Agenda. Industry/Company Overview. Relative Valuation Risks

Transcription

1 Danaher

2 Agenda Industry/Company Overview Investment t Thesis Financial Overview Relative Valuation Risks

3 INDUSTRY/COMPANY OVERVIEW

4 Conglomerate Industry Residential/Commercial Construction Utilities: Energy, Water & Power Aerospace/Defense Electronics/Telecom Safety & Security Automotive Healthcare/Life Sciences Test & Measurement

5 Competitors Large Cap Primes Cooper Crane Actuant Roper ITT Corp Pentair Tyco

6 Guide to Conglomerate Analysis Four key things to look at: Portfolio Mix In good businesses? End Markets What s up, steady and down? Acquisitions Can management execute? Valuation Where s it trading?

7 Company Overview Four Business Segments Professional Instrumentation Medical Technologies Industrial Technologies Tools & Components

8 Professional Instrumentation Environmental Test & Measurement 32% of Revenues; Water, Air Quality, Calibration, Electronics, Telecom

9 Medical Technologies Dental Acute Care Life Sciences Diagnostics 27% of Revenues; Orthodontists, Hospitals, Research/Pathology Labs

10 Industrial Technologies Product ID Motion Control Aerospace/ Defense 29% of Revenues; Food & Beverages, elevators, truck lifts, engine parts

11 Tools & Components Mechanic Hand Tools 2002: 26% of Revenues 2002: 26% of Revenues 2007: 12% of Revenues

12 Geographic Revenue Breakdown United States: 49% Europe: 31% Other: 7% Rest of Asia: 4% China: 9%

13 INVESTMENT THESIS

14 Best-in-Class Conglomerate Attractive product portfolio mix Defensive growth : Water, Medical/Dental, T&M Emphasis on long-cycle businesses Resilient end markets Diversified with limited exposure to cyclical cycles History of M&A Expertise & Execution M&A Opportunities

15 Water Supply Under Pressure $300B-$1T$1T 10%+ By 2025, one-third of the global population will not have access to adequate drinking water

16 Water Heavyweight 12% of Revenues Water Analytics - $4B global market Leading player, 65% outside the U.S Bullish on 40% growth in emerging markets UV Disinfectant i t - $500M global l market 30% market share Better life cycle cost advantage than chlorine Chemical Treatment - $3B global market Planning to expand 50% No presence yet in Europe and Asia

17 Test & Measurement 20% of Revenues Bread & Butter sector $20B+ global market 5-6% annual growth Defensive growth drivers: Food & environmental testing Workers safety concerns Personal security concerns

18 Life Science/Dental $20 billion global l market 7-9% annual growth Defensive growth drivers: Growing demand for better healthcare Academic & government investments Driven by strong aftermarkets Dental +MSD Medical +HSD

19 Diversified End Markets Test & Measurement 22% cyclical Dental Water 12% 15% Non- Life Science Electronics 11% 12% Automotive 8% Food & Beverages 6% Cy yclical Consumerables Housing Aerospace/Defense 4% 4% 6% HON 20% aero, MMM 30% consumer goods, EMR 25% electrical, UTX 50% to construction

20 M&A Strategy Targets fragmented niche industries i History of successful building new platforms Expand margins with low-cost sourcing, lean inventory & productivity initiatives Finances primarily by deployment of cash

21 M&A Results 30% Industry Average 25% ROIC 20% 15% 10% 5% 0% 0.0% 5.0% 10.0% 15.0% 20.0% Growth

22 M&A Opportunities M&A Opportunities within the next 6 months Reduction of PE, lower valuation numbers Downturns favor strategic buyers Mgmt indicated it is becoming more active Top-tier balance sheet: A-Rated,.27 D/E, 14x IC Significant capital available: $1.5B credit facility

23 FINANCIAL PERFORMANCE

24 Strong Revenue Growth Danaher Prime Average 35% 30% 25% 20% 15% 10% 5% 0% Average Danaher 15.7% 30.1% 15.9% 20.2% 14.9% 19.4% UTX 10.0% 20.7% 14.1% 11.9% 14.5% 14.2% ITW 6.0% 16.9% 10.1% 8.8% 15.1% 11.4% Emerson 10% 1.0% 11.9% 10.8% 16.3% 12.1% 1% 10.4% Honeywell 3.7% 10.8% 8.0% 13.4% 10.3% 9.2% 3M 11.6% 9.8% 5.8% 8.3% 6.7% 8.4%

25 Strong Performance Danaher Industry 16.5% 14.2% 13.0% 11.0% 6.4% 5.4% Operating Margins EPS Growth FCF Yield

26 Strong Shareholder Return 5 Year Cumulative Returns

27 Relative Valuation P/E P/E/G EV/EBITDA P/Book D/E 3M Agilent Emerson Honeywell Grainger ITT Industries Roper Danaher Mean Median Historical rel P/E range 10% to 25% DHR Industry Premium (Discount) Current P/E % Average % Cheap in this environment!

28 Risks More Severe customer capital expenditure freeze than expected Inability to buy attractive companies at reasonable prices Inability to access capital

29 Bottom Line: Undervalued Best-in-Class During an economic downturn, Danaher is best positioned to OUTPERFORM the S&P: 1) its portfolio composition in defensive growth & long-cycle sectors 2) end market & geographic diversification 3) history of disciplined execution combined with a strong balance sheet

30 Questions? Imagine. Innovate. Execute. Evolve.