net income. We deployed approximately $1 billion on 14 strategic bolt-on acquisitions to strengthen our existing competitive positions and enhance our future growth prospects. Danaher will generate nearly $20 billion of revenue this year. That size, coupled with our global footprint and our exposure to some of the most attractive scientific and technical end-markets in the world, including health care, environmental and communications, set the stage for continued success in 2014. But, we recognize that there are no guarantees in corporate life. Our teams are hard at work on the following five, Danaher-wide strategic priorities to ensure that we fully seize the potential of our markets for years to come: GAINING MARKET SHARE VIA DBS: GOING DIGITAL: HARNESSING GLOBAL SCALE – THE DANAHER WAY: We continue to develop and We are taking full advantage deploy our growth, lean and of fundamental changes in We’re finding new ways leadership DBS tools to grow computing and communications to leverage our scale – at faster than our served markets. to improve how we market the regional, platform and and sell today’s products, Danaher-wide levels – to tap WINNING IN HIGH- as we explore new product into our collective strengths, GROWTH MARKETS: architectures and business while staying ever mindful We are broadening and models for tomorrow. that our primary focus is on deepening our already our operating companies. significant geographic exposure outside of North America, STRATEGICALLY ALLOCATING CAPITAL: Western Europe and Japan with We continue to be smart and products and services tailored disciplined capital allocators to unique local requirements. with long-term value creation top of mind. 7 441583.TEXT.cs6.indd 7 3/19/14 1:27 PM GAINING MARKET SHARE VIA DBS We anticipate relatively modest market growth rates this year based on slightly more optimistic economic projections. In order to outperform our competition in this environment, we are focused on improving our innovation and commercial capabilities. DBS provides us with the tools and resources we need to serve our customers better in order to gain market share. Our teams are leveraging DBS research and DURING THE PAST THREE development (R&D) tools to meet our customers’ YEARS, DANAHER INCREASED demands and drive new product innovation. For example, in 2013 the R&D SPENDING impact of our new product introductions drove mid- BY GREATER single digit or better core THAN revenue growth at Leica 25% Microsystems, AB SCIEX and X-Rite. Our teams are also using DBS sales and marketing tools to successfully commercialize their products and technologies. Videojet, ChemTreat and Kerr are innovating the ways they market and sell to better reach more customers and respond to their needs promptly. As a result of their efforts in web-based lead generation and superb sales force management, we believe each of these businesses gained market share in 2013. We’ve also successfully driven market share gains by increasing our service offerings to our customers. In the past three years, Hach HACH DROVE has added more than 200 people to its service 15% organization to fill the void created as a result COMPOUNDED AVERAGE of the aging demographic of service and technical support staff among its water quality customers. Hach identified this market dynamic REVENUE GROWTH as an opportunity to help its customers with treatment plant operations and embedded IN ITS SERVICE BUSINESS additional service associates deeply into customers’ workflows. FROM 2010 TO 2013 In addition to a slew of recently introduced new products, our product pipeline is full and strong. Whether it is our ballast water treatment project at Trojan Technologies or our molecular diagnostics effort at Beckman Coulter, we spent nearly $1.25 billion to further develop new technologies in 2013 that will serve to support our growth objectives in 2014 and beyond. 8 441583.TEXT.cs6.indd 8 3/19/14 1:27 PM WINNING IN HIGH-GROWTH MARKETS I’m still amazed to think that our 2013 high-growth market exposure accounted for more than a quarter of our total revenue, or approximately $5 billion. That is larger than Danaher itself was when I became CEO in 2001. Our global journey started in earnest in China more than 15 years ago and it’s our largest high-growth market today. But, China is no longer our only high- DANAHER GENERATED growth market story. Two-thirds of our annual high-growth market sales now BILLION come from other regions. We’ve built an $800 million business in Latin America, IN as well as in Eastern Europe, Russia and $1.7 Turkey.
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