Home » Danaher’s (DHR) CEO Tom Joyce on Q3 2014 Results – Earnings Call Transcript

Danaher’s (DHR) CEO Tom Joyce on Q3 2014 Results – Earnings Call Transcript

The purchase price of $2.2 billion equates to approximately three times revenues and less than four times gross profit, which we believe positions us well from a return perspective. The acquisition remains subject to customary closing conditions, including regulatory approvals and is expected to close in the fourth quarter of 2014 or the first quarter of 2015.

Dental consumables core revenues grew low-single digits as healthy demand in China and the Middle East was partially offset by a modest decline in the developed markets. In the US, the sluggishness we saw in the second quarter continues.

Encouragingly, demand for our implant products remain robust increasing globally at a double-digit rate. Dental technologies core revenues were up mid-single digits, driven by demand for our dental hand pieces and imaging equipment globally.

In mid-September, we introduced the newest member of our family of Cone Beam 3-D imaging products, the i-CAT FLX MV for a medium field of view. The FLX MV allows dentist to capture a high resolution, lower radiation 3D image of the upper and lower piece.

Our Tx STUDIO 5.3 software is also integrated in to the FLX allowing dentist to both scan patients mouth and prepare a full digital treatment plan from one location on a touch screen.

In our Industrial Technology segment, revenues increased 2% while the core revenues were up 4.5%, core operating margin expanded 145 basis points and reported operating margin increased a 170 basis points to 24.3%. Motion core revenues increased a low-single digit rate, marking the second consecutive quarter of growth to the platform.

Demand in the high growth markets was particularly strong, led by industrial automation in China. During the quarter, we completed the divestiture of our electric vehicle systems and hybrid product lines which had annual revenue of approximately $100 million.

Core revenues in our product identification platform grew mid-single digit as Europe and the Middle East both thus saw double-digit growth. At Videojet core revenues grew mid-single digits, as a growing installed base of equipment and solid execution in service help drive high single digit after market revenue growth.

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During the quarter, Videojet launched its 1000 series of continuous inkjet printers. These printers featuring extended life printing core that reduces down time and enables customers to print almost continuously for five years.

Esko also experienced robust demand in the quarter, with double-digit growth in our workflow automation software and digital imaging products. In September, Esko released its new packaging design and workflow automation software Suite 14.

This comprehensive set of software tools helps brand owners interact with their global supply chains in the cloud in proving efficiency and control at every stage of the packaging, design and pre-production process. The reception of Suite 14 has been exceptional and over 1,000 customers have already upgraded since launch.

So to wrap up, the Danaher team executed well this quarter, using the Danaher business system to expand margins, generate strong cash flow performance, and deliver higher than expected earnings. Across the portfolio our outstanding presence in high growth market, investments in innovative new products and focus on improving sales and marketing have helped our businesses continue to take share in their markets.

As we plan for 2015, we remain mindful of the challenging macroeconomic outlook, including the recently strong dollar. Thus, we are continuing to invest in high-impact areas while also increasing spending on productivity initiatives to approximately $125 million in the second half of 2014.

We believe our focus on growth investments and margin expansion combined with our robust balance sheet and M&A capacity position us to finish 2014 well, and drive long term results.

We are initiating fourth quarter diluted net EPS guidance of $1-$1.04, which assumes fourth quarter core revenue growth similar to the first three quarters of 2014. so before we go to Q&A, I wanted to take a moment to share a few thoughts after the first six weeks of my time as Danaher’s CEO.

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When this transition began, I knew that Danaher’s future was bright. I believe it’s now firmer than ever. The caliber of our team, the depth of incredible talent, that deep commitment to DBS and our culture is second to none. Financially, our balance sheet has never been stronger, much as we have done in the past, and more recently with the $3.3 billion, we have committed so far this year, I look forward to channeling this strength to build upon our leading portfolio of companies.

At Danaher, we compete for shareholders and that is on the top of my mind everyday. We continue to look for smart ways to create value for our shareholders and other stakeholders such as this week’s announcement regarding the combination of our communications business with NetScout, the recent divestiture of our electric vehicle and hybrid motor product lines, and our pending acquisition of Nobel Biocare.

As you know, we’re always in the process of evaluating portfolio and our focus will be on acquiring smartly, partnering smartly and managing smartly. Lastly, our teams culture of continuous improvement using Danaher Business System will remain our primary focus, because that is who we are and that is what truly defines our competitive advantage.

Matt Gugino – VP, IR

Thanks Tom. That concludes our formal remarks, and we’re now ready for questions.

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